Responding to U.S. State Department charges, Boeing said yesterday it is not responsible for misconduct by its California-based satellite division that took place in the mid-1990s, before Boeing purchased the satellite operations (see GSN, Jan 2).

Boeing acquired the satellite division in 2000 from Hughes Electronics, a unit of General Motors, the Los Angeles Times reported today.

“It is important to remember that these charges relate to events that occurred in the 1990s when Hughes Space and Communications Co. was under different management and before Boeing acquired the satellite business,” according to Randy Brinkley, president of Boeing Satellite Systems.

As part of the purchase, Hughes “retained responsibility for resolving these China matters and for paying any resulting fines and penalties,” Boeing said (Peter Pae, Los Angeles Times, Jan. 3).

Boeing also said it had spent millions of dollars to improve operations at the satellite division since the acquisition.

“Boeing Satellite Systems is now at what we believe to be the cutting edge of export compliance systems among aerospace companies,” Brinkley said (Agence France-Presse, Jan. 3).

State Department spokesman Richard Boucher disagreed with Boeing’s assertion that it held no responsibility. “Boeing bought the company from Hughes after all this had happened, but they’re still the responsible party to respond to these claims,” Boucher said.

The two companies have 30 days to respond to the State Department’s 34-page charging letter, which accuses the satellite division of violating 123 military export rules by transferring rocket technology to China, Boucher said.  The companies can request a hearing on the charges, which come in response to violations of the Arms Export Control Act and the International Traffic in Arms Regulations, according to Boucher.

“Hughes Electronics Corporation and Boeing Satellite Systems took numerous actions in violation of established export controls and prohibitions and restrictions and of the bilateral agreement between the United States and China,” Boucher said.  “The number and the substance of the charges reflect the seriousness of the violations,” he added (Federal News Service transcript, Jan. 2).

Settlement Near?

Several analysts said the charging letter may only be a first step to a settlement.  Loral Space and Communications settled a similar issue with the State Department early last year (see GSN, Jan. 10, 2002); Boeing and Hughes should be able to work out a deal as well, according to Paul Nisbet, an analyst at JSA Research.

“If they can work it out with Loral, they can certainly do so with Boeing,” Nisbet said (Melissa Allison, Chicago Tribune, Jan. 3).

“I see it as a step toward settling the whole thing,” said Marshall Kaplan, director of space programs for the research company Strategic Insight (Pae, Los Angeles Times).

Although the State Department issued a charging letter against Loral, actual charges were never filed and U.S. officials have complimented the company on its cooperation.

If a settlement is not reached, the fine would not be too much trouble for Boeing or Hughes to handle, according to Nisbet.

“In the scheme of things, it’s just a modest hiccup that’s not of much concern to investors,” he said (Allison, Chicago Tribune).

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