The Justice Department announced that it has declined the prosecution of Universities Space Research Association (USRA) after it self-disclosed five years ago criminal violations of U.S. export control laws committed by its former employee.
Jonathan Soong pleaded guilty in January 2023 to willfully violating the Export Administration Regulations (EAR) by exporting U.S. Army-developed aviation software to a university in the People’s Republic of China (PRC) that had been placed on the Commerce Department’s Entity List and was sentenced to 20 months in prison.
“USRA discovered that one of its employees was funneling sensitive aeronautics software to a Beijing university in violation of export control laws and at risk to our national security,” said Acting U.S. Attorney Patrick D. Robbins for the Northern District of California. “What the company did next made all the difference in the Government’s decision not to prosecute it: the company took swift and proactive measures to disclose the employee’s wrongdoing, provide all known facts, and cooperate – and continue to cooperate – with the government’s investigation.”
According to court documents, in April 2016, USRA contracted with the National Aeronautics and Space Administration (NASA) to, among other things, license and distribute for a fee aeronautics-related and U.S. Army-owned flight control software. Soong was employed by USRA as a program administrator under the contract and was responsible for performing due diligence on prospective purchasers to ensure that the sale or transfer of software licenses complied with applicable law, including by checking the Entity List.
Soong willfully exported software subject to the EAR to Beijing University of Aeronautics and Astronautics, also known as Beihang University, a university in the PRC, knowing that an export control license was required for the export to Beihang because it was on the Entity List.
Beihang was on the Commerce Department’s Entity List due to its involvement in the development of military rocket systems and unmanned air vehicle systems. Soong further used an intermediary to complete the transfer and export of the software to Beihang to avoid detection, and embezzled tens of thousands of dollars in software license sales by directing purchasers to make payment to an account he personally owned and controlled.
This scheme continued until NASA inquired about the sales of software licenses to PRC-based purchasers and USRA began to investigate. Soong initially lied to USRA and fabricated evidence that he had conducted due diligence on the purchasers and provided it to USRA’s counsel to provide to NASA, but after USRA’s counsel investigated further and confronted Soong with evidence that contradicted his statements, he admitted to knowing that Beihang was on the Entity List when he exported the software to Beihang and that a license had been required for the export.
Within days of learning that Soong had willfully violated U.S. export control laws, and before USRA had completed its own investigation to understand the scope of the misconduct, USRA self-disclosed the crime to NSD and fully cooperated with the ensuing criminal investigation, which eventually established that Soong had acted alone at USRA.
USRA’s cooperation included proactively identifying, collecting, and disclosing relevant evidence to investigators, including foreign language evidence and evidence located overseas, and providing detailed and timely responses to the government’s requests for information and evidence.
USRA remediated the root cause of the misconduct by disciplining a supervisory employee who failed appropriately to supervise Soong, and by significantly improving its internal controls and compliance program. USRA also compensated the government both for the funds Soong embezzled, and for the time Soong had spent embezzling funds instead of performing his duties under USRA’s contract with NASA.
The Justice Department declined USRA’s prosecution after considering the factors set forth in the Department’s Principles of Federal Prosecution of Business Organizations and the National Security Division Enforcement Policy for Business Organizations (NSD Enforcement Policy).
The NSD Enforcement Policy creates a presumption that companies that (1) voluntarily self-disclose to NSD potentially criminal violations arising out of or relating to the enforcement of export control or sanctions laws, (2) fully cooperate, and (3) timely and appropriately remediate will generally receive a non-prosecution agreement, unless aggravating factors are present.
In appropriate cases, the NSD Enforcement Policy authorizes prosecutors to go further, and exercise discretion to decline a company’s prosecution. This is the second time that NSD has exercised its discretion to decline the prosecution of a company under the NSD Enforcement Policy.
"This case begs the question of why a company should be at risk of prosecution for the criminal acts of a “program administrator” likely done in violation of corporate policies prohibiting criminal acts (and even lied to the company when it inquired of the employee).,," writes Jonathan Poling of Akin in a LinkedIn post
"The now former employee is prosecuted after the company disclosed his criminal conduct to DOJ. What would occur if it was the other way around?
"Does this further create an environment where whistleblower complaints will increase because first to disclose (company or employee) is now the new paradigm where any criminal act by any employee of a company will be be at risk of being imputed to the company?
"This strikes me as a potential departure from where corporate enforcement was going to go under the Trump Administration. Interesting to see unfold for corporations and employees," Poling concludes.
According to his plea agreement, Soong was aware in April of 2017 that the CIFER software was subject to Export Administration Regulations and that Beihang University was on the Entity List thus making it necessary to obtain a license prior to exporting the CIFER software to the university. Soong acknowledged that he nonetheless arranged to sell and transfer the CIFER software package to the entity without obtaining a license.
Soong acknowledged he used an intermediary to complete the export of the program to avoid detection that the real purchaser was on the Entity List. In May 2017, a representative of the university communicated with Soong and expressed an interest in exploring an arrangement in which rather than use Beihang University as the purchaser of the CIFER software, the purchase would be made in the name of a third-party small company.
For the next several months, Soong communicated with the representative and then, in late 2017, Soong communicated with a representative from Beijing Rainbow Technical Development Ltd. (Beijing Rainbow), identified as being the third-party intermediary for the sale of the CIFER software to Beihang University. Soong ultimately exported directly to Beihang University. In July 2018, Soong also arranged to have the passcodes for the CIFER software package forwarded to Beihang University with payment coming from Beijing Rainbow.
On September 26, 2022, Soong was charged by information with one count of violating the International Emergency Economic Powers Act (IEEPA), in violation of 50 U.S.C. §§ 1702 and 1705. Pursuant to today’s agreement, Soong pleaded guilty to the count. The IEEPA violation carries a statutory maximum penalty of 20 years in prison and a $1,000,000 fine.
According to reporting at the time of his initial indictment in May 2022, Soong also admitted USRA had not received all the credit card payments made for the software he had exported over the years, and he admitted some of the payments had gone to his personal account.
“He claimed that when customers wanted to pay by credit card, USRA did not have a method set up to accept credit card payments,” the complaint states. “He claimed he justified the payments as giving himself a ‘bonus,’ and estimated he stole ‘tens of thousands’ over the years.”
The Universities Space Research Association (USRA) is a private nonprofit corporation under the auspices of the National Academy of Sciences. Institutional membership in the association has grown from 49 colleges and universities, when it was founded, to 76 in 1993. USRA provides a mechanism through which universities can cooperate effectively with one another, with the government, and with other organizations to further space science and technology and to promote education in these areas.
The case was investigated by the Department of Commerce’s Bureau of Industry and Security; the Department of Defense’s Defense Criminal Investigative Service; and the FBI. The NASA Office of Inspector General; U.S. Army Criminal Investigation Division; U.S. Army Counterintelligence; and the Department of Homeland Security, Homeland Security Investigations provided assistance.
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