Jun

1

Russian Export Case Larded with Bogus Spying Charges: Part 3


Posted by at 8:02 am on June 1, 2016
Category: BISCriminal PenaltiesGeneral

Alexander Fishenko
ABOVE: Alexander Fishenko


This blog has been covering the export prosecution of Alexander Fishenko for quite some time. Previous posts on this case can be found here and here. Most of my interest has been in the trumped-up Foreign Agents Registration Act charge brought by the government to allow Fishenko to be characterized, inaccurately, as a Russian “spy.”

Fishenko, who pleaded guilty to all counts in the indictment, is scheduled to be sentenced on June 3. The sentencing memorandum prepared by his lawyers provides more insight into the “spy” nonsense and the government’s motivations in bringing these charges. (I am not linking to the memorandum, even though it is publicly available through PACER, because it contains detailed information on some unrelated private matters relating to Fishenko’s medical history.)

As was detailed in the preceding posts, it was undisputed that Fishenko was buying things at the request of the Russian government. But that alone does not make him a foreign agent required to register under FARA. Section 3(d) exempts “private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal.” There was no allegation or evidence that Fishenko acted for the Russian government in any other capacity, meaning that he was not a “foreign agent” under FARA and, therefore, was under no obligation to register as one.

Apparently, Fishenko was anxious to plead guilty after the indictment, but the government was not willing to take his plea. The hold-up was that Fishenko, although he was willing to plead guilty to all the other charges, did not want to plead guilty to the bogus FARA charge for precisely the reason the government included it: namely, that those charges had been widely, indeed universally, interpreted as charges that he was a Russian spy, something the government well knew and was intentionally using to poison the well.  Fishenko thought that such a plea would permanently damage the reputation of his family members.

Leaving aside for the moment that Fishenko’s activities were exempt under section 3(d) of FARA, it is also undeniable that there is a significant difference between being an “unregistered foreign agent” and being a Russian spy. You can be an unregistered foreign agent in violation of FARA even if you run around wearing a banner saying you work for the Russian government, behavior essentially incompatible with being a spy. Nor was Fishenko charged with espionage under the relevant provisions in 18 U.S.C. §§ 793 – 798, something that certainly would have happened if Fishenko was really a Russian spy.

The only conclusion behind the government’s intransigence on the fake FARA charges is that it wants to keep this weapon in its arsenal for future, and equally illegitimate, use. It’s much easier to convict export defendants once they have been branded in the press as spies. Sadly, such behavior — intentionally bringing unfounded charges for their negative publicity value — turns the word “Justice” in the Department of Justice to Orwellian double-speak.

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May

25

More Border Search Shenanigans by Customs in Sanctions Case


Posted by at 8:51 pm on May 25, 2016
Category: Border SearchesCriminal PenaltiesCustomsIran SanctionsOFAC

Los Angeles International Airport by Daniel Betts [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/redlegsfan21/13789084574 [cropped]Here we go again. Another case has surfaced where U.S. Customs seized computers and other electronic media from a U.S. traveler at the border, shipped them off to be imaged, rifled through the imaged contents looking for evidence and then weeks later, based on emails they found while going through the computer images, finally sought a search warrant arguing that there is probable cause that the Iran sanctions had been violated.

This almost identical scenario recently led a federal district court in Washington, DC, to toss out evidence gathered in this fashion. And neither of these cases is particularly tough: if you have the time to haul the computer from the airport after the passenger has departed, you have time to get a warrant before snooping through the computer. This is not like the typical border search where Customs looks at a suitcase before the traveler takes it with him to a foreign country.

The latest case involves a search of Idin Rafiee, a San Diego resident and U.S. citizen, who, on October 5, 2012, was traveling to London through LAX. He had a computer, an external hard drive, a smart phone and a tablet with him. A Customs agent told Mr. Rafiee that Customs was detaining his electronic media on the ground that there was reason to believe that there was child pornography on it. The media was imaged on October 9 and returned to Rafiee on  October 13. The government did not seek a search warrant until November 1, 2012, and based the warrant on emails that it obtained from the seized media before it had obtained a warrant. Subsequently, Rafiee was charged with violating the U.S. sanctions on Iran.

The child pornography claim was a complete fabrication. There was never any evidence supporting such a belief and no such pornography, or any pornography for that matter, was alleged by the government to have been found. Instead, the only evidence the government had before it searched Rafiee’s devices was an alleged statement by a disgruntled employee that the defendant was doing business in Iran, even though the notes of the conversation with the employee produced by the Government did not mention Iran.

Of course, even if the Government had some valid reason to grab Rafiee’s stuff, there was no exigency once they had it to justify searching it before getting a warrant. They had all the time in the world, as their one month delay in applying for a warrant amply demonstrates. Beyond that, the notion that you can bootstrap a warrant request with evidence from the same computer you are asking to be permitted to search is, at best, ludicrous.

Not surprisingly, the Government finally dropped all charges against Rafiee on May 13, 2016, before the Court even had an opportunity to rule on Rafiee’s motion to suppress.

 

Photo Credit: Los Angeles International Airport by Daniel Betts [CC-BY-SA-2.0 (http://creativecommons.org/ licenses/by-sa/2.0)], via Flickr https://flic.kr/p/n1uEru [cropped]. Copyright 2014 Daniel Betts

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May

23

Vietnam Arms Embargo Lifted (More or Less)


Posted by at 5:07 pm on May 23, 2016
Category: Arms ExportDDTCVietnam

Saigon Morin hotel (Hue, Vietnam 2015) by Paul Arps [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/C2rm6w [cropped and color corrected]During a press conference today in Hanoi, President Obama announced the lifting of the arms embargo against Vietnam. Although he stated that the action had nothing to do with China, U.S. officials have noted before that the idea was to help Vietnam counter threats from the PRC in the South China Sea. There has also been speculation that Vietnam would, in return, provide access to Cam Ranh Bay and its deepwater port.

Of course, attentive readers will remember that back in November 2014 the embargo was lifted to permit exports to Vietnam of non-lethal defense articles and lethal weapons “to enhance maritime security capabilities and domain awareness.” Applications for such exports were considered on a case-by-case basis. As a result of today’s action, this limitation on lethal weapon exports to Vietnam has been removed.

DDTC scrambled to get something up on its website, where this notice now appears:

Industry Notice: Change in Policy on Exports of Munitions to Vietnam (05.23.16)

Pursuant to a decision made by the Secretary of State and effective immediately, the Department of State’s policy prohibiting the sale or transfer of lethal weapons to Vietnam, including restrictions on exports to and imports from Vietnam for arms and related materiel, has been terminated. Consequently, in accordance with the Arms Export Control Act, the Directorate of Defense Trade Controls (DDTC) will review on case-by-case basis applications for licenses to export or temporarily import defense articles and defense services to or from Vietnam under the International Traffic in Arms Regulations (ITAR). DDTC will soon publish a rule in the Federal Register to implement a conforming change to ITAR §126.1.

Since the provisions in section 126.1 refer to a licensing policy, there seems to be no reason why DDTC can’t change the license policy first and clean up the regulations later. After all, the Vietnam subsection of 126.1 starts with “[i]t is the policy of the United States to deny” licenses for exports to Vietnam. So, if an exporter applies for and receives a license, there won’t be any issue of violating the unchanged regulation.

Things, however, are not so simple for the absolute prohibition in section 126.1(b), which provides:

A defense article licensed or otherwise authorized for export, temporary import, reexport, or retransfer under this subchapter may not be shipped on a vessel, aircraft, spacecraft, or other means of conveyance that is owned by, operated by, leased to, or leased from any of the proscribed countries, areas, or other persons referred to in this section.

That prohibition will remain in place, forbidding shipment on Vietnamese vessels of licensed defense articles, until whenever (likely in a few years) DDTC gets around to amending 126.1 to reflect today’s action.

Photo Credit: Saigon Morin hotel (Hue, Vietnam 2015) by Paul Arps [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/C2rm6w [cropped and color corrected]. Copyright Paul Arps 2015.

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May

20

Company Sues Former Exec Over Iran Sanctions Scheme


Posted by at 10:39 am on May 20, 2016
Category: Criminal PenaltiesIran Sanctions

Delfin Production Facilities via http://www.delfinusa.com/photos/ [Fair Use]
ABOVE: Delfin Production Facility


Well, this had to happen sooner or later and I’m surprised it hasn’t happened sooner or more often. Delfin Group USA, a motor oil company, sued Markos Baghdasarian, its former president, for damages it incurred as a result of a scheme concocted by Baghdasarian to ship Delfin products to Iran. (Link – subscription required.) Delfin pleaded guilty to a federal indictment arising from these shipments and was sentenced to three years in federal prison. He was released in 2015.

The complaint seeks damages in the amount of $2.41 million for product seizures, $1.63 million for legal fees, and $200,000 in freight and shipping costs. You have to wonder where Baghdasarian is going to come up with all this cash after three years in Club Fed.

Best irrelevant factoid: the criminal complaint alleged that Baghdasarian put false contact information on one of the barrels of motor oil additives destined for Iran, specifically, a telephone number associated with Victoria’s Secret. This is particularly ironic given that Iran has just recently arrested eight people for posting Instagram photos of women without headscarves.

Photo Credit: Delfin Production Facility via http://www.delfinusa.com/photos/# [Fair Use]

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Copyright © 2016 Clif Burns. All Rights Reserved.
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May

18

Burma Sanctions Continue to Sunset


Posted by at 5:56 pm on May 18, 2016
Category: Burma SanctionsOFAC

Bagan by Staffan Scherz [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/aAeXsZ [cropped and processed]

Yesterday the Office of Foreign Assets Control (“OFAC”) amended the Burmese Sanctions Regulations to broaden the scope of permissible trade with Burma. The Burma regulations, which have been amended piecemeal rather than simply re-issued, remain a complex and confusing mess with prohibitions in one section repealed in a later section. (Why not just remove the first provision, you ask? Don’t be silly, I answer. Do you want lawyers to starve?)

So, for example, section 537.202 prohibits the “exportation … to Burma of any financial services,” which effectively eliminates all trade with Burma because transferring money to Burma is considered an “export of financial services” in OFAC-ese. But if you keep reading the regulations, then you’ll find all the way at the end of the Burma regulations another provision, section 537.529, which says the exact opposite and says that exports of financial services to Burma are authorized. Of course, as is always the case, you still can’t transfer money, er, export financial services, to any blocked party.

Of course, that was all well and good until OFAC discovered that the best port in Burma, and the one through which almost all goods went to and from Burma, was owned by Asia World, a blocked party, effectively foreclosing U.S. trade with Burma. So on December 7, 2015, issued General License No. 20 which allowed all transactions “ordinarily incident to an exportation to or from” Burma as long as it did not involve an exportation of goods to a blocked party.

Although it’s not entirely clear that shipping goods through a blocked port isn’t an export to or from a blocked party, the intent, if not the language, was clear and the port at Yangon was back in business, at least until June 7, 2016, when General License 20 was set to expire. Yesterday’s amendment moved General License No. 20 to a new section 537.532, effectively eliminating the expiration date for dealing with Yangon Port or other blocked individuals while moving goods to and from Burma.

Yesterday’s amendment also dealt with a similar problem confronting U.S. persons residing in Burma, although there was no comparable General License and this issue is now being addressed for the first time by OFAC. Blocked parties have pervasive ownership interests in Burma.  Asia World, for example, owns toll roads, airports, hotels, electric companies and supermarkets. The new section 537.525 allows all transactions by U.S. persons “ordinarily incident to the routine and necessary maintenance within Burma,” other than transactions related to employment of a U.S. person by a blocked party. With this amendment, U.S. persons living in Burma will not have to worry that they’ll have to pay OFAC a $250,000 fine on top of a $1 highway toll, a $2 bread loaf purchase or a $30 electricity bill.

Finally, the amendment is intended to permit transactions with and through almost all banks in Burma. In addition to a number of other entities, the amendment removed three blocked banks from the SDN List and from the general license in section 537.531 since it would no longer be necessary for those banks. It also added two blocked banks to that general license. Of course, this still leaves the issue that we’ve talked about before. Nothing in the SDN listings for these five banks covered by the general license references the general license. So screening software will still show these banks as hits, and funds will be needlessly blocked.

Photo Credit: Bagan by Staffan Scherz [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/aAeXsZ [cropped and processed]. Copyright 2011 Staffan Scherz.

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(No republication, syndication or use permitted without my consent.)


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