United Technologies Fined Over Chinese Z-10 Attack Helicopter

The US Department of Justice (DoJ) says the company, through its subsidiaries Pratt & Whitney Canada (PWC) and Hamilton Sundstrand (HSC), had violated the Arms Export Control Act and made false statements in connection with the illegal export to China of US-origin military software which went on to be used to develop the Z-10.

The settlement, finalised by a court in Bridgeport, Connecticut, sees $20 million paid to the DoJ while the remaining $55 million will be paid to the State Department as part of a separate consent agreement to resolve outstanding export issues.

Reacting to the verdict, UT’s chairman and CEO Louis Chênevert said: ‘Export controls are an integral part of safeguarding US national security and foreign policy interests.

‘As a supplier of controlled products and technologies to the Department of Defense and other domestic and international customers, we are committed to conducting business in full compliance with all export laws and regulations.

‘We accept responsibility for these past violations and we deeply regret they occurred.’

The court heard that China had wanted to develop an attack helicopter since the early 1980s, but due to trade restrictions had sought to develop the type under the guise of a civil medium transport in a bid to secure Western assistance.

The DoJ said that during the development phase of the Z-10, the prototypes were all powered by engines supplied by PWC, amounting to ten in total between 2001 and 2002.

The statement continued: ‘Despite the military nature of the Z-10, PWC determined on its own that these development engines for the Z-10 did not constitute “defence articles”, requiring a US export licence, because they were identical to those engines PWC was already supplying to China for a commercial helicopter.’

Furthermore, the court heard, because the FADEC software, made by HSC in the US to test and operate the engines, was modified for a military application, it was a defence article and still required a US export licence.

The DoJ added: ‘PWC knowingly and wilfully caused this software to be exported to China for the Z-10 without any US export licence.

‘In 2002 and 2003, PWC caused six versions of the military software to be illegally exported from HSC in the United States to PWC in Canada, and then to China, where it was used in the PWC engines for the Z-10.’

The DoJ says PWC’s illegal conduct was driven purely by profit. The company expected its work on the Z-10 would open the door to more lucrative contracts, potentially worth $2 billion.

According to the DoJ, the Z-10 helicopter is in production and initial batches have been delivered to the People’s Liberation Army. However, the aircraft may now be being supplanted or replaced by a new attack helicopter, believed to be designated Z-19.

‘This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses,’ said John Morton, director of US Immigration and Customs Enforcement (ICE).

‘I am hopeful that the conviction of Pratt & Whitney Canada and the substantial penalty levied against United Technologies and its subsidiaries will deter other companies from considering similarly ill-conceived business practices in the future.

‘American military prowess depends on lawful, controlled exports of sensitive technology by US industries and their subsidiaries, which is why ICE will continue its present campaign to aggressively investigate and prosecute criminal violations of US export laws relating to national security.’


Source: By Tony Osborne in London / Shephard News - 29 June 2012

Photo: United Technologies (UT) is to pay more than $75 million in fines after pleading guilty helping China develop the Z-10 attack helicopter.

(29.06.2012)