The saga of the government’s ill-fated prosecution of Alex Latifi and his company Axion Corporation continues. The federal district court judge delivered yet another forceful gavel whack to the hands of the prosecutors and awarded the acquitted defendants legal fees, filing costs and expert witness fees and costs incurred in defending the prosecution. Latifi and Axion were accused of violating the Arms Export Control Act by emailing to a Chinese company technical drawings of a part used in the Black Hawk helicopter. The defense successfully argued that the drawing was available on the Internet and subject to the public domain exception under the International Traffic in Arms Regulations.

This is the first time, at least that I am aware of, where the U.S. government has been ordered to reimburse legal fees and costs incurred by defendant during an unsuccessful prosecution for export violations. Sources close to the case cited statements by prosecutors that they didn’t care whether the prosecution was successful and that their only goal was to put Latifi and Axion out of business.

There’s an interesting angle to the award aside from its uniqueness. We had previously noted that the defense team filed a motion under the Hyde Amendment (18 U.S.C. § 3006A Note) for recovery of attorneys’ fees, but in fact the court awarded the fees under the Civil Asset Forfeiture Reform Act (“CAFRA”) which provides for larger recoveries by acquitted defendants and a looser standard for recovery. Under the Hyde Amendment the acquitted defendant must prove that the prosecution was “vexatious, frivolous, or in bad faith.” Additionally, legal fees recovered under the Hyde Amendment are subject to the $125 per hour fee cap provided in 28 U.S.C. § 2412(d)(2)(A). CAFRA, on the other hand, imposes no such fee limit and provides for recovery in a forfeiture proceeding in which the defendant “substantially prevails.”

The reason that CAFRA was deemed applicable in this case was because the prosecutors included civil forfeiture counts in the indictment. This has been an increasing practice where prosecutors seek forfeiture of all profits related to the illegal exports. The decision of the district court in the Axion case to use the forfeiture claims as a basis for awarding all costs incurred by the defendant as a result of the forfeiture claim may cause prosecutors to rethink including such claims in the indictment.

(Full disclosure: I was interviewed and quoted in the linked article about the award of attorneys’ fees to the defendants in the Axion case)

ABOVE: Endevco 7270A-200K accelerometer

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We’ve posted here previously about the indictment of Qing Li for allegedly attempting to export Endevco 7270A-200K accelerometers without a license to China. That case is proceeding to trial, and the trial court rejected* Qing Li’s claim that the United States Munitions List, as applied in her case, was unconstitutionally vague.

The court characterized defendant Qing Li’s argument as follows:

Defendant argues that the court should dismiss the indictment because the [Arms Export Control Act] and its implementing regulations are unconstitutionally vague as applied to her. Specifically, Defendant argues that a person of ordinary intelligence could not determine that the Endevco accelerometer device is a “military accelerometer” requiring an export license. In support of this argument, she attaches to her motion two pages of manufacturer-provided “public information” regarding the Endevco accelerometer. She argues that “[a] person of ordinary intelligence would likely deem that data sheet incomprehensible,” and that the sheet does not indicate whether the device is for military or weapons use. (Mot. at 3.) She also emphasizes the allegation that even prosecutors must request information from the State Department to determine if an item is on the list.

I haven’t looked at the trial court record but the Endevco “public information” regarding the accelerometer is presumably this data sheet which, admittedly, doesn’t state that the item is on the USML or is export-controlled. And, of course, I’m sure that the argument that even the prosecution had to ask the State Department whether this accelerometer was USML or not elicited some sympathetic nods.

The court quite properly declined to make this a case about whether the USML description of military accelerometers is unconstitutionally vague, stating:

The court notes that not only does Defendant fail to cite a single case in which the court found the AECA unconstitutionally vague, her argument emphasizes the premature and misdirected nature of her challenge. Because the charging statute contains a scienter requirement (willful violation), innocent, accidental, or unknowing exportation of a proscribed device cannot support a conviction. Therefore, the relevant inquiry consists not of an abstract analysis of constitutional vagueness, but what Defendant knew. Such an inquiry will be undertaken by a jury and based on the evidence adduced at trial. See Lee, 183 F.3d at 1032-33 . Here, the factual record has yet to be developed. Until an evidentiary record is created, the court cannot determine whether Defendant “in fact had fair notice that the statute and regulations proscribed [her] conduct.” Hsu, 364 F.3d at 196. Application of these cited controlling authorities, in essence, renders Defendant’s constitutional challenge moot at this juncture.

Readers of this blog with sharp memories may recall, as we discussed here, that the indictment alleged some facts that suggest that Qing Li might indeed have known that the accelerometer was indeed covered by the USML. The undercover agent from whom Ms. Li was trying to purchase the accelerometer allegedly told her that the export required a license and he didn’t think one could be obtained. And although she appeared to walk away from the transaction at that point, citing the “risk” involved, the indictment alleged that she continued to direct the negotiations between the undercover agent and a contact in China.

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