Archive for the ‘Iran Sanctions’ Category



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 [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 [Fair Use]

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Copyright © 2016 Clif Burns. All Rights Reserved.
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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 [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.
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Save the Fokkers

Posted by at 11:40 pm on April 7, 2016
Category: Burma SanctionsCriminal PenaltiesEconomic SanctionsGeneralIran SanctionsSudan

Fokker Services Building in Hoofddorp via [Fair Use]

The United States Court of Appeals for the District of Columbia Circuit just reversed the decision of a lower federal district court which tossed out the deferred prosecution agreement between the Department of Justice and Fokker Services B.V.  Fokker had admitted, in a voluntary disclosure to the Office of Foreign Assets Control (“OFAC”), that  it had obtained U.S. origin aircraft parts which it then re-exported to Iran, Sudan and Burma without the required licenses. This blog has previously criticized both the highly unusual decision of the DoJ to turn a voluntary disclosure to OFAC into a criminal prosecution and the district court’s decision to toss aside the DPA as too lenient, apparently in the belief that Iran was somehow involved in the 9/11 terrorist attacks.

The Court of Appeals decision, which restores the DPA and reverses the lower court, is based simply on its interpretation of the Speedy Trial Act. Because a DPA starts the Speedy Trial Act’s seventy-day clock running, the Act provides, in 18 U.S.C. § 3161(h)(2), that a DPA can turn off this clock “with the approval of the court.” Otherwise, of course, the defendant could escape prosecution after seventy days, despite provisions of the DPA that prosecution would be avoided only upon good behavior by the defendant during a longer period, typically one to three years.

The Court of Appeals held that this requirement of approval did not give the district court the authority to question the leniency of the DPA, the charges brought by the government or the parties prosecuted under those charges. Rather the court reviewing a DPA is limited to determining if the DPA is

geared to enabling the defendant to demonstrate compliance with the law, and is not instead a pretext intended merely to evade the Speedy Trial Act’s time constraint.

The only other authority of the lower court, according to the Court of Appeals, would be to reject “illegal or unethical provisions” of the DPA, noting that the District Court had not argued that anything in the DPA was either illegal or unethical.

The Court of Appeals opinion is, thus, good news and bad news. The bad news is that a court can’t refuse to approve a DPA on the grounds that it was unfair for the government to turn a voluntary disclosure to an administrative agency into a criminal prosecution. The good news is that if the exporter does agree to a DPA, it can have a high degree of certainty that the district court cannot condition approval of the DPA on the insertion of more onerous provisions.

Photo Credit: Fokker Services Building in Hoofddorp via Fokker [Fair Use] [cropped]

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



Slow Boat From Batam

Posted by at 11:17 pm on April 5, 2016
Category: BISCriminal PenaltiesExtraditionIran Sanctions

  1. User:Abelard Fuah, via Wikimedia licensed under CC BY-SA-3.0 [][cropped]On Monday, according to a DOJ press release published on the Bureau of Industry and Security website, the United States finally extradited Steve Lim, a Singaporean national who had been languishing in a jail in Batam, Indonesia. As we reported here and as noted in the DOJ press release, Lim was under indictment in the United States for shipping radio modules from the United States to Iran. In October 2014, Lim had hopped a ferry from Singapore to Batam to attend a trade show and was nabbed at the ferry terminal. An Indonesian judge ultimately permitted, in July 2015, Lim’s extradition notwithstanding the absence of an extradition treaty between Indonesia and the United States

What the DOJ press release fails to mention is that a court in Singapore had refused to extradite Lim in 2011. Singapore, which does have an extradition treaty with the United States, has a dual criminality requirement for extradition. Because the export of the radio modules from Singapore to Iran was not illegal under the law of Singapore, the request by the U.S. for extradition was refused. Lim would still be in Singapore had he not made that trip to Indonesia. What this illustrates is that although U.S. law enforcement authorities claim jurisdiction over foreign nationals who, without ever setting foot in the United States, export items from the U.S., the assertion of this jurisdiction is not without international controversy.

Photo Credit:User:Abelard Fuah, via Wikimedia licensed under CC BY-SA-3.0 [][cropped]

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Copyright © 2016 Clif Burns. All Rights Reserved.
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OFAC May Make a U-Turn on Its U-Turn Ban

Posted by at 10:39 am on March 31, 2016
Category: Iran SanctionsOFAC

Freedom Triumphant by takomabibelot [CC-BY-SA-2.0 (], via Flickr [cropped and processed]An AP story today suggests that the White House may be considering the return of “U-turn” transactions for permitted sales to Iran. Those transactions, which were eliminated in 2008, allowed, under former section 560.516(a)(1), transactions with Iran to be cleared in U.S. Dollars by permitting non-U.S. banks to use their correspondent banks in the United States. In order to qualify for the exception, both the originating and beneficiary banks had to be non-Iranian foreign banks. In addition, no Iranian banks on the SDN List could be involved and, of course, the underlying transaction could not be one prohibited under U.S. law. So, if an Iranian customer wanted to buy goods from France and pay dollars, the Iranian customer would direct its bank in London to use its correspondent account in a New York bank to send the purchase price in U.S. dollars to the seller’s bank in France.

Of course, even if U-turn transactions are permitted once again by OFAC, there is no guarantee that banks will be willing to process them.   After all, no one has forgotten that the New York Department of Financial Services, believing the it understood OFAC regulations better than OFAC, went after Standard Chartered bank for legal U-turn transactions involving Iran.

Photo Credit: Freedom Triumphant by takomabibelot [CC-BY-SA-2.0 (], via Flickr [cropped and processed]

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