Mar

10

A Grizzly Affair with Iran


Posted by at 5:56 pm on March 10, 2014
Category: Iran SanctionsOFAC

By Robert J. Pera (Coutesy of Robert J. Pera) [CC-BY-2.5 (http://creativecommons.org/licenses/by/2.5)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3APera.jpeg
ABOVE: Robert J. Pera
CEO, Ubiquiti Networks


The Office of Foreign Assets Control (“OFAC”) announced last week that Ubiquiti Networks agreed to pay $504,225 to settle charges that Ubiquiti violated the Iran sanctions when it granted a distributor in the U.A.E. exclusive rights to distribute its products in Iran and then sold goods to that distributor which were then shipped to Iran. This was only a minor reduction from the base penalty of $560,250. The reason for Ubiquiti paying so much can be found in some harsh language from OFAC:

Ubiquiti demonstrated reckless disregard for U.S. sanction requirements; Ubiquiti was on notice in February 2010 that the conduct at issue constituted a violation of U.S. law; members of Ubiquiti’s senior management knew or had reason to know that Ubiquiti products were reexported to Iran; [and] Ubiquiti had no OFAC compliance program in place at the time of the apparent violations

Ouch.

You would think that a half-million dollar fine would have caused the company to beef up its compliance game. But head over to the company’s website and sign up for its newsletter to learn more about its products. Take a look at the country drop-down list in the sign up form and you’ll see Iran.

Of course, under the informational exception, it is not illegal to send the newsletter to Iran.  But the newsletter describes products and services that, as Ubiquiti now rather expensively has found out, cannot be shipped to Iran. So why would anyone in Iran be interested in a newsletter about something they are not able to purchase? Here’s a good export compliance tip for our readers: take Iran out of your country drop-down lists for product brochures, newsletters and other promotional materials.

The founder and owner of Ubiquiti is Robert J. Pera.  You might also know as the owner of the Memphis Grizzlies.  You might also know hims as one of the people on Forbes’s list of the ten youngest billionaires in the world.  Even in the unlikely event that he pays the entire OFAC fine out of his own pocket, he will still be a billionaire.

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3 Comments:


Interesting, The owner of Grizzlies and (Iranian Sanction)OFAC. By reading the title I thought this might be related to 7-foot-2 Iranian NBA player Hamed Hadadi who was hired by Grizzlies in Aug,2008. Back at that time first OFAC rejected having a transaction with an Iranian player and then later the license was granted. Probably Robert Pera was not Grizzlies owner at that time and does not remember.But it was a nice coincident.
Mohsen Khayat, LCB and your Blog reader in San Francisco,

http://en.wikipedia.org/wiki/Hamed_Haddadi

Comment by Mohsen Khayat on March 11th, 2014 @ 12:39 am

Mohsen – Pera purchased the Grizzlies in 2012 from Michael Heisley, the founder of Heico.

There are some things I find either amusing or interesting in the enforcement information:

“the conduct constitutes a non-egregious case” – I’d hate to see what they would have done if it was egregious, since the fine imposed was still 90% of the maximum.

“Ubiquiti’s conduct resulted in the provision of goods related to broadband wireless connectivity, worth at least $588,938, to entities located in Iran” – as usually seems to be the case, companies are essentially making peanuts compared to the potential liabilities; Ubiquiti’s income from the sales was only around $30,000 more than the potential fine.

It also looks like this was at least partially a case of ignorance, since the consideration of facts notes that “Ubiquiti was on notice in February 2010 that the conduct at issue constituted a violation of U.S. law,” and the initial statement notes that the exports in question occurred during the period “on or about March 24, 2008, to in or around February 2010.”

Given that Ubiquiti apparently ceased as soon as they were notified of the alleged illegality of their actions, and that they cooperated with OFAC in the investigation, it seems odd that the fine was only reduced 10% from the maximum despite their actions. The conclusion I’m coming to is to make sure you have an OFAC compliance program, since that lack is the only thing I can see that may have been used to justify the low reduction of the fine.

Also, as usual, the detail is much less than what outside observers want. I’d like to know more both about how the licensing arrangement with the Emirati distributor was set up and what sort of compliance program Ubiquiti put in place, since those would help other companies in attempts to avoid violating the sanctions.

Comment by SK on March 11th, 2014 @ 8:11 am

I just checked, UBNT must have read your article, as they have removed IRAN.

Comment by jim poppleton on March 11th, 2014 @ 10:28 am