Conference 7.286::digital

Copied WITHOUT permission from the Saturday December 21, 1991 edition of 
the Boston Globe:

	EXPORT VIOLATIONS COST DIGITAL $2.4m

	In the largest penalty ever for export-control violations, Digital 
Equipment Corporation was fined $2.4m by the Commerce Department yesterday 
for shipping computer products without formal national security 
authorization.

	Mark Frederickson, a spokesman for the Maynard company, said a 
"handful of Digital employees" were to blame for the violations.  He said 
they no longer worked for the company, though he declined to say how many 
were involved or when they left the company.

	Frederickson noted that there was no breach of national security by 
the 31 shipment violations, which occurred between June 1986 and April 1989
.  He said the violations did not involve countries that were barred from 
receiving the equipment.

	The Commerce Department said the computer equipment - VAX 
microcomputers, upgrade kits, video terminals and computer parts - were 
worth $19 million and were controlled "for national security reasons".

	The department's Bureau of Export Administration said the company 
was charged with 62 violations - two counts for each of the 31 shipments - 
under the Export Administrations Act.  The company could have been fined 
$100,000 per violation, or $6.2 million, but instead agreed to pay the 
civil penalty of $2.4 million without admitting or denying guilt.

	"In each instance, Digital Equipment knew department authorization 
was required but did not obtain it", the department said.

	Frederickson said that based on an internal investigation, none of 
the employees personally profited from the violations.  He said the company 
had applied for export licenses, but the employees authorized shipments 
before receiving formal Commerce Department clearance.  The 31 shipments 
represented a fraction of the 3,000 export licenses the company received 
between mid-1986 and the end of 1989, he said.

	"The time between the shipment and actual receipt of the license 
varied from one day to a matter of weeks", said Frederickson, adding that 
Digital would have gained the licenses if the employees had waited for 
formal approval.

	None of the employees was from New England.

	Of the $19 million, the largest group of shipments, totaling $10 
million, went to Singapore for university research and educational uses, 
Frederickson said.  the $9 million balance were shipments to Spain, Finland
, West Germany, Yugoslavia, Brazil, Venezuela, Israel, China, United Arab 
Emirates and Kuwait.

    Sounds like somebody too doggone anxious to make revenue shipments.
    'Course, we don't usually work that way, right?

In all cases the export licenses had been applied for before the systems
shipped -- and would have been awarded only days to a few weeks after they
actually shipped.

Basically, DEC's being fined because some employees thought that getting
the product to the customers when they wanted them rather than waiting
for the red tape was "the right thing to do."

/john

RE:           <<< Note 1703.3 by COVERT::COVERT "John R. Covert" >>>

>Basically, DEC's being fined because some employees thought that getting
>the product to the customers when they wanted them rather than waiting
>for the red tape was "the right thing to do."

     No, no.  Too cheap.  Too easy.  Wrapping oneself in the flag of "I did
for the sake of customer satisfaction" just doesn't work in this case.  Many
more such gung ho deliveries, and we can turn out the lights on this
corporation.  It is quite sufficient to do your best WITHIN the law.  If we
can do that, we will more than thrive.

                                     Greg

Re .3:

>In all cases the export licenses had been applied for before the systems
>shipped -- and would have been awarded only days to a few weeks after they
>actually shipped.

Live Wire says:

"In all cases, applications for the licenses had been submitted to the U.S.
Department of Commerce prior to the shipments.  In all cases but one, licenses
were issued to Digital soon after the shipments.  In the one exception, Digital
retrieved the equipment from the customer."

Contradiction?  Who knows.  I expected clearer prose from this company's public
relations department.
				/AHM

    
    
    let me just clarify for US employees, as we don't receive much/any
    export training. In the UK you get refresher training every year,
    plus test calls from the US Embassy trying to break the system.
    
    Digital operates under a blanket export licence, as such we can export
    the vast majority of our machines to the vast majority of countries
    without getting individual permission from the US Government.
    
    If the US Government decided to, they could revoke the blanket
    licence. This would mean every export of anything bigger than a mouse would
    require a individual export licence to be granted. Everytime a machine
    moved from one building to another, you'd need a licence.
    
    Think how soon this would shut down DEC!
    
    Simon

The refresher course is actually every 2 years and takes about 20 minutes -
there is now a computer based course.

I wonder is there is any way that Digital can organise itself so that
the restrictions imposed by the US don't apply. What exactly constitutes
US technology? It certainly isn't technology developed mainly in the US!

What business does the US Govt have in interfering with the workings of
companies in other countries? It's getting as bad as the IRS poking their
nose here there and everywhere.

Craig

RE:          <<< Note 1703.7 by SYSTEM::COCKBURN "Craig Cockburn" >>>

>I wonder is there is any way that Digital can organise itself so that
>the restrictions imposed by the US don't apply. What exactly constitutes
>US technology? It certainly isn't technology developed mainly in the US!

>What business does the US Govt have in interfering with the workings of
>companies in other countries? It's getting as bad as the IRS poking their
>nose here there and everywhere.

     Oh stop being so wretched, Craig.  I once worked (in the U.S.) for a 
semiconductor firm whose corporate headquarters was in the UK, and that 
government played its hand in mucking about with our operations, too.

                                 Greg

    I'm curious about this one.  I don't know anything about exporting but
    it strikes me oddly that:
    	a) "...there was no breach of security.."
    	b) "...did not involve countries that were barred.."
    	c) "...Digital would have gained the licenses.."
    
    What could possibly warrant such a heavy fine?  I thought we were
    trying to encourage international trade and stimulate economic
    activity to favorably effect our international balance of payments.
    
    Perhaps to the government $2.4 million is just a fine for "speeding."
    
    
    $.02/mine
    
    

    It that the reason the stock dropped over 7 points this weekend????
    
    

	re .5:

	What is unclear or contradictory? In each case, we applied for
	an export licenses before shipping the system. In all cases
	but one, the application resulted in a license being issued
	(but after the system shipped, rather than before). In the
	one case where the application didn't result in a license being
	issued, we went and got the system back.

					Tom_K

    re: -.2
    
    Well, on New York's WINS News Radio 1010, the story was INCORRECTLY
    REPORTED as a 2.4 BILLION DOLLAR FINE this morning.
    
    /ljj
    

re .10:

The stock didn't drop at all over the weekend.  It dropped over 7 points
during the week because DEC announced that it expects a loss for the quarter.
It may seem like a lot of money, but a $2.4 million fine is too small to
have much effect on the stock price.

Re .11:

>	What is unclear or contradictory? In each case, we applied for
>	an export licenses before shipping the system. In all cases
>	but one, the application resulted in a license being issued
>	(but after the system shipped, rather than before). In the
>	one case where the application didn't result in a license being
>	issued, we went and got the system back.

John made the (unsupported) claim in .3 that in ALL cases export licenses would
eventually have been granted within a few weeks after the merchandise was
illegally exported.

Yet Digital's official announcement to employees states that in one case, the
merchandise was retrieved by Digital because no license was issued "soon after
the shipment".

So based solely on the contents of the story in Live Wire, can you tell me if a
license EVER granted by the government in that instance?  If you can't decide
that, I trust you see how John's summary in .3 conflicts with the party line.
				/AHM/THX

>              <<< Note 1703.8 by IMTDEV::BRUNO "Father Gregory" >>>

>     Oh stop being so wretched, Craig.  I once worked (in the U.S.) for a 
>semiconductor firm whose corporate headquarters was in the UK, and that 
>government played its hand in mucking about with our operations, too.

That doesn't make it right for _either_ country to do. Would it not be
more sensible to agree an international set of export regulations 
and then we wouldn't need one set per country plus another set if 
the company's headquarters is somewhere else. One would be enough.

Copyright � Dow Jones & Co. 1991
Source: Wall Street Journal
Headline: Commerce Dept. Fines Digital Equip $2.4M On Export Violation
Time: Dec 20 1991 1207


Story: 
  WASHINGTON -DJ- The Commerce Department said Digital Equipment Corp. agreed 
to pay a fine of $2.4 million for 62 violations of export regulations designed 
to keep computers and other high-tech equipment from ending up in countries 
unfriendly to the United States.
  The agency said the fine was the largest ever levied for export-control 
violations.
  Between June 1986 and April 1989, Digital exported or re-exported computer 
equipment without required authorization 31 times, the department said. The 
agency alleged that Digital knew the authorization was required but didn't 
obtain it.
  The unauthorized exports included VAX workstations, video terminals and 
computer parts worth $19 million, the agency said.  Much of the equipment 
ended up in China and Israel
  Digital neither admitted nor denied the alleged violations, the department 
said, but agreed to pay the fine as part of a consent decree.
  12:07 PM
                                        -0-
  "This matter does not involve any compromise or suggested compromise of 
national security," said Mark Frederickson, a Digital spokesman.
  "It would be difficult to speculate as to the motives of the individuals 
involved; they have been separated from the company," said Fredrickson, who 
added that Digital expects the case to "have no impact on our future ability 
to obtain export licenses."

re my supposedly unsupported claim in .3 that licenses would have been
granted.

read .1.  In that, Frederickson says just that.

Thank you.

/john

>Would it not be more sensible to agree [on] an international set of
>export regulations

Yes.  In fact, these regulations are agreed upon by an international
conference called COCOM.

/john

    The internal message seems to me to be a clear denial that the "spirit"
    of the law was violated, and silent on the matter of a violation of the
    "letter" of the law.

    The external message (the quote I entered from the Wall Street Journal)
    is that Digital does not admit or deny any violation of the law.

    Hey!  Welcome to the world of public relations and employee
    communications.

    The next time you get in trouble for breaking some Digital or site
    policy, just say that you "expected" that whatever action you took
    would be approved in the future.

    Wasn't that the gist of Admiral Hoppers sentiments? N"It is easier to
    apologise afterward than obtain permission beforehand" or somesuch.

    ref .9
    If we had a (not be picky) Japanese Trade Lobbyist working for us we
    probably wouldn't have been fined at all, we most likely would have 
    gotten a write up in the trade rags and received some orders.

Re .17:

>re my supposedly unsupported claim in .3 that licenses would have been
>granted.
>
>read .1.  In that, Frederickson [sic] says just that.

Ah, it certainly does say that.  Sorry I missed that and injected confusion.

I have slight additional information in the form of an undated AP clipping from
an unknown paper (probably from Schenectady, NY)

"
		Computer firm fined $2.4M for illegal sales

Associated Press

WASHINGTON - The Commerce Department announced on Friday a record $2.4 million
fine against the Digital Equipment Corp., accusing the company of exporting
computers without national security authorization.

A Digital spokesman said the problem involved employees who had acted without
authority and that the shipments were not made to countries barred from receiving
the technology for security reasons.

The Commerce Department said the Maynard, Mass., firm agreed to pay the civil
penalty assessed for 62 alleged violations of the Export Administration Act
without admitting or denying guilt.

The fine was the largest ever imposed for export control violations, the
department said.

The consent order alleged that between June 1986 and April 1989, Digital exported
or re-exported computer equipment 31 times without the required authorization
despite knowing it was required for national security purposes.

The equipment included VAX microcomputers and work stations, upgrade kits, video
terminals and computer parts worth $19 million.

Normally, when companies ship products overseas, they first get approval for
export licenses.

In this case, all 31 shipments were made prior to receiving the export licenses,
in anticipation of approval, said Mark Fredrickson, a Digital spokesman.

In all but the final shipment, the licences [sic] were issued shortly after the
transactions, Fredrickson said.  The last shipment was destined for China, but
Digital learned of the federal investigation and took back the computer products,
he said.

The shipments were sent to these countries: Spain, Finland, West Germany, Taiwan,
Singapore, Brazil, Israel, Venezuela, China, Yugoslavia, United Arab Emirates
and Kuwait.
"

You can just hear someone saying, "whoops!" on shipment #31, eh?


Re .19 (, .20):

>    The next time you get in trouble for breaking some Digital or site
>    policy, just say that you "expected" that whatever action you took
>    would be approved in the future.

Just say, "is this the point where I'm supposed to ask for forgiveness?"
				/AHM

>               <<< Note 1703.20 by ASICS::LESLIE "Andy Leslie" >>>
>
>    Wasn't that the gist of Admiral Hoppers sentiments? N"It is easier to
>    apologise afterward than obtain permission beforehand" or somesuch.

The oft-heard version is "It's easier to ask forgivness than permission,"
but as I've pointed out before, it's quite possible that you'll get neither.

- tom]

I also don't think Admiral Hopper was talking about breaking the law.

    The following is transcribed without permission from the Jan 5, 1992
    Nashua Telegraph, in a Semi editorial section titled, "As I see it".

    The Author, Marshall KIdd, is a retired Electrical Engineer who was
    associated with General Electric, and RCA. He lives in Nashua.

    FINE AGAINST DIGITAL EQUIPMENT CORP. IS BUREAUCRATIC INSANITY.

    I Consider the U.S. Government's recent announcement of a $2.5 million
    fine against Digital Equipment Corp. a criminal act by the Government
    against DEC. I believe that the public should not tolerate this
    bureaucratic insanity.

    Digital Equipment is an excellent company and a good corporate citizen
    struggling to survive in the global high technology battlefield. Its
    products are competitive and must be sold in the world market. when the
    U.S. Government fines the company the incredible sum of $2.5 million
    for not filing the proper export forms, it is time to take immediate
    steps to fix this disaster before our high tech industry goes down the
    tubes.

    During the Cold War we had great concern about giving our technology
    away to our enemies. We set up a large Bureaucracy and passed law's to
    limit our High Tech Companies' export sales. The Cold War is over now,
    but we still have the laws and the Bureaucracy.

    The Russian Bureaucracy has made it very clear how destructive strong
    central power can be on manufacturing efficiency and resulting world
    trade. It is a disaster. We can non longer afford similar laws here,
    which are not only ineffective but extremely harmful to our country.

    Common Sense says don't give your enemies your technology. The reality
    is that the technology is mainly manufacturing know-how. If we don't'
    sell our high tech products to the world, our competitors will.

    In the growing global market, our technology leadership position is
    continually being challenged by the Japanese and the Germans. In
    today's world of instant global communication, there is nothing that we
    know that any other major country can't learn in a very short time with
    sufficient financial support.

    IBM, DEC, and Intel all wish they had technology that the Japanese or
    Germans couldn't duplicate in a few years or less. We passed the point
    many years ago when we had absolute technological leadership.

    If the United States is to stay ahead in technology, we must be the
    world's leading manufacturer and supplier of high-technology products.
    As we have all learned from Japanese automobile and semiconductor
    manufacturers, it is production know-how and quality that counts.

    If we penalize our leading companies and let the Japanese and Germans
    have this lead, we will lose the global technology war. This economic
    war with its fierce global competition requires our government's
    cooperation with business if we want to win.

    We cannot afford to lose any more manufacturing industries to the
    Japanese if we want to keep our present standard of living.

    It may already be too late, but some people in Washington are realizing
    what has been obvious to the rest of the world for some time. 
    Government and Business must cooperate and plan together if we are to
    win the Global high technology war. Antitrust, Unfair competition, Tax 
    and Trade policies must be changed.

    Laws that penalize or handicap our companies in the global market must
    be changed or eliminated. We have to take the small risk of a loss of
    some technology versus the greater risk of the loss of entire markets.
    We must have these technology sales to retain our manufacturing
    leadership and employment base as well as maintaining our balance of
    trade.

    Japan does not understand why we were surprised when it became a world
    leader in Automobiles and semiconductors. The Japanese tell us they
    planned it, and I believe them. I have been there and I know what their
    competition is like. Their long range planning gets results.

    We need a high technology cabinet person with sufficient authority to
    help us reduce the roadblocks in our high technology economic war.
    Business is War. In the short term, every time someone wins an order,
    someone else loses.

    In the long run, however, business is the motor that drives the economy
    and employs the people. Business must be encouraged and supported by
    our government, not tied down with excessive  laws and regulations.

    this $2.5 million fine is a criminal act produced by our Government's
    bad laws, not by DIgital EQuipment. This should be a precipitating
    incident to start the war against the anti-competitive laws and
    antibusiness bureaucracy that is ruining our country's economy.

    The government should be doing everything it can to help Digital Make
    more money so it can stop the layoffs and hire more people. If
    government doesn't know how to do it, then ask Ken Olsen. I'm sure he
    would have a lot of good ideas.

    ----