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Mar

16

Iranian Visitor to U.S. Arraigned on Export Charges

Posted by Clif Burns at 5:15 pm on March 16, 2009

ABOVE:Rolls-Royce Model 250
Engine

When an Iranian businessman based in Tehran arrived in the United States on Saturday, he was probably not expecting that his welcome wagon would be a contingent of special agents from the Bureau of Industry and Security (“BIS”), who promptly whisked him away and charged him with violating U.S. export laws restricting trade with Iran. The businessman, Hossein Ali Khoshnevisrad, was arraigned today in a United States District Court in San Francisco.

An affidavit filed by a BIS special agent provides a great deal of detail on the circumstances surrounding Khoshnevisrad’s business operations and his ultimate arrest. Not surprisingly to regular readers of this blog, Khoshnevisrad’s modus operandi was to interject front companies into the transactions to hide the ultimate end-user and destination of the exported goods.

Two series of transactions were detailed by the affidavit. The first involved the sale of Rolls Royce Model 250 helicopter engines. According to intercepted emails and correspondence described in the affidavit an un-named “Irish Trading Company,” which had purchased 17 of the engines, responded to a request from Khoshnevisrad’s company Ariasa AG with a proforma invoice for 8 of the engines. Thereafter, a number of these engines were shipped from New York by the “Irish Trading Company” to Khoshnevisrad’s designated consignee, Penerbit Kemas Sdn. Bhd, in Malaysia. Penerbit is apparently a Malaysian book publisher and distributor with a side business in “auto accessories” but with no apparent need for helicopter engines. The affidavit traces the journey of the engines to Malaysia, but stops there. No description is provided as to when, how or whether the engines went to Iran.

The second transaction involved two aerial panorama carriers which Khoshnevisrad’s company obtained through a “Dutch aviation parts supply company.” (I’ll bet that the Dutch company is Aviation Services International B.V., which was indicted in 2007 for selling U.S.-origin aircraft parts to Iran.). When the Dutch company, in response to an inquiry from the U.S. freight forwarder for the goods, inquired as to who was the end-user, Khoshnevisrad replied:

Regarding the end user as you know USA will not deliver to Iran in any case. You should give an end user by yourself.

The cameras are needed for the students at Geographical university to lern them how to film from the air.

Trust you can manage to get the cameras free.

Best regards,
HOSSEIN.

Ultimately the Dutch company shipped the cameras from the Netherlands to Khoshnevisrad in Tehran.

One puzzling issue in this case is why Khoshnevisrad, who knew that he was breaking U.S. law by arranging the export of U.S.-origin goods to Iran, would travel to the United States in the first place. The chance of him being arrested in, and extradited from, Iran on charges of violating the U.S. sanctions on Iran were, I’d say, pretty much on the same order as the chance that my dog, although a very clever dog, will graduate from college or win the Nobel Prize for Literature. The chances of him being arrested in the United States were pretty high. One has to speculate that some clever law enforcement techniques might have been used to lure him here.

UPDATE: The Washington Post story that I linked, as did other wire stories like this one, referred to Khoshnevisrad’s court appearance on Monday as an arraignment. The DOJ press release, however, characterized the court proceeding as an initial appearance. This would mean that an indictment has not yet been issued and that the arrest warrant for Khoshnevisrad was premised instead on a criminal complaint. If that is the case, the formal arraignment of Khoshnevisrad will occur, if at all, after an indictment or criminal information is subsequently filed.

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Mar

12

Another Overachiever

Posted by Clif Burns at 7:22 pm on March 12, 2009

Category: DDTC

ITAR This must be the season for press releases from companies reporting that they have “achieved” ITAR “certification.” I reported on one of those just a few days ago and along comes another one, this time from California-based SigmaQuest. And I would have let this newest one slide by without comment if there wasn’t something particularly unusual about it.

The ITAR certification specifically demonstrates that SigmaQuest has met requirements pertaining to organization structure, documentation, corporate policy, training and procedures to permit it to handle, use and transfer information controlled by ITAR and the U.S. Munitions List. Moreover, this demonstrates that SigmaQuest has the knowledge and understanding to fully comply with the Arms Export Control Act (AECA) and International Traffic in Arms Regulations as well as having corporate procedures and controls in place to ensure compliance.

Regular readers will by now know that not a single word of that paragraph is even remotely true (and that includes “and” and “the”). But something else might sound, oh, strangely familiar about this paragraph. You might even say it’s “dejÃ vu all over again,” particularly if you remember a press release from another company I blogged about back in 2007

Meeting ITAR Certification certifies that CIMTEK has met requirements pertaining to organization structure, documentation, corporate policy, training and procedures to permit it to handle, use and transfer information controlled by ITAR and the U.S. Munitions list.

Companies receiving this certification demonstrate that they have knowledge and understanding to fully comply with the Arms Export Control Act (AECA) and International Traffic in Arms Regulations as well as having corporate procedures and controls in place to ensure compliance.

Now those similarities can’t be entirely coincidental, can they? I mean the paragraphs are almost word-for-word identical. It just goes to show that one of the dangers of copying some other company’s press release is that what you copy just might not be accurate.

Maybe SigmaQuest even copied it from my earlier blog entry quoting the press release. In that case, I am going to perform the public service of providing, absolutely free of charge and for unrestricted use, language that can be used in all future press releases by companies that have just received their ITAR Part 122 registration numbers:

Company A has just been notified by the Directorate of Defense Trade Controls (“DDTC”) that it is now registered with that agency as required by Part 122 of the International Traffic in Arms Regulations (“ITAR”) for all companies in the United States that manufacture or export defense articles or services. Registration also means that Company A can now legally export defense articles listed on the United States Munitions List. Although Company A prides itself on its rigorous compliance program and knowledge of the ITAR, registration is available to any company that fills out a form and pays a fee and should not be taken as an independent certification of the Company by the DDTC or any other government agency.

I’m not holding my breath that we will see this new version of the registration press release any time soon.

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Mar

11

If Wishes Were Horses, Divandari Would Ride

Posted by Clif Burns at 7:19 pm on March 11, 2009

Category: Iran Sanctions

ABOVE:Ali Divandari
Chairman, Bank Mellat

Today’s online edition of the Wall Street Journal published an interview with Ali Divandari, the Chairman of Iran’s Bank Mellat. That Bank was added to the SDN list in 2007 and since then all U.S. persons that come into possession of any property in which Mellat has an interest must block that property.

The ostensible purpose of the interview was to discuss recent developments in the privatization of Bank Mellat. The Iranian government owns 35% of the bank, but it is selling an additional 15% of its interest in the bank starting at the end of March. The government’s remaining 20% is expected to be sold in 2011.

Divandari said Bank Mellat’s new charter says the government no longer has any control over the bank. Referring to U.S. sanctions, he said that he expects the bank to “have fewer problems” following its partial privatization.

To say that this is, at best, wishful thinking on Divandari’s part is charitable. Bank Mellat wasn’t sanctioned because of the Iranian government’s stake in the bank; instead Bank Mellat was sanctioned because of its participation in Iran’s nuclear proliferation activities, which the Office of Foreign Assets Control described as follows in 2007 when it put the bank on the SDN list:

Bank Mellat provides banking services in support of Iran’s nuclear entities, namely the Atomic Energy Organization of Iran (AEOI) and Novin Energy Company. Both AEOI and Novin Energy have been designated by the United States under E.O. 13382 and by the UN Security Council under UNSCRs 1737 and 1747. Bank Mellat services and maintains AEOI accounts, mainly through AEOI’s financial conduit, Novin Energy. Bank Mellat has facilitated the movement of millions of dollars for Iran’s nuclear program since at least 2003. Transfers from Bank Mellat to Iranian nuclear-related companies have occurred as recently as this year.

Changing the ownership structure of the bank won’t have any impact on this fundamental problem for the bank, so I don’t think that Divandari and his staff should start thinking about U.S.-dollar transactions any time in the near future.

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Mar

10

May Cause Somnambulism with Amnesia for the Event

Posted by Clif Burns at 3:14 pm on March 10, 2009

Category: General

The UK’s Export Control Office (“ECO”) has just released a video on export control that has the tenor and excitement of certain videos they used to show us in high school health class on those touchy subjects of serious concern, and you all know which ones I mean. I think they even hired the same narrator and just told him to say al-you-men-i-um instead of allume-i-num.

Slam down a double espresso and then click play to watch:

For those in the U.K. that the video doesn’t put to sleep, it might scare them into not ever exporting anything again. It doesn’t clearly delineate what can and can’t be exported and then promises jail time for mistakes, solemnly intoning the old canard that “ignorance of the law is no excuse.” (Well, actually it is, at least in the United States. A criminal prosecution for export violations requires that the defendant have at least some knowledge that the export was illegal or improper.)

My absolutely favorite part comes near the end where the soporific narrator intones:

What the ECO does, and the licensing process, is, of course, more complicated than a short video like this can ever hope to explain.

Translation: this video was produced in order to spend some extra funds that were lying around the agency but that’s not something we could admit, at least until the very end of the video where there was a very good chance that you had already decided to watch something much more interesting, like, you know, the one of that dachshund with the machine that throws tennis balls for him.

If you weren’t able to make it through the ECO video, but are still dying to know what was in it, the ECO helpfully provides a transcript here.

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Mar

5

Oh, The Things You Will Learn on Business Wire!

Posted by Clif Burns at 9:26 pm on March 5, 2009

Category: General

Electronic Systems, Inc. Regular readers will know that we have a particular fascination with Business Wire press releases where companies announce that they have “achieved” registration under the International Traffic in Arms Regulations (“ITAR”). These press releases are amusing because anyone who can figure out how to fill out and mail in the registration form with the requisite fee will be registered and will obtain a registration number.

Boasting about ITAR registration is not too different from a company claiming that it “achieved” an employer identification number from the I.R.S, thereby demonstrating the company’s extensive knowledge of corporate tax laws and its commitment to tax compliance. And by the time the PR firms for these new ITAR registrants have finished with the Business Wire press release, some of these companies wind up claiming that the ITAR registration demonstrates the company’s intimate knowledge of even the most obscure provisions of the ITAR, its passage of a grueling three-day exam on all aspects of export law, its successful completion of a three-month compliance audit by the Directorate of Defense Trade Controls (“DDTC”) and its ability to leap tall buildings in a single bound.

The latest in this series is this press release from South Dakota based Electronic Systems, Inc., (“ESI”) which, I must say, sets a new benchmark in misunderstanding the DDTC registration process.

Electronic Systems, Inc. today announced they have received their official International Traffic in Arms Regulations (ITAR) registration from the US Department of State, Bureau of Political-Military Affairs. Companies receiving this certification demonstrate that they have knowledge and understanding to fully comply with the AECE and ITAR as well as having corporate procedures and controls in place to ensure compliance. The ITAR Registration means that the company is uniquely positioned to fully support defense related projects in the United States. Companies that are based in the United States but owned by foreign companies or non-Americans make them ineligible for ITAR compliance.

You know, I was almost willing to go along with the company’s claim that ITAR registration demonstrated that it had knowledge of the ITAR. At least I was until I got to that last sentence about foreign ownership precluding ITAR registration. Apparently section 122.2(b)(2) of the ITAR, which specifically contemplates registration by foreign-controlled companies, wasn’t covered on that grueling exam that ESI had to take before “achieving” registration.

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