Mar

25

Dead Cubans Removed from SDN List; Fictional Daniel Garcia Stays On


Posted by at 10:02 pm on March 25, 2015
Category: Cuba SanctionsOFACSDN List

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/yoh_59/13697566663Yesterday the Office of Foreign Assets Control (“OFAC”) quietly removed a number of Cuba-related listings from its Specially Designated Nationals and Blocked Persons list. These delistings included dissolved companies, dead people and Cuban ships that had either sunk or were out of commission. For example, Amado Padron Trujillo, designated in 1986,was executed in 1989. By Cuba. For treason. Talk about a guy who couldn’t get a break.

Also delisted was the late Alfred Stern, who was once accused of spying for the Soviet Union. He fled the United States, lived in Cuba from 1963 to 1970 and died in Prague in 1986. Another dead man taken off the SDN List was Carlos Duque, a business partner of Manuel Noriega, who stopped threatening the United States when he died last October.

Even though OFAC delisted dead people and sunken ships from the SDN List, it still could not bring itself to delist the probably fictional Daniel Garcia, who allegedly threatens the United States by running a non-existent talent agency, Promociones Artisticas (PROARTE), in Mexico City. The problem with designating a non-existent Daniel Garcia is that there are plenty of real people named Daniel Garcia who, as a result, cannot open bank accounts, get loans, buy automobiles, or get on an airplane without getting searched. We wrote about the curse of being named Daniel Garcia here.

I have been told, off the record, that no one at OFAC knows who Daniel Garcia is or was, if he ever was, and why he was put on the list in the first place. That, I’m told, is part of the reason that Daniel Garcia is fated to remain on the SDN List in perpetuity.

In short, since imaginary people never die, the real Daniel Garcias of the world are just going to have to live with it.

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Mar

23

Feds Indict Man For Mistakes on Discontinued Forms


Posted by at 1:00 pm on March 23, 2015
Category: AESCriminal PenaltiesSEDs

Lamp, Typewrite and Specs by John Levanen[CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/54814530@N00/8314704680/[cropped]

As most readers of this blog know, the venerable Shipper’s Export Declaration was discontinued in 2008. Instead, exporters now file the Electronic Export Information using the Automated Export System.

Apparently the news of this change has yet to make its way into the Justice Department, which recently indicted a California man, Pavel Flider, and his company, Trident International, for “false and misleading export information … in an SED” with respect to fifteen exports made between 2011 and 2013, long after said “SED” had been definitively retired.

Oh, and because those statements on the non-existent form were false, the DOJ charged him with violating the anti-smuggling statute, 18 U.S.C. § 554, which covers any export made “contrary to any law or regulation of the United States.” I’ve criticized this ridiculously overbroad statute before, noting that it turns a trucker on his way to Canada who drives 10 hours and 1 second in a day into a smuggler and a felon. Here the rule violation that turned the defendant into a smuggler was the false statement “in an SED.”

The DOJ press release contains allegations not included in the indictment, namely that “many” (but not all) of the items at issue were “controlled dual-use programmable computer chips capable of operating in austere environments making them useful in both civilian and military applications.” If that truly is the case, you have to wonder why they are just charging the defendant with false SED statements rather than a simple export violation.

Of course, I can imagine that there will be plenty of fun in the courtroom when the prosecutors, who don’t even know which forms are filed with exports, accuse the defendants of making mistakes when they filed their export documentation.

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Mar

19

Export Car to China: Go Directly to Jail


Posted by at 12:41 am on March 19, 2015
Category: ChinaCriminal Penalties

Porsche Panamera via http://files2.porsche.com/filestore.aspx/normal.jpg?pool=multimedia&type=image&id=rd-2014-homepage-teaser-ww-panameraturbos-kw43&lang=none&filetype=normal&version=b51309d8-552d-11e4-99aa-001a64c55f5c&s=4 [Fair Use]

Everybody knows that you can go to jail for exporting a tank to China. But did you know that you can go to jail for exporting a luxury car, classified as EAR99, to China?

Well, it appears that you can. According to an article in the Milwaukee Journal-Sentinel, Mao Peng, a resident of Kenosha, Wisconsin, and his wife were arrested in Los Angeles for exporting luxury vehicles to China and sent back to Wisconsin for trial. Only the terminated criminal proceedings in Los Angeles are in PACER at the moment. The transferred case in Wisconsin has not shown up yet in PACER, so details of the charges are somewhat hard to discern.

But it appears from a number of news sources, like this article in the New York Times, that federal prosecutors have been targeting individuals who purchase luxury vehicles in the United States and then export them to China for resale. Apparently, there is a substantial price differential between the price of luxury vehicles in the U.S. and China creating an attractive arbitrage opportunity for ambitious entrepreneurs. And the auto manufacturers have some how enlisted the DOJ to help them preserve their high margins in China.

At the behest of luxury car manufacturers, the U.S. Government has been seizing cars and bank accounts, but at least one federal judge has called foul. The opinion in that case gives some clue as to the prosecutors’ theories in the luxury car export cases. In that case, the Secret Service seized bank accounts alleged to contain funds derived from an auto broker’s export business. Because luxury auto dealers are prohibited by their manufacturers from selling cars for export, dealers require purchasers to sign, in the purchase documentation, a representation that the cars are for their own use and not for export. The export brokers pay straw purchasers to buy the vehicles for them. The government’s theory is that the brokers are conspiring with the straw purchasers to commit wire fraud in connection with the personal use representations by the straw purchasers. The district court held, relying on the “convergence” requirement, that the misrepresentation was at most a contractual violation rather than a criminal matter because the auto dealers to whom the misrepresentation were made were not injured by the misrepresentation; only the manufacturers were.

Peng’s case, which appears to be the first criminal prosecution for exporting cars to China, may be somewhat different because it appears that his straw purchasers were Native Americans and that sales taxes were therefore not paid on vehicles delivered to reservations on which they lived.   It also appears that the government is alleging that Peng was continuing to use the names of the straw purchasers for more purchases than they had agreed to and that this was some kind of identity theft.   But, according to the Journal-Sentinel article, it also appears that the government’s case is  primarily based on the non-export representations made by the straw purchasers to the auto dealers.

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Mar

17

Sailing to Cuba on the General License May Not Be Smooth Sailing


Posted by at 11:51 pm on March 17, 2015
Category: Cuba SanctionsOFAC

Charlotte under full sale by Nat Benjamin [Fair Use]Here’s a bad idea: apply to the Office of Foreign Assets Control for a license to sail from Martha’s Vineyard to Cuba, have it denied, apply again, never hear back, then decide to go anyway and have the Martha’s Vineyard Times publish a story on your trip. Well, that’s what a guy named Nat Benjamin did and you can read all about it here in the Martha’s Vineyard Times.

Although he timing of the trip is not entirely clear, it appears that Benjamin, who set sail for Cuba in November 2014, arrived in Cienfuegos, Cuba, perhaps luckily for him and his crew, after the new Cuban sanctions rules went into effect on January 15, 2015. According to the Martha’s Vineyard Times article. Mr. Benjamin decided to head for Cuba without the license required at the time of his departure “in hopes that the humanitarian nature of his trip would trump any troubles.”

The question then is whether Mr. Benjamin’s trip fits within the new general license for humanitarian visits set forth in section 515.575 of the Cuban sanctions regulations.

While in Cuba, Mr. Benjamin traveled throughout the country and shared his boatbuilding experience. He was able to contact wooden boatbuilders in the Cuban city of Trinidad.

Mr. Benjamin said Cuba’s wooden boatbuilding industry is not well known outside the country. He partnered with some boatbuilders, hoping to learn about their work, and donated much-needed tools.

Section 515.575 sets forth fairly specifically the sorts of projects that qualify as humanitarian projects, and learning about the work of Cuban boatbuilders, seems to be on the outside edges at best. Here’s what is permitted:

The following projects are authorized by paragraph (a) of this section: medical and health-related projects; construction projects intended to benefit legitimately independent civil society groups; environmental projects; projects involving formal or non-formal educational training, within Cuba or off-island, on the following topics: entrepreneurship and business, civil education, journalism, advocacy and organizing, adult literacy, or vocational skills; community-based grassroots projects; projects suitable to the development of small-scale private enterprise; projects that are related to agricultural and rural development that promote independent activity; microfinancing projects, except for loans, extensions of credit, or other financing prohibited by §515.208; and projects to meet basic human needs.

Maybe this was non-formal educational training on vocational skills, but, even if it does, Mr. Benjamin also needs to be able to prove that he and everyone else devoted a full-time schedule in Cuba to these activities. Having set sail for Cuba before the new sanctions were in effect and with only a vague humanitarian purpose, Mr. Benjamin may not be able to provide this documentation. Perhaps Mr. Benjamin, his wife and his crew are in the clear on this, but this illustrates the potential difficulty in relying on the new general licenses for travel to Cuba without careful preparation and documentation.

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Mar

10

Maryland Pizza Shop Owner Pleads to Export Charges


Posted by at 11:06 pm on March 10, 2015
Category: Arms ExportCriminal PenaltiesDDTC

Da Dan Xia Weapons Cache by Colombia Prosecutor's Office [Fair Use]The owner of a Jerry’s Subs and Pizza franchise in Upper Marlboro, Maryland, pleaded guilty to shipping various rifles and rifle parts, including magazines, receivers, and sights, to Pakistan without the required license from the Directorate of Defense Trade Controls. According to the DOJ press release announcing the plea deal, Kamran Malik, the defendant, shipped the goods in packages with false return addresses and false descriptions of the contents. There is no indication as to  the intended recipients of the firearms and parts in Pakistan. As part of the plea deal, the Government has agreed to argue for a reduction in the offense level from 26 to 23, which would reduce the maximum penalty from 78 to 57 months.

Something else is going on here. There is also a sealed plea agreement supplement. That normally means that the defendant will be a cooperating witness and that the sealed supplement contains a cooperation agreement.  The purpose of sealing that information is to protect the cooperating defendant. Of course, since such supplements pretty much signal that the defendant is going to cooperate with the government, that purpose is largely lost. I suspect this means that the recipients of the items in Pakistan are of more than passing interest to the United States Government.

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