​ Company and Subsidiaries Agree to $75 Million Settlement for Illegally Exporting U.S.-Origin Military Software to China

On June 28, 2012, U.S. Department of Justice (DOJ) reported that Pratt & Whitney Canada Corp. (PWC), a Canadian subsidiary of the Connecticut-based defense contractor United Technologies Corporation (UTC), pleaded guilty to violating the Arms Export Control Act (AECA) and making false statements in connection with its illegal export to China of U.S.-origin military software used in the development of China's first modern military attack helicopter, the Z-10.

UTC, its U.S.-based subsidiary Hamilton Sundstrand Corporation (HSC) and PWC have all agreed to pay more than $75 million as part of a global settlement with the DOJ and State Department in connection with the China arms export violations and for making false and belated disclosures to the U.S. government about these illegal exports.  

The court documents allege that, beginning in the 1990s, after Congress had imposed the prohibition on exports to China of all U.S. defense articles and associated technical data, China sought to develop its attack helicopter under the guise of a civilian medium helicopter program in order to secure Western assistance.  The Z-10, developed with assistance from Western suppliers, is China's first modern military attack helicopter.

During the development phases of China's Z-10 program, each Z-10 helicopter was powered by engines supplied by PWC.  Despite the military nature of the Z-10 helicopter, PWC determined on its own that these development engines for the Z-10 did not constitute "defense articles," requiring a U.S. export license, because they were identical to those engines PWC was already supplying China for a commercial helicopter. In addition, PWC knowingly supplied to Chinese entities via PWC Canada the Electronic Engine Control software, made by HSC in the U.S. to test and operate the PWC engines. Because it was modified for a military helicopter application, it was a defense article and required a U.S. export license. 
According to the court documents, PWC knew from the start of the Z-10 project in 2000 that the Chinese were developing an attack helicopter and that supplying it with U.S.-origin components would be illegal, but failed to notify UTC or HSC about the attack helicopter until years later and purposely turned a blind eye to the helicopter's military application. By early 2004, HSC and UTC learned there might an export problem and stopped working on the Z-10 project. 

Today, the Z-10 helicopter is in production and initial batches were delivered to the People's Liberation Army of China in 2009 and 2010.