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Loral fined for missile aid to China

By Alex Frew McMillan

HONG KONG, China -- U.S. satellite maker Loral Space & Communications Ltd. has agreed to pay a $14 million fine for passing missile technology to China.

The satellite and communications company will pay the fine over seven years to the U.S. State Department, through its Space Systems/Loral Inc. subsidiary.

The subsidiary neither admitted nor denied the charges but has agreed to pay the fine. It contends the information was "mistakenly sent to the Chinese."

The investigation started as a criminal case, after the U.S. government adjudged Space Systems/Loral might have broken export laws when it gave technical help to China, on its rockets.

Loral helped China investigate the February 1996 crash of a Chinese Long March missile that was carrying a Loral satellite.

Such a move requires government clearance. But in June that year, Loral disclosed that it had not received it.

Regret over not seeking approval

On Wednesday, Loral again said it regretted failing to seek approval in aiding China. A 1999 congressional probe determined that Loral gave China valuable information that helped it improve its missiles.

Loral has boosted its compliance program, at a cost of $6 million, in cooperation with the U.S. government. It also says it has improved training and staffing.

The settlement will reportedly help Loral move ahead on a satellite sale to the Chinese government that has been on hold since 1999.

Loral has already built Chinasat-8, a communications satellite that China ordered.

The State Department and the White House are now expected to give Loral's dealings with China the go-ahead.

A fourth-quarter hit

New York-based Loral Space & Communications specializes in communications and satellites, particularly for weather surveillance.

The company was created in 1996, when Lockheed Martin paid $9 billion for all but the satellite operations of Loral Corp. Lockheed Martin also owns 15 percent of Loral Space & Communications.

Loral in turn is the managing partner and owns a 39 percent stake in Globalstar L.P., which sells satellite-phone service around the world.

Globalstar last month unveiled "satphone" services in Afghanistan and the rest of central Asia. It says the satphones, an extension of its Russian satphone service, have proved popular with media companies and aid workers operating in the aftermath of the U.S.-led war in Afghanistan.

The Loral settlement had been expected for some months. Still, Loral stock dropped 5.1 percent to $2.98 in New York trade on Wednesday.

Loral said the fine will be reflected in its fourth-quarter profits. The company says the U.S. Department of Justice has now closed its case on the 1996 incident.




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