Apr

2

Ex-Employee Accuses Security Company of ITAR Violations

Posted by at 4:27 pm on April 2, 2010
Category: DDTC

Convoy in IraqIf the potential benefits of a voluntary disclosure of export violations to the Directorate of Defense Trade Controls (“DDTC”) are not a sufficient motivation, exporters should remember that today’s happy employee can be tomorrow’s disgruntled former employee. The disgruntled former employee is then happy in only one respect: all too happy to blow the whistle on the exporter’s alleged violations of export laws.

Consider the case of a Tennessee-based company that provides security and related services to the United States Government in Iraq and elsewhere. A year ago the company fired an employee for allegedly falsifying time records and for an “appearance of impropriety.” The employee filed suit for wrongful termination, and his complaint cited acts of impropriety allegedly committed by other company employees without termination or other consequences.

The improprieties included the following alleged ITAR violations:

  • The company allegedly asked employees to carry Gen III night vision in their checked baggage to avoid licensing requirement.
  • The company allegedly shipped shotguns to Iraq without required licenses.
  • The company allegedly made multiple shipments of ammunition under the 1000-cartridge exemption in ITAR § 123.17(c) in order to avoid licensing requirements.
  • The company allegedly sent U.S. employees to Uganda and Nigeria to train troops without DDTC authorization

The company denies these allegations, providing the following statement to the Knoxville News when asked to comment on the litigation:

[The company] acknowledges the lawsuit filed by […], a former employee. Because of the ongoing legal process, [the company] cannot comment on the details of the proceedings, except to point out that claims similar to those raised in Loudon County were previously raised by [the employee] and others in lawsuits filed in Knox County and Blount County and both of those lawsuits have been dismissed. [The company] also registers its disappointment in the use of sensational, unsubstantiated, and untrue allegations as a tactic to obscure the real issues of the case.

Of course there’s no way to determine who is telling the truth here but, even so, exporters should never think that there’s no way anyone could ever find out about their potential export violations.

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Copyright © 2010 Clif Burns. All Rights Reserved.
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One Comment:

While it is satisfying that ITAR is making another appearance on Rocky Top (that’s the Knoxville area to you folks outside the SEC), it’s even more interesting that counsel filed in state chancery court alleging only state common law causes of action when there are at least two possible avenues of attack under federal law which could have gotten the plaintiff into federal court. Although there is case law from the DC District in 1995 to the effect that there is no private right of action under the AECA/ITAR, export control violations can serve as a back door into a RICO action (triple damages plus attorneys fees)and/or a false claims act (qui taim) claim. As to RICO, while export control violations are not a direct predicate offense, proceeds derived export control violations were included under money laundering under 18 U.S.C. 1956 as part of the PATRIOT Act in 2001, which is a RICO predicate offense. With respect to a False Claim Act qui tam action, it should be remebered that not so long ago in the Roth and Atmospheric Glow cases, the indictment brought by the AUSA for Rocky Top included a fraud claim based on the theory that the numerous “willful” AECA violations in violation of the contract were intentional fraud and deprived UT of the honest services (which could also reenforce the RICO claim by helping establish a pattern). That same theory could serve as the basis for a qui tam action by a whistleblower, provided that a government contract is involved. Given the other bad acts alleged, if true there were sufficient other bad acts to support both federal causes. Of course, the state law claims could have been tacked on as ancillary claims.

Perhaps plaintiff’s counsel didn’t allege the federal claims precisely in order to stay in Chancery and avoid the possibility of drawing the same U.S. District Court judge as poor Dr. Roth.

Comment by Hillbilly on April 5th, 2010 @ 10:35 am