Company Pays $100,000 for One Transfer of ITAR Technical Data to PRC Citizen Employee

2016/08/09

By: Danielle McClellan

Microwave Engineering Corporation (Microwave) of Andover, MA has pled guilty to one charge of an unauthorized export of a defense article to a foreign person and will pay $100,000 to settle the matter. The company designs and manufactures high-power, broadband passive components, antennas, and waveguides for radio frequency microwave and communication systems. The majority of Microwave’s business comes from orders for custom-designed parts and providing research and development services. Microwave’s products are used in both military and commercial applications and are often integrated into other systems.

The company has submitted over 120 authorizations with DDTC since 2007 and maintained a Technology Control Plan (TCP) which was approved by the Defense Security Service. Between September 2009 and September 2011 Microwave employed a foreign person (citizen of the People’s Republic of China) as a Research Scientist. The employee did obtain an H-1B visa in conjunction with the employment. Microwave’s Export Control Officer explained to the employee’s supervisor that the employee “could only work on general research concepts and could not work on anything related to specific product design or production.” By May 2010 the employee was moved to a segregated work space.

While the employee was employed with Microwave the then president, Dr. Rudolf Cheung, and another engineer repeatedly provided the employee with ITAR-controlled technical data (USML Category XI(b))  without obtaining authorization. Between December 2009 and June 2010 the employee received technical data related to five research and manufacturing projects. Of the five projects, only one actually resulted in a purchase order and finally a developed component in November 2011. Authorization was never obtained from DDTC for this project and the transfer of ITAR-controlled technical data to the employee related to the project was a violation. The Export Control Officer for Microwave became aware of the transfer of technical data for the project in May 2010 and worked to limit the unauthorized transfers.

On January 20, 2012, Microwave disclosed to DDTC the illegal transfer of technical data which also happened to be the day that Dr. Cheung pled guilty to an unrelated criminal violation of the AECA. The Department of State released the following as mitigating factors in the charging letter:

  • Respondent’s submission of a voluntary disclosure under ITAR § 127.12
  • Acknowledging both the charged violation and other potential violations;
  • The exceptional cooperation of the company during the Department’s review of the disclosed conduct; and
  • The reduced likelihood of future violations due to demonstrated improvements in Respondent’s internal compliance program.

The Department also considered countervailing factors.  Most notably:

  • Deficiencies in Respondent’s export compliance program prior to the charged violation;
  • The involvement of a foreign person from the People’s Republic of China, a proscribed destination under ITAR § 126.1 and by statute (Suspension of Certain Programs and Activities, Pub. L. No. 101-246, title IX, § 902,104 Stat. 83 (1990) (amended 1992));
  • The amount of time between discovery of the issues and notification of the Department; and
  • The potential harm to national security.

Charging Letter: http://pmddtc.state.gov/compliance/consent_agreements/pdf/MEC-PCL.pdf

Consent Agreement: http://pmddtc.state.gov/compliance/consent_agreements/pdf/MEC_CA.pdf

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