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Hughes, Boeing fined $32 million

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

The agreement, which was completed Tuesday and released Wednesday, 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 that 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."

Under the agreement the companies will pay $20 million to the federal government over the next seven years, invest another $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 in an arms export case.

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 American 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 financial considerations 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 launch of American satellites on Chinese rockets as concerns rose 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/or 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 individuals and Chinese-related companies and organizations, 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.

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.

The heads of the 1998 congressional committee that investigated the data transfers to China, Rep. Chris Cox, R-Calif., and Rep. Norm Dicks, D-Wash., issued a statement on Wednesday praising the penalty as well as the corporate pledges of remedial action.

"This steep fine and sobering result is another reminder that effectively preventing weapons proliferation requires vigilant enforcement of export controls on military technology," the statement said.

The government's negotiations with Boeing and Hughes stalled, leading the State Department to file the civil equivalent of an indictment last December spelling out the 123 charges.

The charges included three separate cases in which officials from the former Hughes unit helped Chinese-related entities determine what went wrong on failed satellite launchings.