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Episode 315 — Boeing Pays $51 Million for ITAR Violations

Boeing continues to struggle with its core business activities. As troubles mount for Boeing, it  is clear that it continues to suffer from real and pervasive culture issues that have been reflected in serious safety failures, financial difficulties, regulatory violations and serious reputational damage.  Boeing’s troubles permeate every part of its organization — from the board to senior executives, to its operations and its overall ethics and compliance commitment.  As a result Boeing stands at an important crossroad — will it make a real commitment to change, reform and ethics and compliance, or will it continue to limp along suffering repeated incidents of harm?

In its latest (mis)adventure, Boeing fell victim to a State Department fine for $51 million for violations of a number of export controls, including basic licensing requirements for exports to China and Russia. Boeing voluntarily disclosed the violations to the Directorate of Defense Trade Controls (“DDTC”) in the State Department. 

The violations of the International Traffic in Arms Regulations (“ITAR”) included illegal exports to foreign employees and contractors who work in more than 15 countries; a trade compliance specialist fabricating an export license to illegally ship defense items abroad; and violations of the terms and conditions of other export licenses, among other things.

The DDTC’s $51 million penalty is the largest administrative penalty impose for ITAR violations since it imposed a $79 million penalty against BAE Systems in 2011.  Under the terms of the settlement, Boeing must pay $27 million to the DDTC within two years and use the remaining $24  million to improve its compliance program and procedures.  In addition, Boeing is required to hire a DDTC-approved special compliance officer to oversee its compliance with ITAR for the next three years, and that officer will regularly report to the DDTC on Boeing’s progress.

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