Toshiba Unit, 2 Executives Guilty in Export Case
A district court convicted Toshiba Machine Co. and two of its executives Tuesday on criminal charges relating to the company’s export of advanced milling machines to the Soviet Union in 1983 and 1984.
The Tokyo District Court found Toshiba Machine and the two executives guilty of violating Japan’s Foreign Trade Control Law for their part in providing machine parts and computer software to the Soviets after an initial sale of eight multi-axis milling machines.
The defendants were not prosecuted for selling the machines themselves, which U.S. officials say compromised Western security by enabling the Soviets to make quieter submarine propellers. A three-year statute of limitations had taken effect before they were arrested.
The court fined Toshiba Machine 2 million yen--about $15,700. Ryuzo Hayashi, 53, former director of Toshiba Machine’s foundry department, was sentenced to 10 months in prison and Hiroaki Tanimura, 51, former deputy director of the company’s first engineering department, received a one-year sentence. But both sentences were suspended.
A Foreign Ministry official said the sentences appeared to be light because the violation was a first offense for the defendants. He added that Hayashi and Tanimura did not act for personal gain but in the interests of the company.
Akira Iwahashi, president of Toshiba Machine, issued a statement saying that the company’s board had decided Tuesday not to appeal the conviction. There was no immediate word on what Hayashi and Tanimura plan to do. Both were suspended by the company after they were arrested.
Judge Toshio Yonezawa admonished the defendants with harsh words and cautioned them against “corporate activities that put priority on excessive profits and seem to ignore the rules and morals” of Japan’s Western allies.
“You have increased mistrust on the part of the United States and nations of the Free World toward Japan and its corporations,” Yonezawa said, “and invited grave consequences in the contraction and regression of East-West trade.”
Disclosure of the $17-million technology sale last March caused an international uproar. Critics charged that Japanese companies are blind to international security concerns and that the government is lax in controlling the illegal flow of technology to Communist countries despite its membership in the Paris-based Coordinating Committee for Export Control.
The coordinating committee, known as COCOM, bans the sale of milling machines with more than two axes to the Soviet Bloc because they have potential military applications. Toshiba Machine, 50.8% of which is owned by Toshiba Corp., Japan’s largest general electrical machinery manufacturer, has acknowledged that it knew the sale violated Japan’s export laws.
Officials of the subsidiary admitted falsifying documents filed with the Ministry of International Trade and Industry, disguising five- and nine-axis machines to look like two-axis machines and trying to cover up the wrongdoing once an investigation commenced. The parent company, however, says it had no knowledge of the illegal sale until after the police raided Toshiba Machine offices last May.
Administrative Penalties
Amid worsening U.S.-Japan trade friction, the Toshiba Machine case was seized upon as an example of Japanese duplicity by some U.S. politicians, several of whom invited the press to watch them smash a Toshiba radio with a sledge hammer in Washington last year. Sanctions that would ban imports produced by Toshiba Corp. and Toshiba Machine have been debated as part the Omnibus Trade Bill now pending in Congress.
The milling machines were sold to the Soviet trading firm of Techmashimport in a deal that Japanese investigators believe was initiated by the KGB, the Soviet intelligence agency.
U.S. defense officials at first said the Toshiba Machine milling tools gave the Soviet Union technology to fabricate thinner, ultra-quiet propellers that make Soviet nuclear submarines more difficult to detect. However, U.S. authorities have since made conflicting statements about whether the Soviet propellers became quieter before or after the Toshiba Machine sale.
The trade ministry imposed the harshest possible administrative penalties on Toshiba Machine last May, barring the company from trading with COCOM-proscribed nations for one year. The ban was later lifted for exports bound to China.
Japan also strengthened the screening apparatus for exports to the Soviet Bloc and revised the Foreign Trade Control Law to provide for tougher criminal penalties. Under the law, violations can bring up to five years in prison, and the statute of limitations extends for up to five years instead of three.
