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Firms fined over China dealings

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NEW YORK (Reuters) -- Hughes Electronics Corp. and Boeing Co.'s Boeing Satellite Systems unit have agreed to pay a $32 million civil penalty arising from allegations the companies illegally shared sensitive space technology with China in the 1990s.

Hughes and the Boeing unit, then known as Hughes Space and Communication Co., were charged by the State Department last December 26 with 123 violations of the Arms Export Control Act and the International Traffic in Arms Regulations.

The U.S. State Department said the charges related to satellite matters involving China, including failed launches of two commercial communications satellites -- the Long March 2E rocket carrying the APSTAR II Spacecraft in January 1995, and the Long March 3B rocket carrying the INTELSAT 708 Spacecraft in February 1996.

"Hughes Electronics Corp. and Boeing Satellite Systems acknowledge the nature and seriousness of the offenses charged by the Department of State, including the harm such offenses could cause to the security and foreign policy interests of the United States," said Jack Shaw, Hughes's chief executive, and Dave Ryan, Boeing Satellite's vice president and general manager, in a joint statement.

The penalty, agreed to with the State Department on Tuesday, includes payment of $20 million in cash over seven years, $8 million to strengthen export compliance programs, and $4 million credited for past expenses on export program enhancements.

Hughes and the Boeing unit will appoint a third party to monitor export compliance in China and countries of the former Soviet Union.

Hughes, based in El Segundo, California, and owned by General Motors Corp is the largest satellite TV operator. Boeing, based in Chicago, bought Hughes' satellite operations in 2000.

Hughes and the Boeing unit said Hughes Space should have sought and obtained a State Department license before disclosing to China any analysis of launch failures, or providing information or assistance relating to the design and construction of satellite-related products.

The companies, which had long denied wrongdoing in the case, said they "accept full responsibility and express regret" for not having obtained necessary licenses.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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