3D Systems has agreed to pay the United States up to 4.54 million USD to resolve allegations that it violated the False Claims Act by improperly transmitting export-controlled technical data to China in violation of the export control laws of the United States in connection with certain NASA and Department of Defense (DOD) contracts, as announced by the U.S. Attorney for the Northern District of Texas Leigha Simonton.
Also being paid by 3D Systems in agreements related to alleged export violations is a 20 million USD administrative settlement with the U.S. Department of State, as well as a 2.77 million USD administrative settlement with the U.S. Department of Commerce.
A civil settlement was executed with the Department of Justice on February 27, 2023, with the company agreeing to pay 2.27 million USD in restitution to the federal government within the next 30 days.
3D Systems could also be required to pay a further 2.27 million USD in penalties under the Justice Department settlement agreement for a total of 4.54 million USD. This payment is required if the company fails to pay at least that amount in civil penalties to the Departments of State and Commerce respectively in connection with the other administrative settlements.
According to the Justice Department Settlement Agreement, 3D Systems, through Quickparts, which was still a subsidiary of the company at the time of the alleged violations, completed on-demand projects involving technical or other data potentially classified under and controlled by the Export Control Laws.
The Export Control Laws consists of the International Emergency Powers Act, the Arms Export Control Act, the Export Administration Regulations, and/or the International Traffic in Arms Regulations.
According to the United States Attorney’s Office, the Export Control Laws generally prohibit certain controlled items and/or intellectual property from being exported to certain foreign countries. This list of countries includes the People’s Republic of China, without a license or authorisation from the appropriate federal agencies.
In the Justice Department settlement agreement, the United States alleged that between January 1, 2012, and December 31, 2017, 3D Systems exported certain items and/or intellectual property to China without the appropriate license or authorisation in violation of the Export Control Laws in connection with certain contracts issued by DOD and NASA in violation of the False Claims Act.
The alleged violations also included unauthorised exports of technical data to Germany, a proscribed destination under ITAR 126.1, unauthorised reexports of technical data to Taiwan, unauthorised exports of technical data to foreign person employees, and failure to maintain ITAR records according to the Department of State.
In a press release announcing the settlement, the United States Attorney’s Office said: “The claims resolved by the settlement are allegations only. There has been no determination of liability.”
The Department of State, which 3D Systems is paying the 20 million USD settlement to, said that under the terms of the 36-month agreement, the Department has agreed to suspend 10 million USD of the 20 million USD civil penalty on the condition that the funds will be used for Department-approved Consent Agreement remedial compliance measures to strengthen the compliance program of 3D Systems.
3D Systems will also engage an external Special Compliance officer for at least the first year of the Consent Agreement and will conduct two external audits of its ITAR compliance program and implement additional compliance measures.
The Department of State said that 3D Systems cooperated with its review and has been undertaking corrective actions to address the conduct by expanding the scope of its internal investigation to cover exports of technical data; implementing remedial compliance measures; selling its business unit primarily responsible for ITAR activity; and signing a statute of limitations agreement tolling the statutory period.
The Department of State said that due to the company taking these corrective actions, it is ‘not appropriate’ to administratively debar 3D Systems Corporation.
In a statement given to Reuters, 3D Systems said: “The company is pleased to have reached a settlement with the agencies and remains committed to continuing to enhance its export controls program.”
