Archive for June, 2011


Jun

30

Captain Obvious Hacks DDTC Website


Posted by at 7:24 pm on June 30, 2011
Category: DDTC

More Work By Captain ObviousBecause most of Washington, DC, has emptied out in anticipation of the upcoming long weekend for the Fourth of July, the nefarious Captain Obvious took the opportunity to hack into the DDTC website and leave this important reminder to exporters:

Reminder: Individuals and companies transporting ITAR controlled goods are responsible for meeting the requirements of both the United States and the country/ies to which they will be transporting goods. The Department of State’s website on travel (www.travel.state.gov) and the country’s customs office should be consulted to ensure compliance.

The exclamation point in a warning triangle that the hacker put to the left of this important announcement was a particularly malicious touch.

This just goes to show that no one — even the Department of State and its various bureaus — is safe these days from the scourge of hacking. Even this blog had to fend off an attack earlier today from Captain Obvious who attempted, unsuccessfully, to put a reminder on our home page that all exporters, sooner or later, will have to breathe in order to continue exporting.

In case someone at DDTC catches this and removes the hacker’s handiwork, a screen grab of the hacked page can be found here.

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Copyright © 2011 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

29

Reinsurance Firm Agrees To Fine For Violating Iran Sanctions


Posted by at 6:22 pm on June 29, 2011
Category: Iran Sanctions

NITC TankerThe Office of Foreign Assets Control (“OFAC”) today released its monthly civil penalty report for June. The report indicates that General Reinsurance Company (“Gen Re”) agreed to pay $59,130 to settle allegations that it had paid $309,740.65 in 2005 under a facultative reinsurance policy issued to Steamship Mutual Underwriting Association Limited (“Steamship”). The payment was made in connection with claims made against Steamship for losses between 1998 and 2002 covered by a policy issued by Steamship to the National Iranian Tanker Company (“NITC”). In reducing (somewhat) the base penalty of $131,424, OFAC cited a number of mitigating factors including the company’s entry into a tolling agreement, its voluntary disclosure of the violations, its cooperation in the investigation, its subsequent enhancement of its compliance program, and the absence of prior OFAC violations.

The discussion of the violation by OFAC might leave the misleading impression that the payment of the premium by General Reinsurance was the crux of the violation rather than the issuance of the reinsurance policy covering Steamship’s insurance policy for NITC in the first place. OFAC guidance to the insurance industry makes clear that the issuance of the reinsurance to Steamship for its NITC policy would itself have violated OFAC rules without regard to whether any claims were actually made or paid to Steamship.

The reason, however, for the focus on the payment was the five-year statute of limitations. Based on the claim dates involved, the reinsurance policy had to have been issued in 1998 or earlier and thus was well beyond the statute of limitations by the time that General Reinsurance voluntarily disclosed its payments under the reinsurance policy in 2005.

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Copyright © 2011 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

27

Export Defendant Given Probation For Cooperating Against Employer


Posted by at 4:43 pm on June 27, 2011
Category: Criminal PenaltiesIran Sanctions

Hitachi JU-72According to this Law360 post (subscription required), James Larrison, a former employee of Aegis Electronic Group, was sentenced to probation for his role in the company’s export of an EAR99 Hitachi JU72 video camera junction to Iran. Larrison pleaded guilty to the export violation in December 2009. In April 2011, Aegis entered into a deferred prosecution agreement and agreed to pay a $20,000 fine to the Office of Foreign Assets Control (“OFAC”) in connection with this export.

Aegis and Larrison came under investigation when information relating to them was found on the laptop seized by the government from Amir Ardebili, an Iranian procurement agent. Ardebili was lured by federal agents from Iran into the former Soviet Republic of Georgia where he was arrested, whisked away to the U.S., and thrown into solitary confinement to keep him quiet while agents pursued leads they found on his laptop. This blog wrote about the Ardebili case here, here and here.

Larrison was given probation because he cooperated against his former employer and provided the government prosecutors and investigators information about the complete absence of an export compliance program at Aegis. Readers of this blog may well recall a post from a few months ago where Aegis patted itself on its back, and even gave itself a gold seal, when the company registered with the Directorate of Defense Trade Controls under part 122 of the International Traffic in Arms Regulations.

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Copyright © 2011 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

23

OFAC Designation Footnote Exempts Similarly Named U.S. Company


Posted by at 9:53 pm on June 23, 2011
Category: Iran Sanctions

The Office of Foreign Assets Control (“OFAC”) today announced a new round of sanctions against various Iranian entities including the national airline Iran Air and its domestic air carrier Iran Air Tours. The press release announcing the sanctions highlighted Iran Air’s involvement in transporting missiles and parts and components used in developing ballistic missiles. The sanctions also targeted Tidewater Middle East Co. (“Tidewater”), which is the company that manages seven of Iran’s ports. The press release highlighted a number of Iranian vessels that were found to be carrying arms and materiel that had been loaded at ports managed by Tidewater. But the most interesting part of the designation was a footnote:

*There is no relationship between today’s target, Tidewater Middle East Co., and Tidewater (US), an international shipping company headquartered in the United States, listed on the New York Stock Exchange as TDW.

In the past, OFAC has usually declined to provide any statements about people or companies that are not on the SDN list, even though it gives an avenue to parties on the SDN list to argue that they should not be on the list. In short, an innocent party, like someone named Daniel Garcia, who is denied a loan because there is another Daniel Garcia on the list, has less rights with respect to the SDN list than a terrorist who is actually nam mmed on the list. OFAC’s reasoning has been that it doesn’t won’t to say who is not on the list because that person might someday be on the list and the previous negative certification would then be misleading. So what gives with Tidewater, Inc., the Tidewater that is not the Tidewater now on the SDN list? Is this the beginning of a reversal of OFAC’s unwillingness to provide negative certifications, or does Tidewater have extra special clout at OFAC? I am aware of only one other instance where OFAC specifically called out companies with similar names to make clear that they are not on the list. Should all the Daniel Garcias that aren’t the Daniel Garcia on the SDN list give OFAC a call?

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Jun

22

Sales Manager Fined $500,000 by BIS for One Export


Posted by at 9:26 pm on June 22, 2011
Category: BIS

Chasma Nuclear Power PlantThe Bureau of Industry and Security (“BIS”) just released settlement documents pursuant to which a regional sales manager at PPG agreed to a $500,000 penalty arising out of one unlicensed export of EAR99 epoxy paint. The paint, valued at $25,0000, was allegedly for use by a Chinese company constructing a nuclear power facility for the Pakistan Atomic Energy Commission. This export required a license because PAEC is on the BIS Entity List. It may also have required a license under the end-use policy in section 744.2 of the Export Administration Regulations depending on the nature of the facility and whether it was subject to IAEA inspections or not. The settlement documents suspended all but $15,000 of the penalty, which are required to be paid with an initial payment of $5,000 and then four quarterly payments of $2,500.

BIS managed to parlay one export into two violations by charging the sales manager both with conspiring to violate the regulations and with aiding and abetting a violation of the regulations. The documents allege that the sales manager conspired with another sales employee, a distributor and a freight forwarder and that he aided and abetted the export by his employer. By recharacterizing one export as two violations and by imposing the maximum penalty for each, the agency was able to ring up a $500,000 penalty. I suppose that the agency figured they were giving the sales manager a break by not charging him with solicitation, acting with knowledge and misrepresentation in connection with the one export to run the tally up $1.25 million.

Do you remember when BIS said that with the new and improved $250,000 penalty authority, the days of piling on offenses to run up the penalty amount were over? Well, that didn’t last long did it? I suspect we are about to here a plea from BIS for authority to impose $1,000,000 for each violation.

Of course, with the $485,000 hanging over him, woe betide the sales manager if he is a day late or a dollar short in any of his installment payments. BIS will own his house, and he and his family will be living in a refrigerator box under a freeway overpass.

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Copyright © 2011 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)