Management within Pratt & Whitney was skeptical of the civilian helicopter program's "sudden appearance," according to United Technologies' deferred prosecution agreement. But the company nonetheless saw the claim as providing a useful opening: On November 13, 2000, a Pratt & Whitney manager for Asia Marketing emailed two other executives that whether the civil program was "real or imagined," the company could bid for an exclusive role.
Prosecutors, in a court filing, said the company turned a "blind eye" to any doubts because it was hungry to earn up to $2 billion from the civilian program. Canadian authorities, after being told about the parallel Z10C helicopter, approved the export of 10 engines.
Pratt & Whitney's Canadian subsidiary next asked its sister subsidiary Hamilton Sundstrand -- headquartered in the United States -- to write the software needed to control the engines, without saying that the purpose was to equip a military helicopter. From January 2002 to October 2003, Hamilton Sundstrand exported 12 versions of the software to Pratt & Whitney, which sent six of those on to China for use in the development model of the Z10 helicopter, according to the settlement agreement.
Pratt & Whitney executives also kept the military end-use of its engines and software secret from some of the company's engineers. When two were dispatched to China in March 2003 to observe the helicopters, one asked a Chinese official, "where are the other 10 seats," meaning those intended for civilian passengers? The helicopter they saw had only two seats in tandem -- typical of an attack model -- and mock weapons on the hull. According to federal prosecutors who interviewed the engineers, the Chinese official smiled and said, in effect, that it had always been an attack helicopter.
The engineers reported their observation -- and their concerns -- to Pratt & Whitney's manager for Asian marketing upon returning to the company's Montreal headquarters. But no restrictions were imposed by the firm and they kept working on the project.
When Hamilton finally discovered the military use of its software in Feb. 2004, it shut down its production in less than a week. Pratt, still holding out hope for the large civilian helicopter contract, picked up where Hamilton Sundstrand left off and exported its own versions of the software to China through June 2005.
United Technologies made a limited disclosure about its involvement to the State Department in 2006, after an institutional investor said it was researching the company's role in helping China's military and threatened to disinvest. The company has now admitted that disclosure -- which claimed the company believed at the outset there were dual civilian and military helicopter programs -- was inaccurate.
In the end, Pratt got little more for its troubles than a federal probe. In early 2006, China's Aviation Industry Corporation told Pratt & Whitney the supposedly parallel civilian helicopter development would be scrapped. Instead, China said it would instead build a much larger civilian helicopter, too large for the engines built by Pratt & Whitney.