Hughes Electronics Corporation and
Boeing Satellite Systems, Inc., formerly known as Hughes Space and
Communication Co. (HSC), announced today that they have reached a settlement
with the U.S. Department of State over administrative charges relating
primarily to HSC’s involvement in reviews of two failed launches of commercial
communications satellites on Chinese rockets in 1995 and 1996. The charges of
violations of the Arms Export Control Act and implementing regulations were
issued by the State Department in a December 26, 2002 letter. In October
2000, Hughes sold HSC to Boeing and retained responsibility for resolving HSC
pre-acquisition export matters.
The Consent Agreement between the companies and the State Department
provides for a civil penalty in the amount of $32 million, including
$4 million credited for the companies’ past expenditures on export program
enhancements and $8 million that will be invested by the companies in the
future to strengthen their export compliance programs. Under the terms of the
agreement, the $20 million cash portion of the penalty is to be paid in eight
equal installments over the next seven years. In addition, Hughes and Boeing
Satellite Systems each will appoint a separate third party to serve as a
Special Compliance Officer (SCO) for export compliance. The duties of the SCO
will include monitoring compliance with the Consent Agreement and oversight of
exports regulated by the State Department including, in particular, exports to
the People’s Republic of China and several other countries.
Jack Shaw, President and Chief Executive Officer of Hughes Electronics
Corporation, and Dave Ryan, Vice President and General Manager of Boeing
Satellite Systems, issued the following joint statement regarding the
settlement:
“Hughes Electronics Corporation and Boeing Satellite Systems 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 companies acknowledge that HSC should have sought and obtained a State
Department license before disclosing to Chinese nationals or to the
international insurance community any launch failure analysis, or disclosing
any information or providing any assistance pertaining to design, development,
operation, maintenance, modification or repair of launch vehicles, systems, or
facilities. The companies further acknowledge that assistance to a launch
operator in any of these areas could aid in the development of missile system
technology and, thus, have a negative impact on national security. The
companies accept full responsibility and express regret for not having
obtained licenses that should have been obtained, notwithstanding Hughes’
prior public comments to the contrary.
Both of our companies are committed to vigorous compliance with the laws
and implementing regulations and have made, and will continue to make,
substantial investments in export compliance training, processes and
personnel. Both companies and their employees acknowledge the critical
importance to America’s national security of, and the need for strict
compliance with, U.S. export control laws.
We are pleased that an agreement resolving this matter has been reached
with the U.S. Government. Hughes Electronics Corporation and The Boeing
Company have a long history of working with the U.S. Government to prevent the
unauthorized disclosures of valuable national security information and
technical data to foreign persons. Furthermore, we recognize that it is
crucial to the security and foreign policy of the United States to prevent the
unauthorized provision of protected information or defense services that would
or could promote the illicit development of missile system technology.
As the companies were informed in January 2002 by the U.S. Department of
Justice that it had terminated its investigation, this settlement resolves all
outstanding issues regarding these matters. The settlement does not suspend,
limit or otherwise restrict the rights of either company to pursue licensed
exports to China or other countries as otherwise permitted by law.
