Contractor Fined $8M for Decade Worth of Arms Export Violations -- Yet Still Eligible for Future Contracts

A New York company has settled with the U.S. government for $8 million over “numerous” violations of the Arms Export Controls Act and the International Traffic in Arms Regulations over the past decade — but will not be blocked from future government contracts.

“The settlement was reached after an extensive compliance review by the State Department’s Office of Defense Trade Controls Compliance in the Bureau of Political-Military Affairs and addresses hundreds of alleged civil violations of the AECA and ITAR. This settlement highlights the Department’s responsibility to protect sensitive U.S. defense hardware and technology from unauthorized use,” the State Department said.

Aeroflex “demonstrated inadequate corporate oversight and a systemic and corporate-wide failure to properly determine export control jurisdiction over commodities, leading to numerous violations during the period of 1999-2009.”

“Over the course of many years, Aeroflex business units disclosed to the Department hundreds of ITAR violations, largely consisting of unauthorized exports resulting from the failure to properly establish jurisdiction over defense articles and technical data. The violations included unauthorized exports and re-exports of ITAR-controlled electronics, microelectronics, and associated technical data and causing unauthorized exports of ITAR-controlled microelectronics by domestic purchasers,” the department continued.

Under a two-year consent agreement with the State Department, Aeroflex will pay $8 million in civil penalties — however, $4 million is suspended “on the condition the Department approves expenditures for self-initiated, pre-Consent Agreement remedial compliance measures and Consent Agreement-authorized remedial compliance costs.”

The company will also be subject to two audits of its compliance program during this period.

“Aeroflex disclosed nearly all of the ITAR violations resolved in this settlement voluntarily to the Department, acknowledged their serious nature, cooperated with Department reviews, and since 2008 has implemented or has planned extensive remedial measures, including the restructuring of its compliance organization, the institution of a new testing protocol of its commodities, and a revised company-wide ITAR compliance program,” the State Department said. “For these reasons, the Department determined that an administrative debarment of Aeroflex was not appropriate at this time.”

Aeroflex received a $15.2 million contract modification from the Defense Department in June for ground radio maintenance automatic test systems with Marine Corps Systems Command at Quantico.