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Blog 13 USMC 20150721 ITT VECTRAS EXCELIS - ITT Guilty Of Illegally Transferring Classified And Export Controlled Technology To Foreign Countries

One of the most significant advantages of US military is its ability to effectively maneuver and fight at night. Enabled by the most advanced night vision technology in the world, US military can see and defeat the enemy in the most severe conditions of limited visibility. Keeping this important technology safe and secure, and out of the hands of the potential adversaries, thus the secrets of the night vision technologies must be protected but ITT Corporation - in order to reduce its costs and enhance its financial bottom line. By illegally outsourcing the production of some of the most sensitive pieces of the night vision system, ITT has put in jeopardy US military's night time tactical advantages and America's national security.
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  • 1. U.S. Department of Justice UnitedStates Attorney WesternDistrict of Virginia STATEMENT OF U.S. ATTORNEY JOHN BROWNLEE ON THE GUILTYPLEA OF ITT CORPORATIONFOR ILLEGALLY TRANSFERRING CLASSIFIED AND EXPORT CONTROLLEDNIGHT VISION TECHNOLOGY TO FOREIGN COUNTRIES March 27,2007 It is the responsibility of the United States government to provide security to the American people. A strong military, equipped with the most modern and technologically advanced war fighting systems, is critical to this effort. One of the most significant advantagesof our military is its abilityto effectively maneuver and fight at night. Enabled by the most advanced night vision technology in the world, our military can see and defeat the enemy in the most severe conditions of limited visibility. Keeping this important technology safe and secure,and out of the hands of our potential adversaries, is criticalnot only to our national securitybut to the safety and success of soldiers and Marines in combat today. The secrets of our night vision technologies must be protected. Today, we announce that ITT Corporation,the 12thlargest supplier of sophisticated defense systemsto the United Statesmilitary, will plead guilty to two felony charges, pay $100 million in penalties and forfeitures, subject itself to independent monitoring and an
  • 2. extensiveremedial action program, and acknowledgethat it illegally transferred classified and/or sensitive night vision technology to foreign countries - including the People's Republic of China - in order to reduce its costs and enhance its financial bottom line. By illegally outsourcingthe production of someofthe most sensitivepieces of the night vision system,ITThas put injeopardy our military's night timetactical advantagesand America's national security. Simplyput,the criminalactionsofthis corporationhavethreatenedtoturn onthe lightsonthemodernbattlefield forourenemiesand exposeAmericansoldierstogreat harm. For this, ITT Corporation must be brought tojustice. WehavereleasedaCriminalInformation,PleaAgreementand StatementofFactsthat willbe filed inU.S. DistrictcourthereinRoanoketomorrow. ITThas agreedtoplead guilty to Count One for willfilly violating the Arms Export Control Act by illegally sending classified and/orexportcontrolledinformationrelatingto nightvisiontechnologyto foreign countries, including the United Kingdom, Singapore, and the People's Republic of China. ITT will admit that between March 2001, and August 2001, it knowingly, willfilly and illegally sent technical information related to a night vision counter measure - also known as a "light interferenceitlter" - to prohibited facilities. ITThasalsoagreedtopleadguiltytoCountTwoforknowinglyandwillfilly omitting material facts fiom required reports with the intent to obstruct a State Department investigation. ITT will admit that fiom April 2000 to October 2004 it provided false and misleadinginformationtothe StateDepartmentin an efforttohidethe factthatthe company
  • 3. had illegally exported night vision goggles and night vision parts to foreign countries for years. Finally, ITT will acknowledge, as part of a deferred prosecution agreement with regard to Count Three, that fiom January 1996 to May 2006, the company illegally sent export controlled information fiom the United Statesto China, Singapore, and Japan. The illegallyexportedinformationrelatedtotheEnhancedNightVisionGoggleSystem(ENVG), the newest and most powerful night vision system in the world. Aspart of thisplea agreement,ITTwillpay $100 million in criminal fines,penalties, and forfeitures, to be distributed as follows. First, ITT will pay a $20 million monetary penaltytothe Departmentof State. Second,the companywillpay a statutorymaximumfine of $2 million as a part of their guilty pleas. Third, ITT will forfeitto the United States$28 million, a portion of which will be shared with state, local, and federal law enforcement agencies for their work during this investigation. Fourth, ITT will pay $50 million in restitutionto the victims of their crimes -the American soldier. By illegally transferring this importantnight vision technology to foreign countries, ITT has put injeopardy the tactical advantages that enable our soldiersto fight effectively and more safely at night. I believe that our American soldiers are the principal victims of ITT's crimes. Therefore,wehavestructuredtheremaining$50millionpenaltytoensurethat our soldiershavethebest night visionequipmentintheworld. Accordingly,wehave agreed to suspend the immediate payment of the $50 million penalty for 5 years, subject to the 3
  • 4. following conditions. First, during the 5 year period, ITT must invest the $50 million to accelerate and further the development and fielding of the most advanced night vision technology for our soldiers. Second,the dollars ITT spends on this new technology must be approved by the United StatesArmyNightVision&ElectronicSensorsLablocatedatFortBelvoir,Virginia. Third, the United States will maintain "Government Purpose Rights" to all technologythat is developedunder this agreement. This arrangement allows the Governmentto share any technology that is developed by ITT under this agreement with any competing defense contractors for futurecontracts. And fourth, anypart ofthe $50millionpenalty thatremains unspent after five years must be immediatelypaid to the United States. In additionto the guiltypleas and monetarypenalties, the United Stateshas directed ITTto pay for an independentmonitor and staff,who will be selectedby the United States, tomonitor ITT's compliancewiththis agreementand federallaw. Themonitorand staffwill be completely independent and there shall be no limitation on the sharing of information. between the monitor, the United States and other governmentaldepartments and agencies. I would now liketo provide to you a brief summaryof the investigation and some of our findings that are representative of the pattern of regular export violations and misrepresentations uncovered during this investigation. The main violations of the law revealed by the government's criminal investigation are set forth in detail in the Statement of Facts released to you today. 4
  • 5. The government's criminal investigation began on August 1, 2001, when Special Agents fiom the Department of Defense CriminalInvestigative Service(DCIS) discovered that aclassifiedUnited Statesmilitarydocumentrelatingtonightvisiontechnologyhadbeen illegally sentby employeesof ITTNight Vision (ITTNV) to foreignnationals in the United Kingdom. Over the course of the next fiveyears, a team of specialagents fiom DCIS and the Bureau of Immigration and Customs Enforcement (ICE), along with prosecutors fiom my office and the National Security Division of the United States Department of Justice, conductedan in-depth investigationintopotential criminalviolations of our export lawsby employees of ITT NV. During the course of the criminal investigation, the government discovered that ITT NV managers created an atmosphere where U.S. export laws were viewed as obstaclesto gettingbusinessdone. As a result, grosslyinadequateresourceswere devotedby ITT to ensuring compliancewith U.S. export laws. The combination of grossly inadequate resources and a negative attitude toward export compliance led to a regular pattern of export violations and misrepresentationsto the government fiom 1980to 2005. As an example, in April 2001, an ITT NV employee illegally transferred to a Singaporecompanytechnical datarelating to a militarynight vision laserprotection device known as a "Light InterferenceFilter." The Singaporecompany subsequentlysent someof this technical data to a company located in the United Kingdom and to another foreign company located in China. On April 18,2001, an ITT NV employee illegally transferred to a foreign company
  • 6. classified military technical data designated "Secret-No Foreign" relating to the laser protection device. The "No Foreign" designationmeant that this informationwas not to be shared with any foreign company or person, including our closest allies. These illegal transfers were done in an effort to find a new and cheaper manufacturer for the laser protection device. Another exampleoccurred between 2001 and 2005, when ITT NV illegally worked with a Singapore company on the design and production of the Enhanced Night Vision Goggle system. During those efforts, ITT illegally allowed a Singaporeengineer to work side by sidewith ITT engineers at the ITT manufacturing facility located here in Roanoke. In addition, two Chinese optical engineers illegally worked on the design of the ENVG systemin Singapore. Also, ITTNV went to significant lengthsto set up an end run around theDepartmentof Stateexportlicensingsystemby enlistingafiontcompanytoconducttheir ENVG system exports. Finally,Iwould liketo discussthenature andtimingof ourinvestigation. As I stated, this investigation began in August of 2001. On October 29,2002, federal agents and local and state law enforcement executed a search warrant at ITT's facility in Roanoke and recovered many documentsand emails. Overthenext 3 years,ITT and itsoutsidecorporate attorneysfoughtthegovernment's investigationandattemptedtoessentiallyrunouttheclock onthe statuteof limitations. Duringthattime, ITTundertook anumber of actionsthatmade it difficult for the government to uncover the full truth, including asserting questionable
  • 7. privileges. Despitethese obstacles,we were ableto develop a limited criminal case against the company. In the Fall of 2005, we informed the company we were prepared to seek an indictment. When ITT's new CEO, Mr. StevenR. Loranger, who had recently taken over as CEO, and members of ITT's Board of Directors were informed of our evidence and the government's decision to seek an indictment, Mr. Loranger quickly changed course, hired new outside corporate attorneys, and instructed the company to hlly cooperate with our investigation. Mr. Loranger also ordered a completeinternalinvestigationand directedthat the findingsbe sharedwithgovernmentinvestigators. Mr.Loranger,oncepresentedwithour evidence,directed ITTto accept responsibility for the company's past criminal actions and subjected ITT to strict government monitoring. Mr. Loranger's cooperation and strong leadership may have saved ITT fkom permanent ruin. ITT has the potential to play an important role in assisting our military in the developmentand production of sophisticated night vision and other electronicsystemswhich canprovidethe men and womenofthe U.S. militarywith a decisiveadvantagein battle,whichtheyneed and deserve. Ibelieve ITTnow has the opportunityto move forward in a positive way. This agreement is the first of its kind. It is the first conviction of a major defense contractor for aviolationof the Arms Export ControlAct, and we have implementedone of themost extensiveremedialactionprograms. By establishingtheseprecedents,wewill send a clear message that illegally exporting our nation's most important secrets will be prosecuted and punished. We also hope that ITT's current cooperation with this ongoing
  • 8. investigationwill become the standardthroughoutcorporateAmerica. My hope is that ITT will returnto fullcompliancewith our laws, developtheworld's most advancednight vision systems for our soldiers, and become an exemplary corporate citizen. Thank you.
  • 9. NEWS RELEASE UNITED STATES ATTORNEY'S OFFICE WESTERN DISTRICT OF VIRGINIA John L. Brownlee United States Attorney Heidi Coy Public Affairs Specialist BB&T Building 310First Street, S.W.,Room 906 Roanoke, Virginia 24011-1935 Phone: (540) 857-2974 FAX: (540) 857-2179 March 27, 2007 LEADING U.S. MILITARY DEFENSE EQUIPMENT PROVIDER TO PLEAD GUILTY TO ILLEGALLY SENDING SECRET MATERIAL OVERSEAS; WILL PAY $100 MILLION PENALTY ITT Corporation,the leading manufacturer of MilitaryNight Vision Equipment for the United StatesArmed Forces has admittedsending classifiedmaterials overseas and will pay a $100 million penalty, United States Attorney for the Western District of Virginia John L. Brownlee and Assistant Attorney General for the National Security Division Kenneth L. Wainstein announced today. According to the written plea agreement to be filed in United States District Court in Roanoke, ITT Corporation will plead guilty to one count each of export of defense articles without a license and omission of statements of material facts in arms exports reports. The corporationwill pay a total monetary penalty of $100 million. ITT Corporationwill be the first major defense contractor convicted of a criminal violation the Arms Export Control Act. "The superior quality of our night vision technology gives the United States Armed Forces an enormous advantage on the battlefield. Sending sensitive information on these advancements overseas without the necessary licences puts that advantage injeopardy," said
  • 10. United StatesAttorney John Brownlee. "We hope the agreement reached with ITT will send a clearmessagethatanycorporationwhounlawfullysendsclassifiedorexportcontrolledmaterial overseas will be prosecuted and punished. In addition, the remedial action plan that is part of this agreement is designed to bring ITT Corporation back into full compliance, which will benefit both the corporation and the United States." AssistantAttorney GeneralKennethWainsteinsaid, "The sensitive night vision systems produced by ITT Corporation are critical to ourwar-fighting capability and are sought afterby our enemies and allies alike. ITT's exportation of this sensitive technology to China and other ' nationsjeopardized our national security and the safety of our miliary men and women on the battlefield. We commend the prosecution team and ITT Corporation for developing a plea agreementthat addressesthe violations of thepast, ensurescompliance in the future, and serves as a strong warning to others who might be tempted by the profits of such illegal exports." According to the Information to be filed in United States District Court in Roanoke, between March 2001 and August 2001, ITT Corporation exported or caused to be exported defense related technical data to Singapore, the People's Republic of China and the United Kingdom without having first obtained a license or written authorization from .the U.S. Department of State. The technical data included information about a laser counter measure known as a "light interference filter" for military night vision goggle systems. These night vision goggles are designated as defense articles on the United States Munitions List, and companies are required to have a State Department license or written authorization before exporting them.
  • 11. DanielF.Willkens, ActingDirector of the Defense Criminal Investigative Service,said, "The illegal export of U.S. military technology and equipment threatens our national security in the most direct way. This settlement demonstrates the commitment of the Defense Criminal Investigative Service and the U.S. Immigration and Customs Enforcement to ensuring that criticaltechnologies do not fall into the wrong hands and that America's war fighters maintain their tactical and strategic advantage around the world. American security and its critical military technology are simply not up for sale." "Placing profits ahead of .thesecurity of our nation is simply not acceptable for any corporation," said Julie Myers, Department of Homeland Security Assistant Secretary for ICE. "Export violations that compromise our technology pose a potentially deadly threat to our military and our nation. As such, these violations are among the most serious of crimes. Today's case illustrates that corporations engaging in these illegal and reprehensible business practices will pay a heavy price." The Information also charges that between April 2000 and October 2004, ITT Corporation left out material facts from Arms Exports Required Reports. The omission of these material facts made the reports misleading. ITT Corporation was aware that it was violating its export licenses for night vision goggles but failed to take significant corrective action to stop the ongoing violations until shortly before it informed the Department of State a about the violations. ITT Corporation has entered into a plea agreement with the United States whereby the Corporation will plead guilty to Counts One and Two of the Information as described
  • 12. above. As part of the plea agreement, ITT Corporation will enter into a deferred prosecution agreement with the United States whereby the United States will defer prosecution of Counts Three and Four for five years. In return, ITT Corporation will accept full responsibility for its illegal actions and will successfully implement an extensive Remedial Action Plan. As part of the $100 million penalty, ITT Corporation will pay a two million dollar criminal fine, a $50 million deferred prosecution penalty and will forfeit $28 million to the United States as the proceeds of its illegal actions. ITT Corporation will also pay a $20 million dollar monetary penalty to the Department of State. Payment of the $50 million deferred prosecution penalty will be suspended for five years. ITT Corporation can earn up to $50 million credit on monies spent by the corporation toward the acceleration, development and fielding of the most advanced night vision technology so that the members of the United States Armed Forces can maintain their battlefield advantage of having the most capable night vision equipment in the world. The case was investigated by Special Agents John Schoeneweis and Malachi Blake of the Defense Criminal Investigative Service, the investigative arm of the Office of the Inspector General, Department of Defense and Special Agents David Guerrant and Peg Roberts of the U.S. Department of Homeland Security, U.S. Immigration and Customs Enforcement. Assistant United States Attorney Stephen Pfleger is prosecuting the case. END
  • 13. IN THE UNITED STATESDISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA ROANOKE DIVISION UNITED STATES OF AMERICA v. ) Criminal Number ITT CORPORATION ) In Violation of: Title 18, U.S.C. $5 2 Title 22, U.S.C. $5 2778(b)(2), 2778(c) Title 22, C.F.R. $5 127.l(a), ) 127.3 INFORMATION The United States Attorney charges: COUNT ONE (Willful Violation of the International Traffic in Arms Regulations, Export of Defense Articles Without A License) 1. On or between March 2001 and August 2001, in the Western District of Virginia, the defendant,ITT Corporation, did knowingly and willfully export and cause to be exported from the United Statesto Singapore,the People's Republic of China, and the United Kingdom, defense articles, that is, technical data related to a laser counter measure (also known as a "light interference filter") for military night vision goggle systems, which were designated as defense articles on the United States Munitions List, without having first obtained from the Department of State a
  • 14. license or written authorization for such exports. 2. In violation of Title 18,United States Code, Section 2, Title 22, United States Code, Sections2778(b)(2)and 2778(c),Title 18,United StatesCode, Section 2, and Title 22, Code of Federal Regulations, Sections 127.1(a) and 127.3. COUNT TWO (Omission of Statements of Material Fact in Arms Exports Required Reports) 1. On or between April 2000 and October 2004, within the Western District of Virginia, the defendant, ITT Corporation, did knowingly and willfully omit material factsfi-omrequiredreports that werenecessary to make the statementsinthe reports not misleading,
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