Statement Regarding Boeing and Hughes Electronics Consent Agreement with State Department on Export Compliance

Mar 05, 2003, 00:00 ET from Boeing Integrated Defense Systems

    ST. LOUIS, March 5 /PRNewswire/ -- Hughes Electronics Corporation and
 Boeing Satellite Systems, Inc., formerly known as Hughes Space and
 Communication Co. (HSC), announced today that they have reached a settlement
 with the U.S. Department of State over administrative charges relating
 primarily to HSC's involvement in reviews of two failed launches of commercial
 communications satellites on Chinese rockets in 1995 and 1996.  The charges of
 violations of the Arms Export Control Act and implementing regulations were
 issued by the State Department in a December 26, 2002 letter.  In October
 2000, Hughes sold HSC to Boeing and retained responsibility for resolving HSC
 pre-acquisition export matters.
     The Consent Agreement between the companies and the State Department
 provides for a civil penalty in the amount of $32 million, including
 $4 million credited for the companies' past expenditures on export program
 enhancements and $8 million that will be invested by the companies in the
 future to strengthen their export compliance programs.  Under the terms of the
 agreement, the $20 million cash portion of the penalty is to be paid in eight
 equal installments over the next seven years.  In addition, Hughes and Boeing
 Satellite Systems each will appoint a separate third party to serve as a
 Special Compliance Officer (SCO) for export compliance.  The duties of the SCO
 will include monitoring compliance with the Consent Agreement and oversight of
 exports regulated by the State Department including, in particular, exports to
 the People's Republic of China and several other countries.
     Jack Shaw, President and Chief Executive Officer of Hughes Electronics
 Corporation, and Dave Ryan, Vice President and General Manager of Boeing
 Satellite Systems, issued the following joint statement regarding the
     "Hughes Electronics Corporation and Boeing Satellite Systems acknowledge
 the nature and seriousness of the offenses charged by the Department of State,
 including the harm such offenses could cause to the security and foreign
 policy interests of the United States."
     The companies acknowledge that HSC should have sought and obtained a State
 Department license before disclosing to Chinese nationals or to the
 international insurance community any launch failure analysis, or disclosing
 any information or providing any assistance pertaining to design, development,
 operation, maintenance, modification or repair of launch vehicles, systems, or
 facilities.  The companies further acknowledge that assistance to a launch
 operator in any of these areas could aid in the development of missile system
 technology and, thus, have a negative impact on national security.  The
 companies accept full responsibility and express regret for not having
 obtained licenses that should have been obtained, notwithstanding Hughes'
 prior public comments to the contrary.
     Both of our companies are committed to vigorous compliance with the laws
 and implementing regulations and have made, and will continue to make,
 substantial investments in export compliance training, processes and
 personnel.  Both companies and their employees acknowledge the critical
 importance to America's national security of, and the need for strict
 compliance with, U.S. export control laws.
     We are pleased that an agreement resolving this matter has been reached
 with the U.S. Government.  Hughes Electronics Corporation and The Boeing
 Company have a long history of working with the U.S. Government to prevent the
 unauthorized disclosures of valuable national security information and
 technical data to foreign persons.  Furthermore, we recognize that it is
 crucial to the security and foreign policy of the United States to prevent the
 unauthorized provision of protected information or defense services that would
 or could promote the illicit development of missile system technology.
     As the companies were informed in January 2002 by the U.S. Department of
 Justice that it had terminated its investigation, this settlement resolves all
 outstanding issues regarding these matters.  The settlement does not suspend,
 limit or otherwise restrict the rights of either company to pursue licensed
 exports to China or other countries as otherwise permitted by law.

SOURCE Boeing Integrated Defense Systems