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Subu Kota, who pleaded guilty in 1996 to selling the material to an FBI agent posing as a Russian spy, is one of two board directors at the company, Boston-based Brainwave Science. During years of federal court proceedings, prosecutors presented evidence they said showed that between 1985 and 1990 Kota met repeatedly with a KGB agent and was part of a spy ring that made hundreds of thousands of dollars selling U.S. missile defense technology to Russian spies. Kota denied being part of a spy ring, reached a plea agreement in the biotech case and admitted to selling a sketch of a military helicopter to his co-defendant, who was later convicted of being a KGB operative, Bloomberg wrote.

Flynn served more than three decades in the military and rose to become director of the Defense Intelligence Agency before he was fired by President Barack Obama in 2014 over policy disagreements. He formed a private consulting firm, Flynn Intel Group, which has sought business with an array of cyber security firms and defense contractors. He began collaborating with Brainwave Science last spring. 

Read alsoYahoo News: Amid 'arms race' kerfuffle, Trump releases friendly Putin letterFlynn, who has been widely criticized for close associations with Russia, has declined repeated requests during the past month to be interviewed about his company's business ties. A spokesman for the Trump transition team, Jason Miller, said in an email that Flynn has never met or spoken with Kota and that he has ended his association with Brainwave Science.

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In a phone interview on Thursday, Kota described his criminal charges and dealings with the KGB as misunderstandings. He acknowledged selling biotech material to a federal agent posing as a Russian spy, but said the incident was a patent dispute, not espionage.