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08 January 2003

Text: $1 Million Fine for Illegal Computer Shipment to Russia

(U.S. firm also assessed civil fine and other penalties) (600)

A California company will pay a $1 million criminal penalty for
exporting high performance computers to the All-Russian Institute for
Technical Physics (Chelyabinsk-70) in 1996 in violation of U.S. export
control regulations.

Chelyabinsk-70, located in Snezhinsk, Russia, is a nuclear laboratory
operated by Russia's Ministry of Atomic Energy, according to the U.S.
Commerce Department's Bureau of Industry and Security (BIS).

Silicon Graphic, Inc. will also pay a $182,000 civil fine to settle
these charges as well as additional charges relating to illegal
computer exports to Israel, and for failure to meet reporting
requirements for exports to China, Qatar and the United Arab Emirates.

SGI's exporting privileges to Russia will be denied for three years,
although this denial will be suspended provided that SGI does not
commit any export control violations involving Russia during that
time.

Following is the text of the BIS press release:

(begin text)

Department of Commerce
Bureau of Industry and Security (BIS) 
January 7, 2003

SILICON GRAPHICS SETTLES CRIMINAL AND CIVIL CHARGES THAT COMPUTER
SHIPMENTS VIOLATED U.S. EXPORT CONTROLS

The Department of Commerce's Bureau of Industry and Security (BIS)
announced that Silicon Graphics, Inc. (SGI) of Mountain View,
California pled guilty to two felony charges that the company violated
Commerce Department regulations by illegally exporting high
performance computers to a Russian nuclear laboratory in 1996. SGI
agreed to pay $1 million in criminal fines to resolve the charges. In
a related administrative case, SGI agreed to pay $182,000 -- the
maximum penalty authorized by the Export Administration Regulations
(EAR) -- to settle civil charges arising from the same exports to the
Russian nuclear laboratory, as well as additional charges relating to
illegal computer exports to Israel and for failure to meet reporting
requirements for exports to China, Qatar, and the United Arab
Emirates.

As part of the settlement of criminal charges, SGI admitted that, on
two occasions in 1996, the company exported four Challenge L computer
systems, upgrades, and peripheral equipment to the All-Russian
Institute for Technical Physics (Chelyabinsk-70) in violation of U.S.
export control regulations. Chelyabinsk-70, located in Snezhinsk,
Russia, is a nuclear laboratory operated by Russia's Ministry of
Atomic Energy and is engaged in research, development, testing, and
maintenance of nuclear devices.

In addition to the monetary penalties, the civil settlement agreement
provided that SGI's exporting privileges to Russia will be denied for
a period of three years. The denial of export privileges will be
suspended provided that SGI does not commit any export control
violations involving Russia during the suspension period. SGI also
agreed, for a period of three years, not to exercise its eligibility
to use License Exception CTP for exports and re-exports to Russia, or
to engage in any activity -- such as repair or maintenance of
computers -- involving any military or nuclear end-user or end-use in
Russia without the prior written consent of BIS. Finally, SGI agreed
to report to BIS, within 45 days, all of its exports to certain
countries of concern during the last six months.

In announcing the settlement, Acting Assistant Secretary of Commerce
for Export Enforcement Lisa Prager stated that "this case demonstrates
the Bureau's determination to rigorously enforce its controls over
items that can be used in the proliferation of weapons of mass
destruction."

The Department of Commerce, through BIS, administers and enforces
export controls for reasons of national security, foreign policy,
anti-terrorism, nonproliferation, and short supply. Criminal penalties
and administrative sanctions can be imposed for violations of the EAR.

(end text)

(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)