ITT fined $100 million for illegal exports

Manufacturer admits to exporting night vision materials to China, Singapore and Britain without U.S. authorization.


WASHINGTON (CNN) -- The leading manufacturer of night vision gear for the Defense Department has admitted sending classified materials overseas and will pay a $100 million penalty, according to federal prosecutors, who say the actions of ITT Corp. have jeopardized the security of U.S. soldiers.

ITT, based in Roanoke, Va., exported classified or sensitive technical data to China, Singapore and Britain without having obtained authorization from the United States, prosecutors said.

The conviction is the first involving a major defense contractor violating the Arms Export Control Act, prosecutors said.

Saying that American soldiers are "the principal victims of ITT's crimes," U.S. Attorney John Brownlee said he has structured the $100 million penalty so that half of the money is spent by ITT to develop a next-generation night vision system and "ensure that our soldiers have the best night vision equipment in the world."

ITT must invest the $50 million over five years to accelerate development of night vision technology, and the government will maintain rights to all technology that is developed under the agreement.

The arrangement will also allow the government to share any technology developed by ITT under the agreement with ITT's competitors, Brownlee said.

Prosecutors said the probe began Aug. 1, 2001, when Defense Department investigators discovered that ITT night vision employees sent a classified military document to Britain.

The company engaged in a "regular pattern of export violations and misrepresentation" to the U.S. government from 1980 to 2005, prosecutors said.

In some cases, information was transferred because the manufacture of laser gear could be done cheaper overseas.

ITT "went to significant lengths to set up an end run" around State Department licensing systems, prosecutors said, including enlisting a front company to export the systems.

The company also fought the government's investigation, Brownlee said, and attempted "to essentially run out the clock on the statute of limitations." He said the company's posture changed in 2005 with the hiring of a new CEO, Steven Loranger, who hired new outside corporate attorneys and instructed the company to cooperate with the investigation.

ITT Corp., whose competitors include Lockheed Martin (up $0.08 to $98.50, Charts) and United Technologies (down $0.34 to $66.07, Charts), has agreed to plead guilty to a count of violating the Arms Export Control Act by illegally sending classified and/or export-controlled information relating to night vision materials to foreign countries. It also will plead guilty to a count of knowingly or willfully omitting material facts from required reports with intent to obstruct a State Department investigation.

As part of the $100 million penalty, ITT will pay a $2 million criminal fine and a $50 million deferred prosecution penalty - to be invested in night vision technology - and will forfeit $28 million to the U.S. government as the proceeds of its illegal actions. ITT will also pay a $20 million penalty to the State Department.

Shares of ITT (down $0.28 to $60.91, Charts) edged lower during afternoon trading on the New York Stock Exchange.

-- By CNN Producer Mike M. Ahlers

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.