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Boeing joins China-funded global order for IP satellites



Boeing
Co.


BA -3.09%

said Thursday canceled a controversial satellite order funded by a Chinese government company claiming default for non-payment.

Control Laws, Boeing is not allowed to sell satellites directly to China. The company has been criticized by national security officials for trying to circumvent US regulations on sensitive technologies on which the US military relies.

A person familiar with Boeing's thinking said canceling the order was a business decision. The person said the company was likely to try to resell the satellite, which was about to be completed at a Boeing plant in Los Angeles. The company was in arrears with the payments for the satellite and had to spend more than 200 million US dollars to complete it.

Global IP did not immediately respond to the request for a comment. His CEO, Bahram Pourmand, had previously committed to progressing despite China's involvement despite controversy.

The satellite should allow better internet access to Africa. One of the officials' concerns was that China might reinstate commercial technology for military purposes.

The details of the satellite agreement emerged after tensions arose between the founders of the startup and a state-owned Chinese company last year, which had already provided all-round funding by a $ 200 million intermediary.

The founders of Global IP, Emil Youssefzadeh and Umar Javed, claim in a California federal lawsuit that the startup in Los Angeles was secretly controlled by China after accepting funding from a state entity. owned China Orient Asset Management Co. in a complex business involving offshore companies in the British Virgin Islands. Global IP has denied that it was controlled by China.

Lawyers of the China-Orient subsidiary did not comment immediately. Earlier, they claimed that the founders' allegations were false and "flammable."

The controversy over the global IP environment has come at a difficult time for relations between the US and China, with tensions mounting, in particular because of China's alleged theft of US technology. The Canadian authorities' arrest of a prominent Chinese telecommunications official on Saturday at the request of US officials marked the beginning of an even more aggressive phase in the technology battle between Washington and Beijing.

The acquisition of such satellite technology would help China secure its superpower status alongside the US. This would strengthen China's burgeoning space program as well as initiatives to dominate the cutting edge industries and expand its influence in developing countries.

Boeing had said in a previous written statement that it "takes rigorous measures to comply with US export regulations and protect national interests."

The company, the second largest federal contractor

Lockheed Martin
Corp.

, said it had received an export license from the Global IP Satellite Sales Department, and said it would "continue to work closely with trade representatives to ensure adequate protection of satellite technology" about the deal or its funding when applying for the satellite License or answering most of the other specific questions from the journal. The Ministry of Commerce stated that it could not comment on a single application and again declined to comment on Thursday.

Convinced there was no way, the two Global IP founders stepped down, as did the General Counsel. When they left, they expressed concern to Boeing that the company was controlled by China. Boeing agreed to push ahead with the project after a compliance review, a decision that the founders criticized.

"When we resigned over a year ago, we informed Boeing of the reasons for our decision and we hope that everyone involved will see this. We need to put the company on the right path towards compliance," Youssefzadeh said Thursday. "It is unfortunate that this did not happen at the time."

Global IP and its supporters should have reported the satellite transaction to the US Foreign Investment Committee or CFIUS, a body that can recommend the President Block transactions. For national security reasons, lawyers and past and present US Officials who, at the request of the journal, reviewed the allegations in the lawsuit concerning the transaction.

After the Journal began the project last summer, US officials directed the transaction to CFIUS for those familiar with the matter. A spokesperson for the finance department, who heads the CFIUS interinstitutional panel, previously declined to comment. The Ministry of Finance would not comment on Thursday immediately.

After reviewing the transaction, Adm. Dennis Blair, a former US intelligence director, told the journal that he was amazed that Boeing would continue the project. Adm. Blair is chairman of an advisory committee for Lockheed Martin Space Systems, a competitor to Boeing.

Please contact Brian Spegele at brian.spegele@wsj.com and Kate O'Keeffe at kathryn.okeeffe@wsj.com


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