DOJ Declines to Prosecute Contractor After Employee Illegally Exported Software to China

The decision not to prosecute is just the second time DOJ has offered a declination to a company under the agency’s updated voluntary self-disclosure program. DOJ last year declined to prosecute a Massachusetts biochemical firm that was part of an illegal export scheme involving China (see 2405220037 and 2406040069).

Sue Bai, chief of the National Security Division, said the contractor’s employee was “brought to justice because his employer caught him and immediately turned him in. We decline to prosecute his employer and are ready to work together with such responsible corporate actors who are committed to joining us in this fight to protect our country from foreign adversaries.”

DOJ said the violations were committed by Jonathan Soong, who worked as a program administrator for the Universities Space Research Association, a nonprofit research corporation focused on space science and technology. Soong secretly funneled sensitive aeronautics software to China after the association secured a contract with NASA in 2016 to license and distribute the software (see 2301190026).

Soong was responsible for carrying out due diligence on buyers of the software to make sure those sales complied with U.S. laws, including export control regulations and the Entity List. But DOJ said Soong “willfully” exported software, which was subject to the Export Administration Regulations, to Beijing University of Aeronautics and Astronautics, also known as Beihang University, a Chinese university that was added to the Entity List for its work on military rocket systems and drones.

DOJ said Soong knew the university needed an export license and used an “intermediary” to transfer the software to “avoid detection.” He embezzled “tens of thousands of dollars” in software license sales by ordering the buyers to pay his personal account, DOJ said.

NASA eventually asked the Universities Space Research Association about the sales, and DOJ said the organization investigated the issue. Soong at first “lied” and “fabricated evidence” that he had carried out due diligence on the Chinese buyers, but a lawyer for the Universities Space Research Association eventually confronted Soong with evidence that “contradicted his statements,” DOJ said, and Soong then admitted to the illegal exports.

The association voluntarily disclosed the violations “within days of learning” about them and before it had completed its own internal investigation “to understand the scope of the misconduct,” DOJ said. The Universities Space Research Association also “fully cooperated” with DOJ’s criminal investigation, which showed that Soong had acted alone.

The organization also “remediated the root cause of the misconduct by disciplining a supervisory employee who failed appropriately to supervise Soong,” it “significantly” improved its compliance program and “compensated” the government for the funds Soong embezzled and for the time Soong spent embezzling funds instead of carrying out work under the NASA contract. The Universities Space Research Association paid $94,000 of Soong’s salary to NASA and paid the Treasury Department for the $161,000 in sales he embezzled.

The Universities Space Research Association self-reported the violation less than three months after hiring an outside lawyer and cooperated extensively with the government, DOJ’s declination letter said. That included disclosing “all known relevant facts about the misconduct and information about the individuals involved in the transfer and export of the software,” and the “preservation, collection, and disclosure of relevant documents and information,” including documents overseas and translations of those documents. The association’s cooperation “materially assisted the government’s prosecution of Mr. Soong,” the letter said.

The agency also noted that there were “only” four unlicensed exports of software that violated the EAR, and the software was based on information in a publicly available textbook and classified as EAR99 -- items that generally don’t require specific export licenses but do require a license for certain shipments to Entity Listed organizations.

DOJ also said the Universities Space Research Association “did not unlawfully obtain any gains from the offenses,” adding that the association was paid by NASA under the contract, and the proceeds of the license sales “were not retained.” Because of this, the association wasn’t required to “pay any disgorgement, forfeiture, or restitution” to NSD.

As part of the declination, the Universities Space Research Association agreed to “fully cooperate with any ongoing government investigation, including by continuing to disclose relevant information and by making available for interviews and testimony those officers, employees, or agents who have relevant information, as determined in the Department of Justice’s sole discretion.” DOJ also said it may reopen its investigation if it learns anything “that changes our assessment of any of the factors outlined above.”

Universities Space Research Association is "very pleased by this resolution of the matter," a spokesperson said in an email. The association "voluntarily and promptly self-disclosed this rogue employee’s criminal misconduct, misconduct that threatened our national security; cooperated with the government’s investigation proactively and to an ‘exceptional’ degree; reimbursed the government for the losses it suffered; and put in place robust remedial measures to ensure that such misconduct does not recur," the person said.