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Right....remember the Loral deal?

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China Satellite Waiver; Clinton White House delivers papers to Congress in support of the deal

WASHINGTON (May 22, 1998) -- President Bill Clinton on Friday defended a controversial satellite deal with China, even as White House officials delivered documents to the House International Relations Committee about the arrangement.

The president said the deal to launch U.S. satellites on rockets owned by other nations was "correct" and "based on what I thought was in the national interest and supportive of our national security."

"There was absolutely nothing done to transfer any technology inappropriately to the Chinese as a result of this decision," Clinton said. "I believe it was in the national interest and I can assure you it was handled in the routine course of business, consistent with the 10-year-old policy."

The White House backed up that claim by releasing about 400 pages of declassified documents claiming the presidential waiver was consistent with U.S. policy and had been recommended by the president's national security adviser, the State Department and the Pentagon.

White House legislative liaison Mara Rudman, accompanied by at least one White House lawyer, delivered the documents to the House International Relations Committee Friday morning. Rudman was carrying two folders of papers as she arrived at the committee office, but made no comment.

Congressional critics, both Democrats and Republicans, say the Chinese may have had access to sophisticated U.S. satellite and missile technology during an investigation into a failed launch attempt on a Chinese rocket in 1996.

And Republicans have accused Clinton of jeopardizing national security by granting the waiver to please a high-dollar Democratic donor.

A spokesman told CNN the committee does not expect the papers to include a pivotal document from the Defense Department, purportedly linking a possibly illegal transfer of technology with a cooperative investigation among China and two American defense contractors, Loral Space and Communications and Hughes Electronics.

Rep. Ben Gilman (R-N.Y.) hinted the documents may not be as exculpatory as the White House indicated. "Let me just say that some of the documents do raise troubling questions that will have to be pursued," Gilman said. "They make clear that the president was informed that Loral may have contributed technology to China's ballistic missile program before he decided to grant Loral a waiver on February 18th of this year to permit them to export yet another satellite to China."

But how much do we really know?

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It's a fact Loral Space and Communications hired the Chinese to launch one of their satellites two years ago because Chinese rocket launches are relatively cheap. Technically, that is an export of a U.S. satellite to China.

But Loral says the Chinese never got their hands on the satellite itself. And Pentagon officials confirm sensitive technology was encased in a metal "black box" and watched over from factory to launch pad by Department of Defense employees.

There has been bipartisan support for such launches. President Ronald Reagan first initiated the policy 10 years ago. And President George Bush approved nine while Clinton has approved 11, according to the Congressional Research Service.

But concerns have heated up. To launch satellites, China used "Long March" boosters, the same ones they use for intercontinental nuclear missiles, some said to be aimed at U.S. cities.

They weren't very good. The one carrying Loral's satellite blew up 30 seconds after launch on Feb. 15, 1996, costing Loral's insurance companies about $200 million.

Afterward Loral admits it gave the Chinese a written report about the cause of the rocket failure, without official clearance. A Pentagon office concluded in a still-secret report that "United States national security has been harmed," according to government officials. And Loral confirms it is now under investigation by a federal grand jury as a result.

And one House International Relations Committee source, speaking to CNN on background, said the committee plans to focus its investigation on this cooperation.

Loral's chairman Bernard Schwartz (who lobbied Clinton at a WH dinner) denies Loral did anything illegal. In its own defense, Loral says Chinese engineers found the problem -- the rocket failure was caused by bad solder joints -- without Loral's help. And they say "no 'secret' or 'classified' information was ever discussed with the Chinese or included in any reports provided to the Chinese."

Privately, Pentagon officials minimize the affair. One told CNN that the alleged harm to national security was "not significant or substantial ... about a one or two on a scale of ten."

CNN's Brooks Jackson and Paul Courson contributed to this report.