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Rocket Scientist Arrested Under FCPA

The U.S. Department of Justice reported the arrest in Virginia on Wednesday of a physicist accused of bribing Chinese government officials in exchange for contracts to supply space-launch technology that he illegally exported to China.

The DOJ said Shu Quan-Sheng, 68, a native of China, naturalized U.S. citizen, and PhD physicist, was arrested in Newport News by FBI agents. Shu controls AMAC International, a high-tech company based in Newport News with an office in Beijing. He appeared in U.S. District Court for the Eastern District of Virginia, Norfolk Division.

Shu has been charged with bribing and attempting to bribe a foreign government official in violation of the Foreign Corrupt Practices Act. He’s also charged with violating the Arms Export Control Act by unlawfully exporting a defense service and a defense article to foreign persons without prior approval. He faces up to 10 years in prison for each violation of the Arms Export Control Act, and five years in prison for violating the FCPA.

The complaint alleges that Shu offered bribes to government officials in the PRC’s 101st Research Institute to induce the award of a $4 million contract for a hydrogen liquefier to a French company that Shu and AMAC represented. The 101 Institute, as it’s known, is part of the China Academy of Launch Vehicle Technology. The French company received the contract in January 2007 and was obligated to pay Shu a success fee of ten to fifteen percent.

According to the complaint, beginning around January 2003, Shu worked with several PRC government entities involved in the development of a space launch facility on China’s Hainan Island. The facility is designed to house liquid-propelled heavy payload launch vehicles to send space stations and satellites into orbit, as well as provide support for manned space flight and future lunar missions.

The DOJ says the liquefier contract was the first of perhaps five projects by AMAC and the French company related to ground-based support for launch vehicles at the new Hainan Island facility. According to the DOJ, Shu provided technical expertise and purchasing assistance for components critical to the use of liquefied hydrogen — including cryogenic pumps, valves, transfer lines and refrigeration equipment. He was also instrumental in arranging for PRC officials to visit various European space launch facilities and hydrogen production / storage facilities.

The DOJ says Shu lacked “the required licenses or written approvals with respect to brokering, export of defense articles, or proposals to provide defense services to the PRC.”

Shu was investigated by the FBI, with assistance from U.S. Immigration and Customs Enforcement, and the U.S. Department of Commerce, Office of Export Enforcement. The Counterespionage Section of the Justice Department’s National Security Division also assisted.

Shu’s arrest is similar in many ways to arrests earlier this month of U.S. citizens Nam Nguyen, Joseph Lukas, Kim Nguyen, and An Nguyen, along with their Philadelphia-based company, Nexus Technologies (see our post here). They were charged with one count of conspiracy to violate the Foreign Corrupt Practices Act and four substantive counts of violating the FCPA. They’re accused of paying bribes to officials at Vietnam’s Ministries of Transport, Industry and Public Safety to secure contracts to supply high-tech items — including third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. That case, which doesn’t yet involve charges under U.S. export laws, was also investigated by both the FBI and the U.S. Department of Commerce, Office of Export Enforcement.

Shu’s company, AMAC, describes itself on its website as “a high tech company operating at the cutting edge of technology.” The site says because of its accomplishments “in Research & Development of Superconducting RF Power Technologies, Magnetic Levitation and Cryogenics in space, AMAC has been awarded more than $2,000,000 of innovative research grants from the US Department of Energy (DOE) and National Aeronautics & Space Administration (NASA).”

In September 2002, according to its website, AMAC, in cooperation with the Virginia Economic Development Partnership, the U.S. Department of Commerce, and the Small Business Development Center of Hampton Roads, hosted a workshop “for Virginia’s business owners interested in exporting to China.”

Charges in a criminal complaint, as the DOJ says, are mere allegations and defendants are presumed innocent unless and until proven guilty in a court of law.

View the DOJ’s Sept. 24, 2008 release here.


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