By John Mintz
Washington Post Staff Writer
Wednesday, June 24, 1998; Page A04

The Justice Department has expanded its investigation into the transfer of sensitive U.S. space technology to China to examine a case in which Hughes Electronics Corp. gave technical data to China in 1995 after a Chinese rocket carrying a Hughes-made telecommunications satellite exploded shortly after launch.

Unlike the case that sparked the initial investigation, however, the 1995 transfer was done with the knowledge and approval of the U.S. government. According to testimony yesterday before congressional committees examining the Clinton administration's handling of commercial high-technology deals with China, Hughes sought and received permission from the Commerce Department to share its internal report on the causes of the Jan. 25, 1995, crash with the Chinese.

The Justice Department began a criminal investigation last year into the transfer of sensitive rocket technology data to Chinese space officials by Loral Space and Communications after the 1996 explosion of a Chinese rocket carrying a Loral-manufactured satellite. In that case, Loral engineers faxed the Chinese a 25-page report summarizing the conclusions of an independent review panel about the accident's cause.

In the 1996 case, Loral did not consult with federal officials before the transfer, as the company quickly acknowledged it should have done. Once they learned the report had been sent, top Loral executives informed the State Department. Justice launched its investigation after a Pentagon study concluded that the transfer may have damaged U.S. national security by assisting Beijing in improving its ballistic missiles.

Justice Department spokesman Bert Brandenburg said federal investigators are "reviewing information" about the 1995 launch failure as part of its original probe into the 1996 accident.

A Hughes executive said yesterday that the company's report on the accident contained no information about the technologies and performance of China's Long March rocket, much less any information that could assist the Chinese in building missiles.

The Hughes report focused on what happened to its satellite during the brief 65 seconds it and the rocket were aloft, the Hughes executive said.

"We didn't give away any secrets," Hughes spokesman Don O'Neal said yesterday.

The Hughes-made Apstar 2 satellite was destroyed that night in 1995 just as the rocket carrying it entered supersonic speed. Chinese officials said the falling debris killed six Chinese villagers, but U.S. officials said many more were killed.

Hughes officials at the time found ludicrous Chinese allegations that the satellite, and not the rocket, was responsible for the crash. The company, which hoped to expand its business in China, was eager to prove to the Chinese that the satellite was blameless.

In the widened probe, Justice is examining the circumstances under which Commerce officials allowed Hughes to give the report to the Chinese, officials said. William Reinsch, Commerce undersecretary for export administration, testified before a joint hearing of two House committees yesterday that the agency concluded the data in the Hughes report could be given to the Chinese because it "fell within the parameters of the [export] license that had been granted" to Hughes by Commerce. He added that releasing the data didn't assist the Chinese missile program.

Rep. Benjamin A. Gilman (R-N.Y.), chairman of the House International Relations Committee, expressed exasperation that Commerce didn't even ask its bureaucratic rivals in the State and Defense departments about the advisability of sharing the Hughes data.

"Why weren't these agencies, the experts in national security matters, consulted?" Gilman asked Reinsch at the hearing. Reinsch said Commerce's reading of the law allowed it to make the decision.

Members of Congress also were critical of the fact that no Pentagon technology security officials had monitored the launch or the post-accident conversations.

That was so because of separate Commerce decisions dating to 1993, which established that military officials need not be present at technical talks between U.S. and Chinese space officials on launches regulated by Commerce. The administration has said that policy was changed in 1996 to require military monitors.

Rep. Curt Weldon (R-Pa.) revealed at the hearing a Pentagon report showing that U.S. officials did not find in the Loral crash wreckage a computer circuit board with sensitive encryption software for guiding U.S. satellites. Administration officials said the encryption was old and wouldn't reveal much to the Chinese, but Weldon said the National Security Agency changed its satellite encryption after the incident. "Why did they change it if it was so unimportant?" he said.