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Archive for the ‘Criminal Penalties’ Category

Sep

23

Riot Helmet Shipper Complains about BIS Settlement Agreement

Posted by Clif Burns at 8:34 pm on September 23, 2008

An article in today’s Miami Herald provides more details about the settlement agreement that we previously reported and under which freight forwarder Cargoland Air and Ocean Cargo, Inc. agreed to pay a fine of $36,000 to the Bureau of Industry and Security (“BIS”). The fine was paid in connection with an unlicensed shipment of police helmets to Venezuela. These new details, however, may raise more questions than they answer.

According to the article, Susan Olmo, the owner of Cargoland, had no idea a license was necessary:

Doral freight forwarder Susana Olmo shipped 210 riot helmets to Venezuela two years ago as a favor to a customer who had won a contract to outfit some of the country’s police.

It was only after the goods were on their way that Olmo learned that U.S. law required her to have a license to export the helmets. Olmo stopped the shipment and had the helmets returned to the United States, but that wasn’t enough to prevent her company from being fined $36,000 by the Commerce Department

Several things can be gleaned from this. First, it seems likely from this account that Olmo never bother to even consult the Commodity Control List before exporting the helmets. Accordingly, although our previous post on this complained that the ECCN involved might not give reasonable notice to a freight forwarder of what was covered, Olmo can’t claim that defense. Indeed, it is likely that BIS’s decision to whack her company even though she made every effort to get the helmets back was based on the absence of any evidence of an attempt to comply with BIS’s export rules.

I’m not quite sure what to make of Olmo’s claim that the export was “a favor to a customer.” Does Olmo export stuff with charge for customers she likes? And even if she did, I can’t find a personal favor defense in the Export Administration Regulations.

A settlement agreement with BIS doesn’t require that the exporter show remorse for the illegal shipment, and Olmo isn’t about to show any:

Olmo … is riled that she was fined $36,000. She said she lost about $20,000 shipping the helmets back to Miami. And she’s been stuck with about $15,500 worth of helmets she doesn’t know what to do with.

Uh, maybe she could send the helmets back to her customer. And what does she mean that she’s stuck with the helmets? Did she buy them? Was she the exporter of record or, in the current jargon, “U.S. principal party in interest”? Maybe what happened here is that her customer, knowing that a license to ship riot helmets to Venezuela would be difficult to obtain, duped her into buying and exporting the helmets, hence her claim that it was a favor.

‘They want to make an example of a small company,” Olmo said. “I don’t think it was fair. I didn’t make any money.”

She’s vowed she’ll never export anything again.

Her company is a freight forwarder and a non-vessel owning common carrier (“NVOCC”) that ships container loads to foreign countries. Is she saying that she’s shutting down her company? Or again, maybe this is consistent with my speculation that perhaps she was duped by her customer to be the exporter of record here. Even so, someone ought to tell Olmo that even where she is just the freight forwarder she is still involved in an export and required to comply with U.S. export laws.

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Sep

17

Federal Indictment Targets Mayrow Network Exports to Iran

Posted by Clif Burns at 9:51 pm on September 17, 2008

IED detonator The winner of today’s breathlessly exaggerated headline contest goes to the Bureau of Industry and Security (“BIS”) for this:

COMMERCE DEPARTMENT, GOVERNMENT PARTNERS, BREAK UP IRANIAN RING CHARGED WITH PROCURING IED COMPONENTS

Although this headline conjures up a Eliot Ness raid with the culprits being led off in shackles and at gunpoint never to export again, the reality is a bit more mundane. In fact, the headline refers, in part, to a federal grand jury indictment unsealed in Miami today against eight individuals and eight corporations, all allegedly part of the Mayrow General Trading Company network. The defendants were charged in connection with dual-use exports that wound up in Iran, including exported items which could be used in the manufacture of IEDs deployed against U.S. troops in Iraq.

None of the eight individuals or corporations are located in the United States. Whether Britain, Germany, Iran and Malaysia, where the defendants are located, will permit the extradition and prosecution of the individual defendants is a close question, particularly if the defendants’ only contacts with the United States were the purchase of U.S.-origin goods and if the exports to Iran did not break the laws of their countries of residence. (For those individuals located in Iran, of course, it’s not even a close question, and these individuals will be subject to prosecution only if they decide to visit, say, Disneyland or the Grand Canyon or travel to a country that will allow rendition or extradition.)

In addition, the Commerce Department release indicated that 75 companies and individuals had been added to the Entity List in connection with the Mayrow network exports. (The State Department release on the indictment, however, states that there were 100 additions to the Entity List). All exports of U.S.-origin goods to companies and individuals on the Entity List will require a license from the Department of Commerce. Naturally such licenses will generally be denied.

As of this writing, however, the BIS website doesn’t indicate any additions to the Entity List, but it can reasonably be assumed that these additions will appear sooner rather than later. Unlike indictments of foreigners over which the U.S. has precarious criminal jurisdiction, putting members of the network involved in these exports on the Entity List is much more likely to be effective in shutting down the troublesome exports. Once these additions are made, I’ll post a link identifying the companies and individuals involved.

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Sep

9

Mistrial Declared in Night Vision Export Trial

Posted by Clif Burns at 7:51 pm on September 9, 2008

Category: Arms Export • Criminal Penalties • Iran Sanctions

ABOVE: Shahrazad Mir Gholikhan

In yet another strange turn of events in one of the stranger export prosecutions to wend it’s way through the federal courts, a federal district court in Fort Lauderdale declared a mistrial in the prosecution of Shahrazad Mir Gholikhan for her involvement in a plan to export 3,500 night vision goggles to the Iranian military. According to an article in the South Florida Sun-Sentinel, one juror held out for acquittal after eight hours of deliberations. The prosecution announced that it intended to retry Ms.Gholikhan in October.

The case started when Ms. Gholikhan and her ex-husband Mahmoud Seif traveled to Austria to pick up a pair of night vision goggles in order to re-export them to the Iranian military. She and Seif were arrested by the Austrian authorities, convicted, and sentenced to fifty days jail time in Austria, after which they were returned to Iran. In the meantime, a grand jury indicted Gholikhan and Seif for conspiring to export 3,500 Generation III night vision goggles to Iran.

Since the U.S. and Iran do not have extradition treaties, Ms. Gholikhan could have remained safely in Iran but instead came to the United States in December 2007 to enter a plea agreement under which she would plead guilty to one count and be sentenced to time served in the Austrian jail. After the plea was entered, prosecutors said that a mistake had been made in the sentencing guidelines calculation. As a result, Gholikhan was sentenced to 29 months in jail. Gholikhan then moved to withdraw the plea. Even though that motion was opposed by prosecutors, the judge granted the motion and the case was set for trial on all seven counts of the grand jury indictment.

The trial, which began on September 3, focused on the prosecution’s claims that Gholikhan sent faxes and made phone calls about the night vision goggles before the Vienna meeting under the alias Farideh Fahimi. This was to counter the defense’s claim that Gholikhan only acted as a translator for his husband and was not substantially involved in the planned exports. The Sun-Sentinel article described the thrust of the prosecution’s argument as follows:

Prosecutor Michael Walleisa said Gholikhan’s phone records corresponded to calls placed by Fahimi and faxes sent from Fahimi came from Gholikhan’s fax number.

In his closing argument, Walleisa repeated Fahimi’s words on one of the recorded phone calls: “In this line of work, everyone has two or three names, none of which is their real name.”

Gholikan’s new trial is set for October 14.

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Sep

3

Wednesday Export Law Grab Bag

Posted by Clif Burns at 8:52 pm on September 3, 2008

Category: Arms Export • Criminal Penalties • Cuba Sanctions • Iran Sanctions

We’re back from vacation and we’re back with a grab bag of things:

University of Tennessee Professor J. Reece Roth was convicted on eighteen counts, including violations of the Arms Export Control Act for permitting foreign graduate students to have access to information relating to an Air Force project on the use of plasma technologies for unmanned aerial vehicles. According to the report on the Knoxville News Sentinel‘s website, a key piece of evidence proving that Roth had knowledge that his conduct was illegal was a set of notes that divided the work between an American graduate student and the Chinese graduate student in order to keep export-controlled technical data away from the graduate student. When this arrangement impeded progress on the project, the students were allowed to share data. Roth claimed that he didn’t believe the information was export-controlled until the project netted an actual military product, a claim that would appear inconsistent with his initial division of work on the project between the American and the Chinese graduate student.
The Denver Business Journal supplies more information on the Platte River Associates prosecution for allegedly violating the Cuba embargo. The attorney for Platte River told the Denver Business Journal that the prosecution arises from training that the company gave to an employee of a Spanish company, Repsol, that had previously purchased geological modeling software used for oil exploration. The employee arrived with seismic data that appeared to relate to the western Caribbean and possibly to Cuba. There is apparently no allegation that Platte River dealt with any Cubans or the Cuban Government, nor any allegation that Repsol actually used the software in connection with a Cuban project. Instead, it now appears that the government’s case is based not on the sale of the software but the training of the Repsol employee. It’s still a tenuous connection without proof that Repsol used the software in connection with dealings with the Cuban government.
Someone has made a broad-ranging Freedom of Information Act request at the Office of Foreign Assets Control (“OFAC”), apparently seeking copies of all applications for licenses to export agricultural and medical products to Iran. This has prompted OFAC to send letters to licensees requiring the licensees to assert in writing any claims that information in these licenses is proprietary or confidential to the licensee. Does anyone have any information on who may be seeking this information and why? Please let me know in the comments section.

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Aug

15

The FBI Made Me Do It

Posted by Clif Burns at 12:23 pm on August 15, 2008

Category: Criminal Penalties • DDTC

Congressman John Murtha An article in today’s Washington Post provides some interesting insights into the April 2007 conviction of Pennsylvania-based Electro-Glass Products for violations of the Arms Export Control Act arising from the company’s unlicensed exports of 23,000 solder-glass preforms to India. The preforms are allegedly components of military night vision goggles.

As a result of the 2007 conviction, Electro-Glass was debarred from exporting by the Directorate of Defense Trade Controls (“DDTC”). Electro-Glass has now prevailed upon Representative John Murtha to write a letter to DDTC seeking to have the agency set aside the debarment. According to the article, Murtha wrote the letter as a favor to a constituent — the company is located in Murtha’s congressional district.

More interesting than this congressional intervention is the defense proffered by Electro-Glass for its unlicensed exports:

“We want to stay legal, we want to stay aboveboard. It was an accident what happened in the first place,” [James K.] Schmidt [Electro-Glass’s President] said in a telephone interview.

Schmidt said he called the FBI and “they told me that India was a democracy and they should not be denied.” The company later consulted U.S. customs officials and got the impression that it should not stop the shipments, he said.

But officials from both the FBI and U.S. Customs and Border Protection have denied that they gave approval.

Although I don’t doubt that the FBI may have said something like that to Schmidt, you have to wonder why Schmidt was using the Bureau as the company’s export compliance department. Moreover, given that it wouldn’t be clear to either the FBI or Customs that “solder glass preforms” were components of military night vision, it’s hard to see that the okay from either agency, even if given, would be much of a defense.

Admittedly it is self-serving for me to say so, but this case just illustrates why inexperienced companies ought to call an export lawyer before exporting any item that could conceivably have a military use. But don’t be too hard on me for this little bit of self-promotion: it’s the middle of August, everybody is on vacation, and probably only three people will read this post.

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