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Thursday, October 1, 1998 - Page updated at 12:00 AM

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Boeing Dodges Stiffer Fine, Resumes Sea Launch Project -- No National Security Breach In Satellite-Launching Program; Criminal Charges Aren't Likely

Seattle Times Washington Bureau

WASHINGTON - In more than 200 instances, Boeing gave rocket secrets to overseas partners in its sea-based satellite-launching project, but the aerospace giant escaped a $103.5 million federal fine because national security was never breached.

By agreeing to a $10 million fine, cooperating with a federal investigation and revamping a security-compliance plan, Boeing yesterday dodged a much stiffer penalty and a three-year suspension of the Sea Launch program for violating federal export laws, State Department officials said.

Boeing still faces a "current, ongoing criminal investigation into this matter," according to a consent decree signed by State Department Undersecretary John Holum and Boeing Space Division President Jim Albaugh.

However, because national security probably was not breached, the investigation is unlikely to result in the filing of charges, a Justice Department official said.

"We are pleased that the situation is concluded, and we're delighted to have the license reinstated," said Tim Dolan, spokesman for Boeing's space division in Seal Beach, Calif.

Boeing admitted no wrongdoing, but agreed part of the fine would be set aside for a $2.5 million program to ensure there are no violations of export-control laws in its dealings with companies from Russia, Ukraine, Norway and Germany.

Sea Launch's export licenses, which were suspended July 27, were reinstated, and Boeing said it still plans the maiden launch in the first quarter of next year. One company official suggested that Boeing soon might schedule a demonstration launch for the project, which plans to use a converted oil platform and a ship at the equator to send satellites into orbit.

The State Department's Office of Defense Trade Controls found 207 instances of violations of federal export-control laws and notified Boeing on Sept. 2 that each of these violations could result in a $500,000 violation and a three-year debarment of the Sea Launch licenses.

Between January 1994 and Jan. 20 of this year, Boeing illegally exported "defense articles" and "defense services," according to proposed charges sent to Boeing last month.

The specifics of what exact technology was transferred was not made public. Defense articles were defined as technical data outlined in the federal munitions act, and defense services were defined as "furnishing of assistance to foreign persons in the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, processing or use of defense articles."

In most cases, Boeing violated the terms of the export licenses it had obtained for the Long Beach, Calif.-based Sea Launch program by not getting prior approval of technology-transfer-control plans from the U.S. Defense Technology Security Administration.

Under guidelines of the consent decree, Boeing must institute a computerized document-control system to ensure the federal government will have prior review of any sensitive technology shared with the companies in foreign countries.

Two other U.S. companies, Hughes Space & Communications and Loral Space & Communications, are being investigated for similar allegations that they transferred sensitive satellite information to China.

James Grimaldi's phone message number is 202-662-7455. His e-mail address is: jgrimaldi@seattletimes.com

Copyright (c) 1998 Seattle Times Company, All Rights Reserved.

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