3 Indicted for Sending Military Tech to China, Selling Chinese Items to Pentagon

The Department of Justice (DOJ) logo is pictured on a wall in New York on Dec. 5, 2013. Carlo Allegri/Reuters

Three people and a business have been charged in federal court over allegations that they participated in a scheme to sell U.S. military secrets to China and to secretly bring Chinese goods into the U.S. defense supply chain.

Phil Pascoe, Monica Pascoe, Scott Tubbs, and Quadrant Magnetics LLC are accused of wire fraud, violations of the Arms Export Control Act, and smuggling of goods, according to a Nov. 9 statement from the Justice Department.

It’s alleged that the three individuals used the company to conduct an illegal scheme to send export-controlled, defense-related technical data to an unspecified company in China, and to illegally supply the Pentagon with products from China, including rare earth magnets for aviation systems and military items.

The indictment says that Quadrant imported rare earth magnets that were smelted and magnetized by a company in China, and then sold these items to two U.S. companies, which included them in components sold to the Pentagon for use in the F-16 and F-18 aircraft, as well as other defense assets. It’s currently unclear if the items were put to use.

Rare earth magnets sold to the Pentagon must be produced and magnetized in the United States or an approved country under the rules of the Defense Acquisition Regulations System. China isn’t an approved country.

The indictment also alleges that the defendants conspired to use Quadrant Magnetics to send roughly 70 technical drawings to China, which contained export-controlled data related to military end-use items, including aviation, submarine, radar, tank, mortars, missiles, infrared and thermal imaging targeting systems, and fire control systems.

Quadrant Magnetics is based in Louisville, Kentucky. However, the company has several more locations throughout the United States, as well as operations in China, Germany, and Vietnam, according to Louisville Business First.

Phil Pascoe, 60, is the company’s president, Monica Pascoe, 45, is its director of accounting operations, and Tubbs, 59, is its vice president of sales and marketing.

The company is currently expanding in the Louisville area. Earlier in the year, it was announced that the company was preliminarily approved to receive $3.4 million in tax incentives from the state of Kentucky. It’s unclear what effect the indictment will have on the company’s expansion plans or funding qualifications.

If convicted, the defendants would face penalties of “up to 20 years in prison for each count of wire fraud; 20 years in prison for each count of exporting technical data without a license; and 10 years in prison for smuggling goods from the United States,” according to the DOJ.