*Chapter 6
Contents*
**The
PRC's Launch Failure Investigation**
**The
Asia Pacific Telecommunications Insurance Meeting**
**The
PRC's Creation of an 'Independent Review Committee'**
**The
Independent Review Committee's Meetings**
**The
Independent Review Committee's Report**
**Substance
of the Preliminary Report**
**The
Report Goes to the PRC**
**Defense
Department Analyst Discovers the Activities of the Independent Review
Committee**
**Loral
and Hughes Investigate the Matter**
**The
Aftermath: China Great Wall Industry Corporation Revises Its Findings on
the Cause of the Accident**
**U.S.
Government Assessments of the Independent Review Committee's Report, and
Referral to the Department of Justice**
**Background
on Intelsat and Loral**
*Intelsat*
*Loral
Space and Communications*
*Space
Systems/Loral*
*Intelsat
708 Launch Program*
**The
Intelsat 708 Launch Failure**
*Events
Leading Up to the Creation of the Independent Review
Committee*
*The
Government Security Committee Meeting at Loral*
**The
Apstar 1A Insurance Meeting**
**The
April 1996 Independent Review Committee Meetings in Palo
Alto**
*Meeting
on April 22, 1996*
*Meeting
on April 23, 1996*
*Meeting
on April 24, 1996*
**United
States Trade Representative Meeting on April 23, 1996**
**The
April and May 1996 Independent Review Committee Meetings in
Beijing**
*Meeting
on April 30, 1996*
*Members'
Caucus at the China World Hotel*
*Meeting
on May 1, 1996*
**The
Independent Review Committee Preliminary Report**
*Writing
the Report*
*Loral
Sends the Draft Report to the PRC*
*The
Contents of the Draft Report*
*Notification
to Loral Officials That a Report Had Been Prepared*
*Loral
Review and Analysis of the Independent Review Committee
Report*
**The
Final Preliminary Report is Sent to the PRC**
*Another
Copy of the Report is Sent to Beijing*
**Loral
Management Actions After Delivery of the Report** to the
PRC
**Defense
Department Official Discovers the Activities of the Independent Review
Committee**
*Meeting
with the Defense Technology Security Administration*
*Meeting
with the State Department*
*Reynard's
Telephone Call to Loral*
**Loral
Management Discovers the Independent Review Committee Report Has Been
Sent to the PRC**
**Loral's
'Voluntary' Disclosure**
*Investigation
by Loral's Outside Counsel*
*Loral
Submits Its 'Voluntary' Disclosure to the State
Department*
**The
PRC Gives Its Final Failure Investigation Report**
**Assessments
By U.S. Government Agencies and Referral to the Department of
Justice**
*Defense
Department 1996 Assessment*
*Central
Intelligence Agency Assessment*
*Department
of State Assessment*
*Defense
Technology Security Administration 1997 Assessment*
*Interagency
Review Team Assessment*
**Outline
of What Was Transferred to the PRC**
*Independent
Review Committee Meeting Minutes*
*Independent
Review Committee Preliminary Report*
**Loral's
Inaccurate Instructions on Releasing Public Domain Information to
Foreigners**
*Instructions
to the Independent Review Committee Regarding Public Domain
Information*
*State
Department Views on Public Domain Information*
**The
Defense Department Concludes That the Independent Review Committee's
Work Is Likely to Lead to the Improved Reliability of PRC Ballistic
Missiles**
**The
Cross-Fertilization of the PRC's Rocket** and Missile Design
Programs
**The
Independent Review Committee Aided the PRC in Identifying the Cause of
the Long March 3B Failure**
**The
PRC Implemented All of the Independent Review Committee's
Recommendations**
**The
Independent Review Committee Helped the PRC Improve the Reliability of
Its Long March Rockets**
####
*Chapter 6
Summary*
n February 15, 1996, a Long March 3B
rocket carrying the U.S.-built Intelsat 708 satellite crashed just
after lift off from the Xichang launch center in the People's Republic of
China. This was the third launch failure in 38 months involving the PRC's
Long March series of rockets carrying U.S.-built satellite payloads. It
also was the first commercial launch using the new Long March 3B. These
events attracted intense attention from the international space launch
insurance industry, and eventually led to a review of the PRC launch
failure investigation by Western aerospace engineers.
**The activities of the Western aerospace engineers who participated
on the review team - the Independent Review Committee - sparked
allegations of violations of U.S. export control regulations.** The
review team was accused of performing an unlicensed defense service for
the PRC that resulted in the improvement of the reliability of the PRC's
military rockets and ballistic missiles.
**The Intelsat 708 satellite was manufactured by Space Systems/Loral
(Loral) under contract to Intelsat, the world's largest commercial
satellite communications services provider.** Loral is wholly owned by
Loral Space & Communications, Ltd.
**China Great Wall Industry Corporation, the PRC state-controlled
missile, rocket, and launch provider, began an investigation into the
launch failure. **On February 27, 1996, China Great Wall Industry
Corporation reported its determination that the Long March 3B launch
failure was caused by a broken wire in the inner frame of the inertial
measurement unit within the guidance system of the rocket. In March 1996,
representatives of the space launch insurance industry insisted that China
Great Wall Industry Corporation arrange for an independent review of the
PRC failure investigation.
**In early April 1996, China Great Wall Industry Corporation invited
Dr. Wah Lim,** Loral's Senior Vice President and General Manager of
Engineering and Manufacturing, to chair an Independent Review Committee
that would review the PRC launch failure investigation. Lim then recruited
experts to participate in the Independent Review Committee: four senior
engineers from Loral, two from Hughes Space & Communications, one from
Daimler-Benz Aerospace, and retired experts from Intelsat, British
Aerospace, and General Dynamics.
**The Independent Review Committee members and staff met with PRC
engineers during meetings in Palo Alto, California, and in Beijing.**
During these meetings the PRC presented design details of the Long March
3B inertial measurement unit, and the committee reviewed the failure
analysis performed by the PRC.
**The Independent Review Committee took issue with the conclusions of
the PRC investigation because the PRC failed to sufficiently explain the
telemetry data obtained from the failed launch.**
**The Independent Review Committee members proceeded to generate a
Preliminary Report, which was transmitted to China Great Wall Industry
Corporation in May 1996 without prior review by any U.S. Government
authority.** Before the Independent Review Committee's involvement, the
PRC team had concluded that the most probable cause of the failure was the
inner frame of the inertial measurement unit. The Independent Review
Committee's draft report that was sent to the PRC pointed out that the
failure could also be in two other places: the inertial measurement unit
follow-up frame, or an open loop in the feedback path. The Independent
Review Committee recommended that the PRC perform tests to prove or
disprove all three scenarios.
**After receiving the Independent Review Committee's report, the PRC
engineers tested these scenarios and, as a result, ruled out its original
failure scenario. Instead, the PRC identified the follow-up frame as the
source of the failure.** The PRC final report identified the power
amplifier in the follow-up frame to be the root cause of the failure.
**According to the Department of Defense, the timeline and evidence
suggests that the Independent Review Committee very likely led the PRC to
discover the true failure of the Long March 3B guidance platform.**
**At the insistence of the State Department, both Loral and Hughes
submitted "voluntary" disclosures documenting their involvement in the
Independent Review Committee.** In its disclosure, Loral stated that
"Space Systems/Loral personnel were acting in good faith and that harm to
U.S. interests appears to have been minimal." Hughes' disclosure concluded
that there was no unauthorized export as a result of the participation of
Hughes employees in the Independent Review Committee.
The materials submitted by both Loral and Hughes in their disclosures
to the State Department were reviewed by several U.S. government offices,
including the State Department, the Defense Technology Security
Administration, the Defense Intelligence Agency, and other Defense
Department agencies.
**The Defense Department assessment concluded that "Loral and Hughes
committed a serious export control violation by virtue of having performed
a defense service without a license . . . "**
**The State Department referred the matter to the Department of
Justice for possible criminal prosecution.**
The most recent review of the Independent Review Committee matter was
performed by an interagency review team in 1998 to reconcile differences
in the assessments of the other agencies. That interagency team
concluded:
**ï¿½ The actual cause of the Long
March 3B failure may have been discovered more quickly by the PRC as a
result of the Independent Review Committee report**
**ï¿½ Advice given to the PRC by
the Independent Review Committee could reinforce or add vigor to the
PRC's design and test practices**
**ï¿½ The Independent Review
Committee's advice could improve the reliability of the PRC's
rockets**
**ï¿½ The technical issue of
greatest concern was the exposure of the PRC to Western diagnostic
processes, which could lead to improvements in reliability for all PRC
missile and rocket programs**
*Chapter 6
Text*
INTELSAT 708 LAUNCH
FAILURE
LORAL
INVESTIGATION PROVIDES PRC WITH SENSITIVE INFORMATION
## Overview of Events
n February 15, 1996, the Intelsat 708 satellite
was launched on a Long March 3B rocket from the Xichang Satellite Launch
Center in the PRC.1 Even before clearing the launch tower, the rocket
tipped over and continued on a flight trajectory roughly parallel to the
ground.2 After only 22 seconds of flight, the rocket crashed into a nearby
hillside, destroying the rocket and the Intelsat satellite it carried.
The crash created an explosion that was roughly equivalent to 20 to 55
tons of TNT. It destroyed a nearby village. According to official PRC
reports, six people died in the explosion,3 but other accounts estimate
that 100 people died as a result of the crash.4
The Intelsat 708 satellite was manufactured by a U.S. company, Space
Systems/Loral (Loral), under contract to Intelsat, the world's largest
commercial satellite communications services provider.5 In October 1988,
Intelsat had awarded a contract to Loral to manufacture several satellites
in a program known as Intelsat VII. That contract had a total value of
nearly $1 billion.
Intelsat subsequently exercised an option under that contract for Loral
to supply four satellites - known as the Intelsat VIIA series - including
the Intelsat 708 satellite.6
In April 1992, Intelsat contracted with China Great Wall Industry
Corporation for the PRC state-owned company to launch the Intelsat VIIA
series of satellites into the proper orbit using PRC Long March rockets.7
Low price and "politics" were important factors in selecting the PRC
launch services.8
In March 1996, following the Intelsat 708 launch failure, Intelsat
terminated its agreement with China Great Wall Industry Corporation for
additional launch services.9
**The PRC's
Launch Failure Investigation**
China Great Wall Industry Corporation created two groups of PRC
nationals to investigate the launch failure. These were the Failure
Analysis Team and the Failure Investigative Committee. These two
committees reported to an Oversight Committee.
On February 27, 1996, China Great Wall Industry Corporation reported
its determination that the Long March 3B launch failure was caused by a
failure in the inertial measurement unit within the control system of the
rocket.10 The inertial measurement unit is a component that provides an
attitude reference for the rocket, basically telling it which way is
up.11
**The Asia
Pacific Telecommunications Insurance Meeting**
On March 14, 1996, a group of space launch insurance representatives
met in Beijing with representatives of Hughes, the PRC-controlled Asia
Pacific Telecommunications Satellite Co., Ltd., and China Great Wall
Industry Corporation. The purpose of the meeting was to examine the risks
associated with the upcoming launch of the Apstar 1A satellite that was
scheduled for July 3, 1996 on a Long March 3 rocket, in the wake of the
February 15 Long March 3B crash.12
The PRC assured those at the meeting that the launch was not at risk
because the Long March 3 rocket uses a different kind of inertial
measurement unit than the one that failed on the Long March 3B.13
At that meeting, Paul O'Connor, from the J&H Marsh & McLennan
insurance brokerage firm, reportedly insisted that the PRC do two things
before the space insurance industry would insure future launches from the
PRC: first, produce a final report on the cause of the Long March 3B
launch failure; and second, arrange for an independent review of the PRC
failure investigation.14
**The PRC's
Creation of an 'Independent Review Committee'**
In early April 1996, China Great Wall Industry Corporation invited both
Loral and Hughes Space & Communications (Hughes) to participate in an
Independent Review Committee that would review the PRC launch failure
investigation.15 The PRC then invited Dr. Wah Lim, Loral's Senior Vice
President and General Manager of Engineering and Manufacturing, to chair
the committee.16
Lim impaneled the Independent Review Committee with experts from Loral,
Hughes, and Daimler-Benz Aerospace, and retired experts from General
Dynamics, Intelsat, and British Aerospace.17
**The
Independent Review Committee's Meetings**
The Independent Review Committee held two sets of official meetings.18
The first set of meetings was from April 22 to 24, 1996, at Loral's
offices in Palo Alto, California.19 The second set of meetings was from
April 30 to May 1, 1996, in Beijing.20
At these meetings, the Independent Review Committee members reviewed
the extensive reports furnished by China Great Wall Industry Corporation
documenting the PRC launch failure investigation, and provided the PRC
with numerous technical questions regarding the material.21 The
committee's activities also included tours of PRC assembly and test
facilities for guidance and control equipment. The Independent Review
Committee members caucused at their hotel in Beijing on April 30 to
discuss and assess the PRC investigation privately.22
An aborted third round of Independent Review Committee meetings was
scheduled for June 1996. However, the U.S. Government issued a cease and
desist letter to both Loral and Hughes, ordering the companies to stop all
activity in connection with the failure review. The letter also requested
each company to disclose the facts related to, and circumstances
surrounding, the Independent Review Committee.23
**The Independent Review Committee
activity was not authorized by any U.S. Government export license** or
Technical Assistance Agreement.24 Loral had obtained two export licenses
(No. 533593 and No. 544724) from the State Department in 1992 and 1993 to
allow the launch of the Intelsat 708 satellite in the PRC. Neither of
those licenses authorized any launch failure investigative activity.25
Loral was aware from the start of the Independent Review Committee's
meetings that it did not have a license for the Independent Review
Committee activity.26
The Independent Review Committee meetings were not attended by any U.S.
Government monitors, as almost certainly would have been required had
there been an export control license.
**The
Independent Review Committee's Report**
Lim had promised the PRC that the Independent Review Committee would
report its preliminary findings by May 10, 1996.27 This deadline was
driven by Loral's need to determine, by that date, whether its Mabuhay
satellite would be launched on a PRC rocket as planned.
Following the meeting of the Independent Review Committee in Beijing,
the committee members collaborated by facsimile and e-mail to generate a
report of their findings. Loral engineer Nick Yen, who was the Secretary
for the Independent Review Committee, collected input from the committee
members and compiled the report. British committee member John Holt
drafted the technical section of the report, with inputs from the other
committee members.28
A draft of the Independent Review Committee Preliminary Report was
completed by May 7, 1996; the Preliminary Report was completed on May 9,
1996.
**Substance of
the Preliminary Report**
The Independent Review Committee's Preliminary Report was
approximately 200 pages in length. It comprised:
**ï¿½ Meeting minutes**
**ï¿½ Independent Review Committee
questions and China Great Wall Industry Corporation answers**
**ï¿½ Findings**
**ï¿½ Short-term and long-term
recommendations**
**ï¿½ The Independent Review
Committee charter and schedule**
**ï¿½ The Independent Review
Committee membership roster**
**ï¿½
Appendices29**
The thrust of the recommendations presented in the report was:
**Short-Term Recommendations30**
**1) An explanation of the total flight behavior is essential** to
fully confirm the failure mode. A mathematical numerical solution is
recommended immediately, to be followed by a hardware in-the-loop
simulation test when possible.
**2) The detailed design of the motor and its wiring should be
studied** to either: a) preclude harness motion during gimbal motion
or b) alleviate the impact of unavoidable deflection on solder joint
integrity.
**3) Higher quality control and quality standards** in the
manufacturing process need to be implemented and adhered to.
**4) The China Academy of Launch Technology should re-examine the
environmental test plan for all avionics equipment.** It is the
Independent Review Committee's opinion that the environmental tests
performed by the China Academy of Launch Technology might not be
adequate for meeting the requirements of the expected maximum flight
loads, including acoustic noises, or detecting the defects in the flight
hardware.
**5) The Independent Review Committee is very concerned over the
range safety issues in the areas of operation safety, launch safety and
personal safety in general.** Due to the difference in operations and
requirements by various customers/satellite contractors of China Great
Wall Industry Corporation, it is not suitable for the Independent Review
Committee to make generic recommendations for overall implementation
requirements. However, China Aerospace Corporation and China Great Wall
Industry Corporation should carefully review the Action Items, #19, #20,
and #21, of the first committee meeting and propose a well thought
implementation plan to be reviewed, agreed, and accepted by China Great
Wall Industry Corporation's individual customer/prime satellite
contractor.
**Long-Term Recommendations31**
**1) Quality control philosophy and practice of the fabrication,
assembly and test of the inertial measurement unit should be
strengthened.** Personnel should be trained periodically in careful
handling and cleanliness concerns. Cleanliness and careful test handling
should be emphasized and maintained at all times.
**2) Good design and good quality control can achieve the desired
reliability of hardware. However, a design with adequate redundancy**
can also achieve the same desired reliability. Therefore, it should be
strongly considered in avoiding critical single point (or path)
failure.
**The Report
Goes to the PRC**
On May 7, 1996, Loral's Nick Yen, the Secretary of the Independent
Review Committee, faxed the draft Preliminary Report to the committee
members, and to China Great Wall Industry Corporation.
On May 10, 1996, the final Independent Review Committee Preliminary
Report, less attachments, was faxed by Yen to China Great Wall Industry
Corporation.32 The same day, the complete Preliminary Report was
express-mailed by Yen to the Independent Review Committee members.33
On May 13, Yen also faxed the Preliminary Report to a hotel in Beijing
for Paul O'Connor of J&H Marsh & McLennan, who was a guest
there.34
None of these transmitted documents was submitted to the U.S.
Government for review prior to its transmission to the PRC.35
**Defense
Department Analyst Discovers the Activities** of the Independent Review
Committee
The May 13-19, 1996, issue of Space News, a widely-read industry
publication, contained an article stating that Wah Lim, as Chairman of the
Independent Review Committee, had faxed the committee's report of the
failure review to the PRC.36
On or about May 14, 1996, Robert Kovac, an Export Analyst in the
Defense Department's Defense Technology Security Administration (DTSA),
read the Space News article and became concerned that the Independent
Review Committee's activities were not conducted under a license. Kovac
was particularly alarmed that, according to the article, a failure review
report had been distributed to the PRC.
Kovac immediately acted on his concern. He called Loral's Washington
representative and asked whether the Independent Review Committee's
activities had been conducted under a license. Loral's response was to
propose a meeting with Kovac and others for the following day.
On May 15, 1996, Loral's Export Control Officer met with licensing
personnel at the State Department and the Defense Department to report on
the Independent Review Committee's activities.
**The Defense Department advised
the Loral officials to halt all Independent Review Committee activity**
and consider submitting a "voluntary" disclosure to the State
Department.
The State Department made similar recommendations, and sent letters to
both Loral and Hughes soon afterward that reported that the State
Department had reason to believe that the companies may have participated
in serious violations of the International Traffic in Arms
Regulations.
The State Department also requested that the companies immediately
cease all related activity that might require approval, provide a full
disclosure, and enumerate all releases of information that should have
been controlled under the International Traffic in Arms Regulations.
**Loral and
Hughes Investigate the Matter**
On May 23, 1996, Loral engaged the law firm of Feith & Zell of
Washington, D.C., to conduct a limited investigation, as counsel for
Loral, of the events related to the Independent Review Committee. That
investigation included document collection and review, and interviews of
Loral employees. On June 17, 1996, a "voluntary" disclosure was submitted
to the State Department by Feith & Zell on behalf of Loral.37
In that disclosure, Loral stated that its procedures for implementing
export control laws and regulations were deficient, but that Loral was
implementing corrective measures. Also, Loral's disclosure concluded that
"Loral personnel were acting in good faith and that harm to U.S. interests
appears to have been minimal." 38
Hughes' General Counsel's office began an investigation into the
Independent Review Committee matter in early June 1996, after receiving
the State Department letter advising that Hughes may have been a party to
serious violations of the International Traffic in Arms Regulations.
Hughes' investigation report was submitted to the State Department on June
27, 1996. The Hughes report concluded that there was no unauthorized
export as a result of the participation of Hughes employees in the
Independent Review Committee.
The Hughes employees reportedly advised Loral employees to obtain the
appropriate State Department approvals prior to furnishing the documents
to the PRC.39
**The Aftermath:
China Great Wall Industry Corporation Revises Its Findings on the Cause of
the Accident**
In September 1996, China Great Wall Industry Corporation discarded its
original analysis, and in October 1996 made its final launch failure
presentation to officials at Loral.
China Great Wall Industry Corporation determined that the root cause of
the failure was a deterioration in the gold-aluminum wiring connections
within a power amplifier for the follow-up frame torque motor in the
inertial measurement unit. This was the very problem the Independent
Review Committee had identified in their meetings with PRC officials and
in the Preliminary Report.
**U.S.
Government Assessments of the Independent Review Committee's Report, and
Referral to the Department of Justice**
The materials submitted by both Loral and Hughes in their 1996
disclosures to the State Department were reviewed by several U.S.
Government offices, including the State Department, the Defense
Department, the Central Intelligence Agency, and an interagency review
team.
**The 1997 Defense Department
assessment concluded that "Loral and Hughes committed a serious export
control violation** by virtue of having performed a defense service
without a license . . . ."
Based on this assessment, the Defense Department recommended referral
of the matter to the Department of Justice for possible criminal
prosecution.
In July 1998, a U.S. Government interagency team conducted a review of
the Independent Review Committee's activities and reported the
following:
**ï¿½ The actual cause of the Long
March 3B failure may have been discovered more quickly by the PRC as a
result of the Independent Review Committee's report**
**ï¿½ Advice given to the PRC by
the Independent Review Committee could reinforce or add vigor to the
PRC's design and test practices**
**ï¿½ The Independent Review
Committee's advice could improve PRC rocket and missile
reliability**
**ï¿½ The technical issue of
greatest concern was the exposure of the PRC to a Western diagnostic
process40**
The interagency review also noted that the Long March 3B guidance
system on which Loral and Hughes provided advice is not a likely candidate
for use in future PRC intercontinental ballistic missiles. The Long March
3B guidance system is well suited for use on a rocket.
## Details of the Failed Long March 3B-Intelsat
708 Launch and Independent Review Committee Activities
The specific details of the events surrounding the Long March
3B-Intelsat 708 launch failure and the Independent Review Committee are
described in the remainder of this Chapter.
**Background on
Intelsat and Loral**
__Intelsat__ The International
Telecommunications Satellite Organization (Intelsat), headquartered in
Washington, D.C., is an international not-for-profit cooperative of 143
member nations and signatories that was founded in 1964. Intelsat is the
world's largest commercial satellite communications services provider. Its
global satellite systems bring video, Internet, and voice/data services to
users in more than 200 nations and on every continent.41
The member nations contribute capital in proportion to their relative
use of the Intelsat system, and receive a return on their investment.
Users pay a charge for all Intelsat services, depending on the type,
amount, and duration of the service. Any nation may use the Intelsat
system, whether or not it is a member. Intelsat operates as a wholesaler,
providing services to end-users through the Intelsat member in each
country. Some member nations have chosen to authorize several
organizations to provide Intelsat services within their countries.
Currently, Intelsat has more than 300 authorized customers.42
**Intelsat includes two members
from the PRC: China Telecom is a signatory, and Hong Kong Telecom is an
investing entity.** Their investment shares are 1.798 percent and 1.269
percent, respectively, giving the PRC a country total of 3.067 percent,
which makes it the eighth largest ranking member nation.43
On January 2, 1999, Intelsat had a fleet of 19 high-powered satellites
in geostationary orbit. These satellites include the Intelsat 5 and 5A,
Intelsat 6, Intelsat 7 and 7A, and the Intelsat 8 and 8A families of
satellites. The newest generation of Intelsat satellites, the Intelsat 9
series, is in production.44
Nine satellites were manufactured in the Intelsat VII and VIIA series.
Loral manufactured this series of satellites, and they were launched
during the period from 1993 to 1996.45
__Loral Space and
Communications__ Loral Space and Communications, Ltd., is one of
the world's leading satellite communications companies and has substantial
interests in the manufacture and operation of geosynchronous and
low-earth-orbit satellite systems. The company is headquartered in New
York City and is listed on the New York Stock Exchange. Bernard Schwartz
is its Chairman. The company employs approximately 4,000 people.47
Loral Space and Communications, Ltd., owns Space Systems/Loral, one of
the world's leading manufacturers of space systems. It also leads an
international joint venture for the Globalstar system of satellites that
is expected to be placed in service in 1999. Globalstar will support
digital telephone service to handheld and fixed terminals worldwide. Loral
Space and Communications, Ltd., together with its partners, will act as
the Globalstar service provider in Canada, Brazil, and Mexico. Together
with Qualcomm, it holds the exclusive rights to provide in-flight phone
service using Globalstar in the United States. Loral Skynet, acquired from
AT&T in March 1997, is a leading domestic satellite service
provider.48
__Space Systems/Loral__ Space
Systems/Loral (Loral) designs, builds, and tests satellites, subsystems,
and payloads; provides orbital testing, launch services, and insurance
procurement; and manages mission operations from its Mission Control
Center in Palo Alto, California. Loral was formerly the Ford Aerospace and
Communications Corporation. In 1990, Ford Aerospace was acquired by a
group including Loral Space and Communications, Ltd., and re-named Space
Systems/Loral. Loral is located in Palo Alto, California, and Robert Berry
is its President.49
At the time of the Intelsat 708 failure, Loral was 51 percent owned by
Loral Space and Communications, Ltd. The remainder was owned equally by
four European aerospace and telecommunications companies: Aerospatiale,
Alcatel Espace, Alenia Spazio S.p.A., and Daimler-Benz Aerospace AG. In
1997, Loral Space and Communications, Ltd. acquired the foreign partners'
respective ownership interests in Loral.50
Loral is the leading supplier of satellites to Intelsat. Loral's other
significant customers include the PRC-controlled Asia Pacific
Telecommunications Satellite Co., Ltd., CD Radio, China Telecommunications
Broadcast Satellite Corporation, Globalstar, Japan's Ministry of
Transport, Mabuhay Philippines Satellite Corporation, MCI/News Corp., the
National Aeronautics and Space Administration (NASA), the National Oceanic
and Atmospheric Administration, PanAmSat, Skynet, and TCI. Loral employs
approximately 3,100 people, has annual sales of approximately $1.4
billion, and has a backlog of orders for approximately 80
satellites.51
__Intelsat 708 Launch Program
__ On April 24, 1992, Intelsat awarded a contract to China Great
Wall Industry Corporation for the launch of Intelsat VIIA satellites into
geosynchronous transfer orbit.52
On or about September 18, 1992, the State Department issued a license
to Loral for the export to the PRC of technical data in support of
technical discussions for the launch of an Intelsat VIIA satellite.53 On
or about July 14, 1993, the State Department issued an export license to
Loral for the export of the Intelsat VIIA (708) satellite and associated
equipment necessary for the launch.54
Sometime in 1994, representatives from Intelsat and Loral performed a
site survey at the Xichang launch facility in the PRC. One of the Intelsat
representatives who was involved in the launch described the facility as
"primitive but workable."
On or about January 11, 1996, the Intelsat 708 satellite was shipped to
Xichang.
**The Intelsat
708 Launch Failure**
**O**n February 15, 1996, at
approximately 3:00 a.m. local time, a PRC-manufactured Long March 3B
rocket carrying the Intelsat 708 satellite crashed into a mountain side
approximately 22 seconds after liftoff from the Xichang launch site. 55
Employees and family members of Loral witnessed the launch failure from
Palo Alto through a video feed from the launch site.56
Members of the Intelsat and Loral team in the PRC were not allowed by
PRC officials to visit the rocket debris field until late in the afternoon
of that same day.
At least three different explanations have been offered as to why the
Loral and Intelsat employees were not allowed onto the debris field for
approximately 12 hours:
**ï¿½ The first explanation **was
that Loral and Intelsat employees were kept away from the debris field
until safety hazards from the crash site could be neutralized
**ï¿½ The second, as reported in
the news media,** was that the delay had been imposed to give PRC
officials time to seek out U.S. satellite encryption devices intended to
protect the satellite command processor from unauthorized messages once
the satellite was in orbit57
**ï¿½ The third explanation,
offered by at least one Loral employee,** was that the time delay gave
the PRC an opportunity to clean up the probable human carnage that
resulted from the crash
Once they were allowed to go to the site, members of the Loral team
began collecting and separating satellite debris from the rocket debris. A
rough inventory was done, and the satellite debris subsequently was crated
and shipped back to Loral in Palo Alto for analysis.58
Upon examination by Loral engineers in Palo Alto, it was determined
that the satellite's encryption devices had not, in fact, been recovered
from the crash site.
__Events Leading Up to the Creation of
the Independent Review Committee__ On or about February 27, 1996,
two weeks after the failure, PRC engineers announced that they believed
that the cause of the Intelsat 708 launch failure was the inertial
platform of the control system.59 This information was made public in an
attempt to demonstrate that the PRC had identified the cause of the launch
failure.
The interested parties included the aerospace industry in general, but
particularly Loral, Hughes Space and Communications Corporation (Hughes),
and the space launch insurance industry.
Hughes was scheduled to launch its Apstar 1A satellite on a Long March
3 rocket on or about April 1, 1996, less than two months after the
Intelsat 708 crash. Even though the Apstar 1A satellite was scheduled for
a different rocket, concern was still high in the insurance community.
On March 14, 1996, a meeting was held in Beijing involving Hughes; the
PRC-controlled Asia Pacific Telecommunications Satellite Co., Ltd., owner
of the Hughes-manufactured Apstar 1A; and the insurance underwriters for
the Apstar 1A.60
**The main information the PRC
authorities, including the Asia Pacific Telecommunications Satellite
representatives, sought to convey** to the insurance underwriters was
that their failure investigation relating to the Intelsat 708 launch had
shown the cause to be a failure of the inertial measurement unit.61 This
is the rocket subsystem that provides attitude, velocity, and position
measurements for guidance and control of the rocket.62
The PRC representatives stated that the inertial measurement unit used
on the Long March 3B that failed was different from the unit used on the
Long March 3, which was the rocket that would be used to launch the Apstar
1A. They concluded, therefore, that there should be no cause for concern
regarding the Apstar 1A launch.63
Nonetheless, representatives of the insurance underwriters stated that
insurance on the Apstar 1A launch would be conditioned on delivery of a
final report on the root causes of the Long March 3B failure and a review
of that report by an independent oversight team.64
Paul O'Connor, Vice President of J&H Marsh & McLennan space
insurance brokerage firm, later reported to Feith & Zell, a law firm
representing Loral on possible export violations, that insurers had paid
out almost $500 million in claims involving prior PRC launch failures, and
wanted the PRC to provide full disclosure about the cause of the Intelsat
708 failure.65
**From April 10 through 12, 1996,
China Great Wall Industry Corporation held a meeting in Beijing concerning
the Long March 3B failure investigation.66 Loral sent three engineers**
to the meeting: Dr. Wah Lim, Vice President and General Manager of
Manufacturing; Nick Yen, Integration Manager, Intelsat 708 Program; and
Nabeeh Totah, Manager of Structural Systems.67 Intelsat sent as its
representative, Terry Edwards, Manager of Intelsat's Launch Vehicle
Program Office. China Great Wall Industry Corporation provided Intelsat
and Loral with three volumes of data and eight detailed reports on the
current status of the failure investigation. The PRC's Long March 3B
Failure Analysis Team presented the failure investigation progress, and
the preliminary results up to that date, to Intelsat and Loral.68
On or about April 10, 1996, Bansang Lee, Loral's representative in the
PRC, on behalf of China Great Wall Industry Corporation, asked Lim to be
the Chairman of an independent oversight committee.
On or about April 10, 1996, Lim telephoned Robert Berry, Loral's
President, from the PRC. Lim reportedly told Berry that representatives of
China Great Wall Industry Corporation had asked him to chair an
independent oversight committee reviewing the PRC analysis of the Intelsat
708 launch failure.69
Berry says he gave permission for Lim to act as the chairman of the
independent oversight committee because of serious safety issues
associated with the PRC launch site that had been brought to his attention
after the Intelsat 708 failure.70
Before leaving Beijing, Lim created a charter for the committee, and he
changed its name to the "Independent Review Committee." 71 Eventually, the
Independent Review Committee was constituted with the following members
and staff:
__The Government Security Committee
Meeting at Loral__ On April 11, 1996, a quarterly Government
Security Committee meeting was held at Loral.73
The Government Security Committee was established by Loral in
cooperation with the Department of Defense in 1991, when 49% of Loral's
stock was owned by foreign investors.74 The express purpose of the
Government Security Committee was to monitor Loral's practices and
procedures for protecting classified information and technology controlled
under the International Traffic in Arms Regulations.75
The meeting attendees recounted to the Select Committee that Loral
President Berry arrived at the April 11 Government Security Committee
meeting after most of the others had gathered for it.76 Berry announced at
that time that he had just finished with a telephone call from Lim (in the
PRC) and had given Lim the authority to chair the Independent Review
Committee.77
According to Berry, he told the meeting that Lim had advised him that
the PRC was interested in Lim chairing the Independent Review Committee.
Berry testified that he approved Lim's request to participate during that
telephone conversation. Berry testified that he was aware that a report
would be prepared and distributed to the PRC and insurance companies.
However, he had an understanding with Lim that the report would not
contain any technical data or technical assistance.78 A discussion among
the meeting attendees ensued.
**The minutes reflect that Dr.
Stephen Bryen, an outside member of the Government Security Committee,**
recommended that "any report prepared as a result of [Loral's]
participation in the failure review be submitted to the State Department
prior to dissemination to the Chinese." 79
Bryen testified that he was disturbed by the idea of a failure
investigation involving the PRC, and that this would involve technology
transfer which required State Department approval. Bryen testified that
there was a lot of discussion on the matter, but all agreed that nothing
would happen without State Department approval.80
Duncan Reynard, Loral's Export Control Manager, recalls that Bryen
said:
You know, if there's anything written generated by this group of
people, you should run it by ODTC [Office of Defense Trade Controls,
Department of State] before you release it.81
Reynard says Loral Technology Transfer Control Manager William
Schweickert, Loral General Counsel and Vice President Julie Bannerman, and
he attended the Government Security Committee meeting. All three agreed
with Bryen's statement. Reynard says that he felt some responsibility in
connection with Bryen's comment; however, there was no indication from
anyone that a report was going to be prepared. Reynard says that if he had
known that a report was going to be prepared, with the intention of
disseminating it to foreigners, Loral would have sought the appropriate
U.S. Government approval.82
Reynard says that neither he, as Export Control Manager, nor Bannerman,
the General Counsel, nor Schweickert, the Technology Control Manager, took
any proactive measures to follow up on this matter.
Reynard says that "we didn't know what was happening - we didn't - we
were waiting for somebody to tell us." 83 According to interview notes of
Reynard prepared by an attorney from Loral's outside counsel, Feith &
Zell, Reynard said that no one asked him to look into the matter raised by
Dr. Bryen.84
**Loral's General Counsel, Julie
Bannerman, testified that no one conducted any research** to determine
whether the intended activities of the Independent Review Committee were
legal, or within Loral's company policy. Bannerman also testified that the
primary responsibility for matters relating to Bryen's statements would
have rested with Loral's export control office, namely Reynard and
Schweickert.85
Even though there was a formal mechanism for assigning action items in
Government Security Committee meetings, no action item was generated at
the April 11 meeting in connection with the Independent Review Committee.
No one was assigned to inform Lim of the Government Security Committee's
decision that Loral's participation in the Independent Review Committee
needed to be approved by the Department of State.86
One of the participants at the Government Security Committee meeting
was Steve Zurian of Trident Data Systems. Zurian says that Trident has
been a security advisor to Loral for nine years and provides export
consulting to the company. Trident's responsibilities include attending
the Government Security Committee meetings, taking notes, and drafting the
minutes. Zurian says that he and Caroline Rodine, another Trident
employee, attended the April 11, 1996, and the July 11, 1996, Government
Security Committee meetings.
Zurian says that it was the consensus of the attendees at the April 11,
1996, Government Security Committee meeting that Loral should seek and
obtain approval from the Department of State before participating in the
Independent Review Committee, and that Loral President Berry agreed with
the decision.
**Zurian says that at the July 11,
1996, Government Security Committee meeting, Berry said that Loral had
followed up on Bryen's recommendation to obtain State Department
approval** to participate in the Independent Review Committee. (As Loral
admitted in its June 27, 1996 disclosure to the Department of State,
however, this was not the case.)87
Zurian's draft of the July 11, 1996, meeting minutes reflects Berry's
remarks about obtaining State Department approval. Zurian says that he and
Rodine reviewed their notes of the meeting, specifically regarding Berry's
remarks, and both agree that the draft minutes are accurate.
Zurian says that it is possible that Loral's management failed to tell
Berry that they had not obtained the appropriate State Department
approval. He attributes Berry's erroneous understanding to his staff's
failure to advise him of the facts.
But numerous Loral personnel, including Berry, Bannerman, and Reynard,
were aware of Loral's deliberations with the Department of State regarding
the limits on Loral's participation in PRC failure analyses.88
On April 3, 1996, for example, Loral proposed to the State Department
certain language that restricted Loral's participation in possible failure
analyses in connection with two upcoming Long March launches from the PRC,
for the Mabuhay and Apstar satellites. Loral's proposal was that it would
not comment or ask questions in the course of those failure
analyses.89
It also should be noted that on or about January 24, 1996, a few weeks
prior to the Intelsat 708 failure, Loral received and reviewed the Apstar
technical data export license, which stated:
*Delete any discussion or release under this license of any
technical data concerning launch vehicle [rocket] failure analysis or
investigation.90*
On or about February 22, 1996, a week after the Intelsat 708 failure,
Loral received and reviewed the Mabuhay technical data export license that
also stated:
*Delete any discussion or release under this license of any
technical data concerning launch vehicle [rocket] failure analysis or
investigation.91*
**The Apstar 1A
Insurance Meeting**
On April 15 and 16, 1996, a meeting of representatives of companies
providing reinsurance for the upcoming Apstar 1A satellite launch took
place in Beijing. The Apstar 1A launch, and the issues arising from the
Long March 3B rocket failure, were discussed. The launch failure
presentations by PRC representatives made substantially the same points as
had been made at the March 14, 1996, meeting: that the Long March 3B
failure was due to the inertial measurement unit, and that this was not a
concern for the Apstar 1A launch because it would be launched by a Long
March 3 rocket utilizing a different inertial measurement unit with a
previous record of successful launches.92
**At the same meeting, in response
to the requirement that had been stated by the insurance underwriters**
at the March 14 Beijing meeting, the PRC representatives announced the
creation of an independent oversight committee (shortly thereafter named
the Independent Review Committee) to review the findings and
recommendations of the PRC's failure investigation.93
Wah Lim and Nick Yen of Loral, the designated Chairman and Secretary of
the Independent Review Committee, were present at the meeting and
discussed the role of the committee and its members. The two prospective
members from Hughes - John Smay, the company's Chief Technologist, and
Robert Steinhauer, its Chief Scientist - were also present, as was Nabeeh
Totah of Loral, who would serve as one of four Loral technical staff
members to the Independent Review Committee.94
During the April 15 and 16 insurers' meeting, the participants were
taken on a tour of the Long March rocket assembly area. They were also
shown, in a partially opened state, units described by the PRC as the
older Long March 3 inertial measurement unit and the newer Long March 3B
inertial measurement unit. Thus, almost half of the Independent Review
Committee participants had exposure at this time to the findings and views
of the PRC derived from their failure investigation, prior to the first
official Independent Review Committee meeting.95
On April 17, 1996, Wah Lim sent a letter to all Independent Review
Committee members and to China Great Wall Industry Corporation, confirming
that the first meeting of the committee would be in Palo Alto, California
from April 22 to 24, 1996.
**The April 1996
Independent Review Committee** Meetings in Palo Alto
__Meeting on April 22, 1996__
On April 22, 1996, the first Independent Review Committee meeting
convened at Loral in Palo Alto. The foreign committee members, John Holt
and Reinhard Hildebrandt, were not present. No PRC officials were present,
due to a delay caused by visa problems.
Wah Lim called the meeting to order, and the meeting began without a
technology transfer briefing.
The matter of a technology transfer briefing was subsequently raised,
which prompted Lim to leave the meeting. Approximately ten minutes later,
William Schweickert, Loral's Technology Control Manager, arrived and
provided a technology export briefing to the Independent Review Committee
members who were present. According to one of the participants, it
appeared that Schweickert gave a presentation concerning the rules that
should be followed at a PRC launch site, rather than a briefing covering
technical data exchanges.
Schweickert provided the Independent Review Committee members with a
three-page technology export briefing.96 Schweickert says that he had
never prepared a briefing for a failure review before. Thus, he says he
used the export licenses for the launch of the Intelsat 708 as a basis for
the briefing. (Schweickert says that he learned about the imminent arrival
of the PRC visitors only a few days earlier.) However, according to notes
of an interview of Schweickert prepared by an attorney from Feith &
Zell, Loral's outside attorneys, Schweickert looked at the licenses
relating to the Mabuhay and Apstar IIR satellite programs for assistance
in preparing the Independent Review Committee briefing. Those licenses
were more current than the Intelsat 708 license issued in 1992.
**Schweickert stated that these two
licenses required the presence of Defense Department monitors during any
discussions with the PRC.** He said he knew Defense Department monitors
would not be present at the Independent Review Committee meeting. As a
result, he said, he would have to be "careful" in preparing his export
briefing. Schweickert also said that there was not enough time to get a
license.
Schweickert told the Independent Review Committee members that Loral
did not have a license for the meeting. According to Schweickert, he
discussed what he thought the Independent Review Committee could do
without a license - such as receive technical information from China Great
Wall Industry Corporation, request clarification of certain items, ask
questions, and indicate acceptance or rejection of the PRC's
conclusions.
Schweickert did not attend any of the Independent Review Committee
meetings, other than to give the briefing on the first day.
Duncan Reynard, Loral's Export Control Manager, did not learn of the
Independent Review Committee meeting on April 22, 1996 until Schweickert
told him that same day. Reynard says that Schweickert told him he had
prepared a briefing for the meeting, and he asked Reynard to review it.
According to interview notes of Reynard prepared by an attorney from Feith
& Zell, Reynard did not see Schweickert's briefing until late in the
day on April 22, 1996.97 Reynard says he reviewed Schweickert's briefing
and said it was "okay." 98
Reynard says he was not surprised to find out that PRC representatives
would be visiting Loral. Reynard says he "assumed the briefing and the
people that would normally attend something like that were knowledgeable
enough to know how to handle that kind of a meeting." 99
Reynard also says that his understanding of the meeting was that the
PRC representatives were going to make a presentation concerning their
failure investigation of the Intelsat 708 satellite.100
It should be noted that, during this first Independent Review Committee
meeting at Loral's offices, Loral's President, Executive Vice President,
and Export Control Manager were all absent. They had traveled to Europe in
connection with an unrelated business trip, and for vacation.101
The Independent Review Committee members who were present spent the
first day at Palo Alto reviewing the PRC failure analysis. The documents
consisted of approximately 14 reports dealing with technical material,
analysis, and failure modes.102
__Meeting on April 23, 1996__
On April 23, 1996, the two foreign members of the Independent Review
Committee and the PRC engineers arrived at Loral. The PRC representatives
included:
**ï¿½ Huang Zouyi,** China Great
Wall Industry Corporation
**ï¿½ Professor Chang Yang,**
Beijing Control Device Institute
**ï¿½ Li Dong,** China Academy of
Launch Vehicle Technology
**ï¿½ Shao Chunwu,** China
Academy of Launch Vehicle Technology103
The majority of this second day was spent trying to understand the PRC
failure investigation. Many Independent Review Committee members say there
was difficulty in understanding the PRC representatives' presentation
because of language problems. As a result, many clarifying questions were
asked of the PRC representatives. However, Feith & Zell interview
notes of one Independent Review Committee member specifically stated that
a "good translator" was present at that meeting.
The PRC officials stated that they believed the failure mode was
located in the inertial guidance system of the Long March 3B rocket.104
Specifically, they believed the failure was caused by a break in a wire to
a torque motor controlling the inner gimbal in the inertial measurement
unit. While the Independent Review Committee members told the PRC
representatives that they did not necessarily disagree with this analysis,
the minutes of the Palo Alto meeting reflect that the committee
recommended additional investigation by the PRC to verify its failure
analysis.105
During the meeting, the PRC representatives presented information about
the Long March 3B rocket design. The Independent Review Committee members
asked questions to better understand the technology used by the PRC, as it
was not as advanced as Western designs. Hughes Chief Scientist Robert
Steinhauer described the afternoon session as a "tutorial." 106
__Meeting on April 24, 1996__ On
April 24, 1996, the PRC representatives attempted to answer some of the
questions presented by the Independent Review Committee on the previous
day. There was also continued discussion of the launch failure analysis,
and plans were made to continue the meeting in Beijing on April 30 and May
1, 1996.107
The Hughes committee members, Steinhauer and Smay, did not attend the
meeting on April 24.108
The following is the agenda for the April 24 Palo Alto Independent
Review Committee meeting:
9:00 AM REVIEW OF PROGRESS TO DATE IRC 9:30 AM REVIEW OF LM-3/LM-3B
DIFFERENCES CGWIC 10:30 AM BREAK 10:45 AM CONTINUE REVIEW OF
LM-3/LM-3B CGWIC 12:00 PM LUNCH 1:00 PM ACTION ITEMS FOR LM-3/APSTAR
1A IRC 3:00 PM BREAK 3:15 PM WRAP UP AND PREPARATION FOR BEIJING
MEETING IRC 4:00 PM OPEN DISCUSSION ALL 5:00 PM END
**United States
Trade Representative Meeting on April 23, 1996**
On April 23, 1996, Nick Yen, Loral's Intelsat 708 Launch Operations
Manager and Secretary of the Independent Review Committee, and Rex Hollis,
an employee in Loral's Washington, D.C. office, met with various U.S.
Government officials at the offices of the U.S. Trade Representative in
Washington, D.C.
In a memorandum prepared by Yen dated May 15, 1996, memorializing this
April 23, 1996 meeting, Yen described the purpose of the meeting as an
informal briefing on the activities leading up to and including the launch
failure.109
**According to Yen's memorandum,
the U.S. Government representatives at the meeting were interested in the
accuracy of claims by the PRC authorities about the extent of the damage
caused to a nearby village** by the rocket's explosion. They were also
interested in the course of action that was being taken to correct safety
problems and deficiencies at the launch site.
According to the memorandum, which was prepared after the State
Department inquiries about possible export violations by Loral and three
weeks after the meeting, Yen mentioned that an independent review
committee headed by Wah Lim had been created.110
The memorandum reflected that Yen told the meeting attendees that,
since launch site safety related to how the rocket behaves, the
Independent Review Committee would review the findings, conclusions, and
corrective actions performed by the PRC Failure Investigation Committee,
and set the necessary safety implementation requirements for China Great
Wall Industry Corporation to consider for its future customers, not just
Loral.111
Yen did not tell the attendees that Loral did not have a license to
participate in the investigation.
The memorandum stated that one of the U.S. Trade Representative
officials, Don Eiss, requested a copy of the Independent Review Committee
formal report when it became available. According to the memorandum, Yen
told Eiss that he would have to consult with Lim prior to the
dissemination of the report. There is no indication that the report was
ever disseminated to any of these U.S. Government representatives. The
memorandum reflected no substantive discussion concerning the Independent
Review Committee report.112
The meeting was not about export licensing for failure analyses, and no
U.S. official at this meeting has been identified as an export licensing
officer. Loral, in its Voluntary Disclosure, admitted that:
*[T]his meeting cannot be taken as U.S. government consent to
Loral's activities on the IRC (particularly as the State Department
personnel were not from the Office of Defense Trade
Controls).113*
**The April and
May 1996** Independent Review Committee Meetings in
Beijing
__Meeting on April 30, 1996__ On
April 30, 1996, the second series of Independent Review Committee meetings
convened, this time in Beijing. Hughes committee member Robert Steinhauer
did not attend this meeting. The committee members stayed at the China
World Hotel, and were transported by van from their hotel to the meeting
location.
The meeting was held in a large room in a building on the China Great
Wall Industry Corporation campus. In attendance were representatives from
various PRC aerospace organizations.
According to Independent Review Committee members, various PRC
representatives made presentations concerning different aspects of their
launch failure investigation.
Many of the committee members say that it was difficult to understand
parts of the presentation. In some instances, the presentations were made
in Chinese and interpreted for the committee members. Some of the
committee members say that, in their opinion, the interpreters did not
have technical backgrounds. According to some of the committee members who
testified, this lack of technical training contributed to the difficulty
in understanding the PRC presentations.
__Members' Caucus at the China World
Hotel __ On the evening of the first day, the Independent Review
Committee members and technical staff held a caucus in a meeting room at
the China World Hotel. The purpose of the meeting was to discuss the
presentations that had been made by the PRC, to consider the possible
causes of the launch failure, and to decide on what to present to the PRC
participants the following day.
The caucus meeting ran from about 7:00 p.m. to at least 10:00 p.m. No
PRC personnel were present. However, according to testimony presented to
the Select Committee, the discussion was almost certainly secretly
recorded by the PRC.
Topics of discussion included, among others:
**ï¿½ Proposed failure
modes**
ï¿½ Redundancy
**ï¿½ High fidelity testing**
**ï¿½ Gimbals**
**ï¿½ Gyroscopes**
**ï¿½ Torque motors**
ï¿½ Telemetry data
**ï¿½ The oscillatory behavior of
the flight**
During the caucus, the Independent Review Committee members expressed
views that were incorporated in attachment IV of their Preliminary Report.
One committee member described the meeting as a "brainstorming"
session.
The same member stated, "I'm sure we felt that we had to get together
and try to summarize and understand and agree among ourselves what we
thought we had heard and seen that day, and that was the whole idea . . .
It gave us a chance to talk among ourselves and review what we had heard
and perhaps raise questions."
**Striking is one Independent
Review Committee member's admission that** there were probably things
said in these supposedly closed meetings of the committee that they would
not have said in front of the PRC officials.
According to a document reflecting discussions in the caucus meeting,
the Independent Review Committee members were focusing on the following
failure modes:
**ï¿½ Broken wires in general, as
postulated by the China Academy of Launch Technology**
**ï¿½ Frozen follow-up gimbals, a
failure mode not considered by the PRC**
**ï¿½ Open loop in the feed back
path114**
As early as February 29, 1996, China Great Wall Industry Corporation
had identified that there was a problem with the inertial platform.115 In
a March 28, 1996, Information Release from China Great Wall Industry
Corporation, the PRC announced that they were one experiment away from
completing the simulation experiments on the Long March 3B failure
scenarios.116 The Information Release stated that they had analyzed the
telemetry data and the failure mechanism. Through this analysis, they had
isolated four inertial platform failure modes:
**ï¿½ A broken wire to the torque
motor for the inner frame**
**ï¿½ A blocking of the inner frame
axis**
**ï¿½ An open loop of the follow-up
frame**
**ï¿½ Environmental
stress**
From its analysis of the telemetry data, China Great Wall Industry
Corporation determined that during the 22-second flight of the Long March
3B, there were three distinct cycles, each of which lasted a little over
seven seconds. Witnesses at the launch confirmed that the rocket veered
three times before impact. China Great Wall Industry Corporation theorized
that the rocket veered as the result of a faulty wire (or flawed solder
joint) in the inertial platform, which intermittently disconnected and
reconnected at the end of each of the three cycles.117
**By the time of the Beijing
insurance meeting** on April 15, 1996, China Great Wall Industry
Corporation had eliminated two of the four failure modes identified in
March. Specifically, they isolated the problem to the inner frame and
posed the following possibilities:
**ï¿½ Electrical circuitry
problems: **open loop through the inner frame; broken wire; poor
contact; or false welding
**ï¿½ Mechanical problems:** the
axis of inner frame clamping; foreign object blocking118
Viewgraphs supplementing their report stated that the inertial platform
veered three times during the 22-second flight, and that the first
periodic motion occurred in the torque motor on the inner frame axle of
the platform.119 China Great Wall Industry Corporation presented similar
information to the Independent Review Committee participants at the first
meeting of the committee in Palo Alto from April 22 to 24, 1996.
At the second Independent Review Committee meeting in Beijing, China
Great Wall Industry Corporation continued to emphasize the inner frame as
the problem. In fact, they provided the Independent Review Committee
participants a failure tree that specifically eliminated all but the inner
frame as a potential failure mode.120
In the words of one Independent Review Committee participant, "I think
if they had not had the IRC, they would have sold that one down the
line."
**The Independent Review Committee
was not convinced. **First, several committee participants thought the
disconnecting and reconnecting wire theory either was not plausible or was
"highly unlikely." In addition, China Great Wall Industry Corporation was
only able to replicate the first seven to eight seconds of the flight,
rather than the full 22-second flight. Finally, China Great Wall Industry
Corporation had not resolved a fundamental question as to why the
telemetry data in the follower frame was flat, rather than
oscillating.121
In a continuing effort to persuade China Great Wall Industry
Corporation to explain the behavior of the full 22 seconds of flight, the
Independent Review Committee provided comments to the PRC after the first
day of the Beijing meeting. The Independent Review Committee stated that
"China Academy of Launch Technology should consider to perform a
simulation test using an open feed back path as the initial condition. It
is also very critical for CALT [China Academy of Launch Technology] to
explain why the follow-up gimbal resolve[r] (angle sensor) stayed flat
throughout the flight." 122
While the Independent Review Committee generally acknowledged China
Great Wall Industry Corporation's proposed failure modes, they did so only
after modification. For example, the PRC proposed a "broken wire to the
torque motor for the inner frame," while the Independent Review Committee
proposed a "broken wire in general as postulated by CALT." While the PRC
proposed a "blocking of the inner frame axis," the Independent Review
Committee proposed "frozen follow-up gimbals." 123
__Meeting on May 1, 1996__ May
1, 1996, was the second day of the Independent Review Committee Beijing
meetings. The following is the agenda for the second day's of that
meeting:
8:20 IRC MEMBERS LEAVE HOTEL CGWIC 9:00 IRC'S REVIEW TO THE ANSWERS
IRC 11:00 DETAILED DISCUSSIONS OF LM-3 AND LM-3B FAILURE ALL ISOLATION
ANALYSIS AND IMU FOR LM-3 & LM-3B MANUFACTURING AND TEST PROCEDURE
ETC. 12:00 LUNCH BREAK (BUFFET) 13:00 TOUR OF THE ASSEMBLY WORKSHOP
OF L/V, THE IMU TEST FACILITY ALL 16:00 WRAP UP SESSION
IRC/CGWIC 17:00 SUMMARY OF FINDINGS TO DATE AND CONCLUSION IF AVAILABLE
IRC 19:00 DINNER HOSTED BY CASC
During the morning session, a "splinter meeting" was held to
specifically discuss the inertial platform. The meeting was attended by
the five Independent Review Committee members, and a small group of PRC
engineers.124 During the meeting, the committee participants sought
clarifications concerning the signal flow diagrams in order to determine
the cause of the open circuit.
During the Independent Review Committee meetings in Beijing, several of
the Independent Review Committee members toured the PRC manufacturing and
assembly facilities for the Long March 3B inertial measurement unit.
During those tours, the Independent Review Committee members commented to
the PRC engineers about the quality control practices used by the PRC.
These comments on quality control were reiterated in the Independent
Review Committee Preliminary Report sent to China Great Wall Industry
Corporation on May 10, 1996.125
**The
Independent Review Committee Preliminary Report**
__Writing the Report__ Upon
completion of the Beijing Independent Review Committee meeting on May 1,
1996, the process of writing the report began. Wah Lim delegated the task
of writing the major portion of the report to John Holt, the British
committee participant, because he seemed to have the best understanding of
the issues related to the Long March 3B inertial measurement unit.126
On or about May 2, 1996, Holt faxed his draft summary to Nick Yen, the
Secretary of the Independent Review Committee, at Loral. Yen then
disseminated Holt's draft summary to the other Independent Review
Committee members. The committee members subsequently provided their
comments on Holt's draft to Yen and Lim.127
__Loral Sends the Draft Report to the
PRC__ Yen assimilated all of the material into a draft
Preliminary Report during the period May 2 to 6, 1996. He completed the
draft Preliminary Report around May 6 or 7, 1996. Yen then showed the
report to Loral's Wah Lim, the Chairman of the Independent Review
Committee. Lim suggested changes, and told Yen to send it to the
Independent Review Committee members, and to the China Great Wall Industry
Corporation.
On May 7, 1996, Yen distributed the draft Preliminary Report to the
Independent Review Committee members and technical staff for additional
comments.128
On the same day, Yen also faxed a copy of the draft to China Great Wall
Industry Corporation in the PRC.129
According to interview notes of Lim taken by a Feith & Zell
attorney, Lim acknowledged that he instructed Yen to send the draft
Independent Review Committee report to everyone, including the PRC, on May
7, 1996.130
It should be noted that Lim refused to be interviewed or deposed during
this investigation.
__The Contents of the Draft
Report__ The Independent Review Committee's Preliminary Report
repeated the committee's concerns that China Great Wall Industry
Corporation's conclusions were debatable. As a short-term recommendation,
the Independent Review Committee stated:
*An explanation of the total flight behavior is essential to fully
confirm the failure mode.131 A mathematical numerical solution is
recommended immediately, to be followed by a hardware in the loop
simulation test when possible . . .132*
In addition, the draft Preliminary Report documented the Independent
Review Committee's view that an intermittently reconnecting wire - the
PRC's theory - was not necessary for the rocket to behave in the manner in
which it did.
Specifically, the Independent Review Committee postulated that a single
disconnectionwithout reconnectionwould be "a much simpler, and
more plausible, explanation." 133
The Independent Review Committee repeated its concern that "the open
circuit could be at various other physical locations," suggesting that the
problem might not be in the inner frame,134 as was posited by the PRC.
**The Independent Review Committee
participants questioned China Great Wall Industry Corporation's
assertions** that the flat data from the follower frame were bad
data.135 They therefore requested that China Great Wall Industry
Corporation confirm that the follower frame had functioned properly during
flight.
Ten days after China Great Wall Industry Corporation received the
Independent Review Committee's Preliminary Report, it abandoned testing of
the inner frame, and started vigorously testing the follower frame.
One month later, China Great Wall Industry Corporation determined that
the cause of the failure was an open feed back path in the follower frame.
This finding was confirmed in a presentation by China Great Wall Industry
Corporation to Loral, Hughes, and others in October 1996.
In addition to these observations, the Independent Review Committee
document recommended that a "splinter" meeting be held the following day
to examine more closely the failure modes related to the inertial guidance
system of the Long March 3B.136 John Holt, John Smay, Jack Rodden, Fred
Chan, and Nick Yen were selected to participate in the meeting.137
__Notification to Loral Officials That a
Report Had Been Prepared__ On or about May 6, 1996, Lim spoke
during a Loral staff meeting about the work of the Independent Review
Committee, and mentioned that a report was going to be submitted to the
insurance companies on or about May 10, 1996.
Julie Bannerman, Loral's General Counsel, says that she was concerned
about the possibility that the company might incur some liability to the
insurance companies because Loral employees would be associated with
representations that were made in the report. Bannerman advises that, for
this reason, she wanted to add a disclaimer to the report.138
Thus, Bannerman believes that she asked Lim to provide her a copy of
the report prior to its dissemination, although she has no specific
recollection of making the request.139
Bannerman says she does not recall any mention at the Loral staff
meeting that the eport was being provided to the PRC.140
__Loral Review and Analysis of the
Independent Review Committee Report__ Loral General Counsel Julie
Bannerman says that she found a copy of the Independent Review Committee
draft Preliminary Report on her desk on May 9, 1996. She does not know who
put the document on her desk, but believes that it was probably Wah
Lim.141
**Bannerman says that she looked at
the report and realized that it contained technical information **she
did not understand. As a result of the concern this caused her from an
export control perspective, she says she began preparing a memorandum to
send to Loral's outside legal counsel, Feith & Zell in Washington,
D.C., for review.142
During the preparation of her memorandum, Bannerman says that she
telephoned Loral Export Control Manager William Schweickert because she
wanted to mention his April 22, 1996, export briefing in the memorandum.
Schweickert provided her with the requested information, which she
included in approximately one line in the memorandum, but she does not
recall whether she advised Schweickert that a draft report had been
prepared by the Independent Review Committee.143
Bannerman says that she faxed her memorandum and the draft Preliminary
Report to Mark Feldman, an attorney at Feith & Zell. She did not call
Feldman prior to transmitting the document.144
Bannerman says that she was concerned that the draft Preliminary Report
might include technical data or defense services that required an export
license (which Loral did not have), or that it represented activities that
might require a license. However, she says she could not make that
judgment. She did not consider it necessary at this point in time to call
Lim because "the issue at hand was present in the document." Bannerman
advises that she did not speak with Lim on May 9, 1996.145
Bannerman recalls believing that, since the draft Preliminary Report
was in her possession, it would not be disseminated outside Loral.
Bannerman says that, at this point - May 9, 1996 - she was not aware that
the draft Preliminary Report had been disseminated to anyone.146
**The Final
Preliminary Report is Sent to the PRC**
Loral's General Counsel, Julie Bannerman, says that on May 10, 1996,
Loral Export Control Officer Duncan Reynard returned from vacation and
came to her office. Bannerman showed him the Independent Review Committee
report, since she wanted his advice on how to handle the document.147
Bannerman says that Reynard's immediate comments concerned the quality
of the report, not necessarily its substance. Bannerman says that she and
Reynard called Mark Feldman at Loral's outside counsel, Feith & Zell,
to see if he had yet reviewed the report. According to Bannerman, Feldman
said that he had reviewed it, was concerned about the structure and
apparent purpose of the document, and thought that some issues required
resolution.148
Bannerman says she believed the report would not be sent outside Loral
until she and Reynard had more information.149
Bannerman says that she and Reynard advised Loral President Berry of
the situation, and he concurred in their recommendation not to allow
dissemination of the report.150
**Bannerman says that her
recollection is uncertain on this point, but she believes that Reynard was
responsible for preventing any dissemination of the draft Preliminary
Report,** and was going to talk to Wah Lim about that. Bannerman also
believes that she may have called Lim and told him not to disseminate the
report. She says that her recollections of the remainder of that day are
vague, but that she recalls going home with the understanding that the
"mission had been accomplished." 151
Reynard says his recollection is that Bannerman was going to speak to
Lim, and he was going to speak with Yen. Reynard says that, after the
meeting with Bannerman, he went to Yen's office at approximately 11:30
a.m. that same day, May 10, where he saw a number of reports on Yen's
table. Reynard says that Yen confirmed that the documents were copies of
the draft Preliminary Report. Reynard says that Yen told him that he was
preparing the reports for dissemination to the Independent Review
Committee members.152
Reynard says he told Yen that the reports could not go out until Loral
had State Department approval, or a license, and that Yen said he
understood this. Reynard said he did not ask Yen whether the reports had
been sent out, because they were on Yen's desk. Reynard says he took some
copies of the report, so that he could show them to U.S. Government
officials.153
**Yen finished the final
Preliminary Report on May 10, 1996.** He took it, and a cover letter
addressed to China Great Wall Industry Corporation, to Lim for his review.
Lim looked at the report quickly and signed the cover letter.
Yen faxed the report to China Great Wall Industry Corporation in the
PRC shortly afterward that same day.
Later that day, Lim asked Yen if the report had been sent to the China
Great Wall Industry Corporation. When Yen replied that it had, Lim
indicated that Loral might have to apply for a license for the Independent
Review Committee activity.
__Another Copy of the Report Is Sent to
Beijing__ On May 13, 1996, Lim's office instructed Yen to send
the report to Paul O'Connor at J&H Marsh & McLennan in Washington,
D.C. After receiving the report in its Washington office, J&H Marsh
& McLennan requested the report be faxed to O'Connor in Beijing.
Apparently Lim specifically approved faxing the report to O'Connor in
Beijing.
Lim's May 13, 1996, letter transmitting the final Independent Review
Committee Preliminary Report to O'Connor says, in part:
*This [Report] will not be delivered to CGWIC [China Great Wall
Industry Corporation] and its launch service agencies until the export
license or an equivalent authorization is obtained."
154*
This letter is inconsistent with Yen's having already transmitted the
draft Report to China Great Wall Industry Corporation six days earlier, on
May 7. It is also inconsistent with Lim's letter three days earlier, on
May 10, transmitting the final Independent Review Committee Preliminary
Report to China Great Wall Industry Corporation, which was faxed to the
PRC on that date by Yen.
**It should be noted that Wah Lim
refused to be interviewed in this investigation,** despite the issuance
of a subpoena.155 Moreover, the Department of Justice has requested that
further details of this aspect of the Select Committee's investigation not
be publicly disclosed because it would compromise the criminal prosecution
of Loral, Hughes, and their employees. Since the details can be made
public as part of such a prosecution, the Select Committee has agreed to
this request.
**Loral
Management Actions After Delivery of** the Report to the
PRC
Loral General Counsel Bannerman recalls a meeting in Loral President
Berry's office, possibly on May 14, 1996, concerning the Independent
Review Committee matter.
Bannerman believes that Loral's Executive Vice President, Pat Dewitt,
may have called the meeting to discuss a May 14, 1996, memorandum prepared
by Loral Export Control Manager Reynard. The memorandum raised concerns
about possible violations of the International Traffic in Arms Regulations
on the part of Loral.156
Loral President Berry and Weh Lim, the Chairman of the Independent
Review Committee, were also present at the meeting.
During the meeting, Bannerman says Dewitt was concerned about whether
or not the Preliminary Report had been disseminated. She says he asked Lim
to confirm that it had not.157
Bannerman says Lim made a telephone call at that point in the meeting,
but she does not know to whom. Bannerman does not recall that Lim actually
confirmed at this meeting that the Preliminary Report had not been sent.
However, she says the meeting participants "received the message" that Lim
had stopped the report from being disseminated.158
Bannerman believes a meeting was set up for the following day, May 15,
1996, in order to receive a telephone report from Reynard, who was in
Washington meeting with U.S. Government representatives concerning the
report.159
**Reynard says he recalls the
meeting on May 14, 1996, in Berry's office,** during which he gave
copies of a memorandum he prepared to Bannerman, Berry, and Dewitt.160
Reynard says the purpose of the memorandum was to get people's
attention on the Independent Review Committee report and necessary action.
He says the bold print in the memorandum indicated that he was strongly
trying to get people's attention. The final page of the memorandum
contained recommended courses of action.161
One of the memorandum topics concerned an article that appeared in
Space News. The article reported that the Independent Review Committee's
report had been released to the PRC on May 10, 1996. Reynard says that he
considered the article to be inaccurate because, to the best of his
knowledge, the report had not been released.162
Another topic of the memorandum concerned possible violations of the
International Traffic in Arms Regulations, but Reynard does not think
there was any "real" discussion of that specific concern at the
meeting.163
Reynard says that at this point he did not know the report had been
disseminated to the PRC. Reynard says the meeting did not last long, and
that Berry told him at the meeting to go to Washington and to do whatever
was necessary regarding the Independent Review Committee's report.164
On May 14, 1996, Yen received a call from Lim requesting that Yen be
present at a meeting on May 15, 1996, in Berry's office. The purpose of
the meeting was to have a telephone conference with Reynard, who was in
Washington meeting with State Department and Defense Technology Security
Administration officials regarding the Independent Review Committee
activity.
**Defense
Department Official Discovers the Activities** Of the Independent Review
Committee
After reading an article in Space News that described Loral's
involvement in a launch failure investigation, Defense Technology Security
Administration official Robert Kovac called Loral's Washington
Representative, Harold Bradshaw, on or about May 14, 1996. Kovac inquired
about the license that Loral relied upon to conduct the investigation.
When Bradshaw could not provide an answer to Kovac's question, a meeting
was scheduled for May 15, 1996.165
__Meeting with the Defense Technology
Security Administration__ On May 15, 1996, Loral's Reynard and
Bradshaw met with Kovac and two other officials of the Defense
Department's Defense Technology Security Administration. Later that day,
Reynard and Bradshaw met with representatives of the State Department's
Office of Defense Trade Controls.
At the meeting with the Defense Department officials, the Defense
Technology Security Administration reviewed the Preliminary Report and
expressed concerns about the technical data it contained.
The Defense Technology Security Administration participants were
shocked that the Preliminary Report contained references to technical
discussions with the PRC concerning inertial navigation systems. Kovac
told the Loral representatives that, in his opinion, Loral had potentially
violated the law and was in the process of violating it "big time" by
providing the report to the PRC.
Kovac specifically asked Reynard whether the document had been provided
to the PRC. Reynard replied that it had not. But it had, he said, been
disseminated to the Independent Review Committee members.
Kovac specifically advised that Loral should submit a voluntary
disclosure to the State Department.
Kovac had follow-up conversations with Bradshaw, but no other
conversations with Reynard.
In Kovac's opinion, the State Department DSP-5 license, No. 544593,
issued to Loral for the export of technical data in support of technical
discussions for the launch of an Intelsat VIIA satellite, did not allow
Loral to provide any technical assistance to the PRC.
__Meeting with the State
Department__ On May 15, 1996, following their meeting with the
Defense Technology Security Administration. Loral's Reynard and Bradshaw
met with Dr. Kenneth Peoples, the State Department licensing officer for
the Intelsat 708 satellite launch.
Bradshaw had asked for a meeting at the State Department's Office of
Defense Trade Controls to discuss Loral's involvement in a failure
analysis with the PRC.
Based on Loral's presentation about the launch failure investigation of
the Intelsat 708 satellite, Peoples believed there was a serious
possibility the International Traffic in Arms Regulations had been
violated.
Peoples recommended that Loral provide a letter to William Lowell,
Director of the State Department's Office of Defense Trade Controls,
concerning the matter. Loral subsequently delivered a box of documents
relating to this matter to the State Department.
__Reynard's Telephone Call to
Loral__ On May 15, 1996, Loral officers Bannerman, Berry, Yen,
and Dewitt - but not Lim - were present in a meeting room at the company
to receive a telephone call from Loral's Export Control Officer, Duncan
Reynard, who was in Washington. Bannerman recalls that Reynard called and
briefed them on his meeting with U.S. Government officials.166
Bannerman's recollection is that the meeting was related to the
Independent Review Committee. However, she does not recall whether the
meeting was convened to initiate discussions about instituting a Loral
investigation of the Independent Review Committee matter, or whether the
purpose was to just to speak with Reynard.
Bannerman says that they (Loral) got the message that all Independent
Review Committee activity should be ceased.167
Bannerman says she has no recollection of any discussion during this
meeting about whether the Independent Review Committee report had been
sent to the PRC. Bannerman's recollection is that it was decided that
Loral would initiate an investigation into the matter upon Reynard's
return from Washington.168
Bannerman says the message received from Reynard during this meeting
was that Loral was not only to stop all Independent Review Committee
activity, but also to retrieve all copies of the documents that had been
disseminated. Bannerman says she cannot recall Reynard making any comments
about whether the Independent Review Committee report had been
disseminated to the PRC.169
Bannerman says that Yen was present for Reynard's telephone call, and
that Yen did not say that he had disseminated the Independent Review
Committee report to the PRC.170
Others present also recall that Reynard said that the Independent
Review Committee was not a good idea, and that Loral should prepare a
voluntary disclosure.
**After the telephone conference
with Reynard ended, Lim asked Yen to retrieve the Independent Review
Committee reports** that had been distributed to the foreign committee
members. But Lim did not ask Yen to retrieve the copies that had been sent
to the other Independent Review Committee members, or to China Great Wall
Industry Corporation.
Bannerman says she has no specific recollection of meeting with Reynard
upon his return from Washington. However, she believes she probably did,
and that Reynard initiated a preliminary investigation into the
matter.171
**Loral
Management Discovers the Independent** Review Committee Report Has Been
Sent to the PRC
Bannerman says that Reynard told her on May 20, 1996, that Yen had
admitted earlier that day he had disseminated the report to the
PRC.172
Reynard advises that he confronted Yen in a small office at Loral, and
asked him directly whether he had disseminated the report. Yen admitted,
says Reynard, that he had transmitted the report to the PRC on May 10,
1996.173
Reynard says he did not ask Yen why Yen had not told anyone at Loral
previously that he had disseminated the document to the PRC.
After receiving the information that the report had been sent to the
PRC, Bannerman believes she advised Pat Dewitt, Loral's Chief Financial
Officer, about the situation. She says she does not remember whether they
told Berry about the matter at this time.174
Bannerman recalls making a decision that she wanted outside counsel to
conduct an investigation, and that she did not interview Lim or Yen about
the matter because outside counsel was going to investigate. Bannerman
says she believed that the matter required delicate handling.175
**Loral's
'Voluntary' Disclosure**
__Investigation by Loral's Outside
Counsel__ From May 29 through 31, 1996, an attorney from Loral's
outside counsel for export matters, Feith & Zell, visited Loral's
facility in Palo Alto and interviewed almost all of the Loral personnel
referred to by name in the disclosure. Two Feith & Zell attorneys
returned to Palo Alto from June 4 through 6, 1996, to hold follow-up
interviews and review additional documents. Feith & Zell eventually
completed the investigation and prepared a disclosure that was submitted
on June 17, 1996, to the State Department.176
__Loral Submits Its 'Voluntary'
Disclosure to the State Department__ The disclosure by Loral
chronicles the company's version of the involvement of Loral personnel in
the Intelsat 708 launch failure investigation. It analyzes the Independent
Review Committee meetings held in both Palo Alto and Beijing, as well as
the preparation and dissemination of the Preliminary Report.177
This submission was in response to a May 29, 1996 letter from William
Lowell of the State Department, advising Eric Zahler, General Counsel of
Loral Space and Communication, Loral's parent corporation, that there was
reason to believe that Loral may have participated in serious violations
of the International Traffic in Arms Regulations by providing unauthorized
defense services to the PRC in connection with the February 1996 launch
failure investigation.178
Lowell recommended that Loral:
**ï¿½ Take immediate steps to cease
all related activity that may require approval**
**ï¿½ Provide a full
disclosure**
**ï¿½ Enumerate all releases that
were controlled under the International Traffic in Arms
Regulations179**
The following outlines the substance of Loral's Voluntary Disclosure
and its appendices and exhibits.
**Loral's disclosure to the State
Department was silent as to why Yen disseminated a draft copy** of the
Independent Review Committee Preliminary Report to China Great Wall
Industry Corporation on May 7, 1996.
Also, no reason was provided as to why Yen disseminated the final
version of the Independent Review Committee Preliminary Report to China
Great Wall Industry Corporation on May 10, 1996.
In addition, Loral's disclosure failed to identify - among other issues
- the following facts:
**ï¿½ During the time in which the
Independent Review Committee was formed** and conducted its
activities, Loral did not adequately staff its export control
function.180
**ï¿½ In January 1995, Loral
assigned responsibility** for drafting its "Export Control Operating
Procedures" by January 25, 1996. As of July 1996, those procedures had
not been drafted.181
**ï¿½ Even though the issue of
Loral's participation in the Independent Review Committee was
discussed** at the April 11, 1996 Government Security Committee
meeting, no one communicated the substance of that discussion to any of
the participants in, or to the Chairman of, the Independent Review
Committee.
**ï¿½ No one, other than the
participants in the Independent Review Committee,** ascertained the
type and extent of the Independent Review Committee's failure review
activities.182
**ï¿½ No one conducted any research
to determine whether the intended activities of the Independent Review
Committee were legal** or consistent with Loral's company
policy.183
**ï¿½ Adequate notice was not
given** regarding the impending visit of PRC engineers to Loral's
facility in Palo Alto.184
**ï¿½ Loral failed to adequately
review the export control briefing** to be delivered to the
Independent Review Committee, even though the drafter of that briefing
had never prepared an export control briefing in connection with a
failure review.185
**ï¿½ No one ensured that the
delivery of that briefing** to the participants of the Independent
Review Committee was adequate.186
**ï¿½ At the time of the first
Independent Review Committee meeting in Palo Alto, Loral's President,
Executive Vice President, and Export Control Manager** traveled to
Europe in connection with an unrelated business trip and
vacation.187
**ï¿½ No one monitored the
Independent Review Committee's failure review activities in the
PRC.188**
**ï¿½ Once it was determined that a
report had been drafted, no one effectively communicated to the
responsible Loral employees** that the report should not be
transmitted to the PRC prior to review by Loral's General Counsel or the
U.S. Government.189
**ï¿½ Officers at Loral's parent,
Loral Space and Communications, Ltd., were not involved in oversight**
of Loral's participation in the Independent Review Committee and
acknowledge that they were distracted by other business matters,
primarily the sale of Loral's defense assets to Lockheed-Martin.190
**ï¿½ No one was reprimanded,
subjected to the company's administrative action, or fired** in
connection with the matter.191
The 'voluntary' disclosure failed to disclose the following indications
that Loral employees were generally aware of the export restrictions
related to failure reviews:
**ï¿½ Nick Yen, the Independent
Review Committee Secretary, was aware of the export control hazards**
that attended failure reviews, as evidenced by the fact that he had
reported his concerns regarding Hughes' participation in the 1995 Apstar
failure review.192
**ï¿½ The technical data license
for the Intelsat 708 stated: "The contractor must not provide any
technical assistance whatsoever** to its Chinese counterparts which
might assist China to design, develop, or enhance the performance of any
of its contemplated or existing space launch missiles or facilities."
193
**ï¿½ Numerous Loral personnel,
including the Executive Vice President, General Counsel, Export Control
Manager, and Yen, were aware of, or participated in, contemporaneous
discussions with the State Department regarding the permissible
bounds** of Loral participation in PRC failure analyses. These
discussions were embodied in an April 3, 1996 Loral proposal to the
State Department of license language that would restrict Loral's
participation in possible failure analyses in connection with the
upcoming Mabuhay and Apstar Long March launches. Loral's proposal was
that it would not comment or ask questions in the course of any such
failure analyses.194
**ï¿½ On or about January 24, 1996,
a few weeks prior to the Intelsat 708 failure, Loral received and
reviewed the Apstar technical data export license** issued to Loral by
the U.S. Government. The license barred Loral from passing any technical
data to the PRC in connection with a failure investigation. The license
stated: "[D]elete any discussion or release under this license of any
technical data concerning launch vehicle [i.e., rocket] failure analysis
or investigation." 195 This came to Loral senior management's attention
shortly after the license was received.
**ï¿½ On or about February 22,
1996, a week after the Intelsat 708 failure, Loral received and reviewed
the Mabuhay technical data export license** issued to Loral by the
U.S. Government. The license barred Loral from passing any technical
data to the PRC in connection with a failure investigation. The license
stated: "[D]elete any discussion or release under this license of any
technical data concerning launch vehicle [i.e., rocket] failure analysis
or investigation." 196 This came to Loral senior management's attention
when the license was received.
The Loral disclosure acknowledged that it was a serious mistake not to
have sought State Department approval for the Independent Review Committee
activities. The disclosure did not admit to any violations of the
International Traffic in Arms Regulations, although it recognized that the
issue of assistance to China Great Wall Industry Corporation raised
problems under these regulations. The disclosure advised that Loral's
policy was to seek State Department approval before proceeding with
activities such as the Independent Review Committee.197
The disclosure stated that Loral was taking a series of corrective
actions to ensure that similar mistakes do not happen again. The thrust of
those measures was to:198
**ï¿½ Improve export control
training** of all staff who engage in or authorize communications with
foreign persons.
**ï¿½ Tighten procedures to ensure
communication and follow-up** between export control staff and program
staff.
**ï¿½ Reinvigorate the corporate
policy that compliance with export control laws** and regulations
takes priority over business concerns.
**The PRC Gives
Its Final Failure Investigation Report**
On October 21 and 22, 1996, China Great Wall Industry Corporation made
its final launch failure presentation to officials at Loral.199 The
meeting was sponsored by Loral's Mabuhay Program, which subsequently
launched the Mabuhay satellite on the Long March 3B rocket on August 19,
1997.
On September 10, 1996, China Great Wall Industry Corporation had
announced its final failure determination: that the cause of the February
11, 1996 Long March 3B crash was the absence of current output from the
servo-loop of the follow-up frame of the inertial guidance
platform.200
It should be noted that the follow-up frame failure mode had been
rejected by China Great Wall Industry Corporation during the Beijing
Independent Review Committee meetings.201 Yet, even though this mode had
been rejected by China Great Wall Industry Corporation during the Beijing
meetings, the Independent Review Committee included it in its final
Preliminary Report as a possible failure mode.202
During the October 21 and 22, 1996 Long March 3B failure review
presentation at Loral, China Great Wall Industry Corporation produced
documents that showed it had started testing for the follow-up frame
failure mode on or about May 20, 1996 - slightly more than two weeks after
the conclusion of the Beijing Independent Review Committee meetings, and
ten days after receiving the Independent Review Committee's Preliminary
Report.203
China Great Wall Industry Corporation finished testing the follow-up
frame failure mode on or about June 20, 1996.
**Assessments by
U.S. Government Agencies And** Referral to the Department of
Justice
Loral and Hughes each submitted information to the State Department in
their disclosures regarding the Independent Review Committee. The State
Department reviewed this material, and generated an assessment of the
information contained in the documents that were submitted.
The State Department also asked the Department of Defense and CIA to
review the materials and generate their own assessments.
The Defense Department conducted two analyses: one in August 1996, and
another - by the Defense Technology Security Administration - in May
1997.
The Central Intelligence Agency provided views to the State Department
in June 1996, but limited its analysis to proliferation concerns. In
addition, in 1998 an interagency review team was asked to address a subset
of questions that remained after the earlier assessments.
__Defense Department 1996
Assessment__ In August 1996, the Department of Defense prepared a
classified assessment of the Independent Review Committee materials. That
assessment reported that the Defense Department would have recommended
against issuing a license for the sharing of technical information with
the PRC by Loral and Hughes. It concluded that there existed the potential
for moderate harm to national security interests.
The assessment cited 18 violations that it believed had occurred during
the Independent Review Committee's exchanges of information with the PRC.
These examples were taken from the minutes of the second Independent
Review Committee meeting, and from the draft and final versions of the
Preliminary Report.
In conclusion, the Department of Defense assessment stated:
*It is likely that the all-Chinese Failure Analysis Team [PRC]
pursued recommendations made by Independent Review Committee in its
draft report . . . and that the pursuit of these recommendations
directly resulted in the Chinese team finding the correct cause of
failure * in the Long March 3B guidance system . . .
*Evidence suggests that the Independent Review Committee very
likely led the Chinese to discover the true failure of the Long March 3B
guidance platform.204*
__Central Intelligence Agency Assessment
__ On June 17, 1996, the Central Intelligence Agency reported to
the State Department that the Independent Review Committee report did not
disclose any significant missile-related technology or know-how to the
PRC's ballistic missile program. The Central Intelligence Agency judged
that the Independent Review Committee's actions posed no proliferation
concerns. The Central Intelligence Agency assessment was based on a review
of the Independent Review Committee's preliminary report that State had
received from Loral and focused only on proliferation concerns related to
the PRC's ballistic missiles.
__Department of State Assessment __ On
March 25, 1997, the State Department, after considering the views of the
other agencies, reported its assessment of the Independent Review
Committee's materials. That report stated: "[State] believes information
passed to China . . . could significantly improve the manufacturing,
production, reliability, and maintainability" of the Long March 3B
guidance system.
__Defense Technology Security
Administration 1997 Assessment__ The Defense Department's Defense
Technology Security Administration issued a classified assessment of the
Independent Review Committee activities on May 16, 1997. That report
stated:
*Loral and Hughes committed a serious export control violation by
virtue of having performed a defense service without a license in the
course of conducting an investigation for China of the failure of the
February 1996 launch of the Long March 3B.*
*This activity also violated the U.S.-China Space Launch Technology
Safeguards Agreement.*
*The defense service consisted of a full range of investigatory,
engineering and corrective analyses to assist the Chinese in identifying
the root cause of the failure and corrective measures.*
*The significant benefits derived by China from these activities
are likely to lead to improvements in the overall reliability of their
launch vehicles [i.e., rockets] and ballistic missiles and in particular
their guidance * systems.205
Based on its assessment, the Defense Technology Security Administration
recommended that the matter be referred to the U. S. Department of Justice
for possible criminal investigation.
__Interagency Review Team
Assessment__ In 1998 an interagency review team was asked to
respond to questions regarding the Long March 3B and its guidance system.
At the conclusion of the Select Committee's investigation, the interagency
review team's conclusions remained in draft form. However, members of the
team briefed the Select Committee staff and provided documents requested
by the Select Committee.
**The technical issue of greatest
concern to the interagency review team was that the Independent Review
Committee exposed the PRC** to Western diagnostic processes. In
addition, the Independent Review Committee provided the PRC with
alternative possible causes of the failure that the PRC had apparently not
previously considered in their investigation.
The interagency review team also found that the Independent Review
Committee outlined for the PRC the general approach to isolating the true
failure mode. This may have been of significant help to the PRC, and may
have led it to discover the true failure mode more quickly. This could
have prevented a failure in one or more subsequent rocket flights
involving the same guidance system. (The Long March 3A, 3B, and 3C rockets
all use the same guidance system.)206
More important still, the team members believed, was the exposure to
the diagnostic test process outlined by Loral and Hughes that could
improve PRC pre-flight and post flight failure analysis for their
ballistic missile programs. This, in turn, could increase future ballistic
missile reliability.207
**Outline of
What Was Transferred to the PRC**
During their engagement, the Independent Review Committee members
communicated with the PRC in several ways:
**ï¿½ In-person
conversations**
**ï¿½ In-person briefing
presentations**
**ï¿½ Written questions and
answers**
**ï¿½ Provision of other written
materials:**
**- Briefing charts**
**- Meeting minutes**
**- Agendas**
**- Independent Review Committee charter** and membership
**- Independent Review Committee** Preliminary
Report208
The written records of these communications have been scrutinized by
the several U.S. Government agencies that generated assessments of the
Independent Review Committee's activities.
__Independent Review Committee Meeting
Minutes__ The minutes for the Independent Review Committee
meetings in Palo Alto and in Beijing contained questions, answers, action
items, Independent Review Committee comments, agendas for the next
meeting, and an Independent Review Committee preliminary assessment.209
They were transmitted to China Great Wall Industry Corporation as
follows:210
**ï¿½ On April 25, 1996,** Yen
faxed the minutes of the Independent Review Committee meeting in Palo
Alto, California, to China Great Wall Industry Corporation.211
**ï¿½ On May 6, 1996,** Yen faxed
the minutes of the Independent Review Committee meetings in Beijing to
China Great Wall Industry Corporation.212
__Independent Review Committee
Preliminary Report__ The Independent Review Committee Preliminary
Report, and a draft version, were transmitted to the PRC in May 1996, as
follows:
**ï¿½ On May 7, 1996,** Yen faxed
a draft of the Preliminary Report to China Great Wall Industry
Corporation, as well as to the Independent Review Committee
members.213
**ï¿½ On May 10, 1996,** Yen
faxed the final version of the Preliminary Report, less attachments, to
China Great Wall Industry Corporation. He shipped complete copies to all
Independent Review Committee members via express-mail.214
**ï¿½ On May 13, 1996,** Yen
faxed the final Independent Review Committee Preliminary Report to a
hotel in Beijing for Paul O'Connor of the J&H Marsh & McLennan
insurance brokerage firm.215
**Loral's
Inaccurate Instructions on Releasing** Public Domain Information to
Foreigners
During a brief presentation at the first Independent Review Committee
meeting in Palo Alto, the Loral Technology Transfer Control Manager gave
instructions to the committee members regarding the dissemination of
public domain information to the PRC.216 Statements from State Department
officials indicate that the Loral instructions were not accurate. Other
elements of the Loral Technology Transfer Control Officer's presentation,
not addressed here, were also inadequate.
__Instructions to the Independent Review
__ Committee Regarding Public Domain Information When, on
April 22, 1996, the Independent Review Committee met for the first time at
the offices of Loral in Palo Alto,217 one of the first speakers was
Loral's Technology Transfer Control Manager, William Schweickert.
Schweickert presented a two-page briefing on technology export control as
it applied to the Independent Review Committee.
Two of the Independent Review Committee members were not present at
that time, and the PRC visitors also were not present.218
The first page of the briefing material began by stating that Loral did
not have an export license covering the Independent Review Committee
failure review in which the audience was participating.219
It went on to list what could be done by the Independent Review
Committee without a license. This list included:
**ï¿½ "Receive technical
information from CGWIC [China Great Wall Industry Corporation]"**
**ï¿½ "Request
clarification"**
**ï¿½ "Ask questions"**
**ï¿½ "Indicate acceptance or
rejection of conclusions"**
**ï¿½ "Discussions must be limited to the data presented or to
information in the public domain" 220**
The second chart listed the activity the Independent Review Committee
could not engage in without a license. This list included:
**ï¿½ "Disclosure of launch
vehicle/satellite detail design, manufacturing processes or computer
source code data"**
**ï¿½ "Disclosure of analytical
tools, methodology, algorithms not in the public domain"**
**ï¿½ "Disclosure of information
that will enhance the launch site facilities or launch vehicle/missile
capabilities of the PRC" 221**
The instruction in the briefing chart that said, "discussions must be
limited to the data presented or to information in the public domain"
indicates that the Independent Review Committee members can freely discuss
information in the public domain.222 This statement was not correct.
__State Department Views on Public Domain
Information__ In general, a U.S. citizen may transfer public
domain information to a foreign national. However, such a transfer is not
allowed if it occurs in the performance of a defense service, which is
defined in Part 120 of the International Traffic in Arms Regulations.
In a defense service, a person or a company does a service for, or on
behalf of, a foreign party, directly related to a commodity on the
munitions list.
The expertise and experience of the person making the disclosure, and
the circumstances of the disclosure, are important in determining whether
a defense service has been performed through such a disclosure. As an
example, simply giving a foreign national an article from the Encyclopedia
Britannica is not an export requiring a license. If, however, the article
is provided to a foreign national by an experienced engineer in the
context of specific technical discussions, a defense service that requires
a license may have been performed.
Thus, it is possible to perform a defense service while using only
public domain informaion. A person with technical expertise or experience
may guide or shape a discussion, leading it in some way by using the
public domain information that is being provided. In this way, the person
may convey some knowledge, some ability, or some expertise, and thus may
be performing a defense service.
**Defense
Department Concludes That the Independent Review Committee's Work Is
Likely to Lead to the Improved Reliability of PRC's Ballistic
Missiles**
The Defense Technology Security Administration stated in its 1997
assessment of the Independent Review Committee activities that "[t]he
significant benefit derived by China from these activities are likely to
lead to improvements in the overall reliability of their launch vehicles
[rockets] and ballistic missiles and in particular their guidance
systems." 223
The Defense Department 1996 assessment stated:
*The [Independent Review Committee] second meeting minutes provides
two alternate causes for the guidance system failure that were
previously ruled out or not cited by [the China Academy of Launch
Vehicle Technology].*
*Furthermore, [the Independent Review Committee] recommends
specific testing to confirm/deny these alternative causes that otherwise
would likely not have been done by China.*
*If true failure turns out to be one of these alternatives, then
the [Independent Review Committee] will have solved the guidance problem
for [the China Academy of Launch Vehicle Technology] and possibly
prevented a future failure of a [rocket] or developmental
missile.*
The Defense Department 1996 assessment further stated:
*The [Independent Review Committee] Preliminary Report recommends
specific guidance platform problems that should be studied and fixed.
This could improve the success of their guidance platforms for [rockets]
and missiles.*
*
*
THE LONG MARCH 3B GUIDANCE SYSTEM AND BALLISTIC
MISSILES
The Long March 3B guidance system is judged by the Select Committee to
be among the systems capable of being adapted for use in the PRC's planned
road-mobile intercontinental ballistic missiles. According to the Select
Committeeï¿½s technical expert, the lightweight and compact design of the
Long March 3B guidance system makes it among the systems capable of being
used on a small, solid-propellant missile like the PRC's DF-31
intercontinental ballistic missiles. The accuracy of the Long March 3B
guidance system is sufficient to target U.S. cities, although there is no
basis for assuming greater guidance accuracy than would be achieved with
larger, heavier inertial measurement units such as those used on the PRC's
currently deployed CSS-4 intercontinental ballistic missile. If the Long
March 3B inertial measurement unit were utilized on an intercontinental
ballistic missile (ICBM), its advantage would be its lower cost, smaller
size, lighter weight, and proven track record. Its disadvantage would be
that the Long March 3B inertial measurement unit would require
modification to be rugged enough for use on the road-mobile DF-31. If
another, better system is available, however, it is more likely to be
chosen for that mission.
The interagency review team, in its July 1998 assessment, stated that
the advice given to the PRC by the Independent Review Committee could
reinforce or add vigor to the PRC's design and test practices. In December
1998, the U.S. Government internally reported that the Independent Review
Committee may have improved the reliability of the Long March 3B guidance
system and, by extension, other rockets that use this guidance system. And
if the PRC acquired or developed a manufacturing or testing process for
their rocket program that could benefit their missile programs, they could
incorporate it into those programs.
**The
Cross-Fertilization of the PRC's Rocket** and Missile Design
Programs
Chang Yang attended both the Palo Alto and Beijing Independent Review
Committee meetings. Chang, a PRC engineer, is the Vice-Director of the
Beijing Institute of Control Devices. Given the cross-fertilization
between the PRC's rocket guidance system designers and intercontinental
ballistic missile guidance system designers, Chang's participation in the
Independent Review Committee likely ensured that any significant
information imparted by the Independent Review Committee members was used
to improve the PRC's ballistic missile systems. Chang certainly could have
passed on significant information to the engineers working on ballistic
missile guidance systems.
The interagency review team found that the technical issue of greatest
concern was exposing the PRC to Western diagnostic processes, as suggested
by Loral and Hughes.224 This exposure could improve the PRC's pre- and
post-flight failure analysis for their ballistic missile programs. This,
in turn, could increase the PRC's future ballistic missile
reliability.225
The interagency review team also reported that the Independent Review
Committee provided the PRC with alternative possible causes of the failure
that the PRC had apparently not previously considered, at least to that
point in their investigation.226
Finally, the interagency review team reported that advice given to the
PRC by the Independent Review Committee could help to reinforce or add
vigor to the PRC's adherence to good design and test practices.227 This
information could be used by the PRC to assess the failure of any future
ballistic missiles or rockets.228
The Defense Technology Security
Administration determined that:
*The IRC's activities encompassed a wide range of investigatory,
engineering, and corrective analyses, including the provision of "Action
Items" identifying additional research and testing approaches and
specific recommendations for improvement in [rocket] design,
manufacturing, testing and quality assurance
processes.229*
Because of the level of interaction between the China Academy of Launch
Vehicle Technology's rocket and intercontinental ballistic missile
programs and the affiliations of the PRC members involved in the
Independent Review Committee, the experience gained in diagnostic and
failure investigation techniques during their participation in the
Independent Review Committee could assist the PRC in its future rocket and
ballistic missile development and testing programs.
**The
Independent Review Committee Aided the PRC In Identifying the Cause of the
Long March 3B Failure**
China Great Wall Industry Corporation's final investigation report
indicated that the true failure mode was discovered by the end of May 1996
after repeated tests and analysis. China Great Wall Industry Corporation
reported that the root cause of the failure was most probably the lack of
output in the three gold-aluminum engagement joints inside the power
amplifier module (HMS501J) for the servo-loop of the follow-up frame. The
PRC final investigation report said, "the joint deterioration caused the
loop failed to work [sic]." 230
The Defense Technology Security Administration assessment of the
Independent Review Committee activities stated: "[The Department of
Defense] considers it highly probable that, as a result of the
[Independent Review Committee's] activities, the PRC has determined the
root failure cause and is making progress toward correcting underlying
design, manufacturing, test and quality assurance processes for the [Long
March 3B's] guidance unit." 231
The interagency review team assessed in July 1998 that the true failure
mode may have been discovered more quickly by the PRC as a result of the
Independent Review Committee's report.232
According to the Department of Defense, the Independent Review
Committee very likely led the PRC to discover the true failure of the Long
March 3B guidance system:
*Stating it simply, it can be shown that before [the] IRC
[Independent Review Committee], the Chinese team had narrowed the
most-probable failure scenario to a particular area of the inertial
platform (inner frame gimbal).*
*It can also be shown that in the IRC draft report delivered to
China, that the IRC pointed out that the failure could also be in two
other places (namely the follow-up frame gimbal or in an open-loop
feedback path) and stated that China should explain some as-yet
unexplained data output (concerning the follow-up frame); [the] IRC went
on to recommend that China perform tests that would prove/disprove all
three scenarios.*
*It can be shown that after the IRC report (and suspension of IRC
activities), the Chinese team performed specific tests for these
scenarios, and that shortly after the IRC report, these tests resulted
in the Chinese team ruling out their original failure scenario (the
inner frame gimbal) and resulted in isolating the follow-up frame gimbal
as the source of the failure.233*
**The PRC
Implemented All of** the Independent Review Committee's
Recommendations
At the Pre-Shipment Review on April 14, 1997 for the upcoming PRC
launch of Loral's Mabuhay satellite, the China Academy of Launch Vehicle
Technology announced that it was taking 44 corrective actions to address
the cause of the Long March 3B failure.
These corrective measures included discarding all remaining HMS501J
power amplifier modules from the batch used on the Long March 3B flight
that failed.234
All of the Independent Review Committee's recommendations from its
Preliminary Report are addressed by these 44 corrective actions. Selected
recommendations and PRC corrective actions are detailed on the
overleaf:235
Loral does not believe that the PRC's actions resulted from the
Independent Review Committee. Loral stated in an update to its State
Department disclosure provided at the request of the Select Committee that
"none of the Chinese's [sic] announced improvements to its Long March 3B
rockets was the result of Loral's participation in the Independent Review
Committee." 236
However, the corrective actions presented by the PRC in April 1997 are
much more comprehensive than the list of corrective actions presented a
year earlier at the Apstar 1A pre-flight briefing in April 1996.237
At the Apstar 1A briefing, which preceded the Independent Review
Committee activities, the PRC listed:
**ï¿½ Six "comprehensive
enhancements for [the] inner frame axle circuit"**
**ï¿½ Several general reliability
design review actions to be completed in 1997**
**ï¿½ Ten "production assurance"
corrective actions238**
The 1996 briefing expressly matched only two corrective actions from
the 1997 briefing: to increase reliability of the inertial measurement
unit's slip rings (1997 corrective action #10 of 44) and to perform a
review of the Long March 3B design toward improving the overall
reliability (1997 corrective action #21 of 44).239
**The
Independent Review Committee Helped the PRC Improve the Reliability of Its
Long March Rockets**
The Defense Technology Security Administration stated in its assessment
of the Independent Review Committee activities that "[t]he significant
benefits derived by China from these activities are likely to lead to
improvements in the overall reliability of their launch vehicles [rockets]
. . . and in particular their guidance systems." 240 Likewise, the
interagency review team reported in their assessment that the advice given
by the Independent Review Committee could improve PRC space rocket
reliability.241
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