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. Last Updated: 07/27/2016

U.S. Fines Sun for Dual-Use Exports

SAN JOSE, California -- Sun Microsystems Inc. and its subsidiaries are paying $291,000 in fines to settle allegations that the computer giant exported computers to China that were used for military purposes, the U.S. Commerce Department announced.

Santa Clara, California-based Sun is one of the best-known technology companies to be fined in a Commerce Department crackdown on illegal exports, which intensified in the fall. The department's Bureau of Industry and Security is conducting roughly 1,500 investigations into illegal exports.

Federal officials are particularly concerned about shipments of so-called dual-use technology -- computers, software, telecommunication devices and other equipment with both military and civilian uses. Officials say dual-use exports are on the rise to China, India, Russia, Pakistan and other countries with known or suspected nuclear weapons programs.

"The Sun case shows that license conditions matter, and we're aggressively targeting compliance," Assistant Commerce Secretary Julie Myers said Monday. "Companies are on the hook to follow the conditions on the license."

In a statement Monday, Sun emphasized that it settled the case "without admitting or denying the allegations."

"Sun maintains comprehensive procedures to comply with all aspects of U.S. and, where applicable, foreign export control laws," the company said in an e-mail. "All export transactions are closely monitored by these procedures, which have been strengthened to enhance our ability to ensure full and strict compliance with applicable laws."

According to a certified letter that the Commerce Department mailed to Sun chairman Scott McNealy dated Jan. 31, 2002, Sun shipped a powerful E5000 server without the required license in February 1997.

At the time, Sun filed paperwork stating that the server was destined for the "Automated Systems Ltd. Warehouse" in Hong Kong. Federal agents found the machine at the Changsha Institute of Science and Technology in Changsha, in mainland China.

Sending equipment to an address other than the one stated in the original paperwork is a violation of export code. The Changsha Institute offers courses specializing in missile and rocket research and development technology, federal agents say.

In July 1997, according to the letter to McNealy, a Sun employee "altered" a nonproliferation compliance letter and submitted the falsified document in response to a subpoena from the Bureau of Export Administration. Alteration of license documents is also a violation of export code.

Other violations include two servers shipped to Egypt without licenses in March 1998. Those computers ended up with the Egyptian military.

Worldwide Sports & Recreation Inc., which does business as Bushnell Corp., was sentenced in August to a $650,000 criminal fine, a $223,000 civil fine and five years of probation for exporting more than 500 Night Ranger night vision devices to Japan and 14 other countries from 1995 to 1997. Night Rangers must be licensed when shipped anywhere except Canada.

Mountain View, California-based Silicon Graphics Inc. pleaded guilty in January to two felony charges for exporting computers to a Russian nuclear laboratory in 1996. SGI agreed to pay $1 million in criminal fines and $182,000 in civil fines.

According to the Commerce Department, SGI exported four computer systems to Chelyabinsk-70, a nuclear laboratory operated by Russia's Nuclear Ministry.