Firm May Face Fines on Exports

U.S. export-control officials have accused Sun Microsystems Inc. of violating federal regulations in the sale of computer equipment to Egypt and, through a reseller in Hong Kong, to China.

The Commerce Department’s Office of Export Enforcement warned the company that it could be subject to fines or even denial of export privileges if Sun is found to have broken the law.

Santa Clara, Calif.-based Sun disclosed the February accusation Monday in its annual filing with the Securities and Exchange Commission. The firm said it was negotiating with the Commerce Department and that it was “reasonably likely” it would reach a settlement that would not have a material effect on its operations. But the export officials warned that Sun was likely to face additional charges.

“We do not believe the evidence would support the extreme sanction of a denial of export privileges,” Sun wrote in its filing. Slightly more than half of Sun’s revenue comes from overseas.

Sun spokesman Andy Lark said he didn’t know how the hardware in question was used. He said China was barred from receiving the goods when it did so in 1997, and the issue in the 1998 sale to Egypt involved improper notification to authorities.

This is the second time in recent years that Sun’s China dealings have triggered federal action.

Also in filings Monday, Sun named former SEC Chief Accountant Lynn Turner and former Sun Chief Financial Officer Mike Lehman to its board. It said Packet Design Chief Executive Judith Estrin had resigned from the audit committee of its board. Sun does business with Packet Design, and Sun CEO Scott McNealy, Chief Scientist Bill Joy, and two nonexecutive directors have interests in that firm.