Department of Commerce Actions
On January 28, 2010, the Department of Commerce’s Bureau of Industry and Security (“BIS”) entered into an agreement with Robert E. Quinn (“Quinn”), of Lexington, Kentucky, to settle charges that Quinn violated the Export Administration Regulations (“EAR”) by providing false statements to an Office of Export Enforcement (“OEE”) special agent investigating alleged EAR violations by Quinn’s former employer, Clark Material Handling Company (“CMHC”). According to the settlement agreement, during 2003 Quinn coordinated unauthorized shipments of CMHC truck parts through the United Arab Emirates to Iran, though in December 2004 Quinn told the OEE agent investigating CMHC’s activities that he had no knowledge of the alleged violations. Under the settlement Quinn was assessed a civil penalty of $11,000, which was suspended for one year and will be waived provided he commits no further violation of the EAR or an associated regulation during the suspension period.
On February 4, 2010, officials from the Departments of Justice (“DOJ”), Commerce, and State, and from U.S. Immigration and Customs, announced the arrest of a Taiwanese national, Yi-Lan Chen (also known as Kevin Chen, “Chen”), for allegedly exporting commodities to support Iran’s missile program. According to the criminal complaint, Chen attempted and completed exports to Iran of a number of dual-use goods through freight forwarders in Taiwan and Hong Kong, thereby violating the U.S. Iran Embargo, and the International Emergency Economic Powers Act (“IEEPA”). Chen’s alleged customers include companies linked to Iran’s ballistic missile program, and to chemical research and development in the country. If convicted, Chen faces up to 20 years imprisonment and up to $1 million in fines.
On February 5, 2010, the UK-based Balli Group PLC and its subsidiary, Balli Aviation Ltd. (collectively “Balli”), accepted a $15 million civil fine from BIS and the Treasury Department’s Office of Foreign Assets Control (“OFAC”) to settle charges that Balli conspired to export three U.S.-origin Boeing 747 airplanes to Iran without obtaining the necessary authorization from BIS or OFAC. On the same day, Balli also pleaded guilty to a two-count criminal charge in connection with its activities, under which it will pay a $2 million fine to DOJ. According to the various agency allegations, for three years beginning around October 2005, Balli facilitated the purchase and lease of the aforementioned aircraft for use by Iran’s Mahan Airlines (“Mahan”) for flights into and out of the country, and attempted to assist Mahan in obtaining three more U.S. planes, again without the necessary authorization. Exacerbating the gravity of its offenses, from March through August 2008, Balli was subject to a BIS Temporary Denial Order prohibiting the company from conducting or participating in any transaction involving an item controlled under the EAR. If Balli engages in any other violations or fails to pay its civil penalty, which constitutes one of the largest fines ever levied by BIS for an export violation, Balli will be prohibited for a period of five years from participating in the export from the United States of any item subject to the EAR.
On February 12, 2010, Sirchie Acquisition Company, LLC (“Sirchie”), of Youngsville, North Carolina, entered into an administrative agreement with BIS, and a three-year deferred prosecution agreement (“DPA”) with DOJ, to settle charges that Sirchie Fingerprint Laboratories, Inc. (“SFPL”), a company whose assets were acquired by Sirchie in 2008, aided and abetted the evasion of a BIS Temporary Denial Order (“TDO”). The TDO had been issued against SFPL and its then-president and chief executive officer (the “denied person”) in December 2005. According to information obtained by BIS, in 2006 and 2007 the denied person, aided by SFPL, participated in at least 10 export transactions while the TDO was pending, each action a violation of the EAR. Under the terms of the settlement agreement, Sirchie will pay a $250,000 penalty for each violation with which it was charged, a one-to-one application of fines for EAR violations that has never before been imposed by BIS. Pursuant to the DPA, Sirchie must pay $10.1 million in criminal penalties, including the expenditure of $1.5 million over three years to implement a new export compliance program.
On February 18, 2010, BIS issued an order denying the export privileges of Afshin Rezaei (“Rezaei”), of Atlanta, Georgia, until May 2018. Rezaei pleaded guilty in May 2008 to violating the IEEPA by knowingly and willfully exporting laptop computers from the United States to Iran without the necessary OFAC authorization.
On February 26, 2010, BIS announced the denial of the export privileges of Mohamad M. Elkateb (“Elkateb”), of Canyon Country, California, for a period of one year. The order was issued pursuant to an administrative agreement between BIS and Elkateb to settle charges that Elkateb conspired to violate the EAR by facilitating the export of U.S.-origin laboratory equipment to Syria without the necessary BIS authorization.
On March 2, 2010, BIS entered into settlement agreements with Aviation Services International, B.V., also known as Delta Logistics, B.V. (collectively “ASI”), and its principal owners Robert Kraaipoel and Niels Kraaipoel (collectively “the Kraaipoels”), stemming from charges that ASI and the Kraaipoels conspired to export U.S.-origin aircraft parts, electronic components, and polymide film to Iran through the Netherlands, Cyprus, and the United Arab Emirates, without the necessary OFAC authorizations. Under the settlement agreements, for a period of seven years ASI and each of the Kraaipoels may not conduct or participate in any transaction involving an item controlled under the EAR. A civil penalty of $250,000 has also been assessed against ASI and each of the Kraaipoels (the “denied persons”), which penalty will be waived provided none of the denied persons commits a further violation of the EAR or an associated regulation for the next three years. ASI’s settlement with BIS was factored by OFAC in a related settlement agreement, which is discussed below under the “Department of the Treasury Actions” heading.
On March 9, 2010, BIS obtained authorization for renewal of a TDO issued against Iran’s Mahan Airways (“Mahan”) for 180 days. The TDO, which also named Balli Group PLC (see above) and several others, was originally issued March 17, 2008, and has been renewed against Mahan ever since (though the others were released in September 2009). According to the renewal order the action was appropriate since, among other things, Mahan continues to operate three U.S.-origin Boeing aircraft sold and transported to Mahan in violation of BIS and OFAC regulations.
On March 18, 2010, an agreement was entered between BIS and Buffalo, New York-based G&W International Forwarders (“G&W”) to settle charges that G&W violated the EAR by aiding and abetting the export of a Stack Sizer Screening Machine (used for filtering a variety of mineral particles from other media) to an entity in India without the necessary license. Under the agreement, G&W will pay a fine of $20,000 (or be subject to a one-year TDO), and must complete an audit of its regulatory compliance program within the next year.
On March 26, 2010, BIS and other agencies announced the extradition and indictment of Hok Shek Chan (also known as John Chan, “Chan”), of Hong Kong, on charges that Chan conspired with two Malaysian nationals, Wong Fook Loy (also known as Aaron Wong) and Ngo Tek Chai (also known as T.C. Ngo), and others, to violate the Arms Export Control Act. Specifically, Chan and his co-conspirators are charged with exporting from the United States 10 tachometers used in C-130 military flight simulators, without the proper license or State Department authorization. If found guilty, Chan faces up to 10 years in prison, an additional three years of supervised release, and a fine of up to $1 million.
Department of the Treasury Actions
On March 8, 2010, OFAC announced that Industrial Maritime Carriers Worldwide, L.L.C. (“IMCW”) remitted $72,072 to settle allegations that IMCW violated the Sudanese Sanctions Regulations in January and February 2007, by transporting and arranging for the unloading of transformers, locomotives, and spare parts to Sudan.
Also on March 8, 2010, OFAC announced a $525 settlement with an individual accused of purchasing Cuban cigars over the Internet from on or about December 2004 through February 2005.
On March 9, 2010, the Dutch aviation services company ASI settled charges by OFAC that ASI violated the Iranian Transactions Regulations and the IEEPA by participating in the unlicensed export of aircraft parts and other goods to Iran from October 2005 through October 2007. As we reported previously, in September 2009, ASI and two of its principals pleaded guilty to federal conspiracy charges arising from those alleged activities, pursuant to which ASI was assessed a $100,000 criminal penalty. OFAC fined ASI $750,000 under its settlement agreement, but deemed the fine satisfied by ASI’s acceptance of the criminal penalty and the seven-year TDO imposed by BIS (discussed above).
On March 19, 2010, as part of a comprehensive settlement with several agencies (including FCPA aspects discussed under the “FCPA Enforcement” heading below), Delaware-based Innospec Inc. (“Innospec”) agreed to pay $2.2 million to settle OFAC’s allegations that Innospec violated the Cuban Assets Control Regulations, by selling oil-soluble fuel additives to state-owned power plants in Cuba from 2001 through 2004 through a subsidiary Innospec purchased, but later sold. Innospec voluntarily self-disclosed its actions to OFAC, and received a mitigated fine for cooperating with the agency’s investigation.
On January 11, 2010, the Securities and Exchange Commission (“SEC”) settled charges against NATCO Group Inc. (“NATCO”), a provider of oil and gas production equipment, that NATCO’s wholly owned subsidiary TEST Automation & Controls, Inc. (“TEST”) violated the Exchange Act sections of the FCPA, requiring public companies to keep accurate records of their payments, and to adopt internal accounting controls toward this purpose. The SEC’s complaint specifically charged that TEST employees in Kazakhstan paid extorted fines to obtain work visas, which fines were then reimbursed to the employees and recorded inaccurately as “bonus payments” and “visa fines” in NATCO’s consolidated books and records. While neither admitting nor denying the allegations, NATCO agreed to pay a $65,000 civil penalty, and consented to an administrative cease-and-desist order prohibiting NATCO from committing or causing any future violation of the FCPA’s Exchange Act provisions.
On January 20, 2010, the Associated Press reported that Juthamas Siriwan (“Siriwan”), the former governor of the Tourism Authority of Thailand, was indicted along with her daughter, Jittisopa Siriwan, in the U.S. District Court for the Southern District of California. Siriwan was named in the September 11, 2009 FCPA action against Los Angeles film executives Gerald and Patricia Green (the “Greens”), whose conviction we previously reported. Siriwan and Jittisopa Siriwan are charged with one count of conspiracy, seven counts of transporting funds for the purpose of bribery, and one count of aiding and abetting, for their alleged role in the Greens’ securing of contracts to manage and operate Thailand’s yearly “Bangkok International Film Festival.”
On February 10, 2010, John W. Warwick (“Warwick”), of Virginia Beach, Virginia, pleaded guilty to a one-count indictment for his role in a six-year conspiracy to bribe Panamanian officials for the award of contracts to maintain lighthouses and buoys along Panama’s waterways. Warwick, his co-conspirator Charles Jumet, whose November 13, 1999, conviction we previously reported, and others made payments from 1997 through 2003 totaling more than $200,000 to three former Panamanian officials, to secure contracts for Ports Engineering Consultants Corporation, a company incorporated under the laws of Panama and created solely for the purpose of obtaining the contracts. As part of his plea agreement Warwick forfeited the $331,000 he made in the scheme. He will be sentenced in May, and faces up to five years in prison and a fine of up to $660,000.
On February 19, 2010, DOJ announced that Jean Fourcand (“Fourcand”), of Miami, Florida, pleaded guilty to his role in a money laundering scheme designed to remit bribes to Robert Antoine (“Antoine”), a Haitian telecommunications official, on behalf of U.S. telecommunications companies. We previously reported that Fourcand’s co-conspirators were charged in December 2009 with violating the FCPA, along with two Haitian officials charged with money laundering. Fourcand faces up to 10 years in prison and a fine of the greater of $250,000 or twice the value of the funds he helped to transfer. As part of his plea agreement, Fourcand forfeited $18,500, the amount of a check he received during the conspiracy and used to engage in a real estate transaction for Antoine’s benefit. Antoine himself pleaded guilty just over a month after Fourcand, and agreed to forfeit nearly $1.6 million he received through the scheme. He faces up to 20 years in prison, and a fine of up to twice the forfeited amount.
On March 1, 2010, the British defense contractor BAE Systems plc (“BAES”) pleaded guilty to providing false statements about its implementation of policies and procedures to ensure BAES complied with the anti-bribery provisions of the FCPA, and with the Anti-bribery Convention of the Organisation for Economic Cooperation and Development. According to court documents, from 2000 to 2002, BAES instead willfully failed to adopt the kinds of mechanisms necessary to ensure compliance with anti-bribery laws, and with U.S. export controls, and as a result amassed more than $200 million from questionable business transactions. With its guilty plea, BAES will pay a $400 million criminal fine, one of the largest ever assessed by DOJ in an FCPA enforcement action, and must obtain and retain for three years an independent monitor, who will ensure the company does adopt a comprehensive and effective regulatory compliance program.
On March 16, 2010, Philadelphia-based Nexus Technologies Inc. (“Nexus”) and three of its employees, president and owner Nam Nguyen, and his siblings Kim Nguyen and An Nguyen (collectively “the Nguyens”), pleaded guilty to conspiring to bribe Vietnamese officials to obtain omnibus contracts to supply that country’s government with a variety of equipment and technology, from underwater mapping devices to satellite communication parts. In connection with their guilty plea, Nexus and the Nguyens admitted that from 1999 to 2008, they paid bribes totaling more than $250,000, which were falsely recorded as “commissions” in the Nexus records. Nexus has agreed to cease operations, and faces a fine of up to $27 million. Nam and An Nguyen face up to 35 years in prison each, and Kim Nguyen may be sentenced to up to 30 years.
On March 18, 2010, the SEC charged Innospec, whose OFAC violations were described above, with violating by FCPA by engaging in widespread bribery of officials in Iraq and Indonesia in order to obtain business, and by paying kickbacks to Iraqi officials to obtain contracts under the United Nations Oil for Food Program. According to the SEC’s complaint, between 2000 and 2007, Innospec paid more than $9.2 million in illegal bribes, in order to obtain approximately $176 million in government contracts. While neither admitting nor denying the charges against it, Innospec agreed to a $40.2 million settlement, $11.2 million of which will be remitted to SEC, $14.1 million to DOJ, $2.2 million to OFAC, and $12.7 million to the United Kingdom’s Serious Fraud Office. The company’s compliance with the FCPA will also be independently monitored and reported for the next three years.