Export regulation news, analysis and commentary
Willbros Group Inc. and Willbros International Inc., a wholly owned subsidiary, have agreed to pay over $32 million in penalties, disgorgement and interested in criminal case with the Department of Justice and with the Securities and Exchange Commission. The companies are both publicly traded and provide construction, engineering and other services in the oil and gas industry. Read More
Ben-Ami Kadish has been arrested on several charges of spying conspiracy. From 1979 into 1985 he was employed at the US Army’s Armament Research, Development, and Engineering Center. Beginning in 1980 Kadish, a US citizen, would take classified documents home and provide them to an unnamed citizen of Israel who would photograph the documents.
The Israel citizen was employed by the Government of Israel as the Consul for Science Affairs at eh Israeli Consulate General in Manhattan. He would direct Kadish on what documents he needed and met Kadish at his home to photograph them.
Of the numerous documents photographed over the years the most alarming were documents classified as restricted containing nuclear weaponry, major weapon systems of an F-15 fighter jet, and major strategies of the US patriot missile air defense system, noted as being “Secret”.
On March 20, 2008 Kadish received a phone call from the unnamed co conspirator instructing him deny any contact with him to federal law enforcement officials. The next day Kadish followed the conspirator’s orders and denied any contact with the individual and even the phone conversation from the previous evening.
Kadish is charged with 4 counts of conspiracy, that which include disclosing documents of US national defense to the Government of Israel, acting as an agent of the Government of Israel, hindering a communication to a law enforcement officer, and making a materially false statement to a law enforcement officer.
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French corporation, Cryostar France pleads guilty to conspiracy, illegal export, and attempted illegal export of Cryogenic Submersible Pumps to Iran. Cryostar has several businesses worldwide where they specialize in the design and manufacturing of cryogenic equipment. They were sentenced in the US to a criminal fine of $500,000 and corporate probation of two years.
Cyrostar was a middleman between Ebara International Corp., Inc. and “TN” a French company with a US subsidiary. Cryostar was to purchase the pumps from Ebara and then resell them to “TN” who would then forward the pumps to Iran. Cryostar falsely indicated that the final purchaser was the French company “TN” who would install the pumps in France, when all parties were in agreement that the pumps would go to Iran. The three companies created false purchase orders, and purchased as many component parts from non-US suppliers as possible to avoid any and all questions from US suppliers and to conceal their conduct. No export licenses were ever obtained for any of the items.
In 2004 penalties were imposed on Ebara and its former CEO Everett Hylton. At that time Ebara pled guilty to criminal violations and agreed to an administrative settlement, with combined fines of over $6.4 million dollars while Hylton agreed to personally pay $109,000. Ebara and Hylton’s schemed together to violate the embargo on Iran after some people in Ebara initially stopped an Ebara sale to Iran. Ebara falsified some documents and removed “made by Ebara” markings from certain items to evade US restrictions on Iran.
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Daniel Max Sherman a former physicist from Atmospheric Glow Technologies, Incorporated plead guilty to conspiracy with J. Reece Roth a professor at The University of Tennessee to transmit export controlled technical data to the People’s Republic of China. Between January 2004 and May 2006 the two worked with a Chinese graduate research assistant at the university where the professor and student researched military drone aircraft to develop plasma actuators.
In the court documents, prosecutors claim that Sherman and Roth both agreed amongst themselves to assign the Chinese student, Xin Dai, to the military development project. They never advised the Air Force or sought any special export licenses or consul.
At this time Sherman faces up to 5 years imprisonment and a $250,000 fine, the charges for the professor and student have yet to be released.
Patrick Rowan, Assistant Attorney General for National Security made a point, “Knowingly disclosing restricted US military data to foreign nationals represents a very real threat to our national security, particularly when we know that foreign governments are actively seeking this information for their military development.”
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Alex Latifi, owner of Axion Corp. has won yet another case against the US government. His criminal case was thrown out because of lack of evidence and poor witnesses, after the success, Latifi’s lawyers filed for reimbursement of legal fees, filing costs and money spent on expert witnesses during his trial. The Civil Asset Forfeiture Reform Act is designed “to give owners innocent of any wrongdoing the means to recover their property and make themselves whole after wrongful government seizures.” Latifi is expected to receive around $500,000.
Lawyers around the country are in agreement to say that this is going to change the way people look at arms-export cases. Cliff burns, an arms-export expert from Powell Goldstein explained, “This is the first time and it will create quite a stir, No one I know has ever recovered legal fees against the federal government in an arms-export case.”
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Chi Mak, a former engineer for defense contractor Power Paragon, was sentenced to 293 months in federal prison and fined $50,000. Mak conspired with his wife, brother, sister-in-law and nephew to obtain naval technology and then export the material to the People’s Republic of China.
Co-conspirators from the PRC provided a task list for Chi Mak that requested specific defense information, including research regarding nuclear-powered submarines. The list contained instructions for Mak to take part in seminars and then compile information he obtained from the seminars onto computer disks. Nearly all of the information he obtained from the seminars was sensitive and subject to restrictions regarding its distribution, storage and handling.
Chi Mak and his wife would copy the information onto CD-ROM disks and then forward the disk to Mak’s brother, Tai Mak who would have his son take the data and encrypt it onto the CD-ROM disk. Tai Mak and his wife then took the disk and hid it in their luggage as they traveled to the PRC to deliver it, when they attempted to board the plane in Los Angeles they were arrested along with Chi Mak and his wife at their home and their son was apprehended and charged seven months later.
All conspirators have pleaded guilty and all face deportation back to the PRC.
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OK, so you violate the Export Administration Regulations, you might get a fine between $50,000 and $500,000 in most cases. And in the small percentage of ITAR violations in which there is a monetary penalty, you normally are looking at a fine between $1 million to $20 million. But, ladies and gentleman, if you over charge the US Government for shipping costs, you might end up with a big fat $28 million fine.
National Air Cargo (NAC), a US military contractor, has paid $28 million to settle both criminal and civil allegations. NAC is said to have defrauded the Department of Defense, and the Justice Department by submitting fraudulent claims for payments for the shipment of freight. The company pleaded guilty to one count of knowingly making a material misstatement to the US.
From 1999 to 2005 NAC transported freight wholly by surface transportation rather than by air as required by the Department of Defense regulations. The company would then bill the DOD for freight charges and pocket the difference between air and land delivery. The company falsified documents to represent actual delivery dates.
The lawsuit was actually brought on by Mark Oehm, a former NAC employee, the “whistleblower” brought on the lawsuit under the False Claims Act, which permits private citizens to bring lawsuits on behalf of the US and receive a portion of the proceeds of any settlement or judgment. Oehm will be receiving $3.3 million as his share, he may not have his job anymore, but I am sure his share of the settlement will help him cope.
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Lucent Technologies Inc., a global communications solutions provider has entered into an agreement with the Department of Justice to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA). The company provided travel and other items of value to Chinese government officials and included it as expenses in company books and records. Read More
According to the Justice Department, Samuel Shangteh Peng, who formerly was involved in export sales for Edevco Corporation, agreed to plead guilty to five illegal export criminal charges, each of which carries a maximum of 10 years in jail. Mr. Peng was charged with illegal exports in 1999 and 2000 of vibration amplifiers, cable assemblies and vibration processor units to Hindustan Aeronautics Limited’s Engine Division in India, which was on BIS’ Entity List during that time.
Ouch.
The first-ever National Export Control Coordinator for the Department of Justice was appointed last June 20, 2007. Steven W. Pelak, a veteran prosecutor for 18 years, has been an Assistant U.S. Attorney and Senior Litigation Counsel in the National Security Section of the U.S. Attorney’s Office for the District of Columbia and, since September 2001, has served as the Anti- Terrorism Coordinator for the U.S. Attorney’s Office. Mr. Pelak is detailed to the Counter-espionage Section of the Justice Department’s National Security Division, wherein he will have some of the following responsibilities:
Attorney General Alberto Gonzales mentioned in his June 11 speech on nuclear terrorism that the Justice Department’s National Security Division where federal prosecutors were provided instruction and guidance on export control cases, with trainers from the Justice Department and the relevant investigative agents on hand providing comprehensive prosecutorial instruction.
Everyone has probably heard of the FCPA. As a result of SEC investigations in the mid-1970’s, over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign officials to secure some type of favorable action by a foreign government. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. Several firms that paid bribes to foreign officials have been the subject of criminal and civil enforcement actions, resulting in large fines and suspension and debarment from federal procurement contracting, and their employees and officers have gone to jail.
It is my experience that most U.S. companies’ compliance to the FCPA is no more than “lip service.” The CEO issues a policy that instructs all employees to comply with the FCPA and that bribes of foreign government officials will not be tolerated. Then he/she and other members of the company’s senior management wrap themselves in this cozy “policy security blanket” and they are confident the company is in compliance. After all, everyone knows you can’t bribe government officials. Yeah, right!
On February 22, Titan Corporation (Titan) plead guilty to criminal charges of violating the FCPA, falsifying books and records of Titan, and willfully aiding and assisting in the preparation or presentation of a false or fraudulent tax return for Titan.
Does the case against Titan signal a heightened FCPA enforcement effort on the part of the Justice Department?
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