Military Contractors Are Fined Over Aid to China

Michael S. Schmidt

Washington. A Canadian subsidiary of the Connecticut-based military contractor United Technologies Corp. pleaded guilty Thursday to federal charges that it had illegally helped the Chinese government develop an attack helicopter now in service there.

As part of a settlement with the Justice and State departments, the contractor, the Canadian subsidiary and another US subsidiary agreed to pay more than $75 million to the departments for making false statements to federal authorities.

The helicopter, known as the Z-10, seats two people and is designed mainly to attack tanks, armored vehicles and other ground forces. It is being mass produced in China.

The Canadian subsidiary, Pratt & Whitney Canada Corp., violated the Arms Export Control Act by providing the Chinese with 10 engines to power Z-10 helicopters in 2001 and 2002, according to an announcement by the US attorney’s office for Connecticut. Technology for the engines, the authorities said, had originally been created for US military helicopters.

According to the settlement, Pratt & Whitney Canada pleaded guilty to illegally exporting to China the US military software used to operate the engines.

Pratt & Whitney Canada “anticipated that its work on the Z-10 military attack helicopter in China would open the door to a far more lucrative civilian helicopter market in China” that may have been worth $2 billion to the company, according to the Justice Department. Ultimately, the Chinese government chose not to award the company contracts for civilian helicopters.

United Technologies and its US subsidiary, Hamilton Sundstrand Corp., waited until 2006 to tell the US government about the sales, according to the authorities, and then lied about them.

The settlement said that the Justice Department would defer its prosecutions of United Technologies and Hamilton Sundstrand as long as the companies paid their fines and allowed an independent monitor to assess their compliance with export law.

“We accept responsibility for these past violations and we deeply regret they occurred,” said Louis R. Chenevert, chairman and chief executive of United Technologies.

He said that since 2006 United Technologies had invested more than $30 million “to strengthen its export compliance infrastructure,” including “increased employee training and communications efforts.”

The announcement from the Justice and State Departments comes as the Obama administration has increased its pressure on China. The administration has outlined plans to expand its military presence in the Pacific to reassure allies that they will be protected from the Chinese, who have vastly expanded their military spending in recent years.

“Due in part to the efforts of these companies, China was able to develop its first modern military attack helicopter with restricted US defense technology,” said Lisa Monaco, assistant attorney general for National Security. “As today’s case demonstrates, the Justice Department will spare no effort to hold accountable those who compromise US national security for the sake of profits and then lie about it to the government.”

The Justice Department has increased prosecutions against domestic companies selling military technology to the Chinese. So far this year, it has prosecuted six significant cases.

The most recent arrest occurred in May, when authorities apprehended a Chinese citizen in connection with charges that he had illegally exported transducers to China that can be used in centrifuges to enrich uranium. In April, a California man was sentenced to 46 months in prison for exporting thermal-imaging cameras to China.

“This is not the first and in all likelihood won’t be the last as the US intelligence community assesses that the government of China is one of the most aggressive and capable collectors of sensitive US technologies,” Bruce Foucart, special agent in charge of homeland security investigations for New England, said at a news conference in Bridgeport, Conn.

According to emails obtained by the Justice Department, Pratt & Whitney knew that it may have been violating American laws.

“Please note the attached notice [in bold] regarding the imposition of US sanctions on the Chinese Government for military aircraft,” according to an e-mail obtained by the Justice Department. “We must be very careful that the helicopter programs we are doing with the Chinese are not presented or viewed as military programs. As a result of these sanctions, we need to be very careful with the Z10C program. If the first flight will be with a gun ship then we could have problems with the US government.”

New York Times