The Bureau of Industry and Security (“BIS”) recently released a settlement agreement in which Robert Abreu, the Senior Director of Strategic Sales for Supermicro Computers, agreed to pay $60,000 to settle charges arising from illegal exports of computer motherboards to Iran. The motherboards were shipped by Supermicro and Abreu to a distributor in the UAE which then re-exported the motherboards to Iran.

The charging letter set forth four separate shipments to Iran. Each shipment was alleged to have violated EAR § 764.2(b) inasmuch as Abreu aided and abetted export of items without the required licenses.

As usual, BIS can’t resist resist piling on by charging both an offense and the lesser included offense and then collecting fines for both. With respect to the fourth shipment, the charging letter also alleged that Abreu violated EAR § 764.2(e) because he had “knowledge” that a violation would occur.

Finally, Abreu was charged with violating EAR § 764.2(g) by making a false statement to a BIS Agent. According to the charging letter, Abreu made a false statement to the agent when he said that he did not know that the items were being reexported from the UAE to Iran until after the shipments were made.

Two facts set forth in the charging letter suggest why BIS may have sought such a significant fine against an employee of the exporter. First, Abreu was alleged to have sent an email in connection with the fourth shipment describing the shipment as a sale involving “motherboards to Iran.” Second, according to the charging letter, Abreu had previously sent a letter to Supermicro employees advising them of the embargo on shipments to Iran. This may also explain why Abreu agreed to such a significant fine.

As we have reported previously, Abreu’s employer, Supermicro, agreed last September to pay to BIS a civil penalty of $125,400 in connection with shipments of motherboards and computer chassis to Iran, some of which appear to be the same shipments charged against Abreu.

The White House’s early Christmas gift to BIS — the Export Enforcement Act of 2007 — was posted this afternoon on the Bureau of Industry and Security’s website. When we reported on it yesterday, only a somewhat misleading Reuter’s wire story was available.

The Reuter’s story suggested that the maximum penalty for corporations for violations of the EAR would be increased under the act to $5 million or ten times the value of the exported good, whichever is greater. What the news item didn’t make clear was that this was an increase in the criminal penalties for violations. But not to worry. The proposed law also includes a whopping increase in the available civil penalties from $50,000 per violation to $500,000. Even if an exporter gets the standard 50 percent mitigation for a voluntary disclosure, a $250,000 penalty will still make exporters think twice about whether to disclose a violation or take its chance that the violation will never come to light.

The other significant change for exporters in the White House proposal is the provision of the bill which expands the list of criminal violations that can be a predicate for a denial of export privileges. It’s an interesting mishmash of provisions. A denial can be premised, for example, on a threat to use a heat seeking missile (18 U.S.C. § 2332g) but not on actually blowing up an airport (18 U.S.C. § 2332g)

The White House export proposal also reauthorizes the Export Administration Act for another five years.

Personally I think the chance of getting this legislation through the current Congress is remote, so I don’t think anybody should be staying up nights fretting about increased export penalties.

The White House today announced that it was sending to Congress the “Export Enforcement Act of 2007.” The proposed legislation would substantially increase penalties for violations of the Export Administration Regulations (“EAR”):

The proposed Export Enforcement Act of 2007 . . . would increase maximum corporate penalties from $50,000 under the executive orders to either $5 million or ten times the value of the exported good, whichever is more.

Yikes! Penalties at that level will certainly make exporters think twice about making a voluntary disclosure to BIS. Even if the exporter gets the 50 percent mitigation for the voluntary disclosure, the new penalties will result in significant payments for EAR violations.

As of the time of this post the only news report of the Bush administration’s proposal was the Reuters India story linked above. Nor was a copy of the legislation available for review on the White House website or on Thomas. When it becomes available, we’ll post a more detailed analysis.