Archive for the ‘ITAR’ Category


Sep

17

Turkish Citizen Indicted For Foreign Downloads of Submarine Drawings


Posted by at 7:11 pm on September 17, 2014
Category: Arms ExportCriminal PenaltiesDDTCITARUSML

By U.S. Navy via http://www.navy.mil/view_image.asp?id=16778 [Public Domain]Alper Calik — a Turkish citizen and co-owner of Clifton, New Jersey based Clifmax LLC — has been arrested based on a criminal complaint, dated September 12, charging him, among other things, with violating the Arms Export Control Act by exporting without a license certain drawings relating to the NSSN (Virginia) class submarine. (And, no, I am not reporting this case simply because the company is named Clifmax, although that is, leaving the alleged criminal conduct aside, an awesome name for a company.)

At the heart of the allegations are two drawings that Calik downloaded from a DoD database after signing the Military Critical Technical Data Agreement which must be signed in order to gain access to the DoD drawing database at issue. The criminal complaint alleges that Calik downloaded these images while in Turkey and attempts to assert that Calik knew doing this was illegal because he had signed the Military Critical Technical Data Agreement.

However, the Military Critical Technical Data Agreement is hardly specific about what is or is not permitted with respect to the drawings, saying only this:

[The undersigned] acknowledge[s] all responsibilities under applicable U.S. export control laws and regulations (including the obligation, under certain circumstances, to obtain an export license from the U.S. Government prior to the release of militarily critical technical data within the United States) or applicable Canadian export control laws and regulations, and (2) agree[s] not to disseminate militarily critical technical data in a manner that would violate applicable U.S. or Canadian export control laws and regulations.

Suffice it to say that this certification is poorly drafted and confusing, mentioning an export license only in the context of releasing the data “within the United States.” Nor does the certification that he would not “disseminate” the data clearly prohibit him from downloading the information for his own personal review in a foreign country. Obviously, such downloads do in fact violate U.S. exports if the downloads include ITAR-controlled technical data, but this certification neither makes that clear nor establishes that Calik had the necessary criminal intent when he downloaded the documents

The complaint alleges that there were legends restricting export on the drawings involved, but does not quote those legends. Whether these legends are enough of a predicate to support the criminal intent necessary for conviction on the export charges depends on what those legends said and that remains to be seen.

UPDATE:  Two commenters make an excellent point about using the legends on the drawings as indicia of criminal intent: Calik would have only seen the legends after he downloaded the drawings in Turkey.  The significance of this point is magnified even further when you consider this statement from the criminal complaint:

Beginning in or around 2009 to the present time, ALPER CALIK downloaded approximately one hundred thousand drawings. some of which were subject to U.S. export control regulations without obtaining export licenses from the U.S. Department of State. ALPER CALIK was not in the United States when the majority of the drawings were downloaded.

At issue are only two of these one hundred thousand downloaded drawings, which would have revealed the legends only after being downloaded.  The overwhelming portion of the remainder of the drawings not having any indication that the downloading of these or other drawings might be problematic.

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Jun

24

It’s Good To Be The King


Posted by at 11:15 pm on June 24, 2014
Category: DDTCITARUSML

Intersil Low Dose Irradiator via http://www.intersil.com/en/applications/rad-hard/eldrs.html [Fair Use]Last week the Directorate of Defense Trade Controls (“DDTC”) announced that it had fined Intersil Corporation, a California-based manufacturer and developer of semiconductors and integrated circuits, $10,000,000 of which $6,000,000 goes to Uncle Sam and the remaining $4,000,000 goes to Intersil’s compliance program and remedial measures. Along with the fines, DDTC has required Intersil to jump through a number of now-typical compliance and re-education hoops, including appointing an ombudsman, hiring a special compliance officer, rewriting its compliance programs, engaging in audits, making frequent reports to DDTC and writing “I will not violate the ITAR” three million times on a blackboard after school. Well, of course, only the last item was not actually required.

According to the Proposed Charging Letter, Intersil incurred the ire of DDTC by classifying certain of its products as ECCN 3A001.a.1, 3A001.a.2, and EAR99 even though the items were radiation hardened and space qualified and, therefore, covered instead by USML Category XV(e). Why Intersil made this mistake is not revealed in the documents but since Intersil was applying for BIS licenses for the goods when required, it is hard to imagine that it was anything other than a good faith mistake (which is, probably, the reason why this information is omitted.) As a result, there were 3,152 unauthorized exports of Intersil’s products, although, due to the statute of limitations, only 339 exports were actually charged, with DDTC swearing left and right that although it couldn’t help mentioning the 3,152 exports it was paying absolutely no attention whatsoever to those in formulating the $10 million penalty.

But here is the most interesting part of the charging documents:

Several of the unauthorized exports were subsequently re-exported or retransferred without authorization due in part to the misclassification of the ICs.On August 20, 2010, a DDTC official misinformed Intersil that for any ICs that “HAVE already been exported under EAR jurisdiction, these [ICs] ARE NOT retroactively subject to the retransfer provisions of 22 CFR 123.9.: Intersil was further misadvised that Intersil did not need to inform its foreign customers to submit ITAR re-export authorization for these items and that this “decision to not retroactively aply USML controls for these already exported [ICs] will continue to be applicable even if a future formal CJ determination asserts USML controls apply.”

Interestingly, notwithstanding this bad advice, Intersil is charged with causing various unauthorized re-exports from, and retransfers in, foreign countries due to its misclassification of the integrated circuits. Whether or not any of these were the result, at least in part, of DDTC’s admittedly bad advice that the retransfer provisions would not apply to items exported under the EAR is not clear, but let’s give DDTC the benefit of the doubt and assume that these were all unrelated.

Even so, there is still an interesting moral to this story. Exporters who make mistakes have to pay large fines and engage in burdensome remediation activities. DDTC officials who make mistakes have to do, er, well, nothing at all because, well, you know, mistakes happen. As they say, it’s good to be the king.

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Mar

5

Ignorance Is Indeed a Defense: NASA Ames Edition


Posted by at 6:06 pm on March 5, 2014
Category: DDTCDeemed ExportsITAR

Aerial View of NASA Ames Research Center https://www.facebook.com/photo.php?fbid=10151655073516394&set=pb.338122981393.-2207520000.1394054211.&type=3&theater [Public Domain]The NASA Office of Inspector General completed its investigation of unlicensed releases of ITAR-controlled technology to foreign nationals working at the Ames Research Center and — surprise! surprise! — it found no evidence of any violations of law. According to a summary of the OIG report, ITAR-controlled information was released without proper authorization to foreign nationals working at Ames. However, this was not a violation of law, just “poor judgment,” which is a nice way of saying that ignorance of the law can be a defense if you work at NASA and are being investigated by the NASA OIG. The full report was withheld because of privacy concerns, i.e., it mentioned the names, I would presume, of all the people running around at Ames and exercising poor judgment.

As they say on the car commercials: “Professional government workers exporting on closed course. Do not attempt this yourself.” In other words, “poor judgment” will not be enough to exonerate deemed exports in the private sector.

The reason for this all being just a lapse of judgment and not an export violation is this:

We … found significant disagreement between scientists and engineers at Ames and export control personnel at the Center and NASA Headquarters as to whether the work the foreign nationals were performing at Ames involved ITAR-controlled technology.

For you and me, such confusion means you need to file a Commodity Jurisdiction request with the State Department to clear things up. For NASA workers it means that export controls are hard and engineers can’t be blamed for getting hard questions wrong. This statement is somewhat incredible in the context of this finding in the report:

In addition, on two occasions a senior Ames manager inappropriately shared documents with unlicensed foreign nationals that contained ITAR markings or had been identified as containing ITAR-restricted information by NASA export control personnel.

But, yeah, everybody was still confused and disagreeing over whether this stuff was ITAR-controlled or not.

Then we have the part of the report which suggests that Professor Roth probably wishes he worked at NASA and not the University of Tennessee.

We also found that a foreign national working at Ames inappropriately traveled overseas with a NASA-issued laptop containing ITAR-restricted information. Even though the foreign national had an ITAR license at the time, the regulations forbid taking such export-controlled information out of the country. However, we were unable to substantiate concerns that the foreign national shared ITAR-protected information while overseas.

Professor Roth is sitting in a federal correctional facility in part because he carried a laptop with ITAR-controlled data to China without any evidence whatsoever that he even opened those files on his computer while in China. I think this is what some people might call a double standard.

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Jan

13

California Man Sentenced to Three Years for Export Violations


Posted by at 6:14 pm on January 13, 2014
Category: Criminal PenaltiesDDTCITAR

Philip He Family Photo via http://news.yahoo.com/special-report-china-39-weapon-snatchers-penetrating-u-150652962.html [Fair Use]
ABOVE: Philip Chaohui He


Last February, this blog reported on the indictment of Philip Chaohui He, who had been indicted on charges that he attempted to export to China $549,654 worth of ITAR-controlled, radiation hardened, space qualified memory chips to China without the required export license. On December 19, Mr. He, who had entered a guilty plea to the charges, was sentenced to three years in prison.

Since our original post, several interesting details have emerged with respect to Mr. He and his attempted export to China. The first relates to the potential involvement of the Chinese government in these exports. The San Francisco Chronicle tells an interesting story as to the ship on which He tried to load the memory chips. The ship was owned by ZPMC, a Chinese state-owned enterprise that was fabricating steel towers for the San Francisco Bay Bridge renovation, a project on which Mr. He was working as an engineer. Mr. He told Jim Yang an employee of ZPMC that one of their employees had left behind in San Francisco a package of personal effects and that he would like to return the package to the employee via a ZPMC ship that was soon departing from the port in Long Beach, California.

Yang said he wondered why He would want to drive seven hours to make the delivery, but he had replied, “Fine.”

“So he drove down by himself with a couple of boxes in his vehicle,” Yang said. “And we had dinner together because he was doing us a favor.”

The next morning, Yang said, He followed him in his car to the Port of Long Beach, where they entered the ZPMC dock site using Yang’s security badge.

Mr. He was immediately arrested on the dock. Yang denies that he knew what was in the package or that ZPMC was in cahoots with He. The red flag here is not just the one flying over Beijing. Why was He driving seven hours with a package of personal effects as a favor to a ZPMC employee he met on the Bay Bridge Project? He couldn’t figure out any other easier way to return the box? Then Yang uses his badge and let’s He on the dock with a package of completely unknown contents that could have been a dirty bomb for all Yang knew. Uh huh. Sure. And if you believe that I’ve got a Bay Bridge to sell you.

The second detail relates to the participation of the memory chip manufacturer, Aeroflex, in the apprehension of Mr. He. We speculated in the original post that He’s large order of stuff he had little demonstrated need for set off alarm bells in Aeroflex and that they set the law on him. This lengthy investigative report on the case by Reuters confirms that this was the case.

People and companies who buy these kinds of rad-chips are usually well-established, repeat customers – more multinational corporation than mom & pop. Aeroflex salesmen had never heard of “Philip Hope” or his company, “Sierra Electronic Instruments.”

Most suspicious of all, just days after placing the order, Hope sent Aeroflex a certified check for the full amount, $549,654. That was rare. Buyers were expected to make a deposit, but nobody paid up front.

Of course, being alert to red flags and lending a helping hand to the government did not result in any expression of gratitude from the Government which, not long after, fined Aeroflex $8 million for export violations that Aeroflex voluntarily disclosed to the Government. My guess is that in the future Aeroflex will simply decline to make sales like this one that are suspicious and won’t feel particularly motivated to pick up the phone and tell the feds about it.

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Dec

20

Back in the U.S.S.R.? Pleading Guilty to U.S. Export Violations May Get You Home


Posted by at 12:53 am on December 20, 2013
Category: Criminal PenaltiesDDTCGeneralITARUSML

By  Sgt. Scott M. Biscuiti [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADefense.gov_photo_essay_090329-M-7747B-015.jpg

On Tuesday, Russian Roman Kvinikadze pleaded guilty in federal court in Wyoming to charges that he attempted to export thermal imaging weapon sights to Russia without a required license from the U.S. State Department.  Last month, we reported on Kvinikadze’s arrest and the charges brought against him as well as the Russian government’s criticism of the entire matter.  Kvinikadze’s plea is not a surprising development since, as we alluded to last month, an entrapment defense even under the most favorable circumstances is difficult to prove.

What is surprising, however, is how soon Kvinikadze may be leaving U.S. federal prison.  The Associated Press reported on Tuesday that the federal judge in Kvinikadze’s case said “immigration authorities intend to send Kivinikadze back to Russia.”  As we said last month, Kvinikadze’s best defense was not going to be in the courtroom but through diplomatic channels plied with the Russian government’s support.  Unlike a month ago, when the Russian human rights commissioner publicly decried Kvinikadze’s arrest, the Russian government has been quiet since Kvinikadze entered his guilty plea.

If Kvinikadze in fact returns shortly to Russia, the Department of Homeland Security, the agency which conducted the investigation into Kvinikadze, may be reconsidering the effectiveness of operations, like the one used against Kvinikadze, that engage foreign persons online to arrange for unlawful export transactions and entice them into travel to the United States to be arrested.  At a minimum, would-be U.S. export control violators abroad ought to think twice about meeting a potential business partner for the first time in the United States.  But more importantly, foreign governments may begin to join Russia in denouncing such U.S. policing of its laws around the world.  One of the aspects that have made U.S. investigations and law enforcement activities abroad of FCPA violations so successful in recent years is the U.S. cooperation with foreign law enforcement. Without such cooperation, the United States may see more guilty foreign criminals going home.

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