Four Companies and Five Individuals Indicted for Illegally Exporting Technology to Iran
Earlier this month, the U.S. Attorney’s Office for the Southern District of Texas unsealed a 24-count indictment charging nine defendants with violating the International Economic Emergency Powers Act by engaging in illegal exports to Iran. The defendants, a mix of companies and individuals from Texas, California, Taiwan, Turkey and Iran, allegedly formed a procurement network that operated in the United States to funnel goods to Iran. The defendants are accused of circumventing U.S. sanctions laws to export to Iran sensitive U.S. technologies useful to Iran’s military programs, including uninterruptible power supplies and high-technology microelectronics that can be used in surface-to-air and cruise missiles. The network allegedly shipped at least $24 million in commodities to Iran between July 2010 and April 2015.
The nine defendants are: Texas-based Smart Power Systems Inc. (SPS) and Iran-based sister company Faratel, along with co-owners Bahram Mechanic of Houston and Khosrow Afghahi of Los Angeles, and SPS vice president Tooraj Faridi; trading company Hosoda Taiwan Limited Corporation and its senior manager Arthur Shyu of Taiwan; and shipping company Golsad Istanbul Trading Ltd. and its employee Matin Sadeghi of Turkey.
The indictment alleges that Faratel regularly sent lists of commodities to be procured to Mechanic, Faridi and Afghani. Mechanic allegedly sent the orders to Shyu, who purchased the commodities through Hosoda and shipped them to Turkey. In Turkey, according to allegations in the indictment, Sadeghi acted as a false buyer on behalf of Golsad and shipped the commodities to Faratel.
Mechanic and Faridi appeared this month before a Magistrate Judge in the Southern District of Texas, while Afghahi will appear before a court in the Central District of California. There are outstanding warrants for the arrest of Shyu and Sadeghi who are thought to be outside of the United States. If convicted, individual defendants face a possible 20-year prison sentence, and the corporate defendants could be fined as much as $1 million per count.
The Department of Commerce is designating seven individuals and entities on the Bureau of Industry and Security (BIS) Entity List in connection with these charges for facilitating the defendants’ illegal export of controlled items. The BIS Entity List identifies non-U.S. persons that are prohibited from receiving items subject to the Export Administration Regulations (EAR) unless the exporter obtains a license from BIS, which reviews such requests with a presumption of denial.
Former NYPD and CBP Officers Sentenced to Three Years for AECA Violations
In late March 2015, the U.S. District Court for the Eastern District of New York sentenced Rex Maralit, of New Jersey, and Wilfredo Maralit, of California, to three years in prison. The brothers pleaded guilty to violating the Arms Export Control Act (AECA) in June 2014 in connection with unlicensed exports to the Philippines of various military-type firearms, magazines and accessories. Rex, a former New York City police officer, and Wilfredo, a Customs and Border Protection officer, used their official status to obtain and export the weapons without the necessary U.S. State Department authorization.
New Jersey Owner of Defense Contracting Businesses Pleads Guilty to AECA Violation
Early this month, Hannah Robert, of New Jersey, pleaded guilty in the U.S. District Court for the District of New Jersey to violations of the AECA arising from a conspiracy to illegally export military blueprints to India. Robert owned two New Jersey-based companies that contracted with the U.S. Department of Defense (DoD) to produce defense hardware and spare parts. Between June 2010 and December 2012, she transferred export-controlled technical data to a colleague in India without obtaining the necessary licenses from the U.S. State Department in order to submit bids to potential foreign customers. Exported technical data included drawings of parts used in torpedo systems on nuclear submarines, F-15 fighter planes and attack helicopters. Robert used her position as volunteer web administrator of a church to transfer thousands of drawings by uploading the drawings to the password-protected church site and providing her colleague in India with the username and password.
In addition to the unlicensed technical data exports, Robert’s company produced faulty wing pins for the F-15 fighter and issued false inspection reports and certifications that failed to accurately state that the pins were manufactured in India. As a result of the defect, DoD had to ground 47 F-15s for inspection and repair at a cost of over $150,000. Robert must pay more than $180,000 to DoD as part of the plea agreement. She faces a possible five-year prison sentence.
Egyptian Company and Two Managers Plead Guilty to AECA Violations for Attempted Shipment of US Munitions Samples to Egypt
AMA United Group and AMA United partners Amged Kamel Yonan Tawdraus and Malak Neseem Swares Boulos, all of Egypt, pleaded guilty in the U.S. District Court for the Eastern District of New York to violations of the AECA arising from the attempted unlicensed export of samples of items included on the United States Munitions List (USML). Tawdraus and Boulos sought to obtain a land mine, bomblet bodies, and trumpet liners on behalf of an AMA United customer in Cairo. To this end, they traveled from Egypt to New York in July 2011 to inspect the items and attempted to ship samples to Egypt without obtaining required licenses from the U.S. Department of State. The partners face possible five-year prison sentences, fines and the denial of export privileges.
Turkish National Agrees with BIS to 20-Year Denial of Export Privileges for Aiding and Abetting a Violation of a Temporary Denial Order against His Company
In late March, BIS and Yavuz Cizmeci, of Turkey, agreed to a 20-year denial of Cizmeci’s export privileges. Cizmeci was President and CEO of Ankair, a charter airline in Turkey. BIS issued a temporary denial order against Ankair in June 2008 in order to prevent Ankair from reexporting a Boeing 747 to Iran Air. A BIS investigation revealed that in approximately July 2008, Cizmeci facilitated the reexport to Iran of the 747 by submitting false documentation to Turkish authorities indicating that the aircraft was destined for Pakistan instead of Iran.
Georgia Company Agrees to $23K Settlement with OFAC for Apparent Violations of the Foreign Narcotics Kingpin Sanctions Regulations
First Data Resources, LLC of Atlanta, Georgia, agreed in mid-April to a $23,336 settlement with OFAC for alleged violations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR). According to OFAC, between February and June 2011, First Data provided data processing services to a Specially Designated Narcotics Trafficker (SDNT). First Data employed sanctions interdiction software, which flagged the customer as a possible SDNT, but deficiencies in the software and in First Data’s compliance processes prevented its effectiveness in preventing the transactions.
The settlement, a reduction from the base penalty of $69,144, reflects, among other factors, OFAC’s determination that First Data voluntarily disclosed the alleged violations, took remedial action and cooperated with OFAC in the investigation.
Find out more by reading OFAC’s enforcement notice.