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Loral Company Statement

Clinton Defends Satellite Waiver (Washington Post, May 18)

Justice Dept. Investigates Satellite Exports (Washington Post, May 17)

Chung Ties Funds To DNC (Washington Post, May 16)


Loral Denies Benefits in Return for Donations

By Roberto Suro and Juliet Eilperin
Washington Post Staff Writers
Tuesday, May 19, 1998; Page A03

In its first detailed response to allegations it received favorable treatment from the Clinton administration on high-technology exports to China, a major U.S. aerospace company denied yesterday that it requested or received "political favors or benefits of any kind" in exchange for campaign donations.

As congressional GOP leaders said they were considering naming a special committee to investigate the matter and the Justice Department moved closer to opening a criminal case, Loral Space and Communications Ltd. said that a waiver it received early this year to export satellite technology to China was "handled in a routine way" by the U.S. government.

"No political favors or benefits of any kind were requested or extended, directly or indirectly, by any means whatever," the statement said.

The company also said earlier allegations that its space systems division "provided missile guidance technology to the Chinese are false."

The Justice Department opened one criminal investigation last year to determine whether Loral and Hughes Electronics Corp. violated laws regarding the export of sensitive technologies after the 1996 crash of a Chinese "Long March" missile carrying a Loral-made satellite. In reviewing the results of a Chinese probe into the crash's cause, Loral and Hughes technicians allegedly turned over information that would improve the missile's guidance systems, despite U.S. policy against doing so.

Last February, with Justice already scrutinizing those allegations, Loral sought and was granted permission by the White House to return to China for another commercial satellite launch. Republicans claim the decision was influenced by $632,000 in donations to the Democratic Party by Loral CEO Bernard Schwartz, the party's largest single donor for the 1996 election.

The Loral statement yesterday said that Schwartz "was not personally involved in any aspect of this matter" and noted that this year's waiver was "one of 16 such waivers approved by Presidents Bush and Clinton since 1989."

The Justice Department's campaign finance task force, which is investigating a variety of allegations connected to 1996 campaign contributions, met yesterday to review the Loral matter but reached no conclusion on how to proceed. However, officials involved in the discussions said it appeared increasingly likely they would soon begin a full-scale criminal investigation of the 1998 waiver.

Meanwhile, House Speaker Newt Gingrich (R-Ga.) is considering establishing a select committee to probe the Loral matter and the broader allegation that the Chinese government sought to buy influence with the Clinton administration by coordinating a plan to illegally funnel as much as $2 million into U.S. political campaigns. Justice's investigation of the alleged "China plan" received a break recently when Democratic fund-raiser Johnny Chung told prosecutors he was given $300,000 by a Chinese military officer to use in U.S. campaigns.

"The express purpose of the select committee would be to address the unanswered questions surrounding Loral, as well as investigate whether or not communist China attempted to influence U.S. policy," Gingrich spokeswoman Christina Martin said, adding that the panel likely would be headed by Rep. Christopher Cox (R-Calif.).

Senate Majority Leader Trent Lott (R-Miss.) also said his chamber may launch a broader inquiry. The administration's decision to grant repeated satellite launch waivers to Loral, he said, has generated "growing concern" among Republicans about the administration's conduct of foreign policy.

White House spokesman Jim Kennedy responded, "We are confident that any fair . . . review will show that our policies were based on America's national interest."

The Loral statement provided the company's first detailed account of the failed 1996 launch and its involvement in Chinese efforts to correct the missile malfunction. "The company did not advise the Chinese on how to fix any problems with the Long March rocket," the statement said.

It noted that the owner of the satellite, Intelsat, the international communications consortium, had selected the Long March as its launch vehicle. Numerous companies launch commercial satellites atop Chinese rockets to save time and money.

After the Chinese conducted their own investigation, the statement said, the insurance industry "was unwilling to insure future . . . launches" unless "outside engineers" agreed with the Chinese conclusion the crash resulted from a "low-tech" soldering problem. In response to the insurance industry request, the statement said, Loral formed a committee of "representatives of several satellite companies" to review the Chinese results.

"The review committee's function was to obtain information from the Chinese, not to help the Chinese solve their problems," the statement said. The committee report led to the Justice investigation because "contrary to SS/L's [Space Systems/Loral's] own internal policies," a copy of it was provided to the Chinese "before consulting with State Department export licensing authorities," the statement said.

Staff reporter Helen Dewar contributed to this report.

© Copyright 1998 The Washington Post Company

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