Archive for the ‘Criminal Penalties’ Category


Jul

15

Who Sang First, Kraaipoel or Fokker?


Posted by at 6:36 pm on July 15, 2014
Category: Criminal PenaltiesIran SanctionsOFAC

Rob KraaipoelBack in the early days of this blog in 2007, we reported on the case of Robert Kraaipoel, a Dutch businessman who was indicted for selling U.S. origin items to Iran, even though Mr. Kraaipoel had never set foot in the United States and even though the sales were completely legal under Dutch law. We challenged the notion that under international law, the U.S. origin of the items was enough of a basis to assert criminal jurisdiction over Mr. Kraaipoel.

In 2009, we reported that Mr. Kraaipoel had voluntarily flown to the United States to face the music. We expressed some surprise that he had done this and expressed even more surprise that the court let him fly back to the Netherlands after a guilty plea. At the time we noted that this was likely because he had agreed to cooperate with the government in indicting other bigger fish.  Indeed, the sentencing memorandum filed by the U.S. Attorney in 2012 cited substantial and extensive cooperation by Mr. Kraaipoel dating back to 2007.  The court ultimately sentenced Mr. Kraaipoel to sixty months of probation and no prison time, no doubt because of Mr. Kraaipoel’s cooperation with U.S. authorities vis-à-vis his dealings with Iran.

Now it appears that one of the companies that got snared by Kraaipoel’s cooperation may have been the Dutch company Fokker Services BV, about which we reported last month.  Fokker agreed to pay $21 million to OFAC and to the DOJ under a deferred prosecution agreement.  Interestingly, Kraaipoel’s role in the Fokker case may derail the deferred prosecution agreement itself.

The federal court judge charged with approving the deferred prosecution agreement was concerned that the agreement for lenient treatment was premised on Fokker’s voluntary disclosure in 2010.  Because Kraaipoel began talking with prosecutors back in 2007, there was some concern, and some sources who told Bloomberg News, that the government knew about Fokker’s misconduct well before the voluntary disclosure, which would, of course, substantially detract from the credit that Fokker should receive for having voluntarily disclosed the matter.

A hearing on the deferred prosecution agreement to resolve these issues is scheduled for July 24.

 

Permalink Comments (1)

Bookmark and Share



Jun

26

How Not To Smuggle Guns To Nigeria


Posted by at 8:38 pm on June 26, 2014
Category: Arms ExportCriminal Penalties

Mugshot of Sheriff Olaleran Mohammed [Fair Use]
ABOVE: Sheriff Mohammed


A federal jury in Minnesota, on June 16, convicted a naturalized U.S. citizen on charges that he illegally exported guns to Nigeria without a license. At issue were eight handguns that Sheriff Olaleran Mohammed stuffed into brown paper bag and placed between the seats of a 1998 Mercury that was being shipped via a cargo ship container to Nigeria. Spanish police discovered the guns when the ship called in Valencia, Spain, on its way to Lagos.

The trial brief filed by Mr. Mohammed’s lawyers before the jury trial gives a pretty clear idea why he was ultimately convicted. First, the brief tries to rely on the exemption in section 123.17(c) of the ITAR for temporary exports of not more than three nonautomatic weapons for personal use. Since there were eight guns in the paper bag in the Mercury, I guess the idea here was that the defendant could invoke the exemption three times to cover his eight guns, or something like that.

The other argument forwarded by the defendant’s trial brief on the export charge is that Mr. Mohammed had no idea whatsoever that it was illegal to export firearms for personal use to Nigeria without a license. Which is, of course, why he stuffed them in a paper bag and hid them in a 1998 Mercury he was sending to Nigeria.

Permalink Comments (3)

Bookmark and Share



Jun

5

Beat the Fokkers


Posted by at 9:32 pm on June 5, 2014
Category: Criminal PenaltiesIran SanctionsOFAC

Fokker Services Building in Hoofddorp via http://www.fokker.com/sites/default/files/styles/carousel_innovations/public/media/Images/Services/Contact_Fokker_Services_Location_Hoofddorp_637x286.jpg?itok=NYP0cc2k [Fair Use]The Office of Foreign Assets Control (“OFAC”) announced today that a $21 million fine had been extracted from the Dutch company Fokker Services BV in connection with its export of U.S. origin spare aircraft parts from the Netherlands to Iran and Sudan. The re-exports to Iran and Sudan by a Dutch company were prohibited under section 560.205 of the Iran regulations and section 538.507(b) of the Sudan regulations because the aircraft parts were presumably ECCN 9A991, although this fact is not expressly stated.

Half of the $21 million dollars is being paid in connection with a deferred prosecution agreement with the U.S. Attorney for the District of Columbia. This is disturbing because the OFAC announcement makes clear that the exports were voluntarily disclosed by Fokker to OFAC. One of the major incentives for a voluntary disclosure is to avoid criminal prosecution. After the Fokker case, people are certainly going to think twice about making a voluntary disclosure.

Nothing in OFAC’s description of the reasons for the penalty justify turning a voluntary disclosure into a criminal prosecution. OFAC describes the violation as “wilful and reckless” because Fokker knew that these were U.S. origin parts. Note that there is no claim that Fokker knew that its export of these parts from the Netherlands to the embargoed countries was a violation of U.S. law, only that it knew that the parts were U.S. origin. Foreign persons might well not understand that exports of U.S. origin parts from their own country and in compliance with their own laws would be illegal, so OFAC is making an unjustifiable leap from knowledge of the parts’ origin to a “wilful and reckless” violation of law. Another aggravating factor was the absence of a U.S. sanctions compliance program at the Dutch company, again hardly a sound reason for turning a voluntary disclosure into a criminal prosecution.

Permalink Comments (4)

Bookmark and Share



May

30

Having Baggage Is Not A Crime


Posted by at 5:10 pm on May 30, 2014
Category: Criminal PenaltiesDoJEconomic SanctionsIran SanctionsSanctions

Please Report Any Unattended Luggage by Kenneth Lu https://www.flickr.com/photos/toasty/2619866851/in/photolist-DLUFQ-5z9X21-K3Ta2-4Zvv98-JHpPQ-AEW4c CC BY 2.0 [https://creativecommons.org/licenses/by/2.0/] (cropped)

A federal jury in Ft. Lauderdale, Florida recently acquitted Patrick Campbell on charges that alleged he attempted and conspired to violate U.S. economic sanctions against Iran.  As we reported at the time of his arrest last year, Campbell, who is from Sierra Leone, was detained at JFK Airport as soon as he cleared customs and was found to have uranium inside shoes packed in his luggage.  Prior to his U.S. arrival (and immediate arrest), according to the government, Campbell had been communicating with an undercover ICE agent in Ft. Lauderdale in order to arrange the sale of uranium from Sierra Leone to Iran.

We surmised at the time of his initial charging that Campbell had arguably done nothing in the United States that constituted an attempt or conspiracy to commit a U.S. sanctions violation simply by entering the United States.  Because the Iran Transactions and Sanctions Regulations cover only exports from the United States (which this was not) or exports by a U.S. person (which Campbell was only by virtue of being physically present in the United States), he could only be convicted for what he actually did while in the United States.  The Justice Department tested those boundaries, and a jury wasn’t convinced.  A great deal of credit should be given to Campbell’s attorney, Richard Serafini.

We spoke with Mr. Serafini about the case and the arguments he made to the jury in Campbell’s defense.  Mr. Serafini said that he emphasized to the jury that the Justice Department had not shown beyond a reasonable doubt that Campbell had done anything with the specific intent to violate U.S. sanctions.  In addition, he said that he told the jury that Campbell should not be considered to have committed any criminal acts as a U.S. person simply because he was lured to enter the United States by law enforcement.  Mr. Serafini said that he finally impressed upon the jury that, regardless of any criminal act that may have been committed, Campbell had been entrapped by the ICE agent to do so.

While no one can know what may have led the jury to acquit, it is certainly noteworthy that one or more of those arguments possibly resonated with jurors.  The jury instructions shed a little more light in that the court explained an attempt must be “more than simply preparing” and have a ”substantial step … that would normally result in committing the offence.”  What did Campbell do in the United States to meet that requirement?  Having uranium in your luggage could be seen by a jury as “simply preparing.”  As for conspiracy, the jury rightfully asked the court during deliberation whether the undercover agent could be part of the conspiracy.  The court responded simply, “No, a government agent cannot be a co-conspirator.”  In sum, it looks like the facts didn’t fit the crime and a well-marshaled defense portrayed that.

In so far as Campbell’s case has a bearing on subsequent sanctions prosecutions, we may have been clairvoyant in our warning last September:

As the stretch of sanctions includes more foreign individuals and their subsequent imprisonment, the United States may find itself retreating from expanding prosecution after a successful defense or even international criticism that U.S. sanctions as so applied are too attenuated for a reasonable interpretation of the sanctions’ purpose or the laws themselves.

Campbell’s acquittal sends the Justice Department back to the drawing board to reconsider future prosecutions based on undercover operations targeting foreign persons and inviting them to the United States for their unbeknownst arrest.  As we reported in the case of a Russian caught up a similar operation last year, the resulting arrest stirred U.S.-Russian diplomatic waters and resulted in his return to Russia after pleading guilty.  Be careful what you do on the Internet, and that goes for the government too.

Permalink Comments Off

Bookmark and Share



May

28

DoJ Miffs Description of Iran Sanctions


Posted by at 6:09 pm on May 28, 2014
Category: Criminal PenaltiesDoJIran Sanctions

By Another Believer (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADepartment_of_Justice%2C_Washington%2C_D.C._2012.JPGIn a recent DoJ press release correcting a previous press release that incorrectly stated that the DoJ had indicted someone on export charges that they hadn’t actually indicted him on (oops!), the DoJ took the opportunity to try to explain the scope of the U.S. sanctions on Iran. Unfortunately the DoJ got it wrong. Of course, when an exporter makes a mistake about the scope of the Iran sanctions, it’s a big deal; but when the DoJ makes a mistake, oh well, we all make mistakes.

At issue are charges against Pennsylvania-based Hetran, Inc. which allegedly shipped a horizontal lathe to Iran via a company in Dubai. This gives the DoJ the opportunity to say this:

American companies are forbidden to ship dual use items – such as the peeler – to Iran without first obtaining a license from the U.S. Department of Commerce

Oh dear, where to start with this? Really, it’s just wrong in so many ways. Let’s start with section 746.7 of the Export Administration Regulations which sets forth the controls by the Department of Commerce’s Bureau of Industry and Security on exports to Iran. That would have been a good place for the DoJ to start as well before attempting to explain U.S. sanctions on Iran.

Subsection (e) says this

No person may export or reexport any item that is subject to the EAR if such transaction is prohibited by the Iranian Transactions Regulations (31 CFR part 560) and not authorized by OFAC.

Subsection (a) says this:

[I]f OFAC authorizes an export or reexport, such authorization is considered authorization for purposes of the EAR as well.

So, where does that leave us?

Error 1: Licenses aren’t just required for exporting dual use items to Iran. OFAC rules forbid all exports to Iran except for certain limited items such as food, medicine, medical devices, informational products and personal telecommunications devices. Plenty of things that aren’t dual use (i.e. listed on the Commerce Control List) require licenses.

Error 2: the requirement for exports to Iran is a license from OFAC, not from BIS. A license from BIS is required only if no license from OFAC has been obtained and the matter is “not subject to OFAC regulatory authority.”  EAR 746.7(a)(2).

Here’s an idea: maybe people in the DoJ should be required to attend BIS’s annual Update Conference before they are allowed to say things about export law.

 

Permalink Comments (4)

Bookmark and Share