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A US-based company and its Canadian subsidiary today pleaded guilty to the charges of helping China develop a new attack helicopter and agreed to pay a penalty of $75 million as part of the settlement.
At a federal court hearing in Bridgeport, Conn., United Technologies and its two subsidiaries, Pratt & Whitney Canada and Hamilton Sundstrand Corp, pleaded guilty to violating Arms Export Control Act and making false statements in connection with its export to China of US-origin military software used in China's first modern military attack helicopter the Z-10.
In addition, they all agreed to pay more than $75 million as part of a global settlement with the Justice Department and State Department.
Dating back to the 1980s, China sought to develop a military attack helicopter.
Beginning in the 1990s, after Congress had imposed the prohibition on exports to China, China sought to develop its attack helicopter under the guise of a civilian medium helicopter program in order to secure Western assistance, said the US Immigration and Customs Enforcement's (ICE).
During the development phases of China's Z-10 program, each Z-10 helicopter was powered by engines supplied by PWC. PWC delivered 10 of these development engines to China in 2001 and 2002.
Despite the military nature of the Z-10 helicopter, PWC determined on its own that these development engines for the Z-10 did not constitute "defence articles," requiring a US export license, because they were identical to those engines PWC was already supplying China for a commercial helicopter.
ICE said on Thursday that the Z-10 helicopter is in production and initial batches were delivered to the People's Liberation Army of China in 2009 and 2010.
The primary mission of the Z-10 is anti-armour and battlefield interdiction. Weapons of the Z-10 have included 30 mm cannons, anti-tank guided missiles, air-to-air missiles and unguided rockets.
"PWC exported controlled US technology to China, knowing it would be used in the development of a military attack helicopter in violation of the US arms embargo with China," said US Attorney David Fein.
"PWC took what it described internally as a 'calculated risk,' because it wanted to become the exclusive supplier for a civil helicopter market in China with projected revenues of up to two billion dollars. Several years after the violations were known, UTC, HSC and PWC disclosed the violations to the government and made false statements in doing so," he said.
"Due in part to the efforts of these companies, China was able to develop its first modern military attack helicopter with restricted US defence technology," said Assistant Attorney General Lisa Monaco.
According to ICE, because the electronic engine control software, made by HSC in the United States to test and operate the PWC engines, was modified for a military helicopter application, it was a defence article and required a US export license.
Still, PWC knowingly and willfully caused this software to be exported to China for the Z-10 without any US export license.
In 2002 and 2003, PWC caused six versions of the military software to be illegally exported from HSC in the United States to PWC in Canada, and then to China, where it was used in the PWC engines for the Z-10, it said.
According to court documents, PWC knew from the start of the Z-10 project in 2000 that the Chinese were developing an attack helicopter and that supplying it with US-origin components would be illegal.
When the Chinese claimed that a civil version of the helicopter would be developed in parallel, PWC marketing personnel expressed scepticism internally about the "sudden appearance" of the civil program, the timing of which they questioned as "real or imagined."
In a statement Assistant Secretary Shapiro, of the State Department's Bureau of Political-Military Affairs, said: "Today's $75 million settlement with United Technologies Corporation sends a clear message: willful violators of US arms export control regulations will be pursued and punished. The successful resolution of this case is the byproduct of the tireless work of our compliance officers and highlights the relentless commitment of the State Department to protect sensitive American technologies from being illegally transferred."