World

China Export Indictments

October 20, 1999 / 2:27 PM EDT / AP

McDonnell Douglas Corp. and a Chinese government-owned company were indicted Tuesday on charges they tried to circumvent U.S. export controls and ship sophisticated machine tools to China for use in military production.

The China National Aero-Technology Import Export Corp., or CATIC, was the first Chinese government entity ever charged with violating U.S. export controls.

The Chinese Foreign Ministry, in a statement, denied wrongdoing and asked Â"the American side ... to seek truth through facts in dealing with this problem and resolve this case appropriately so as not to impact the improvement and development of China-U.S. relations.Â"

The indictment comes during a sensitive period in U.S.-Chinese ties. The FBI is redoing its investigation of alleged Chinese nuclear espionage. And while China seeks admission to the World Trade Organization, Customs Service agents are conducting several major investigations of other potential export violations involving China and aerospace equipment, officials said.

The case involved McDonnell Douglas' sale in 1994 of 19 surplus machine tools to the Chinese company for $5 million. The U.S government licensed the export of the tools only for use in a joint Chinese-McDonnell Douglas program to build 40 McDonnell Douglas civilian airliners in China.

Six of the sophisticated machine tools were diverted, in violation of license restrictions, to the Nanchang Aircraft Corp., where China makes Silkworm cruise missiles and A-5 attack aircraft. The diversion was discovered before the tools were misused in China, according to U.S. Attorney Wilma Lewis and a 1996 report by Congress' General Accounting Office.

Lewis told a news conference, Â"This criminal conspiracy was a serious attempt to circumvent the export control laws designed to protect the national security of the United States.Â"

In addition to conspiracy, the defendants Â– including several individuals involved with the case -- were charged with false statements to the U.S. government about the intended use for the machine tools that McDonnell Douglas sold CATIC after its Columbus, Ohio, plant closed. In Columbus, the tools had been used to bend and shape steel for the U.S. B1 bomber and the Peacekeeper and Titan missiles.

Â"U.S. Customs agents, with the assistance of Commerce Department investigators, found clear and convincing evidence that CATIC and McDonnell Douglas knowingly diverted sensitive technology for Chinese military use,Â" Customs Commissioner Raymond W. Kelly said.

Calling the allegations groundless, Beijing criticized what it called Â"anti-China forces in the United StatesÂ" that have tried to Â"raise an anti-China waveÂ" in America.

If convicted, the companies could face fines of up to $10 million apiece. Individuals indicted could be imprisoned for up to five years and fined up to $250,000.