On June 28th, Pratt & Whitney Canada Corporation (PWC) pleaded guilty to violating the Arms Export Control Act and to making false statements regarding its illegal export of US-origin military software to China. This software was used in the development of the Z-10, China’s first modern military attack helicopter. PWC, along with its parent company, defense contractor United Technologies Corporation (UTC), and UTC’s US-based subsidiary Hamilton Sundstrand Corporation (HSC), will have to pay more than $75 million as part of a settlement with the Justice and State Departments.

 

Beginning in the 1980’s, China sought to develop a military attack helicopter. After the US Congress imposed a prohibition upon licenses for the export of defense articles to China in 1990, China began developing the attack helicopter under the disguise of a civilian helicopter in order to receive Western assistance.

 

PWC began supplying illegal Z-10 engines to China in 2000, despite knowing that they were assisting in the development of an attack helicopter. The software used to test and operate these engines was produced by HSC in the US and modified for a military helicopter application, therefore making it a defense article that required a US export license. PWC failed to disclose these illegal exports to the US government until 2006, when an investor group recognized the illegal business activity. When making a disclosure to the State Department, PWC made numerous false statements, including that they were unaware that the Z-10 program involved a military helicopter.

 

The Justice Department has charged UTC, PWC, and HSC with the following counts:

 

  • Count One charges PWC with violating the Arms Export Control Act
  • Count Two charges PWC, UTC, and HSC with making false statements to the US government
  • Count Three charges PWC and HSC with failure to inform the US government of exports of defense articles to China in a timely manner

 

Under the agreement, the companies must pay $75 million and retain an Independent Monitor to assess their compliance with export laws for the next two years.

 

ICE Director Morton has this to say about the case:

 

This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses. American military prowess depends on lawful, controlled exports of sensitive technology by U.S. industries and their subsidiaries, which is why ICE will continue its present campaign to aggressively investigate and prosecute criminal violations of US export laws relating to national security.

 

To read the Department of Justice press release, click here: http://1.usa.gov/N1FoRC

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Trade Watch

14 January 2010

BIS Reaches Settlement Agreement with Hailin Lin for Export Violations

The Bureau of Industry and Security has published its settlement agreement with Hailin Lin, which resolves allegations that she committed 124 violations of U.S. Export Administration Regulations by failing to obtain the proper export licenses, and/or providing false descriptions, and/or withholding required information on the invoices provided to shippers, for certain electronic shipments to China. Lin was assessed a $1.364 million fine (which would be waived if no further violations occur in a one year period) and prohibited from engaging in certain export activities for a 15-year period.

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