Aerospace firms fined for giving China data

$32 million deal settles civil charges on rocket, satellite information

March 06, 2003|By NEW YORK TIMES NEWS SERVICE

WASHINGTON - Two top American aerospace companies have agreed to pay a record $32 million in fines to settle civil charges that they unlawfully transferred rocket and satellite data to China in the 1990s.

The agreement, completed Tuesday and released yesterday, comes two months after the State Department accused the companies, Hughes Electronics Corp., a unit of General Motors, and Boeing Satellite Systems of 123 violations of export laws in connection with the Chinese data transfers.

In a joint statement, the companies said they "express regret for not having obtained licenses that should have been obtained" in the 1990s by a Hughes unit, the Hughes Space and Communications Co., which was acquired in 2000 by Boeing.

The companies also said they "acknowledge the nature and seriousness of the offenses charged by the Department of State, including the harm such offenses could cause to the security and foreign policy interests of the United States."

The technology used to launch civilian rockets and satellites is similar to that used to launch missiles, so there are tight curbs - mostly administered by the State Department - on the export of satellites, aerospace equipment and related defense services.

The Chinese have always insisted that their rocket and missile programs did not need help from U.S. companies.

But a string of Chinese rocket failures in the 1990s ended only after American companies transferred data on guidance systems, telemetry, aerodynamics and rocket failures.

In 1998, a congressional panel criticized satellite manufacturers for sometimes subordinating national security to the "bottom line" and concluded that their "illegally transmitted" information had improved the reliability of China's civilian and military rockets.

The next year the United States stopped permitting the use of American satellites for Chinese aerospace ventures amid concerns about Chinese aid to missile programs in North Korea and Pakistan.

China agreed in November 2000 not to assist other countries in developing ballistic missiles that could deliver nuclear weapons.

But the Central Intelligence Agency told Congress earlier this year that China has continued to provide missile-related items and assistance to North Korea and several other "countries of proliferation concerns."

The settlement ends a five-year federal investigation into how American satellite and aerospace companies aided China as they competed to have their satellites launched aboard Chinese rockets.

The assistance went to Chinese nationals as well as Chinese-related entities, some private and some governmental.

Previously the Lockheed Martin Corp. and Loral Space and Communications Corp. agreed to pay fines - $13 million and $20 million respectively - to settle similar cases.

The Justice Department terminated its criminal investigation of Hughes and Loral last year without taking any action.

Under the agreement released yesterday, the companies will pay $20 million to the federal government over the next seven years, invest $8 million to boost their export compliance programs and receive a $4 million credit for past export enhancement programs.

Officials said the $32 million civil penalty is the largest fine in an arms export case.

The settlement also calls for the companies to appoint an outsider, a "separate third party," to monitor the agreement as well as future exports to countries such as China.

Unlike the previous cases against Loral and Lockheed, the government's negotiations with Boeing and Hughes stalled, leading the State Department to file the civil equivalent of an indictment in December spelling out the 123 charges.

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