Jul
14
Company Files Chapter 11; Blames Export Investigation
Posted by Clif Burns at 5:27 pm on July 14, 2009
Category: General
Colorado-based Rocky Mountain Instruments, a manufacturer and distributor of optical components for lasers and imaging devices, filed for reorganization under Chapter 11 of the Bankruptcy Code. An affidavit by a company executive that is part of the filing also blames a 2007 raid by the Defense Criminal Investigative Service (“DCIS”) for at least part of the company’s financial woes, even though the raid has not yet resulted in any formal charges being filed against the company.
The affidavit went on to claim that the raid was triggered by an employee whistle-blower who reported that the company exported product specifications without a necessary export license. The product involved was not specified by the affidavit. As a result of the tip, DCIS, Immigration and Customs Enforcement (“ICE”) and the local constabulary surrounded the business on October 11, 2007, with fifty cars. Yes, you read that correctly: not five, but fifty, “five-zero,” five times ten, or, for any latinists out there, “L” cars. The company claims that the raid triggered a 15 percent decline in business, although it’s not quite clear how it derived that figure. In all events, it’s hard to imagine that a convoy of fifty police cars didn’t have at least some temporary impact on business.
Two compliance lessons can be learned here. First, there’s always a disgruntled employee who will happily turn your company in for export violations. Second, the ensuing theatrics from law enforcement might have a negative impact on a company’s future sales.
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Copyright © 2009 Clif Burns. All Rights Reserved.
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4 Comments:
First of all – holy law enforcement 50 cars! Still I too am suspicious of the claim that the raid is reason for the drop off in business. I don’t think they do much business by foot traffic – unless the raid got coverage in the press. It will be interesting to see what comes of the investigation.
Interesting to see the below on their home page. Hmmm… I wonder if it was put there before or after the raid.
“Due to their potential strategic high value, export of RMI products and related technical data may be subject to U.S. or other export licensing requirements.
Please consult your export control administrator or contact RMI for more information.”
You can certainly see the remedial actions taken by visiting RMI’s website. Plenty of overt export control related information and warnings.
The enforcement agencies ain’t necessarily picky about the employees who rat out their employers. In the Chattanooga Group case (ultimately settled by consent agreement), the informant was accused of misappropriation of company funds. In the Alabama Blackhawk case where the trial judge acquited on the basis of governmemnt misconduct, the informant and star witness had plead to embezzlement in state court. In the Quinn case, it appears that not only did the VP it ultimately indicted and convicted for perjury not only knew of the perjury at the time but failed to disclose it to the defense. Given that under the US Attorney’s manual, local AUSAs can’t indict for an export control violation without getting Main Justice approval, and Main Justice usually sends down a minder (i.e., special trial attrney) to second chair the case, you just have to wonder about the mindset of the folks at Main Justice who continue to approve and prosecute cases against otherwise legitimate businesses that are built on the testimony of liars. This isn’t like going after the Mafia or MS-13: Gives true meaning to the word “counter-intelligence”.
Dear Cliff
I know a friend who had simular problem.
How long does these cases take anyway?
Almost two years and RMI did not receive any notice from the investigators?
For my friend it’s been little past a year.
If his case take that long too, I think he will also have problem with his business.
He just want to know when they will finish the investigation.
Joshua
