Major Export Enforcement Cases - Directorate of Defense Trade ...

Department license. In carrying out the conspiracy, Khaki directed Yi and others to contact U.S.
companies about purchasing U.S.-origin goods. Yi and other conspirators then purchased goods
from various U.S. companies and had the goods exported from the United States through China
and Hong Kong to Khaki and others in Iran. Yi and others made false statements to U.S.
companies on behalf of Khaki to conceal that Iran was the final destination and end-user of the
goods. For example, the indictment alleges that Khaki reached out to an individual in China, as
well as to Yi, and to an undercover agent in the United States to obtain 20 tons of C-350
maraging steel from the United States for Khaki’s customer in Iran. In late 2008, Khaki also
reached out to an individual in China about procuring 20 tons of 7075-O aluminum alloy 80mm
rods and 20 tons of 7075-T6 aluminum alloy 150 mm rods from the United States or Europe.
Khaki also allegedly sought to obtain mass spectrometers from the United States, including a
magnetic mass spectrometer for the isotopic analysis of gaseous uranium hexafluoride, which is
used in the gas centrifuge process to enrich uranium. Khaki and Yi also conspired to obtain
other items from U.S. companies that can be used for gas centrifuges, including measuring
instruments, MKS Baratron pressure transducers, vacuum pumps and other accessories, according
to the charge. Khaki also allegedly sought to obtain radioactive source materials from the United
States, including barium-133 source, europium-152 source, cobalt-57 source, and cadmium-109
source. Finally, the indictment alleges the defendants were able to successfully cause the illegal
export of two Twister Speed Lathes as well as nickel alloy 120 wire from the U.S. through China
to Iran. This investigation was conducted by ICE.
Assault Rifle Magazines to Mexico – On July 9, 2012, Mexican national Teodoro Sanchez-Alejo
and Alejandro Rivera-Ruiz of Laredo, Texas, pleaded guilty in the Southern District of Texas to
attempting to illegally smuggle a total of 300 assault rifle magazines to Mexico. The magazines
were designed for AK-47 type assault rifles and M-16/M-4/AR-15 type assault rifles. The
investigation was conducted by ICE, ATF and CBP.
Military Software Used For China’s First Modern Attack Helicopter -- On June 28, 2012, in the
District of Connecticut, Pratt & Whitney Canada Corp. (PWC), a Canadian subsidiary of
Connecticut-based defense contractor United Technologies Corp. (UTC), pleaded guilty to
violating the Arms Export Control Act and making false statements in connection with its illegal
export to China of U.S.-origin military software that was used in the development of China’s first
modern military attack helicopter, the Z-10. In addition, UTC, its U.S.-based subsidiary
Hamilton Sundstrand Corp. (HSC), and PWC all agreed to pay more than $75 million as part of a
global settlement with the Justice Department and the State Department in connection with
various export violations, including those related to the Z-10, and for making false and belated
disclosures to the U.S. government about the illegal exports for the Z-10. A three-count criminal
information was filed against the companies. Count one charged PWC with violating the Arms
Export Control Act for the illegal export of defense articles to China for the Z-10 helicopter.
Specifically, in 2002 and 2003 PWC knowingly and willfully caused HSC military software used
to test and operate PWC engines to be exported to China for the Z-10 without any U.S. export
license. PWC knew from the start of the Z-10 project in 2000 that the Chinese were developing
an attack helicopter and that supplying it with U.S.-origin components would be illegal.
According to court documents, PWC’s illegal conduct was driven by profit. PWC anticipated
that its work on the Z-10 attack helicopter in China would open the door to a far more lucrative
civilian helicopter market in China potentially worth as much as $2 billion to PWC. Count two
of the information charged PWC, UTC, and HSC with making false statements about these illegal
exports to the State Department in their belated disclosures, which did not begin until 2006.
Count three charged PWC and HSC for their failure to timely inform the State Department of the
unlawful export of defense articles to China, an embargoed nation, as required by U.S. export
regulations. This is the first case in which the provisions in count three have been enforced
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