United Technologies Corporation (UTC) has agreed to pay more than $75 million as part of a “global settlement” with the State Department and Justice Department to address arms export violations to China, false and belated disclosures to the U.S. Government about these illegal exports, and many other compliance failures.
An extensive enforcement review by the Department of State’s Office of Defense Trade Controls Compliance has addressed several hundred civil violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). The State Department has reached administrative agreement with United Technologies Corporation to terminate and resolve these violations. This settlement highlights the role of the Department in protecting sensitive American technologies from being illegally transferred to, or received by, unapproved foreign actors.
The Department determined that UTC’s numerous violations demonstrated a systemic, corporate-wide failure to maintain effective ITAR controls. Since 2006, UTC operating units and subsidiaries (including Pratt & Whitney, Hamilton Sundstrand Corporation and Sikorsky Aircraft Corporation) have disclosed to the Department hundreds of ITAR violations. A number of the violations may have caused harm to U.S. national security and foreign policy interests.
Accordingly, the Department proposed to UTC a consolidated resolution via an administrative settlement which would ensure immediate, comprehensive and effective remedial action across the company’s many operating units and subsidiaries. Among the civil violations settled by UTC are several arising from the unauthorized provision in 2002 and 2003 of U.S. origin, ITAR-controlled engine software for military attack helicopters in the People’s Republic of China. Concurrently with the administrative settlement, UTC has also agreed with the U.S. Department of Justice to resolve criminal charges related to these transactions. UTC subsidiary Pratt & Whitney Canada Corporation (P&W Canada) has pleaded guilty in the U.S. District Court in Connecticut to a criminal violation of the AECA and ITAR, while UTC, Hamilton Sundstrand and P&W Canada have also entered into a deferred prosecution agreement regarding this and other related charges. UTC and the Departments of State and Justice coordinated the resolution of the civil and criminal matters.
Of the $75 million “global settlement” with the Justice Department and State Department, approximately $20.7 million of this sum represents fines, forfeiture and other penalties to be paid to the Justice Department. Under the terms of a four year Consent Agreement with the State Department, UTC will pay a civil penalty of $55,000,000. The State Department agreed to suspend $20,000,000 of this amount on the condition that the funds have or will be used for Department-approved pre- and post-Consent Agreement remedial compliance measures.
UTC disclosed nearly all of the ITAR violations resolved in this settlement voluntarily to the Department, acknowledged their serious nature, cooperated with Department reviews, and implemented or has planned extensive remedial measures. For these reasons, the Department has determined that an administrative debarment of UTC is not appropriate at this time.
In response to the criminal conviction, the Department of State is imposing a statutory debarment on P&W Canada. In accordance with the AECA, after a thorough review of the circumstances surrounding the conviction and a finding that appropriate steps had been taken to mitigate law enforcement concerns, the Department determined to exclude certain activities involving P&W Canada from the statutory debarment, as specified in an upcoming Federal Register notice announcing the debarment. Authorization requests for all other ITAR-regulated activities involving P&W Canada will be denied unless accompanied by a “transaction exception” request which will be reviewed and adjudicated by the Department.
The Consent Agreement and related documents will be available to the public on the Directorate of Defense Trade Controls website at http://www.pmddtc.state.gov/compliance/consent_agreements.html.