Archive for the ‘Iran Sanctions’ Category


Oct

20

Did Ron Jeremy Save This Export Defendant From Jail?


Posted by at 6:31 pm on October 20, 2014
Category: BISCriminal PenaltiesIran Sanctions

Touraj Ghavidel and Ron Jeremy via Ghavidel's Twitter Feed https://twitter.com/MrTouraj [Fair Use]
ABOVE: Touraj Ghavidel and Ron
Jeremy


The Bureau of Industry and Security just released settlement documents resolving allegations that Borna Faizy, Touraj Ghavidel and Signal Microsystems, Inc., illegally exported computer equipment from the United States to Iran. According to the BIS charges, Faizy, Ghavidel and Signal Microsystems transshipped the items through Dubai (where else?), used coded language in emails with Iranian customers to hide their customer’s identities and locations, and falsely stated on their Electronic Export Information filings that the ultimate end users were in Dubai. As a result, over at least 2 years, more than $1 million in computer equipment was shipped by the three to Iran. Under the settlement agreement, no fine is being imposed; rather the three exporters have agreed to a ten-year denial order.

The settlement agreement comes on the heels of a plea agreement entered by Faizy and Ghavidel where they plead to making false statements to federal agents in violation of 18 U.S.C. § 1001. Under the plea, the government and the defendants agree that a fine and one year probation would be an adequate sentence. The basis for the charge under 18 U.S.C. § 1001 is that Faizy and Ghavidel, when questioned by federal investigators, swore up and down that they were absolutely not doing any business with Iran and would never ever even think of doing so, cross their hearts and hope to, etc., etc.

It is hard to tell why such a favorable plea deal was reached here. The false EEIs and the coded emails certainly suggest that the defendants knew that they were breaking the law. And they also managed to ship a boat load, almost literally, of computers to Iran. All I can figure is that the prosecutors saw the picture of Ghavidel with Ron Jeremy, which Ghavidel put on his own Twitter feed, and decided that Ghavidel was too cool to go to jail.

Permalink Comments (2)

Bookmark and Share



Oct

2

Newest Sanctions Crime: Buying a Condo while Iranian-American


Posted by at 11:12 pm on October 2, 2014
Category: Iran SanctionsOFAC

By Don-vip (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AU.S_Treasury_Department_in_Washington%2C_D.C..jpgOne of the possibly unintended consequences of the heavy fines imposed on banks by the Office of Foreign Assets Control (“OFAC”) for violations of the vaguely and confusingly written Iran sanctions regulations is that banks overreact, exhibiting a Pavlovian response to anything with the word Iran involved and blindly blocking everything in sight. As a result, Iranian-Americans often have a difficult and unpredictable relationship with their own banks here in the United States. As recently reported by the Arizona Republic, Neda Tavassoli, an Iranian-American, had difficulty closing her purchase of a condominium when one of the banks involved needlessly blocked the account holding her funds for the down payment.

The story begins, improbably enough, when her ex-husband, who is also a U.S. citizen, was visiting his family in Iran and checked their joint account from a computer in Iran. The bank then froze that account. Subsequently the bank even froze an unrelated escrow account to which Ms. Tavassoli’s parents, also U.S. citizens, wired the down payment for the condo in issue. Neither Ms. Tavassoli, her ex-husband,  her parents nor the U.S. bank from which the parents wired the funds are on the SDN list, so there is no conceivable reason for these accounts to be blocked. None of these parties are even in Iran so there was not even a reason to reject the wire transfer to the escrow account, much less to block it.

Most importantly, checking the account from Iran, which got the whole business started, would not serve as a basis for blocking the account. Whether the bank broke any rules by providing the information back to Iran in response to the account query depends on whether that communication was “incident to the exchange of personal communications over the Internet” and therefore permitted by section 560.540 of the Iran regulations. But even if the exception in section 560.540 for Internet communications does not apply, the proper response by the bank was simply not to respond to the request, not to block the account.

Permalink Comments Off

Bookmark and Share



Sep

22

Texas Man Charged with Smuggling for Forwarding One Email


Posted by at 10:10 pm on September 22, 2014
Category: Criminal PenaltiesIran SanctionsOFAC

BlackBerry email on the BB 8330 by Ian Lamont(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/ilamont/4329363938/A criminal information was filed last week against Patrick Jean Zuber, a U.S permanent resident and former Weatherford International Vice-President, charging him with conspiracy to violate the anti-smuggling statute, 18 U.S.C. § 554. How did he get into such trouble? Actually, he didn’t do anything more than push the forward button to send an email from a company in Thailand seeking to purchase equipment for an oil project in Iran. That’s right: he is being charged not with sending any equipment to Iran; he is being charged with sending an email forwarding that inquiry from the potential customer in Thailand.  Zuber forwarded that inquiry to a Canadian employee of Weatherford.  This cold-blooded and heinous act of clicking “forward”  was deemed to be facilitation of an illegal export to Iran. The criminal information is silent as to whether any export actually occurred

Whether the Canadian to whom the email was sent was employed by a U.S. or foreign subsidiary of Weatherford is not made clear by the criminal information. If it was a foreign subsidiary, then at the time Zuber forwarded the email, it would have been perfectly legal, under section 560.205 of OFAC’s Iranian Transactions and Sanctions Regulations, for the Canadian citizen at a foreign company to export EAR99 items to Iran even if they were originally manufactured in the United States. In that case, showing criminal intent by Zuber, who may well have thought that Canada could legally fulfill the order he forwarded, is going to be extremely difficult.

Of course, there may be other facts not mentioned in the criminal information which justify this prosecution. But if the basic crime here is forwarding an email to someone that Zuber thought could legally fulfill the order, this really seems more suited for a civil, rather than a criminal, penalty. After all, section 560.205 of OFAC’s requlations does prohibit a U.S. person from facilitating a transaction by a foreign person that would be illegal if done by a U.S. person and so OFAC would clearly have the authority to fine Mr. Zuber for pushing the forward button.

Photo Credit: In 30 Minute Guides

Permalink Comments (1)

Bookmark and Share



Sep

12

Maybe Their Phones Aren’t Working


Posted by at 3:27 pm on September 12, 2014
Category: Iran SanctionsOFACSudanSyria

By CFTC via https://www.flickr.com/photos/cftc/4406624868/sizes/z/ [Public Domain]Both the Commodity Futures Trading  Commission and the Office of Foreign Assets Control announced settlement agreements under which they imposed fines of $150,000 and $200,000 respectively on the oddly named Zulutrade, an online foreign exchange broker.  Zulutrade has nothing to do with Africa but is located in Pireaus, Greece, incorporated in Delaware and registered with the CFTC (which is how OFAC and CFTC got their hooks into a company located in Greece). The OFAC announcement is here and the CFTC announcement is here.

The reason for the fines is that Zulutrade allegedly maintained accounts for over 400 persons in Iran, Sudan, and Syria. On this much, the CFTC and OFAC agree. Beyond that the two agencies have different stories about how the violations, which were not voluntarily disclosed by Zulutrade, occurred. OFAC’s explanation is simply that Zulutrade had no idea it needed to comply with U.S. sanctions, perhaps not surprising in the case of a company sitting in Greece even if incorporated in Delaware.

Zulutrade failed to screen or otherwise monitor its customer base for OFAC compliance purposes at the time of the apparent violations. This failure was the result of a lack of awareness regarding U.S. sanctions regulations.

But to listen to CFTC the problem was that Zulutrade was aware of its responsibilities, tried to comply with them and botched it.  The Zulutrade compliance program, according to CFTC, provided that Zulutrade

may delegate implementation to third party service providers or agents. The procedure also says that if implementation is delegated, “Zulutrade shall have a written agreement with the other entity outlining the other entity’s responsibilities, and shall actively monitor the delegation to assure that the procedures are being conducted in an effective manner.” However, Respondent did not follow its procedure for OF AC screening. Specifically, Respondent relied entirely upon third parties to implement its procedures but Respondent did not have written agreements with all such third parties and OF AC screening was not performed.

I do not see any way to read these two narratives as consistent. OFAC says Zulutrade had no idea it needed to comply, but CFTC says that Zulutrade knew it need to comply but delegated the responsibility to third parties, although not in the fashion required by its compliance program and, apparently, without checking to see if the third parties were in fact screening. It’s hard to explain these two different accounts of what happened other than by the fact that OFAC and CFTC are in different parts of Washington and their telephones must not be working.

Permalink Comments Off

Bookmark and Share



Aug

4

The Auto Sound and the OFAC Fury


Posted by and at 3:30 pm on August 4, 2014
Category: Economic SanctionsIran SanctionsOFACSanctions

Soundstream Audio Car http://www.soundstream.com/images/intl-team/pic/england/england/images/new/UK%20(1).jpg [Fair Use - Soundstream is Epsilon sub]

OFAC announced that it assessed a $4,073,000 penalty against California-based Epsilon Electronics Inc.  Epsilon sells, among other things, audio and video equipment for cars (think of any number of MTV auto-improvement shows).  OFAC alleged that over an almost four-year period from 2008 to 2012, Epsilon sold such equipment valued at over $3.4 million to a UAE company, Asra International Corporation LLC, that “reexports most, if not all, of its products to Iran and has offices in Tehran.”  What is notable about the Epsilon penalty is the rare occurrence that OFAC described sanctions violation as “egregious.”

We have noted from time to time the confusion in OFAC enforcement announcements that describe “non-egregious” cases that appear on the facts provided to be anything but.  But now with Epsilon, we have precedent for what it takes to push OFAC over the limit.  So, what did Epsilon do to warrant the branding of an egregious offender?

Included in OFAC’s allegations were Epsilon’s attempts “to hide or purposely obfuscate its sales to Iran, when it changed a Web site to remove a photo gallery of Epsilon’s products that was labeled ‘Iran’” and “to mislead OFAC by providing false information in its subpoena responses and other letters to OFAC.”  It also doesn’t help that, as OFAC points out, Asra’s website indicated that it only distributed products to Iran (Asra’s website is curiously now under construction).

But what OFAC explicitly identified as its egregious benchmark was violations occurring after OFAC sent a cautionary letter to Epsilon in 2012.  After receiving the letter, OFAC alleged that Epsilon issued five invoices to Asra for products that Epsilon knew or had reason to know were intended for Asra’s resale in Iran.

Whatever the reason for Epsilon’s actions, even if a back-office mishap, the moral of the story is to treat OFAC’s cautioning not as a mere warning but as a pronouncement that OFAC is watching and there is a need to get your house in order.  A decision to continue with business as usual comes at a substantial risk unless a company can satisfy itself that what it is doing does not violate U.S. law.  That may be a tall order when OFAC has already informed you that it suspects violations have occurred.

A debate over OFAC’s adjectival use of “egregious” and “non-egregious” is not a matter of semantics.  Epsilon sold over $3.4 million worth of merchandise and now will be forced to pay that amount and over half a million more to the U.S. Government.  So, when OFAC gives you a yellow light, it’s best to slow down rather than speed up because OFAC has traffic cameras everywhere and your ticket will be in the mail.

Clif adds:  Another thing that accounts for OFAC’s fury and the mega-fine is that Epsilon had the temerity to challenge OFAC and file a response challenging OFAC’s Pre-Penalty Notice.  OFAC rejected Epsilon’s arguments summarily in the Penalty Notice, declining to reduce the proposed penalty by even a nickel.   Suffice it to say, OFAC was not amused by the extra work involved in responding to Epsilon’s objections.

The scarcely concealed ire by OFAC obscures an important issue.  What is at issue here are subwoofers and amplifiers used to pimp out cars in Iran, something that no doubt irks the mullahs and the Iranian government (presumably even more than it irks OFAC) as young Iranians cruise down the street blaring “Swagga Like Us.”   Whatever one may think of such behavior, one thing is certain: playing loud music in a car will not under any circumstances enrich uranium or detonate a nuclear device. Certainly Epsilon deserved a fine here but OFAC should have imposed one more in accord with subwoofers than centrifuges.

Permalink Comments Off

Bookmark and Share