Earlier this week, Taiwanese citizen Kunlin Hsieh pleaded guilty to violations of the International Emergency Economic Powers Act (“IEEPA”) for shipping sophisticated electronics parts to Iran without the requisite license from the Office of Foreign Assets Control (“OFAC”). He was arrested in August 2014 along with an alleged co-conspirator, Latvian citizen and Taiwanese resident Agris Indricevs, who interestingly did not join in the plea. While the evidence against Hsieh appears airtight, which would explain his guilty plea, the evidence presented against Indricevs call into question whether a criminal IEEPA charge is warranted.
According to the Indictment, Hsieh and Indricevs
“along with R.S., M.F., and S.Y. obtained or attempted to obtain parts from United States companies without notifying the United States companies that these parts were being exported to Iran or getting a license to export these parts to Iran”
Based on press reporting and the indictment, R.S., identified elsewhere as Ryan Suwanna, was a former employee of Junbon Enterprises, Hsieh’s Taiwanese company. His case is currently under seal and he is mentioned in the indictment as cooperating with the investigation beginning in January 2014. M.F. and S.Y. correspond to Mehrdad Foomanie and Susan Yip. Foomanie is the owner of the Iranian companies that were the recipients of the products supplied by Hsieh and Yip. Yip was convicted of Iran-related IEEPA violations in October 2012.
While Hsieh is alleged to have begun the conspiracy in October 2007, Indricevs was not employed at Junbon until July 2013 according to his LinkedIn page. This was months after an undercover federal agent was first in contact with Suwanna. The indictment states that Suwanna told an agent, identified as A.G., that Indricevs would be replacing him and “is getting up to speed with regards to all your projects,” presumably referring to those in Iran. On July 28, just weeks after starting his new position, Suwanna spoke on the telephone to the agent and discussed a “fake invoice” with a false end-user certification, for circuit boards containing a laminate produced by a U.S. company, while indicating that Indricevs was “right next to me” during the conversation.
The indictment also alleges that Indricevs violated IEEPA by taking an order on behalf of Hsieh for “laminates” produced by “N. Corp” and “T. Corp.” In email correspondence with an undercover agent, Indricevs stated that “we are located in Taiwan which allows us to get possibly better deals on laminates from suppliers and also delivery to Iran should be with no complications as opposed to delivery from U.S.” He later also agreed to “mark the boxes to customer’s requirements,” including not using documents “that say Iran or ‘IR’.”
The first major problem comes in the indictment. Indricevs is being charged with a violation of the Iranian Transactions and Sanctions Regulations (“ITSR”), 31 C.F.R. Part 560. The issue is that the section of the ITSR cited by DOJ is 560.204, which prohibits
“exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, technology, or services to Iran or the Government of Iran.”
Indricevs is certainly not a U.S. person and according to a Motion to Dismiss filed by defense counsel, the “laminates” in question were manufactured in and obtained from companies in South Korea and France. Though the companies themselves were subsidiaries of U.S. companies, this does not mean that the products themselves should necessarily be considered U.S.-origin. Even if they were, a far more appropriate violation would have 560.205, which prohibits the reexportaiton of U.S.-origin goods by non-U.S. persons to Iran. In fact, except for the shipment that occurred in July 2013, its unclear that Indricevs participated in any shipments involving obviously U.S. origin goods.
The bigger problem is the question of whether Indricevs actually knew he was violating any laws. Determining whether a criminal violation of IEEPA has occurred requires proving “willfulness” on the part of the accused. Under IEEPA, a criminal penalty is warranted for
“A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of, an unlawful act described in subsection (a) of this section.”
The 9th Circuit has ruled that “willfulness” in the context of IEEPA
“requires the government to prove beyond a reasonable doubt that the defendant acted with knowledge “that his conduct was unlawful… but not that the defendant was aware of a specific licensing requirement.” See U.S. v. Mousavi.
Indricevs is a Latvian citizen who, until his arrest, was living and working in Taiwan, only a year removed from an MBA at a Taiwanese university. It seems dubious that he was aware that he, as a non-U.S. resident dealing in questionably U.S. origin goods, has sufficient mens rea to satisfy the requisite standard of willfulness. This may explain why his alleged co-conspirator Hsieh, who was Junbon’s Sales Manager, pleaded guilty, while Indricevs appears to be destined for trial. DOJ might want to reconsider whether this prosecution is worth their time.
Maybe they should also start teaching U.S. export controls and economic sanctions at Taiwanese universities.