ABOVE: Richard Bistrong

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Well, it now seems that some export issues may be arising in the much-publicized “Shot Show” Foreign Corrupt Practices Act (“FCPA”) prosecution. In that case, law enforcement officials perp-marched owners and officials of gun and law enforcement supply businesses from the Las Vegas Shot Show and then charged them with violating the FCPA.

This is the first and only FCPA prosecution that has arisen from a sting operation. The prosecution alleges that the defendants had agreed to make kickbacks to African officials in connection with the potential award by those officials of a $15 million contract. The transactions were fictional and cooked up by investigators. The African officials were imposters played by FBI agents with thespian inclinations.

The chief cooperating witness, who undertook a major role in setting up the sting, is Richard Bistrong, a former official of a body armor company who is himself now charged with paying actual bribes to actual officials in actual transactions. Specifically, Bistrong is the subject of a criminal information filed in a federal district court charging Bistrong with bribing UN officials to rig bids which resulted in awards of large body armor contracts to his company. In the Shot Show prosecutions, Mr. Bistrong pretended to be the broker in the phony African transactions and introduced the defendants to the FBI undercover agents who were playing various roles in the sting.

The defendants have argued that they were entrapped by the FBI through Bistrong’s inducement and that they had no predisposition to commit the crimes charged. In effect, Bistrong dangled $15 million contracts in front of the defendants, many or some of whom were store-front businesses and had never had such large contracts offered to them before. Key to the defense in this case is to discredit Bistrong above and beyond the issues raised by his own FCPA prosecution. According to this recent post at the blawg Main Justice, the defendants have asked for copies of Mr. Bistrong’s tax returns, alleging that they will reveal tax violations by Bistrong. The judge hearing the trial has indicated that if the government doesn’t turn over the tax returns voluntarily, then he will grant an order forcing them to do so.

The defense has also asked for “any export licenses [Bistrong] had been given by the federal government.” (And you thought I would never get to the export angle, didn’t you?). This request did not just come out of the blue. The criminal information filed against Bistrong alleges export violations in addition to the FCPA violations. Specifically it alleges that Bistrong shipped vests and helmets with level IIIa ballistic protection to the Kurdistan Regional Government in Iraq without the required licenses from the Department of Commerce’s Bureau of Industry and Security (“BIS”). It looks like the defendants here are gathering impeaching evidence to support the government’s charges against Bistrong, evidence which the government certainly won’t introduce on its own in the Shot Show FCPA prosecution.

The last four items posted by the Bureau of Industry and Security (“BIS”) — and which are linked here, here, here, and here) on its list of reported export violations — all involved impositions of export denial orders on individuals already convicted of crimes. Two of the four are currently languishing in federal correctional institutions and one served a two-year sentence of incarceration.

Needless to say, there is nothing (other than, of course, the lapse of the Export Administration Act) prohibiting BIS from piling more punishments on these individuals, even though arguably incarceration, as the harshest penalty short of execution, really should be seen as sufficient punishment. (By the way, I am not suggesting to the export hawks on the hill, who seem to increase penalties every time they get a chance, that the death penalty might be a proper punishment for exporting a teflon-lined valve without a BIS license.) But I think that these add-on, johnny-come-lately penalties ought to be put in proper context by noting that unconscionable breadth of the standard denial order as currently drafted.

For example, after the individual subject to the denial order is released from prison, it is fair to say that employment opportunities are already restricted because of his or her incarceration or conviction. But the denial order, which prohibits the individual from “directly or indirectly” “benefiting in any way from any transaction involving any item exported or to be exported from the United States” further limits those employment possibilities. Taking a job with any company that is involved in any exports would seem to violate the denial order even if the job was a menial job with no connection to the company’s export activities. And what company doesn’t export? Well, I suppose the individual subject to the order could always work for a shoe shine stand or iron shirts in a laundry.

Additionally, the Denial Order effectively prohibits the subject individual from travelling abroad. Travel abroad would result in an export of the individual’s baggage and personal effects (unless, of course, the individual travels in, er, a state of nature). The standard denial order even explicitly denies the subject individual the ability to use the BAG license exception which ordinarily covers personal effects carried with a traveler oversea. The prohibition on using an item that has been exported from the United States arguably prohibits the subject individual from using airplanes, boats and automobiles even for domestic travel if they’ve ever left the United States. Of course, since the person subject to the denial order is working for a shoe shine stand or a shirt laundry, travel of any kind won’t really fit in his or her budget

The standard denial order doesn’t incorporate any of the routine export exemptions, such as those for informational materials. Sending a birthday card to a relative abroad could wind up costing about $250,000 more than the cost of the card or the postage. Arguably the Berman Amendment applies even if the standard denial order doesn’t say so, but by not explicitly exempting informational materials, the order at a very minimum deters the individual from trading information with relatives and friends abroad.

Finally, a person subject to a denial order might wind up with a BIS charging letter as thanks for his or her contributions to U.S. charities sending food, aid, medicine, medical supplies and relief to Haiti or other scenes of catastrophic natural disaster.

Export denial orders may well have a legitimate administrative purpose (assuming that they are subsequently permitted by authorizing legislation), but current export reform efforts provide an opportunity to rewrite the standard denial order to eliminate its excessively broad scope. It also provides an opportunity to consider whether anything is really gained by routinely and automatically imposing a denial order on parties already subjected to substantial criminal penalties.