On October 5, 2017, the Second Circuit upheld the over 8 years sentence of Mozaffar Khazaee who pleaded guilty in February 2015 to violating the Arms Export Control Act, 22 U.S.C. § 2778 (the “AECA”) by attempting to transfer to Iran proprietary, trade secret and export controlled material relating to the U.S. Air Force’s F-35 Joint Strike Fighter (JSF) Program. Mr. Khazaee allegedly stole the materials from U.S. defense contractors where he had formerly worked, and many of the documents were prominently labeled as “Export-Controlled” and stamped with “ITAR-controlled” warnings.
In November 2015, we published a blog post noting the surprise of many that the U.S. Government originally charged and indicted Mr. Khazaee solely with the federal offense of Interstate Transportation of Stolen Property (“ITSP”) rather than a violation of the AECA and the International Traffic in Arms Regulations (“ITAR”). Mr. Khazaee pleaded guilty on February 25, 2015 via a “Substitute Information” to one count of the unlawful export of technical data from the United States in violation of the AECA. On October 23, 2015, Mr. Khazaee was sentenced to 97 months in prison and ordered to pay $50,000 in fines for violating the AECA.
On appeal, Mr. Khazaee argued that he mistakenly thought he was pleading guilty to ITSP rather than to a violation of the AECA, and claimed he did not admit to willfully violating the AECA. Mr. Khazaee also alleged the U.S. District Court for the District of Connecticut improperly involved itself in the plea negotiations when the court (i) asked Mr. Khazaee directed questions designed to elicit admissions about his conduct, including willfulness, that went beyond those necessary to satisfy the court that Mr. Khazaee understood the nature of the charges and how his conduct rendered him guilty, and (ii) twice directed defense counsel to consult with Mr. Khazaee during the plea allocution.
Sitting for the Second Circuit, U.S. Circuit Judges John M. Walker and Raymond J. Lohier and U.S. District Judge John F. Keenan determined there was no evidence the District Court improperly participated in the plea discussions. The three-judge panel likewise rejected Mr. Khazaee’s claims that he thought he was pleading guilty to ITSP and that he did not admit to “willfully violating” the AECA. According to the Summary Order and Judgment, “Khazaee admitted that he exported documents containing ‘information [that] was illegal to disclose,’ . . . and that, based on his training on export restrictions, he understood that it was illegal to export the information to Iran.” The Second Circuit found this admission satisfied the AECA’s willfulness element and affirmed the lower court’s judgment.
The Khazaee prosecution highlights the challenges and difficulties confronted by law enforcement in light of export control reform and the deregulation of aspects of international commercial arms sales instituted initially in 2013. The prosecutors’ initial decision to charge Mr. Khazaee with the less serious ITSP charge rather than under the AECA reflect growing challenges and difficulties faced by federal investigators and prosecutors as they confront uncertainty and ambiguity surrounding whether the AECA/ITAR controls the export of military technical information relating to weapons systems. The determination whether such military technology is controlled for export by the AECA/ITAR, at least with regard to certain items which are not enumerated on the U.S. Munitions List (“USML”) and which are only controlled for export if “specially designed,” now falls exclusively to an engineer or weapons system designer and her subjective intent and contemporaneous documentation that the part, component, or software “was or is being developed with knowledge that it is or would be for use in or with both defense articles enumerated on the USML and also commodities not on the USML.” See ITAR Section 120.41(b)(4).
Placing the determination whether certain military technology should be controlled for export to foreign nations under the AECA/ITAR exclusively into the hands of private commercial actors creates great ambiguities and uncertainties for investigators seeking to answer promptly and accurately whether an individual unlawfully and willfully sought to export and sell F-35 technology to Iran, China, or another foreign nation. With regard to military technologies and technologies of value to the intelligence community that are controlled for export only on the basis of being “specially designed,” investigators and prosecutors can no longer rely upon the assessment of State Department and Defense Department experts for definitive licensing determinations. Although apparently paradoxical at first glance, federal investigators and prosecutors increasingly may steer clear of charges under the AECA/ITAR and instead rely upon less serious but more generally applicable federal offenses such as the charge of ITSP and wire fraud to protect national security interests in connection with their efforts to support and protect the superiority of United States military technology.