United States Department of State (DOS) - Settlement Summary (As of: 112512) UNITED TECHNOLOGIES CORPORATION (UTC) Includes subsidiaries: Pratt & Whitney (PW) Canada; Hamilton Sundstrand Corporation;

Sikorsky Aircraft Corporation; Deco Aerospace, Inc.; Kidde Technologies, Inc.; and PW Rocketdyne [Consent Agreement (CA) Date: 062812]

Trade compliance professionals are encouraged to read all the available related documents at www.pmddtc.state.gov/compliance/consent_agreements/UTC.html.

Charges

Description Monetary Fines

Mandated Action Plan Highlights Actual Remedial

General

1-13

14-24

25 26

27-84

85

86-136 137

138-574

575-576

Five-hundred and seventy-six (576) alleged violations of the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR) for unauthorized export and transfer of defense articles, to include technical data (TD), and unauthorized provision of defense services to various countries, including proscribed destinations. - Unauthorized exports to Canada of Electronic

Engine Control (EEC) software - Unauthorized re-transfer of modified EEC

software to the People’s Republic of China (PRC) - Failure to file export information - Failure to immediately notify (the DOS) of

sale/transfer to a proscribed country - Unauthorized exports of defense articles due to

incorrect jurisdiction self-determination - Unauthorized export to Venezuela of test stand - Unauthorized exports of TD and automation tools - Unauthorized export of TD to the PRC - Failure to comply with the terms and

administrative requirements of agreements - Unauthorized exports of defense articles to

Singapore

$55,000,000 (Civil Penalty)

* Including $20,000,000

- Appoint qualified individual from outside UTC as Special

Compliance Officer (SCO) with approval of the Director, Defense Trade Controls Compliance (DDTC)

- Promote and publicize existing reporting mechanisms for reporting allegations of AECA and ITAR violations

- Within 12 months of the CA date institute strengthened and uniform corporate export compliance procedures

- Continue to implement a comprehensive and reasonably uniform automated export compliance system throughout operating divisions, subsidiaries and business units

- Develop and implement policies, procedures and training to ensure accurate identification & tracking of ITAR controlled TD

- Conduct a study to identify feasible improvements to maximize automation of the identification and tracking of ITAR-controlled TD throughout the information technology infrastructure

- Review and verify the export control jurisdiction of all ITAR-regulated hardware exported in the past five years from operation divisions, subsidiaries and business units

- Conduct two audits by an outside consultant with AECA/ITAR expertise and approved by the Director, DDTC (The 1

st by 12

months and the 2nd

within 36 months of the term of the CA) - While CA is in effect, arrange and facilitate with minimum

advance notice onsite reviews by the DDTC - 3 months prior to CA conclusion, submit a written certification

that all CA mandated compliance measures are implemented SCO RESPONSIBILITIES in three principal areas: Policy and Procedure includes: jurisdiction and TD determinations, access controls, re-exports/re-transfers, agreement management, preventing, detecting and reporting violations. [See CA, (n)(1) i-xii, pages 8-10]; Specific Duties include: oversight of CA mandated compliance measures, allocation of resources, expenditures, incorporating ITAR compliance into business plans, implementing policies & procedures, reporting violations and potential violations. [See CA, (n)(2) i-vii, pages 10-11]; Reporting includes: tracking, evaluating and reporting of ITAR violations and compliance resources to UTC’s Board of Directors, UTC’s Senior Vice President and General Counsel and the Director, DTCC. [See CA, (n)(3) i-iv, pages 11-12]

NOTABLE CA QUOTES: “Respondent’s subsidiaries repeatedly discovered and disclosed violations to the (State) Department, in some cases finding that reported remedial measures failed to prevent or detect additional similar violations.” [See Proposed Charging Letter (PCL), page 2, first paragraph (para)] “The violations demonstrate a systemic, corporate-wide failure to maintain effective ITAR controls and require immediate, comprehensive, effective remedial action across Respondent’s many operating units and subsidiaries.” (See PCL, VIOLATIONS, page 5, second para)

DEPARTMENT OF JUSTICE (DOJ) CRIMINAL CASE: In a separate related DOJ global settlement, UTC and affiliates Pratt & Whitney Canada and Hamilton Sundstrand Corporations also pleaded guilty to violating the AECA and making false statements in connection with illegal exports to the PRC and agreed to pay the DOJ an additional $20.7 million fine. [For complete details, see DOJ Press Release (PR), 062812, at www.justice.gov/opa/pr/2012/June/12-nsd-824.html].

RELATED US GOVERNMENT REMARKS: “…any corporation that willfully sends export controlled material to an embargoed nation will be prosecuted and punished, as will those who know about it and fail to make a timely and truthful disclosure. (David B. Fein, US Attorney, District of Connecticut, DOJ PR, 062812); “This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses.” (John Morton, Director, US Immigration and Customs Enforcement, Department of Homeland Security, DOJ PR, 062812)

OTHER FACTS/ITEMS OF INTEREST: According to hoovers.com, UTC is a public company and #48 of the FORTUNE 500. UTC and its subsidiaries develop technologies, systems and services for the aerospace, construction and security industries. UTC operates in more than 70 countries. Over half of UTC’s sales are outside the US. UTC 2011 facts (Source: http://finance.yahoo.com/q/ks?s=UTX+Key+Statistics): Revenue: $58.08 billion; Employees: 199,900.

Trade Compliance Solutions

CA will remain

in effect for 4 years.

* $5 million of the $55 million penalty is suspended for self-

initiated pre-CA Remedial compliance measures.

* $15 million of the $55 million is suspended for Remedial compliance measures over

the 4 years of the CA. Total fine of $55 million equates to $95,486.11 per alleged violation.

The worse case criminal fine

could have been $576 million.

Actual civil penalty of $55 million is about 9.5%

of maximum that could have been imposed.

for criminal violations.

There are no restrictions on distribution of this document exactly as is with complete/proper citation/attribution. For changes, inputs, suggestions, please contact John Priecko at 703-895-1110 or jpriecko@comcast.net.