Archive for October, 2010



Court Rules That OFAC Must Reveal Names of Individual License Holders

Posted by at 9:47 pm on October 28, 2010
Category: OFAC

Not ConfidentialEarlier this month, a federal district court judge in New York ruled that the Office of Foreign Assets Control (“OFAC”) was required to disclose to the New York Times the names of all individuals who had been granted licenses relating to activities in foreign countries, such as Iran, where such activities would otherwise be illegal. OFAC had previously agreed to disclose the names of corporate licensees to the New York Times after it filed its lawsuit seeking names of all companies and individuals with OFAC licenses. (The New York Times lawsuit likely explains OFAC’s decision earlier this year to advise corporate licensees that it would release their identities to the public notwithstanding Exemption 4 of the FOIA which exempts confidential business information from release under the act.)

In the case of individual licensees, Exemption 6 allows the government to withhold from disclosure under the FOIA “personnel and medical files and similar files.” The court held that Exemption 6 did not apply in this case because, although the names constituted “similar files” under Exemption 6, the individuals’ interest in privacy was outweighed by the public’s interest in disclosure of the names.

OFAC requested and was granted a 45-day stay of the decision. As a result, it seems likely that OFAC will appeal the district court’s decision

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Will Persian Carpets Soon Fly into the United States Again?

Posted by at 9:35 pm on October 27, 2010
Category: Iran Sanctions

Flying CarpetThe recently-passed Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”) ended the import of Persian rugs into the United States. According to this post in the Wall Street Journal‘s Corruption Currents blog, officials at the Office of Foreign Assets Control (“OFAC”), the office in the Treasury Department responsible for administering the Iran import bans, said that they have received a “surprisingly high number of calls” from people who want to import Persian carpets for personal use.

The post continues by suggesting that OFAC may indeed be inclined to permit imports of Persian carpets for personal use, either under an exception for imports of personal luggage and household goods or otherwise.

Alexandre Manfill, chief of compliance implementation at OFAC, hinted at recent anti-money laundering conference in Washington that, in fact, they do.

He said the office was working on an interpretation of the ban that would allow for the importation of carpets and pistachios for non-commercial use

Such exceptions would be fully consistent with CISADA. First CISADA, in section 103(b)(1)(B), provides that the exceptions provided in section 203(b) of the International Emergency Economic Powers Act (“IEEPA”) would still apply. Section 203(b)(4) permits “importation of accompanied baggage for personal use,” which would seem to include all the Persian carpets you can stuff in your luggage.

But what about importation of Persian rugs as “household goods” or for non-commercial use? Section 203(b) of IEEPA does not extend to non-commercial imports or household goods. As OFAC noted in the notice adopting the rule eliminating the general license for imports of Persian carpets and foodstuffs, Section 103(d) of CISADA permits OFAC to promulgate regulatory exceptions to the import ban. If such regulatory exceptions permit import of items from Iran for commercial use, the agency must submit a report to Congress certifying that the exception is in the national interest. This gives OFAC fairly broad authority to create broad exceptions for imports for non-commercial use, and it looks like it may well do so for non-commercial importation of Persian carpets.

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Small British Company Takes On Lloyds for Not Cashing Cuban Check

Posted by at 8:26 pm on October 25, 2010
Category: Cuba SanctionsEUForeign Countermeasures

Cuban Postage StampIt started simply enough. A small, U.K.-based agricultural consultant, Fertecon, took a check for £7,156 to its banker, Lloyds, and asked them to cash it. Lloyds refused. The reason? The check came from Cuba.

Once bitten, twice shy, it would seem. Last year, Lloyds agreed to pay $217 million in penalties and to adopt certain compliance procedures arising from allegations by the U.S. Treasury Department’s allegations that Lloyd deleted information about Libya, Sudan and Iran in wire transfer instructions in order to clear dollar transactions through its correspondent banks in the U.S. Specifically, Lloyds agreed to third party audits “to determine whether any payments subject to OFAC regulations were processed through, or on behalf of, any U.S. individual or entity.”

Twice shy here means that Lloyds is backing away from transactions that it would appear aren’t even subject to OFAC’s regulatory jurisdiction and which don’t involve transactions to be processed through a U.S. bank or on behalf of any U.S. entity. It was a check payable to a U.K. company in pounds sterling. So maybe its thrice shy or twenty times shy.

The problem here, of course, is E.U. Council Regulation No. 2271/96 which makes it illegal for Lloyds to cooperate with the U.S. sanctions on Cuba. This point was not lost on Fertecon, or its lawyers, who have traipsed off to U.K. and E.U. authorities to complain. Lloyds case with the E.U. is not terribly enhanced by the fact that U.S. law wouldn’t appear to prohibit Lloyds from negotiating a Cuban check in pounds sterling for a U.K. customer. Lloyds must have made a careful calculation, given the lack of any significant enforcement of Regulation 2271/96, that it would be happy to be bitten by a toothless, mangy dog in its own backyard if it would curry favor with a neighbor’s angry pit bull that thinks it owns the entire neighborhood.

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More Details on Indicted Irish Company’s Shipments to Iran Emerge

Posted by at 7:16 pm on October 21, 2010
Category: BISCriminal Penalties

Tom McGuinn
ABOVE: Thomas McGuinn

An excellent article by Justin Blum on the U.S. investigation of the Irish company Mac Aviation appeared today on Bloomberg News. I have previously reported here and here on the pending indictments of Mac Aviation and its principals Tom and Sean McGuinn arising out of their efforts to acquire aircraft parts and other items from U.S. suppliers for export to Iran. Blum has done considerable research and leg-work in reporting this story, including a number of interviews with law enforcement sources working on the case and speaking on condition of anonymity. It’s well worth a read. (I would recommend the article even if I were not quoted in it.)

The story clears up one detail I wondered about with respect to F-5 canopy panel exports contained in the superseding indictment of Mac Aviation and its principals Tom and Sean McGuinn. Commerce Overseas, the California company that ultimately sold the F-5 panels to Mac Aviation refused to sell the panels to Mac Aviation in Ireland or to deliver them to its representatives in the United States without an export license. Ultimately, however, Commerce Overseas released the panels to ABL Freight. The superseding indictment does not indicate the reason for Commerce Overseas’ change of heart.

Blum’s reporting indicates that Commerce Overseas decided to release the canopies to ABL Freight after an ABL manager, Eddie Garcia, agreed in writing not to export these items without an export license. Of course, the first thing that happened once ABL received the panels is that Garcia changed the shipping invoices, relabeled the contents as plastic panels, and indicated a shipping destination of Malaysia.

Garcia said he didn’t know the package contained F-5 parts and just included the documents Mac Aviation provided.

“We’re just simple people trying to do the business and that’s it,” he said.

Uh huh. Right. Garcia had to have known that there were export controlled items in the package, even if he didn’t know they were F-5 parts. Otherwise, why would Commerce Overseas have extracted from him the pledge not to export without a license? So he should have thought twice before swapping the labels and exporting the package. There was not, last time I checked, an exemption in the Arms Export Control Act for “simple people trying to do business.”

Blum’s story also delves into another anomaly in the Mac Aviation matter. Tom McGuinn pleaded guilty to export charges in 1994. Although that resulted in McGuinn winding up on the State Department’s List of Statutorily Debarred Parties, he was not placed on the Denied Persons List maintained by the Commerce Department, even though the conviction would permit him to have been placed on that list by Commerce. Companies and individuals on that list cannot receive any exports from the United States. According to Blum:

The Commerce Department, which regulates dual-use items, was never informed that McGuinn entered a guilty plea, so it put neither Mac Aviation nor McGuinn on its roll of those banned from exports of any items originating from the U.S., according to Kevin Griffis, a spokesman for the department.

The department now receives regular accounts of convictions, he said.

The five-year statute of limitations on export penalties would prevent Commerce from adding McGuinn to this list at this late date.

UPDATE: The five-year statute of limitations contained in 28 U.S.C. § 2462 applies to the judicial enforcement of any administrative penalty, which would include denial orders. It’s not entirely clear whether or not this would limit the period of time in which a denial order could be issued after conviction of an export law violation. If it doesn’t impose such a limit, then the question arises as to why the Department of Commerce, now that it is aware of the conviction of Thomas McGuinn (and has been for some time), hasn’t imposed a denial order on Mr. McGuinn and his company.

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BIS Imposes Denial Order on Defunct Company

Posted by at 7:07 pm on October 20, 2010
Category: BIS

Former Alphatronx Office Location (2nd Floor)Earlier this month the Bureau of Industry and Security (“BIS”) imposed a ten-year denial order on Alphatronx, Inc. on the ground that the company was related to Joseph Pinquet who had been convicted of violating the Arms Export Control Act in connection with his export of military power amplifiers to China without a license. According to BIS, Pinquet was President of Alphatronx and used the company to purchase and ship the military power amplifiers that led to Pinquet’s conviction.

However, from all indications, Alphatronx is, to paraphrase a famous Monty Python skit, passed on, gone to meet its maker. It’s a stiff, bereft of life, resting in peace, off the twig, kicked the bucket, shuffled off the mortal coil, run down the curtain and joined the choir invisible. Alphatronx is an ex-company.

According to Florida Division of Corporations, the company was dissolved for failure to file an annual report in 2009. The company did not respond to BIS’s notice of its intent to impose a denial order on it. Its phone number is disconnected. Its website is dead. Its sole principal is in jail.

It is, I suppose, all well and good for BIS to keep itself gainfully occupied, but imposing this denial order was rather like shutting a barn door to keep a dead horse inside.

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