Mar

30

Brotherly Love Only Goes So Far


Posted by at 1:15 pm on March 30, 2015
Category: Arms ExportCriminal Penalties

Ariel Maralit[Fair Use]I’ll admit it and apologize in advance.  The main reason for this story and for this link to Britain’s worst newspaper is so that I can run the picture of Ariel Maralit. Ariel, the guy in the photo on the right brandishing the weapons and wearing the moronic grin, is the brother of former NYPD officer Rex Maralit and former U.S. customs agent Wilfredo Maralit.  Both former law enforcement brothers have now pleaded guilty to violations of the Arms Export Control Act in connection with a little business they ran with brother Ariel in the Philippines.   Seems Ariel would take orders from customers in the Philippines for AR-15s, semi-automatic weapons and assault rifles and would then send these orders on to brothers Rex and Wilfredo in the United States.  The brothers would use their law enforcement discounts to buy the weapons cheaply and then pack them up and ship them to Ariel for a tidy profit.  Rex is quoted as saying he just thought he was “avoiding red tape.”   Wilfredo’s lawyer said he was just in it for the money.

And now for the best part.  Rex and Wilfredo

were told they would receive a lighter sentence if they could convince their brother Ariel to come to the United States and face charges, but the brothers were unsuccessful.

Allegedly Ariel replied to his brothers’ pleas to give himself up by sending them a recording of “Baretta’s Theme.”  You remember: “Don’t do the crime if you can’t do the time.” Okay, I made up this last part about sending the song, but once you start linking to the Daily Mail, it’s hard not to follow their example.

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Mar

27

PayPal Has No Pals at OFAC


Posted by at 8:04 am on March 27, 2015
Category: OFACSDN List

PayPal Campus Outdoor by PayPal via https://www.paypal-media.com/assets/zip/PayPal_HQ_Campus_Outdoor.jpg [Fair Use]Internet payment facilitator PayPal recently agreed to pay to the Office of Foreign Assets Control $7,658,300 in fines and penalties to settle charges that it processed 486 financial transactions involving embargoed countries and blocked parties on OFAC’s Specially Designated Nationals and Blocked Persons List (the “SDN List”). The magnitude of this penalty becomes apparent when you consider that the 486 transactions amounted to a total of $43934.02 in transactions averaging $90.40 each.

Oh, and in case you were thinking, well that’s what they get for getting caught, you should realize that these violations were, according to the Settlement Agreement, voluntarily disclosed. Worse yet, this huge fine was imposed even though PayPal cooperated with the investigation, tolled the Statute of Limitations, and sacrificed on the altar of OFAC’s wrath its compliance division’s entire management, all of whom are now looking for new employment.

What seems to have gotten OFAC’s dander up, and led to the agency calling this an “egregious” case, pretty much the ne plus ultra of regulatory misdeeds, involved PayPal’s dealings with Kursad Zafer Cire, an A.Q. Khan crony designated by OFAC under its WMD sanctions program. Although these were only 136 transactions, totalling $7091.77 and averaging $52.15 each, PayPal processed six of these transactions after its interdiction software flagged this guy. On the sixth occasion, PayPal asked Cire to fax them his passport, which he dutifully did, and even though the passport conclusively matched the information on the SDN List, the PayPal risk officer let the transaction go through.

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Mar

25

Dead Cubans Removed from SDN List; Fictional Daniel Garcia Stays On


Posted by at 10:02 pm on March 25, 2015
Category: Cuba SanctionsOFACSDN List

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/yoh_59/13697566663Yesterday the Office of Foreign Assets Control (“OFAC”) quietly removed a number of Cuba-related listings from its Specially Designated Nationals and Blocked Persons list. These delistings included dissolved companies, dead people and Cuban ships that had either sunk or were out of commission. For example, Amado Padron Trujillo, designated in 1986,was executed in 1989. By Cuba. For treason. Talk about a guy who couldn’t get a break.

Also delisted was the late Alfred Stern, who was once accused of spying for the Soviet Union. He fled the United States, lived in Cuba from 1963 to 1970 and died in Prague in 1986. Another dead man taken off the SDN List was Carlos Duque, a business partner of Manuel Noriega, who stopped threatening the United States when he died last October.

Even though OFAC delisted dead people and sunken ships from the SDN List, it still could not bring itself to delist the probably fictional Daniel Garcia, who allegedly threatens the United States by running a non-existent talent agency, Promociones Artisticas (PROARTE), in Mexico City. The problem with designating a non-existent Daniel Garcia is that there are plenty of real people named Daniel Garcia who, as a result, cannot open bank accounts, get loans, buy automobiles, or get on an airplane without getting searched. We wrote about the curse of being named Daniel Garcia here.

I have been told, off the record, that no one at OFAC knows who Daniel Garcia is or was, if he ever was, and why he was put on the list in the first place. That, I’m told, is part of the reason that Daniel Garcia is fated to remain on the SDN List in perpetuity.

In short, since imaginary people never die, the real Daniel Garcias of the world are just going to have to live with it.

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Mar

23

Feds Indict Man For Mistakes on Discontinued Forms


Posted by at 1:00 pm on March 23, 2015
Category: AESCriminal PenaltiesSEDs

Lamp, Typewrite and Specs by John Levanen[CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/54814530@N00/8314704680/[cropped]

As most readers of this blog know, the venerable Shipper’s Export Declaration was discontinued in 2008. Instead, exporters now file the Electronic Export Information using the Automated Export System.

Apparently the news of this change has yet to make its way into the Justice Department, which recently indicted a California man, Pavel Flider, and his company, Trident International, for “false and misleading export information … in an SED” with respect to fifteen exports made between 2011 and 2013, long after said “SED” had been definitively retired.

Oh, and because those statements on the non-existent form were false, the DOJ charged him with violating the anti-smuggling statute, 18 U.S.C. § 554, which covers any export made “contrary to any law or regulation of the United States.” I’ve criticized this ridiculously overbroad statute before, noting that it turns a trucker on his way to Canada who drives 10 hours and 1 second in a day into a smuggler and a felon. Here the rule violation that turned the defendant into a smuggler was the false statement “in an SED.”

The DOJ press release contains allegations not included in the indictment, namely that “many” (but not all) of the items at issue were “controlled dual-use programmable computer chips capable of operating in austere environments making them useful in both civilian and military applications.” If that truly is the case, you have to wonder why they are just charging the defendant with false SED statements rather than a simple export violation.

Of course, I can imagine that there will be plenty of fun in the courtroom when the prosecutors, who don’t even know which forms are filed with exports, accuse the defendants of making mistakes when they filed their export documentation.

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Mar

19

Export Car to China: Go Directly to Jail


Posted by at 12:41 am on March 19, 2015
Category: ChinaCriminal Penalties

Porsche Panamera via http://files2.porsche.com/filestore.aspx/normal.jpg?pool=multimedia&type=image&id=rd-2014-homepage-teaser-ww-panameraturbos-kw43&lang=none&filetype=normal&version=b51309d8-552d-11e4-99aa-001a64c55f5c&s=4 [Fair Use]

Everybody knows that you can go to jail for exporting a tank to China. But did you know that you can go to jail for exporting a luxury car, classified as EAR99, to China?

Well, it appears that you can. According to an article in the Milwaukee Journal-Sentinel, Mao Peng, a resident of Kenosha, Wisconsin, and his wife were arrested in Los Angeles for exporting luxury vehicles to China and sent back to Wisconsin for trial. Only the terminated criminal proceedings in Los Angeles are in PACER at the moment. The transferred case in Wisconsin has not shown up yet in PACER, so details of the charges are somewhat hard to discern.

But it appears from a number of news sources, like this article in the New York Times, that federal prosecutors have been targeting individuals who purchase luxury vehicles in the United States and then export them to China for resale. Apparently, there is a substantial price differential between the price of luxury vehicles in the U.S. and China creating an attractive arbitrage opportunity for ambitious entrepreneurs. And the auto manufacturers have some how enlisted the DOJ to help them preserve their high margins in China.

At the behest of luxury car manufacturers, the U.S. Government has been seizing cars and bank accounts, but at least one federal judge has called foul. The opinion in that case gives some clue as to the prosecutors’ theories in the luxury car export cases. In that case, the Secret Service seized bank accounts alleged to contain funds derived from an auto broker’s export business. Because luxury auto dealers are prohibited by their manufacturers from selling cars for export, dealers require purchasers to sign, in the purchase documentation, a representation that the cars are for their own use and not for export. The export brokers pay straw purchasers to buy the vehicles for them. The government’s theory is that the brokers are conspiring with the straw purchasers to commit wire fraud in connection with the personal use representations by the straw purchasers. The district court held, relying on the “convergence” requirement, that the misrepresentation was at most a contractual violation rather than a criminal matter because the auto dealers to whom the misrepresentation were made were not injured by the misrepresentation; only the manufacturers were.

Peng’s case, which appears to be the first criminal prosecution for exporting cars to China, may be somewhat different because it appears that his straw purchasers were Native Americans and that sales taxes were therefore not paid on vehicles delivered to reservations on which they lived.   It also appears that the government is alleging that Peng was continuing to use the names of the straw purchasers for more purchases than they had agreed to and that this was some kind of identity theft.   But, according to the Journal-Sentinel article, it also appears that the government’s case is  primarily based on the non-export representations made by the straw purchasers to the auto dealers.

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