Sep

17

Turkish Citizen Indicted For Foreign Downloads of Submarine Drawings


Posted by at 7:11 pm on September 17, 2014
Category: Arms ExportCriminal PenaltiesDDTCITARUSML

By U.S. Navy via http://www.navy.mil/view_image.asp?id=16778 [Public Domain]Alper Calik — a Turkish citizen and co-owner of Clifton, New Jersey based Clifmax LLC — has been arrested based on a criminal complaint, dated September 12, charging him, among other things, with violating the Arms Export Control Act by exporting without a license certain drawings relating to the NSSN (Virginia) class submarine. (And, no, I am not reporting this case simply because the company is named Clifmax, although that is, leaving the alleged criminal conduct aside, an awesome name for a company.)

At the heart of the allegations are two drawings that Calik downloaded from a DoD database after signing the Military Critical Technical Data Agreement which must be signed in order to gain access to the DoD drawing database at issue. The criminal complaint alleges that Calik downloaded these images while in Turkey and attempts to assert that Calik knew doing this was illegal because he had signed the Military Critical Technical Data Agreement.

However, the Military Critical Technical Data Agreement is hardly specific about what is or is not permitted with respect to the drawings, saying only this:

[The undersigned] acknowledge[s] all responsibilities under applicable U.S. export control laws and regulations (including the obligation, under certain circumstances, to obtain an export license from the U.S. Government prior to the release of militarily critical technical data within the United States) or applicable Canadian export control laws and regulations, and (2) agree[s] not to disseminate militarily critical technical data in a manner that would violate applicable U.S. or Canadian export control laws and regulations.

Suffice it to say that this certification is poorly drafted and confusing, mentioning an export license only in the context of releasing the data “within the United States.” Nor does the certification that he would not “disseminate” the data clearly prohibit him from downloading the information for his own personal review in a foreign country. Obviously, such downloads do in fact violate U.S. exports if the downloads include ITAR-controlled technical data, but this certification neither makes that clear nor establishes that Calik had the necessary criminal intent when he downloaded the documents

The complaint alleges that there were legends restricting export on the drawings involved, but does not quote those legends. Whether these legends are enough of a predicate to support the criminal intent necessary for conviction on the export charges depends on what those legends said and that remains to be seen.

UPDATE:  Two commenters make an excellent point about using the legends on the drawings as indicia of criminal intent: Calik would have only seen the legends after he downloaded the drawings in Turkey.  The significance of this point is magnified even further when you consider this statement from the criminal complaint:

Beginning in or around 2009 to the present time, ALPER CALIK downloaded approximately one hundred thousand drawings. some of which were subject to U.S. export control regulations without obtaining export licenses from the U.S. Department of State. ALPER CALIK was not in the United States when the majority of the drawings were downloaded.

At issue are only two of these one hundred thousand downloaded drawings, which would have revealed the legends only after being downloaded.  The overwhelming portion of the remainder of the drawings not having any indication that the downloading of these or other drawings might be problematic.

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Sep

12

Maybe Their Phones Aren’t Working


Posted by at 3:27 pm on September 12, 2014
Category: Iran SanctionsOFACSudanSyria

By CFTC via https://www.flickr.com/photos/cftc/4406624868/sizes/z/ [Public Domain]Both the Commodity Futures Trading  Commission and the Office of Foreign Assets Control announced settlement agreements under which they imposed fines of $150,000 and $200,000 respectively on the oddly named Zulutrade, an online foreign exchange broker.  Zulutrade has nothing to do with Africa but is located in Pireaus, Greece, incorporated in Delaware and registered with the CFTC (which is how OFAC and CFTC got their hooks into a company located in Greece). The OFAC announcement is here and the CFTC announcement is here.

The reason for the fines is that Zulutrade allegedly maintained accounts for over 400 persons in Iran, Sudan, and Syria. On this much, the CFTC and OFAC agree. Beyond that the two agencies have different stories about how the violations, which were not voluntarily disclosed by Zulutrade, occurred. OFAC’s explanation is simply that Zulutrade had no idea it needed to comply with U.S. sanctions, perhaps not surprising in the case of a company sitting in Greece even if incorporated in Delaware.

Zulutrade failed to screen or otherwise monitor its customer base for OFAC compliance purposes at the time of the apparent violations. This failure was the result of a lack of awareness regarding U.S. sanctions regulations.

But to listen to CFTC the problem was that Zulutrade was aware of its responsibilities, tried to comply with them and botched it.  The Zulutrade compliance program, according to CFTC, provided that Zulutrade

may delegate implementation to third party service providers or agents. The procedure also says that if implementation is delegated, “Zulutrade shall have a written agreement with the other entity outlining the other entity’s responsibilities, and shall actively monitor the delegation to assure that the procedures are being conducted in an effective manner.” However, Respondent did not follow its procedure for OF AC screening. Specifically, Respondent relied entirely upon third parties to implement its procedures but Respondent did not have written agreements with all such third parties and OF AC screening was not performed.

I do not see any way to read these two narratives as consistent. OFAC says Zulutrade had no idea it needed to comply, but CFTC says that Zulutrade knew it need to comply but delegated the responsibility to third parties, although not in the fashion required by its compliance program and, apparently, without checking to see if the third parties were in fact screening. It’s hard to explain these two different accounts of what happened other than by the fact that OFAC and CFTC are in different parts of Washington and their telephones must not be working.

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Sep

12

New Russian Sanctions Add Parties to SSIL and SDN Lists


Posted by at 1:48 pm on
Category: Russia Designations

This morning OFAC added a number of Russian entities to the SSIL and SDN Lists.  Those new designations are the following:

The following entities have been added to OFAC’s SDN List:

JOINT STOCK COMPANY ALMAZ-ANTEY AIR DEFENSE CONCERN MAIN SYSTEM DESIGN BUREAU NAMED BY ACADEMICIAN A.A. RASPLETIN (a.k.a. A.A. RASPLETIN MAIN SYSTEM DESIGN BUREAU; a.k.a. ALMAZ-ANTEY GSKB; a.k.a. ALMAZ-ANTEY GSKB IMENI ACADEMICIAN A.A. RASPLETIN; a.k.a. ALMAZ-ANTEY MSDB; a.k.a. ALMAZ-ANTEY PVO ‘AIR DEFENSE’ CONCERN LEAD SYSTEMS DESIGN BUREAU OAO ‘OPEN JOINT-STOCK COMPANY’ IMENI ACADEMICIAN A.A. RASPLETIN; a.k.a. GOLOVNOYE SISTEMNOYE KONSTRUKTORSKOYE BYURO OPEN JOINT-STOCK COMPANY OF ALMAZ-ANTEY PVO CONCERN IMENI ACADEMICIAN A.A. RASPLETIN; a.k.a. JSC ‘ALMAZ-ANTEY’ MSDB; f.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO NAUCHNO PROIZVODSTVENNOE OBEDINENIE ALMAZ IMENI AKADEMIKA A.A. RASPLETINA; a.k.a. “GSKB”), 16-80, Leningradsky Prospect, Moscow 125190, Russia; Website http://www.raspletin.ru/; Email Address info@raspletin.ru; alt. Email Address almaz_zakupki@mail.ru [UKRAINE-EO13661].

JSC V. TIKHOMIROV SCIENTIFIC RESEARCH INSTITUTE OF INSTRUMENT DESIGN (a.k.a. JSC NIIP; f.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO NAUCHNO ISSLEDOVATELSKI INSTITUT PRIBOROSTROENIYA IMENI V.V. TIKHOMIROVA), 3 Ul. Gagarina, Zhukovski, Moskovskaya Obl 140180, Russia; Gagarin Str, 3, Zhukovsky 140180, Russia; Website http://www.niip.ru; Email Address niip@niip.ru; Registration ID 1025001627859; Government Gazette Number 13185231 (Russia) [UKRAINE-EO13661].

KALININ MACHINE PLANT JSC (a.k.a. KALININ MACHINE-BUILDING PLANT OPEN JOINT-STOCK COMPANY; a.k.a. KALININ MACHINERY PLANT-BRD; a.k.a. MASHINOSTROITEL’NYI ZAVOD IM. M.I. KALININA, G. YEKATERINBURG OAO; a.k.a. MZIK OAO; a.k.a. OPEN-END JOINT-STOCK COMPANY ‘KALININ MACHINERY PLANT. YEKATERINBURG’; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO MASHINOSTROITELNY ZAVOD IM.M.I.KALININA, G.EKATERINBURG), 18 prospekt Kosmonavtov, Ekaterinburg, Sverdlovskaya obl. 620017, Russia; Email Address info@zik.ru [UKRAINE-EO13661].

MYTISHCHINSKI MASHINOSTROITELNY ZAVOD, OAO (a.k.a. JSC MYTISHCHINSKI MACHINE-BUILDING PLANT; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO ‘MYTISHCHINSKI MASHINOSTROITELNY ZAVOD’), 4 ul. Kolontsova Mytishchi, Mytishchinski Raion, Moskovskayaobl 141009, Russia; UL. Koloncova, d.4, Mytishi, Moscow region 141009, Russia; Website www.mmzavod.ru; Email Address mmzavod@mail.ru; Registration ID 1095029003860 (Russia); Government Gazette Number 61540868 (Russia) [UKRAINE-EO13661].

OAO ‘DOLGOPRUDNY RESEARCH PRODUCTION ENTERPRISE’ (a.k.a. DOLGOPRUDNENSKOYE NPP OAO; a.k.a. DOLGOPRUDNY; a.k.a. DOLGOPRUDNY RESEARCH PRODUCTION ENTERPRISE; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO DOIGOPRUDNENSKOE NAUCHNO PROIZVODSTVENNOE PREDPRIYATIE), 1 Pl. Sobina, Dolgoprudny, Moskovskaya obl. 141700, Russia; Proshchad Sobina 1, Dolgoprudny 141700, Russia; Email Address dnpp@orc.ru; Registration ID 1025001202544; Tax ID No. 5008000322; Government Gazette Number 07504318 [UKRAINE-EO13661].

The following entities have been added to OFAC’s Sectoral Sanctions Identifications List pursuant to the directives that can be found here
 

​AK TRANSNEFT OAO (a.k.a. AKTSIONERNAYA KOMPANIYA PO TRANSPORTUNEFTI TRANSNEFT OAO; a.k.a. OAO AK TRANSNEFT; a.k.a. OIL TRANSPORTING JOINT-STOCK COMPANY TRANSNEFT; a.k.a. TRANSNEFT; a.k.a. TRANSNEFT OJSC; a.k.a. TRANSNEFT, JSC), 57 B. Polyanka ul., Moscow 119180, Russia; 57 Bolshaya. Polyanka, Moscow 119180, Russia; Website www.transneft.ru; Email Address transneft@ak.transneft.ru; Executive Order 13662 Directive Determination – Subject to Directive 2; Registration ID 1027700049486; Tax ID No. 7706061801; Government Gazette Number 00044463; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.[UKRAINE-EO13662].

LUKOIL OAO (a.k.a. LUKOIL; a.k.a. LUKOIL OIL COMPANY; a.k.a. NEFTYANAYA KOMPANIYA LUKOIL OOO; a.k.a. NK LUKOIL OAO), 11 Sretenski boulevard, Moscow 101000, Russia; Website www.lukoil.ru; Email Address info@lukoil.ru; Executive Order 13662 Directive Determination – Subject to Directive 4; Registration ID 1027700035769; Tax ID No. 7708004767; Government Gazette Number 00044434; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives. [UKRAINE-EO13662].

OJSC GAZPROM NEFT (a.k.a. GAZPROM NEFT OAO; a.k.a. JSC GAZPROM NEFT; a.k.a. OPEN JOINT-STOCK COMPANY GAZPROM NEFT; f.k.a. SIBIRSKAYA NEFTYANAYA KOMPANIYA OAO), Let. A. Galernaya, 5, ul, St. Petersburg 190000, Russia; Ul. Pochtamtskaya, 3-5, St. Petersburg 190000, Russia; 3-5 Pochtamtskaya St., St. Petersburg 190000, Russia; 125 A. Profsoyuznaya Street, Moscow 117647, Russia; Website http://www.gazprom-neft.com/; Email Address info@gazprom-neft.ru; alt. Email Address pr@gazprom-neft.ru; alt. Email Address shareholders@gazprom-neft.ru; alt. Email Address ir@gazprom-neft.ru; Executive Order 13662 Directive Determination – Subject to Directive 2; alt. Executive Order 13662 Directive Determination – Subject to Directive 4; Registration ID 1025501701686; Tax ID No. 5504036333; Government Gazette Number 42045241; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives. [UKRAINE-EO13662].

OPEN JOINT STOCK COMPANY GAZPROM (a.k.a. GAZPROM OAO; a.k.a. OAO GAZPROM), 16 Nametkina St., Moscow, Russia GSP-7, 117997, Russia; 16 Nametkina ul., Moscow 117991, Russia; Website www.gazprom.ru; Email Address gazprom@gazprom.ru; Executive Order 13662 Directive Determination – Subject to Directive 4; Registration ID 1027700070518 (Russia); Tax ID No. 7736050003 (Russia); Government Gazette Number 00040778 (Russia); For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives. [UKRAINE-EO13662].

ROSTEC (a.k.a. ROSTEC STATE CORPORATION; a.k.a. RUSSIAN TECHNOLOGIES; a.k.a. RUSSIAN TECHNOLOGIES STATE CORPORATION FOR ASSISTANCE TO DEVELOPMENT, PRODUCTION AND EXPORT OF ADVANCED TECHNOLOGY INDUSTRIAL PRODUCT; a.k.a. STATE CORPORATION FOR ASSISTANCE TO DEVELOPMENT, PRODUCTION AND EXPORT OF ADVANCED TECHNOLOGY INDUSTRIAL PRODUCT ROSTEKHNOLOGII; a.k.a. STATE CORPORATION ROSTECHNOLOGII; a.k.a. STATE CORPORATION ROSTEKHNOLOGII), 24 Usacheva ul., Moscow 119048, Russia; 21 Gogolevsky Blvd., Moscow 119991, Russia; Website www.rostec.ru; Email Address info@rostec.ru; Executive Order 13662 Directive Determination – Subject to Directive 3; Registration ID 1077799030847 (Russia); Tax ID No. 7704274402 (Russia); Government Gazette Number 94137372 (Russia); For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives. [UKRAINE-EO13662].

SBERBANK OF RUSSIA (f.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO SBERBANK ROSSII; a.k.a. SBERBANK ROSSII; f.k.a. SBERBANK ROSSII OAO), 19 ul. Vavilova, Moscow 117997, Russia; SWIFT/BIC SABRRUMM; Website www.sberbank.ru; Email Address sbrf@sbrf.ru; Executive Order 13662 Directive Determination – Subject to Directive 1; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.[UKRAINE-EO13662].

SURGUTNEFTEGAS (a.k.a. OPEN JOINT STOCK COMPANY SURGUTNEFTEGAS; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO SURGUTNEFTEGAZ; a.k.a. SURGUTNEFTEGAS OAO; a.k.a. SURGUTNEFTEGAS OJSC; a.k.a. SURGUTNEFTEGAZ OAO), ul. Grigoriya Kukuyevitskogo, 1, bld. 1, Khanty-Mansiysky Autonomous Okrug – Yugra, the city of Surgut, Tyumenskaya Oblast 628415, Russia; korp. 1 1 Grigoriya Kukuevitskogo ul., Surgut, Tyumenskaya oblast 628404, Russia; Street Kukuevitskogo 1, Surgut, Tyumen Region 628415, Russia; Website www.surgutneftegas.ru; Email Address secretary@surgutneftegas.ru; Executive Order 13662 Directive Determination – Subject to Directive 4; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives. [UKRAINE-EO13662].

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Sep

10

Sen. Landrieu Attempts to Clarify the Record … But Doesn’t


Posted by at 8:28 pm on September 10, 2014
Category: Economic SanctionsOFACSDN ListVenezuela

Sen. Landrieu [Official Portrait, Public Domain]

On Sunday, in Lafayette, LA, The Advertiser printed an opinion from Sen. Mary Landrieu entitled, “Sanctions, as written, will hurt La. workers.”  While we hoped Sen. Landrieu was writing to clarify the record in response to our post last week, she was writing instead to respond to an earlier opinion in The Advertiser written by Sen. Marco Rubio and Rep. Bill Cassidy.

Sen. Landrieu began by referring to the Lake Charles, LA oil refinery as “owned by Citgo, a Venezuelan company with a strong and respected reputation in Louisiana.”  Citgo, however, is quite clearly a U.S. company, founded and incorporated in the United States over a hundred years ago.  It became wholly owned U.S. subsidiary of Petróleos de Venezuela, the Venezuelan national oil company, in 1990, but remained a U.S. company.  The hawkish view on U.S. sanctions is, of course, that Citgo, even though a U.S. company employing U.S. persons, is not immune from the conduct of its foreign parent if, in this case, Petróleos de Venezuela’s conduct were found to be at variance with U.S. economic sanctions and was added to the SDN List, its subsidiary Citgo would be equally blocked and unable to employ U.S. workers.

In her opinion, Sen. Landrieu continued to defend her opposition to the Venezuela Defense of Human Rights and Civil Society Act of 2014 because she believed that “the legislation as written was too vague” and “will continue to oppose it unless the language of this resolution makes crystal clear that there will be no threat to the [Lake Charles] refinery.”  But, as we pointed out last week, Sen. Landrieu’s references to amending the Act have led to no clear (crystal or otherwise) suggestions on how to do so.  We think we can help her out.

The Act, like other sanctions bills, already permits the President to waive the application of sanctions against a person if he determines that such waiver is necessary for the “national security interests of the United States.”  The amendment we recommend to Sen. Landrieu is to rewrite the waiver in Section 5(c)(1) to read, “The President may waive the application of sanctions under subsection (b) with respect to a person if the President determines that such a waiver is in the national security or economic interests of the United States.”  By adding simply “or economic” to the waiver condition, the President has another avenue to defend not imposing sanctions against otherwise sanctionable foreign persons.  Again, as we pointed out last week, the President would not take lightly a decision to block Citgo’s assets in Louisiana or anywhere else in United States.  Congress, moreover, would be hard-pressed to oppose a waiver if the President were able to show that imposing sanctions would have tremendous economic ramifications.

If Sen. Landrieu wants to take the position that U.S. economic sanctions against human rights violators can’t come with a cost that significantly harms the U.S. economy, there is a way to protect that interest.  Whether or not her position wins the day on the Senate floor, we think the only practical way to do so is to give the President more discretion in how he may choose not to impose sanctions.  A tidy addition of the two words “or economic” should do the trick and put to bed another odd episode of “How a Bill Becomes a Law.”

 

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Sep

9

Export Fugitive Ends Life on the Lam, Pleads to Lesser Charge


Posted by at 9:06 pm on September 9, 2014
Category: Arms ExportCriminal PenaltiesDDTCExtradition

John NakkashianA little over five years ago, we reported on a settlement agreement pursuant to which Air Shunt, Inc., agreed to pay DDTC a penalty of $100,000 in connection with three unlicensed exports of military aircraft parts. These same three violations were alleged in an indictment of an Air Shunt Vice-President, John Nakkashian, who was at the time of the settlement nowhere to be found and presumed to be a “fugitive from justice.”

For reasons not entirely clear, Nakkashian was arrested in June of this year by ICE agents at the Los Angeles International Airport. I suspect that this was not because Nakkashian was trying to sneak back into the country to vacation at Disneyland. More likely it was part of a carefully negotiated deal, because Nakkashian and the prosecutors just submitted a plea agreement to the court under which Nakkashian pleaded to one false statement count (18 U.S.C. § 1001) in connection with one of the three illegal exports set forth in the original indictment. The false statement at issue was Nakkashian’s  statement in the export documents that no license was required for the export. The government, in return, agrees to a base offense level of 8 under the Sentencing Guidelines which would mean, if Nakkashian has no prior criminal history, a sentence of zero to six months. Compare this to the original indictment where each of the three counts had a base offense level of 26, meaning a sentence of at least 63-78 months for a defendant with no prior criminal history.

That’s a sweet deal and you have to wonder how a former “fugitive from justice” got this deal until you realize that Armenia, which is where we suspected Mr. Nakkashian (by virtue of his surname) was hiding out, has no extradition treaty with the United States. Moreover, given that this was not a crime of violence, it is unlikely that Armenia would voluntarily cooperate in returning Mr. Nakkashian to the United States for trial. That gave Nakkashian a potent bargaining chip which it would seem he used to maximum benefit with the U.S. preferring to impose some penalty rather than none at all.

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