HUGHES, BOEING SETTLE WITH STATE DEPT. FOR $32 MILLION OVER CHINA
Hughes Electronics and Boeing Satellite Systems (BSS) have settled for $32 million with the State Dept. on allegations the companies were involved in unauthorized assistance to China, State said. It had filed 123 charges against Hughes and Boeing in Dec. alleging they had violated the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR) (CD Jan 3 p3).
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The consent agreement signed by both companies included remedial compliance measures to be instituted in addition to the fine. A Hughes spokesman said the only other option was an “administrative hearing process that we could have participated in but we didn’t feel it was in our best interest.”
State is holding both companies responsible even though it was a Hughes unit, Hughes Space & Communications (HSC), that was involved with China at the time and Boeing, which acquired the unit, has said since that Hughes retained responsibility for “these China matters.” Boeing spokesman said Wed. even though the charges related to events before BSS came into existence, “Boeing believed it was beneficial to address this and lingering concerns raised by the State Department.” Both will be jointly responsible for paying $20 million in cash to State. The payments will be made in 8 installments over 7 years, the companies said in a joint statement. A Hughes spokesman didn’t comment on the amount for which each company was responsible. State said $12 million would go to the U.S. Treasury and $8 million to the U.S. Customs Service “to settle a separate claim against these companies.”
The remaining $12 million will be suspended and applied to required compliance measures. Both companies must appoint 3rd party special compliance officers who will monitor activities with China and countries of the former Soviet Union, State said. The compliance steps are expected over a 5-year period, with Boeing providing $6 million and Hughes $2 million. Each company will receive a $2 million credit for “past expenditures on export program enhancements,” they said.
The Hughes/Boeing statement said both realized Hughes should have obtained a license before “disclosing… any launch failure analysis, or disclosing any information or providing any assistance pertaining to” all aspects of launch vehicles, systems and facilities. The companies said they accepted full responsibility for their actions and were committed to laws and regulations involving export control. Rep. Cox (R-Cal.) and Rep. Dicks (D-Wash.), chmn. of the House Select Committee on U.S. National Security and Military/Commercial Concerns with China, in a joint statement applauded the State Department’s decision: “This steep fine and sobering result is another reminder that effectively preventing weapons proliferation requires vigilant enforcement of export controls on military technology.”