Feb

3

When Pigs Fly


Posted by at 9:54 pm on February 3, 2015
Category: CanadaCriminal PenaltiesForeign Export Controls

When Pigs Fly by arvind grover [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr http://www.flickr.com/photos/arvindgrover/3194476705 [cropped]According CTV’s investigative reporting arm W5, the Canadian Federal Government has agreed to pay a Canadian businessman, Steve de Jaray, more than $10 million to compensate him for damages caused to him by the government’s erroneous prosecution in which it charged de Jaray with illegal exports of items that were not in fact export controlled.

The case began in 2008 when de Jaray’s company, Apex Micro Electronics, shipped microchips used in flat screen televisions and video games to Hong Kong. Canadian customs flagged the items as suspicious. In February 2009, Canadian Mounties (probably not on horseback) and other officials raided de Jaray’s home and office causing, de Jaray alleged, him to lose his business and ultimately his house. Experts hired by de Jaray determined that the items were not export-controlled and Canada stayed, then ultimately dropped, the prosecution.

Interestingly, and not entirely surprisingly, it appears that there are some U.S. fingerprints on the prosecution. Lawyers for de Jaray allege, citing a cable released by WikiLeaks, that just months before de Jaray’s goods were seized, U.S. officials, including a high official from the State Department’s Bureau of Politico-Military Affairs, chided the Canadians for their poor export enforcement records and insisted that certain trade concessions might be withheld if the Canadians did not start following the U.S. example and throw more people in jail for export violations.

According to CTV, de Jaray has been living in self-imposed exile from Canada for the past 6 years. My guess is that he’s probably not in the United States. I also guess that the United States would pay similar damages in an export case when, as they say, pigs fly.

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Jan

29

The Case of the Missing Cuba Embargo Regulations


Posted by at 9:25 pm on January 29, 2015
Category: BISCrimea SanctionsCuba SanctionsOFAC

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_59/13697566663The recent OFAC amendments to the Cuba embargo regulations, and related statements by OFAC, went to great pains to make clear that, notwithstanding these changes, the embargo was still in place. That being said, it is somewhat perplexing that the Cuba Assets Control Regulations have disappeared, or at least most of the Cuba Assets Control Regulations have disappeared from OFAC’s website.

If you go to OFAC’s page on the Cuba sanctions, and then scroll down to the bottom, you will see under “Code of Federal Regulations” a link for “31 CFR Part 515 – Cuban Assets Control Regulations.” Click on that link, and it will take you here, which is the Federal Register notice with just the amended regulations. The other regulations are nowhere to be found. Maybe OFAC did repeal the Cuba embargo after all?

In another example of epic Web fail, BIS today promulgated new regulations relating to the Crimea Sanctions, which can be found here in the Federal Register. But if you go to the BIS website, the new rules are nowhere to be found. They are not mentioned in the slider at the top listing other current developments. They are not even mentioned in the BIS Newsroom where the latest entry is — seriously — July 22, 2014. What? No news at all for 6 months??

As to the new Crimea regulations themselves, I am not at all sure what they mean. I’ll post on them once I figure that out.

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Jan

29

Buy Me Some Peanuts and OFAC-jacks


Posted by at 1:13 am on
Category: BaseballCuba SanctionsOFAC

Yoan Moncada via MLB http://js.mlblogs.com/2014/06/30/cuban-inf-prospect-yoan-moncada-has-left-the-island/ [Fair Use]
ABOVE: Yoan Moncado


It’s cold outside. It’s been snowing. So it’s time, of course, to dream of spring training and the boys of summer. Let’s talk baseball. And OFAC. Batter up!

Baseball blogs, reporters and social media are a-twitter that Yoan Moncado, the 19-year-old baseball phenomenon from Cuba, is not currently able to sign with a Major League Baseball team because of OFAC and the embargo against Cuba.

The new Cuba regulations leave in place the general license, useful mostly to baseball teams, which unblocks Cuban nationals after they have taken up permanent residence in a country outside Cuba. Once a Cuban baseball player has been unblocked, he can be signed by a U.S. baseball team.

Moncado, it seems, has become a permanent resident of Guatemala. So what’s the hold-up? Well, it’s not OFAC. It’s worse. It’s fear of OFAC. Notwithstanding the provision unblocking Moncado, MLB, apparently fearing the ire of OFAC (and a mega-fine) if evidence of permanent residence outside Cuba is faked, still requires a specific license from OFAC prior to allowing a team to sign a Cuban player. The problem is OFAC is apparently saying that it won’t issue a specific license when the conditions for the general license are met. Unstoppable force, meet immovable object. Immovable object, meet unstoppable force.

According to an MLB memo, reported here, MLB and OFAC are in discussions to resolve this impasse. Don’t break out the Cuban cigars yet to celebrate Moncado’s signing.

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Jan

27

Epsilon, Epsilon


Posted by at 11:25 pm on January 27, 2015
Category: Iran SanctionsOFAC

Soundstream Persian Catalog https://web.archive.org/web/20150128024201/http://www.asra-co.com/Download/SoundStream-Persian.pdf[Fair Use - Soundstream is Epsilon sub]As we reported in a recent post, The Auto Sound and the OFAC Fury Part II, auto audio manufacturer Epsilon Electronics responded to the $4 million fine imposed by OFAC by filing a lawsuit with what we think has little chance for success. One question that this raises is whether Epsilon might have had better alternatives than filing a long-shot Eighth Amendment lawsuit, and I think, after reviewing the exhibits to the complaint, that it did.

Epsilon was fined for its sales of $3.5 million in auto audio equipment from its subsidiaries Power Acoustik and Soundstream to Iran through its Dubai-based distributor Asra International. OFAC’s detailed, six-page pre-penalty notice leveled serious charges at Epsilon, including that Epsilon lied to OFAC in its subpoena response and other communications, that it knew or should have known that Asra only sold to Iran, and that it tried to obfuscate its Iran sales by eliminating a web page on its own site showing its products in Iran.

In response, Epsilon hired a Beverly Hills tax lawyer who filed a brief five-paragraph response amounting to less than a full page of text. This half-hearted response was mostly devoted to arguing, in its longest paragraph, that the owners of Epsilon were observant Jews and would never sell anything to Iran. It also argued, somewhat astonishingly, that OFAC’s prepenalty notice contained no evidence that any Epsilon products were sold to Iran and that the website references to its products in Iran were a false attempt by Epsilon to exaggerate its global reach in order to remain competitive with other major players in the electronics industry.

One can imagine the response over at OFAC to this letter, particularly given that the company, which claims it was prohibited by its religious beliefs from shipping to Iran, had already received a cautionary letter from OFAC arising from its own direct shipment of monitor parts to Iran in 2008. Nor could OFAC have thought much of Epsilon’s general inclination toward truthfulness given its claim that any indication on its own website that it sold products to Iran was a lie and thus no proof that any of its products actually were shipped to Iran.

Frankly, it’s hard to imagine how on earth this response was even filed with OFAC in the first place. Indeed, it seems to me that replacement counsel that filed the lawsuit against OFAC would have had an argument that it should be given a chance to prepare and submit a proper response to the pre-penalty notice. Of course, I don’t know if new counsel tried this and was refused by OFAC but I doubt this occurred or this would have been mentioned in the complaint. And even if OFAC had been asked, it may have refused. But given the problems with the original response and given the difficulty of overturning agency action on review, this was certainly what I would have tried.

On a slightly different topic, we noted in the first post on this case that the website of the distributor, Asra,  was now mysteriously under construction.  Of course, nothing ever dies on the Internet thanks to the Wayback Machine, and we found archived versions of the Asra website alive and well.  The archived websites make clear that Iran was Asra’s principal, if not its only, market.  Even its Farsi-language catalog of Epsilon’s Soundstream products, a page from which is pictured above, can still be downloaded here.

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Jan

22

The Auto Sound and the OFAC Fury Part II


Posted by at 9:54 pm on January 22, 2015
Category: Iran SanctionsOFAC

Soundstream Audio Car http://www.soundstream.com/images/intl-team/pic/england/england/images/new/UK%20(1).jpg [Fair Use - Soundstream is Epsilon sub]This blog previously reported the $4,073,000 fine imposed by the Office of Foreign Assets Control (“OFAC”) on Epsilon Electronics for selling automobile stereo equipment to a company in the UAE that resold the items to Iran. OFAC documents indicated that the reseller’s website made clear that it only sold its products to Iran, that Epsilon had attempted to conceal its dealings with Iran by eliminating a web page showing its products and labelled Iran, and that Epsilon under a prior business name had shipped a monitor to Iran for which it had received a cautionary letter from OFAC.

Epsilon has now filed a complaint in the United States District Court for the District of Columbia challenging the fine, alleging, among other things, that the fine violates the Eighth Amendment to the United States Constitution which prohibits cruel and unusual punishment. Epsilon is invoking specifically the language in the Eighth Amendment which prohibits “Excessive Fines” from being imposed. It’s an odd claim given the Supreme Court’s statement in Browning-Ferris Industries v. Kelco Disposal, 492 U.S. 257 (1989), one of the Supreme Court’s few cases on the Excessive Fines clause, that the amendment “places limits on the steps a government may take against an individual.” No court, to my knowledge, has applied the clause to a civil penalty against a corporation. And, even if a court decided to apply the clause to a corporate fine, the principal of proportionality embodied by the clause would not likely be offended by a $4 million fine for the shipment of $3.5 million in goods to Iran.

The complaint further claims that OFAC properly failed to consider mitigating circumstances, namely that Epsilon had no idea that its distributor was shipping to Iran and engaged in no acts of concealment. The complaint includes as exhibits the OFAC documents stating Epsilon knew, or had reason to know, that all of its distributor’s business was conducted solely with Iran and that Epsilon had removed a web page on its site associating its products with Iran.  So it is more than a little odd, given that a reviewing court is going to give a great deal of deference to the findings of the agency under review, that the complaint makes these claims without even attempting to address these unfavorable findings by OFAC clearly set forth in the complaint’s own exhibits.

I said in my original post that, as a matter of policy, I thought OFAC had better things to worry about than pimped out cars cruising the streets of Tehran. But, sadly, I don’t think this complaint has the firepower to convince a court to force OFAC to spend more time on centrifuges and less on subwoofers.

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