BRIDGEPORT, Conn. (CN) – Pratt & Whitney Canada, a subsidiary of Pentagon contractor United Technologies Corp., pleaded guilty to criminal charges that it helped China develop its first modern attack helicopter and lied about it to authorities, federal prosecutors said.
The Justice Department filed a three-count criminal information against UTC, Pratt & Whitney Canada and Hamilton Sundstrand.
They are accused of violating the Arms Export Control Act in the illegal export of defense articles to China for the Z-10 helicopter; of making false statements to the U.S. government about their belated disclosures of the illegal exports; and of failing to timely inform the U.S. government of the export of defense articles to China, which is banned.
The defendants agree to pay more than $75 million in penalties.
Pratt & Whitney pleaded guilty to the first two counts. Prosecutors recommended that prosecution of United Technologies and Hamilton Sunstrand on the second count and PWC and HSC on the third count be deferred for 2 years, the Justice Department said in a statement.
The United States has banned the export of defense technical data to China since the Tiananmen Square massacre in June 1989. Prosecutors said China tried to develop its attack helicopter under the guise of a civilian program, to get assistance from Western suppliers.
“During the development phases of China’s Z-10 program, each Z-10 helicopter was powered by engines supplied by PWC,” prosecutors said in the statement. “PWC delivered 10 of these development engines to China in 2001 and 2002. Despite the military nature of the Z-10 helicopter, PWC determined on its own that these development engines for the Z-10 did not constitute ‘defense articles,’ requiring a U.S. export license, because they were identical to those engines PWC was already supplying China for a commercial helicopter.”
Prosecutors said that since the HSC-made Electronic Engine Control software was modified for a military helicopter application, it was a defense article and required a U.S. export license, but PWC knowingly had the software exported to China for the Z-10 without one.
In 2002 and 2003, six versions of the military software were illegally exported from HSC in the United States to PWC in Canada, and then to China, where it was used in the PWC engines for the Z-10.
“PWC knew from the start of the Z-10 project in 2000 that the Chinese were developing an attack helicopter and that supplying it with U.S.-origin components would be illegal,” prosecutors said. “When the Chinese claimed that a civil version of the helicopter would be developed in parallel, PWC marketing personnel expressed skepticism internally about the ‘sudden appearance’ of the civil program, the timing of which they questioned as ‘real or imagined.’ PWC nevertheless saw an opening for PWC ‘to insist on exclusivity in [the] civil version of this helicopter,’ and stated that the Chinese would ‘no longer make reference to the military program.’ PWC failed to notify UTC or HSC about the attack helicopter until years later and purposely turned a blind eye to the helicopter’s military application.”
By 2004, HSC stopped working on the Z-10 after learning there might by a export problem, prosecutors said. Court documents indicate Pratt & Whitney’s conduct was motivated by profit, that the work on the Z-10 would lead to the more lucrative civilian helicopter market in China that Pratt & Whitney estimated was worth up to $2 billion.
Only after an investor group asked UTC about the illegal activity in 2006 did it make disclosures to the State Department, disclosures that contained false statements.
“Among other things, the companies falsely asserted that they were unaware until 2003 or 2004 that the Z-10 program involved a military helicopter,” prosecutors said. “In fact, by the time of the disclosures, all three companies were aware that PWC officials knew at the project’s inception in 2000 that the Z-10 program involved an attack helicopter.”
The first Z-10s were delivered to the Chinese Army in 2009, with its primary mission anti-armor and battlefield interdiction. It is armed with a 30-mm cannon, anti-tank guided missiles, air-to-air missiles and unguided rockets.