The federal government agreed to pay $290,000 to an Alabama defense contractor who claimed wrongful prosecution after he was acquitted three years ago on criminal charges of sending defense secrets to China.

Alex Latifi's company, Axion Corp., also is back doing business with the U.S. government.

The settlement ended a long legal struggle for Latifi, an Iranian-born U.S. citizen. The government claimed he sent classified information to China about the design of the Blackhawk helicopter and also faked testing on government-contracted work.

Defense attorney Jim Barger said he did not know of another case where the federal government has voluntarily paid a criminal defendant.

"I think Mr. Latifi should feel vindicated," Barger said "And in my discussions with him, he not only feels that way, he's a proud American and a very patriotic citizen with no ill-will toward the government that abused him in the past and is making amends for it now."

Peggy Sanford, a spokeswoman for U.S. Attorney Joyce White Vance, confirmed the settlement.

"This was so we could devote our resources to protecting the people in this district rather than expending them on extended litigation in which we believe we would have ultimately prevailed, but the outcome is never certain," Sanford said.

Agents seized Axion bank accounts and company property in Huntsville in June 2006. Latifi was indicted on export violation charges in March 2007 related to the design of a tungsten vibration damper for Blackhawk helicopters.

During his trial, a government witness acknowledged the related plans that Latifi had faxed to a China-affiliated company were not stamped "classified" and the judge noted the plans could be found on the Internet. Latifi was acquitted on all charges.

The government's investigation was fueled by a disgruntled employee who was later convicted of embezzling money from Latifi's company.

Latifi maintained his innocence throughout the investigation and, after his acquittal, sought compensation for legal costs, citing a bad faith prosecution. A judge awarded him more than $360,000, but an appeals court lowered the amount and the government paid Latifi some $70,000 for attorney fees.

Latifi's business was all but shuttered after the case, but Barger said Axion has bounced back. The company now has 11 employees and is doing contract work on machine-gun mounts for combat vehicles and also is a supplier for the Abrams tank mine roller, used in Iraq and Afghanistan to disable roadside bombs.


Information from: The Huntsville Times,