ITT to pay $100 million in fines, plead guilty to 2 counts

The Roanoke Times ^ | March 27, 2007 | Unknown

[Perseverando]

Plea Agreement

Night-vision equipment maker ITT Corp. will pay $100 million in penalties and forfeitures and plead guilty to two felonies for illegally sending classified or controlled information to foreign countries, the U.S. Attorney’s Office announced today.

“Simply put, the criminal actions of this corporation have threatened to turn on the lights on the modern battlefield for our enemies and expose American soldiers to great harm,” U.S. Attorney John Brownlee said in a statement. “For this, ITT Corporation must be brought to justice.”

"We have been cooperating with the government in this investigation and we have voluntarily disclosed all discrepancies that our internal reviews revealed," Steven Loranger, chairman, president and chief executive officer of ITT Corp., said in a statement. "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."

According to Brownlee, the government’s criminal investigation began in August 2000, when officials discovered that a classified U.S. military document relating to night vision technology had been illegally sent by employees of ITT Night Vision to foreign nationals in the United States. As the investigation continued over the next five years, the government discovered that ITT Night Vision managers “created an atmosphere where U.S. export laws were viewed as obstacles to getting business done,” Brownlee’s statement says.

A combination of “grossly inadequate resources and a negative attitude toward export compliance” led to a regular pattern of export violations and misrepresentations to the government from 1980 to 2005, Brownlee said.

As part of the $100 million penalty, ITT will pay a $2 million criminal fine and a $20 million penalty to the U.S. State Department. It also will forfeit $28 million to the United States as the proceeds of its illegal actions.

Payment of the remaining $50 million will be suspended for five years. ITT can earn up to a $50 million credit on any money the company spends on developing new, more advanced night vision technology for the U.S. military.

[antiRepublicrat]

I kind of like the penalty, especially the forced R&D for our troops, except a few people need to be in jail too.

[kittymyrib]

Just "bidness as usual" for the traitors in our corporate boardrooms. These companies should be shut down for a year the first time they circumvent the prohibitions against trading with our enemies. The second time, they should be shut down permanently. If that were ITT's punishment, I'll bet it would be a come-to-Jesus moment for other companies.

[Enchante]

"plead guilty to two felonies for illegally sending classified or controlled information to foreign countries"

Are any INDIVIDUALS going to jail?? The company should be banned from federal contracts forever, or at least for a good long time. This does not sound like a minor loss -- they have handed the PRC the crown jewels of night-vision, which had been one of the areas of decided US military advantage in recent years. It probably won't be all too long before terrorist groups are turning out with the latest and greatest knock-offs of US night-vision technology, courtesy of the PRC and the scumbags who sent this stuff over there.

[hkp123]

Wow, a few more corporations like this pay fines and our debt will be paid for! Where does that fiat dollar fine go? The GAO doesn't have a clue. We do.

[El Gato]

These companies should be shut down for a year the first time they circumvent the prohibitions against trading with our enemies. The second time, they should be shut down permanently

Then who will the US Military buy the stuff from? Hmm? The Chinese maybe?

You've got to punish by criminal penalties, the individuals involved, but the civil penalties which hit their bottom line is a much better incentive for the honest, but corner cutting, executives to do better in the future.

Only if you find that individuals knew about, or participated in, the transfer of the information, should those criminals be hit with the full force of the criminal law, including charges of treason, for which the penally can be death, be used. But in that case, I'll all for it.

[bpjam]

I'd like the penalty myself if it involved somebody going to a white collar prison somewhere. They were selling military technology to our enemies via 'foreign nationals'. Is this just going to be another Bernard Schwartz-Loral situation where a US military contractor trades with our enemies and flaunts our export laws and then makes up for it with monetary discomfort? Check this companies campaign contributions.

[kinoxi]

In other news ITT gets contract boost.
That'll teach em. /s

[bpjam]

btw, did anybody notice that they discovered in 2000 that this company had BEEN doing this - past perfect - BEEN. That would be the Clinton years where military contractors were looking to get rich off of other countries militaries since they knew the US military was facing decreasing budgets. Does the chairman of ITT happen to be another FOB?

[Pox]

All of the ITT personnel involved in this treason should be put to death immediately, IMO.

[puppypusher]

The Government should force them to develope methods to make the NVG's that they gave away harmless to our troops.

The use of NVG's is one advantage we have over our potential enemies and corporations like ITT are selling this technology and putting our troops and country at risk.

I personally think the penalty is way to weak.

[El Gato]

except a few people need to be in jail too.

After reading the release. I agree, maybe quite a few people, some of them very high up in the corporation. Just getting fired is not enough. They must do jail time, or worse

pour encourager les autres

[to encourage the others].

[Paleo Conservative]

I kind of like the penalty, especially the forced R&D for our troops, except a few people need to be in jail too.

Jail? Isn't this espionage? That's a capital crime.

[SuperSonic]

[Captain Rhino]

Now you have got to consider the source in what I am about to write, but I heard a report on NPR during the drive home today that indicated that the cover up was probably worse than the underlying crime.

Apparently in 2001, ITT contracted with a Singapore manufacturer to make some "minor subcomponents" of the night vision devices in question and the subcontractor, in turn, contacted several other companies for manufacturing support. To support this subcontracting effort, some employees at ITT shared technical information on these components without first obtaining permission form the State Department. At least one of the subcontracting companies was located in China. That sharing without permission created the initial violation.

However, according to the ITT spokesman speaking in the report, only technical information on the minor components was shared. Neither the minor components themselves nor core technology (components or technical information) was shared. The spokesman asserted that without access to the core technology, it is impossible to reverse engineer the advanced NVG technology.

(BTW, this technology is already compromised. How many pairs out of the thousands of these NV goggles in Iraq, Afghanistan, and worldwide where ever US forces operate have been lost, stolen, or simply "gone missing" during operations since 2001? Surely, at least some of them have entered the black market and have been obtained by the intelligence services of the PRC, Russia, Iran, and other countries.)

The report went on to state that had the company simply admitted its trespass against the import/export laws in 2001, the situation (and consequent punishment) would have been less severe. Instead, the employees covered up and displayed a disdain for complying with the law, And THAT, more than the original offense, is the basis of the fine.

Apparently, the offending individuals no longer work for ITT. (It is pretty much standard practice for firms in this situation to dump their liabilities overboard if they can.) So they may have been gone from the company for awhile. Like you, I would like to read an article telling us their names and the length of the prison sentences they received.

As for the company, the 100 million dollars is going to come out of profits and I'm pretty sure that the DoJ will make sure it truly does come out of profits (vice being added into existing program charges with the result that the taxpayer ultimately ends up paying the fine). Losing 100 million dollars in profits will definitely PO the stockholders and there will probably be some strong repercussions over that.

As for a permanent ban, let's not throw out the baby with the bath water. The responsible individuals have been discharged and remain liable for criminal prosecution. The company itself, an artificial person, can't be imprisoned. But it has been significantly fined and agreed to other penalties. (BTW, that's the only part of the deal I don't like. It should have been 100 million AND ITT develops new NV technology for government use without any financial offsets or possibility of profit. But that may be too harsh considering the fact these were "minor components.")

As a cautionary note, I'll just relate that about a dozen years ago or so, I worked for a government support contractor whose CEO was indicted and convicted of defrauding the government through the manipulation of travel funds. (He was also the CFO - always a bad arrangement.) Basically, he was using the travel claim system to solve certain corporate cash flow problems.

DoD was not amused.

He went off to jail (not sure if anyone else in corporate HQ went with him) and the company was forbidden to bid on DoD contracts for six months. Unfortunately, nearly all its major contracts came up for re-competition during that period. The business went bankrupt and, IIRC, some 800 people (the vast majority working hard and playing by the rules) lost their jobs due to the misconduct of a few.

ITT employs tens of thousands. Only a fraction have any involvement with NVGs, and the offending individuals are only a minute fraction of that fraction.

[antiRepublicrat]

Jail? Isn't this espionage? That's a capital crime.

Not for a very long time, at least in practice.

[Jonathan]

Who?

Names?

What executives?

Which people? WHO??

Name them. Arrest them. Try them. Convict them. Jail them.

If GWB will not do that, this will happen again.

INSANE!!!!

[Captain Rhino]

At the bottom of page 6 of the Plea Agreement (link posted with the article above) and continuing onto page 7, the U.S. Attorney details where the investigation is centered (Roanoke, VA) and the division of the company involved.

(I'd post the relevant text here but the file is a .pdf image file and text selection is not enabled/possible with my Mark 1 Mod 0 Adobe Acrobat reader.)

As detailed on those pages, DoJ has executed search warrants on the company's ITT division and, after a change of CEO and corporate lawyers in late 2005, the company is cooperating with the investigation. They (DoJ) have documents with names and dates, so I expect that there will be indictments for individuals. The plea agreement only covers ITT as a corporation (an artificial person), so they still remain individually liable for their actions. Your questions for those details will be answered when the grand jury returns the true bill (of indictment) against them. Stay tuned.

Given how big a fine was levied against the company, ITT, if no one else, has a vested interest in seeing that the employees that cost it so much money are prosecuted. I expect that the US Attorney will be diligent in bringing charges against these persons, trying them, and, when and if guilty verdicts are handed down, demanding appropriate punishment. As for possible punishment, here's the relevant section from the Arms Export Control Act:

(c) Criminal violations; punishment

Any person who willfully violates any provision of this section or section 2779 of this title, or any rule or regulation issued under either section, or who willfully, in a registration or license application or required report, makes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, shall upon conviction be fined for each violation not more than $1,000,000 or imprisoned not more than ten years, or both.

Source:http://www.law.cornell.edu/uscode/html/uscode22/usc_sec_22_00002778----000-.html

At $1 million and 10 years per violation, these persons are looking at very serious fines and jail time. Mr. "NVG-program-manager-who-can't be bothered-with-the-law" probably has a much more humble attitude these days.

However, I doubt they will draw the maximum penalty possible. Since most people are very risk averse when it comes to going to jail for long periods and losing everything they own, sentencing these persons to even a fraction of the maximum penalty possible will have an edifying effect in deterring a disregard for these import/export controls among those dealing with them. (BTW, these convictions and sentences will probably do very little to curb real industrial espionage. The motivations for those offenses are criminal from even before the first instance of an offense. (Conspiracy to commit the espionage normally proceeding the actual act.))

The wheels of justice do grind very slowly but they also grind very fine. (Usually, that is.)

[Kakaze]

This is unreal. The only people who are paying a penalty here will be the American soldier and their families. The exposure of OWN men to death by our OWN technology, is unacceptable.

Those who perpetrated the crime are being punished by profit...develop more goodies for us which we will in the end buy and you are off the hook!

Payed off now by not only our enemies but unwittingly by our own citizens too.

This plays out like some surreal treason theater.

[snowsislander]

ITT can earn up to a $50 million credit on any money the company spends on developing new, more advanced night vision technology for the U.S. military.

I don't see any mention of a requirement that this research be done here in the U.S.