3D Systems Corporation To Pay Up To $27m Settlement For Alleged Violations of U.S. Export Laws
The U.S. Department of State has concluded an administrative settlement with 3D Systems Corporation, to resolve alleged violations of the Arms Export Control Act (AECA), 22 U.S.C. § 2751 et seq., and the International Traffic in Arms Regulations (ITAR), 22 C.F.R. Parts 120-130. The Department of State and 3D Systems have reached the settlement following an extensive compliance review by the Office of Defense Trade Controls Compliance in the Department’s Bureau of Political-Military Affairs.
The Department of State and 3D have reached an agreement pursuant to ITAR § 128.11 to address alleged ITAR violations occurring during the period of 2012 – 2018 involving unauthorized exports of technical data to Germany, unauthorized exports and retransfers of technical data to the People’s Republic of China (PRC), a proscribed destination under ITAR § 126.1, unauthorized reexports of technical data to Taiwan, unauthorized exports of technical data to foreign-person employees, and the failure to maintain ITAR records.
The settlement demonstrates the Department’s role in strengthening U.S. industry by protecting U.S.-origin technical data from unauthorized exports. The settlement also highlights the importance of obtaining appropriate authorization from the Department before exporting ITAR-controlled technical data.
Under the terms of the 36-month Consent Agreement, 3D Systems Corporation will pay a civil penalty of $20,000,000. The Department has agreed to suspend $10,000,000 of this amount on the condition that the funds will be used for Department-approved Consent Agreement remedial compliance measures to strengthen 3D’s compliance program. In addition, the Company will engage an external Special Compliance officer for at least the first year of the Consent Agreement and will conduct two external audits of its ITAR compliance program and implement additional compliance measures.
The Company cooperated with the Department’s review and has been undertaking corrective actions to address this historic conduct by expanding the scope of its internal investigation to cover exports of technical data; implementing remedial compliance measures; selling its business unit primarily responsible for ITAR activity; and signing a statute of limitations agreement tolling the statutory period. For these reasons, the Department has determined at this time that it is not appropriate to administratively debar 3D Systems Corporation.
Further Penalty of $4.54 Million For Allegedly Transmitting Export-Controlled Technical Data To China
In addition 3D Systems has agreed to pay the United States up to $4.54 million to resolve allegations that it violated the False Claims Act by improperly transmitting export-controlled technical data to China in violation of the export control laws of the United States in connection with certain NASA and DOD contracts, announced U.S. Attorney for the Northern District of Texas Leigha Simonton.
In parallel agreements also related to alleged export violations, the company has agreed to the $20 million above administrative settlement with the U.S. Department of State, and a further $2.77 million administrative settlement with the U.S. Department of Commerce.
Per the terms of a civil settlement executed with the Department of Justice 3D Systems Corporation agreed to pay $2.27 million in restitution to the federal government within the next 30 days. The company may be required to pay an additional $2.27 million in penalties under the Justice Department settlement agreement, for a total of up to $4.54 million, if it fails to pay at least that amount in civil penalties to the Department of State and the Department of Commerce in connection with the parallel administrative settlements referenced above.
According to the Justice Department Settlement Agreement, 3D Systems – through its Quickparts subsidiary – completed on-demand manufacturing projects both directly and indirectly on contracts issued by DOD and NASA, including for projects involving technical or other data potentially classified under and controlled by the International Emergency Economic Powers Act, the Arms Export Control Act, the Export Administration Regulations, and/or the International Traffic in Arms Regulations (collectively, the Export Control Laws).
Generally, the Export Control Laws prohibit certain controlled items and/or intellectual property from being exported to certain foreign countries, including the People’s Republic of China, without a license or authorization from the appropriate federal agencies. In the Justice Department settlement agreement, the United States alleged that between January 1, 2012 and December 31, 2017 3D exported certain items and/or intellectual property to China without the appropriate license or authorization in violation of the Export Control Laws in connection with certain contracts issued by DOD and NASA in violation of the False Claims Act.
The claims resolved by the settlement are allegations only. There has been no determination of liability.