UTC-State Department Settlement Summary

This concise one-page document is an overview and Settlement Summary of the June 28, 2012, US State Department, Directorate of Defense Trade Controls (DDTC) Consent Agreement with United Technologies Corporation (UTC). It parallels a June 28, 2012, US Department of Justice (DOJ) action against UTC and its subsidiaries that resulted in a guilty plea and $75 million dollar criminal fine. This template summary is a factual overview of UTC’s five-hundred and seventy-six alleged unauthorized exports and transfers of defense articles, to include technical data, and unauthorized provision of defense services to various countries, including proscribed destinations. To better appreciate the two cases (one criminal and one civil); you must carefully read the entire settlement package on the DDTC website at www.pmddtc.state.gov/compliance/consent_agreements/UTC.html Details on the DOJ case are at www.justice.gov/opa/pr/2012/June/12-nsd-824.html. This summary consolidates material from the US Department of State’s Proposed Charging Letter, Consent Agreement and Order. It is a much more concise and consistent summary in a format that is particularly useful for C-level executives and trade compliance professional’s education/training at all levels. Thoroughly reading settlements and monitoring various US Government enforcement and compliance resources should be an integral part of any trade compliance professional’s reading and an essential element in any comprehensive Trade Compliance Program. One-page summaries like these help get the word out in a more bite-size way and allow readers to more quickly digest and compare individual cases.

1. United States Department of State (DOS) - Settlement Summary

(As of: 112512)
UNITED TECHNOLOGIES CORPORATION (UTC)

Includes subsidiaries: Pratt & Whitney (PW) Canada ; Hamilton Sundstrand Corporation;
Sikorsky Aircraft Corporation; Deco Aerospace, Inc. ; Kidde Technologies, Inc.; and PW Rocketdyne

[Consent Agreement (CA) Date: 062812]


Trade compliance professionals are encouraged to read all the available related documents at www.pmddt c.state.gov/compliance/consent_agreements/UTC.html.


Charges


Description
Monetary Fines


Mandated Action Plan Highlights
Actual

Remedial


General








1-13

14-24

25
26

27-84

85
86-136
137
138-574

575-576
Five-hundred and seventy-six (576) alleged
violations of the Arms Export Control Act (AECA)
and International Traffic in Arms Regulations
(ITAR) for unauthorized export and transfer of
defense articles, to include technical data (TD),
and unauthorized provision of defense services
to various countries, including proscribed
destinations.

- Unauthorized exports to Canada of Electronic
Engine Control (EEC) software
- Unauthorized re-transfer of modified EEC
software to the People’s Republic of China (PRC)
- Failure to file export information
- Failure to immediately notify (the DOS) of
sale/transfer to a proscribed country
- Unauthorized exports of defense articles due to
incorrect jurisdiction self-determination
- Unauthorized export to Venezuela of test stand
- Unauthorized exports of TD and automation tools
- Unauthorized export of TD to the PRC
- Failure to comply with the terms and
administrative requirements of agreements
- Unauthorized exports of defense articles to
Singapore


$55,000,000

(Civil Penalty)




* Including
$20,000,000
- Appoint qualified individual from outside UTC as Special
Compliance Officer (SCO) with approval of the Direc tor,
Defense Trade Controls Compliance (DDTC)
- Promote and publicize existing reporting mechanis ms for
reporting allegations of AECA and ITAR violations
- Within 12 months of the CA date institute strengt hened and
uniform corporate export compliance procedures
- Continue to implement a comprehensive and reasonably
uniform automated export compliance system throughout
operating divisions, subsidiaries and business unit s
- Develop and implement policies, procedures and tr aining to
ensure accurate identification & tracking of ITAR c ontrolled TD
- Conduct a study to identify feasible improvements to maximize
automation of the identification and tracking of IT AR-controlled
TD throughout the information technology infrastruc ture
- Review and verify the export control jurisdiction of all ITAR-
regulated hardware exported in the past five years from
operation divisions, subsidiaries and business unit s
- Conduct two audits by an outside consultant with AECA/ITAR
expertise and approved by the Director, DDTC (The 1
st
by 12
months and the 2
nd
within 36 months of the term of the CA)
- While CA is in effect, arrange and facilitate wit h minimum
advance notice onsite reviews by the DDTC
- 3 months prior to CA conclusion, submit a written certification
that all CA mandated compliance measures are implemented

SCO RESPONSIBILITIES in three principal areas:
Policy
and

Procedure
includes: jurisdiction and TD determinations, acce ss controls, re-exports/re-transfers,
agreement management, preventing, detecting and reporting violations. [See CA, (n)(1) i-xii, pages 8-1 0]; Specific Duties include: oversight of CA mandated
compliance measures, allocation of resources, expe nditures, incorporating ITAR compliance into busine ss plans, implementing policies & procedures, repor ting
violations and potential violations. [See CA, (n)(2 ) i-vii, pages 10-11]; Reporting includes: tracking, evaluating and reporting of IT AR violations and compliance
resources to UTC’s Board of Directors, UTC’s Senior Vice President and General Counsel and the Director, DTCC. [See CA, (n)(3) i-iv, pages 11-12]
NOTABLE CA QUOTES:
“
Respondent’s subsidiaries repeatedly discovered and disclosed violations to the
(State)

Department, in some cases finding
that reported remedial measures failed to prevent or detect additional similar violations.” [See Proposed Charging Letter (PCL), page 2, firs t paragraph
(para)] “The violations demonstrate a systemic, corporate-wide failure to maintain effective ITAR controls and require immediate, comprehensive,
effective remedial action across Respondent’s many operating units and subsidiaries.” (See PCL, VIOLATIONS, page 5, second para)
DEPARTMENT OF JUSTIC
E

(DOJ)
CRIMINAL
CASE:
In a separate related DOJ global settlement, UTC and affiliates Pratt & Whitney Canada and Hamilton
Sundstrand Corporations also pleaded guilty to viol ating the AECA and making false statements in connection with illegal exports to the PRC and agreed to pay the
DOJ an additional $20.7 million fine. [For complet e details, see DOJ Press Release (PR), 062812, at www.justice.gov/opa/pr/2012/June/12-nsd-824.html].


RELATED US GOVERNMENT REMARKS:
“
…
any corporation that willfully sends export controlled material to an embargoed nation will be prosecuted
and punished, as will those who know about it and fail to make a timely and truthful disclosure. (David B. Fein, US Attorney, District of Connecti cut, DOJ PR,
062812); “This case is a clear example of how the illegal e xport of sensitive technology reduces the advantages our military currently possesses.”
(John Morton, Director, US Immigration and Customs Enforcement, Department of Homeland Security, DOJ PR, 062812) 

OTHER FACTS/ITEMS OF INTEREST: According to hoovers.com, UTC is a public company and #48 of the FORTUNE 500. UTC and its subsidiaries develop
technologies, systems and services for the aerospac e, construction and security industries. UTC opera tes in more than 70 countries. Over half of UTC’s sales are
outside the US.
UTC 2011
facts (Source: http://finance.yahoo.com/q/ks?s=UTX +Key+Statistics): Revenue: $58.08 billion; Employee s: 199,900.




Trade Compliance Solutions


CA will remain
in effect for 4 years.

*
$5 million of the $55 million
penalty is suspended for self-
initiated pre-CA Remedial
compliance measures.

*
$15 million of the $55 million
is suspended for Remedial
compliance measures over
the 4 years of the CA.

Total fine of $55 million
equates to $95,486.11
per alleged violation.

The worse case criminal fine
could have been
$576 million.

Actual civil penalty
of $55 million is about 9.5%
of maximum that could
have been imposed.

for criminal violations.
There are no restrictions on distribution of this d ocument exactly as is with complete/proper citation /attribution.
For changes, inputs, suggestions, please contact Jo hn Priecko at 703
-
895
-
1110 or [email protected].