Archive for the ‘Criminal Penalties’ Category


Aug

9

If A U.S. Attorney Can’t Get Export Law Right, Why Should Anyone Else?


Posted by at 6:14 pm on August 9, 2017
Category: Criminal PenaltiesSyria

Orange Check Cashing via Google Maps [Fair Use]Rasheed Al Jijakli, the owner of Orange Check Cashing in Orange, California, has been indicted for illegal exports of tactical flashlights, rifle scopes, cameras, radios, voltmeters and laser boresighters to Syria. According to the indictment, Jijakli allegedly took the items with him on flights to Turkey, crossed the border from Turkey to Syria and gave the items to rebel groups in Syria. He was arrested on August 1 and released on a $250,000 bond pending trial.

Of course, for the criminal indictment to succeed the U.S. Government must prove that Jijakli knew that supplying these items to persons in Syria was illegal. The indictment alleges that Jijakli told an un-indicted co-conspirator “about a technique he used to smuggle goods into Turkey without being detected by law enforcement.” It also alleges that he asked the same unindicted co-conspirator if he “needed an alias in the event law enforcement questioned [him] about the purchases.” The trial and any conviction may well turn on whether a jury decides the un-indicted co-conspirator is telling the truth about these statements by Jijakli.

But the prosecution’s efforts to prove that Jijakli understood the complexities of export law sufficiently to have criminal intent will be hindered by the prosecution’s own inability to understand the relevant export laws. Paragraph 6 of the indictment says this:

6. With certain limited exceptions not applicable here, U.S. sanctions against Syria prohibited, among other things, the export,
re-export, sale, or supply, directly or indirectly, of U.S.-origin goods from the United States or by a United States person wherever
located, to Syria without prior authorization from the Secretary of the Treasury.

Nope. The Syrian Sanctions Regulations administered by the Office of Foreign Assets Control (“OFAC”) in the Treasury Department do not prohibit the export of goods to Syria. Section 542.207 which regulates exports to Syria only prohibits unlicensed exports of services from the United States or by a U.S. person. The export of goods to Syria is instead controlled by the Export Administration Regulations. Only a license from BIS is required for export of goods to Syria; no license from OFAC or the Secretary of Treasury, as the indictment would have it, is required.

If a prosecutor with a law degree can’t get U.S. export laws right, how can we expect a guy who owns a check cashing place in a strip mall to get it right?

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Jul

19

Why One of the Swapped Prisoners Did Not Return to Iran.


Posted by at 9:55 pm on July 19, 2017
Category: Criminal PenaltiesDDTCITAR

Nima Golestaneh Mug Shot [Fair Use]
ABOVE: Nima Golestaneh

In January 2016 the United States and Iran engaged in a prisoner swap. None of the freed prisoners returned to Iran, instead they all chose to remain in the United States, including Nima Golestaneh, the only Iranian national in the group. (The remainder were dual U.S.-Iranian citizens). Golestaneh, who had been nabbed in, and extradited from, Turkey, had been convicted of a scheme to hack into Arrow Tech in Vermont and send its ITAR-controlled software back to Iran.

Now we have a pretty good idea why he may have been selected for a pardon and why he decided that going back to Iran might not have been such a good idea. Yesterday, two Iranians, Mohammed Ajily and Mohammed Rezakhah were added by OFAC to the Specially Designated Nationals and Blocked Persons List (the “SDN List”) and the Department of Justice announced that an indictment against the two had been unsealed. The indictment reveals that Ajily and Rezakhah were Golestaneh’s co-conspirators in the hacking scheme, and it seems certain that Golestaneh made a deal and dropped the dime on Ajily and Rezakhah.

Both Ajily and Rezakhah are currently in Iran and probably have no current plans to visit Disneyland or anywhere else outside Iran. It’s also safe to assume that Golestaneh would not be welcomed with open arms should he turn up in Iran. In fact, that would be an instance of going from the frying pan (a U.S. jail) into the fire (an Iranian one).

The indictment details Golestaneh’s role in the hacking conspiracy. Apparently his job was to procure servers in Canada and the Netherlands. These enabled Rezakhah to download the Arrow Tech software without using an IP address from Iran, which likely would have been blocked by Arrow Tech. The software would not run without a hardware dongle from Arrow Tech, and Arrow Tech informed foreign customers that they would need an export license to obtain the dongle. That dongle not doubt contained the digital key needed to decrypt the program and allow it to run. It looks like Rezakhah hacked into Arrow Tech’s servers to obtain the digital key needed to decrypt the program.

Of course, it’s not just Rezakhah who has a problem in this scenario. If in fact, if Arrow Tech allowed foreign download of ITAR-controlled encrypted software without a license, that was arguably problematic. DDTC has taken the position that items are exported even if encrypted. And, if there is support for that position by DDTC, it can be found in this case, which demonstrates that there is always some possibility that the encryption will be broken. (It now appears that Arrow Tech distributes the software only by optical media and not by download). One has to wonder if the failure of DDTC to adopt rules like those adopted by BIS which exempt encrypted items from the definition of export is, at least in part, the result of what happened in this case.

One other thing bears noting here, namely, the most amusing irrelevant statement ever put in a criminal indictment. For some reason, the indictment notes that Ajily, Rezakhah’s co-conspirator “received certificates of appreciation for his work from several of the Iranian government and military entities.”   Seriously, he got certificates he could frame and hang on his office wall.  Awesome.  That was a clear violation of the law that forbids receiving certificates of appreciation from Iran.  I have to imagine that this factoid comes from Golestaneh who, when he was singing to the DOJ, said something on the order of  “Ajily got certificates and all I got was this lousy jumpsuit.”

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