LORAL AND U.S. GOVERNMENT SETTLE 1996 CHINESE LAUNCH MATTER
Justice Department Declines Further Action
Payment of Fine Spread over Seven Years
New York - January 9, 2002 - Loral Space & Communications (NYSE:LOR) announced today that it has reached a settlement with the U.S. government in a case relating to the company's involvement in a review of a Chinese rocket launch failure in 1996.
Loral also announced that it has been informed that the Justice Department has terminated its investigation of the company and has declined to pursue the matter further.
Loral has agreed to pay a civil fine of $14 million to the State Department without admitting or denying the government's charges. The cost of the fine (approximately $0.04 per share) will be reflected in Loral's 2001 fourth quarter results. Under the terms of the agreement the fine is to be paid over seven years, without interest, resulting in a cash impact annually of approximately $2 million.
Loral also has strengthened its export compliance program. The company's past and future compliance costs, as agreed to with the government, will total at least $6 million, $2 million of which has already been expensed.
Loral's chairman and chief executive officer, Bernard L. Schwartz, said:
"Loral and its employees are patriotic, law-abiding citizens and we take this matter very seriously. We historically have had an excellent security record and are committed to vigorous compliance with export control laws. The company has instituted an extensive new training program, significantly expanded staff, and greatly improved oversight in the area of export control.
"This matter grew out of the activities of an Independent Review Committee (IRC) set up to inform the insurance industry about the causes of a 1996 Chinese rocket failure. The IRC was organized at the request of the insurance underwriters and was composed of representatives from Loral and five other satellite and satellite launch companies.
"Upon learning that a copy of the IRC's preliminary report was mistakenly sent to the Chinese by a Loral employee, the company made an immediate and voluntary disclosure to the State Department noting that an effort had been made to delete all sensitive material in advance. Nonetheless, Loral accepts full responsibility for the matter and expresses regret for its failure to obtain appropriate State Department approval."
Loral Space & Communications (NYSE:LOR) is a high-technology company that concentrates primarily on satellite manufacturing and satellite-based services.
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This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, from time to time, Loral Space & Communications Ltd. or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, but are not limited to, various filings made by the company with the Securities and Exchange Commission, press releases or oral statements made with the approval of an authorized executive officer of the company. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions. These factors and conditions have been described in the section of Loral's annual report on Form 10-K for the fiscal year ended December 31, 2000, entitled "Certain Factors That May Affect Future Results," and the company's other filings with the Securities and Exchange Commission. The reader is specifically referred to these documents regarding the factors and conditions that may affect future results.