A six-year U.S. probe found that Pratt & Whitney, a key military hardware supplier to the U.S., sold China the software and engines needed to make its first-ever modern attack helicopter.
The Canadian arm of the aircraft engine manufacturer Pratt & Whitney closed a six-year U.S. government probe last week by admitting that it helped China produce its first modern attack helicopter, a serious violation of U.S. export laws that drew a multimillion dollar fine.
At the same time it was helping China, the company was separately earning huge fees from contracts with the Pentagon, including some in which it was building weapons meant to ensure that America can maintain decisive military superiority over China's rising military might.
The Chinese helicopter that benefited from Pratt's engines and related computer software, now in production, comes outfitted with 30 mm cannons, anti-tank guided missiles, air-to-air missiles and unguided rockets. "This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses," Immigration and Customs Enforcement Director John Morton said in a statement released on June 28.
The events are once again raising questions about the circumstances under which major defense contractors might be barred from government work. Independent watchdogs have long complained that few such firms have been barred or suspended, even for egregious lawbreaking, such as supplying armaments or related equipment to a hypothetical adversary.
Nothing in the settlement agreement, in which Pratt & Whitney and two related companies, United Technologies and Hamilton Sundstrand agreed to pay a total of $75 million for multiple violations of export rules, directly threatens Pratt's existing or future government contracting.
It's not the first time that United Technologies -- the parent company of Pratt -- has run afoul of government regulations. An SEC filing by the firm in February, in which the company disclosed the probe's existence, listed two earlier lawsuits filed by the government against the company over its defense-related work; both were listed as still pending in the courts.
The Project on Government Oversight, a nonprofit watchdog group in Washington, ranks United Technologies at number seven on a list of the top 100 contractors cited for misconduct since 1995.
"They've had a smattering of issues over the years -- everything from environmental violations to false claims made to the government," said Neil Gordon, a POGO investigator focusing on government contracting issues. "The military relies on too few companies for these weapons and services. So, they often have few other options when a provider is guilty of misconduct."
Since July 2006, when United Technologies filed statements about its assistance to China that it now admits were erroneous, the Pentagon has awarded more than $1.67 billion in contracts to Pratt and its affiliates, according to a search of the Federal Procurement Data System. And since Pratt & Whitney began its dealings with China in September 2000, the company has received $2.27 billion from the Defense Department.
One of Pratt & Whitney's principal contracts now is to supply jet engines for Air Force's F-35 Joint Strike Fighter jets. The Obama administration waged a major battle to make the company the sole provider of those engines over the last two years, writing General Electric's rival engine contract out of federal budgets in an effort to save money. The Pentagon explained in the White House's proposed fiscal year 2011 budget -- issued Feb. 1, 2010 -- that Pratt & Whitney's engine work was "progressing well," making GE's work superfluous. The Government Accountability Offices subsequently disclosed in December 2010 that engine costs for the jets have risen by 75 percent since 2001.
The jet is being developed in part to ensure that the U.S. military can prevail against any potential adversary, including major powers able to field multiple advanced aircraft. Though officials say there's no reason to expect a U.S. military confrontation with China, the Pentagon said this spring it was reorienting its forces to reassure allies worried about what they regard as a rising Chinese threat.
In addition to prosecuting firms in court, the U.S. government has three options for taking action against defense contractors. Suspension typically bars a company from receiving government contracts for 18 months, and debarment does the same for a longer period -- three years. The State Department can also choose to revoke a company's export license, blocking sales to foreign governments or corporations.
Cheryl Irwin, a spokeswoman for Secretary of Defense's office, said the Defense Department to her knowledge had not taken action against UTC and its affiliates or reviewed the company's contracts in light of last week's settlement.
The prosecution marked "one of the largest resolutions of export violations with a major defense contractor in the Justice Department's history," U.S. Attorney for Connecticut David Fein, who directed the prosecution, announced at a press conference last week. Assistant Attorney General Lisa Monaco, who spoke with Fein in Bridgeport, Connecticut said Pratt had compromised "U.S. national security for the sake of profits and then lie[d] about it to the government."
After closely examining company procedures and internal records, investigators concluded that United Technologies was responsible for a string of 576 export-related violations. What the Defense Department knew and when it knew it is not completely clear.