New-York based electronics wholesaler Sunrise Technologies and Trading Company (“ST&TC”) and its president Jeng “Jay” Shih have been indicted in federal court in the District of Columbia for exporting laptops to Iran by transshipping them through the UAE. The criminal complaint filed in the case provides details of the investigation leading up to the indictment of Shih and his company.

According to the criminal complaint, in April 2010, Customs seized several shipments from ST&TC destined to a freight forwarder and to a purchasing company in the UAE. Review of emails from the purchasing companies to the freight forwarders revealed that those emails were sent through an Internet service provider in Iran. An investigation of one of the freight forwarders in UAE revealed that the company regularly shipped items to Iran. In an unrelated investigation, federal investigators arrested an Iranian in the UAE involved in the transshipment of items from the U.S. to Iran. The Iranian became a cooperating witness and wore a wire in various meetings with Shih. Conversations between Shih and the cooperating witness allegedly substantiate that Shih knew the end users for his shipments were in Iran.

In order to convict Shih and ST&TC, the government will need to prove that they knew that their UAE shipments were illegal. The criminal complaint suggests that the evidence in this regard will be a 2006 “outreach visit” by the Bureau of Industry and Security’s Office of Export Enforcement to Shih and his company where the OEE special agents informed Shih that it was illegal to export items to Iran. In addition, the criminal complaint cites statements allegedly made by the cooperating witness that Shih knew that the end users were in Iran. Significantly, the criminal complaint also cites statements that suggest that Shih labored under the common misconception that the U.S. embargo on Iran did not apply to shipments to other countries even if they were destined to Iran

Finally, in the context of discussing his efforts to contest the continued detention of the shipments, SHIH stated that he would never admit to agents of the United States Government that he was sending goods to Iran even though Sunrise was supplying computers from the United States to end-users in Iran, saying in sum and substance:

So no matter what, legal procedure, whatever, you have to fight that and say I never do that . . . even if you are doing this, you are not going to admit it, right?

Which I am legally, I’m not doing directly with Iran.

(emphasis added.)

This is a problem that recurs frequently in these transshipment cases. Proving that the defendant knew that the items were ultimately destined to Iran is not proof that the defendant knew that the export to the intermediary country was illegal. If OEE is going to engage in outreach visits, it ought to make clear that these transshipment scenarios are as illegal as direct shipments to embargoed countries.

Given the frequency with which these OEE “outreach visits” are later used by the government to shore up its case of criminal intent, it might be wise, if OEE shows up for an unannounced “outreach visit,” to tell the OEE agents that you are too busy to meet. If they insist on a subsequent meeting, you might want to have your lawyer there.

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