Archive for the ‘Criminal Penalties’ Category


Apr

22

Houston CEO Indicted For Not Having an Export License That He Didn’t Need


Posted by at 7:23 pm on April 22, 2015
Category: BISCriminal PenaltiesIran SanctionsOFAC

Smart Power Systems and Bahram Mechanic via http://www.smartpowersystems.com/content/main/corporateinformation.html [Fair Use]Houston-based Smart Power Systems and its CEO Bahram Mechanic (as well as various other individuals) were indicted last week on charges that they exported certain export-controlled items to Iran without a license. The indictment alleges that certain uninterruptible power supplies, microcontrollers and digital signal processing chips, all allegedly classified as ECCNs 3A991,  were transshipped through third countries to a company in Tehran, allegedly controlled by Mechanic.

Not surprisingly, the indictment tries to make the case that these run-of-the-mill electronic items are critical military goods that Iran can use to launch missiles and build nuclear bombs. Of course, the government’s credibility in its assessment of the alleged capabilities of these items is rather diminished by its claim that these items are classified as ECCN 3A991, one of the least stringent export controls under the Export Administration Regulations. At best, however, the microcontrollers are 3A991.a, which covers microprocessors meeting certain computational benchmarks. The uninterruptible power supplies are not covered at all by 3A991 and are almost certainly EAR99.

Worse, for the government, if the uninterruptible power supplies are EAR99,  then the government’s theory of what laws were broken by their exports to Iran completely collapses. The indictment alleges that the defendants violated the International Emergency Economic Powers Act because no license was obtained from the Bureau of Industry and Security (“BIS”). Apparently, no one at the DOJ looked at EAR Section 746.7, which indicates that a BIS license is required only for certain items. EAR99 items are not among them.

Of course, a license from the Office of Foreign Assets Control (“OFAC”) is required to export EAR99 items from the United States to Iran. But the government is not alleging Mechanic and Smart Power needed an OFAC license; instead, it is saying they  didn’t have a BIS license even though they did not need that license. If the government can’t get the law it is enforcing right, it should not try to send people to jail for violating it.

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Apr

21

Texas Judge Indicted For Illegal Firearm Exports


Posted by at 10:38 pm on April 21, 2015
Category: Arms ExportCriminal PenaltiesDDTC

Judge Tim Wright [Credit: Williamson County][Fair Use]
ABOVE: Judge Tim Wright


Well, it is probably safe to say that not many (if any) judges have been indicted on allegations of illegally exporting firearms. But that’s what happened to Judge Tim Wright, a judge in Williamson County, Texas, who was charged with various firearm charges, including illegal exports of firearms. There are few details in the indictment beyond alleging that Judge Williams, which the indictment rather oddly insists on calling “Timothy L. Wright, III, aka ‘The Judge,’” sold guns to a person without an export license knowing that the guns were intended for export.

This is a strangely odd locution: it alleges that Judge Wright knew that the guns were for export but does not allege that the Judge knew that the purchaser did not have an export license or that the Judge knew that his sale or the export were illegal. This probably explains why Judge Wright was charged under the Anti-Smuggling Statute, 18 U.S.C. § 554, and not under the Arms Export Control Act, 22 U.S.C. § 2278. There is well-established precedent under the Arms Export Control Act that a conviction can only be had if the defendant knew that his export was in violation of law. On the other hand, it appears hat prosecutors believe, as I have said previously, that they can establish a criminal violation of 18 U.S.C. § 554 simply by proving the defendant knew that the item was to be exported without any requirement that they prove he knew that the export was illegal.

Whether a court will send someone to jail on such a flimsy showing of criminal intent remains to be seen.

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Apr

16

Thursday Grab Bag


Posted by at 8:05 am on April 16, 2015
Category: Crimea SanctionsCriminal PenaltiesCuba SanctionsIran SanctionsOFACSudanSyria

Grab BagHere are a few recent developments that you may have missed:

  • Last month we criticized the Department of Justice for conspiring with foreign luxury car makers to jail U.S. citizens who exported luxury cars to China to arbitrage the difference between U.S. and Chinese prices for these vehicles. Apparently, the DoJ now is having second thoughts about wasting taxpayer money and its resources on this nonsense. According to the  New York Times, settlements have recently been reached in nine states where prosecutors have agreed to return seized cars to, and drop charges against, luxury car exporters. Good.
  • On Monday we reported that Obama was going to drop Cuba from the list of state sponsors of terrorism, a move we thought was largely symbolic. Yesterday he did just that, and provided the 45-day notice required under the three acts that provide the basis for the list: § 6(j)(4)(A)(i)-(iii) of the Export Administration Act of 1979; § 40(f)(1)(A)(i)-(iii) of the Arms Export Control Act; and § 620A(c)(1)(A)-(C) of the Foreign Assistance Act of 1961. The linked New York Times article wrongly states that Congress can block this action with a joint resolution. Only the Arms Export Control Act provides for this blocking mechanism, and, as we noted, there’s no way that the White House will remove Cuba from the current arms embargo. So a joint resolution under the AECA would be, like the removal itself, largely symbolic
  • The Office of Foreign Assets Control (“OFAC”) revised its rules on Monday to amend the Syrian Sanctions Regulations to permit certain activities with respect to written publications, including the ability to pay advances and royalties, to substantively edit manuscripts and to create marketing campaigns. These activities have been permitted for Cuba, Sudan and Iran since 2004. Don’t try this yet in Crimea which remains, bizarrely and incomprehensibly, the most heavily sanctioned place on the face of the planet
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Mar

30

Brotherly Love Only Goes So Far


Posted by at 1:15 pm on March 30, 2015
Category: Arms ExportCriminal Penalties

Ariel Maralit[Fair Use]I’ll admit it and apologize in advance.  The main reason for this story and for this link to Britain’s worst newspaper is so that I can run the picture of Ariel Maralit. Ariel, the guy in the photo on the right brandishing the weapons and wearing the moronic grin, is the brother of former NYPD officer Rex Maralit and former U.S. customs agent Wilfredo Maralit.  Both former law enforcement brothers have now pleaded guilty to violations of the Arms Export Control Act in connection with a little business they ran with brother Ariel in the Philippines.   Seems Ariel would take orders from customers in the Philippines for AR-15s, semi-automatic weapons and assault rifles and would then send these orders on to brothers Rex and Wilfredo in the United States.  The brothers would use their law enforcement discounts to buy the weapons cheaply and then pack them up and ship them to Ariel for a tidy profit.  Rex is quoted as saying he just thought he was “avoiding red tape.”   Wilfredo’s lawyer said he was just in it for the money.

And now for the best part.  Rex and Wilfredo

were told they would receive a lighter sentence if they could convince their brother Ariel to come to the United States and face charges, but the brothers were unsuccessful.

Allegedly Ariel replied to his brothers’ pleas to give himself up by sending them a recording of “Baretta’s Theme.”  You remember: “Don’t do the crime if you can’t do the time.” Okay, I made up this last part about sending the song, but once you start linking to the Daily Mail, it’s hard not to follow their example.

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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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