Unverified Parties

J. Reece Roth, a 70 year old retired University of Tennessee professor faces up to 160 years in prison and more than $1.5 million in fines for 18 counts of conspiracy, fraud and violating the Arms Export Control Act. Roth, an expert in plasma research, agreed to serve as a subcontractor on a US Air Force project which was awarded to Knoxville technology firm Atmospheric Glow Technologies Inc.(AGT) The project involved the development of advanced plasma actuators for use on the wings of Air Force drones, a defense munitions item.

Roth assigned two of his graduate students, Truman Bond an American and Xin Dai a Chinese foreign national, to work on the project with him. At first, Xin Dai was not allowed to view Truman Bond’s work to ensure that export laws were not broken. Soon after, Roth and Atmospheric Glow Technologies representative Daniel Max Sherman agreed that this was slowing the process and allowed the graduate students to work together and share all information. Read More

The Department of Treasury’s Office of Foreign Assets Control has issued a guidance document to give much need direction banks, importers, and exporters regarding blocked property and interests in blocked property. The main issue the OFAC is attempting to answer in this document is, what if a company is not on the SDN list, but one of its partners/ shareholders/ members is? Can we do business with the company? The answer is not so clear however, it actually is that it depends. If the SDN lists any partners/ shareholders/ members who have 50% or more interest in the company than the answer is no, but if they only have 49% or less interest in the company than you can in fact do business with the company but you should act with strong caution.

This all may sound a bit clear until the fact arises of how to actually find out if the SDN has 50% or greater interest therein the company. The OFAC does not give any opinions or options to generate an answer for this problem. If in fact a company fails to detect a SDN interest in 50% or more in one of their customers and ends up engaging in business the company will be treated by the OFAC as if they dealt with an SDN directly.

OFAC warns and reminds companies, “In certain OFAC sanctions programs (e.g., Cuba and Sudan), there is a broader category of entities whose property and interests in property are blocked based on, for example, ownership or control.”

More information:
OFAC Guidance Document (PDF)