Archive for the ‘Criminal Penalties’ Category


Sep

2

Export Defendant Pays for Requesting Jury Trial


Posted by at 12:05 pm on September 2, 2016
Category: BISCriminal Penalties

Alexander Fishenko
ABOVE: Alexander Fishenko


This blog has closely followed the case involving Alexander Fishenko and his company ARC Electronics, mostly because the government larded the export charges against Fishenko with bogus “spying” charges premised on an alleged charge that he failed to register under the Foreign Agent Registration Act.  Those charges were bogus because the act makes clear that selling goods to a foreign government is not an activity that requires registration.

A number of the employees of ARC were also indicted on export charges in connection with the exports to Russia without the required BIS licenses. One of them, Anastasia Diatlova, the most junior sales clerk in the organization, is now apparently facing harsher sentencing than other sales clerks at ARC because she ticked off the government by making them go to trial, or at least that’s the claim made in the Sentencing Memorandum filed by Ms. Diatlova’s attorneys. That memo argues that she should get the same sentence of time served as the other sales clerks in the organization. (Fishenko, who owned Arc and ran the operation, pleaded guilty and was sentenced to ten years.)

Apparently time served was offered in the plea deal but Diatlova went to trial anyway.  That decision was premised on the reasonable belief that someone who had only an eighth grade education, received little if any compliance training, and had previously refused to sell parts where she knew them to be restricted was unlikely to have known that the one export with which she was involved and charged was illegal.

But, juries being juries, and with the prosecutors no doubt screaming “spy” and “Russia” at every available opportunity, the jury convicted her anyway. And now the government wants revenge and has taken the offer of a sentence of time served off the table. That is, of course, their right, but it seems petty and almost despicable in the case of a $15/hour sales clerk who sold an item that probably would have been licensed if one had been requested. One has to wonder why the government was chasing her anyway other than as potential low-hanging fruit that could result in another notch on their holsters.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jul

12

Catfish Row


Posted by at 9:47 pm on July 12, 2016
Category: Criminal PenaltiesDDTCITAR

Jason Bourne [Fair Use]The affidavit in support of the criminal complaint filed against Gregory Allen Justice for passing allegedly export-controlled data to an undercover FBI agent is a lurid potboiler, a train wreck that you can’t stop watching, a bizarre mashup of David Lynch and Austin Powers. Worse, you don’t know whether to laugh at the defendant, feel sorry for him or recoil in horror.

The tawdry affair starts with Justice, with an extremely ill, housebound wife, getting “catfished” by a woman who aroused his interests by sending him pictures, allegedly of herself, but in fact pictures of an Eastern European model. Justice, in hopes of replacing his sickly wife with a trophy wife, started sending “Chay” (the catfisher’s nom de doom or screen name) boxes of cash and gifts from Amazon including a $900 iPhone, a flat panel television, a charcoal grill and other goodies. Soon Justice was short of cash and, apparently enamored with James Bond, Jason Bourne and the be-wigged Russian spies on the television series The Americans (honestly, I’m not making that up) decided to become a Russian spy and sell everything he could lay his hands on about the satellites made by his employer.

Being a real-life spy is much harder than being one on TV or in the movies, and Justice screwed things up before he even got started. In November 2015, he stuck a thumb drive in his computer. Game over. This set off alarm bells at his employer and everything he did on his computer after that was monitored, recorded, saved, analyzed and handed over to the feds in a neat box with a pretty bow on top. As a result, the closest Justice ever got to a real Russian was when he stood in line at Starbucks behind a guy (from Kansas) reading Tolstoy.

In January his car was surreptitiously searched, and a handwritten note with the address of the Russian Embassy in Washington, DC, was found. One month later an undercover agent, pretending to be a Russian spy, called Justice and negotiated the purchase of documents and information from Justice. For the next three months, there were numerous phone calls and five in-person meetings between Justice and the undercover agent posing as a Russian spy. You can’t help but wonder if the sting stretched out so long because the FBI was having fun with this guy. He was low hanging fruit who liked to discuss recent episodes of The Americans and express his admiration of James Bond and Jason Bourne.

None of this was necessary because he signed a receipt for the money he was given by the undercover agent for the first drop of documents. Yes, you read that right. He signed a receipt for the money. Seriously. I’m not even a spy, nor have I pretended to be one, in my spare time, on TV, or otherwise, and even I know that you don’t sign receipts for the money that the Russkies pay you for spying.

Above and beyond all this, the affidavit says that Justice asked the fake spy to help him buy drugs that, it appeared, he planned on using to get his wife out of the way and close the deal with “Chay.” And he was also apparently supplementing his spy payments by dealing GHB, a controlled substance, on the side.

The real question, of course, in this: how much time and money was spent in building the case against a guy who makes Austin Powers look like Albert Einstein and who, apparently, never sold any documents to anyone other than the FBI? I’m sure that the FBI relished all the giggling over war stories that this case would yield but, frankly, I would imagine there are better uses of investigative time, money and resources. The minute he signed that first receipt, it was time to break out the cuffs.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

23

Delay in Filing Voluntary Disclosure Costs Company $100k


Posted by at 9:00 am on June 23, 2016
Category: Criminal PenaltiesDDTCVoluntary Disclosures

Microwave Engineering CorporationFour years ago, this blog last reported on Microwave Equipment Corporation (“MEC”) in North Andover, Massachusetts, when its President, Rudolf Cheung, pleaded guilty to exporting a military antenna to Singapore without a license. MEC is back in the spotlight again having just agreed to pay the Directorate of Defense Trade Controls (“DDTC”) $100,000 in connection with MEC’s unlicensed provision of ITAR-controlled technical data to a Chinese national employee without a license. According to the Proposed Charging Letter, Cheung “repeatedly provided Employee with ITAR-controlled … technical data … between December 2009 and June 2010 … in relation to five discrete research and manufacturing projects.”

The charging letter specifically noted MEC’s “exceptional cooperation” during the investigation, but still decided to whack the company with a large fine, citing the fact that the employee was Chinese and, apparently more significantly, the delay by MEC in filing the voluntary disclosure after discovering the violation:

Respondent’s Export Compliance Officer became aware that specific projects were being discussed with Employee in or around May 2010, and took steps to limit such conversations. Respondent did not, however, submit a disclosure to DDTC reporting the unauthorized transfer of ITAR-controlled information to Employee until January 20, 2012. The disclosure was submitted by the company on the same day that Dr. Cheung pleaded guilty to an unrelated criminal violation of the AECA.

This seems harsh, to say the least. It is obviously not a coincidence that the voluntary disclosure was not filed until Cheung, the president of the company, pleaded guilty to his own export charges. Clearly, Cheung, no doubt for his own reasons, was blocking the disclosure, and it seems unfair to penalize those left behind for these additional violations by Cheung because he delayed their disclosure. Still, this underlines the conventional wisdom that voluntary disclosures should be filed promptly after the discovery of the violation.

As an interesting footnote, Cheung has still not been sentenced, almost four years after his guilty plea. A sentencing hearing was scheduled for April 24, 2015, but it did not take place. Since that time, various deadlines and hearings were reset by the court. The last docket entry is a call for a joint status report which was due to be filed on January 29, 2016, but appears to have never been filed.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

15

DOJ Issues Misleading Press Release in Connection with Export Guilty Plea


Posted by at 11:47 pm on June 15, 2016
Category: BISCriminal PenaltiesIran SanctionsOFAC

All in a Day's Work by Damian Gadal via Flickr https://flic.kr/p/5xQkWj [Fair Use]
ABOVE: Erdal Kuyumcu

This blog reported earlier on the case against Erdal Kuyumcu in connection with exports of an EAR99 Cobalt Nickel powder (CoNiCrAIY) to Iran. In that initial post, I questioned the government’s evidence that Mr. Kuyumcu knew that his sales of this powder to a customer in Turkey were destined to Iran, noting that the criminal complaint based its allegations on the “training and experience” of an investigating agent who felt that unrelated emails discussing Iran covered these shipments. (I also mocked the agent’s claim that a “[b]ased on my training and experience … [a] colon followed by a close parenthesis … represents a smiley face.”)

Yesterday the Department of Justice issued a press release stating that Mr. Kuyumcu had pleaded guilty to the charges against him. Of course, the DoJ, as usual, could not restrain itself from misleading hyperbole in the process of patting itself on its own back:

Kuyumcu, a United States citizen, conspired to export from the United States to Iran a metallic powder composed of cobalt and nickel without having obtained the required license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). The metallic powder can be used to coat gas turbine components, such as turbine blades, and can also be used in aerospace, missile production, and nuclear applications. Such specialized metals are closely regulated by the U.S. Department of Commerce to combat nuclear proliferation and protect national security, and exporting them without an OFAC license is illegal.

Why, you ask, if CoNiCrAIY powder is “closely regulated” by the U.S. Department of Commerce was its export a violation of OFAC rules? Good question. CoNiCrAIY powder is EAR99 and its export is not regulated, either “closely” or otherwise, by the Department of Commerce. Perhaps the DoJ has gotten confused, innocently or otherwise, by ECCN 2E003.f which controls certain “technology” for application of certain specified inorganic compounds, including CoNiCrAIY and similar compounds, on non-electronic substrates. But even this is not tantamount to close regulation of the powder because other inorganic compounds covered within these controls of deposition technology include tungsten and oxides like, er, carbon dioxide. By this logic, if Kuyumcu exported a carbonated soft drink to Iran, the DoJ could claim that he exported a product to Iran “closely regulated” by the Department of Commerce.

Once again, we see that the government can misinterpret export laws and regulations with immunity while everyone else does so at their peril.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

1

Russian Export Case Larded with Bogus Spying Charges: Part 3


Posted by at 8:02 am on June 1, 2016
Category: BISCriminal PenaltiesGeneral

Alexander Fishenko
ABOVE: Alexander Fishenko


This blog has been covering the export prosecution of Alexander Fishenko for quite some time. Previous posts on this case can be found here and here. Most of my interest has been in the trumped-up Foreign Agents Registration Act charge brought by the government to allow Fishenko to be characterized, inaccurately, as a Russian “spy.”

Fishenko, who pleaded guilty to all counts in the indictment, is scheduled to be sentenced on June 3. The sentencing memorandum prepared by his lawyers provides more insight into the “spy” nonsense and the government’s motivations in bringing these charges. (I am not linking to the memorandum, even though it is publicly available through PACER, because it contains detailed information on some unrelated private matters relating to Fishenko’s medical history.)

As was detailed in the preceding posts, it was undisputed that Fishenko was buying things at the request of the Russian government. But that alone does not make him a foreign agent required to register under FARA. Section 3(d) exempts “private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal.” There was no allegation or evidence that Fishenko acted for the Russian government in any other capacity, meaning that he was not a “foreign agent” under FARA and, therefore, was under no obligation to register as one.

Apparently, Fishenko was anxious to plead guilty after the indictment, but the government was not willing to take his plea. The hold-up was that Fishenko, although he was willing to plead guilty to all the other charges, did not want to plead guilty to the bogus FARA charge for precisely the reason the government included it: namely, that those charges had been widely, indeed universally, interpreted as charges that he was a Russian spy, something the government well knew and was intentionally using to poison the well.  Fishenko thought that such a plea would permanently damage the reputation of his family members.

Leaving aside for the moment that Fishenko’s activities were exempt under section 3(d) of FARA, it is also undeniable that there is a significant difference between being an “unregistered foreign agent” and being a Russian spy. You can be an unregistered foreign agent in violation of FARA even if you run around wearing a banner saying you work for the Russian government, behavior essentially incompatible with being a spy. Nor was Fishenko charged with espionage under the relevant provisions in 18 U.S.C. §§ 793 – 798, something that certainly would have happened if Fishenko was really a Russian spy.

The only conclusion behind the government’s intransigence on the fake FARA charges is that it wants to keep this weapon in its arsenal for future, and equally illegitimate, use. It’s much easier to convict export defendants once they have been branded in the press as spies. Sadly, such behavior — intentionally bringing unfounded charges for their negative publicity value — turns the word “Justice” in the Department of Justice to Orwellian double-speak.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)