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CUSTOMS MANAGER, HOME DESIGN INDUSTRY
Going to prison or paying a large fine for an export violation seems hypothetical or imaginary until it happens to you.
The possibilities are horrifying to both individuals and businesses, but regrettably, American businesses and business people are convicted and fined, and American business people do go to jail. Their names, their company names, and their violations are matters of public knowledge and consequently the cause of a great deal of damage to both brand and personal reputation, as well as future prospects.
The heaviest fines are for willful, criminal convictions (currently up to $1 million, increasing to up to $10 million or ten times the value of the export when the new Export Administration Act is passed). Civil penalties are not as harsh, but still consequential.
In addition to fines and prison terms under criminal and civil sanctions, there are administrative sanctions (including denial of export privileges and exclusion from practice), statutory sanctions, seizure and forfeiture, cross-debarment, denial of licenses or approvals, and suspensions of the right to contract with the United States Government that can ruin a company.
Case materials courtesy of the United States Government Bureau of Industry and Security (BIS) and Department of Justice.
2016 U. S. Export Violations
CGG Services S.A.,
February, 2016. CGG Services S.A.—a provider of services and goods for oil and gas exploration—has agreed to pay $614,250 to settle potential civil liability for allegedly exporting U.S. origin goods, spare parts and other equipment from the United States to vessels that were operating in Cuba’s territorial waters. The allegations also included processing data from seismic surveys within Cuba’s Exclusive Economic Zone benefiting a Cuban company.
Halliburton Atlantic Limited and Halliburton Overseas
February, 2016. Halliburton Atlantic Limited agreed to pay $304,706 for the settlement of a potential civil liability in connection with the alleged violation of the Cuban Assets Control Regulations. Two subsidiaries of Halliburton Energy Services, Inc. allegedly committed the violations by dealing in property in which Cuba had an interest when they exported goods and services, totaling $1,189,752, in support of oil and gas exploration and drilling activities within Angola’s Cabinda Onshore South Block oil concession
2015 U.S. Export Violations
Crédit Agricole Corporate and Investment Bank
October, 2015. Credit Agricole Corporate and Investment Bank or CA-CIB, and its predecessors agreed to pay a settlement of $329,593,585 for processing thousands of transactions in violation of Sudanese and Iranian Sanctions Regulations. Personnel were aware of U.S. sanctions and understood the requirement to block or reject transactions involving an OFAC-sanctioned country or person. Despite this knowledge, they used cover payments and implemented special payment practices that skipped over references to U.S.-sanctioned entities or countries.
March, 2015. Commerzbank AG agreed to settle with the Office of Foreign Assets Control (OFAC) for $258,660,796 for violations of multiple sanctions programs involving parties from Iran, Sudan, Burma and Cuba. Processing thousands of transactions through U.S. financial institutions, Commerzbank engaged in payment practices that removed, omitted, obscured, or otherwise failed to include references to U.S.-sanctioned persons.
Life for Relief and Development
March, 2015. Life for Relief and Development agreed to a $780,000 civil settlement with the Office of Foreign Assets Control (OFAC) for knowingly and willfully forming a conspiracy for the purpose of transferring funds from the United States to Iran. In calculating the penalty amount, OFAC considered three such fund transfers totaling $236,000, and the formation of the conspiracy itself.
March, 2015. PayPal agreed to a $7,658,300 civil liability settlement after processing transactions in apparent violation of sanctions programs administered by the Office of Foreign Assets Control (OFAC). OFAC determined that PayPal voluntarily self-disclosed the apparent violations and failure to employ adequate screening technology and procedures to reject or block prohibited transactions.
Hsien Tai Tsai
March, 2015. Hsien Tai Tsai pled guilty and was sentenced to 24 months in federal prison for providing goods and services to a North Korean arms dealer for use in weapons programs. Tsai conducted business under different company names as a cover up and was associated with at least three companies based in Taiwan.
Russell Henderson Marshall
April, 2015. Russell Henderson Marshall was sentenced to serve 41 months in prison, and his company Universal Industries Inc., sentenced to one year probation after violating a denial order by attempting to send three temperature transmitters used on military aircraft to Thailand and Pakistan.
May, 2015. The Bolingbrook, Illinois owner and president of Trexim Corporation was sentenced to 24 months in federal prison and two years of supervision after pleading guilty to one count of willfully violating export control regulations. Ahmed attempted to ship a thermal imaging camera from his company to a company in Pakistan without obtaining the necessary licenses.
John Bean Technologies
June, 2015. John Bean Technologies agreed to pay $391,950 to settle potential civil liability for alleged violations of Executive Order 13382 and/or the Weapons of Mass Destruction Proliferators Sanctions Regulations. The Chicago corporation appeared to have violated regulations when goods they sold to a Chinese company were shipped by Islamic Republic of Iran Shipping Lines (IRISL) aboard a blocked vessel from Spain to China.
Blue Robin Inc.
July, 2015. Blue Robin Inc. was issued a penalty of $82,260 for violating the Iranian Transactions and Sanctions Regulations (ITSR) by importing web development services from Iranian company PersiaBME. Blue Robin was aware that they were doing business with an Iranian company without taking adequate compliance measures, but ultimately self-disclosed the violation.
Navigators Insurance Company
August, 2015.Navigators Insurance Company agreed to remit $271,815 to settle its potential civil liability for 48 apparent violations after its U.K. branch issued insurance policies to North Korean-flagged vessels that covered incidents that occurred in Iran, Sudan and Cuba. Navigators Insurance Company allegedly did not have a formal OFAC compliance program in place at the time the apparent violations occurred.
Schlumberger Oilfield Holdings Ltd.
August, 2015. Schlumberger Oilfield Holdings Ltd. agreed to pay a $232,708,356 penalty for allegedly violating the International Emergency Economic Powers Act (IEEPA) by facilitating illegal transactions and engaging in trade with Iran and Sudan.
Production Products Inc.
August, 2015. Production Products Inc. agreed to pay $78,750 to settle civil liability for two alleged violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. part 544. Production Products Inc. allegedly shipped three duct fabrication machines to China National Precision Machinery Import and Export Corp. and received payments without OFAC authorization.
2014 U.S. Export Violations
Wind River Systems
October, 2014. Wind River Systems agreed to pay $750,000 in order to settle allegations that it had sold encryption software to entities on the BIS Entity List. The penalty was approved to “serve as a reminder to companies of their responsibility to know their customers and, when using license exceptions, to ensure their customers are eligible recipients”.
Robbins & Myers Belgium S.A
October, 2014. Robbins & Myers Belgium S.A pled guilty to the illegal export of drilling equipment to Syria. The company agreed to pay $1,000,000 in criminal fines for the export of the goods, which they sold initially for only $31,716.
September, 2014. Harold Rinko pled guilty to conspiracy to illegally export laboratory equipment from the U.S. to Syria via Jordan, the U.A.E., and the U.K. Rinko could be sentenced to up to five years in prison, as well as fined up to $250,000.
Epsilon Electronics Inc.
July, 2014. Epsilon Electronics Inc. was assessed a penalty of $4,073,000 for allegedly violating the Iranian Transactions and Sanctions Regulations (ITSR) after shipping audio and video equipment to a company that it knew, or ought to have known, would re-export it to Iran. Epsilon’s lack of a compliance program was mentioned as one factor that helped determine the severity of the fine.
Bank of America, N.A.
July, 2014. Bank of America, N.A. agreed to pay $16,562,700 to settle allegations it violated the Foreign Narcotics Kingpin Sanctions Act (FNKSR). The apparent violations included a failure to block five accounts owned by individuals on OFAC’s SDN List, and processing 208 transactions conducted by said individuals. The apparent violations were determined to be egregious, due in part to deficiencies known to be present in its OFAC Screening Tool.
June, 2014. Intersil Corporation entered into a consent agreement with the DDTC to settle allegations that it had engaged in the unauthorized export and re-export of integrated circuits controlled under ITAR, leading to potentially thousands of export violations. As part of the consent agreement, Intersil agreed to pay $6,000,000 in fines and a further $4,000,000 on remedial compliance measures, a total penalty of $10,000,000.
BNP Paribas SA
June, 2014. BNP Paribas SA agreed to pay $963,619,900 to settle apparent violations of OFAC regulations involving multiple financial transfers to the Sudan, Iran, Burma, and Cuba, over the span of several years. Multiple factors contributed to the severity of the fine, among them senior managment’s knowledge of the apparent violations and the company’s lack of a adequate compliance policies and procedures.
June, 2014: Fokker Services B.V. (FSBV) agreed to pay $21,000,000 to settle allegations that it repeatedly violated the Iranian Transactions and Sanctions Regulations (ITSR) and the Sudanese Sanctions Regulations (SSR) by exporting or reexporting aircraft spare parts to Iran and the Sudan. The apparent violations were determined to be egregious, in part because FSBV had no formal OFAC compliance process in place during most of the period in which the violations were alleged to have occurred.
Janiece Michelle Hough
June, 2014 Janiece Michelle Hough was found guility of one count of smuggling goods from the United States after she shipped two Advanced Combat Optical Gunsights to Germany as part of her home business operations. She did so without the requisite license needed for the parts under the ITAR. Following her guilty plea, Hough was sentenced to six months of imprisonment, followed by three years of supervised release. Hough was also ordered to perform 100 hours of community service and to forfeit $198,054.
May, 2014. Decolar.com, Inc. agreed to pay $2,809,800 to settle alleged violations of the Cuban Assets Control Regulations (CACR). The settlement amount was influenced in part by the lack of any OFAC compliance program at the time of the apparant violations.
Aramex Emirates, LLC
May, 2014: The Bureau of Industry and Security announced that Aramex Emirates, LLC, located in Dubai, United Arab Emirates (U.A.E.), agreed to pay a $125,000 civil penalty in connection with the unlicensed export and reexport to Syria, via the U.A.E., of network devices and software without the required BIS licenses.
April, 2014. CWT B.V. agreed to pay $5,990,490 to settle allegations it violated the Cuban Assets Control Regulations (CACR). The settlement amount was influenced by the fact that CWT was a “sophisticated international corporation” that nonetheless lacked an adequate OFAC compliance program.
April, 2014. Hetran, Inc. and its CEO, Helmut Oertmann were charged with conspiracy to evade export reporting requirements and with smuggling to Iran. The item in question, a dual-use single lathe machine. The company now faces a potential fine of up to $1,000,000, while Oertmann could receive a prison term of up to ten years if found guilty.
John Alexander Talley
April, 2014: A U.S. District Judge sentenced John Alexander Talley (42, Seattle, Washington) to 30 months in federal prison for conspiracy to violate the International Emergency Economic Powers Act and the Iranian Transaction Regulations. According to court documents, from about 2009 to about September 2012, Talley and his company conspired with others to unlawfully export sophisticated enterprise level computer equipment from the United States to Iran, and to provide computer information technology (IT) support services for the equipment, all in violation of the United States embargo.
Esterline Technologies Corporation
March, 2014. Esterline Technologies Corporation entered into a consent agreement with the DDTC to settle allegations that it improperly transfered technical data to foreign person employees and misclassified defense items controlled under ITAR. As part of the consent agreement, Esterline agreed to pay $10,000,000 in fines and another $10,000,000 for remedial compliance measures, a total penalty of $20,000,000.
Ubiquiti Networks, Inc
March, 2014. Ubiquiti Networks, Inc agreed to pay $504,225 to settle allegations it violated the Iranian Transactions and Sanctions Regulations (ITSR). The apparent violations involved the export or re-export of broadband wireless technology to Iran. Though the case was ruled non-egregious, the settlement amount was influenced by the fact that Ubiquiti had no OFAC compliance program in place at the time the violations allegedly occurred.
February, 2014: The Bureau of Industry and Security announced that it reached a $115,000 civil settlement with Intevac, Inc., of California. BIS fined the company for five violations of the Export Administration Regulations (EAR), including the unauthorized release of export controlled manufacturing technology to a Russian national working at its U.S. facility. The settlement involves “deemed exports,” releases of controlled technology made to a foreign national located in the U.S.
Domingos, Carlos (Spain Night Vision)
February, 2014. Carlos Dominguez was administratively debarred due to the alleged re-export without proper U.S. authorization of hundreds of night vision goggles, in addition to other defense articles and related technical data, controlled under ITAR.
February, 2014. Italy-based Area S.p.A agreed to pay a civil penalty of $100,000 to settle allegations that it deliberately sold U.S. origin network monitoring technology to a Syrian firm.
Joint-Stock Commercial Bank “Bank of Moscow”
January, 2014. Joint-Stock Commercial Bank “Bank of Moscow” agreed to pay $9,492,525 to settle allegations it violated the Weapons of Mass Destruction Proliferators Sanctions Regulations and Executive Order 13382 by transferring funds to Iran from Russia. OFAC found the absence of adequate compliance polices to be an aggravating factor in the case.
Clearstream Banking, S.A.
January, 2014. Clearstream Banking, S.A. Sagreed to pay $151,902,000 to settle allegations it violated the Iranian Transactions and Sanctions Regulations (ITSR). Clearstream’s quick response to the apparent violations, which included implementing strong sanctions compliance standards, was considered a mitigating factor that prevented the penalties from being higher.
January, 2014. Mozaffar Khazaee is indicted on two counts of transporting, transmitting and transferring in interstate commerce goods obtained by theft, conversion, or fraud. He is alleged to have stolen proprietary material relating to military jet engines, and then attempted to transport it to Iran. He faces up to 20 years in prison if convicted on all counts.
2013 U.S. Export Violations
Selected U.S. Export Enforcement and Embargo Criminal Prosecutions
The following are snapshots of some selected export and embargo-related criminal prosecutions handled by the Justice Department. These cases resulted from investigations by the Department of Homeland Security’s U.S. Immigration and Customs Enforcement (ICE), the Federal Bureau of Investigation (FBI), the Department of Commerce’s Bureau of Industry and Security (BIS), the Pentagon’s Defense Criminal Investigative Service (DCIS), and other law enforcement agencies. Also included are several settlement cases, illustrating civil penalties.
November, 2013: the United States Attorney announced that Peter Gromacki, a U.S. citizen, was sentenced in federal court to three months in prison for exporting high-grade carbon fiber to China. In order to evade United States restrictions on export of this type of carbon fiber to China, Gromacki enlisted the help of co-conspirators in Europe and China and made false statements on U.S. customs forms.
Weatherford International Ltd
November, 2013: The Bureau of Industry and Security announced Weatherford International Ltd. in Houston, Texas, and four of its subsidiaries (collectively, “Weatherford”) have agreed to pay a $50 million civil penalty following allegations that they exported oil and gas equipment to Iran, Syria and Cuba in violation of the Export Administration Regulations (EAR) and the Iranian Transactions and Sanctions Regulations (ITSR). The fine is largest civil penalty levied by the Bureau of Industry and Security to date.
August, 2013. Meggitt faces proposed charges based on allegations that it violated section 38 of the AECA and section 127 of the ITAR in connection with the unauthorized export of defense articles, to include technical data; the unauthorized provisions of defense services; violation of the terms of provisos or other limitations of license authorizations; and, the failure to maintain specific records involving ITAR-controlled transactions. To settle these allegations, Meggitt shall pay in fines and in remedial compliance measures a civil penalty of twenty-five million dollars ($25,000,000). Twenty-two million dollars ($22,000,000) of this civil penalty will be suspended as set forth in paragraph (17)(b) of the Consent Agreement on the condition that Meggitt applies this amount to self-initiated, pre-Consent Agreement remedial compliance measures.
August, 2013. Aeroflex faces proposed charges based on allegations that it violated section 38 of the AECA and section 127 of the ITAR in connection with violations related to the unauthorized export, retransfer, and re-export of defense articles, to include technical data, including to proscribed destinations. To settle these allegations, Aeroflex shall pay in fines and in remedial compliance measures a civil penalty of eight million dollars ($8,000,000). Four million dollars ($4,000,000) of this civil penalty will be suspended as set forth in paragraph (19)(b) of the Consent Agreement on the condition that Aeroflex applies this amount to self-initiated, pre-Consent Agreement remedial compliance measures.
Precision Image Corporation
July, 2013. U.S. Immigration and Customs Enforcement announced that Precision Image Corporation owner Chih-Kwang Hwa pled guilty to exporting restricted technical data to a Taiwanese electronics manufacturer. He now faces a potential maximum penalty of a 20 year prison term and $1,000,000 fine at his sentencing.
American Express Travel Related Services Company, Inc.
July, 2013. The Treasury Department announced that American Express Travel Related Services Company, Inc. had agreed to pay a $5,226,120 settlement after having apparent violations of the Cuban Assets Control Regulations (CACR). The company had issued over 14,000 tickets for travel between Cuba and various countries other than the U.S. Many of these countries had laws that permitted activities prohibited by the CACR, and so the tickets required OFAC authorization, which was neither sought nor given. The fine was particularly heavy because investigators determined that the company had an inadequate compliance program given the scope of its activities.
Intesa Sanpaolo S.p.A
June, 2013. The Treasury Department announced that Intesa Sanpaolo S.p.A had agreed to pay a $2,949,030 settlement after apparently violating several OFAC sanctions. Among Intesa’s sins, it had conducted business with an Italian firm, Irasco, that was found to be Iranian owned. The fine was particularly harsh because Intesa was found to have failed to maintain a sufficiently robust compliance program over the time the apparent violations took place.
The American Steamship Owners Mutual Protection and Indemnity Association, Inc.
May, 2013. The Treasury Department announced that The American Steamship Owners Mutual Protection and Indemnity Association, Inc. had agreed to pay a $348,000 settlement for apparent violations of various OFAC sanctions. Their apparent offense? They processed insurance claims and issued Letters of Undertaking that involved Cuba, Iran, and Sudan.
May, 2013. The Bureau of Industry and Security announced that Lisong Ma, a Chinese citizen, allegedly tried to export weapons-grade carbon fiber to China. He potentially faces up to 20 years in prison and a million dollar fine if convicted.
Alex Tsai and Gary Tsai
May, 2013. The Bureau of Industry and Security announced that Alex Tsai and Gary Tsai allegedly tried to unlawfully export controlled metal-working equipment to North Korea. According to the BIS press release “Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine; money laundering carries a maximum of 20 years in prison and a $500,000 fine; and conspiracy to defraud the United States carries a maximum of five years in prison and a $250,000 fine.”
April, 2013. The Bureau of Industry and Security announced that Computerlinks FZCO would pay a $2,800,000 settlement over alleged violations of the EAR. Computerlinks allegedly exported and reexported software and equipment to Syria without proper export licenses.
April, 2013. The DDTC announced that Raytheon Company had agreed to pay a $4,000,000 penalty for violating multiple sections of the ITAR and spend an additional $4,000,000 on remedial measures to prevent future violations. Raytheon was found, among other things, to have inaccurately tracked temporary imports and exports, to have improperly documented those imports and exports, and to have allowed foreign partners to have manufactured approved exports beyond the amount permitted by their licenses.
March, 2013. The Bureau of Industry and Security reported that Mehdi Khorramshahgol allegedly reexported industrial parts to Iran after initially exporting them to the United Arab Emirates. He now faces up to twenty years in prison if convicted.
March, 2013. The Treasury Department announced that EGL, Inc. had agreed to pay a $139,650 settlement for alleged violations of the Iranian Transactions and Sanctions Regulations and the Cuban Assets Control Regulations. EGL made the mistake of acting as a freight forwarder for a company shipping to an oil rig located in Iranian waters.
American Optisurgical, Inc.
February, 2013. The Treasury Department announced that American Optisurgical had agreed to pay a $404,100 settlement after having allegedly violated the Iranian Transactions and Sanctions Regulations by selling medical supplies to Iranian parties or to third parties known to be passing the supplies to Iranian entities. The stiffness of the fine was mitigated by the fact that that OFAC would have granted a license for the supplies if one had been properly sought.
Offshore Marine Laboratories
February, 2013. The Treasury Department announced that Offshore Marine Laboratories agreed to pay a $97,695 settlement after having allegedly violated the Iranian Transactions and Sanctions Regulations. The company shipped supplies to the United Arab Emirates, but the ultimate destination was known to be, or ought to have been known to be, an Iranian oil rig.
January, 2013. The Bureau of Industry and Security reported that Timothy Gormley unlawfully shipped controlled microwave amplifiers to multiple prohibited countries. He was sentenced to 42 months in prison for this crime.
January, 2013. The Treasury Department announced that Ellman International agreed to pay a $191,700 settlement after having allegedly violated the Iranian Transactions and Sanctions Regulations. In this case, the violation of OFAC sanctions was found to be willful and with knowledge of the illegal nature of the transactions involved. However, the violations took place under a different ownership, and the new owners were the ones who brought the matter to OFAC’s attention. They also took steps to implement a robust compliance program to help prevent future violations. In light of this, the fines were lessened considerably.