On October 5, 2005, the Department of Commerce, Bureau of Industry and Security ("BIS") entered an order under which ProChem (Proprietary), Limited ("ProChem") (as the successor to Protea Chemicals (Proprietary), Limited ("Protea")) of South Africa, agreed to pay $1,540,000 in civil penalties to settle charges that Protea had committed 220 violations of the Export Administration Regulations ("EAR") from 1999 to 2003 in connection with exports of potassium cyanide and sodium cyanide to South Africa. BIS alleged that Protea resold the potassium cyanide and sodium cyanide to end users in South Africa not listed on the original U.S. export licenses, and that Protea resold these chemicals knowing that the sales would violate the EAR. Although ProChem had no relationship with Protea at the time that all or nearly all of the alleged violations occurred, BIS assessed the penalty against ProChem on a theory of successor liability. Protea sold its business to an intermediate party in 2001, and ProChem then acquired the Protea business in 2003. See "Do Due Diligence Before an Acquisition: Don’t Buy an Enforcement Action", Sentinel, Vol. I, No. 1 (March 2004).
The Justice Department announced on October 18, 2005 that a division of Staples, Inc. has paid the United States $7.4 million to settle allegations that it submitted false claims when it sold office supply products manufactured in countries not permitted by the Trade Agreements Act to United States government agencies. Staples was required by its contract with the General Services Administration ("GSA") to prevent such items from being offered for sale to U.S. government agencies. This case was filed under the qui tam or whistleblower provisions of the False Claims Act by Safina Office Products and two of its executives, Edward Wilder and Robert Hsi Chou Lee, in the U.S. District Court for the District of Columbia in January 2003. Safina, Wilder and Lee will collectively receive $1.11 million of the total recovery as their statutory award. This settlement follows in the wake of two previously reported settlements involving Office Max, Inc. ($9.8 million) and Office Depot, Inc. ($4.7 million), which were based on the same allegations.
On October 24, 2005, the U.S. Court of Appeals for the Fifth Circuit upheld the conviction of a Texas Tech University ("Texas Tech") medical researcher on 47 counts of criminal activity, including three counts in connection with the transportation of human plague bacteria and exports of the plague bacteria to Tanzania in violation of the EAR. Thomas Butler, M.D., was sentenced to 24 months’ imprisonment, three years’ supervised release, fined $15,000, and ordered to pay $38,675 in restitution to Texas Tech. In completing the waybill for shipment to Tanzania, Dr. Butler certified that the samples were being exported in accordance with the requirements of the EAR, which they were not. The court noted that the certification contradicted a Centers for Disease Control document in Dr. Butler’s possession that indicated a Department of Commerce export license was required. The court also noted that Dr. Butler’s knowledge of export requirements was further supported by the numerous previous occasions on which Dr. Butler had exported infectious samples and other dangerous goods in compliance with the EAR.
On October 24, 2005, the Department of Commerce announced that Sermatech International Inc. ("Sermatech") of Pottstown, Pennsylvania, agreed to pay civil penalties in the amount of $17,500 to settle charges that it violated the EAR. BIS charged that, on five occasions from July 9, 2002 through February 2, 2004, Sermatech exported technical data regarding the coating, brazing, and repair welding on components of gas turbines to its South Korean joint venture, Sermatech Ltd., with an expired Department of Commerce export license. Sermatech voluntarily self-disclosed the violations.
On October 24, 2005, Cymer, Inc. ("Cymer"), located in San Diego, agreed to pay a civil penalty of $19,250 to settle charges that it committed five violations of the EAR when, among other things, it released deep ultra violet technology to foreign nationals from Russia and China without BIS licenses. BIS also charged that Cymer violated the EAR when it exported deep ultra violet light sources to Taiwan on two occasions without a BIS license, and made false statements in connection with one of those exports when it stated on the Shipper’s Export Declaration ("SED") that no license was required.
Overton’s, Inc., of Greenville, North Carolina, agreed on October 24, 2005 to pay $6,600 as a civil penalty to settle BIS charges that it committed 22 violations of the EAR by exporting optical sighting devices and related equipment from September 2000 through January 2002 to Canada without Department of Commerce licenses required under the EAR.
On October 27, 2005, BIS entered an order under which Spencer Clark Rogers agreed to pay a civil penalty of $5,500, and allowed his export privileges to be denied for a period of two years to settle BIS charges that he transferred foreign origin sealing products located in the United States to a U.S. exporter while representing that the products were of U.S. origin. This misrepresentation caused the exporter to file a SED that falsely stated that the goods were of U.S. origin. Misrepresenting the source of items subject to the EAR is a violation of those regulations. In a separate October 27 order, Mr. Lei Jack Chen agreed to pay a civil penalty of $5,500 and allowed denial of his export privileges for two years to settle similar charges by BIS.
On November 7, 2005, Maine Biological Laboratories ("MBL"), of Waterville, Maine, agreed to pay a civil penalty of $100,000 to settle charges that it committed 12 violations of the EAR by exporting avian vaccines containing the Newcastle disease virus to Syria without the required BIS licenses. BIS also charged that on one occasion, MBL failed to file a SED with BIS and made false statements on three others, claiming that the vaccines could be exported to Syria without a license. Finally, MBL transferred the vaccines to an end-user in Syria with the knowledge that doing so violated the EAR. Lohmann Animal Health International, a company related to MBL, guaranteed the payment of MBL’s civil penalty. BIS also denied MBL’s export privileges for a period of five years.
On November 7, 2005, Medical Equipment Specialists, Inc. ("MES") agreed to pay a civil penalty of $37,500 to settle BIS charges that it committed five violations of the EAR in connection with the attempted export of X-ray film processors to Cuba through Canada. BIS charged that in June 2000, MES attempted to export the film processors to Cuba via Canada without obtaining the necessary export license. BIS charged that MES also falsely represented the ultimate destination of the film processors on the Shipper’s Export Declaration as the Virgin Islands, when in fact it was Cuba. MES transferred the items to a freight forwarder knowing that it had made false statements on the SED, and BIS charged that MES committed all of these acts in conspiracy with others, knowing that violations of the EAR would occur.
Salinas International Freight Company, Inc. ("Salinas"), of Dallas, agreed on November 7, 2005, to pay $11,600 as a civil penalty to settle charges that it committed two violations of the EAR when it exported computers and related equipment to Saudi Arabia on behalf of Tetrabal Corp., which at the time was subject to a temporary denial of its export privileges. In addition to making exports on behalf of a denied person, Salinas was charged with making false statements on the SED when it stated that the export of the computers to Saudi Arabia did not require a license because all export transactions on behalf of a denied person require the prior authorization of BIS.
On November 9, 2005, BIS ordered the denial of export privileges for five years for Performance Medical Supplies of Australia under a settlement agreement between the parties. BIS charged that Performance com mitted 10 violations of the EAR and the Department of Treasury’s Office of Foreign Assets Control ("OFAC") Iranian Transactions Regulations ("ITR") in connection with the exports of physical therapy equipment from the United States to Iran via Australia without the required license from OFAC.
On November 14, 2005, BIS entered orders against Trans-Media Services Ltd. of Malta and its Chairman and Managing Director, Mohammed Saleh Sweidan. These parties each agreed to pay $19,800 as a civil penalty to settle charges that they violated the EAR by making false statements in connection with the export of satellite communications equipment to Malta. BIS charged that in July 2003, Trans-Media by Sweiden stated to BIS officials that the company had never entered into any contracts to supply items from the United States, but had attempted to do so. Sweiden also stated that Trans-Media had never imported any items from the United States. However, Trans-Media had entered into a contract to purchase satellite communications equipment, and in June 2003, Trans-Media purchased such equipment and it was exported to Malta.
The Department of Commerce announced on November 17, 2005 that Norman Fox & Co. ("Norman") of California agreed to pay a $42,000 civil penalty to settle administrative charges that it violated the EAR. BIS alleged that Norman improperly exported chemicals controlled to prevent the proliferation of chemical and biological weapons from the United States to Hong Kong without the required Department of Commerce export licenses. BIS charged that, on 12 separate occasions, Norman exported a chemical mixture containing triethanolamine to Hong Kong without the required export license. Norman voluntarily disclosed these violations to BIS.
The Department of Commerce announced on November 17, 2005 that Parker Hannifin Corporation ("Parker Hannifin") of Cleveland, Ohio, agreed to pay $185,000 in civil penalties to settle charges that it exported fluid control valves to Taiwan and China without the required export licenses in violation of the EAR. BIS charged that Parker Hannifin committed 53 violations of the EAR by exporting check valves to Taiwan without the required licenses, transferring the check valves to Taiwan knowing that violations of the EAR were occurring, exporting manual stop cock valves to China without the required licenses, and making false statements on Shipper’s Export Declarations filed with the U.S. Government. Parker Hannifin voluntarily self-disclosed the violations.
On November 17, 2005, the Department of Commerce announced that Epstein, Edell, Shapiro, Finman & Lytle LLC of Rockville, Maryland, agreed to pay a $17,000 civil penalty to settle allegations that it violated the antiboycott provisions of the EAR. BIS alleged that in February 2002, in connection with transactions involving the transfer of information from the United States to Syria, Epstein furnished prohibited information about another person’s business relationships with Israel in violation of the EAR. BIS also alleged that Epstein failed to report in a timely manner its receipt of the request to provide such certification from an intermediary in Jordan. The firm voluntarily disclosed the transactions. The antiboycott provisions of the EAR prohibit U.S. persons from complying with certain requirements of unsanctioned foreign boycotts, including furnishing information about business relationships with or in Israel. In addition, the EAR requires that U.S. persons report their receipt of certain boycott requests to the Department of Commerce. See "Who is Your Company Boycotting? A Review of the U.S. Anti-boycotting Regulations" Sentinel Vol I, No. 2 (July 2004).
BIS announced on November 17, 2005 that Oceanic Container Line Inc., of Staten Island, New York, agreed to pay an $8,250 civil penalty to settle allegations that it violated the antiboycott provisions of the EAR. BIS charged that Oceanic furnished prohibited information about another company’s business relationships, and that Oceanic failed to report in a timely manner its receipt of a request to provide that information. BIS also charged that Oceanic failed to maintain records containing information relating to that request.
On November 18, 2005, Fiber Materials, Inc. ("Fiber Materials"), of Biddeford, Maine, and its company executives, Walter L. Lachman and Maurice H. Subilia, Jr., were sentenced in federal court for violating U.S. export law in connection with the export to India of equipment used to improve the accuracy of strategic ballistic missiles. Mr. Lachman was sentenced to three years’ probation, the first year of which is to be spent in home detention. Mr. Subilia was sentenced to three years’ probation, the first six months of which is to be spent in a halfway house, to be followed by one year of home detention. The court also imposed a fine of $250,000 on Mr. Lachman, Mr. Subilia, and Fiber Materials. In March 1995, a federal trial jury found each of the defendants guilty of violating the EAR and of conspiring to export a control panel from the United States to the Defense Research Development Laboratory in India, which was intended to operate a hot isostatic press which was to be subsequently provided by Fiber Materials. The control panel required an export license from BIS for export to India, and no such license was obtained by Fiber Materials. After trial in 1995, the defendants filed a motion for a judgment of acquittal notwithstanding the guilty verdict, arguing that the EAR was unconstitutionally vague. The District Court did not rule on this motion until 2003, at which time it allowed the motion and vacated the convictions. The United States appealed, and in October 2004, the U.S. Court of Appeals for the First Circuit reversed the District Court and reinstated the convictions, finding the EAR to be sufficiently clear.
BIS entered an order on November 22, 2005, under which Carrier Access Corporation agreed to pay a civil penalty of $61,600 to settle charges that it committed 16 violations of the EAR and OFAC’s ITR for the unlicensed exports of telecommunication devices and technical information to Iran via the UAE and customers in Canada.
Richard Greenleaf, a former vice president of a wholesale supplier of aircraft parts pleaded guilty on November 30, 2005 to one count of making false statements to the Department of Commerce in connection with the exportation of aircraft parts to a "Specially Designated National" of Libya. Greenleaf admitted that he caused aircraft parts to be shipped to Mediterranean Aviation Company, Ltd., a/k/a "Medavia" in Malta on approxi mately 30 separate occasions. During the time in which the shipments were made, Medavia was designated by OFAC as a Specially Designated National of Libya under the Libyan Sanctions Regulations. Separately, NewCal pleaded guilty as a corporation to one count of falsifying and concealing a material fact in connection with the exportation of aircraft parts to a Specially Designated National of Libya. The company also pleaded guilty to one count of exportation of aircraft parts to a "Specially Designated National" without prior authorization from OFAC. Under terms of the plea agreement, NewCal will be placed on a term of corporate probation for a period of two years and pay a fine of $200,000. Greenleaf faces a maximum sentence of five years in prison and a fine of $250,000.
On November 30, 2005, BIS entered an order under which Air Cargo International ("ACI"), of Newark, New Jersey, agreed to pay an $11,000 civil penalty to settle charges that it committed two violations of the EAR by aiding and abetting the attempted unlicensed export of two thermal imaging cameras to an entity in the UAE, and making false statements in connection with that attempt. In June 2004, ACI completed a required SED and signed the name of the exporter without obtaining necessary information from the exporter. ACI also stated on the SED that the cameras did not require an export license, when in fact they did.
On December 14, 2005, BIS denied the export privileges of Zhan Gao and four other related parties for a period of 10 years following the March 4, 2005 felony conviction of Gao for violations of the International Economic Emergency Powers Act and the Internal Revenue Code. Gao was convicted of exporting microprocessors to China without a license from the Department of Commerce. The microprocessors were controlled for national security purposes on the Commerce Control List and required a license prior to export. In connection with these violations, BIS also denied the export privileges of Technology Business Services, University Laboratories, Allways, Inc., and Donghua Xue.
Fernando Sero was sentenced in a New York federal court on December 19, 2005 to 40 months in federal prison for shipping defense articles, including weapons and weapons parts, to the Island of Mindanao in the Philippines in violation of the Arms Export Control Act. It was alleged that Sero exported certain defense articles, such as A15s, AK-47s, M-16s, G-3s and HK-94s, along with other weapons parts and ammunition, to the Philippines on numerous occasions over a three-year period. Sero purchased the weapons in the United States and then smuggled them to Mindanao in sealed containers by falsifying shipping documents.
U.S. bank regulators and supervisors announced on December 19, 2005, that ABN AMRO Bank N.V. of Amsterdam will pay an $80 million penalty in connection with findings that the bank failed to comply with U.S. anti-money laundering laws.
On December 20, 2005, LPPAI, Ltd., a Houston limited partnership doing business as PA, Inc., pleaded guilty and was sentenced in the U.S. District Court for the District of Columbia for the attempted unlicensed export of specialty alloy pipes to Iran in violation of the EAR and the ITR. Under a written plea agreement, LPPAI was assessed a criminal fine of $50,000 and corporate probation of three years with terms to prevent future violations of the U.S. export laws. LPPAI also entered into a separate administrative settlement agreement under which LPPAI agreed to pay a civil penalty of $50,000 and be subject to a suspended order denying LPPAI’s export privileges for five years. LPPAI also agreed not to contest the forfeiture of the specialty pipe seized in the matter.
On December 22, 2005, BIS announced that The CIT Group, Inc. ("CIT") agreed to settle charges of 17 violations of the EAR. Specifically, BIS charged CIT with exporting oscilloscopes to Israel Signal Generators to the Philippines without a required export license. In addition, BIS charged CIT with making false representations, statements, and certification to the U.S. Government by filing Shipper’s Export Declarations indicating that no license was required ("NLR") for the exports to the Philippines. Under the terms of the settlement agreement, CIT has agreed to pay $74,800.
On December 28, 2005, BIS announced that Becton, Dickinson and Company ("BD Biosciences") agreed to settle charges of 36 violations of the EAR related to illegal exports of EAR99 biomedical products, which had originally been exported from the United States to Singapore, to Indian organizations included on the BIS Entity List. Specifically, BD Biosciences voluntarily disclosed the exports of biomedical research products, labware for tissue culture and fluid handling, and reagent systems for life sciences research to various Indian organizations involved in nuclear weapons and atomic energy research. Under the terms of the settlement, BD Sciences has agreed to pay a settlement of $123,000, to perform an audit of its internal compliance program according to BIS guidelines, and to provide a copy of the final audit report to BIS.
The U.S. Department of State, Directorate of Defense Trade Controls ("DDTC") announced on December 30, 2005 that the United States has sanctioned nine companies, six in China, two in India, and one in Austria, for selling materials to Iran that can be used in the production of missiles and weapons of mass destruction. The six Chinese companies facing sanctions are China National Aero-Technology Import and Export Corporation ("CATIC"), China North Industries Corporation ("NORINCO"), Zibo Chemet Equipment Company, Hongdu Aviation Industry Group, Ounion International Economic and Technical Cooperative, and Limmt Metallurgy and Minerals Company. The State Department described NORINCO as a "serial offender." The other sanctioned companies were Indian chemical exporters Sabero Organics Gujarat Ltd., and Sandhya Organic Chemicals Pvt. Ltd., and Austrian arms manufacturer Steyr-Mannlicher GmbH. The sanctions, which last until December 2007, not only prohibit the companies from doing business with the U.S. government, but also prevent them from receiving export licenses required to buy certain U.S. technologies.
On January 11, 2006, the United States Attorney’s Office announced that GasTech Engineering Corp. ("GasTech") pleaded guilty to conspiracy to violate the Iranian Transactions Regulations. GasTech admitted that it conspired with its President, Parviz Khosrowyar, and other unindicted co-conspirators, to provide engineering and procurement services to the Government of Iran’s National Iranian Gas Company for the design of the Tabnak Gas Treating Plant in Iran. Pursuant to the Plea Agreement, as a special condition of the term of probation to be imposed by the court, GasTech has agreed to implement a corporate compliance program to be monitored by the Department of Commerce, and to not violate any export control laws or regulations going forward. Finally, GasTech has agreed to a forfeiture money judgment representing proceeds traceable to its role in the conspiracy and payment of a regulatory penalty, in addition to any fine imposed at sentencing.
On January 19, 2006, the United States Attorney’s Office announced that Ning Wen was sentenced to 60 months’ imprisonment for export control and money laundering violations. He was also ordered to pay a $50,000 fine and given two years’ supervised release. He has agreed to forfeit his interest in his home and $329,000 cash as well. In September, a jury convicted Ning Wen of nine counts related to his participation in a conspiracy to illegally export more than $300,000 in electronic components to the People’s Republic of China (PRC) from 1991 to 2004. The electronic components, primarily semi-conductor chips, had a wide variety of applications including military radar and communications applications, and as such, required the permission of the United States government to export to the PRC because of national security concerns over potential uses. Wen and his co-conspirators intentionally disregarded the licensing requirements and shipped the items to China, where they were distributed to entities and institutes including some that conduct military research and development. The jury also convicted Wen of laundering money for the purpose of promoting the illegal exports.
This article is presented for informational purposes only and is not intended to constitute legal advice.
