Three Arrested for Illegal Scheme to Export Controlled Data and Defraud the Department of Defense (DOJ Action) Those involved. Phil Pascoe; Monica Pascoe; Scott Tubbs; and Quadrant Magnetics, a U.S.-based provider of magnets and magnetic-based materials. Charges with penalties. Wire Fraud (maximum of 20 years); Exporting Technical Data without a license (maximum of 20 years); Smuggling Goods out of the United States (10 years); and Conspiracy to Defraud the United States (5 years). What happened? On November 9, Phil Pascoe, Monica Pascoe, and Scott Tubbs were indicted. The DOJ alleges the defendants conspired to send to China dozens of technical data drawings controlled under the International Traffic in Arms (ITAR). The drawings, which were sent as attachments to emails, related to submarine periscopes, multi-spectral targeting systems, infrared imaging systems, and the F-16 radar. The United States maintains an absolute embargo on ITAR exports to China. In addition, the indictment alleges that Quadrant Magnetics imported and sold magnets from China to two U.S. government contractors but misrepresented that the items were magnetized in Louisville, Kentucky. Those magnets were then included in products sold to the Department of Defense in violation of the DFARS specialty metal clause.
Read the press release here.
Notably. Companies doing business with China should know that exports do not require physical objects moving across borders. As was the case here, emailing attachments containing technical data covered by the ITAR can result in criminal penalties. Moreover, companies doing business with the government should understand that DFARS requirements apply to subcontractors. Here, DFARS 225.252-7009, the specialty magnets clause, applied to Quadrant Magnetics just as it applied to the prime contractor. Chinese Government Intelligence Officer Sentenced to 20 Years in Prison for Espionage Crimes, Attempting to Steal Trade Secrets from Cincinnati Company (DOJ Action) Those involved. Yanjun Xu, Deputy Division Director of China’s Ministry of State Security (MSS), a Chinese intelligence agency responsible for counterintelligence, foreign intelligence and political security. Charges with penalties. Conspiracy to Commit Economic Espionage; Conspiracy to Commit Trade Secret Theft; Attempting Economic Espionage by Theft or Fraud. Xu was convicted of two counts of conspiracy and attempting to commit economic espionage and two counts of attempting to steal trade secrets. He was sentenced to 20 years in prison. What happened? Xu, acting undercover, worked with a General Electric (GE) Aviation employee to attempt to obtain technical information related to GE Aviation’s fan blades and relay it to the Chinese government. Xu, presenting himself as a Jiangsu Science and Technology Association (JSTA) representative, lured the GE employee into giving a presentation about his work and offered to pay his expenses. After the trip, Xu continued to communicate with the GE employee and asked the employee several questions related to the fan blades.
2 International Trade Enforcement Roundup |
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