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Defense Subcontractor Paid for Exposing Arms Secrets by Manufacturing Overseas

Rocky Mountain Instrument Company (RMI) recently entered into a settlement agreement with the DOJ to resolve False Claims Act allegations. RMI, a manufacturer of optical components used in laser and imaging applications, allegedly violated both the Arms Export Control Act and International Traffic in Arms Regulations by manufacturing some components overseas, using foreign workers. Because Department of Defense would not purchased components made in violation of law, RMI violated the False Claims Act as a subcontractor by causing contractors to submit claims for payment to the government. On June 23, 2009, the company filed for Chapter 11 bankruptcy and as a result of this settlement, has agreed to pay the U.S. government $1 million as part of its bankruptcy reorganization.

The Arms Export Control Act (AECA) prohibits the sale of certain sensitive technologies to international parties. The provisions of the AECA are implemented through the International Traffic in Arms Regulations (ITAR). These regulations require that all defense and military related technology materials and information not be shared with foreigners absent authorization with the Department of State. RMI allegedly manufactured optical and laser products overseas, thereby relaying sensitive technical data abroad in violation of both the AECA and the ITAR.

The company also faced a criminal violation of the AECA and the ITAR, resulting in an additional $1 million fine and a five year probationary term. The DOJ press release can be found here.