ABOVE:A.Q. Khan

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How often can you find the backstory on SDNs in an investigative piece in The New Yorker? Not often. But today’s designation by the Office of Foreign Assets Control (“OFAC”) of some of the key figures in A.Q. Khan’s nuclear network includes a number of folks informatively profiled in this 2006 piece by Steve Coll in The New Yorker. As a result of the designations, any property or money in which the designated individuals have an interest in the United States will be blocked.

Here are some of the individuals designated in today’s article and a little background (via Steve Coll’s article) on these players in Khan’s network:

A.Q. Khan. You probably knew about Mr. Khan even if you hadn’t read Steve Coll’s article. Often called the father of Pakistan’s nuclear program, Mr. Khan confessed on national television in Pakistan on February 4, 2004, that he had been involved in providing controlled nuclear technology and information to Iran, Libya and North Korea. President Musharraf immediately pardoned Khan but put him, nonetheless, under house arrest. Surprisingly, Khan was not subject to U.S. sanctions until today notwithstanding his initial confession and subsequent revelations about the extent of his proliferation activities.

Gotthard Lerch. The unfortunately-named Mr. Lerch is a German national that Coll described as a meticulously-dressed “big man with a flattened nose and a bulky face.” Lerch, a salesman and engineer, owned a company that specialized in making industrial vacuum systems that are useful in nuclear proliferation. In the summer of 2006 he was tried and convicted in Germany on charges of supplying nuclear equipment to Libya for $20 million dollars (half of which he was alleged to have cleared as profit). Although Lerch proclaimed his innocence, materials supplied by Qaddafi to U.S. and other investigators named Lerch as a source of equipment for Libya’s nuclear program.

Peter Griffin. Mr. Griffin is a British national, a retired businessman with a home near Bordeaux, France, and was a witness against Lerch in the German prosecution. Although he was arrested for interrogation in 2005 under Britain’s anti-terrorism law, Griffin has never been charged with any crime. Griffin claims that he was framed by B.S.A. Tahir, a protegé of Khan’s, who, Griffin alleges, forged documents showing Griffin’s supply of equipment to Libya’s nuclear program. Griffin was called to testify because he claims to have “walked into Tahir’s office on a social visit and found Lerch shouting, ‘I want my money!’ Tahir also subsequently asked Griffin to transfer 25,000 Swiss Francs to Lerch’s account although he didn’t ask why and was subsequently repaid by Tahir. Not surprisingly, Tahir was also designated in today’s order by OFAC.

Daniel Geiges. Mr. Geiges is a Swiss national who has been living in South Africa since 1969. He told Coll that he received an order for pipe work and autoclaves used in uranium-enrichment plants through his boss Gerhard Wisser. Geiges said that Wisser told him that the blueprints for the project were provided by Lerch. In February 2008, Geiges, who is gravely-ill from colon cancer, received from a South African court a 13-year suspended sentence for violating South Africa’s export laws. Wisser, who was also designated by OFAC in today’s order, previously received a suspended sentence on the same charges.

Coll’s interview with Geiges provided Geiges rationale for cooperating with the Khan network:

“Look, for me it was in the first place a job which I’d been taught to do,” Geiges continued. “I was three years away from retirement, and rocking the boat at that stage was simply not an option.” He felt, he said, that he had “basically two options.” He could “do it to my best ability, and within the given parameters, or I run to the authorities with a slim chance of making a fool of myself if it turns out that the whole thing could be legalized.” If he became a whistle-blower, he thought, he would likely have to “lose a job and accept cuts in my retirement benefits—and become a pariah which no other employer would touch.”

Nuclear proliferators, I guess, have to eat too.

For everyone who has been complaining that export controls imposed by the Bureau of Industry and Security (“BIS”) have meant that U.S. manufacturers aren’t on a level playing field with foreign competitors, it’s now time to put your money, or at least your comments, where your mouth is. BIS has just solicited comments from the export community on whether “U.S. export controls influence manufacturers’ decisions to use or not use U.S.-origin parts and components in commercial products and the effects of such decisions.

Specifically, BIS is interested in whether export controls, such as licensing requirements for for foreign-manufactured goods with more than de minimis U.S. content, have an actual economic impact on U.S. manufacturers and exporters. The agency is soliciting not only specific and quantitative data but also “anecdotal information.”

Areas of interest to BIS include:

Comments are due by February 19, 2009, and may be submitted via e-mail to [email protected]. The subject line must reference ‘‘Parts and Components Inquiry.” For those who wish to send comments by snail mail, the address can be found in the public notice.

So speak by February 19 or forever hold your peace.

A spokesman for the Treasury Department’s Office of Foreign Assets Control (“OFAC”) told Export Law Blog this morning that discussions between OFAC and the North Pole over Santa Claus’s Christmas Eve itinerary had broken down and were not expected to be resumed before Santa’s scheduled departure on December 24 at 10 pm EST.

The dispute arose from a dilemma that the U.S. sanctions against Cuba posed for Santa’s planned delivery of toys to children in Cuba. If Santa delivers toys for U.S. children first, there will be toys destined for Cuba in the sleigh in violation of 31 C.F.R. § 515.207(b). That rule prohibits Santa’s sleigh from entering the United States with “goods in which Cuba or a Cuban national has an interest.” On the other hand, if Santa delivers the toys to Cuban children first, then 31 C.F.R. § 515.207(a) prohibits the sleigh from entering the United States and “unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba.”

A press release from the North Pole announced that the OFAC rules left Santa no choice but to bypass the children of the United States this Christmas. A spokesman from OFAC warned that if Santa attempted to overfly the United States, his sleigh would be forced to land and his cargo seized. He continued:

We know that the outcome is harsh, but we cannot allow Fidel Castro’s regime to continue to be propped up by Santa’s annual delivery of valuable Christmas toys to Cuban children.

Congressional leaders had left for the holiday recess and could not be contacted for comment.

Looking at the title of today’s notice from the State Department’s Directorate of Defense Trade Controls (“DDTC”), which reads “Policy of Denial Regarding ITAR Regulated Activities of EP Investments, LLC (a/k/a Blackwater),” one might think it’s “Bye, Bye, Blackwater.” But the actual content of the notice isn’t quite so bad since it provides significant exceptions to this policy of denial, exceptions which seem designed to allow Blackwater’s contracts with the United States Government to proceed unimpeded as long as Blackwater files some additional paperwork for its new license applications.

In fact, the policy of denial doesn’t apply to applications that are in “direct support to the U.S. Government” and where certain conditions are met. Those conditions are the following:

Applications that are not in direct support of the U.S. government are subject to a policy of denial unless the license request “is based on overriding U.S. national security, foreign policy or law enforcement grounds or present other compelling reasons.” In cases found to meet that criteria, the ECC must submit the same certification letters, including the 30- and 60-day followups, as described above.

Finally, Blackwater isn’t allowed to use any ITAR exemptions from licensing, such as the spare parts exemption in section 123.16(b)(2). Instead, license applications must be filed for each exemption and those applications will be considered on a case-by-case basis.

Outside of requiring a bundle of additional paperwork for each Blackwater license, the biggest effect of the new policy is probably that Blackwater won’t be able to follow through on its proposed pirate-chasing gig.

According to an exclusive story in today’s Washington Times, the Validated End User Program implemented by the Department of Commerce’s Bureau of Industry and Security (“BIS”) may be terminated before the end of the Bush administration on January 20. Under that program, five companies in China were permitted to obtain from U.S exporters certain dual use items without export licenses that otherwise would have been required. As reported earlier on this blog, the program had come under criticism because two of the five validated end users had links to the Chinese military. The program had also come under fire because the Chinese government was not allowing U.S. investigators to have access to the facilities of the approved companies to verify that the exported items were not being diverted to the Chinese military.

An unidentified spokesman for the Commerce Department, who spoke to the Washington Times on condition of anonymity, said that the program could only be saved if the Chinese agreed to on-site inspections:

“This program will either be fixed or ended before Jan. 20,” the official said, adding that a decision will be made “in days, not weeks.”

China could avoid a suspension of the program by agreeing to U.S. demands for on-site inspections. The official said, however, that it does not appear likely that Beijing will make concessions before the Bush administration leaves office.

You have to wonder why BIS ever thought it would be able to engage in official inspections in foreign countries. Not surprisingly, most foreign countries are just a little touchy about the sovereignty issues raised by allowing foreign law enforcement officials to inspect facilities located on the foreign countries’ soil. Indeed, the Chinese had a history of interfering with efforts by the U.S., even before the Validated End User program was adopted, to determine whether items shipped under export licenses were used in the manner described in the export licenses.

UPDATE: BIS has issued a press release disputing the Washington Times article. The release states, among other things, that BIS has been able to conduct site-checks in China and is simply trying to formalize procedures for future site checks. It does concede that suspension of the program is a possibility if those procedures are not formalized.

[h/t to commenter jd]