Archive for July, 2007


Jul

20

One Man’s Trash Is Another Man’s Treason


Posted by at 4:03 pm on July 20, 2007
Category: Nonproliferation

K25 Building at the East Tennessee Technology ParkRoy Lee Oakley, an unskilled maintenance worker, was indicted on July 17 and charged with violating section 224 of the Atomic Energy Act (42 U.S.C. § 2274). The charges were based on Oakley’s alleged attempts to export gas diffusion barriers from a dismantled uranium enrichment plant to the French. But before you go check your supply of radiation pills and duct tape, I can assure you that this is a story more out of Austin Powers than Tom Clancy.

According to the Knoxville News-Sentinel, Oakley was an unskilled worker employed by Bechtel Jacobs which had a contract to dismantle the gaseous diffusion plant that was once used to enrich uranium at the East Tennessee Technology Park outside Knoxville. One of the tasks assigned to Oakley, according to Oakley’s attorney, was to break the gas diffusion barriers and associated equipment into pieces. The gas diffusion barriers are membranes used to separate isotopes of uranium.

Oakley’s attorney claims that although Oakley thought of these broken barriers as “trash,” they might still be of interest to the French. (It is not clear whether this is because Oakley didn’t really think the barriers were trash or because he thought that the French had an unusual interest in buying trash). So Oakley did what any patriotic American would do, he called the French Embassy in Washington, D.C., and offered to sell the pieces to them. The response of the French diplomats to Oakley’s call, again in the words of Oakley’s own attorney, was that “they laughed at him.” And then apparently they called the FBI. The FBI had an agent impersonate a French diplomat to conclude the transaction (or at least enough of it to indict Oakley). Am I the only one wondering whether the FBI agent put on a cheesy French accent as part of the sting?

If the facts are as presented above, Oakley’s prospects for acquittal do not look good and indeed he deserves to be punished. However, the huffing and puffing about the vast harm that might have occurred — from various government officials and the perpetual alarmists at Arms Control Wonk — needs to be tempered somewhat.

There is a reason that the gas diffusion enrichment plant had been in mothballs for some time and was being dismantled is that it was obsolete and had been replaced by cheaper and more efficient methods of uranium enrichment. According to a typically reliable assessment from GlobalSecurity.org:

Gaseous diffusion is unlikely to be the preferred technology of a proliferator due to difficulties associated with making and maintaining a suitable barrier, large energy consumption, the requirement for procuring large quantities of specialized stage equipment, large in-process inventory requirements, and long equilibrium times.

Nor is it clear even that providing the membrane itself would enable a potential proliferator to determine how it had been manufactured. So, Oakley probably broke the law, but probably doesn’t deserve to be seen as the latest Julius Rosenberg or AQ Khan.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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Jul

19

New BIS Regulations Discourage Voluntary Disclosures of Violations


Posted by at 5:40 pm on July 19, 2007
Category: Anti-BoycottBIS

NooseThe Bureau of Industry and Security (“BIS”) has released new regulations explaining the treatment that BIS will give to voluntary disclosures of BIS’s antiboycott regulations. Those regulations, for example, prohibit exporters from certifying to Arab League countries that exported products do not contain Israeli content.

The new regulations set forth the procedures for filing a voluntary disclosure. These procedures more or less parallel the procedures adopted at other agencies, including permitting the filing of a bifurcated voluntary disclosure, i.e., an initial disclosure after the violation was discovered and a more detailed disclosure after the violation has been investigated by the company making the disclosure. The initial voluntary disclosure must be filed before BIS has learned of that information from another source and commenced an investigation. The new regulations make clear that disclosures made to the agency during telephone calls seeking guidance on the rules are not considered disclosure of the information from another source.

But, BIS being BIS, the new rules enshrine significant disincentives to companies to make voluntary disclosures. Most significantly, section 764.8(b)(4) says this:

Although a voluntary self-disclosure is a mitigating factor in determining what administrative sanctions, if any, will be sought by BIS, it is a factor that is considered together with all other factors in a case. The weight given to voluntary self-disclosure is solely within the discretion of BIS, and the mitigating effect of voluntary self-disclosure may be outweighed by aggravating factors.

What BIS is saying here is that it may in certain circumstances give no weight whatsoever in mitigation because of the voluntary disclosure. This is a significant disincentive to voluntary disclosures because a company must weigh the possibility of there being no benefit to the voluntary disclosure against the possibility that BIS would never discover the violation if it hadn’t been disclosed. The only way to preserve the incentive to make a voluntary disclosure is to say that aggravating factors might be used to reduce the weight given to the voluntary disclosure but not to totally eliminate it.

But (and I’m sure some readers won’t be surprised by this) it gets worse:

Voluntary self-disclosure does not prevent transactions from being referred to the Department of Justice for criminal prosecution. In such a case, BIS would notify the Department of Justice of the voluntary self-disclosure, but the decision as to how to consider that factor is within the discretion of the Department of Justice.

Of course, a VSD shouldn’t be a “get out of jail free” card and there may be rare circumstances where such a disclosure should be referred to DOJ. But BIS by stating only that cases may be referred without the further qualification that the VSD at least makes it somewhat less likely that the case will be referred, erects another disincentive to voluntary disclosure. In my experience, the driving force behind most voluntary disclosures is the company’s desire to reduce the risk of prosecution.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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Jul

17

Rood Remarks on US-UK Export Treaty


Posted by at 11:57 am on July 17, 2007
Category: Arms ExportDDTC

FlagsAn article in today’s edition of the Financial Times reports on a press conference given yesterday by John Rood, Assistant Secretary of the State Department’s Bureau of International Security and Nonproliferation, where Rood discussed the recently signed Defense Trade Cooperation Treaty between the U.S. and the U.K. (Don’t go looking for a transcript at the State Department’s website; usually only Sean McCormack’s daily press briefing is posted and other special press briefings, such as Rood’s on the treaty, are not.)

Rood had a few interesting things to say. First, he said that the administration hopes to get the treaty through the Senate before the end of this year. This seems optimistic at this point with the August recess nearly upon us. Additionally, it is unclear how functional the Senate will be after the slumber party planned for the next few nights.

Second, Rood said that the State Department and the Department of Defense hoped to have “implementation procedures” in place “within six months” to determine what companies and individuals would be part of the “approved community” that could receive and disclose ITAR-controlled technical data without formal approval by the Directorate of Defense Trade Controls (DDTC).

Finally, Rood more or less dashed the hopes of other countries — such as Canada and Australia — that might arguably wish to have similar treatment as the U.K. Rood said the treaty was entered into because of the “close relationship” between the U.S. and U.K. Then he said:

If other countries approach us we’d have to ask ‘Do they have the same close relationship?’ I don’t know if we’ll do anything like that or not.

I’m sure that remark was well received in Ottawa and Canberra.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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Jul

16

Myanmar Obtains Military Helicopters Despite Arms Embargo


Posted by at 3:43 pm on July 16, 2007
Category: Arms ExportSanctions

Dhruv Advanced Light HelicopterAmnesty International, according to a letter it sent last Friday to the President of the Council of Ministers of the E.U., has evidence that India intends to transfer two military helicopters to the Myanmar military. The Dhruv Advanced Light Helicopters in question contain component parts from E.U. defense suppliers. As a result Amnesty International is asking E.U. member states to withdraw existing licenses and deny future license for any exports to India that could be used for the Dhruv helicopter. Amnesty is also asking the E.U. to impose upon future exports a strict and enforceable condition that items could not be re-exported to countries subject to arms embargoes.

The Dhruv helicopter also incorporates U.S. parts. The active vibration control system is made by Lord Corporation in North Carolina. U.S. companies supplying components to India that could be used for the Dhruv should expect increased scrutiny if the delivery to Myanmar takes place.

Although incorporating a number of advanced features, the Dhruv has been plagued by some controversy. In February of this year a Dhruv crashed, killing one pilot and injuring the other, during practice maneuvers for an air show. A 2004 crash had been blamed on defective tail rotor design, which was claimed to have been fixed. The February crash calls that into question. However, the Myanmar regime can’t afford to be picky and will no doubt accept delivery of the Dhruv whether or not the tail rotor has been fixed.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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Jul

12

Living Up to Carp


Posted by at 8:24 pm on July 12, 2007
Category: Iran SanctionsOFAC

Freshwater CarpIowa-based fish processor Stoller Fisheries was recently assessed $931.25 by the Office of Foreign Assets Control (OFAC) for shipping 20 grams of carp pituitary glands (valued at $4,900) to Iran without an OFAC license. Carp pituitary glands are believed to be beneficial to the spawning and fertility of farmed fish. The violation was not voluntarily disclosed.

The penalty notice issued by OFAC indicated that the company made both a written presentation and a verbal presentation to OFAC, which prompted OFAC to reduce it’s proposed penalty of $3,725 to the $931.25 actually assessed. The $3,725 represents a substantial reduction from the $11,000 penalty that could have been imposed, assuming, as seems the case, that only one export was involved.

So what prompted this significant reduction for a company that, after all, didn’t voluntarily disclose the violation?

To begin with, Stoller’s case presented all the other factors that would normally be used for mitigation. As the penalty notice stated:

Company alleged that it was not aware of regulations prohibiting sales to Iran and that its primary business is in the processing of fresh water fish for human consumption and particularly kosher fish products. Moreover, Company alleged that the sale of carp pituitary glands is a by-product of the primary business.

In support of its request for a waiver, Company has submitted its current compliance policy instructing employees to check and verify exportations to countries prior to packaging any shipment to such country and to contact the U.S. Customs and Border Patrol if any questions arise. . . .

Company took affirmative steps to prevent further unlicensed shipments to Iran and that some relief is warranted in consideration of the fact that this constitutes Company’s first offense on record at OFAC, Company instituted a new compliance policy, and evidence that such activity may have been licensable.

First offense? Check. Inexperienced exporter? Check. Unintentional violation? Check? Licensable? Check. Implemented steps to prevent similar exports? Check. Adopted new compliance program? Check.

One part of the compliance program adopted by Stoller, however, is something that I don’t recommend. As noted above, Stoller’s program advises employees to contact Customs if they have questions about a shipment. If Customs thinks it is being used as compliance counsel, it may well decline to provide assistance beyond saying: “Ship it and we’ll seize it and prosecute if there’s a problem.”

In addition to the mitigation factors mentioned above, there is one intangible reason, which I’ll call the good guy factor, that I think may also explain why Stoller was treated well here. I can’t help but think that Company officials made quite a personal impression during their verbal presentation to OFAC. This suspicion is based on the Company’s website which is, frankly, simple, charming and appealing. Even though I have no particular use for the plate-frozen blocks of mechanically-deboned minced fish sold by the Company, the website made even me consider, if only for a moment, whether I might find some use for plate-frozen fish blocks. Okay, let’s be honest, I even wondered whether I could find some use for the carp pituitary glands.

I think what sold me on the Company, among other things, was this memorable phrase from the website:

Don’t ask if the carp is good enough for you to eat. Ask instead if you’re good enough to eat carp.

Words to live by indeed.

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Copyright © 2007 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)