Beshear's office 'actively reviewing' federal charges against Louisville magnetics company

Kentucky Gov. Andy Beshear's team is reviewing allegations against three people and a Louisville-based magnetics company after they were federally charged on an accusation they took part in an illegal scheme to send information about U.S. military projects to China while supplying the U.S. Department of Defense with unauthorized items.

Phil Pascoe, 60, and Monica Pascoe, 45, of Floyds Knobs, Indiana, and Scott Tubbs, a 59-year-old man from Georgetown, have been charged along with Quadrant Magnetics LLC with wire fraud, violations of the Arms Export Control Act, smuggling goods and selling U.S. military data to China, according to a release from the U.S. Department of Justice. They have also been charged with unlawfully supplying the Department of Defense with rare-earth magnets used in aviation systems that were magnetized in China, a violation of national regulations.

Quadrant Magnetics announced earlier this year it planned to build a $95 million rare-earth magnet manufacturing facility in Louisville. The manufacturer already owns an engineering, assembly and machining hub by Jeffersontown which has been open since 2001.

The new facility, dubbed "Project NeoGrass," was pitched in previous statements from the company as "the blueprint that the magnetics industry and our customers need. It is a revitalization of rare-earth manufacturing and research and development in the U.S."

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To help bring the project to Kentucky, Beshear's office previously said the state's Economic Development Finance Authority approved a 10-year incentive deal with Quadrant with up to $3.4 million in tax breaks possible if certain conditions were met, including creating at least 200 full-time jobs in the Bluegrass State with an average wage of at least $28.15.

Now, that deal could be at risk. Crystal Staley, a Beshear spokesperson, said the governor's office "just learned of the charges against this company and are actively reviewing them."

"We fully support any and all efforts to protect our national security and are grateful for the hard work of the dedicated professionals in our federal law enforcement agencies," Staley said Thursday in an email.

Brandon Mattingly, a spokesperson for Kentucky's Cabinet for Economic Development, said the board sees national security as its "top priority." The tax incentive agreement has not yet received final approval, he said, and Quadrant has not yet taken any action to claim those incentives.

"The state tax incentive agreement preliminarily approved through the Kentucky Business Investment program in January for the company’s proposed investment to manufacture rare-earth magnets in Kentucky are performance-based in nature with no up-front money exchanged as part of the agreement," Mattingly said in an email. "We will await further information as it becomes available and are prepared to support the federal government in their investigation."

The indictment from the Department of Justice said between January 2012 and December 2018, the three defendants "conspired to send approximately 70 drawings containing export-controlled technical data to a company located in China without a license from the U.S. government."

The charging document also alleged Quadrant imported its rare-earth magnets from a company in China. Once they were in the U.S., the indictment said, Quadrant sold those products to two U.S. companies which included the magnets in military equipment sold to the Department of Defense.

Under the Defense Acquisition Regulations System, rare-earth magnets sold to the Department of Defense are required to have been produced and magnetized in the U.S. or in another authorized country, a list that does not include China.

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The Department of Justice said that the Defense Criminal Investigative Service, the FBI, the Department of Homeland Security, the IRS' Criminal Investigation unit, the Naval Criminal Investigative Service and the Department of Energy’s Office of Inspector General are investigating the case, according to the release.

Quadrant bills itself as "the worldwide leader in the magnetic industry" on its website. The company's global headquarters are in San Diego, with additional offices in Europe, Asia and Australia. Its Louisville hub is located at 12500 Plantside Drive, where it produces rare-earth magnets used in electric vehicle motors and other products.

The roles the three people hold with the company were not noted in the release, but Business First previously reported Phil Pascoe is the president of Quadrant Magnetics.

A statement Tuesday provided by company spokesperson Audrey Young said Quadrant is "cooperating with the government regarding the recent indictment from the Western District of Kentucky. We will continue to do so, and we remain focused on our mission to serving as an important partner to our customers.”

This article originally appeared on Louisville Courier Journal: Quadrant Magnetics, 3 people charged with giving China military info