Sep

7

Brace Yourself: OFAC Fines Orthodontic Device Company


Posted by at 10:02 pm on September 7, 2016
Category: General

WCT Headquarters via http://www.worldclasstech.com/images/history/WCT-Building.jpg [Fair Use]Today the Office of Foreign Assets Control (“OFAC”) fined Oregon orthodontic device manufacturer World Class Technology Corporation $43,200 for seven shipments of orthodontic devices valued at $59,886 to Iran. The shipments in question were transshipped through Germany, UAE and Lebanon.

OFAC noted that there were three aggravating factors. First, the company did not confess its sins voluntarily to OFAC but instead got caught. Second, company executives knew the orthodontics were going to Iran. Third, the company disrespected OFAC by not having an OFAC compliance program until 2008.

There is, of course, more than a little absurdity in the idea that every company in the U.S. must have an OFAC compliance program or bear the wrath of the agency. WCT is estimated to have between 50-99 employees. Its headquarters are pictured on the left. It has under $20 million in revenue per year currently and, no doubt, much less before it adopted its compliance program in 2008. How many agencies must small businesses bow down to through adopting compliance programs designed to assure that they do not transgress the regulations of that agency? Would any of them ever get any business done if they did?

OFAC cited five mitigating factors, which presumably saved WTC from a company crushing $1.75 million fine which OFAC noted was the statutory maximum. First, the transaction would likely have been licensed. Second, WCT had no sanctions history in the previous five years. Third, WCT agreed to toll the statute of limitations — the penalty imposed today covered violations dating back to 2008. Fourth, WCT ultimately adopted a compliance program. Fifth, WCT “lacked commercial sophistication in conducting international sales.”

The real face-palm moment here is mitigating factor five. OFAC admits that WCT should be given a break because it didn’t have the commercial savvy to understand that it was violating OFAC regulations. Only a few nanoseconds before OFAC was criticizing the company for not having an OFAC compliance program. How does this add up? Do they cancel each other out? More likely, OFAC wants to have it both ways rather than to confront the ugly fact that it has absolutely no outreach to small businesses like WCT, and itself bears some measure of blame for the exports of unsophisticated companies.

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Sep

2

Export Defendant Pays for Requesting Jury Trial


Posted by at 12:05 pm on September 2, 2016
Category: BISCriminal Penalties

Alexander Fishenko
ABOVE: Alexander Fishenko


This blog has closely followed the case involving Alexander Fishenko and his company ARC Electronics, mostly because the government larded the export charges against Fishenko with bogus “spying” charges premised on an alleged charge that he failed to register under the Foreign Agent Registration Act.  Those charges were bogus because the act makes clear that selling goods to a foreign government is not an activity that requires registration.

A number of the employees of ARC were also indicted on export charges in connection with the exports to Russia without the required BIS licenses. One of them, Anastasia Diatlova, the most junior sales clerk in the organization, is now apparently facing harsher sentencing than other sales clerks at ARC because she ticked off the government by making them go to trial, or at least that’s the claim made in the Sentencing Memorandum filed by Ms. Diatlova’s attorneys. That memo argues that she should get the same sentence of time served as the other sales clerks in the organization. (Fishenko, who owned Arc and ran the operation, pleaded guilty and was sentenced to ten years.)

Apparently time served was offered in the plea deal but Diatlova went to trial anyway.  That decision was premised on the reasonable belief that someone who had only an eighth grade education, received little if any compliance training, and had previously refused to sell parts where she knew them to be restricted was unlikely to have known that the one export with which she was involved and charged was illegal.

But, juries being juries, and with the prosecutors no doubt screaming “spy” and “Russia” at every available opportunity, the jury convicted her anyway. And now the government wants revenge and has taken the offer of a sentence of time served off the table. That is, of course, their right, but it seems petty and almost despicable in the case of a $15/hour sales clerk who sold an item that probably would have been licensed if one had been requested. One has to wonder why the government was chasing her anyway other than as potential low-hanging fruit that could result in another notch on their holsters.

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Aug

29

Let No Such Man Be Trusted


Posted by at 8:46 pm on August 29, 2016
Category: Cuba SanctionsOFAC

Send a Piano to Cuba by Cubanos en UK via Cubanos en UK Facebook Page per http://www.telesurtv.net/english/news/UK-Effort-to-Donate-Piano-to-Cuba-Runs-Afoul-of-US-Blockade-20160822-0008.html [Fair Use]Some Cubans in London wanted to send a piano to Conservatory Amadeo Roldan in Havana. They raised money for this gift by holding a classical music concert and sold tickets for the event through the U.S. company Eventbrite. Things immediately went downhill for that poor piano.

Not surprisingly, Eventbrite confiscated the money from the ticket sales and refused to send it to Cubanos en UK. Daniesky Acosta, the head of that group, tried to tell Eventbrite that, as the group and the concert were in London, the confiscation of the funds was “outside U.S. law.” Except of course Eventbrite isn’t.

So Acosta tried a different tack, citing the E.U. blocking regulation that prohibits people in the E.U. from complying with the U.S. embargo on Cuba. Unfortunately, Eventbrite is in San Francisco and not subject to the directive. Cubanos en UK has sought to enlist the U.K. government on its side, again without much success given the location of Eventbrite.

Cubanos en UK then, oddly, talked to the Attorney General of the State of Iowa:

Cubanos en UK sought legal advice from the … attorney general of Iowa, Tom Miller, who has years of experience working on OFAC regulations with regards to the Cuba blockade. Miller told the organization that the transaction was legal, but Eventbrite continues to insist that it is in violation of OFAC regulations.

I’m not quite clear why the Attorney General of Iowa is an OFAC expert in the first place, but his alleged claim that the export of the piano to Cuba would be perfectly legal suggests that he might not in fact have profited much from his “years of experience” working on OFAC’s rules on the Cuba embargo. The closest exemption in the Cuba regulations would be the section which permits humanitarian donations to “projects involving formal or non-formal educational training.” This, without more, might cover the donation of piano to a music conservatory. The problem is the further qualification: the covered eductation training is limited to

Entrepreneurship and business, civil education, journalism, advocacy and organizing, adult literacy, or vocational skills; community-based grassroots projects; projects suitable to the development of small-scale private enterprise; projects that are related to agricultural and rural development that promote independent activity; microfinancing projects, except for loans, extensions of credit, or other financing prohibited by §515.208; and projects to meet basic human needs.

Although “civil education” is somewhat vague, it presumably means the sort of things taught in a civics class, and although you and I might agree that music is a basic human need, I think OFAC means more basic needs like food, water and shelter. So, for as much as I favor sending pianos to Cuba, it seems that a specific license would be needed.

[Title of this post is taken from here.]

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Aug

23

A Decade of Blogging


Posted by at 5:00 pm on August 23, 2016
Category: General

Blue Hour Capitol Building

Ten years ago from this past Sunday, on August 21, 2006, I put up the first post on this blog. I had zero readers. I bet no one ever even read that post until, perhaps, today. In fact, according to my server logs, I had a grand total of 53 people come to read the blog in August 2006, and most of them were probably web-crawling robots.

Since then, I’ve put up 1,370 posts. The site has had 3.9 million visits. Each month, an average of 8,000 unique visitors drop by. And for that, I want to thank each and every one of my readers who have made this possible.

That includes the anonymous BIS agent in New Jersey who for several years posted anonymously from his home computer comments reviling me as an uneducated imposter. His chief complaint was that I referred to “BIS ALJs” rather than his preferred, and more eloquent, alternative: “Coast Guard ALJs Who Are Assigned To Hear BIS Cases But Who Are Paid By The Coast Guard Which In Turn Is Reimbursed By BIS For The ALJs’ Time.” I think he may have, in one of his comments, even called for my law school to revoke my degree and, in another, for me to refund all the legal fees that I had collected in my lifetime. He hasn’t been around for quite some time and I rather miss him.

I also want to thank the commenters who caught and pointed out things that I actually got wrong or that I should have mentioned but didn’t. I’ve learned things from them as I hope readers may have learned things from me.

Without question, thanks are also due to Jim Bartlett, who has regularly republished each and every post in The Daily Bugle, even ones where I tried to sneak in naughty words or risqué double entendres that might offend his family audience.

I’ve tried these last ten years to make export law entertaining, which, I suppose, is rather like trying to stage a punk rock version of La Bohème with a fifth grade cast and a pit orchestra of ukuleles — easier said than done and not something that will appeal to everyone. But once you’ve gone through the effort to rent the house and put a show like that on the stage, there’s no point in cancelling the performance.

Photo Credit: Blue Hour Capital Building by Clif Burns, via www.clifburns.net. Copyright 2016 Clif Burns

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Aug

17

This Post About Kim Kardashian Will Leave You Utterly Speechless


Posted by at 10:19 pm on August 17, 2016
Category: SECSyria

Homs Syria by Bo yaser (Own work) [CC BY-SA 3.0], via Wikimedia Commons https://commons.wikimedia.org/wiki/File%3ADestruction_in_Homs_(2).jpg [cropped and processed]

According to this article, the Securities and Exchange Commission is sending out inquiries to certain publicly traded technology companies to ask them whether they are involved in any illegal exports to Syria. Among the subjects of concern by the SEC is a company named Glu Mobile, the perpetrator of a mobile phone game called, and I’m not kidding here, “Kim Kardashian: Hollywood.” This game allows you to “create your own star and customize your look with hundreds of style options … [and] join Kim Kardashian on a red carpet adventure.” Apparently, civilization as we know it will crumble into dust if people in Syria can play this game on their phones. (Frankly, we’d probably be better off if this game could ONLY be played in Syria, but that’s another issue.)

Glu pointed out to the geniuses at the SEC, who apparently can’t figure out how mobile phones work, that mobile games are sold through the iTunes, Amazon and Android stores and that these stores don’t permit sales to Syria. One can only imagine that the folks at the SEC must have been under the impression that mobile games were distributed on floppy disks sent through the mails.

Photo Credit: By Bo yaser (Own work) [CC BY-SA 3.0], via Wikimedia Commons [cropped and processed].

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