Mar

18

University Medical Researcher Prosecuted for Sending Medical Device to Iran


Posted by Clif Burns at 8:21 pm on March 18, 2014
Category: Criminal PenaltiesIran SanctionsOFAC

By Erin! Nekervis [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3APlanking_on_an_MRI_machine.jpgAccording to this article in the San Diego Union Tribune, Mohamad Nazemzadeh, who was a Research Fellow in the Neurology Department of the University of Michigan at the time of his arrest, is being prosecuted for sending a medical device to Iran. At issue is a coil for a magnetic resonance imaging (MRI) machine. The coil is the assembly of wires that generates the necessary radio signals when electricity flows through them to permit imaging the part of the body within the coil. Mr. Nazemzadeh is currently a researcher at the Henry Ford hospital in Detroit and his area of specialty is, not surprisingly, magnetic resonance imaging.

A part for an MRI machine would, under the Trade Sanctions Reform and Export Enhancement Act of 2000, be eligible for an export license notwithstanding the embargo on Iran. Nazemzadeh’s failure to obtain a license would, of course, be a violation of the embargo. Even assuming that it was a criminal violation in his case, one has to wonder why prosecutorial resources are being consumed to prosecute a researcher for trying to send life-saving medical equipment to Iran. Aren’t there dangerous people out there with guns and bombs who might warrant the attention instead?

An affidavit in support of a search warrant for Nazemzadeh’s mobile phone provides more detail on the case than the Union-Tribune article and casts some doubt on whether Nazemzadeh actually had the criminal intent necessary to support a criminal prosecution for the attempted export of the MRI part. According to the affidavit, Nazemzadeh was negotiating with the undercover federal agent (who had been tipped off by the used medical device company that Nazemzadeh had contacted) to ship the MRI coil to Iran through a company in the Netherlands. As is often the case, it is not uncommon for people to believe (incorrectly) that if it is legal to ship an item to a particular country, no laws are broken if the item is then re-exported to a prohibited destination. Here, according to the affidavit, Mr. Nazemzadeh continued to say to the undercover agent that he believed the transaction was legal and says this is true because the export from the United States is to the Netherlands, not Iran.

Just tell that, you sold that item to some company in the Netherlands, and you have the request so you’re, you issued pro forma form for them and they sent money from the bank account to you, everything is legal between you[r] two companies …. [T]here’s nothing to do with Iran. You actually have sold that coil to one company in Netherland [sic], ok?

Granted that isn’t a true statement of the law, but a good faith legal mistake is not a criminal act. Instead, this is precisely the sort of case that ought to be handled as an administrative matter by OFAC. Such a proceeding could result in the imposition of substantial civil penalties on Mr. Nazemzadeh notwithstanding his mistaken belief that the transaction did not violate U.S. law.

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Mar

13

Daily News Attempts Export Humor; Bombs


Posted by Clif Burns at 4:25 pm on March 13, 2014
Category: BISCCLNorth Korea Sanctions

By Jared Kofsky (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADaily_News_Building-_WPIX_CW_11.JPGIt must have been a slow news day on Tuesday for the New York Daily News, because the aging tabloid decided to try its hand at export humor. As you might imagine, things did not go well for the paper.

The attempt occurred in a feature called “Your Cheat Sheet,” which appears in a blog called “The Swamp” and looks at important events in DC. You know, so-and-so is testifying on the Hill, Prime Minister Muckety-Muck of Lower Lithovakia meets with USDA officials, etc.   With that in mind, we present the joke in full:

Breaking News, so let’s parachute Anderson Cooper into: the Commerce Department’s Bureau of Industry and Security holds a meeting of the Materials Processing Equipment Technical Advisory Committee to “discuss technical questions that affect the level of export controls applicable to materials processing equipment and related technology.”

[Insert sad trombone sound here.]

Okay, so see the Daily News writer thought it was just hilarious that somebody would meet about “materials processing equipment and related technology.” That’s like a meeting, you know, on polynomial equations or plasma actuators or other silly egghead stuff for nerdy bureaucrats. Losers!!!  Bring in that Anderson Cooper fellow to cover this really groundbreaking story, etc., etc.

One person who doesn’t think exports controls on “materials processing equipment and related technology” is a laughing matter is the Nork Dictator Kim-Jong Un. The UN Panel Report discussed in yesterday’s post noted that a key obstacle to Nork nuclear ambitions, and a key incentive for the country’s efforts to evade international sanctions, is that “it lacks sufficient domestic precision machine tool manufacturing capability” needed for building missiles and uranium enrichment facilities. That’s the equipment that’s in — yep, you got it — Category 2 of the Commerce Control List which covers “materials processing equipment and technology.”

The morale of this story is, of course, that export control humor should be left to the professionals.

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Mar

12

UN Panel Sticks Fork in Norks, Says They’re Done


Posted by Clif Burns at 9:53 pm on March 12, 2014
Category: North Korea SanctionsU.N. Sanctions

Weapons found on Chong Chon Gang via http://www.un.org/ga/search/view_doc.asp?symbol=S/2014/147 [Fair Use]This blog has reported twice (here and here) on the seizure by the Panamanians of the Nork vessel, the Chong Chon Gang, by Panamanians after they discovered a boatload (so to speak) of Cuban weapons on the vessel headed for North Korea. Among the more telling aspects of the story is that the weapons were hidden under mountains of sugar and that the ship’s captain attempted suicide during the course of the search. Notwithstanding this, both the Cubans and the Norks steadfastly maintained that there was nothing to see here, that everything was on the up and up, and that everyone should just move on.

Well, the United Nations Panel of Experts convened to investigate compliance with U.N. sanctions against North Korea has decided that there was indeed plenty to see here. Its just-issued report highlights the Chong Chon Gang incident (as well as other Nork shenanigans) as evidence of persistent efforts by North Korea to evade U.N. Sanctions. Here are some interesting highlights used by the report to bolster its conclusion that the Chong Chon Gang shipment violated U.N. sanctions on the prohibition of shipments of arms and materiel by member states such as Cuba to North Korea.

The panel rejected Cuba’s risible, if not hilarious, argument that the sanction prohibiting “transfer” of arms and materiel to North Korea was not violated because Cuba retained ownership of the arms being shipped to North Korea for overhaul and maintenance. The Panel correctly pointed out that such a distinction would allow countries to lease weapons to North Korea, an absurd result inconsistent with the purpose of the sanctions.

More importantly, the panel rejected the argument by pointing to the evidence of elaborate attempts by Cuba and North Korea to conceal the nature of the shipment. This argument might be summarized as “If you don’t have anything to hide, why are you so busy trying to hide it?” Among the evasive tactics cited by the Panel (above and beyond burying the stuff under a mountain of sugar) were the following:

  • After discharging its cargo in Havana, the ship drifted for 10 days in the sea north of Cuba before sailing to Mariel where it took on the weapons cargo.
  • Although documents were found on the ship identifying the consignor and consignee of the sugar shipment, no such documents were found with respect to the concealed weapons.
  • The ship’s route and position were concealed by switching off the ship’s automatic identification system.
  • False documents were submitted to the Panama Canal Authority which omitted Mariel, where the weapons were loaded, from the list of prior ports visited.
  • The vessel ignored the standard practice of loading dangerous cargo, which included ammunition, rockets and explosives, at the top of the ship,  loading it instead deep in the hold where it could be concealed by the sugar cargo. The weight of the sugar could have contributed to a catastrophic explosion, endangering the ship, its crew and nearby ships and their crew. Clearly concealment was a higher priority than safety.

There’s more in the Panel Report, including a detour involving Dennis Rodman’s Happy Birthday, Mr. Dictator celebrity tour, so stay tuned for future posts on Nork sanction evasion techniques.

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Mar

10

A Grizzly Affair with Iran


Posted by Clif Burns at 5:56 pm on March 10, 2014
Category: Iran SanctionsOFAC

By Robert J. Pera (Coutesy of Robert J. Pera) [CC-BY-2.5 (http://creativecommons.org/licenses/by/2.5)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3APera.jpeg
ABOVE: Robert J. Pera
CEO, Ubiquiti Networks


The Office of Foreign Assets Control (“OFAC”) announced last week that Ubiquiti Networks agreed to pay $504,225 to settle charges that Ubiquiti violated the Iran sanctions when it granted a distributor in the U.A.E. exclusive rights to distribute its products in Iran and then sold goods to that distributor which were then shipped to Iran. This was only a minor reduction from the base penalty of $560,250. The reason for Ubiquiti paying so much can be found in some harsh language from OFAC:

Ubiquiti demonstrated reckless disregard for U.S. sanction requirements; Ubiquiti was on notice in February 2010 that the conduct at issue constituted a violation of U.S. law; members of Ubiquiti’s senior management knew or had reason to know that Ubiquiti products were reexported to Iran; [and] Ubiquiti had no OFAC compliance program in place at the time of the apparent violations

Ouch.

You would think that a half-million dollar fine would have caused the company to beef up its compliance game. But head over to the company’s website and sign up for its newsletter to learn more about its products. Take a look at the country drop-down list in the sign up form and you’ll see Iran.

Of course, under the informational exception, it is not illegal to send the newsletter to Iran.  But the newsletter describes products and services that, as Ubiquiti now rather expensively has found out, cannot be shipped to Iran. So why would anyone in Iran be interested in a newsletter about something they are not able to purchase? Here’s a good export compliance tip for our readers: take Iran out of your country drop-down lists for product brochures, newsletters and other promotional materials.

The founder and owner of Ubiquiti is Robert J. Pera.  You might also know as the owner of the Memphis Grizzlies.  You might also know hims as one of the people on Forbes’s list of the ten youngest billionaires in the world.  Even in the unlikely event that he pays the entire OFAC fine out of his own pocket, he will still be a billionaire.

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Mar

6

U.S. Sanctions on Russia Start with a Secret List


Posted by Clif Burns at 7:50 pm on March 6, 2014
Category: Economic SanctionsRussia Sanctions

Sevastopol, Crimea By Alexxx1979 (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ASevastopol_IMG_4024_1725.jpgThe White House issued an executive order this afternoon starting off the expected sanctions on Russia in response to Russia’s invasion of Crimea. As anticipated, these sanctions involve targeted sanctions on certain individuals and entities involved in the invasion of Crimea, including travel bans and asset blocking.  Designated Crimean officials supporting the Russian actions will also subject to the order.

The order does not include a list of the particular officials subject to asset blocking, presumably because that list is being developed now. Neither is there a list of those subject to the travel ban, but that’s because the list is secret. Even sanctioned individuals, apparently, deserve a little privacy.

The New York Times reports that a “senior administration official” stated that just under a dozen persons are currently subject to the travel ban. Several are already in the United States and they will learn that they are on the list when their visas are revoked. The rest will learn that they are on the blacklist should they apply for a visa. It’s unclear how much deterrent impact such a secret blacklist will have on its targets.

Interestingly, the New York Times suggests that the executive order contains provisions that will eventually allow the names of those subject to visa bans to be made public. Frankly, I don’t see anything in the order which states this expressly or leads to such a conclusion. On the other hand, I am unaware of any federal law which would prohibit the disclosure of the names of non-U.S. citizens who will not be granted visas to travel to the United States. If anyone has an idea on where these foreign privacy rights come from, please let me know in the comments.

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