--Qiang Hu, a China-based employee of MKS Instruments, has been charged with export violations
--Hu's prosecution comes as U.S. officials have stepped up enforcement of high-tech export restrictions
--MKS Instruments says it isn't a target of the investigation, but the arrest could affect its Shanghai office
(Adds details about the arrest of MKS employee, Commerce Department agent's comments and background beginning in first paragraph.)
By Kristin Jones Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A Chinese employee of MKS Instruments Inc. (MKSI) has been charged with conspiracy to violate U.S. export laws through the illegal sales of equipment that can be used to enrich uranium.
The prosecution comes amid a spate of similar cases in recent years--many of them with a China connection--as the U.S. steps up its enforcement of restrictions on the export of high-tech items with potential military uses.
Qiang Hu, also known as Johnson Hu, a 47-year-old sales manager at MKS Shanghai, was accused of illegally supplying unauthorized customers with $6.5 million worth of export-restricted MKS pressure transducers. He was arraigned Tuesday in the U.S. District Court of Massachusetts, and is being held without bail.
A public defender representing Hu declined to comment.
U.S. laws restrict the export of a certain kind of MKS Baratron transducers, which measure pressure and convert it into a signal, because of their potential use in making nuclear weapons. The sensors are frequently used to manufacture semiconductors and light-emitting diodes. But they can also be used to detect pressure in gas centrifuges, which are used to make weapons-grade uranium.
A second MKS Shanghai employee, who worked under Hu's supervision and has been named as his co-conspirator, hasn't been charged. Both employees have been placed on administrative leave and are in the process of being terminated, the company said.
The two were accused of using legitimate export licenses to send transducers to unauthorized end users in China, and fraudulently obtaining licenses using a front company, in a conspiracy that began no later than March 2007 and continued until this year.
"As a result of the conspiracy of Hu and his co-conspirators, thousands of MKS pressure transducers were smuggled from the United States and delivered to unknown and unauthorized end-users who did not certify, as required by law, that the pressure transducers would not be used in nuclear activities or re-exported to another country," said Department of Commerce agent Catherine L. Donavan in an affidavit filed with the court last week.
The case comes as U.S. officials have dialed up efforts to find and prosecute instances of illegal export of military technology to China. Similar cases in the recent past have brought lengthy jail terms. The owner of Massachusetts-based company Chitron Electronics Inc. was sentenced to an eight-year prison term last year for illegally supplying an array of components with potential uses in military radar systems to unauthorized customers in China. In April, a California-based exporter was sentenced to three years in jail for illegally exporting thermal imaging cameras to China.
Chinese officials have complained that the laws are too broad, and limit the trade of a wide range technologies with benign, often industrial uses.
The company doesn't expect the alleged violations to have a material adverse impact on its business. But MKS says the disruption could hurt its Shanghai sales office, which employs about 50 people and is the sole avenue for exports to China.
In fiscal 2011, MKS Shanghai sales of export-licensed products accounted for 1.2% of the company's total revenue, while total Shanghai sales of all products accounted for 7.9%.
Shares were down 2.7% to $24.10 in recent trading. The stock is down 2.7% so far this year.
-By Kristin Jones, Dow Jones Newswires; 212-416-2208; kristin.jones@dowjones.com
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