Kentucky businessman charged with illegally sending military data to China
A Central Kentucky man has been charged in an alleged scheme to illegally provide military information to a company in China, according to the U.S. Attorney’s Office in Louisville.
Scott Tubbs, 59, of Georgetown; Phil and Monica Pascoe of Floyds Knobs, Ind.; and a company called Quadrant Mechanics LLC were charged in an indictment unsealed Wednesday, according to a news release from prosecutors.
The charges against them are wire fraud, violations of the Arms Export Control Act and smuggling, the release said.
The indictment alleges that between January 2012 and December 2018, Tubbs, the Pascoes and the company took part in a conspiracy to send about 70 drawings with technical data to a company in China without a license.
The drawings belonged to two U.S. companies and related to end-use items for infrared and thermal-imaging targeting systems and fire-control systems for the U.S. Department of Defense, according to the release.
In addition, the indictment charges that Quadrant Mechanics imported rare-earth magnets produced by a Chinese company and sold them to two U.S. companies which included them in components sold to the government for military use. These components were used in F-16 and F-18 fighter jets, according to the U.S. Attorney’s Office.
Under federal law, rare-earth magnets sold to the Department of Defense must be produced in the U.S. or an approved country, and China isn’t on the list, according to the release.
The indictment was unsealed after the three were arrested.
If convicted, the three could face up to 20 years on each of the most serious charges of wire fraud and exporting technical data without a license.
The state approved Quadrant Materials for up to $3.4 million in tax incentives in January for a new $95 million manufacturing facility the company said it was considering building in Louisville.
The description of the company in records of the state Cabinet for Economic Development said Quadrant Materials “provides magnetic-related products, services and technologies with a global footprint with locations in the United States, Japan, China, Germany and Australia.”
Those records also say the company was looking at building a “world-class magnet manufacturing and research facility” in Louisville.
Quadrant said it already had 23 full-time employees in Kentucky when it applied and projected employment would grow to 200 in a few years.
In a statement from Gov. Andy Beshear’s office, spokesperson Crystal Staley said the office was reviewing the charges.
“We fully support any and all efforts to protect our national security and are grateful for the hard work of the dedicated professionals in our federal law enforcement agencies,” Staley said.
The state’s economic development cabinet said in a statement that national security is a top priority for the administration and that it recognized the severity of the charges.
The company didn’t receive any tax incentives up front and the incentives have not received final approval, the cabinet said.
“We will await further information as it becomes available and are prepared to support the federal government in their investigation,” the statement said.
The Defense Criminal Investigative Service, the FBI, the Department of Homeland Security, the Internal Revenue Service, the Naval Criminal Investigative Service and the Department of Energy’s Office of Inspector General are investigating the case, according to the release.
