- The Washington Times - Thursday, January 10, 2002

A U.S. satellite maker under investigation for providing missile technology to China has reached a settlement with the U.S. government and will pay a $14 million fine.

Loral Space & Communications Ltd. announced the settlement in a statement yesterday and said it was informed by the Justice Department that an investigation of the company for the technology transfer has ended without prosecution.

"Loral has agreed to pay a civil fine of $14 million to the State Department without admitting or denying the government's charges," the company statement said.

The fine will be paid over seven years without interest at a rate of around $2 million annually, the company said.

A Justice Department spokesman referred questions to the State Department. A State Department official had no immediate comment.

The missile-technology-transfer case highlighted the pro-China export policies of the Clinton administration, which critics say damaged U.S. national security.

The technology provided by Loral allowed China to increase the reliability of its space-launch boosters, which U.S. intelligence officials said are identical to the boosters used in its long-range nuclear missiles and built by the same state-run firm.

A classified Pentagon report concluded in 1998 that the technology likely gave China a "significant" boost in its long-range missiles, which the CIA has said includes more than a dozen targeted at U.S. cities.

U.S. intelligence officials said China used one of its space launchers to flight-test the warhead-carrying stage of its new Dong Feng-31 missile last week. The space launcher blew up in midflight, however.

A senior Bush administration official said the deal for Loral to pay a fine was reached after the Justice Department declined to bring criminal charges.

The Justice Department last year also declined to prosecute a CIA officer who tipped off Hughes Electronics, a U.S. satellite maker still under investigation in missile-technology transfers, to the criminal probe.

Bernard L. Schwartz, Loral's chairman and chief executive officer, said in a statement that "we take this matter very seriously.

"We historically have had an excellent security record and are committed to vigorous compliance with export control laws," Mr. Schwartz said. "The company has instituted an extensive new training program, significantly expanded staff, and greatly improved oversight in the area of export control."

Mr. Schwartz said the case grew out of the company's role in an insurance and technical review panel that investigated a 1996 Chinese rocket launch failure.

The panel's report was "mistakenly sent to the Chinese by a Loral employee," Mr. Schwartz said, and the company then informed the State Department.

"Nonetheless, Loral accepts full responsibility for the matter and expresses regret for its failure to obtain appropriate State Department approval," Mr. Schwartz said.

Defense officials said the company had an incentive to help the Chinese improve the reliability of their launchers because it would reduce insurance costs. A failed launch could cost insurers $300 million or more.

Mr. Schwartz was the largest single contributor to President Clinton's 1996 re-election campaign and had lobbied aggressively to loosen export controls on satellite sales to China.

Hughes Electronics remains under investigation, according to U.S. officials, in its role in helping China improve fairings and nose cones that could be used on Chinese strategic nuclear missiles.

In June 2000, Lockheed Martin agreed to pay the State Department a fine of $13 million for a similar improper transfer of missile technology to China dating to 1994.

The companies were required to obtain an export license before providing such technology to China.

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