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BIS Claims Higher Penalties Haven’t Slowed Voluntary Disclosures
Posted by Clif Burns at 12:37 pm on June 12, 2009
Category: BIS
According to an article (subscription required) in today’s Inside U.S. Trade, an official of the Bureau of Industry and Security (“BIS”) told an agency advisory committee that the significant increases in penalties enacted by Congress in 2006 for export violations has not deterred exporters from filing voluntary self disclosures of export violations. Thomas Madigan, the director of BIS’s Office of Export Enforcement (“OEE”) told the Rules and Procedures Technical Advisory Committee (“RPTAC”) that exporters filed VSDs at roughly the same rate as last year. He based this assertion on the 167 VSDs filed this year, which is close to the 175 that would be expected at this time in the fiscal year based on the 200 VSDs that were filed during the last fiscal year. (BIS’s fiscal year ends on September 30).
Madigan also gave a partial breakdown for the disposition of the VSDs filed in 2009. Of the 167 filed, four were closed with no action and 14 with warning letters. The bad news, then, is that companies filing a VSD, can pretty much expect a fine. The good news is that none of the 167 VSDs was referred to the Department of Justice for prosecution.
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2 Comments:
Perhaps that should read “The good news is that none of the 167 VSDs was referred to the Department of Justice for prosecution yet.” Or perhaps they don’t count some of those cases as VSDs if the disclosure was less than fulsome or don’t count them as a referral if a grand jury hasn’t returned an indictment yet or the indictment remains sealed.
More bad news is that parties filing voluntary disclosures, can pretty much expect they’ll have to wait awhile before they know if their submission will result in no action, a warning letter, or a fine.
The vast majority of disclosures received by BIS are still taking 12 months or more to resolve. In any given year, the number of VSDs resolved will be made up largely of VSDs submitted in prior years. Of Madigan’s numbers, of the 149 VSDs received in 2009 but not yet resolved, a fair number will likely carry over into 2101.
BIS would give a better picture of VSD activity if it included figures on the number of VSDs open at any one time, how many total have been resolved and how in a given year, and a year-by-year breakdown.
Untold in Madigan’s statement is whether, of cases resolved, the number of those receiving monetary penalties is increasing (it appears that it is; in prior years, 95%+ of VSDs submitted, were resolved via means other than monetary penalties), and, for those cases in which monetary penalties are assessed, if the amounts are increasing (again, it appears they are, in some cases dramatically).
It’s likely that, of the 149 unresolved 2009 VSDs to date, a fair number will receive warning letters. But the anecdotal indication is that a higher number of those will result in monetary penalties than in prior years, and that when monetary penalties are issued, they’ll be in higher amounts. And we can’t discount the possibility of referrals for criminal prosecution – granted, BIS in the past have very sparingly reserved such action to cases that allegedly involved false statements in the VSD process itself, but that only goes to show that such referrals are possible. There’s an old joke in import/export law enforcement circles, that what’s called a “VSD” in the administrative enforcement world, is what’s called a “confession” in the criminal world – and all of the FBI, ICE and OEE agents out there are very cognizant of the fact that their job title is “criminal” investigator.
Incidently, has anyone seen BIS’s Annual Report to Congress for 2008? As of late last week I hadn’t seen it on their website. It would be interesting to see what they reported on VSD and other statistics for FY2008, particularly since FY2009 is now well over half over.
