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Counter Proliferation Investigation Unit
05/22/2008

DIRECTV makes final $5 million payment on $32 million 2003 settlement

Hughes Electronic Corp. and Boeing Co. violated U.S. export laws on satellite technology

WASHINGTON, D.C. - The DIRECTV Group Inc., current owner of Hughes Electronic Corp., on Tuesday made the final $5 million payment to U.S. Immigration and Customs Enforcement (ICE) from a 2003 $32 million settlement for violating the Arms Export Control Act (AECA).

ICE agents (then part of the U.S. Customs Service) initiated an investigation into Hughes Corp. and Boeing Co. (formerly Hughes Space and Communications) in August 1999 for suspected unlicensed transfer of licensable technology and services to the Chinese government.

The investigation determined that Hughes and Boeing provided the Chinese government with detailed launch-failure examinations for two rocket launches in 1995 and 1996. Specifically, the information provided to the Chinese government related to the failed launch of a Long March 2E Chinese rocket carrying an American-made APSTAR II satellite in January 1995, and a Long March 3B Chinese rocket carrying an American-made INTELSAT 708 satellite in February 1996. These rockets provide the platforms to put the satellites into Earth’s orbit.

Hughes and Boeing identified technical solutions for the launch failures and provided the technical data and defense services to the Chinese government without receiving permission from the U.S. Department of State's Directorate of Defense Trade Controls (DDTC). DDTC regulates the export of military commodities, technical data and defense services. ICE is the only investigative agency identified within the International Traffic in Arms Regulations (ITAR) authorized to investigate AECA violations. Ultimately, ICE the investigation revealed 123 civil violations of the AECA and ITAR.

"ICE is uniquely qualified to identify and investigate companies or individuals that try to skirt U.S. export laws," said Mark X. McGraw, special agent in charge of the ICE Office of Investigations in Washington, D.C. "This case in particular demonstrates the possible consequences to our country when these laws are violated."

On March 5, 2003, Hughes and Boeing agreed to pay a $32 million penalty for violating federal export laws. The penalty funds were divided as follows: $12 million paid to DDTC, $12 million for developing internal export-control processes, and $8 million to ICE. ICE previously received a $3 million payment from Hughes and Boeing. The $5 million paid to ICE May 20 represents the remaining portion of the penalty due to ICE.

In January 2002, a related investigation involving Loral, Space and Communications resulted in a $20 million settlement with the Department of State for violations relating to the INTELSAT 708 launch failure.

These illegal actions may have damaged U.S. national security and provided substantial assistance to the Chinese government to improve the performance of its intercontinental ballistic missile (ICBM) program.

In January 2008, the Chinese government announced that it successfully intercepted and destroyed an obsolete Chinese weather satellite 528 miles above the Earth by a Long March 2F rocket with a "kinetic kill vehicle" atop it. This event was the first known use of anti-satellite (ASAT) technology by the Chinese. ASAT technology involves not only destroying or disabling the intended target, but also creating a debris field capable of disabling other satellites in similar orbit.

The U.S. military is highly dependent upon low Earth-orbit satellites for communications, GPS navigation for smart bombs and troops, and for real-time surveillance. The Chinese test highlights the satellites' vulnerability. In a first-strike war scenario, destroying or disabling U.S. military satellites would significantly hinder our military.

Following the 2003 settlement, DIRECTV purchased Hughes Electronic Corp. and assumed responsibility for its debts.