The Directorate of Defense Trade Controls (“DDTC”) has posted the settlement documents for the case involving Interturbine Aviation Logistics GmbH and its Texas subsidiary which was reported by this blog last week. And — now, don’t faint from shock — an overeager business development executive and one of his employees appear to have been the source of Interturbine’s problems.

According to the Proposed Charging Letter, the $1 million penalty was premised on one shipment of 400 kilograms (880 pounds) of Dow Corning Ablative 93-104 Ablative Material and Sealant. The substance can be used to provide heat-protective coatings on missile tips and is controlled under Category IV(f) of the United States Munitions List.

In 2004 Dow Corning notified its customers that DC 93-104 was a USML item and could no longer be shipped outside the United States. On of Dow Corning’s former customers, Bayern-Chemie, began to look for a new supplier and contacted Interturbine’s German office. A business development employee of Interturbine thereafter met with GmbH. The employee then prepared a report stating that DC 93-104 couldn’t be sold outside the United States and that this presented an “excellent opportunity” to acquire a “profitable new customer.”

The Interturbine employee instructed an intern to prepare a purchase order. When the intern noted that the material was export-controlled the business development employee falsely told the intern that the export had been cleared. The intern then ordered DC 93-104 from Dow Corning for shipment to Interturbine’s Texas office.

Once the shipment from Texas to Germany had been made, the Vice-President of Business Development in Interturbine’s German office altered records to show that the 400 kilograms of DC 93-104 were still in Texas. He also created a delivery note indicating, falsely, that the material had been shipped to Bayern-Chemie from Interturbine’s facility in Germany.

Things went downhill rapidly after that. Bayern-Chemie questioned the absence of a U.S. export license, quarantined the shipment and refused to pay Interturbine for the shipment. Interturbine conducted an internal investigation and requested Bayern-Chemie to return the shipment to Texas. U.S. Customs seized the shipment on its way back to Texas. And the rest is now history.

Even though the Interturbine employees were selling missile products, it’s safe to say they weren’t rocket scientists. Trying to make an illegal export to Bayern-Chemie without having everyone at Bayern-Chemie in on the scheme is a little bit like writing a bank robbery demand note on the back of your own business card.

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