Wednesday March 10 1:26 AM ET

U.S. Charges Two In Alleged Tech Smuggling Plot

BOSTON (Reuters) - A U.S. grand jury indicted a Chinese citizen and a naturalized Canadian Tuesday on charges the pair tried to smuggle U.S. missile technology to China.

Yao Yi, 33, of Beijing, and Collin Xu of Montreal, and their companies Lion Photonics, Inc. of Beijing and Lion Photonics, Canada, Inc., allegedly conspired to smuggle fiber optic gyroscopes from a Massachusetts maker to China.

``This was a concerted effort to export valuable American technology that can be used in missiles and guidance systems to China,'' U.S. Attorney Donald Stern said.

Xu is also accused of money laundering and lying to U.S. Customs officials during the alleged scheme. The indictment charges that he wired $47,769 to the United States from Canada to pay for the equipment.

The gyroscopes fall under the U.S. Arms Export Control Act, which requires a special license to export such sensitive technology.

Yao first tried to buy the gyroscopes in late 1997 on behalf of his Beijing company through Xu's firm in Montreal, ostensibly for use on a railroad project, court papers said.

The court papers added that U.S. Customs then rejected Lion Photonic's application for an export license submitted by an unidentified Massachusetts manufacturer. Then the gyroscope maker received another order for the same equipment from Micro Techland of Montreal. The manufacturer grew suspicious and contacted Customs, which set up a sting.

Yao was arrested in San Diego on Feb. 22 and was expected to arrive in Massachusetts for a hearing later this week, a spokeswoman for Stern said, adding Xu had been in custody since a detention hearing on Feb. 16 in Massachusetts.

If convicted on all charges, Xu faces up to 65 years in prison and a fine of $1.25 million. Yao faces up to 10 years in prison and a $250,000 fine.