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RMI Settles ITAR Case for $1M, Exits Bankruptcy
Nov 2010
LAFAYETTE, Colo., Nov. 2, 2010 — Optical components maker Rocky Mountain Instrument Co. will pay the federal government $1 million to settle civil charges related to the illegal export of sensitive military information for the manufacture of certain optical and laser products overseas, the Justice Department announced last week. In a related matter, RMI announced it has emerged from Chapter 11 bankruptcy protection after receiving approval from creditors and court confirmation of its reorganization plan.

The civil settlement was reached between Rocky Mountain Instrument (RMI), based in Lafayette, Colo., and the federal government and a client of Phillips & Cohen LLP. RMI designs and manufactures optical components and assemblies for laser and imaging applications by the military and in the aerospace, medical and other fields.

The case apparently is the first time the False Claims Act has been used in connection with violations of International Traffic in Arms Regulations (ITAR) and the Arms Control Export Act, said Claire M. Sylvia, a San Francisco attorney with Phillips & Cohen.

RMI pleaded guilty to a related criminal charge in June and was sentenced at that time to forfeit $1 million and spend five years on probation (See RMI Fined $1M for Illegal Exports). The criminal plea agreement said that RMI exported from 2005 to 2007 prisms and technical data related to various optics used in military applications to Turkey, South Korea, China and Russia without having first obtained from the US Department of State a license or written authorization for such exports as required under ITAR.

The civil settlement covers a related allegation that RMI caused defense contractors to submit false claims for payment to the Pentagon in violation of the False Claims Act by illegally exporting technical data that was used to manufacture parts used in certain military equipment the contractors sold to the Pentagon.

The False Claims Act is the government's primary law enforcement tool for combating fraud against the government. The law prohibits companies from submitting claims for payment to the government that are false or fraudulent.

RMI's full resolution of the US Department of Justice investigation, which began over three years ago, was key to its emergence from Chapter 11 bankruptcy, the company said in a statement Oct. 18. Another factor was the strong financial performances of both RMI and its affiliate, RMI Laser LLC, a maker of industrial laser marking systems that did not enter bankruptcy protection.

RMI said it filed for protection on June 24, 2009, amidst the crash of the real-estate market, the economic crisis and uncertainty regarding the ongoing federal investigation into its export compliance procedures (See RMI Files for Bankruptcy).

"I am confident that we will continue to grow and serve critical high technology markets both here and abroad. We are happy to be able to honor all of our commitments to creditors, who have supported us throughout the years," said RMI CEO Steven Hahn in a statement.

For more information, visit:

aerospaceAmericasArms Control Export ActAsia-PacificbankruptcyBusinessChapter 11Chinacivil chargesClaire Sylviacompliancecriminaldefensedefense contractorsDepartment of StateFalse Claims Actfederal investigationguiltyimagingindustrialInternational Traffic in Arms RegulationsITARmedicalMiddle Eastmilitary informationoptical componentsopticsoverseaspenaltyPrismsprobationRMIRocky Mountain InstrumentRussiasettlementSouth KoreaSteven Hahnturkeylasers

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