Chinese subsidiary exec of U.S. firm sentenced for illegal export to Pakistan

A former managing director of PPG Paints Trading Co. in Shanghai, a wholly-owned Chinese subsidiary of U.S.-based PPG Industries was sentenced Thursday to a year in prison for conspiring to illegally export high-performance epoxy coatings to nuclear reactors in Pakistan.

The sentencing of Xun Wang for violating the International Emergency Economic Powers Act was announced by U.S. Attorney Ronald C. Machen Jr. in the District of Columbia and Eric L. Hirschhorn, undersecretary for industry and security at the Commerce Department.

Wang, 52, was sentenced by U.S. District Judge Emmett G. Sullivan, who also ordered Wang to pay a $100,000 fine and perform 500 hours of community service.

“Xun Wang was the most senior PPG Paints Trading corporate executive involved in this unlawful export scheme,” said Mr. Machen. “This prosecution has already held corporations accountable for their violations of U.S. export laws, but today’s prison sentence shows our determination to hold corporate executives personally responsible when they compromise our nation’s security in the pursuit of corporate profits.”

Wang pleaded guilty to the conspiracy in November 2011 and agreed, as part of her plea, to cooperate with the government’s investigation. Her cooperation led to the Dec. 3 guilty plea by the China Nuclear Industry Huaxing Construction Co., Ltd.

Mr. Machen said that plea is believed to be the first time that a People’s Republic of China corporate entity has entered a plea of guilty in a U.S. criminal export matter. As part of its plea agreement, Huaxing agreed to the maximum criminal fine of $2 million, half of which will be stayed pending its successful completion of five years of corporate probation.

The Wang investigation was led by the Commerce Department Bureau of Industry and Security (BIS).
In November 2011, Wang also settled an administrative proceeding brought by the Commerce Department regarding the same allegations of her criminal case. As part of her settlement agreement, Wang agreed to pay a civil penalty of $200,000 with another $50,000 payment suspended, and to be placed on the Commerce Department’s “denied persons” list for a period of five years with an additional five years suspended.

As a denied person, Wang will be prohibited from directly or indirectly participating in any transaction involving a Commerce Department-regulated commodity, software or technology that is exported, or to be exported, from the U.S.

“This case clearly demonstrates our resolve to hold individuals responsible for violations of our export-control laws,” said Mr. Hirschhorn. “Individuals can no longer hide behind a corporate veil. BIS special agents will continue to leverage our unique authorities to pursue violators anywhere in the world.”

In both the criminal and administrative cases, Wang is accused of conspiring to export, re-export and transship high-performance epoxy coatings to the Chashma II nuclear power plant in Pakistan.

The plant is owned and operated by the Pakistan Atomic Energy Commission, the science and technology organization responsible for Pakistan’s nuclear program. In November 1998, following Pakistan’s first successful detonation of a nuclear device, the Commerce Department added the commission, as well as its subordinate nuclear reactors and power plants, to the list of prohibited end users under the Export Administration Regulations.

Wang’s conviction is related to the Dec. 21, 2010, guilty plea of PPG Paints Trading to a four-count information in the D.C. court. Together, PPG Paints Trading and PPG Industries paid $3.75 million in criminal and administrative fines and more than $32,000 in restitution.

According to Wang’s plea documents, in January 2006, PPG Industries sought an export license for the shipments of coatings to Chashma II. In June 2006, the Commerce Department denied the application. Wang and her co-conspirators then agreed on a scheme to export, re-export and transship PPG Industries’ high-performance epoxy coatings from the U.S. to Chashma II via a third-party distributor in China, without obtaining the required export license from Commerce.

The plea documents said that from June 2006 through March 2007, Wang and her co-conspirators intentionally concealed from PPG Industries that three shipments of the coatings would be delivered to Chashma II.