The 18-month sting, code-named 'Operation Lightning Strike', aimed at exposing fraud at the Johnson Space Center in Texas. The revelation that one unnamed astronaut and five other Nasa employees may be implicated in corruption is a serious blow to the battered image of the space agency.
Nasa had hoped to restore its reputation by successfully repairing the Hubble space telescope when the space shuttle Endeavour docks it later today. Launched in 1990, the dollars 1.6bn ( pounds 1bn) telescope was immediately found to be unable to focus because its primary mirror was the wrong shape.
The FBI is upset that the investigation was exposed by press and television in Texas before it was concluded. Nasa has long been notorious for being spendthrift and careless in the way it awards the contracts - on which it spends 85 per cent of its dollars 14bn annual budget - to private companies.
The focal point of the sting was to persuade the life-sciences section of Nasa, which studies weightlessness in space, to buy the bogus equipment, whose ostensible purpose was to dissolve kidney stones through ultrasound. At least 15 contract employees and two large aerospace firms are said to be implicated.
Two employees of General Electric Aerospace Division, now owned by Martin Marietta, were secretly videotaped by the FBI receiving thousands of dollars in cash bribes. They had allegedly promised to steer sub-contracts to a phoney FBI front-company which was pretending to be a minority-owned business.
Although sting operations have become an accepted part of US law-enforcement practice, the offer of bribes by undercover agents is often difficult to distinguish from entrapment.