Archive for the ‘Criminal Penalties’ Category


Jun

22

The Chewbacca Defense: Export Edition


Posted by at 5:26 pm on June 22, 2017
Category: Arms ExportCriminal PenaltiesDDTC

Human Cannonball by Laura LaRose [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/6shAzP [cropped and processed]The decision in United States v. Burden, decided back in November of 2016, is not breaking news, but as I’ve seen several commentaries on it recently, I thought I might weigh in.  The defendants in that case argued that they had not violated the Arms Export Control Act because — get this — ammunition magazines and grenade launcher mounts, according to the defendants, are not defense articles. The defendants argued that these items are not defense articles because they can also be used with airsoft guns.  Accordingly they claimed the magazine and mount are not defense articles as defined in section 120.4 of the International Traffic in Arms Regulations and no license was required for their export.   This is pretty much like arguing that cannons are not defense articles because you could use them in circuses to shoot people into trampoline nets.

For reasons that are not clear, this led the District Court to actually consider whether these items were defense articles or not as defined in section 120.4.  That section deals with commodity jurisdiction determinations and had no relevance to the case under consideration.  The question properly before the court was whether the grenade mounts and ammunition magazines are on the United States Munitions List (“USML”), not whether they are defense articles.

If the items are on the USML, they are by definition defense articles.   The very first sentence of the USML makes this crystal clear:

U.S. Munitions List. In this part, articles, services, and related technical data are designated as defense articles or defense services pursuant to sections 38 and 47(7) of the Arms Export Control Act.

This means that the only real question the court had to answer was whether the grenade mount and ammunition magazine were described in Category I(h) of the USML which covers “[c]omponents, parts, accessories and attachments” of firearms described in Category I, subparts (a) through (h). It doesn’t matter that these items can be used on airsoft or paintball guns any more than it matters that a cannon can be used in a circus act or a performance of the 1812 Overture. Certainly the magazine meets the definition of a component and the mount meets the definition of an attachment and that, pretty much, should have been the end of it.

Even so, the court decided that the items were defense articles not because they were on the USML but because an expert witness from DDTC said that they were defense articles. The expert in question was Robert Warren, formerly Division Chief of the Plans, Personnel, Programs, and Procedures Division of DDTC, an odd choice in comparison to, say, the division chief for the division that handles licensing for firearms.  In any event, the court noted that Warren testified that “a defense article as we termed it is anything that has a military significance or military application.”  And that, according to the court, settled the question as to whether the mount and the magazine were defense articles.

Of course, the idea that something is a defense article if it has a military application is the equally stupid mirror argument to the defendants’ nonsensical claim that something is not a defense article if it has a non-military use.  Under the standard articulated by Warren, a water canteen purchased at a camping store or a pair of camo pants purchased from a clothing store would be defense articles.

As noted above, there was no need for anyone to dive down this rabbit hole and figure whether the mount and the magazine were defense articles.  If they were described by Category I(h) as attachments and components of firearms then they were defense articles.  End of story.  No further proof as to whether they were defense articles was necessary.   And, given that the defendants did not appear to dispute that these items were components and attachments of firearms but only that they were defense articles, it is not unfair to accuse them of raising the fabled Chewbacca defense.

Photo Credit: Human Cannonball by Laura LaRose [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/6shAzP [cropped and processed]. Copyright 2009 Laura LaRose

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Jun

20

Shedding Light on Gun Exports on the Dark Web


Posted by at 9:57 pm on June 20, 2017
Category: Arms ExportCriminal PenaltiesDDTC

Cobray M-11 Pistol via https://www.gunsamerica.com/UserImages/199/917418641/wm_md_10452136.jpg [Fair Use]
ABOVE: Cobray M-11 Pistol

Two geniuses in Georgia hit on what they must have imagined was the perfect crime: sell guns to foreigners anonymously on the dark web; get paid anonymously in Bitcoins; make a billion dollars; spend the rest of their lives watching extreme wrestling and tractor pulls on cable TV. Except, of course, what really happened means that their cable TV viewing options over the next few years are likely to be extremely limited.

Even if, as the dog in the famous cartoon tells the other dog, “on the Internet nobody knows you’re a dog” (or a gun smuggler), you can’t stay on the Internet forever. Not surprisingly, even though the two defendants tried to cloak themselves behind the dark web and supposedly anonymous cryptocurrency, they still had to leave their computers, buy the guns, take them to the post office and ship them to real people. And that, as they say, was all she wrote.

According to the indictment, the two defendants, Gerren Johnson and William Jackson, who used the pseudonyms CherryFlavor and CherryFlavor_2, first captured the attention of authorities when a 9mm pistol was “recovered” in the Netherlands from a buyer who said he bought the gun from dark web vendor named CherryFlavor. Shortly thereafter Australian customs recovered another pistol hidden in a karaoke machine (see, nothing ever good comes from karaoke), and the Australian buyer also identified his seller as CherryFlavor.

And here’s how the feds figured out who was hiding behind the CherryFlavor screen name: according to the indictment, Johnson bought an unusual gun, a Cobray Model M-11 Georgia Commemorative 9mm pistol from a dealer in Georgia. Two days later he posted the gun for sale on his dark web site. Now the feds had the link they needed: a non-virtual gun dealer making a real sale in the real world to a real person of a real gun that then shows up on CherryFlavor’s page. Game over.

The interesting thing is what Messrs. CherryFlavor are charged with in the indictment. The first count is operating an unregistered firearms business. The second and third counts are for exports of two guns in violation of the anti-smuggling statute, 18 U.S.C. 554, which forbids exports from the United States “contrary to any law or regulation of the United States.” Oddly, the law said to be violated was not the Arms Export Control Act but 18 U.S.C. § 922(e) which prohibits shipping a firearm without disclosing to the shipper that a firearm is being shipped.

So why aren’t the defendants charged with what appears to be a clear violation of the Arms Export Control Act? We know that prosecutors have argued, not very persuasively, that the knowledge requirement for violations of section 554 is just an intentional export without any requirement that the defendant knows the intentional export is in violation of law. But here, if the allegations of the indictment are true, the case that the defendants knew what they were doing is, as they say, a slam dunk. They sold guns to foreign customers using pseudonyms on the dark web in exchange for Bitcoins and sent the guns hidden in karaoke machines. Criminal intent does not get much clearer than that. My guess is that there is more going on here than Dumb and Dumber selling guns on the dark web. Charges like this suggest that the prosecutors have negotiated with the defendants in exchange for some broader cooperation. If that’s true, it will be interesting to see what happens next.

UPDATE:  Commenter “Name” makes a good point: because the case is in the 11th Circuit, the prosecution has to deal with a stricter intent requirement and has to show that the defendants knew that an export license was required.  See United States v. Macko, 994 F.2d 1526 (11th Cir. 1993).  The defendants’ concealment of the gun in a karaoke machine shows a knowledge of illegality but, perhaps, not necessarily a knowledge of a license requirement under the AECA.  It was for this reason, the commenter said, that the charge was under 18 U.S.C. § 554, which might not be subject to the stricter intent requirement.  Commenter “Name” used a VPN to conceal his/her identity and location, so I suspect this is a person who has some actual knowledge of why the government charged this case the way it did.

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(No republication, syndication or use permitted without my consent.)

Jun

13

Sales Clerk Charged with Illegal Exports Given New Trial


Posted by at 10:17 am on June 13, 2017
Category: BISCriminal Penalties

Alexander Fishenko
ABOVE: Alexander Fishenko


Almost a year ago, I commented on the fate of a lowly sales clerk, Anastasia Diatlova, in the prosecution of Alexander Fishenko, his company Arc Electronics, and employees of Arc for exports of various items to Russia without a license. Ms. Diatlova, the most junior sales clerk in the organization, had refused a plea of time served and gone to trial. This infuriated the prosecutors who took that offer off the table when a jury convicted Ms. Diatlova. Last month, however, Ms. Diatlova was granted a new trial on the export charges. The district court, in granting the new trial, held that there was insufficient evidence that Ms. Diatlova knew that it was illegal to ship the item in question.

The court described the evidence of criminal intent presented by the prosecution as follows:

(1) Diatlova received training on export controls and was aware that microelectronics, when mailed to Russia, are “generally subject to U.S. export control laws (emphasis added);” (2) the higher-ups at Arc (Fishenko, Posobilov and Abdullaev) “routinely lied and fabricated documents in order to evade export control restrictions”; (3) Diatlova filled out a “End-Use Certification/Statement of Assurance” indicating that the end user was Izhevsky Radio Plant, when the recipient was instead Atrilor, LTD, making her, at a minimum, guilty of aiding and abetting the illegal shipment of that part; and that proof exists that she was aware in April of 2012, upon arrest, that the part at issue was restricted.

The court held that allowing the jury verdict to stand “would constitute a ‘manifest injustice’ in light of the flimsiness of this evidence,” noting quite reasonably that her knowledge about the export at the time of arrest had little bearing on her knowledge as of the time of the export. Nor could the illegal intent of other employees be attributed to her. The court did not even comment on the export control training, implicitly rejecting the notion that training alone can lay the groundwork for subsequent criminal prosecution. Finally, putting the wrong end-user on the end-use certificate was seen as the court as a sufficient predicate to let Ms. Diatlova’s conviction for wire fraud stand but not as proof that she knew the export was illegal.

This highlights the difficulty confronted by prosecutors when they target people in the cubicles.  As we noted in our prior post on Ms. Diatlova, she had only an eighth-grade education and was being paid only $15 per hour.   Sadly, this appears to be another case of prosecutors who are more concerned about their conviction stats than anything else.

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(No republication, syndication or use permitted without my consent.)

Apr

18

Indictment of SDN Ignores OFAC’s 50 Percent Rule


Posted by at 2:56 pm on April 18, 2017
Category: Criminal PenaltiesOFACSDN List

Kassim Tajideen Mugshot [Fair Use]
ABOVE: Kassim Tajideen

Prosecutors love to add cute little nicknames to indictments.   In their view, United States v. John Jones aka Vicious Johnny the Kneecapper sounds much, much better than plain old vanilla United States v. John Jones.  So, in the indictment against recently arrested Kassim Tajideen the government makes sure to lead off with a few akas:  “Big Haj” and “Big Boss.”  In this case, however, maybe the United States needs its own aka as well: “United States aka United States of Imaginary Laws”

Tajideen is on the Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked Persons.   He is being prosecuted for “causing” U.S. persons to violate the rules against transactions with blocked parties.   Charging an SDN for doing business with U.S. persons, rather than charging U.S. persons that do business with the SDN, is unusual but not unprecedented.

The problem here, however, is not that the prosecution is unusual.   The problem is that the prosecution is based on a rookie mistake and an careless misinterpretation of governing law.  The theory of the indictment is that Tajideen, by not disclosing that he controlled various companies, caused U.S. persons to transact business with those companies in violation of U.S. sanctions.   Here’s what the indictment says:

The business empire utilized different corporate entities over the years, all controlled by KASSIM TAJIDEEN, including Epsilon, ICTC, and Sicam Ltd., to procure and distribute goods throughout the world, including the United States. KASSIM TAJIDEEN was the ultimate owner and chief decision-maker of the business empire, with IMAD HASSOUN acting as confidante and lieutenant. KASSIM TAJIDEEN benefited directly and indirectly from the operation of the business empire.

22. At all relevant times during the conspiracy, the defendant KASSIM TAJIDEEN was designated a Specially Designated Global Terrorist by the United States Department of the Treasury, Office of Foreign Assets Control, pursuant to the International Emergency Economic Powers Act, Executive Order 13224, and the Global Terrorism Sanctions Regulations. As discussed above, the SDGT designation resulted in any property in the United States, or in the possession or control of U.S. persons, in which KASSIM TAJIDEEN had an interest, being blocked, and all U.S. persons were generally prohibited from transacting business with, or for the benefit of, KASSIM TAJIDEEN.

Most readers here will immediately see the problem with the prosecutor’s case. In effect, the prosecution is asserting, wrongly, that it is illegal for a U.S. person to deal with an entity in which an SDN has any interest. Alternatively, the prosecutors might be asserting above that it must be at least a controlling interest. But whichever the case, that is just not true.

OFAC has issued clear guidance, easily found by anyone with access to the Internet (which presumably includes the prosecutors here) that describes the circumstances in which any entity in which an SDN has interest is itself also blocked by operation of law.  This guidance makes clear that it takes more than “any interest” or even a “controlling interest” for ownership by an SDN result in the owned entity being itself blocked.

Here is what that guidance says:

Persons whose property and interests in property are blocked pursuant to an Executive order or regulations administered by OFAC (blocked persons) are considered to have an interest in all property and interests in property of an entity in which such blocked persons own, whether individually or in the aggregate, directly or indirectly, a 50 percent or greater interest. Consequently, any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person.

The guidance makes it perfectly clear that control alone does not result in the SDN’s company being blocked:

U.S. persons are advised to act with caution when considering a transaction with a non-blocked entity in which one or more blocked persons has a significant ownership interest that is less than 50 percent or which one or more blocked persons may control by means other than a majority ownership interest. Such entities may be the subject of future designation or enforcement action
by OFAC.

There’s good reason for this rule. Although majority ownership of an entity is something on which information can be easily gathered, it is difficult, if not impossible, for a party to a transaction to determine every owner of that entity or even the person who might ultimately exercise de facto control over that entity. So, under the OFAC guidance, it was not illegal for U.S. persons to transact business with these entities in which Tajideen had some interest, maybe even a controlling one. If those transactions were not illegal, then Tajideen did not cause any illegal transactions and the bottom drops out of the government’s case.

What the government had to allege here, and what it somehow was unable to do, is that Tajideen had a “50 percent or greater” interest in Epsilon, ICTC, and Sicam Ltd.  Even saying, as the indictment does, in one place that Tajideen was the “ultimate owner and chief decision-maker of the business empire” is not the same as saying that he had an interest of 50 percent or more in the three companies at issue.

Indeed the government’s silence here, like the dog’s silence in The Adventure of Silver Blaze, says all you need to know.

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Mar

8

Did Undercover Agent Give Legal Lecture to Defendant on Export Law or Not?


Posted by at 10:07 am on March 8, 2017
Category: Arms ExportCriminal PenaltiesDDTC

Kolar Rahman Mug Shot
ABOVE: Kolar Rahman

Several law enforcement officials have said to me that what often makes their jobs so easy is that many criminals are several forks short of a kitchen utensil drawer.   With that in mind, we bring you the story of Kolar Rahman Anees Ur Rahman, who, if the criminal complaint is to be believed, was pretty stupid.  But maybe not.  You decide.

Mr. Rahman is an Indian national living in the UAE who just received five years probation in connection with a scheme to ship sniper rifles to Belarus. After an associate of Rahman’s contacted a gun manufacturer in the United States with a request to buy guns for Belarus, a federal undercover agent got in contact with Rahman in the UAE to continue the purchase negotiations. The undercover (or UCA in fedspeak) lured Rahman to Chicago, which was Rahman’s second mistake, the first of course having been trying to ship rifles from the US to Belarus in the first place.

Now what follows as described in the criminal complaint is astonishing, if true:

The UCA reminded RAHMAN that all of the .308 Caliber sniper rifles are export controlled in the U.S. by ITAR and could not be exported to certain countries without a license. The UCA reminded RAHMAN, due to the policy of denial in place by the U.S. government against Belarus, that it was not possible to obtain the required export licenses needed to legally export the .308 Caliber sniper rifles. The UCA explained that in order to export the firearms, they would need to make misrepresentations on the paperwork as to where the rifles would be shipped. RAHMAN informed the UCA he understood and still wanted to continue with their business transaction. The UCA informed RAHMAN he wanted to make sure RAHMAN understood the risks and that they would both go to jail if they were caught illegally exporting the rifles and ammunition. RAHMAN informed the UCA he understood the risk and that he desired to complete their business transaction as planned.

Seriously? This lengthy lecture on the law didn’t set off alarm bells, warning signals, blaring sirens, flashing lights and abject fear in Rahman? What real criminal ever gives a lengthy lecture to his associates about criminal law before embarking on the planned conduct? “Hey, Rufus, ya know robbing banks is illegal, right? And if we carry guns the penalty is increased to 30 to life? If we do this, we can both go to jail for at least thirty years or more. You know that, right? Speak up. I can’t hear ya. Okay, so you are absolutely, positively certain without any equivocation that you still want to rob this bank and you’re doing so of your own free will even though you might wind up in jail for a very long time? Don’t nod, Rufus, I need to hear you say yes.”

The UCA, if he in fact said all this, was making sure he could establish the necessary criminal intent for an export violation. This is critical where an Indian national living in the UAE might not know the ins and outs of U.S. export laws or about the U.S. arms embargo on Belarus. (I bet even a bunch of Americans don’t know about the Belarus embargo.) But you have to wonder why Rahman when (and if) he got this five-minute spiel on U.S. law didn’t run out the door of the hotel room in Chicago and hop on the next flight back to the UAE.

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)