Pentagon red-faced over award to security company

July 18, 2000
Web posted at: 11:26 p.m. EDT (0326 GMT)

From CNN National Security Producer Chris Plante

WASHINGTON (CNN) -- The Defense Department says it is embarrassed about having presented an award for industrial security to a company that is being investigated for giving a sensitive report on missile technology to the government of China.

The Defense Security Service (DSS) presented the Cogswell Award Monday to the Loral Space & Communication company for "Outstanding Industrial Security Achievement" -- then learned several hours later that Loral is the subject of an ongoing three-year investigation into the alleged security breach.

The decision to give the award to Loral was almost immediately reversed.

"I'd describe it as an embarrassment and something that was unfortunate," said Pentagon spokesman Ken Bacon. "As soon as it was learned that Loral was under investigation, the award was withdrawn."

A grand jury has been looking into allegations that Loral violated export control laws when they provided the Chinese government with an assessment of a failed Chinese missile launch, perhaps contributing to China's ballistic missile program.

The failed Chinese missile was contracted to carry a Loral satellite into orbit.

"I think it's seen upstairs (in the office of Defense Secretary William Cohen) as an embarrassment, and it was quickly corrected," Bacon said.

The decision to present the award for sound security practices to Loral and 49 other companies had been approved by the office of the Secretary of Defense.

"I don't have a good explanation for this, but I suspect that the award -- I know that the award was for a national industrial security program, which involves steps that companies take to deal with the way classified information is handled within their facilities. And the people who made this award were probably unaware of the fact that Loral was under investigation for another matter, which is a violation of export control, an alleged violation of export control policies," Bacon said.

"So it was just a question of somebody not being omniscient enough to have a complete picture of Loral's dealings across the board."

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Defense Security Service (DSS)
U.S. Department of Defense
Loral Space & Communications, Ltd.

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