Apr
11
The OFAC-tory Cents for April 2007
Posted by Clif Burns at 5:14 pm on April 11, 2007
Category: Cuba Sanctions • OFAC
Last week OFAC released its typically opaque monthly report on recently imposed civil penalties. This report reveals that, once again, the full force of the Federal government was brought to bear on two hapless web surfers who bought some Cuban stogies over the Internet. We understand that a spokesman for Fidel Castro said that this OFAC action was the final straw and that Castro was, at last, going to resign and go into alcohol rehab, claiming that it was a serious drinking problem that caused him to become a communist dictator in the first place.
A.N. Deringer, the freight-forwarding company, was fined $700 for helping somebody or other export something or other to Iran.
The Kinecta Federal Credit Union coughed up $3,102 for initiating a funds transfer to a Cuban national. In case you haven’t heard of Kinecta, which started out as the Hughes Aircraft Employees Federal Credit Union, here’s an interesting little quote I found on Kinecta’s website from the its founder:
I went to Mr. Hughes’ office in Hollywood and talked to his secretary Nadine. I gave her all the facts and Mr. Hughes said, ‘Sure. Start the Credit Union. Just keep my name clean. I don’t want anything funny going on.’ I said, you can be sure of that. And Hughes Credit Union was born.
It’s a good thing Howard Hughes is no longer around to hear about this!
Finally a more substantial fine of $66,547.31 (every penny counts!) was imposed on G.E. subsidiary Datex-Ohmeda for shipments of medical equipment through Dubai to Iran made by its former subsidiary Spacelabs Medical . This enforcement action arose from a voluntary disclosure, no doubt one that was insisted on by OSI Systems when it bought Spacelabs from Datex-Ohmeda in 2004. Datex-Ohmeda was forced to spin-off Spacelabs as a condition to GE’s acquisition of Datex-Ohmeda’s parent company. It’s reasonable to suppose that Spacelabs’ Iranian problem was caught by a sharp-eyed lawyer for OSI (not me) during due diligence and that, as a result, OSI required the disclosure and required Datex-Ohmeda to pay any fine.
Oddly this is yet another recent case where medical equipment — which is of course eligible for a license to Iran under TSRA — is shipped without a license. It seems to me a heckuvalot easier just to get the license in the first place rather than go through the whole rigmarole of transshipping the goods through Dubai. What is going on here? Are there a large number of exporters that simply do not know about TSRA?
Permalink
Copyright © 2007 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
8 Comments:
Where do you find the time to dig up this stuff? Remind me to tell you the story of the South Bay Cigar Club some day. Most expensive vacation those guys ever took!
With appreciation for the afternoon laugh,
John
Yes, thanks for the laugh. I know that the CivPen folks who remain at OFAC after their former chief left Treasury are an earnest if somewhat obtuse bunch. Not sure they recognize the broader implications of the cases they choose to pursue, especially in terms of advancing agency and specific program interests. There is, for lack of a better word, a real hodgepodge quality to the enforcement portfolio….
Enough already with the ‘hapless web surfers innocently buying Cuban cigars over the internet”. They knew better, it’s not a recent development that Cuban cigars are illegal in the U.S., and they thought they were being clever. What’s next? Indignant harumphing that the Rolexes being offered to you by email aren’t genuine?
I have a much better story about people who should know better…
We’d, of course, love to to hear that story, Scott, if you want to share it.
And I didn’t say that the web surfers “innocently” bought the Cuban cigars. I also meant hapless in the sense of unlucky, i.e., they got caught.
My point is that the regulatory policy is stupid, not that these people didn’t know they were breaking the law. Forty years of the embargo and Castro can still govern from a hospital bed — you’d think somebody might figure out that the sanctions aren’t working. . . .
A.N. Deringer has a letter on the BIS enforcement list for aiding and abetting the shipment of copier toner to Iran. Wonder if it is the same transaction? But really a freight forwarder and copier toner, surely there are more threatening exports to Iran.
OFAC doesn’t really care about the overall significance of a transaction: All they care about is their body count, i.e., the number of deals killed, because all they ultimately care about is the political support from the expatriate groups (e.g., Cuban colonists in Cuban Occupied Florida) that sponsor and protect OFAC.
My story, suitably anonymized, centers on writs of maritime attachment. Over the past couple of months, I’ve personally seen 2 such writs attempting to recover funds from shipments to blocked countries.
Clif can probably add much more detail about the process, but the Reader’s Digest version would go like this…
A party to a trade transaction needs to recover goods or money from the another party for whatever reason. They go to a lawyer, who says, “There may be a way to create a lien against payments being made to them. Tell me a little more. Who is the company you’re looking to recover from?”
“ABC Trading”
“And where are they located?”
“They’re in Iran.”
“No problem, here’s the application for a writ.”
Later….
“Your Honor, you have before you an application for a writ to recover funds from ABC Trading, located in Iran.”
“No problem, here’s your writ.”
The writ is served on a baker’s dozen of money center banks. One or more of them call the attorney and ask if they have a license from OFAC to collect the funds.
“Huh? A what? From who?”
As I said previously, file under ‘people who should know better.’
Haha! That’s hilarious, Scott
(except of course to those who should have known better).
