Archive for the ‘Criminal Penalties’ Category


May

12

Federal Court Strikes Down Warrantless Border Search in Iran Export Case


Posted by at 11:23 pm on May 12, 2015
Category: Criminal PenaltiesIran Sanctions

Los Angeles International Airport by Daniel Betts [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/redlegsfan21/13789084574A federal district court judge in the District of Columbia last week granted a motion to suppress evidence obtained by a DHS Special Agent after a laptop was seized from a departing passenger at LAX and subsequently subjected to a comprehensive forensic search. Prosecutors attempted to defend the search as a routine border search which could be conducted without reasonable suspicion of any kind and without any warrant. The court held that the search was impermissible both because the government had no reasonable suspicion of “ongoing or imminent” criminal behavior and because the search was an extensive forensic search conducted away from the border after the passenger had long departed the country.

In the case at issue, the DHS had some evidence that the defendant, five years prior to the search, had shipped items to China knowing that they were going to be transshipped to Iran. When the investigating special agent learned that the defendant had traveled to the United States, the agent decided to have CBP seize the defendant’s laptop at LAX when he departed the country. The laptop was then shipped to San Diego where the hard drive was imaged. Specialized software was then used to search the contents of the hard drive. More than 20,000 files and a large number of emails were retrieved which, after review by the special agent, provided evidence of the Iran exports that occurred five years earlier. The special agent then applied for, and obtained, a search warrant seeking authority to seize those emails and documents which then served as a basis for the prosecution before the federal district court in the District of Columbia.

The Court’s decision that the search was unreasonable relied on a number of factors. First, the court noted that suspicion of prior criminal activity was not a reasonable suspicion that could support a warrantless search at the border. Such a search could only be justified on the basis of a suspicion of imminent or ongoing criminal activity, not past criminal activity, and there was no reason for the agent to suspect ongoing or imminent criminal activity. Instead he was just fishing for evidence of past criminal activity.

Second, the court distinguished the type of search that occurred from a routine border search that could be justified by reasonable suspicion of ongoing or imminent criminal activity. The court noted that the actual search occurred long after the passenger had departed and at hundreds of miles from the border where the laptop was seized. Additionally, it was a search of unlimited scope and unlimited duration. This, the court felt, was far different from opening and examining a passengers luggage or briefcase at the border for a search prior to departure.

The court also seemed troubled by misrepresentations made by the DHS Special Agent when he did finally apply for a warrant to seize the documents obtained from the defendant’s hard drive. The affidavit in support of the application for a warrant represented to the court that the warrant was needed to enable a search of the “mind-boggling” amount of data on the hard drive and that the extraction of the data “may take weeks or months.” In fact, this was all a charade (to use a polite term); all of the extraction had already occurred and no further searches of the hard drive were thereafter conducted by the DHS special agent or the government.

Although the court did not directly focus on this, another factor seems dispositive here. Warrantless searches are normally justified by some exigency for the search which makes it difficult to obtain a warrant in advance. In a typical border search, the luggage or briefcase being examined is about to leave the country and seeking a warrant before that departure would be impractical. Here, however, the government had the luxury of all the time in the world to image the hard drive and examine its contents. There is no possible reason as to why it was impractical to get a warrant before extracting the data and rifling through its contents.

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Apr

29

Florida Man Sentenced for Brokering Dual-Use Exports


Posted by at 10:10 pm on April 29, 2015
Category: BISCriminal Penalties

Universal Industries HQ via Google Maps https://goo.gl/maps/TNQDh [Fair Use]
ABOVE: Universal Industries HQ


Russell Henderson Marshall, a UK citizen living in Florida, pleaded guilty and was sentenced to 41 months in prison and deportation on charges that he brokered dual-use items listed on the Commerce Control List. Yes, that’s right — for brokering non-USML items listed on the CCL. Because there is no prohibition on unlicensed brokering of items on the CCL, you may wonder how this happened.

To understand how this happened, we have to go back to 2012 when Universal Industries Limited, Inc., was slapped by the Bureau of Industry and Security with an Order Denying Export Privileges based on Universal’s conviction under the Arms Export Control Act for unlicensed exports of military aircraft parts. The order prohibited Universal or any of its employees from “carrying on negotiations concerning … any item … to be exported from the United States.”

Marshall was the CEO of Universal and was charged with two counts of violating the denial order. The first count, as described in the factual proffer supporting Marshall’s guilty plea, alleged that he sent an email to a potential U.S. purchaser quoting a price for three aircraft temperature sensors. A document recovered after a BIS agent did some dumpster diving behind Universal’s office.  Documents found in the trash revealed that the sensors were destined for the Royal Air Force of Thailand. The second count alleged that Marshall exchanged emails with a U.S. company related to a jet aircraft part to be exported to the Pakistan Air Force. The content of the emails sent by Marshall are not revealed.

Oddly, the factual proffer devotes considerable space to establishing that the items involved were ECCN 9A619.x. Given that the Denial Order would be violated if Marshall sent an email with a price quote for a Snickers Bar that was to be sent to Canada as a family birthday gift, it is not quite clear why the documents go to such length to establish that the items were not simply EAR99.

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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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