Government Contracts Monitor

Taiwanese Circuit Boards Cost a Contractor Four Months in Prison

November 18, 2013

In a recent case, United States v. Precision Image Corporation, Inc. and Chih-Kwanh Hwa, No.13-CR-00226, U.S. District Court for the Eastern District of Washington, the owner of a circuit board supplier was sentenced to prison for selling Taiwanese-manufactured circuit boards to the U.S. Navy. Chih-Kwanh Hwa, Precision Image’s owner, successfully bid on $180,034 of Navy contracts for circuit boards to be used on a variety of Navy aircraft, including fighter planes and helicopters. A portion of the contracts ($42,900) were set aside for U.S. manufacturers. According to the government’s sentencing memorandum, Hwa misrepresented to the Navy that the circuit boards were manufactured in the United States when in fact they were manufactured in Taiwan. Additionally, the Navy supplied Hwa with the technical data necessary to construct the boards, which was designated on the United States Munitions List, International Trade in Arms Regulations. Therefore, the data could not be sent outside the United States without a license from the State Department. Hwa did not obtain a license, and sent the data to the Taiwanese manufacturer.

The government acknowledged that although the State Department issued a license to a different supplier that used the same Taiwanese manufacturer Hwa used, Hwa did not seek or obtain a license, therefore the government stated that “by circumventing the State Department, it is impossible to know whether the technical data stayed with the Taiwanese manufacturer or landed in different hands, or whether there will ever be any harmful consequences of Hwa’s actions.

Precision Image was sentenced to three years of organizational probation and a $300,000 fine. As for Hwa, the government requested 18 months of incarceration and the Court gave him 4 months with two years of supervised release and no fine. The case, although involving a relatively small contract, provides a strong reminder of the national security aspects of certain government contracts that cannot be ignored by contractors.

Brian Stolarz is the attorney responsible for the content of this article.