In an affidavit, Gowadia admitted to transmitting classified information, and stated that he did so "to establish the technological credibility with the potential customers for future business.

On October 26, 2005, Gowadia was arrested and charged with one count of "willfully communicating delivering or transmitting national defense information to a person not entitled to receive it, which information the possessor has reason to believe could be used to the injury of the United States or to the advantage of a foreign nation" in the United States District Court for the District of Hawaii.

According to a press release from the Department of Justice: The indictment charges Gowadia with "performing substantial defense related services for the People's Republic of China (PRC) by agreeing to design, and later designing, a low observable cruise missile exhaust system nozzle capable of rendering the missile less susceptible to detection and interception."

Count one of the superseding indictment charges Gowadia with conspiring to violate the Arms Export Control Act by entering into an illegal agreement to design and assist in the testing of the stealthy cruise missile nozzle.

Count two charges Gowadia with the substantive act of performing a defense service for the PRC without first obtaining the necessary licensing approval of the U.S. Department of State.

The superseding indictment also describes Gowadia's covert travel and entry into mainland China for the purpose of assisting the PRC in the development of the stealthy exhaust nozzle.

[12] In November 2009, defense counsel psychology experts tried to establish that Gowadia suffers from narcissistic personality disorder but U.S. Magistrate Judge Kevin S.C. Chang said in a ruling issued late Friday, November 20, that the testimony of the two defense witnesses — Richard Rogers, a forensic psychology professor at the University of North Texas, and Pablo Stewart, a psychiatry professor at the University of California, San Francisco — was not credible.

[16] Sorenson, the prosecutor, later won the J. Michael Bradford Award of the National Association of Former United States Attorneys for his work in the case.