August 1998
THE STRANGE CASE OF DR. LIM

A Chinese Long March rocket, carrying an American-made satellite, blew up on liftoff in China in February 1996. The Chinese government asked Loral Space & Communications LTD to investigate the explosion. To head the probe, they asked, by name, for a Chinese-born rocket scientist at Loral.

Loral complied with the Chinese request, abruptly firing the executive in charge of day-to-day operations at the launch site in China who would have managed the review. During the review, the Chinese government in Beijing was "inadvertently" faxed a report of the findings before a copy was given to the State Department for approval and release.

Two key questions are at issue in this puzzling case: First, was the personnel switch made to accommodate the Chinese government? And, second, did the review of the rocket explosion facilitate the transfer of sensitive data and technology to Beijing?

At the center of this controversy is Dr. Wah Lim, a Chinese-born physicist and expert in advanced guidance and navigations systems, who left Loral for Hughes Electronics shortly after completing the Chinese Launch review. Dr. Lim was employed at Loral in 1996, when Liu Jihuan, Chairman of China Aerospace, a Chinese government company, asked Loral to place Dr. Lim in charge of the review committee looking into the Long March rocket explosion.

The executive Loral fired was James Reynolds, Executive Vice President and General Manager of Loral's space systems unit, who would have conducted the review. Mr. Reynolds, a retired Air Force colonel and Naval Academy graduate, had a reputation at Loral as a stickler for complying with U.S. security regulations imposed on satellite manufacturers.

Executives at both Loral and Huges Electronics (Hughes participated with Loral in the review of the explosion) claim the findings report was faxed to Beijing by mistake. This explanation seems bogus, however. Loral was warned by an outside panel of security advisers that the company could not participate in the Chinese review of the launch without first getting permission from the State Department.

Dr. Lim ignored this warning and convened the review panel's first meeting without a State Department license. The New York Times disclosed a letter from Dr. Lim to China Aerospace in 1996 in which he expressed hope that his review would ensure the reliability of Long March launch vehicles in the future.

U.S. military experts have said that any transfer of satellite data and technology in the course of the Loral-Hughes review would have allowed China to improve its nuclear-missile capability. The matter is now under investigation by the Justice Department and Congress.