Charles R. Smith
Monday, June 20, 2005

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  "Such debarment prohibits the subject from participating directly or indirectly in the export of defense articles or defense services for which a license or approval is required," stated the announcement.

The State Department debarment noted that Hughes had previously violated International Traffic in Arms Regulations (ITAR) export control laws and that there was a "reasonable basis for the Office of Defense Trade Controls Compliance to believe that the violator cannot be relied upon to comply with the AECA or ITAR in the future."

Hughes Network Systems, according to its own advertisements, is currently selling lightweight small satellite terminals or Very Small Aperture Terminal (VSAT) Network technology to China. The miniature – man-portable – satellite uplink terminals can be quite useful for military applications.

"VSAT networks are typically arranged in a star based topology, where each remote user is supported by a VSAT. The Earth hub station acts as the central node and employs a large size dish antenna with a high quality transceiver. The satellite provides a broadcast medium acting as a common connection point for all the remote VSAT earth stations. VSAT networks are ideal for centralized networks with a central host and a number of geographically dispersed terminals," states a Hughes Network Systems Beijing advertisement.

China Army Inc.

In addition, the company offers a wide variety of high-speed secure satellite communication systems. Hughes, now a division of DirecTV, also has an interesting list of customers inside the People's Republic.

One Hughes Network Systems customer is China Electronic System Engineering Company. However, CESEC is not some simple Chinese electronics company that builds cheap TVs and offers satellite descramblers. Commerce Department documents show that "China Electronics Systems Engineering Company (CESEC)" is "a subsidiary of the People's Liberation Army."

Another Hughes Network customer is China Telecommunications Broadcast Satellite Corporation, or Chinasat. Chinasat purchased two satellites from Hughes during the 1990s, one of which crashed upon liftoff from a PRC rocket base. Chinasat is also known as yet another front company for the People's Liberation Army (PLA) and currently provides space communications for the PLA.

Hughes Network is also providing services to other known PLA fronts including the Civil Aviation Administration of China (CAAC), which is part of the Chinese air force, and the China International Trust and Investment Corporation, or CITIC.

CITIC is known as a front for Chinese arms manufacturer Poly Technologies Corporation. According to a 1997 report prepared by the Rand Corporation, Poly Technologies was founded in 1984 as a subsidiary of CITIC.

"Poly Technologies, Ltd., was founded in 1984, ostensibly as a subsidiary of CITIC, although it was later exposed to be the primary commercial arm of the PLA General Staff Department's Equipment Sub-Department," states the Rand report.

In 2002, Hughes was charged with violating 123 counts of national security violations, providing a vast array of U.S. satellite, space and missile technology directly to the PLA through front companies such as China United Telecommunications.

In fact, Hughes Network is still dealing with the same Chinese army-owned company that it was fined for breaking U.S. national security with in 2002. According to the sanction report of 2002, Hughes violated U.S. national security with China United Telecommunications Satellite Co., Ltd.

"The turnkey system was to include two satellites to be launched from China on the Long March 3B SLV, five gateways, one network operations center, one satellite operations center and an initial purchase of 70,000 user terminals, with the ground network equipment and handsets to be provided by HUGHES NETWORK SYSTEMS," states the 2002 report.

Chinagate Legacy

The activities at Hughes Network Systems are a legacy of its former CEO and boss, C. Michael Armstrong. Armstrong has also been in the news lately. The Department of Justice Criminal Division recently responded to a Freedom of Information Act request made by this reporter in 2003. The Criminal Division elected to deny access to records it kept on the former Hughes CEO.

According to Justice, the denial "permits the withholding of records or information complied for law enforcement purposes, but only to the extent that the production of such law enforcement records or information could reasonably be expected to constitute an unwarranted invasion of personal privacy."

What information the Criminal Division compiled on C. Michael Armstrong may never be known. However, it is worth noting that Armstrong's legacy is his success in what became known as "Chinagate," the sale of advanced satellite and space technology to the Chinese army.

The role in Chinagate played by Armstrong is clearly displayed in his own words. In 1995, Armstrong wrote then Clinton National Security Advisor Anthony Lake, seeking to transfer satellite export authority from the State Department to the Commerce Department.

"The USG [U.S. government] does not require Congressional approval to remove commercial satellites from the United States Munitions List (USML), which is under State Department jurisdiction, and placing them on the Commerce Control List (CCL), which is under Commerce Department jurisdiction," wrote Armstrong.

"It is my understanding that State has resisted vigorously Commerce attempts to do just that. For the national good, this situation must change. A commercial communications satellite is not a defense item. State Department control of satellites is not required for national security. Continued State Department control is damaging to the U.S. satellite industry and is not warranted."

Thank You, Bill Clinton

In 1996, President Clinton moved the oversight of satellite exports from the State and Defense departments to the Commerce Department. In response, Armstrong and his counterparts wrote a thank-you letter to Clinton.

In a May 3, 1996 letter signed by the CEOs of Hughes, Lockheed and Loral, the three executives expressed their thanks directly to Bill Clinton.

"In October of last year we wrote to you asking you to complete the transfer of responsibility for commercial satellite export licensing to the Department of Commerce. Your administration recently announced its intention to do just that."

"We greatly appreciate this action which demonstrates again your strong commitment to reforming the U.S. export control system," states a letter signed by Hughes CEO Armstrong, Lockheed CEO Norman Augustine and Loral CEO Bernard Schwartz.

In the end Hughes was charged with 123 counts of violating national security. All of the violations took place during Armstrong's term as head of Hughes. Hughes pleaded no contest to the 123 charges filed by the U.S. State Department and has since paid a record fine.

Armstrong's contention that "a commercial communications satellite is not a defense item" is simply false. In fact, Hughes executives admitted that the satellites sold to China were military items. Ironically, the admission came when the company tried to sell a former Chinese satellite to the U.S. military.

AsiaSat, a company founded in 1988 in part by the Chinese army, made a March 1996 satellite purchase from Hughes to build the AsiaSat-3 with a $220 million loan from a consortium of banks.

Asiasat-3 was placed into an incorrect orbit by a Russian Proton booster rocket launched from Baikonur in 1997. In 1998, space insurance companies paid off the satellite loss and transferred ownership to Hughes.

AsiaSat-3, a commercial satellite sold to China, was more than just a $220 million piece of orbiting junk. Hughes recovered Asiasat-3, using a special lunar orbit technique to bring it back into a useable position around the earth.

Hughes then offered the recovered satellite to the U.S. Navy for military purposes. Mark J. Schwene, Hughes Global Services vice president, was quoted in Aviation Week and Space Technology making the offer.

"Possible markets for the satellite (AsiaSat-3) include providing capacity over ocean regions for the Navy as well as providing sufficient communications services in times of crisis to meet military communications surge requirements," stated the Hughes VP.

The very same Hughes "commercial" satellite sold to China was being offered to the U.S. Navy to serve in times of crisis to meet American military requirements. Of course, it never occurred to C. Michael Armstrong that the Chinese army might use Hughes satellites for "military communications."

Stop the Chinese Espionage

Armstrong has since left Hughes, and the satellite company has been sold to Boeing. Boeing took the hit for the 123 violations and has had to clean up the Hughes mess. Boeing officials have replaced the Armstrong management and revamped the company with new leadership, emphasizing national security first.

Meanwhile, Hughes Network Systems (Beijing) has come into the spotlight as unable to be trusted with U.S. national security. The lesson here for the Bush administration is that it is not U.S. companies who violate U.S. national security but the Chinese government and its willing pit bull, the People's Liberation Army. It is time to stop dealing with the PLA.

Charles Smith will be on: The Jerry Hughes Show on Friday, 6/24/05, at 3 p.m. Eastern time. Show information at http://www.cilamerica.com.

The George Putnam Show on Friday, 6/24/05, at 1 p.m. Pacific time (4 p.m. Eastern time) on KCAA 1050 AM in Southern California; WPYT 560 AM in Pittsburgh; WLTH 1370 AM in Gary, Ind., and Chicago; and CRN Radio Network, WWW.CRNI.NET.

Editor's note:
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