U.S. night vision producer to pay $100 million for illegal exports

U.S. night vision producer to pay $100 million for illegal exports U.S. night vision producer to pay $100 million for illegal exports
   U.S. night vision producer ITT Corp. has admitted to federal investigators that it sent classified materials related to its products overseas without proper authorization and will pay a $100 million penalty.
   ITT is the first major defense contractor to be convicted of a criminal violation of the Arms Export Control Act. According to the written plea agreement to be filed in the U.S. District Court in Roanoke, Va., ITT will plead guilty to one count each of export of defense articles without a license and omission of statements of material facts in arms exports reports.
   The plea agreement reveals that in one count ITT exported defense-related technical data to China, Singapore and the United Kingdom between March 2001 and August 2001 without having first obtained a State Department license. The military night vision-related data is registered on the department’s U.S. Munitions List.
   Count two of the information charges that between April 2000 and October 2004 ITT left out material facts from the Arms Exports Required Reports. ITT was aware that it was “violating its export licenses for night vision goggles, but failed to take significant corrective action to stop the ongoing violations until shortly before it informed the Department of State about the violations,” the Justice Department said in a statement Tuesday.
   “These violations have made it clear that we had gaps in our compliance programs,” said Steven R. Loranger, chairman, president and chief executive officer for the White Plains, N.Y.-based company, in a press release.
   He emphasized that, “the heart of our night vision goggles — the tube — is secure. No technical information regarding the tube was ever compromised.”
   Loranger said ITT has taken measures to correct the compliance
problems:
   * Insuring that all employees understand and follow applicable regulations governing the export of critical technology.
   * Naming a new compliance officer.
   * Instituting a required ethics and compliance training program for all staff worldwide.
   * Developing a comprehensive computer-tracking program to monitor all packages sent from ITT facilities.
   * Working with independent experts to refine and enhance the effectiveness of these measures.
   The Justice Department said $50 million of the prosecution penalty would be suspended for five years, subject to certain conditions. ITT can reduce this penalty by investing $50 million toward the acceleration, development and fielding of the most advanced night vision technology to the U.S. troops.
   The State Department has placed restrictions on certain exports of night vision equipment and technical data and ITT night vision will not be allowed to ship devices to specific parties for a period of not less than one year. ITT estimates that this restriction will apply to less than 5 percent of its total night vision sales.
   According to today’s Wall Street Journal, the company’s defense business accounted for 47 percent of its total $7.81 billion in sales in 2006 and 50 percent of its operating profits. While the $100 million penalty is relatively small, the most most damaging outcome for any company like ITT will be the flood of negative publicity, said Paul DiVecchio, president of DiVecchio & Associates, a Boston-based consulting firm specializing export compliance, in a recent interview.
   “We hope the agreement reached with ITT will send a clear message that any corporation who unlawfully sends classified or export-controlled material overseas will be prosecuted and punished,” said U.S. Attorney John Brownlee in a statement.
   “Placing profits ahead of the security of our nation is simply not acceptable for any corporation,” added Julie Myers, assistant secretary for Immigration and Customs Enforcement. “Export violations that compromise our technology pose a potentially deadly threat to our military and our nation.”
   However, there is a concern within the federal government that too many export restrictions have eroded the country’s once prominent position in the development of this technology by causing U.S. producers of commercial uncooled infrared cameras to increasingly move offshore. The U.S. government requires licenses for exports of these items to all destinations, except for Canada.
   These commercial devices are used in electronics, medical devices and automotive industries, and also for firefighting, search and rescue and industrial safety operations.
   Late last year, the Commerce Department’s Bureau of Industry and Security conducted a study on behalf of the Defense Department’s Army Night Vision & Electronic Sensors Directorate to better understand the increase in global competition on the U.S. thermal imaging industry. The military is increasingly concerned that shrinking research and development and sales of U.S.-made commercial thermal imaging devices may ultimately impede future development and availability of this equipment for the U.S. military.
   BIS’s study found through overseas customs data increasing competition in exports of commercial thermal imaging devices and sensors from the European Union, Japan and China. The study noted that the total U.S. share of global exports for imaging and sensors actually slipped from 2001 to 2005. (For more details about the BIS study, read the February American Shipper, pages 31-32.)