Department of Defense magnet supplier charged with sending military intelligence to China
LOUISVILLE, Ky. — Three people and a Louisville, Kentucky-based magnetics company have been federally charged on allegations 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.
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 produces rare-earth magnets used in electric vehicle motors and other products.
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 in the area which has been open since 2001.
The new facility, dubbed "Project NeoGrass," was pitched "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." in previous statements from the company.
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To help bring the project to the state, Kentucky Gov. Andy 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.
Beshear's representatives did not immediately respond to a request for comment sent Wednesday afternoon.
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.
Requests for comment sent early Thursday morning to Quadrant were not immediately returned.
This article originally appeared on Louisville Courier Journal: Kentucky company charged with giving China US military intelligence
