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Loral Company Statement

Tuesday, May 19, 1998

Loral Space & Communications Ltd. issued this "fact sheet" in response to allegations linking campaign contributions by the company's chairman to technology transfer waivers granted by the Clinton administration. For more information, see The Post's May 19 story.

Allegations that Space Systems/Loral provided missile guidance technology to the Chinese are false.

SS/L makes commercial communications satellites, not launch vehicles. The company did not advise the Chinese on how to fix any problems with the Long March rocket. All company employees were specifically instructed not to provide any such assistance, and the company believes that its employees acted in good faith to comply with the strict and complex requirements of the export control laws.

SS/L maintains rigorous security for launches in China. In addition, before exporting a satellite to China, U.S. satellite companies must obtain an export license from the U.S. Government. The license tightly restricts Chinese access to any part of the satellite and limits the technical data and assistance that may be provided to the Chinese.

Charges by unnamed sources in the press paint an inaccurate picture of the role of the American commercial satellite industry after the February 1996 Long March rocket failure. That failure involved the attempted launch of a satellite manufactured by SS/L for Intelsat, the international communications consortium. Intelsat had selected Long March as its launch vehicle, and the U.S. Government, according to law, approved the use of the Chinese booster.

The Chinese - and the Chinese alone - conducted an independent investigation of the launch failure and they determined that the problem was a defective solder joint in the wiring - a "low-tech" matter.

Assertions that SS/L and Hughes made an independent investigation to determine the cause of the launch failure are not correct. The Chinese did not want outsiders probing into the matter. The insurance industry, however, was unwilling to insure future Long March launches unless outside (non-Chinese) engineers concluded that the Chinese had in fact solved their own problem with the Long March. In April 1996, at the insurance companies' insistence, representatives of several satellite companies were asked to review the results of the Chinese investigation to determine if they were adequate.

The satellite companies were not asked to investigate the launch failure independently, nor did they do so. Only after SS/L's customer, Intelsat, agreed to participate did SS/L consent to the request to form the review committee. Hughes and other companies also participated.

The review committee's function was to obtain information from the Chinese, not to help the Chinese solve their problem. The Chinese had come to their conclusion about the cause of the failure before the review committee was initiated. The committee's review determined that the Chinese investigation's conclusion -- that a failed solder joint was the most likely cause of the launch failure -- was correct. The review committee did not perform any tests or provide any test data to the Chinese. The committee did, however, note that further tests by the Chinese would be required to achieve certainty.

This entire activity was carried out openly. Press releases on the review committee's work were issued. While it was underway, SS/L discussed the review committee's work with a number of U.S. officials interested in China's space program. As far as SS/L engineers can determine, no sensitive information - no significant technology - was conveyed to the Chinese. No "secret" or "classified" information was ever discussed with the Chinese or included in any reports provided to the Chinese.

The matter became an issue because, contrary to SS/L's own internal policies, the committee provided a report to the Chinese before consulting with State Department export licensing authorities. As soon as SS/L management learned of this in May 1996, SS/L informed the State Department and the Defense Department. SS/L then made complete disclosure of the facts to the U.S. Government in June 1996 including a detailed, written report of all communications with the Chinese. The company is cooperating fully with a Justice Department investigation and with the relevant congressional committees. Based upon its own review of the matter, SS/L does notbelieve that any of its employees dealing with China acted illegally or damaged U.S. national security.

Bernard Schwartz, Chairman of Loral Space & Communications Ltd., the parent company of SS/L, was not personally involved in any aspect of this matter. No political favors or benefits of any kind were requested or extended, directly or indirectly, by any means whatever.

Allegations of a connection between the launch failure and a subsequent Presidential authorization for use of Chinese launch services for another SS/L satellite to China are without foundation. The authorization, one of 16 such waivers approved by Presidents Bush and Clinton since 1989, was handled in a routine way by U.S. Government experts. Contrary to the allegations, the waiver did not authorize SS/L to transfer technology to the Chinese; it did not waive the requirement that SS/L obtain all the usual export licenses and approvals relating to the launch. In fact, the export license for the new launch applied the strictest prohibitions on technology transfer and specified that any new launch failure investigation would require a separate license. Loral complies strictly with all U.S. export control laws and regulations.

© Copyright 1998 The Washington Post Company

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