(Reuters) – United Technologies Corp and two of its subsidiaries sold China software enabling Chinese authorities to develop and produce their first modern military attack helicopter, U.S. authorities said on Thursday.
At a federal court hearing in Bridgeport, Connecticut, United Technologies and its two subsidiaries, Pratt & Whitney Canada and Hamilton Sundstrand Corp, agreed to pay more than $75 million to the U.S. government to settle criminal and administrative charges related to the sales.
As part of the settlement, Pratt & Whitney Canada agreed to plead guilty to two federal criminal charges – violating a U.S. export control law and making false statements. The charges were in connection with the export to China of U.S.-origin military software used in Pratt & Whitney Canada engines, which was used to test and develop the new Z-10 helicopter.
Also as part of the deal, United Technologies and Hamilton Sundstrand admitted to making false statements to the U.S. government about the illegal exports.
Hamilton Sundstrand and Pratt & Whitney Canada also admitted that they had failed to make timely disclosures, required by regulations, to the U.S. State Department about the exports.
The government said that the $75 million settlement breaks down into roughly $20.7 million in criminal fines, forfeitures and other penalties to be paid to the Justice Department and roughly $55 million in payments to the State Department as part of a consent agreement resolving more than 500 administrative export control violations.
About $20 million of the fines will be suspended, to be used by the company for continuing to improve its export control procedures, and for hiring an independent monitor, United Technologies said.
As part of the agreement, the U.S. State Department also will impose a partial debarment of Pratt & Whitney Canada for new export licenses, although the company can request licenses on a case-by-case basis. The debarment does not affect United Technologies or Hamilton Sundstrand, and the Canadian unit can request full reinstatement in one year.
PROGRAM DATES TO 1990s
U.S. authorities said China had been trying to develop a specialized modern military attack helicopter since the 1980s. But since the Chinese government’s 1989 crackdown on the pro-democracy movement, the U.S. government has prohibited the export to China of U.S. defense equipment and technology.
Beginning in the 1990s, a U.S. official said, China began an effort to develop a military attack helicopter but under the guise of a civilian helicopter program. The program culminated in the Z-10 attack helicopter, which is in production today, the official said.
Initial batches of the aircraft were delivered to China’s People’s Liberation Army beginning in 2009. The helicopters’ primary use would be for attacking armor and battlefield operations but it also has limited air-to-air combat capabilities.
Z-10 prototypes have been equipped with 30mm cannons, anti-tank guided missiles, air-to-air missiles and unguided rockets.
U.S. authorities said that Pratt & Whitney Canada’s initial involvement in the program was to deliver 10 engines t o China from Canada in 2001 and 2002. The United States said that for the purposes of this deal, Pratt & Whitney Canada argued that the engines did not constitute defense equipment subject to the U.S. military embargo on China because the engines were identical to those it was supplying China for commercial helicopters.
As part of Wednesday’s settlement, however, Pratt & Whitney Canada agreed to plead guilty to criminal charges related to its export to China of U.S.-made electronic engine control software used to test and operate the Pratt & Whitney Canada engines. U.S. authorities maintain that when the software, made in the United States by Hamilton Sundstrand, was modified for use in military helicopters, it thus became subject to the U.S. military embargo on China.
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