Heightened federal scrutiny of unauthorized technology transfers to foreign entities has once again resulted in high-profile criminal convictions, as two senior executives of Quadrant Magnetics, a Kentucky-based manufacturer specializing in rare earth magnetics, have pleaded guilty in federal district court to charges stemming from the unlawful transmission of ITAR-controlled technical data to an affiliate in China. The case, which underscores the heightened scrutiny of corporate interactions with Chinese affiliates in sectors deemed critical to national security, arose from a long-running investigation into Phil Pascoe and Scott Tubbs, both high-ranking executives at the company, who were indicted for their alleged involvement in the illicit email transmission of sensitive corporate documents to an affiliate in China. The nature of the charges and the factual admissions contained in their plea agreements represent a significant victory for the U.S. Department of Justice’s ongoing efforts to curb unauthorized technology transfers, particularly in industries where dual-use applications present potential national security concerns.
Indictments originating from the Western District of Kentucky—first filed in 2022 and amended twice, culminating in the filing of a second superseding indictment in 2023 for both defendants—detail a vast conspiracy in which Pascoe and Tubbs engaged in the deliberate and systematic transmission of controlled technical data on multiple occasions to a Quadrant affiliate in China without the requisite licenses or regulatory approvals required under U.S. export control laws. The prosecution alleged that both executives acted with knowledge of the legal restrictions in place and nevertheless elected to circumvent compliance safeguards in order to facilitate the unauthorized transfer of technical specifications, including engineering drawings and proprietary production processes. According to the charging documents, these transmissions occurred over a prolonged period, with evidence demonstrating that Pascoe and Tubbs used email to share export-controlled information that would enable the Chinese affiliate to reproduce sensitive components outside the purview of U.S. regulatory oversight. The government’s theory of liability was predicated on violations of the Export Control Reform Act (“ECRA”) and the International Traffic in Arms Regulations (“ITAR”), both of which impose strict limitations on the dissemination of controlled technology to foreign entities. Given the strategic importance of rare earth magnetics in defense, aerospace, and other advanced manufacturing sectors, the case quickly drew the attention of federal law enforcement agencies tasked with protecting U.S. national security interests.
Plea agreements executed in February 2025 memorialize Pascoe’s and Tubbs’s admissions of guilt and confirm that both executives knowingly engaged in conduct that contravened federal export laws. Under the terms of the agreements, Pascoe and Tubbs each pleaded guilty to Count 1 of the second superseding indictment, a charge that captures their knowing and unlawful transmission of controlled technical data to a foreign entity without securing the appropriate authorizations. Court records indicate that the pleas were entered pursuant to Rule 11(c)(1)(A) and (B), meaning that the government has agreed to dismiss other charges contained in the indictment in exchange for the guilty pleas, while still reserving the right to advocate for a significant custodial sentence. In doing so, Pascoe and Tubbs have effectively acknowledged that their actions were not inadvertent mistakes or the product of regulatory ambiguity, but rather deliberate and calculated violations of U.S. law that exposed sensitive corporate information to a foreign entity operating in a jurisdiction widely regarded as a primary geopolitical and economic competitor to the United States.
Court orders following the entry of the guilty pleas set the stage for sentencing proceedings, which are scheduled to take place in June 2025. Under federal sentencing guidelines, violations of export control statutes—particularly those involving willful misconduct—often result in lengthy prison sentences, as well as substantial financial penalties and debarment from participation in regulated industries. Given the sensitive nature of the information transmitted and the apparent breadth of the conspiracy outlined in the indictment, it is anticipated that prosecutors will seek significant custodial terms, particularly given the Department of Justice’s growing emphasis on corporate executive accountability in export control enforcement actions. The presentence investigation reports, which will be filed in advance of sentencing, are expected to provide additional details regarding the nature and extent of the violations, the financial and strategic benefits obtained by the defendants, and any mitigating factors that may be relevant to sentencing considerations. Until sentencing occurs, Pascoe and Tubbs have been permitted to remain on bond, though they are likely to face substantial collateral consequences, including permanent restrictions on their ability to work in industries governed by export control regulations.
As federal authorities continue to intensify export control enforcement efforts, the criminal case against Pascoe and Tubbs serves as a cautionary tale for corporate executives operating in highly regulated industries. The Justice Department’s success in securing guilty pleas reinforces the U.S. government’s resolve to aggressively pursue individuals who knowingly violate export restrictions, particularly in cases where the unauthorized dissemination of controlled technology has the potential to benefit foreign entities in adversarial jurisdictions. With growing geopolitical tensions and an increasing focus on supply chain security, technological sovereignty, and the safeguarding of dual-use technology, companies engaged in international business must ensure that their compliance programs are not only robust on paper but actively enforced in practice. This case underscores the vital importance of internal controls that effectively prevent unauthorized data transfers, employee training that ensures an understanding of export compliance obligations, and proactive monitoring mechanisms that detect potential violations before they materialize into criminal actions.
