The U.S. Justice Department is hoping last week”™s guilty plea by ITT Corp. to illegally exporting secret military data regarding its night-vision goggles will serve as a warning to other defense contractors that outsource work.
Harrison-based ITT will pay a $50 million penalty ”“ $2 million criminal fine, $28 million forfeiture fine and $20 million penalty to the State Department ”“ as part of its plea agreement. In addition, the company will pay $50 million “in restitution to the victims of their crimes ”“ the American soldier,” U.S. Attorney John Brownlee said. Actually, it”™s not a payment but an agreement to expend $50 million in the next five years toward development of more advanced night-vision technology.
In addition to the monetary penalties, the government has directed ITT to pay for an independent monitor and staff to make sure the company complies with the agreement and federal law.
In a related action, the State Department will not allow ITT Night Vision to ship devices to certain parties for a period of not less than one year. The restriction will apply to less than 5 percent of the company”™s total Night Vision sales, the company said in a statement.
“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,” Brownlee said.
“While this settlement relates to the actions of a few individuals in one of our 15 business units, we regret very much that these serious violations occurred,” Steven R. Loranger, chairman, president and chief executive officer of ITT, said in a statement. “I want to reinforce, however, that the heart of our night-vision goggles ”“ the tube ”“ is secure. No technical information regarding the tube was ever compromised.”
The investigation of ITT began in August 2001 when government agents were made aware that “a classified government document designated ”˜Secret”™ ”˜NOFORN”™ had been illegally sent to an unauthorized facility in the United Kingdom by employees of ITT Night Vision,” according to the Justice Department”™s Statement of Facts. ITT Night Vision is a division of ITT in Roanoke, Va. During the investigation, “the government uncovered a pattern of violations of the export laws of the United States spanning from the 1980s to 2006” at the Roanoke facility.
The criminal investigation found that ITT did not have a system in place to ensure compliance with U.S. export laws. Workers who attempted to make sure the company complied with the International Traffic in Arms Regulations were viewed by some ITT Night Vision managers “as obstacles to getting business done,” according to Justice Department findings. In one instance, an attempt by one female worker to make higher-level managers aware of a situation involving her manager flouting export laws, resulted in no disciplining of the manager. Rather, he was placed in a position where he was the “official responsible for ensuring that the ITAR regulations that he had so blatantly violated were enforced.”
The investigation also found cover-ups by the company and attorneys. In one instance, night-vision goggles that were loaned could not be accounted for. In order to loan equipment to a foreign person, ITT was required to obtain a temporary export license from the State Department”™s Office of Defense Trade Controls Licensing. The investigation found that ITT failed to keep track of the loaned equipment and tried to cover it up in a disclosure letter to the office by saying that the violations were “recently discovered” and corrective action was taken with the employees involved. In October 2004, the State Department, relying on “the impressions created by the disclosure letters” that the company was acting in good faith did not refer the issue to the Justice Department for investigation. Instead, the violations were rolled into another set of violations and placed in a single civil consent agreement in which ITT was to pay $8 million and “did not have to admit any wrongdoing and avoided the major impact of a prospective debarment from obtaining future export licenses.” The investigation eventually found that “counsel for ITT Defense and the outside attorneys intentionally withheld material facts, information and circumstances” from the State Department about the loaned night-vision goggles “in an effort to limit the potential penalties and consequences that might be imposed by the government.”
ITT said it has begun implementing stricter new measures, including:
Insuring all personnel 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 employees 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.
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