In a rare occurrence, the top executive of a major Minnesota corporation has pleaded guilty in U.S. District Court to violating U.S. export laws.
In a negotiated plea to two misdemeanors, MTS Systems Chairman Sidney Emery avoided what could have been a felony prosecution. That could have meant the company's loss of critical export licenses and possible prison terms for officials at the publicly held maker of testing equipment that sells about $500 million worth of equipment around the globe annually. Emery acknowledged to U.S. Magistrate Judge Franklin Noel that the export license applications made in 2003 and 2004 failed to disclose that MTS employees knew the equipment could end up in the hands of India's unregulated nuclear power industry, which has been linked to the country's weapons industry. U.S. companies are barred from shipping to such firms. "We did not knowingly commit a fraudulent act," said Emery, who also admitted to making mistakes. "We'd like a chance to rectify that."
MTS was fined $400,000, given two years on probation and told to step up internal controls and sponsorship of an export forum with the U.S. Commerce Department to help other companies learn from MTS' mistakes.
Emery pointed out that MTS, because of questions from Commerce Department officials and its own inquiries, never shipped the equipment in 2003 and 2004, and has since established a model "export-control system."
MTS also will pay $400,000 in fines to settle related civil charges levied by the Commerce Department.
"MTS takes full responsibility for these violations of law," MTS Chief Executive Laura Hamilton said Wednesday in a letter to shareholders. She succeeded Emery as CEO in January. "Over the past six years, we have thoroughly reviewed all aspects of our export management system to verify that our internal controls ensure compliance and eliminate the risk of errors in the future."
MTS drew the Commerce Department's attention because of a December 2000 shipment to an Indian intermediary who had suspected ties to the nuclear industry. MTS knew the subsidiary was on a Commerce Department watch list, but shipped the equipment without an export license or Commerce Department approval. In 2006, MTS and the Commerce Department settled administrative charges of that shipment containing a "thermal-mechanical fatigue test system" that eventually ended up at the Indira Gandhi Center for Atomic Research.
In early 2007, the Commerce Department banned Megatech Engineering and Services, MTS' former Indian representative, for 15 years from participating in certain U.S. export transactions.
