FULL TEXT: SPACE SALVAGE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-01070R000301450003-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: January 6, 2010
• Sequence Number: 3
• Publication Date: October 24, 1984
• Content Type: OPEN SOURCE

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RADIO TV REPORTS, INC.
4701 WILLARD AVENUE, CHEVY CHASE, MARYLAND 20815
[phone]
PROGRAM
Enterprise
STA11ON
WETA-TV
PBS Network
DATE
October 24,
1984
9:30 P.M.
CITY
Washington, D.C.
Full Text:
Space Salvage
NARRATOR: This is a story of two worlds, one of highly
sophisticated space technology, and another, thousands of miles
away, where they still use a quill pen. Lloyd's of London
carries most of the financial risk of those multimillion-dollar
space shots when things go wrong.
This week on Enterprise, "Space Salvage."
Last February the crew of the space shuttle prepared to
launch a communications satellite owned by Western Union. It was
called West Star 6. It was insured for over $100 million. At
first, everything looked fine.
Crew member Bruce McCandless:
BRUCE MCCANDLESS: The deployment was flawless, and we
were confident that everything had-'gone well. It wasn't until
several hours later, when we got a query from the control center
in Houston, that we began to realize that perhaps something had
gone awry.
NARRATOR: Despite this, the second satellite, belonging
to Indonesia, was launched three days later. It was insured for
$75 million. This time the shuttle crew decided to film the
motor as it was fired.
MCCANDLESS: When the motor lit exactly 45 minutes
later, we found that we had a little white light which we rapidly
shuttered in the TV camera. We got a great big luminous smoke
ring that expanded out. And we interpreted that as some sort of
a failure in the nozzle.
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NARRATOR: The dot of light faded because the motor
died. The fault lay in the black cone at the bottom of the
motor. It apparently disintegrated. Instead of a very high
circular orbit, both satellites were now in a useless elliptical
orbit. They both function. But because they are in the wrong
orbit, they can't do their job. They are so much space junk,
with a total insurance liability of $180 million, the greatest
insurance loss in space.
With many underwriters at Lloyd's suffering losses,
space insurance became a dirty word here. Lloyd's has now paid
out twice as much money as it has received, with the lead
underwriters taking a major loss.
Stephen Merritt has $7 1/2 million at stake with Palopa
B (?), the communications satellite that was to have been
stationed over the islands of Indonesia. High above North
America was the planned location of the other satellite, West
Star 6. The lead underwriter of West Star is Richard Malum (?).
His share ofthe insurance is $3 million. But Malum's reaction to
his losses was very different from Merritt's. Malum paid up.
RICHARD MALUM: As per our policy wordings and condi-
tions, we paid in accordance with those conditions at the right
and proper time. And the fact that Merritt hasn't paid has no
effect on us at all.
NARRATOR: Stephen Merritt hasn't paid because he has a
remarkable plan to do something that has never been done before.
In fact, no one is even sure whether it's possible. He wants to
stage a rescue in space.
STEPHEN MERRITT: What we intend to do is to get a
shuttle up to a place in space where the satellite can be
brought, the satellite then be loaded onto the shuttle, brought
down, refurbished by Hughes, made in a condition where it's
effectively as good as new, and then it can be relaunched, and
the Indonesians will have their satellite in working order.
NARRATOR: The obstacles are formidable. First, he must
persuade the Indonesians not to claim the insurance money, so he
can use it to finance the rescue and start building a backup
satellite in case the operation fails.
MERRITT: The Indonesians, according to the plan, if it
works out, they will actually get a usable satellite in orbit
about a year earlier than they could otherwise achieve it.
NARRATOR: Next, he must persuade NASA to use a shuttle
to bring the satellite down. He'll appeal to the agency's
self-interest.
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NASA need to demonstrate how the shuttle can be used for
recovery. Clearly, internationally, that will have political
significance to them. They also want to demonstrate it to
themselves, for their own confidence and so forth.
NARRATOR: Then, he must get Hughes Aircraft, the
satellite manufacturer, to build special rescue equipment and fix
the satellite once it's down. Merritt is ready with some
convincing arguments.
MERRITT: Hughes -- two things. One is that it helps to
protect their reputation. The other thing is that it would
demonstrate that they are the best manufacturer of satellites and
have the greatest care of their product. And I think that it has
very considerable value to them as part of their general pride of
the way they do business.
NARRATOR: Merritt's biggest hurdle will be his own
colleagues, who will have to foot the bill if the rescue fails.
But he's got an answer for them too.
MERRITT: If we do nothing now, then the satellite is a
total loss and they have a full claim, under their policy.
There's no question about that at all. If we can go through, in
conjunction with the Indonesians and with NASA and Hughes, with
this recovery exercise, then there's a very good chance that
there will be some sort of saving. How many millions of dollars
will actually be saved is anybody's guess. But it doesn't take
many millions of dollars to be saved to make it worthwhile doing.
NARRATOR: It's an unusual gamble for people who have
been gambling for 300 years. It was back in the 1680s that
Edward Lloyd set up his coffeehouse in the City of London, where
merchants and shipowners dabbled in insuring each other's cargoes
as a business sideline. Lloyd's likes to remember that it's been
around for a long time. In those days they met at coffeehouse
tables with facing bench seats. That design is echoed in today's
underwriter boxes. They've even kept the waiters, but their job
now is to announce the brokers.
The general public isn't allowed on the floor of
Lloyd's. If you want to insure something, first get yourself a
broker. And then, whether its film-star legs or jumbo jets, the
broker will approach the underwriter who specializes in that kind
of risk.
Richard Malum doesn't just insure satellites. As an
aviation underwriter, he spends most of his time insuring
airplanes.
There are no committee decisions here. Each underwriter
uses his own skill and judgment to decide whether he will accept
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the risk. But when things go wrong, it's not only the under-
writer who has to pay up. Most of the loss falls on their
backers, who never come near Lloyd's.
Ken Hicks is one of them. He's a landowner in the South
of England. To become a member of Lloyd's, he had to show
personal wealth of at least $130,000. His stake in Lloyd's
brings him a comfortable income, but the potential risks are
chilling.
KEN HICKS: If one's a member of Lloyd's, one's liable
to lose absolutely everything that one possesses: your home,
your farm, your cars, your clothes. You're liable right down to
your last shirt button, not just the amount of money that you
have invested in Lloyds, but absolutely everything.
NARRATOR: But it's unlikely that will happen. Ken
Hicks' syndicate insured part of the $100 million West Star
satellite. But there are so many backers, that Hicks' share will
only be $100.
Once a year, Ken Hicks makes his way to the City of
London for a special evening. He's in rich company. It's
wealthy people like these who back Lloyd's insurance. Hicks'
fellow diners are all members of a group of Lloyd's syndicates.
They're a very cautious group. They pride themselves on having
refused to insure the Titanic. And in the past 50 years, no
member has lost a penny.
Tonight they've come to hear how well they're doing.
Their aviation underwriter reports a profit, but just barely.
MAN: Ladies and gentlemen, good evening.
Nineteen eighty-two produced a series of losses in the
market of such size and frequency that it was at year-end fairly
described as the worst year ever for aviation insurers. These
losses included Air Florida, Pan Am, Spantex, and two satellites.
At the end of 1983, we decided that we would not write
any new space business until the rates rise. Unfortunately, this
decision was not taken in time to avoid the West Star loss, but
we did decline to underwrite the Indonesian Palopa satellite
which failed to reach its correct orbit.
NARRATOR: But news of a possible rescue of the satel-
lites has reached Ken Hicks.
HICKS: Mr. Broadsbridge (?), is Syndicate 959 likely to
be asked to put up any more money for this recovery? And if the
answer to this should be yes, are there real chances of a profit
coming to the syndicate?
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MAN: The excitement of recovering the satellites is
great. It's something we'd all like to be involved with. The
reality of the situation, money, could mean that we finally elect
not to attempt to recovery either of the satellites.
NARRATOR: For this syndicate, at least, space insurance
has been deemed too risky. It is now getting much harder to
insure any satellites, as the French are about to find out.
The European launcher Ariane, due to go up in July, has
a new design with two booster rockets at the bottom. It has been
thoroughly tested on the ground, but never in flight. And on its
very first launch, it will carry a very expensive payload, two
more satellites. The French Telecom satellite is inside the
black container. On top of it is the ECS 2, which has already
been insured at Lloyd's. Should the Ariane rocket fail, both
satellites might well be lost, a risk which makes many unde-
rwriters reluctant to insure the Telecom.
Broker Chris Kevell (?) has been asked by the French to
secure whatever insurance he can on the satellite. On May 15th
he approaches Eddie Simms (?), a lead underwriter.
today.
CHRIS KEVELL: We've got the Telecom business with us
NARRATOR: Simms had earlier insisted on a rate of 15
percent for the Telecom, the highest ever for a satellite. The
French rejected it. But failing to get insurance elsewhere,
they're now forced to accept it. The remaining question is what
Simms's line will be. In other words, how much of the risk he'll
be willing to underwrite.
KEVELL: What sort of line are you [unintelligible]?
EDDIE SIMMS: Well, we can only write ten million
NARRATOR: Ten million francs isn't a bad start. But
Chris Kevell would have liked more.
KEVELL: We're faced with a market that, after the
Palopa and West Star mishaps at the beginning of the year, is
slightly wary of the overall situation. And we also have a
capacity problem.
NARRATOR: That capacity problem, the accumulated risk
of two satellites on the same rocket, is Kevell's biggest
headache.
He approaches Richard Malum, who got his fingers burnt
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KEVELL: What we've got, Richard, today is we've got
the, I think, the first launch since the Palopa/West Star
situation. This is the launch and the first 180 days, the
initial in-orbit cover. We're talking about sums, in short, of
355 million. Eddie Simms has led it off, and we're talking about
that as a rate.
MALUM: And what accumulation have we got?
MALUM: ECS 2, which we're on.
KEVELL: Which you're on. And we've got 48 million on
that based in this market.
MALUM: Can we just check and see how much we've got on
MALUM: We've got a very big line. Actually, I think,
because of that, because this is an accumulation factor, we're
not going to underwrite this one.
KEVELL: Richard, I think we're going to find that
problem all the way around the market. So what I'd say to you
is, look, please, can you write, say, a part of your line on ECS,
because this is a very good write. Because of the Palopa
situation, we've got better terms on this.
MALUM: First of all, I'm not greatly in love with
Ariane as a launch vehicle.
KEVELL: This is a tried and tested satelllite. It is a
derivative of the ACS, the European space satellite, which to
date has been successful for you. What I'd like you to do is to,
say, write us three-quarters of a million, half your line on the
other one.
MALUM: Well, what you'd like me to do and what I'm
actually going to do will be two different things. I'm afraid
I'm fully accumulated, I've got a full line on ECS B. I don't
want to write any more on this particular launch.
KEVELL: ...say that we can put down a half a million
line.
MALUM: I cannot subject my names and my syndicate to a
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line bigger than I feel we should write on this particular
launch. And I think we've got the maximum line on the other
satellite.
KEVELL: But you've got -- I mean your accumulation is
purely on the launch vehicle, which is 18 minutes worth of
exposure. The other 180 days, you've got no accumulation.
MALUM: What happened to the first two Ariane launchers?
KEVELL: They went, in short, for a considerable amount.
MALUM: What happened to them? What happened to them?
KEVELL: This is the L-10. This is the Ariane 3.
MALUM: Well, they've had a failure rate of two out of
five, haven't they?
KEVELL: The whole space field's progressed, Richard.
MALUM: The thing is, it's not that we're totally
against Ariane. We've written a line, we've written a line on
this particular launch. And I'm not prepared to write any more
of it.
KEVELL: Come on, you can write us half a million.
MALUM: You're a very good-broker, Chris, but I'm afraid
the answer is negative.
KEVELL: There is some way that you can put a line on
this for us.
MALUM: No. I've got my full line on that particular
launch. Thank you very much. So you'll have to seek [unintel-
ligible] elsewhere.
KEVELL: Okay, Richard.
NARRATOR: Despite his best efforts, Kevell only manages
to get 25 percent cover at Lloyd's.
With the growing disenchantment with space insurance, it
might seem impossible for Stephen Merritt to launch his satellite
rescue plan. But then the plan gets a boost from space itself.
NASA demonstrates its ability to capture a satellite, the ailing
Solar Max, and repair it in space. Merritt is quick to exploit
NASA's success.
DELBERT SMITH: What we have for you here today are a
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series of film clips of the actual Solar Max recovery itself.
NARRATOR: Delbert Smith, Merritt's American lawyer, has
come to London to promote the rescue of Palopa B with the
underwriters.
SMITH: The Solar Max was the beginning of what we're
talking about today, and that is the much easier, the much more
technologically simpler task of the recovery of a straight-
forward, simple satellite.
NARRATOR: After the meeting, Stephen Merritt has what
MERRITT: Their reaction was a certain amount of
surprise, a certain amount of confusion. But at the end, there
was almost complete unanimity to go ahead with it.
NARRATOR: The underwriters have approved the plan, but
only on the condition that he gets an acceptable price from NASA
and Hughes. They, in turn, suggest that it would be cheaper to
rescue both Palopa and West Star. Hughes wants $2.5 million for
one satellite and five million for two. And NASA wants 4.7
million for one and 5.5 for two, making a total rescue price of
$7.2 million for one satellite or 10.5 million for both.
The potential reward to the underwriters might be as
high as $30 million for one satellite and 60 million for two. In
other words, they must risk $10.5 million to make 60.
Stephen Merritt wants to go ahead, and asks broker John
Howes to persuade the other underwriters to put up the $10 1/2
million, which they would lose if the rescue fails.
MAN: I'm not too sure I want to see you. You always
cost me money when you come in.
HOWES: This is the recovery sheet that we're going to
put on the market for the B2 satellite.
MAN: These seem rather more reasonable than the ones
that-were being mooted recently.
HOWES: Yes, I think they are, because I think it's
--they are the double pickup, for West Star 6 as well.
MAN: So fishing for two is cheaper than fishing for
one, really.
HOWES: That's right.
MAN: Okay. I said you always cost me money when you
come in.
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Thank you for all the work you've done in the matter. I
know it's been a long uphill slope for you.
HOWES: I just hope it works.
NARRATOR: Elsewhere, John Howes meets more resistance.
MAN: I've been into all this with Mr. Merritt, but can
you tell me how many underwriters have agreed to this and how
many have disagreed?
HOWES: At the present time, we're going around the
market. As you see, there are a number of initials there.
MAN: There're not many, are there?
HOWES: No, but there are three photostats in the market
being taken around by my colleagues, and it is being agreed to.
I think at the end of the day you're probably going to come up
with something like an 85 percent agreement.
MAN: And what happens to the other 15 percent?
HOWES: That is going to be referred back to.certain
underwriters who feel that they could take more of this.
MAN: And who are the underwriters who are going to take
the additional gamble?
HOWES: I don't know yet.
MAN: You don't know yet.
HOWES: No. Some of -- I think Mr. Merritt is, prepared
to take some of it.
NARRATOR: Stephen Merritt can only pick up so much
himself, so he'll have to get as many underwriters as possible to
go along with him.
MAN: I see. Well, we've had various meetings on this,
and I certainly to follow Stephen Merritt on this. I just
initial it?
HOWES: Yes. Thank you very much.
MAN: And keep our fingers crossed. I've never written
a satellite in my life, and of course...
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NARRATOR: With the underwriters beginning to go along
with the plan, Merritt pays a visit to NASA Headquarters in
Washington.
MERRITT: ...express our thanks to NASA for enabling us
NARRATOR: He's here to brief the Indonesians on the
preparations for the rescue.
MERRITT: We shall, after lunch, get down to discussing
the basic sense and possibilities of...
NARRATOR: But as he talks, it becomes apparent that the
Indonesians have an entirely different agenda. They just want
their money, and aren't interested in his schemes. Merritt's
group will have to go it alone.
Back in London, there's another problem. If the West
Star is rescued, Richard Malum says his group will have a claim
on the money.
MALUM: Well, we have rights of recovery because under
the policy we have with Western Union, if the satellite is
recovered and relaunched, we have entitlement of 50 percent of
the revenue if it is relaunched successfully. This is what the
discussion is about with Steve in America at the moment.
NARRATOR: Merritt, determined to beat back the chal-
lenge, calls a meeting. All the underwriters who lost money on
the two satellites have been invited to attend. Richard Malum
could conceivably block the entire venture.
MALUM: If no agreement is reached, I doubt whether they
can go ahead with the recovery of those two satellites, 'cause
Western Union, the owner of West Star 6, are not prepared to
release title of ownership to anybody unless there is agreement
between the two sets of insurers.
NARRATOR: The two leads put their respective cases.
Richard Malum argues that all those who lost money on the West
Star should have a share of any income arising from its rescue.
Stephen Merritt, who had insured the revenue of the satellite,
argues that the small print gives him and his colleages a prior
claim.
meeting.
Twenty minutes later, Stephen Merritt leaves the
MERRITT Well, we've left the Western Union primary
underwriters to discuss amongst themselves what their position
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is. But broadly speaking, we were encouraged by the enthusiastic
support, if you can call silence enthusiastic support.
NARRATOR: Richard Malum is forced to concede, as
Merritt holds firm.
MALUM: The only way this matter would have been solved
would be in the courts. And quite frankly, we did not wish to go
to court with another Lloyd's underwriter on a matter such as
this. We thought it would be bad for Lloyd's. And quite
frankly, we did not want to be seen to be stopping an idea of
recovering these satellites.
NARRATOR: The rescue is on. And by August, Merritt is
at Hughes Aircraft in California. Having obtained title to both
satellites, he's here to represent the new owners, the under-
writers of Lloyd's, to see how their money is being spent.
MERRITT: Will one side of the satellite be much hotter
than the other, or would it have been spinning sufficiently?
MAN: There may be as much as a 100-degree gradient
between the two vehicles. And we will actually apply heaters to
one or the other.
NARRATOR: Hughes is building new equipment to hold the
satellites as they're brought down to earth on board the shuttle.
It's never been done before. And the equipment doesn't come
cheap. This piece alone costs $200,000.
By late August, another obstacle is overcome. After a
delay of two months, the shuttle Discovery, which NASA will use
for the rescue, finally manages to get off the ground for its
inaugural flight. It carries three satellites, insured for a
total of $240 million. All are launched successfully, much to
the relief of the underwriters.
The rescue is now scheduled for November. The plan is
to use the remote manipulator arm of the shuttle to grab the
satellites. But Palopa and West Star weren't designed to be
rescued, so there's nothing for the arm to grab. This is where
the astronauts come in, using a specially designed device.
explains.
DALE GARDNER: We call it an AKM capture device. The
common name that we call it is a Stinger. It's a long probe that
sticks out in front of the MMU, and it's much like a mollie bolt,
a bolt that you can put through a wall, and it has three fingers
or two fingers that then pop on springs, such as you can then
pull it back with threads and attach something to the wall.
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We're going to do that same thing with the Stinger. The point
that we're going to attack on the spacecraft is the rocket
nozzle, that has since been fired.
NARRATOR: NASA has been training the astronauts for
months. Dale Gardner and Joe Allen will both have to go out and
grab the satellites. So they've been practicing the procedure in
a water tank at Houston.
The Lloyd's underwriters are paying for it all: the
cost of training, the development of the equipment, as well as a
share of the launching costs.
Merritt's in Houston to see a model of the capture
MAN: In reality, he'll be in a position about like so,
with his hands in this area with the hand controllers. So he'll
be flying, looking like down the point of the probe across this
cross-member here. And when he gets the probe in, just as he's
about ready to touch the spacecraft, he'll pull this lever back.
These toggles spring out, and then you couple -- soft-dock, if
you will -- between the Stinger and the spacecraft. So it can't
get loose, even though it might, you know, rattle around a little
bit. You've got it captured.
NARRATOR: Later, Merritt gets a tour of Mission Control
at the Johnson Space Center, where he'll be during the rescue.
MAN: The flight controllers control the shuttle
vehicle. We have the flight director's console, and he's in
charge of the entire operation. This is our customer support
room, where you'll be located during the flight. We have in here
all of the communications and displays that you'll need to
observe the operations. And if you are here for the launch, this
is typical of the place you would be sitting. As a matter of
fact, you might be at this table. And it provides you with all
of the communications that you need to follow the progress of the
flight.
NARRATOR: It has been a long haul for Merritt. In an
effort to minimize his losses, he's moved from underwriting at
Lloyd's into the riskier business of space salvage.
MERRITT: Well, somewhat reluctantly, I think. We would
have preferred not to have got into this position. But seeing as
we're in it, we're reasonably happy.
NARRATOR: As the shuttle prepares for takeoff, Merritt
could only wait and hope. Will he and his colleagues save $60
million or will they lose another 10?
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MERRITT: I'm very optimistic. I don't think anybody
can be totally confident, as nothing approaching it has been done
before. But I'm very optimistic that we shall have a successful
outcome.
NARRATOR: The moment of truth will come in two weeks,
during Discovery's next scheduled flight. The rescue of the
satellites will probably be televised. You can be sure Lloyd's
of London will be watching.
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