Clinton Move May Have Undercut Probe of 2 U.S. Firms’ Aid to China

A federal grand jury investigation into whether two U.S. companies illegally assisted China’s ballistic missile program is proceeding, despite Justice Department concern that President Clinton’s subsequent approval for providing similar technology has undercut the probe, government sources said Saturday.

The two companies--Loral Space & Communications of New York and Hughes Electronics of Los Angeles, a division of General Motors--denied any wrongdoing.

At issue in the grand jury probe is whether the two companies provided technology to China beyond that which federal law allows while taking part in a review of a 1996 explosion of a Chinese rocket carrying a Loral-built satellite.

Because the technology of putting a commercial satellite into orbit is related to that which guides long-range nuclear missiles, the question of whether the two companies overstepped their bounds led to the federal grand jury inquiry, a government source said.

Potentially thwarting the investigation, Justice sources say, was Clinton’s approval in February of the launching of another Loral satellite on a Chinese rocket, a mission that involved some of the same technology at issue in the grand jury inquiry.

A White House official said Clinton acted only after consultations with several government departments convinced him the move was in the national interest.

But the president’s action is likely to draw scrutiny because Loral’s chairman and chief executive officer, Bernard L. Schwartz, contributed $100,000 last year to the Democratic National Committee, ranking him as a major donor.

The inner-government conflict over assisting China with technology that could be put to military use reflects a long-running debate about the wisdom of such assistance.

The incident that sparked this controversy began two years ago after the Chinese rocket carrying the Loral-built satellite exploded on its launch pad. Experts from Loral and Hughes were called in to study the failure and provided the Chinese with “technical data,” according to a U.S. government source.

The data were contained in a report, the government source said.

A State Department official in charge of monitoring exports of high-technology items is said to have warned that the report included data so sensitive that providing it to the Chinese required a license. But by that time, the source said, the information may already have been transmitted.

The need for federal approval for such dealings with China came with the sanctions the United States imposed after the Chinese crackdown on dissidents during Tiananmen Square demonstrations in 1989. Satellites, for instance, cannot be exported to China without a special presidential waiver.

A Defense Department source said the underlying concern was the extent to which China obtained American help in improving the guidance systems for its rockets and missiles--especially since China has been exporting missile technology to countries such as North Korea and Iran.

“Guidance [for missiles] seems to be a critical factor for Iran and North Korea, and they’re getting it from China,” the source said.

The White House official, who declined to be identified by name, said Clinton, in approving the launching of the Loral satellite in February, “took into account the relevant factors from various departments and decided it was in the national interest.”

Export licenses for such activities “are a way to guarantee continued U.S. corporate participation in the international satellite market and also further our engagement strategy with China.”

The official declined to comment on whether the Justice Department was among the agencies consulted by Clinton.

Richard Dore, a spokesman for Hughes Electronics, said his company has “not been officially informed of any grand jury investigation.”

Clinton’s action drew criticism from those who have repeatedly warned that the transfer of high-technology equipment and data to China could enhance the military capabilities of its People’s Liberation Army.

William C. Triplett, former chief counsel to the Senate Foreign Relations Committee, said that by providing the assistance to China, “you’re making it more possible to threaten the United States with nuclear destruction.” After Hughes joined with Loral in efforts to determine the cause of the satellite explosion in February 1996, the State Department wrote Hughes about the matter. That led to the company’s conducting an internal investigation.

That investigation “found that our employee participation did not result in the unauthorized export of any control technology,” Dore said.

Times staff writers Tyler Marshall in Washington and Karen Kaplan in Los Angeles contributed to this story.