MTS Systems would pay U.S. $1 million in fines

MTS Systems is negotiating a $1 million settlement to resolve a federal investigation into the sale of equipment several years ago that could have been used to test nuclear weapons in India.

Eden Prairie-based MTS disclosed the anticipated plea agreement with the U.S. Department of Justice in a recent filing with federal regulators.

Neither MTS, its attorney nor the Justice Department would comment Wednesday. In 2003, the Star Tribune reported that a grand jury heard testimony from an employee responsible for the company's compliance with federal export laws governing the sale of test equipment.

"In the plea agreement, the company has agreed that the [Department of Justice] could have proven that [MTS] filed applications with the [Department of Commerce] in 2003 that failed to properly disclose that company employees had collective knowledge of a possible use of the equipment to test the safety of structural components in India's nuclear power plants," MTS said in its filing with the Securities and Exchange Commission. "This constitutes an end use that is prohibited by the United States due to the unregulated nature of the nuclear power plants.

"These omissions made the applications false."

Under the proposed deal, which would be reviewed by a federal judge, MTS would plead guilty to two misdemeanor charges, pay a $400,000 fine, sponsor an export compliance symposium, and improve its export-management and compliance controls.

MTS expects total fines paid to the Justice and Commerce departments would come to about $1 million, plus the cost of its multiyear defense.

MTS, which has 1,600 employees, is a leading global provider of mechanical testing systems and simulation equipment. It had 2007 earnings of $42 million on revenues of $421 million. It is best known for hydraulic machines that shake and roll automobiles, test the strength of aircraft parts and evaluate the performance of medical devices.

In 2003, CEO Chip Emery, an engineer and former Navy officer, disputed that MTS did anything wrong or illegal.

The United States closely monitors exports that could be used for nuclear-weapons research in India and other nuclear-armed countries. Emery said at the time that the equipment was not sent to any of the Indian organizations that are denied certain U.S. equipment without the approval of the U.S. Commerce Department.

In 2006, MTS settled a portion of a Department of Commerce civil complaint and paid a fine of less than $100,000. The company began to discuss terms to resolve the criminal investigation last year.

MTS said in the federal filing that its board concluded there had been "no willful violations" of laws by any of its employees and that it has developed a "model export management system" in recent years and enhanced its related training programs.