ITT Pleads Guilty to Giving Away Tech Secrets, to Implement Broad Reforms

March 28, 2007
ITT Corp. (White Plains, N.Y.) reached a final settlement relating to an investigation that began in 2001 regarding ITT Night Vision's compliance with

ITT Corp. (White Plains, N.Y.) reached a final settlement relating to an investigation that began in 2001 regarding ITT Night Vision's compliance with International Traffic in Arms Regulations (ITAR). ITT will plead guilty to one ITAR violation relating to the improper handling of sensitive documents, and one ITAR violation of making misleading statements. As part of the plea agreement, the company will pay a $2 million criminal fine, forfeit $28 million in illegal proceeds to the U.S. government and pay $20 million to the State Department.

The case was prosecuted by Assistant Attorney General for the National Security Division Kenneth Wainstein and U.S. Attorney for the Western District of Virginia John Brownlee, along with the Defense Criminal Investigative Service (DCIS) and U.S. Immigration and Customs Enforcement (ICE). ITT is the U.S. military's 12th largest systems supplier, and is the first major defense contractor convicted of a criminal violation under the Arms Export Control Act that was passed in 1976.

"The sensitive night vision systems produced by ITT Corporation are critical to U.S. war-fighting capability and are sought by our enemies and allies alike," said Assistant Attorney General Wainstein in a news release. "ITT's exportation of this sensitive technology to China and other nations jeopardized our national security and the safety of our military men and women on the battlefield. We commend the prosecution team and ITT Corporation for developing a plea agreement that addresses the violations of the past, ensures compliance in the future, and serves as a strong warning to others who might be tempted by the profits of such illegal exports."

"The superior quality of our night vision technology gives the United States Armed Forces an enormous advantage on the battlefield. Sending sensitive information on these advancements overseas without the necessary licenses puts that advantage in jeopardy," said U.S. Attorney John Brownlee. "We hope the agreement reached with ITT will send a clear message that any corporation who unlawfully sends classified or export-controlled material overseas will be prosecuted and punished. In addition, the remedial action plan that is part of this agreement is designed to bring ITT Corporation back into full compliance, which will benefit both the corporation and the United States."

The company has agreed to continue to invest in research and development for its night vision products to provide the most advanced night vision technology to the U.S. military and its allies. The value of these investments is $50 million over the next five years. In addition, the company has been engaged in a comprehensive review of its policies, practices, training programs and procedures, including complete audits of all business units. New monitoring approaches, communications and training initiatives have already begun and more are expected.

"We have been cooperating with the government in this investigation and we have voluntarily disclosed all discrepancies that our internal reviews revealed," said Steven Loranger, company chairman, president and CEO, in a company report. "While this settlement relates to the actions of a few individuals in one of our 15 business units, we regret very much that these serious violations occurred. I want to reinforce, however, that the heart of our night vision goggles--the tube--is secure. No technical information regarding the tube was ever compromised."

"These violations have made it clear that we had gaps in our compliance programs. The steps we are taking now will address these issues in a comprehensive way," he added.

The company has begun implementing stricter control measures such as: Insuring that all personnel understand and follow applicable regulations governing the export of critical technology, naming a new compliance officer, instituting a required ethics and compliance training program for all employees worldwide, and developing a comprehensive computer tracking program to monitor all packages sent from ITT facilities.

"ITT plays a vital role in national and international security through its defense products, space and related services. We recognize that any company that supplies high technology equipment to the Defense Department bears a special responsibility," Loranger said. "We will meet this obligation with the compliance measures we've already instituted and the additional reforms to be put in place as part of this agreement."

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