United Technologies Fined $75 Million for Chinese Helicopter Caper
United Technologies agreed to pay a $75 million fine yesterday under a deferred prosecution agreement over Pratt & Whitney Canada’s violation of US Arms Control laws. The company helped the Chinese build an attack helicopter.
In an email that the Justice Department said was sent on Sept. 12, 2001, Pratt Canada’s export manager cautioned that the company had to be careful that the helicopter program with China not be presented as military. [...]
By 2004, executives in the U.S. offices of Pratt and United Technologies became aware of the possible breaches.
“I would say the ’2 seat version’ is code for an attack helicopter,” a United Technologies legal official wrote in an email. “This has the possibility to be very controversial…Any concerns?”
One of the key features of the story is how the violation came to light. An outside organization conducted its own research on the company’s activities which pushed Pratt Canada to reveal the problems to the US government:
The companies only disclosed the breach to the U.S. authorities in July 2006 after a Scandinavian group that offers advice on socially responsible investing raised the issue with United Technologies, saying they were “carrying out in-depth research,” according to an email cited by the Justice Department.
The Justice Department said the company’s disclosures between July and September 2006 contained a number of false statements, including that officials at UTC and its two units companies were unaware the Z-10 program was military in nature.
Under a deferred prosecution agreement, United Technologies will pay $20.7 million to the Department of Justice and another $55 million to the State Department for hundreds of other arms export law violations that turned up in the wake of the Chinese helicopter investigation. Up to $20 million of that can be suspended if applied to compliance measures.
All of this underscores our continuing emphasis on developing a First to Know capability within your organization. Disclosures made voluntarily carry much greater weight with regulators.