Jan
14
Virginia Company Pleads Guilty to Arms Brokering Charges
Posted by Clif Burns at 10:14 pm on January 14, 2010
Category: Criminal Penalties • Part 129
Virginia-based Taipan Enterprises Ltd. pleaded guilty to, and paid a $15,000 fine for, charges that it illegally engaged in arms-brokering without registering with, and obtaining licenses from, the Directorate of Defense Trade Controls (“DDTC”). The Statement of Facts that supported the guilty plea revealed that Taipan’s woes began when its President, Ioannis Papathanassiou, was questioned by U.S. Customs upon returning from Brazil and told the customs agents that he was in Brazil selling farm equipment. An inspection of his luggage revealed product brochures from Agrale for military vehicles which Papathanassiou allegedly falsely stated were for farming purposes.
The Statement of Facts detailed subsequent transactions that involved the attempted sale of night vision goggles, machine pistols, M4 rifles and gas grenades among other items. Significantly, however, there is no allegation in the Statement of Facts that any of the sales ever occurred. Instead, in each instance, the Statement of Facts said that Papathanassiou “attempted” to sell the items. Notwithstanding that the only charges against Papathanassiou related to transactions that were attempted but uncompleted, he was charged with arms brokering without registering with DDTC as an arms-broker or obtaining necessary licenses for arms-brokering. Apparently just discussing a potential transaction requires registration.
The problem with this theory is, of course, the definition of “broker” in Part 129 of the International Traffic in Arms Regulations under which Taipan was charged. Under that definition, found in section 129.2(a), “broker” is defined as:
any person who acts as an agent for others in negotiating or arranging contracts, purchases, sales or transfers of defense articles or defense services in return for a fee, commission, or other consideration.
It’s probably safe to say that Taipan didn’t receive a fee or commission from the manufacturers of the defense articles for proposed sales that never occurred. Even if Taipan did receive a fee or commission for these attempted sales, the receipt of the fee or commission from the manufacturers is a necessary element of the charged criminal violation and needed to be alleged in the Statement of Facts in order to support the plea.
Permalink
Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
5 Comments:
An alternate reading might be that negotiating for a fee, commission, or other consideration is enough to support the charge.
@MJ. That is a possible reading, but this will still need to have been alleged in the Statement of Facts.
Amen, Brother Burns. Another episode of AUSAs Gone Wild.
One thing–among many–that’s always intrigued me about the brokering regime is that key ITAR defintions contain dispositive elements that the AECA doesn’t. The “in return for a fee, commission, or other consideration” qualifier at ITAR 129.2(a) simply doesn’t exist at 22 U.S.C. 2778(b)(1)(A)(ii). (The same goes for “agent for others”). Query: Whether it’s possible to be convicted of a criminal violation of the AECA without having violated the ITAR, if the ITAR require proof of elements (such as consideration) that the AECA doesn’t mention.
Anyhoo. Assuming ITAR 129.2(a)’s consideration element is required for a criminal conviction, I might go a little farther than MJ. Using what little contract law I remember, I think if I were prosecuting a case in which payment hadn’t actually been made, I would likely contend that a promise of future payment is, at the time the promise is made and the agreement reached, “other consideration.”
But, to echo your central beef, Clif, there’s nothing alleging even a promise of payment in the Statement. The consideration element simply isn’t given any, um, consideration.
@ Pat: If the implementing regs left out a statutory element, then, at the very least, any indictment that omitted the statutory elements would fail, and the reg would probably be found to be invalid. However, the delegation of rulemaking authority in AECA is broad enough that, if DDTC actually engaged in lawful rulemaking under the APA, DDTC could add qualifying elements in the rule implementing the statute (thus increasing its own burden of production and persuasion). Of course, DDTC falsely and fraudulently claims that all of its activity is exempt from the entire APA under the “foreign affairs function” exemption for rulemaking in 5 USC 553. The 1946 legislative history to the APA compiled by the Judiciary Committee and relied upon by the Supreme Court in other APA cases as a guide to interpretation makes it clear the “foreign affairs function” exemption (emphasis on the word “function”) applies only to diplomatic and other government-to-government executive branch activities that do not directly affect the public. The ITAR is the result of a congressional delegation of its plenary constitutional power to regulate foreign commerce, and does directly affect the public, thus DDTC’s claim of exemption from the APA under the “foreign affairs function” exemption is a fraud. The same can be said of those portions of the EAR and the OFAC regs that were promulgated without APA rulemaking. The failure to abide by APA rulemaking also make such regs vulnerable under the Regulatory Flexibility Act (5 USC 601 et seq).
