ABOVE: Marina Hemingway, Cuba

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Back in November 2008, Export Law Blog reported on the Federal Government’s indefatigable campaign to bring to justice Michele Geslin and Peter Goldsmith who had organized a sailboat regatta between Key West and Cuba. The story wondered why the organizers were hunted down and fined by the Bureau of Industry and Security (“BIS”) while the skippers of the boats were allowed to sail off into the sunset without repercussions.

Well, it appears that at least one skipper, Wayne LaFleur, did feel the bitter lash of BIS. Two weeks ago, BIS issued a Final Decision and Order fining LaFleur $8,000 for his export of his sailboat to Cuba in connection with the regatta. The order does admit that none of the other skippers were penalized and provides no explanation for the agency’s decision to go only after LaFleur.

The order also doesn’t clearly detail what defenses, if any, LaFleur had to the BIS charges other than LaFleur’s claim that he had received permission from the Coast Guard to travel to Cuba. BIS’s response to this defense was as unhelpful as it was Kafkaesque: it’s not BIS’s fault if the Coast Guard doesn’t coordinate with us and gives you permission to do something illegal.

Significantly the Coast Guard Administrative Law Judge (“ALJ”) who heard the BIS case and issued a Recommended Decision and Order made absolutely no mention of LaFleur’s defense that the Coast Guard gave LaFleur permission to sail into Cuban waters. No doubt admitting the Coast Guard’s mistake would have put the ALJ in an uncomfortable position.

At the time of the regatta, the Coast Guard had established a “security zone” consisting of the U.S.-territorial waters off the coast of Florida. For a vessel the size of LaFleur’s, departure from the “security zone” and entry into Cuban waters merely required the the approval of the Captain of the Port, i.e., the commanding official of the Coast Guard for the sector involved. Not until after the regatta, which took place in May 2003, did the Coast Guard’s rules require that such permission could only be given by the Coast Guard if the requesting vessel had a license from BIS to export the vessel to Cuba. The final rule establishing the BIS license requirement was adopted by the Coast Guard on July 8, 2004, more than a year after the regatta took place.

Perhaps the Coast Guard, which improperly authorized the trip to Cuba without all proper governmental authorizations, should be held accountable for aiding and abetting the export, just as were the organizers of the regatta. But the Coast Guard ALJ, who must have been aware of all this background, obviously had no desire to go there.

On January 10, FBI agents arrested William Chi-Wai Tsu, a U.S. citizen and resident of California. Tsu, who was born in Shanghai, was detained on charges that he had illegally exported electronic components to China without first obtaining required licenses from the Bureau of Industry and Security (“BIS”). An extraordinarily detailed affidavit by BIS Special Agent Willie Lo filed with the U.S. District Court provides an interesting narrative of how Mr. Tsu’s allegedly illegal exports were uncovered.

According to the affidavit, Mr. Tsu made numerous purchases of electronic components from RFMW, Ltd., a San Jose distributor. These components included a Trinquint TGA4036 amplifier circuit controlled under ECCN 3A001.b.2.d.

Employees of RFMW had advised Tsu that the components he was purchasing required export licenses. They received assurances from Tsu that he was not exporting the items but was instead using them in a manufacturing operation he owned in New Hampshire. When Tsu returned integrated circuits in October 2008 for “quality control” issues, RFMW became suspicious that the items had been exported.

First, the circuits seem to have been “primitively” handled, something which would not have happened in an assembly house in the United States. Such facilities typically have clean rooms for the handling of circuits. Second, the delay in returning the items also suggested that they left the United States.

When RFMW requested permission to visit Tsu’s facility in New Hampshire where he was using the circuits, Tsu declined saying that the facility was being “remodeled” and was not accepting visitors. The rest, as they say, is history.

If these allegations are true, this case is the only one I know where, seemingly, the defendant smuggles goods from the United States and then tries to return them for a refund. That doesn’t seem that much different from a thief returning the stolen loot to the victim and demanding better stuff.

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.