ESTERLINE TECHNOLOGIES SETTLES STATE DEPARTMENT ALLEGATIONS OF UNAUTHORIZED EXPORTS

FROM:  U.S. STATE DEPARTMENT

State Department Concludes Settlement of Alleged AECA and ITAR Violations by Esterline Technologies Corporation

Media Note

Office of the Spokesperson

Washington, DC

March 6, 2014

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The U.S. Department of State concluded an administrative settlement with Esterline Technologies Corporation of Bellevue, Washington, to resolve alleged violations of the Arms Export Control Act (AECA) (22 U.S.C. § 2778) and the International Traffic in Arms Regulations (ITAR) (22 C.F.R. Parts 120-130). Esterline agreed to enter into a consent agreement with the Department pursuant to ITAR Section 128.11. The agreement was reached following an extensive compliance review by the Department’s Office of Defense Trade Controls Compliance (DTCC) in the Bureau of Political-Military Affairs. This settlement addresses hundreds of alleged civil violations of the AECA and ITAR, and highlights the Department’s responsibility to protect U.S. defense articles, including technical data, and defense services from unauthorized use.

DTCC determined that Esterline demonstrated inadequate corporate oversight and failed to establish an adequate AECA and ITAR compliance program in its defense trade activity. Over the course of many years, Esterline and its operating divisions, subsidiaries, and business units disclosed to the Department hundreds of alleged AECA and ITAR violations consisting of unauthorized exports of defense articles, including technical data, and defense services; unauthorized temporary imports of defense articles; violations of terms and conditions of licenses or approvals granted; exports of defense articles in excess of quantity and value authorized; improper use of exemptions; and failure to file or filing of incorrect documentation with the Automated Export System.

DTCC’s compliance review concluded that many of these alleged violations occurred because Esterline did not properly establish jurisdiction over its defense articles and technical data, did not properly administer licenses and agreements, and had incomplete or poor recordkeeping. The alleged violations involved defense articles, technical data, and defense services that are or were controlled at the time of the alleged violations by the U.S. Munitions List under the following current or former categories: IV(h), VI(i), VI(f), VI(g), VII(g), VII(h), VIII(h), VIII(i), XI(a), XI(c), XI(d), XII(e), XII(f), XV(e), XV(f), XX(c), and XX(d).

Under the terms of a three year Consent Agreement with the Department, Esterline will pay a civil penalty of $20 million. The Department agreed to suspend $10 million of this amount on the condition the Department approves expenditures for self-initiated, pre-Consent Agreement remedial compliance measures and Consent Agreement-authorized remedial compliance costs. Additionally, Esterline will engage a Special Compliance Official to oversee the Consent Agreement, and Esterline will conduct two audits of its compliance program as well as implement additional compliance measures, such as improved policies and procedures, and additional training for employees and principals.

Esterline disclosed the alleged AECA and ITAR violations resolved under this settlement to the Department, acknowledged the serious nature of the alleged violations, cooperated with the Department, and implemented or has planned extensive remedial measures. For these reasons, the Department determined that an administrative debarment of Esterline was not appropriate at this time.

FORMER HONEYWELL EMPLOYEE DEBARRED BY STATE DEPARTMENT FOR DOCUMENT FABRICATION

FROM:  U.S. STATE DEPARTMENT 
State Department Debars Former Honeywell International Employee for Export Violations
Media Note
Office of the Spokesperson
Washington, DC
November 27, 2013

The State Department issued an order administratively debarring LeAnne Lesmeister, former compliance officer at Honeywell International, Inc. (Honeywell), from participating in any activities that are subject to the International Traffic in Arms Regulations (ITAR)(22 C.F.R. parts 120-130) for violations of the Arms Export Controls Act (AECA)(22 U.S.C. § 2778) and the ITAR.

Honeywell voluntarily disclosed to the Department numerous ITAR violations carried out by Ms. Lesmeister, its senior export compliance officer in Clearwater, Florida, between 2008 and 2012. Ms. Lesmeister, who had worked in export compliance at Honeywell for twenty-seven years, used her position to circumvent Honeywell’s export compliance program in the fabrication of various export control documents that Ms. Lesmeister presented as Department of State authorizations. Relying on these falsified authorizations, Honeywell exported defense articles, including technical data, and provided defense services to various foreign persons without Department approval in violation of the AECA and ITAR.

The State Department’s Office of Defense Trade Controls Compliance in the Bureau of Political-Military Affairs performed an extensive compliance review of the disclosed violations. The results of that review indicated no direct harm to U.S. foreign policy or national security. The nature of the violations, however, prompted the Deputy Assistant Secretary for Defense Trade Controls in the Bureau of Political-Military Affairs to formally charge Ms. Lesmeister with twenty-one violations of the AECA and ITAR in connection with her creation and use of Department authorizations, containing false statements or omitting and misrepresenting material facts for the purpose of exporting, retransferring, or furnishing defense articles, technical data, or defense services, and causing the unauthorized export of technical data and provision of defense services.

This administrative debarment is the result of the Department’s first institution of an administrative proceeding by referral of a charging letter before an Administrative Law Judge for consideration pursuant to ITAR § 128.4. The referral and debarment followed Ms. Lesmeister's failure to answer the formal charges.

Acknowledging the serious nature of the violations, Honeywell cooperated fully with the Department’s review and implemented remedial measures to resolve the conditions that allowed the misconduct of one employee, in a position of authority, to bring about significant export compliance violations.

This administrative proceeding highlights the range of potential penalties that may be imposed by the Department on entities or individuals for ITAR violations. Individuals, if found culpable, may not be shielded by their employers for their independent violations. Those persons tasked with an entity’s export responsibilities, should be vigilant in their compliance with all export control regulations.

Under the terms of the administrative debarment, Ms. Lesmeister will be prevented from participating directly or indirectly in any activities that are subject to ITAR for a period of three years and until an application for reinstatement is submitted and approved by the Department. The Department determined that civil penalties were not appropriate at this time.

STATE DEPARTMENT CONCLUDES EXPORT VIOLATIONS BY MEGGITT-USA, INC.

FROM:  U.S. STATE DEPARTMENT, 
Department of State Concludes Settlement of Export Violations by Meggitt-USA, Inc.
Media Note
Office of the Spokesperson
Washington, DC
August 23, 2013

The State Department concluded an administrative settlement with Meggitt-USA, Inc. ("Meggitt") a Delaware corporation, and subsidiary of Meggitt PLC, a corporation organized under the laws of England and Wales and ultimate parent of the Meggitt group of companies, to resolve alleged violations of the Arms Export Controls Act ("AECA")(22 U.S.C. § 2778) and the International Traffic in Arms Regulations ("ITAR")(22 C.F.R. parts 120-130). The settlement was resolved pursuant to ITAR Section 128.11 wherein Meggitt agreed to enter into a consent agreement with the Department.

The settlement was reached after an extensive compliance review by the Department of State’s Office of Defense Trade Controls Compliance in the Bureau of Political-Military Affairs of multiple disclosures submitted by Meggitt group subsidiaries involving hundreds of potential civil violations of the AECA and ITAR, of which sixty-seven are alleged as charges. This settlement highlights the Department’s responsibility to protect U.S. defense hardware and technology from unauthorized use and ensure compliance with the AECA and ITAR.

Over the course of several years, Meggitt subsidiaries and business units disclosed to the Department hundreds of ITAR violations beginning in the mid-1990s, largely involving the unauthorized export of defense articles, including technical data, the unauthorized provision of defense services, violation of the terms of provisos or other limitations of license authorizations, and the failure to maintain specific records involving ITAR-controlled transactions.

Under the terms of the 30-month consent agreement with the Department, Meggit is assessed a civil penalty of $25 million, of which $3 million will be paid in installments and the remainder suspended on the condition the Department approves expenditures for self-initiated, pre-consent agreement remedial compliance measures and consent agreement-authorized remedial compliance costs. In addition, an Internal Special Compliance Official will be engaged by Meggitt to oversee the consent agreement, which will also require the company to implement additional compliance measures, including enhanced policies and procedures, to review external audit programs and conduct audit measures pursuant to the agreement, to review jurisdictional determinations of commodities, and report on system upgrades and improvements.

Meggitt disclosed nearly all of the ITAR violations resolved in this settlement voluntarily to the Department, many of which were the result of post-acquisition review by Meggitt, acknowledged their serious nature, cooperated with Department reviews, and implemented or has planned extensive remedial measures throughout its subsidiaries. For these reasons, the Department determined that an administrative debarment or suspension of Meggitt was not appropriate at this time.

U.S.-AUSTRALIA DEFENSE TRADE COOPERATION TREATY FACT SHEET

Photo:  The Sydney Opera House.  Credit:  CIA World Factbook

FROM: U.S. STATE DEPARTMENT

The U.S.-Australia Defense Trade Cooperation Treaty
Fact Sheet
Office of the Spokesperson
Washington, DC
November 14, 2012

The U.S.-Australia Defense Trade Cooperation Treaty supports the longstanding alliance between our two nations by facilitating industry collaboration and innovation, allowing U.S. and Australian troops to get the best technology in the fastest way possible to meet shared security challenges. Australia is already one of the United States’ top defense trading partners. In FY2011 Foreign Military Sales to Australia amounted to US$3.9 billion. The Treaty will further enhance our bilateral defense partnership.
The Treaty was signed in 2007 and the United States Senate provided its advice and consent to ratification in 2010. This October, the Australian Parliament passed legislation required to move forward with implementation of the treaty.

The Treaty allows for the export of certain defense articles and services between the United States and Australia without the need for export licenses or other International Traffic in Arms Regulations (ITAR) approvals. By streamlining the export process and eliminating the requirement to prepare and obtain export licenses or other approvals, this treaty will enhance defense trade between the United States and Australia.

The Treaty also supports Australian defense industries’ ability to team with U.S. partners or directly bid on U.S. Government proposals, which will create healthy competition in the defense sector.

The Treaty will create an "Approved Community" of government and private sector entities that may export and transfer certain U.S. Munitions List items for pre-approved facilities in Australia and the United States.

Through the creation of an Approved Community of users, the Treaty will make it faster and easier for U.S. and Australian defense industry to collaborate on developing and fielding future technologies needed to support U.S. and Australian government security interests.

ALPINE AEROSPACE CORPORATION SETTLES ARMS CONTROL VIOLATIONS WITH U.S. STATE DEPARTMENT

FROM U.S. STATE DEPARTMENT

The Department of State has reached administrative agreement with Alpine Aerospace Corporation and TS Trade Tech Incorporated of New Jersey to resolve violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR) related to the export of significant military equipment.

The two companies, which share common ownership, procure and sell replacement parts to the aerospace industry. Many of the parts procured and sold by the Companies are designated as defense articles pursuant to § 38 of the AECA and the United States Munitions List (USML), § 121.1 of the ITAR and require authorization from the Department prior to export. Following an October 2010 filing of criminal information in the District Court for the District of New Jersey, the companies approached the Department to propose an administrative settlement and disclose additional violations.

From July 2005 through January 2007, the two companies arranged several foreign sales without obtaining the proper approvals prior to exporting, and in some instances, cited licenses that did not cover the companies' exports. In addition, the companies failed to obtain the appropriate non-transfer and use certifications for export of significant military equipment.

The Department proposed the following charges, which are resolved by the concluded agreements along with additional violations disclosed to the Department. Alpine engaged in six exports of parts for use on a Hawk missile system, and in a separate violation, failed to obtain a DSP-83 Non-Transfer and Use Certificate for these exports. Alpine cited an existing export license on export control documents for the exports which did not, in fact, authorize the export of parts for the Hawk missile system. TS Trade engaged in one export of aircraft parts and associated equipment without authorization.

Under the terms of the agreements, Alpine agrees to a civil penalty of $30,000 and TS Trade Tech agrees to a civil penalty of $20,000. The civil penalties are to be suspended on the condition that they are to be used for pre- and post-Consent Agreement expenditures for remedial compliance measures. Any portion of the penalty that is not so used will be forfeited at the conclusion of the thirty-month term of the agreements. The companies will implement additional remedial compliance measures, provide additional training to staff and principals, and will undergo two external audits of their compliance programs.

The companies have acknowledged the seriousness of the ITAR violations and have cooperated with the Department, expressed regret for their actions and taken steps to improve their compliance with law and regulations. For these reasons, the Department has determined that an administrative debarment of the companies is not appropriate at this time.