Archive for the ‘Part 129’ Category



The Strange Case of Marc Turi

Posted by at 8:18 am on October 6, 2016
Category: Criminal PenaltiesDDTCPart 129

Marc Turi via [Fair Use]
ABOVE: Marc Turi

Two days ago, on October 4, a federal district court in Arizona dismissed a criminal indictment brought in 2014 against Marc Turi that accused him of lying in two brokering applications that Turi had submitted to the Directorate of Defense Trade Controls (“DDTC”) in 2011. The dismissal was based on a motion to dismiss filed the day before by the prosecution noting that a consent agreement had been reached between Turi and DDTC.  Under that consent agreement, released by DDTC yesterday,  Turi agreed that for four years he will not engage in any “activities subject to the ITAR.”

The Turi case is, to say the least, an odd case, not the least because it involves an arms deal with the Libyan rebels which everyone — DDTC, the prosecutors, and Turi — concede never took place.

The story begins with the revolt in Libya that broke out in February 2011. Near the end of that month, the rebels attempted to establish an interim government under the banner of organization known as the Libyan National Transitional Council (“NTC”). On February 26, 2011, the UN imposed an arms embargo on Libya, which DDTC finally got around to implementing some three months later on May 24, 2011, when it amended Part 126 to include Libya. The NTC was ultimately recognized as the government of Libya by the United Nations on September 16, 2011.

According to the indictment, on March 11, 2011 and before the US imposed the arms embargo on Libya in May, Marc Turi filed an application seeking to broker the sale of certain arms from Eastern Europe to the NTC. This application was denied by DDTC on March 22, 2011, by DDTC.

A week later, on March 29, 2011, Turi filed another application with DDTC requesting permission to broker to the government of Qatar a list of arms which the indictment, in paragraph 24(ee), described as “nearly identical” to the arms detailed in the previous application relating to the NTC. That application was granted by DDTC on May 5, 2011. On June 11, 2011, Turi filed an application to broker the same arms listed in the Qatar application to the U.A.E. government instead.

On June 29, 2011, Turi sent a letter, apparently never signed, to Mustafa Abdul Jalil, the Chairman of the NTC, by which the NTC agreed to reimburse the government of UAE for the arms described in the brokering applications filed by Turi with respect to Qatar and UAE. That letter was never signed, the arms never went to the NTC and the U.S. government indicted Turi for lying in the UAE and Qatar brokering applications by failing to reveal that the arms were destined ultimately to the NTC.

Turi’s defense, as revealed in his Motion to Compel Discovery, was that he was, in fact, acting on behalf of the CIA which sought to arm the NTC notwithstanding the UN embargo. Turi and the government then wrangled over these discovery requests, which the government claimed sought classified information, until the DDTC deal was reached and the government requested the dismissal of the indictment.

With these facts in mind, let’s look at the documents released by DDTC relating to the settlement.  These documents are, to say the least, odd. To begin with DDTC does not charge Turi with lying in the brokering applications he made with respect to Qatar and the UAE.

Instead, DDTC in its proposed charging letter first accuses Turi of making an unapproved proposal to the NTC in violation of section 126.1(e) of the International Traffic in Arms Regulations, citing the June 29 letter to Chairman of the NTC. Apparently no one at DDTC actually read section 126.1(e) because there is no way that this letter violated that section. That section only prohibits proposals “made to any country referred to in this section (including the embassies or consulates of such a country), or to any person acting on its behalf.” Given that the NTC was not recognized as the legitimate government of Libya until September 2011, the letter to the NTC in June, when NTC was simply a rebel organization, was not made to Libya or anyone acting on its behalf and so could not violate section 126(e).

The second violation in the DDTC charging letter is that Turi acted as a broker for Libya without authorization. This is problematic on two counts. The first is that if Qatar hires Turi to send arms to Libya the Turi is brokering for Qatar and not for Libya. Perhaps there’s a problem that Qatar’s intentions with respect to Libya weren’t revealed in the application, but DDTC isn’t charging Turi with violating the prohibition on false statements in applications. Besides, that was the charge DOJ made, and they dropped that.

But the second, and larger, problem with the brokering charge is this: DDTC had to know when it approved the Qatar brokering application where the arms were headed. That application was filed exactly one week after the Libya application was denied and covered a list of arms nearly identical to the ones in the Libya application. DDTC isn’t that stupid, nor is everyone else as stupid as DDTC must imagine.

Consider this: say you’re a compliance officer and an employee asks to ship some flowers to Iran. You, of course, say no. Five minutes later he’s back in your office saying he decided to send the exact same flowers to the UAE instead. No problem, you say. Does anyone honestly think that DDTC or BIS or OFAC would look the other way? Or would they have your head on a platter?

DDTC and that State Department almost certainly were fine with letting Qatar arm the rebels in Libya; they just could not admit that in writing.


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Copyright © 2016 Clif Burns. All Rights Reserved.
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ITAR? What’s An ITAR? Isn’t That a News Bureau in Russia or Something?

Posted by at 10:12 pm on June 2, 2015
Category: DDTCPart 129

Matthew VanDyke via[Fair Use]
ABOVE: Matthew VanDyke

A guy named Matthew VanDyke announced this on Facebook:

I have been in ‪#‎Iraq‬ helping to raise and train a Christian army to fight ‪#‎ISIS‬. Sons of Liberty International (SOLI), my new company that provides free military consulting and training to local forces fighting terrorists and oppressive regimes, has been consulting and training the Nineveh Plain Protection Units (NPU) in Iraq. In December I took a US Army veteran with me to Iraq to open a covert training facility north of Mosul, and SOLI began training Christian fighters.

Oh, surely, you say, if you’re a regular reader of this blog, he must have a State Department license before he provides defense services in Iraq, right? No one would just go on Facebook and announce to the entire world that he’s training soldiers in Iraq without getting a license first, would they?

So, a reporter at Mother Jones asks VanDyke just that:

VanDyke told Mother Jones that initially “nobody was sanctioning it.” He added, “Part of the whole purpose of SOLI is to step in where governments had failed, so going and asking permission from the governments that have already failed is not particularly productive.”

Uh oh.

Later, after telling Mother Jones “repeatedly” that no one in the State Department had the slightest idea he was training soldiers in Iraq, VanDyke seems to have changed his story. According to Mother Jones:

He subsequently stated in an email that “Sons of Liberty International complied with US registration requirements prior to signing a contract with the Nineveh Plain Protection Units (NPU), as required by U.S. law.”

Well, there you have it, yet another undocumented benefit of registration: once registered with DDTC, you can provide military training in the foreign country of your choosing. (DISCLAIMER: Professional scofflaw on closed course. Do not try this on your own. Serious legal injury, including criminal prosecution, could result.)

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Copyright © 2015 Clif Burns. All Rights Reserved.
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Law Firm Sues DDTC over Application of Brokering Rules to Legal Advice

Posted by at 9:58 pm on March 4, 2015
Category: DDTCPart 129

State Department by Josh [CC-BY-SA-2.0 (], via Flickr [cropped]On March 3, 2015, a small DC law firm filed a complaint against the Directorate of Defense Trade Controls (“DDTC”) seeking, inter alia, injunctive relief prohibiting DDTC from applying its brokering rules to the provision of specified types of legal advice. This blog previously has discussed the potential application of part 129 brokering rules to the activities of lawyers on behalf of their clients. As we stated, the broad language of part 129 always arguably covered legal work on behalf of clients, but no lawyers ever registered as brokers and DDTC never complained. When DDTC amended the brokering rules, it arguably then explicitly decided to start covering legal services. The interim rule does exempt legal advice, specifically noting, in the Federal Register notice at least, that legal advice about export compliance was within the exemption. The situation was then muddied when DDTC published FAQs on the brokering rules which said that common legal services, namely, “structuring a transaction” involving defense articles or negotiating contract terms involving defense articles was outside the scope of the exemption.

The plaintiff in the recently filed lawsuit optimistically (and some might say foolhardily) requested from DDTC an advisory opinion stating that certain legal services, such as advising on the structure of transactions involving defense articles and drafting contracts for the sale of defense articles, were outside the scope of Part 129. Not surprisingly, the request for an advisory opinion languished at DDTC for months, despite the plaintiff’s repeated communications with DDTC asking them to act on the advisory opinion request. Finally, according to the complaint, and eleven months after the request was made, a DDTC official called plaintiff and said the rules did not cover the activities specified in the request, and plaintiff, based on those representations, agreed to withdraw the request.

Seven months later, on February 24, 2015, in a plot twist worthy of Franz Kafka, the same DDTC official sent a letter to plaintiff and, incredibly, retracted the previously provided advice:

Please be advised that your letter of August 29, 2013 and our conversation which took place on July 3, 2014, lacked sufficient detail for the Department to make an official determination as to whether the activities discussed constituted brokering activities.

The official asked the plaintiff to submit another advisory opinion request. The understandably frustrated plaintiff filed a lawsuit instead.

There are, of course, a number of problems with applying Part 129 to legal services beyond the provision of legal advice on export compliance. To begin with, lawyers will need prior permission from the State Department under section 129.4 before becoming involved in transactions involving specified defense articles such as night vision equipment. Worse, section 122.5 would require lawyers to make all records relating to these transactions available to DDTC and law enforcement in violation of attorney-client privilege.

The good news, of course, is that DDTC’s bizarre volte-face on the applicability of Part 129 to legal services is unlikely to be favorably viewed by the court and means, I think, that the initial advantage in this lawsuit is with the plaintiff.

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Copyright © 2015 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



First Thing We Do, Let’s Register All the Lawyers

Posted by at 11:44 pm on September 11, 2013
Category: DDTCPart 129

Daumier Lawyers [Public Domain]One of the issues that has haunted the efforts by the Directorate of Defense Trade  Controls (“DDTC”) to amend its brokering rules has been what to do with lawyers. Are lawyers that assist their clients with transactions involving defense articles brokers or not? Do they need to pony up registration fees? Worse, are there situations where they must get permission from DDTC before counseling clients on defense related transactions?

To be fair about the issue, DDTC is trying to fix an issue that arises from the overly broad definition of brokering services in the current rules. The current definition covers anyone who acts “as an agent for others in negotiating or arranging contracts, purchases, sales or transfers of defense articles or defense services in return for a fee.” The minute a lawyer calls the lawyers for the other side, the issue arises as to whether the lawyer has become a broker. It’s easy to say that the lawyer isn’t in that case an “agent” for his client in the traditional sense, except for the fact that DDTC has made clear that “agent” here is meant in a very broad sense that goes beyond the notion of an agent under the common law of agency. No lawyers have been registering as brokers, and DDTC has so far never suggested that it had any interest in pursuing lawyers.

The newly released “interim final” rule attempts to address this issue, and by explicitly raising the issue may make the situation even worse than it was when the rules were silent on the issue. The “interim final” rule says that brokering activities do not include “activities by an attorney that do not extend beyond the provision of legal advice to clients.” Not surprisingly, there is no definition of “legal advice” but DDTC tries to clarify it with this comment at the beginning of the Federal Register notice on the “interim final” rule:

The Department has clarified that “activities by an attorney that do not extend beyond the provision of legal advice to clients” is not within the definition, and notes that “legal advice” includes the provision of export compliance advice by an attorney to a client.

Two problems now are posed by the “interim final” rule. First, the exemption applies only to the extent that a lawyer is communicating with his own client. If he or she talks to the other lawyers in a transaction, the lawyer has arguably become a broker. Second, lawyers in a transaction involving defense articles are going to provide legal advice far beyond the “provision of export compliance advice.” Simple advice to the client about whether the contract should include an arbitration clause, or whether the law of New York or California applies. Those might be clear examples of legal advice but what if the lawyer provides his or her thoughts on certain risks that the transaction might pose?  Is that business or legal advice?  Has the lawyer stepped over the line and become a broker?

And here’s the most terrifying thought. If the transaction involves a “foreign defense article,” then under the “interim final” rule, a lawyer will need State Department approval before advising his or her client on whether to include an arbitration clause or before the lawyer calls opposing counsel to discuss contractual issues. I suspect that many lawyers will ignore these requirements but that is going to be harder to do under the new language in this rule when (and if) it goes into effect on October 25 of this year.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Miracle on E Street

Posted by at 10:24 pm on August 28, 2013
Category: DDTCPart 129

M1200 Armored Knight source: [Public Domain]It seems like the Directorate of Defense Trade Controls (“DDTC”) has been working on the amendments to the brokering rules in Part 129 of the International Traffic in Arms Regulations since sometime during the Taft Administration. So when the latest iteration of these rules, oxymoronically labelled as the “Final Interim” Rule, appeared early this week I wearily clicked through to the Federal Register notice, fully prepared to revisit the horror that I had experienced some many times before. But, but, I soon realized that the lengthy gestation of the rules and the numerous rounds of public comment had borne fruit. Although not perfect, this new version fixes a number of the problems that plagued the previous versions.

I will over the next several days review various parts of the new rules, but I want to start with the best news. Cue music for a happy dance: DDTC has finally gotten the jurisdictional scope of the rules right.  As many of you know far too painfully, DDTC had, starting with some improvident remarks made by at least one former staffer at the agency, argued that the brokering rules, even before any proposed amendment, covered foreign persons in foreign lands if a U.S. origin defense article was involved. The earlier versions of the proposed rules made this explicit, covering U.S. persons, all persons in the United States and

any foreign person located outside the United States involving a U.S.-origin defense article or defense service.

The Final Interim rule completely eliminates this last category and, at last, returns to the original intent of the Brokering Amendment to the Arms Export Control Act, the authority for the brokering rules in the first place. As DDTC says in its comments on the Final Interim rule:

In conformance with the statutory requirements for the brokering of defense articles and services, the Department has revised the proposed changes to these definitions to clarify their scope. In particular, the Department has clarified that foreign persons that are required to register as brokers are those that are in the United States and those foreign persons outside the United States that are owned/controlled by a U.S. person. And the Department has removed from the definition of ‘‘brokering activities’’ the activities of any foreign person located outside the United States acting on behalf of a U.S. person.

This is great news and eliminates an enormous headache for exporters that use foreign reps and agents to distribute their defense articles abroad.

The only downside is that this new language makes clear the foreign subsidiaries may have to register, something that had not been required by previous versions of the rule which covered activities “for others” and which some at DDTC had said informally did not cover companies under the same “corporate umbrella,” although some others at the agency have said informally that all foreign subsidiaries were covered if they were involved in the parent company’s sale of defense articles.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)