ITT Corporation Requested to Take Action Against Employees Responsible for Illegal Exports
On May 4, 2007, ITT Corporation filed its first quarter 2007 quarterly report (Form 10-Q) with the Securities and Exchange Commission. Among other things, the 10-Q notes that an ITT shareholder has requested ITT's Board of Directors to take actions against the ITT employees that were responsible for engaging in the activities that led to the criminal penalties that were levied on the company. The relevant language in the 10-Q states as follows:
On March 27, 2007, ITT Corporation reached a settlement relating to an investigation of its ITT Night Vision’s compliance with International Traffic in Arms Regulations (ITAR). As part of the settlement, ITT Corporation pleaded guilty in the United States District Court for the Western District of Virginia to one ITAR violation relating to the improper handling of sensitive documents and one ITAR violation involving making misleading statements. The Company will pay a total of $50.0 [million] in fines, forfeitures and penalties, including a payment of $30.0 [million] made in the first quarter of 2007. This liability was fully accrued at December 31, 2006. The Government has agreed to defer action regarding a third count of ITAR violations, pending the Company’s implementation of a remedial action plan. The Company has also agreed to invest $50.0 [million] over the next five years in research and development and capital improvements for its Night Vision products. As a result of the guilty plea, ITT Corporation became subject to automatic statutory “debarment” from future export licenses. However, because the debarment will be applicable to only a portion of the Company’s Night Vision business, it is expected that the net effect of the debarment will restrict less than 5% of total Night Vision sales for a period of not less than one year. The Company can seek restatement of export privileges after one year. The Company anticipates negotiating administrative agreements with the Departments of State and Defense during the second quarter of 2007. Management believes that this matter will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
On April 17, 2007, the Company’s Board of Directors received a letter on behalf of a shareholder requesting that the Board take appropriate action against the employees responsible for the actions described in the Company’s agreements with the United States Attorney’s Office for the Western District of Virginia, which were disclosed on Form 8-K filed on March 30, 2007. The request is being evaluated.