May

15

Florida Man Charged With “Brokering” His Own Defense Exports


Posted by at 4:47 pm on May 15, 2008
Category: Criminal PenaltiesPart 129

38 caliber jacketed soft point ammunitionThis recently unsealed criminal complaint against a Florida man shows that the FBI agents and the federal prosecutors haven’t a clue as to the correct reading of the definition of a “broker” in Part 129 of the International Traffic in Arms Regulations (the “ITAR”). In fact, it appears that the prosecutors and investigators have charged the defendant as an unlicensed broker merely because he had begun to negotiate for the export of a shipment of ammunition before getting the export license. If that’s a criminal offense, there are certainly lots of people who better get their affairs in order and contact a criminal defense attorney.

The defendant, Lance Brooks, had been awaiting sentencing after pleading guilty to the unauthorized export of defense services arising out of a trip he made to the UAE to train customers in the use of a grenade launcher. While Brooks was awaiting sentencing, the FBI obtained a warrant to search a DHL package to Brooks from the Firearms Coastal Security Branch in Jamaica. Inside the package was an End Use Certificate (DSP-83) from Jamaica’s Ministry of National Security pertaining to 270,000 rounds of jacketed soft point ammunition, most of it .38 caliber.

The FBI Joint Terrorism Task Force contacted the Jamaican government to obtain further details about the transaction. According to the Jamaican government, Brooks had bid in response to a government proposal to purchase the ammunition, had won that bid, had faxed an invoice for the ammunition to the government, provided banking information for payment for the ammunition, and requested and received an End User Certificate (DSP-83) from the Jamaican government for the ammunition. The FBI inquired with the Directorate of Defense Trade Controls (“DDTC”) to determine if Brooks had a license to export the ammunition. When it learned that Brooks had not yet applied for the license, it charged him with engaging in unlicensed brokering activities without first having registered as a broker with DDTC.

Significantly there is no evidence alleged in the complaint that Brooks had attempted to export the ammunition without a license or that he had no intention of applying for the license. Indeed, his request that the Jamaican Government execute and send to him the End User Certificate (DSP-83) — a document that had to be obtained before a license could be granted — suggested that Brooks had every intention of obtaining a license prior to export. Lacking any evidence of an attempted export or a conspiracy to export, it would appear that the FBI and prosecutors cooked up the brokering charge.

The definition of “broker” in section 129.2 of the ITAR doesn’t cover Brooks’s activities with respect to the contemplated sale of ammunition to the Jamaican government. The key part of that definition is that a broker is someone who acts “as an agent for others” in arranging for the sale of defense articles “in return for a fee.” The allegations of the criminal complaint do not provide any evidence that Brooks was acting for anyone other than himself in arranging this contract or that he was going to receive any fee from that other person. Instead, it appears that Brooks was engaged in a transaction on his own behalf and expected a sales profit on the deal rather than a third-party fee or commission.

If what Brooks did — namely, negotiating a contract for a defense article prior to receiving an export license — is brokering, than almost every exporter will be subject to criminal penalties if they haven’t registered as a broker. Worse, those exporters may need to obtain brokering licenses from DDTC before even talking to potential customers with respect to transactions that fall within the brokerage licensing requirements of section 129.6.

Exporters that had such a poor understanding of the ITAR as these federal enforcement officials would likely be fined or worse when their misunderstandings led to rule violations; no such negative consequences, however, await these enforcement officials who appear not to have even a rudimentary understanding of Part 129 or the definition of a “broker” under that Part. One can only hope that Brooks’s public defender reads Part 129 with slightly more care and gets these charges dismissed.

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Copyright © 2008 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)


10 Comments:


DDTC has informed my company that the acquisition of non-US defense articles in one country for sale in another country constitutes brokering activities. Conceptually, DDTC wants to have control over all US persons who engage in any transaction involving defense articles, whether or not the articles are of US origin or where they are located.

Comment by Kndl on May 15th, 2008 @ 5:00 pm

Right, but brokering still requires that the broker is acting as an agent for a third party. And it is quite clear that it doesn’t matter whether the articles are US-origin or not; the jurisdictional hook is the broker who must be a U.S. Person, in the U.S. or “otherwise subject to U.S. jurisdiction.”

Comment by Clif Burns on May 15th, 2008 @ 5:19 pm

Is it possible that the ammunition is not of U.S. origin. In other words he was acting as a broker for a non-U.S. company? This may be what the first poster is suggesting.

Comment by LDM on May 15th, 2008 @ 6:13 pm

Even if it is non-U.S. ammunition, he still has to be acting as an agent for others. If Brooks bought the ammunition for his own account and resold it, he’s not a broker, just an exporter. This is true without regard to the origin of the ammunition. But if say he arranged a contract between a French ammunition company and Jamaica and got a commission, then he would be a broker. Nothing in the complaint suggests that he was acting on behalf of anyone other than himself. He was planning to sell the ammo himself directly to Jamaica, not arranging for someone else to sell it to them.

Comment by Clif Burns on May 15th, 2008 @ 6:41 pm

I willing to bet real money that Justice will file a motion claiming that interpretation of the ITAR brokering provisions is a political question not subject to judicial review, i.e., the court is just a rubber stamp for the newly minted national export control coordinator and whatever post-facto interpretation Justice/DDTC fancies goes.

Comment by Mike Deal on May 15th, 2008 @ 10:38 pm

A couple of years ago we received a request from DDTC suggesting that we should have registered as brokers under 22CFR129 (We are Customs Brokers and Freight Forwarders) in a very polite and scary letter. DDTC does not want or care to realize the difference between this and a Customs Broker under 19CFR111. Even 22CFR129 does not require FF to register. This is laughable but at the end is serious business. Small companies do not have the resources to hire expensive lawyers to defend against this kind of intimidation. What the Government is doing with this individual is the best example injustice. He should never have pleaded guilty. Sometimes I ask myself if this is the Land of Free.

Comment by Jairo on May 18th, 2008 @ 11:44 am

This is while we let ex-KGB turned mob boss Victor Bout help us run guns into Iraq and Africa, out of Texas and Florida:

http://www.pbs.org/frontlineworld/stories/sierraleone/bout.html

Comment by Charles Liu on May 21st, 2008 @ 9:57 pm

Is there a resource for guidance on what is and what is not a “defense service” under ITAR s 120.9 et seq.? there are a lot of potential borderline cases — where do you turn for guidance on whether you do or do not need a Technical Assistance Agreement (TAA, under 120.22)?

Comment by John on June 13th, 2008 @ 11:17 am

If one is registered as a Exporter, can he act as a Broker too. For instance, one day you have a client from Italy who wants to buy a rifle from you and export to him (end user) in Italy. – (EXPORTER)

The next day, you have a government official in East Timor that wants to buy 100 rifles from H&K in Germany and wants you to facilitate the deal. – (BROKER)

If you are registered with DOD as one can you perform the other task as well?

Comment by Dave J. on April 28th, 2010 @ 9:49 pm

@Dave J: yes.

Comment by Clif Burns on April 29th, 2010 @ 12:00 am