The Securities and Exchange Commission released (on Black Friday of all days) a document requesting public comment on whether the SEC should develop mechanisms to facilitate greater access by investors and the public to corporate disclosures concerning that corporation’s activities in or with countries designated as State Sponsors of Terrorism. This request for comments is related to the ill-fated and short-lived web listing that the SEC’s Office of Global Security put up last July, and which we discussed here and here. That list purported to help identify companies that had been doing business in sanctioned countries such as Iran, Cuba, Sudan, North Korea and Syria.

The SEC document maintains an agnostic tenor on whether it will reinstitute the Office of Global Security’s list. Instead it asks for comment as to whether the public needs an enhanced tool for this purpose other than the existing mechanisms to search corporate filings with the SEC. The release further notes that the tool might not be useful without constant updating, a task that it states might unduly strain the SEC’s staff and resources. Finally, the SEC document suggests that the disclosure issue might best be handled by having corporate filers include searchable tags with their filings disclosing activities in sanctioned states.

One part of the SEC’s discussion of the Office of Global Security’s list is intriguing. The SEC states that the list was not simply a product of keyword searches but that these searches were further refined by staff analysis of the significance of the activity revealed by the search:

[The list] was not based on a simple keyword search of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The web tool was the result of a staff review of company disclosure including any reference to a State Sponsor of Terrorism. This disclosure review allowed the web tool to exclude disclosure unrelated to a company’s activities in or with any of these countries (e.g., generic references to a country; references to a State Sponsor of Terrorism in the context of an executive officer’s or director’s experience and educational background; or generic descriptions of risk associated with the possibility of war). It also permitted the web tool to exclude companies whose disclosures stated that they did not conduct business in or with State Sponsors of Terrorism.

But these filters were apparently narrowly applied. As we noted in our initial post on the SEC list, Cadbury Schweppes appeared on the list because it disclosed that it had divested its operations in Syria. Obviously, this meant that the the last filter was applied to exclude only companies that never conducted business in a sanctioned state and not those that at some prior time had done business with a sanctioned state.

Ahmed Idris Nasreddin

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On August 29, 2002, OFAC designated various entities owned by Ahmed Idris Nasreddin, thereby blocking all assets of those entities and forbidding U.S. citizens and companies from dealing with those entities. The basis for the designation was a finding that Nasreddin was a “supporter of terrorism.” The press release supporting the designation stated:

Based on information available to Italy and the United States, … Ahmed Idris Nasreddin (“Nasreddin”), through commercial holdings, operate[s] an extensive financial network providing support for terrorist related activities.

OFAC didn’t disclose what information linked Nasreddin to terrorism, but other sources suggest that Nasreddin finances a mosque in Milan, Italy, which is the major station of Al-Qaeda in Europe and that, among other things, the Al-Qaeda operatives involved in the 1998 embassy bombings stayed at the Mosque

One of the blocked Nasreddin entities was Akida Bank Private Limited, about which the OFAC press release said:

Nasreddin, who serves as Akida Bank’s president, also serves on the board of directors of Akida Bank along with Youssef Nada. According to corporate documents, the Nasreddin Foundation, an entity proposed for designation, owns an overwhelming majority of shares of Akida Bank, affording Ahmed Idris Nasreddin and the Nasreddin Foundation ownership and control of Akida Bank.

That was then; this is now:

The following deletions have been made to OFAC’s SDN list:

AKIDA BANK PRIVATE LIMITED (a.k.a. AKIDA INVESTMENT CO. LTD.; a.k.a. AKIDA INVESTMENT COMPANY LIMITED), c/o Arthur D. Hanna & Company, 10 Deveaux Street, Nassau, Bahamas, The; P.O. Box N-4877, Nassau, Bahamas, The [SDGT]

A number of other Nasreddin entities designated in 2002 were also deleted from the SDN list.

The accompanying Federal Register notice is completely opaque as to the reasons for deletion, stating only:

The Department of the Treasury’s Office of Foreign Assets Control has determined that these individuals and entities no longer meet the criteria for designation under the Order and are appropriate
for removal from the list of Specially Designated Nationals and Blocked Persons.

There isn’t an OFAC procedure for former supporters of terrorism to absolve themselves simply by claiming that they’ve renounced terrorism or seen the light. I suppose that a change in ownership of the designated entities might be grounds for removal from the SDN list, but there is no suggestion here that Nasreddin divested his control of these entities.

Instead the deletion must be a concession that the original designation was mistaken. And needless to say, OFAC isn’t particularly interested in revealing why it was mistaken in the first place, although you would think that such an explanation would be in order here, particularly where there had been allegations that Nasreddin was financing the major Al-Qaeda station in Europe.

A battle is being waged over the planned, but allegedly illegal, export of a former U.S. Navy hospital ship M/V Sanctuary. Decommissioned in 1989, the battle certainly isn’t over whether a license should have been obtained from the Directorate of Defense Trade Controls (“DDTC”).

No, it’s all being waged around the Toxic Substances Control Act (TSCA), yet another federal statute that may have an impact on exports. Section 12 of TSCA, 15 U.S.C. § 2611, requires prior notice to the EPA of exports of certain substances and section 6(e), 15 U.S.C. § 2605(e), through its prohibition on introduction of polychlorinated biphenyls (“PCBs”) into commerce, forbids the export of PCBs. And, according to opponents of the export, Sanctuary likely contains PCBs.

In 2003, a federal district court, relying on section 6(e) of TSCA entered a temporary restraining order forbidding the export of WWII-era decommissioned ships to the United Kingdom. The EPA had issued in May 2003 “enforcement discretion” letter saying that it would not enforce section 6(e) to prevent the export of naval vessels if certain conditions were met. The district court provisionally accepted the plaintiff’s argument that the EPA was required to engage in a formal rulemaking proceeding to adopt this exemption. Since then, no WWII-era naval ships have been exported.

The Sanctuary was sold in 1989 to a non-profit organization which turned it into a drug rehabilitation center and moored it in Baltimore. Subsequently the organization defaulted on moorage payments and the ship was auctioned off August 21, 2007 on the Baltimore Court House steps to Potomac Navigation Inc. The Basel Action Network, a group devoted to opposing toxic waste exports, is claiming that Potomac Navigation intends to export the ship to a breaking yard in India or Bangladesh where it will be demolished for scrap. The EPA has reportedly contacted the new owners to request permission to board the ship to sample for PCBs.