Archive for the ‘Iran Sanctions’ Category


Jun

28

ZTE Gets Last Minute Reprieve (Sort Of)


Posted by at 10:33 pm on June 28, 2016
Category: BISChinaEntity ListIran Sanctions

ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use]The Bureau of Industry and Security today announced that it was extending the Temporary General License which permitted exports to ZTE from June 30 all the way to August 30. ZTE, as this blog reported here, was placed on the Entity List because of elaborate shenanigans by the company by which it bought U.S. goods and resold them to Iran.

Two weeks after bringing the ban hammer down on ZTE, BIS issued a temporary general license which covered March 24 to June 30, more than three months. The new temporary license expires on August 30, one day short of two months from June 30. Why this temporary license is shorter than the previous one was not disclosed but one can only suspect that ZTE may not be minding its manners in the way that BIS would like to see.

The problem for U.S. exporters is that such a short license, with the real possibility, given its shortened length, that it may not be renewed beyond August 30, opens up the possibility that the exporter will sell items to ZTE that it may not later be able to service even though the warranty on those items is still in force. If the temporary general license is not renewed and ZTE stays on the list, the ability of the U.S. exporter to send replacement parts to ZTE or, alternatively, to repair the item in the United States and return it to ZTE will be in question. It would not surprise me if the temporary general license does not get much use.

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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.)

May

25

More Border Search Shenanigans by Customs in Sanctions Case


Posted by at 8:51 pm on May 25, 2016
Category: Border SearchesCriminal PenaltiesCustomsIran SanctionsOFAC

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/redlegsfan21/13789084574 [cropped]Here we go again. Another case has surfaced where U.S. Customs seized computers and other electronic media from a U.S. traveler at the border, shipped them off to be imaged, rifled through the imaged contents looking for evidence and then weeks later, based on emails they found while going through the computer images, finally sought a search warrant arguing that there is probable cause that the Iran sanctions had been violated.

This almost identical scenario recently led a federal district court in Washington, DC, to toss out evidence gathered in this fashion. And neither of these cases is particularly tough: if you have the time to haul the computer from the airport after the passenger has departed, you have time to get a warrant before snooping through the computer. This is not like the typical border search where Customs looks at a suitcase before the traveler takes it with him to a foreign country.

The latest case involves a search of Idin Rafiee, a San Diego resident and U.S. citizen, who, on October 5, 2012, was traveling to London through LAX. He had a computer, an external hard drive, a smart phone and a tablet with him. A Customs agent told Mr. Rafiee that Customs was detaining his electronic media on the ground that there was reason to believe that there was child pornography on it. The media was imaged on October 9 and returned to Rafiee on  October 13. The government did not seek a search warrant until November 1, 2012, and based the warrant on emails that it obtained from the seized media before it had obtained a warrant. Subsequently, Rafiee was charged with violating the U.S. sanctions on Iran.

The child pornography claim was a complete fabrication. There was never any evidence supporting such a belief and no such pornography, or any pornography for that matter, was alleged by the government to have been found. Instead, the only evidence the government had before it searched Rafiee’s devices was an alleged statement by a disgruntled employee that the defendant was doing business in Iran, even though the notes of the conversation with the employee produced by the Government did not mention Iran.

Of course, even if the Government had some valid reason to grab Rafiee’s stuff, there was no exigency once they had it to justify searching it before getting a warrant. They had all the time in the world, as their one month delay in applying for a warrant amply demonstrates. Beyond that, the notion that you can bootstrap a warrant request with evidence from the same computer you are asking to be permitted to search is, at best, ludicrous.

Not surprisingly, the Government finally dropped all charges against Rafiee on May 13, 2016, before the Court even had an opportunity to rule on Rafiee’s motion to suppress.

 

Photo Credit: Los Angeles International Airport by Daniel Betts [CC-BY-SA-2.0 (http://creativecommons.org/ licenses/by-sa/2.0)], via Flickr https://flic.kr/p/n1uEru [cropped]. Copyright 2014 Daniel Betts

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

May

20

Company Sues Former Exec Over Iran Sanctions Scheme


Posted by at 10:39 am on May 20, 2016
Category: Criminal PenaltiesIran Sanctions

Delfin Production Facilities via http://www.delfinusa.com/photos/ [Fair Use]
ABOVE: Delfin Production Facility


Well, this had to happen sooner or later and I’m surprised it hasn’t happened sooner or more often. Delfin Group USA, a motor oil company, sued Markos Baghdasarian, its former president, for damages it incurred as a result of a scheme concocted by Baghdasarian to ship Delfin products to Iran. (Link – subscription required.) Delfin pleaded guilty to a federal indictment arising from these shipments and was sentenced to three years in federal prison. He was released in 2015.

The complaint seeks damages in the amount of $2.41 million for product seizures, $1.63 million for legal fees, and $200,000 in freight and shipping costs. You have to wonder where Baghdasarian is going to come up with all this cash after three years in Club Fed.

Best irrelevant factoid: the criminal complaint alleged that Baghdasarian put false contact information on one of the barrels of motor oil additives destined for Iran, specifically, a telephone number associated with Victoria’s Secret. This is particularly ironic given that Iran has just recently arrested eight people for posting Instagram photos of women without headscarves.

Photo Credit: Delfin Production Facility via http://www.delfinusa.com/photos/# [Fair Use]

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

Apr

12

Texas Millionaire’s Release in Iran Prisoner Swap Remains a Mystery


Posted by at 6:21 pm on April 12, 2016
Category: Criminal PenaltiesIran SanctionsOFAC

Smart Power Systems and Bahram Mechanic via http://www.smartpowersystems.com/content/main/corporateinformation.html [Fair Use]An excellent and detailed article in the Houston Press, an alternative weekly news magazine and website, ponders the reason that a Texas millionaire, Bahram Mechanic, was on Iran’s prisoner swap list and received, as part of the prisoner swap negotiated with the nuclear deal, a pre-trial pardon of export charges that had been filed against him. This blog had previously written about the indictment against Mechanic which incorrectly accused him, at least for certain (but not all) of the charged exports, of not having a BIS license that he didn’t need. Nine months later, in January 2015, Mechanic walked out of the federal detention center where he was being held without bond pending trial. Like the other Iranian prisoners swapped in the deal, none of whom actually returned to Iran, Mechanic re-ensconced himself in a $2 million condo atop the forty story Four Leaf Towers in Houston and had the crab dinner he complained he had been craving ever since he became the involuntary guest of federal taxpayers.

The author of the article candidly admits that he has no idea why the Iranians were interested in freeing Mechanic. But he does supply a number of curious details about the case. First, Mechanic was denied bail, at least in part, because they found 156 grams of cocaine, 4 kilos of an opium derivative, multiple passports and $100,000 in cash in multiple currencies in a safe in his home. The drug possession charges were later dropped without explanation.

Second, it appears that his defense was going to be a version of the dog that didn’t bark in the night. Apparently, back in 1997, Mechanic had a lawyer at a small trade firm in Houston send a letter asking the Office of Foreign Assets Control if his ownership interest in, and business relationship with, Faratel, a company in Iran, posed any problems. (Ya think?) Not hearing anything (ever) back from OFAC, Mechanic and his lawyers saw this as a green light to continuing shipping things to Faratel in Iran. This is a bit odd since he was indicted at about the same time as the letter to OFAC for transshipping items through Taiwan to Faratel in Iran. Although those criminal charges were dropped, he ultimately paid OFAC a $100,000 fine to settle civil penalty charges OFAC brought arising out of those shipments.

Mechanic’s lawyer suggested to the author of the Houston Press article that the government’s case was meritless, using a familiar term sometimes used to describe bovine excrement. He speculates that the government fabricated the case against Mechanic as “trade bait” for the Iranians. At other times in the article, Mechanic’s lawyer somewhat inconsistently concedes that Mechanic may have done the things he was accused of doing but didn’t know that it was wrong, apparently because the 1997 letter never got an answer (other than, of course, the $100,000 fine).

None of this does anything but deepen the mystery as to why anyone in Tehran would give two cents, much less three American prisoners, to spring Mechanic from jail so he could return to his luxury condo in Houston and catch up on all the crab dinners he missed while in jail.

Photo Credit: Smart Power Systems and Bahram Mechanic via Smart Power Systems [Fair Use];

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