Department of State Holds Boeing Responsible for Export Violations Committed by Acquired Company
 
February 18, 2003
 

The State Department’s Office of Defense Trade Controls (ODTC) has formally charged Boeing with 123 violations of U.S. export control laws arising out of conduct committed by Hughes Space & Communications Company. In an October 2000 deal, Boeing acquired Hughes Space & Communications Company from Hughes Electronics Corporation, a company that has been under investigation for the illegal export of satellites and satellite/launcher-related technology to China. Under the terms of the Boeing-Hughes deal, Hughes is responsible for any penalties or fines that result from the conduct that led to the investigation. Nevertheless, the State Department has insisted that Boeing is a responsible party as a result of having bought the company, and thus has included it in the charges. The December 26 charging letter also notes that possible penalties include a three-year ban on export privileges. Such a penalty was not anticipated by the parties at the time of acquisition, and if imposed, would exceed the terms of the purchase. Some industry analysts consider the charges to be unfair because significant confusion existed about the application of export regulations to commercial satellite deals at the time of the alleged violations. Officials of both companies continue in negotiations with ODTC.