The Roanoke Times March 28, 2007
ITT pleads guilty to sharing secrets with China, others
ITT downplayed the information's value.
By Mike Gangloff and Andrew Kantor
A quest to find cheaper suppliers overseas will cost ITT Night Vision, the Roanoke County company whose goggles let U.S. soldiers see on dark or smoky battlefields, $100 million in fines, forfeitures and investment in new technology that it will have to share with competitors, federal investigators said Tuesday.
ITT is scheduled to be in federal court in Roanoke today to formalize an agreement in which it admits giving away classified information -- including secrets that might let an enemy defeat the military's latest-generation night vision technology or come up with its own version.
Besides illegally sending information to companies in China, Singapore, Japan and the United Kingdom, the company also allowed complete sets of night vision gear to disappear by lending them to foreign customers who did not return them, court documents said.
The transfer of classified information could undo an advantage the U.S. military has enjoyed over its opponents for decades, U.S. Attorney John Brownlee said at a press conference where he and other federal officials outlined a five-year investigation of the company they called one of the military's top suppliers.
"Simply put, the criminal actions of this corporation have threatened to turn on the lights on the modern battlefield for our enemies and expose American soldiers to great harm," Brownlee said.
In documents signed Tuesday, ITT agreed to plead guilty to two felonies and accept what Brownlee and other observers called one of the largest penalties of its kind.
The unusual provision that $50 million of the penalty may be spent developing new night vision ideas that ITT will have to share is structured to send a message "both to the company and to others," said Carl Tobias, a professor at the University of Richmond's law school and federal courts watcher.
Mike Hayman, ITT Night Vision's president and general manager for the past year, said Tuesday that the case will not affect employment. The Roanoke County plant has about 1,400 workers.
Employees involved in the federal violations have either left ITT or been removed from their positions, and the company is focused on moving ahead, Hayman said.
Saying he recognized that ITT bears a "special responsibility" because of the nature of its work, Hayman said the company will be a "responsible defense contractor" going forward.
ITT is overhauling a variety of export-related practices, Hayman said, including starting new training programs and hiring an independent monitor chosen by federal officials.
"We're going to continue working hand-in-hand with the government," spokeswoman Courtney Reynolds said.
ITT's stock dropped more than 2 percent in six minutes Tuesday morning, from $61.22 to $59.80, before recovering most of the loss. It closed at $60.82, down 37 cents for the day.
The company released a statement saying it also faced new State Department restrictions on exports of night vision equipment and technical data, and could not ship devices to specific destinations for at least a year. The company estimated that less than 5 percent of its night vision sales would be affected.
ITT's statement said the company remains confident in its financial forecast released in December, when the company announced it was setting aside $25 million toward an upcoming settlement of a federal investigation, and updated in February.
Flanked Tuesday by more than a dozen local, state and federal law enforcement officers and investigators -- and by poster-size graphics of night vision gear and a map showing ITT's web of international connections -- Brownlee said ITT managers had sought to evade technology export restrictions for 25 years.
Federal investigators began to investigate the company's transfers of technical information in August 2001.
A parallel State Department investigation wrapped up in 2004, concluding that ITT did nothing wrong intentionally and assessing an $8 million penalty that was to include the company developing better controls over exports.
But information released Tuesday by Brownlee painted a different picture of the company's actions, saying managers sometimes used a foreign company's U.S. affiliate as a "front" to conceal illegal transfers. In other cases, managers simply ignored restrictions and sent drawings and specifications by fax or mail to overseas companies they hoped would manufacture products more cheaply.
"That information is so secret that you cannot share it with anyone -- and they did that, and they knew they did that," Brownlee said.
The two charges to which ITT agreed to plead guilty are willful export of defense articles without a license, related to transfer of information to offshore suppliers in 2001, and willful omission of statements of material fact in arms exports reports, related to the company's attempts to conceal its loss of equipment lent to customers.
Hayman and Reynolds on Tuesday downplayed the ramifications of the lost technology.
Night vision goggles consist of two major elements, each composed of hundreds of components. The lens collects either visible or infrared light, and the "tube" processes it.
The tube, Reynolds said, "is kind of the engine of our product," and information about it was not compromised.
"We have no direct evidence that it has been reverse-engineered," Hayman said.
Reverse engineering -- taking apart a product to learn how to make your own -- is a time-honored military practice.
In some cases it's to create your own version of a piece of equipment. In others, it's to learn an opponent's capabilities. And what ITT leaked, according to U.S. Attorney's Office spokeswoman Heidi Coy, was related to the absolute top-of-the-line hardware that the U.S. military reserves for itself, not the lower-powered equipment approved for more general sale.
Thus reverse engineering the U.S. version of a piece of equipment could allow an adversary to match U.S. capabilities, something even allies aren't supposed to be able to do.
In the case of China, it's a bigger issue. "We generally think of the U.S. as being about 25 years ahead of the Chinese in terms of technology," said John Pike, director of GlobalSecurity.org, an independent group of military analysts.
Reynolds said that won't happen. "You cannot reverse engineer a goggle by just having a goggle in your possession," she said.
But there are still ways to use the information against the military.
The technical data ITT gave away included specifications for the light interference filter, a set of coatings on the goggles' lenses designed to protect a user from being blinded by a laser. Knowing details of those coatings could be enough to defeat them.
Lasers can operate at a variety of wavelengths, which can be thought of as colors. The lens coatings cannot block every color.
In simple terms, Pike said, "If it was working against red, you'd go to green."
Further, Pike said the coatings used in the night vision goggles would probably also appear in other military hardware. "Something like that would be used generally on battlefield electro-optics," he said, meaning it could be more than night vision equipment that's been compromised.
It's a scenario the Defense Department was aware of. It had classified some of the specifications of the light interference filters as SECRET/NOFORN, meaning that those details could not be shared with any other country, even closest allies.
Brownlee said today's court filing won't end his investigation and that individuals could be charged.
"They don't know this," he said of ITT. "Today is not the last day."
© Copyright 2007, The Roanoke Times
