Archive for the ‘Criminal Penalties’ Category


Sep

17

Turkish Citizen Indicted For Foreign Downloads of Submarine Drawings


Posted by at 7:11 pm on September 17, 2014
Category: Arms ExportCriminal PenaltiesDDTCITARUSML

By U.S. Navy via http://www.navy.mil/view_image.asp?id=16778 [Public Domain]Alper Calik — a Turkish citizen and co-owner of Clifton, New Jersey based Clifmax LLC — has been arrested based on a criminal complaint, dated September 12, charging him, among other things, with violating the Arms Export Control Act by exporting without a license certain drawings relating to the NSSN (Virginia) class submarine. (And, no, I am not reporting this case simply because the company is named Clifmax, although that is, leaving the alleged criminal conduct aside, an awesome name for a company.)

At the heart of the allegations are two drawings that Calik downloaded from a DoD database after signing the Military Critical Technical Data Agreement which must be signed in order to gain access to the DoD drawing database at issue. The criminal complaint alleges that Calik downloaded these images while in Turkey and attempts to assert that Calik knew doing this was illegal because he had signed the Military Critical Technical Data Agreement.

However, the Military Critical Technical Data Agreement is hardly specific about what is or is not permitted with respect to the drawings, saying only this:

[The undersigned] acknowledge[s] all responsibilities under applicable U.S. export control laws and regulations (including the obligation, under certain circumstances, to obtain an export license from the U.S. Government prior to the release of militarily critical technical data within the United States) or applicable Canadian export control laws and regulations, and (2) agree[s] not to disseminate militarily critical technical data in a manner that would violate applicable U.S. or Canadian export control laws and regulations.

Suffice it to say that this certification is poorly drafted and confusing, mentioning an export license only in the context of releasing the data “within the United States.” Nor does the certification that he would not “disseminate” the data clearly prohibit him from downloading the information for his own personal review in a foreign country. Obviously, such downloads do in fact violate U.S. exports if the downloads include ITAR-controlled technical data, but this certification neither makes that clear nor establishes that Calik had the necessary criminal intent when he downloaded the documents

The complaint alleges that there were legends restricting export on the drawings involved, but does not quote those legends. Whether these legends are enough of a predicate to support the criminal intent necessary for conviction on the export charges depends on what those legends said and that remains to be seen.

UPDATE:  Two commenters make an excellent point about using the legends on the drawings as indicia of criminal intent: Calik would have only seen the legends after he downloaded the drawings in Turkey.  The significance of this point is magnified even further when you consider this statement from the criminal complaint:

Beginning in or around 2009 to the present time, ALPER CALIK downloaded approximately one hundred thousand drawings. some of which were subject to U.S. export control regulations without obtaining export licenses from the U.S. Department of State. ALPER CALIK was not in the United States when the majority of the drawings were downloaded.

At issue are only two of these one hundred thousand downloaded drawings, which would have revealed the legends only after being downloaded.  The overwhelming portion of the remainder of the drawings not having any indication that the downloading of these or other drawings might be problematic.

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Sep

9

Export Fugitive Ends Life on the Lam, Pleads to Lesser Charge


Posted by at 9:06 pm on September 9, 2014
Category: Arms ExportCriminal PenaltiesDDTCExtradition

John NakkashianA little over five years ago, we reported on a settlement agreement pursuant to which Air Shunt, Inc., agreed to pay DDTC a penalty of $100,000 in connection with three unlicensed exports of military aircraft parts. These same three violations were alleged in an indictment of an Air Shunt Vice-President, John Nakkashian, who was at the time of the settlement nowhere to be found and presumed to be a “fugitive from justice.”

For reasons not entirely clear, Nakkashian was arrested in June of this year by ICE agents at the Los Angeles International Airport. I suspect that this was not because Nakkashian was trying to sneak back into the country to vacation at Disneyland. More likely it was part of a carefully negotiated deal, because Nakkashian and the prosecutors just submitted a plea agreement to the court under which Nakkashian pleaded to one false statement count (18 U.S.C. § 1001) in connection with one of the three illegal exports set forth in the original indictment. The false statement at issue was Nakkashian’s  statement in the export documents that no license was required for the export. The government, in return, agrees to a base offense level of 8 under the Sentencing Guidelines which would mean, if Nakkashian has no prior criminal history, a sentence of zero to six months. Compare this to the original indictment where each of the three counts had a base offense level of 26, meaning a sentence of at least 63-78 months for a defendant with no prior criminal history.

That’s a sweet deal and you have to wonder how a former “fugitive from justice” got this deal until you realize that Armenia, which is where we suspected Mr. Nakkashian (by virtue of his surname) was hiding out, has no extradition treaty with the United States. Moreover, given that this was not a crime of violence, it is unlikely that Armenia would voluntarily cooperate in returning Mr. Nakkashian to the United States for trial. That gave Nakkashian a potent bargaining chip which it would seem he used to maximum benefit with the U.S. preferring to impose some penalty rather than none at all.

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Aug

19

Chinese Hacker Nabbed on Export Charges


Posted by at 9:20 pm on August 19, 2014
Category: Arms ExportCriminal PenaltiesDDTCDeemed Exports

Stephen Su photo taken by CBP during U.S. transit in 2011 via http://www.cbc.ca/news/canada/british-columbia/su-bin-chinese-man-accused-by-fbi-of-hacking-in-custody-in-b-c-1.2705169 [Public Domain]
ABOVE: Stephen Su


Well, we all know, or should know, that hacking is a criminal violation of the Computer Fraud and Abuse Act, at least when it entails unauthorized access to another party’s computer. What you may not know is that if you’re a foreign national and if the data accessed is technical data controlled by the International Traffic in Arms Regulations, hacking can also be a violation of the Arms Export Control Act.

Back in June, Canadian authorities arrested, at the request of the FBI, a Chinese citizen and Canadian permanent resident named, variously, Su Bin, Stephen Su and Stephen Subin, who we’ll refer to simply as Su for convenience.  Su , the owner of Lode-Tech, a Chinese company with an office in Canada, was accused of conspiring with several Chinese nationals to hack into U.S. defense contractors’ computer systems and to exfiltrate data about military aircraft back to China.  Last Friday, Su was indicted by a federal grand jury in California.

One of the charges in the indictment is a violation of the Arms Export Control Act.  The theory behind this charge is that Su, with his PRC-based co-conspirators, conspired to break in the U.S. computer systems and to disclose ITAR-controlled technical data to foreign nationals among whom were, of course, themselves.

The criminal complaint filed back in June, which served as the basis for Su’s arrest, contains some fascinating details.  First, it appears that access was gained to the defense contractors’ systems by sending emails to employees of the contractors containing infected attachments or links to infected websites that installed malware on the systems which allowed the hackers to control the systems, to view files on the system, and to send the files back to themselves.   Interestingly, the files were then transferred to hop points or servers in Hong Kong and Macao and from there were physically carried back into the PRC.   Interestingly, it appears that as the Internet becomes easier for security agencies to surveil, modern spies have started to revert back to older methods of spycraft such as smuggling documents, document drops, and, conceivably, even encrypted Morse code shortwave radio transmissions.  One wonders if the NSA is training folks in Morse Code and invisible ink.  What’s next?  Microdots?

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Jul

23

Be Careful What You Like on Facebook


Posted by at 4:40 pm on July 23, 2014
Category: BISCriminal Penalties

Facebook Profile Photo of Viacheslav Zhukov https://www.facebook.com/viacheslav.zhukov.7[Fair Use]
ABOVE: Viacheslav Zhukov


A Savannah resident, Viacheslav Zhukov, has been charged in a superseding indictment with export violations and false statements in connection with rifle scopes that he mailed from Savannah, Georgia, to Russia without the required license from the Bureau of Industry and Security (“BIS”). He is being held without bond awaiting trial.

As this blog has often noted, a frequent challenge in export prosecutions is establishing that the defendant knew that his unlicensed export was illegal. U.S. export laws are, as we all know, complicated; and a Russian immigrant might not know that mailing rifle scopes to Russia without a license would be illegal.

As the false statement count suggests, there is some evidence that Zhukov may have known that the exports required a license from the U.S. government.  Zhukov allegedly filed a Customs Declaration with the U.S. Postal Service saying that the boxes contained a “cardboard box, a model battle tank, and men’s jeans.” Telling customs that you’re mailing a “cardboard box” to Russia probably is more or less an open invitation to having your shipment detained and inspected, which may well be how he was caught.

Of course, there may be other reasons that Zhukov fibbed about the contents of the box. Perhaps he was hoping to avoid Russian import license requirements or duties. At this point, we have no idea what his explanation will be for providing an incorrect description of the items being exported.

One interesting digression: Mr. Zhukov has a Facebook page (although he’s not able to update it at the moment), and the only thing at all that he says that he likes is an album by Murder Death Kill appealingly titled “F*** With Us And Find Out.”  (The asterisks are not part of the original album title.) That album features songs such as “Kill Yourself,” “People Will Die,” and “Hostility.” I’m sure he now wishes that he liked (at least on Facebook) something more innocuous like Tchaikovsky’s Greatest Hits or the Cole Porter Songbook.

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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.

 

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