Department of Commerce Actions
On September 18, 2009, Aaron Henderson of Coralville, Iowa, doing business as Valhalla Tactical Supply, pleaded guilty to an indictment charging him with exporting EOTech sighting devices to Taiwan and Afghanistan without obtaining the proper export license from the Bureau of Industry and Security (“BIS”), in violation of the Export Administration Regulations (“EAR”). Henderson agreed to forfeit two firearms that were seized from his residence in January 2008. Henderson faced 20 years imprisonment and a $1 million fine, but the U.S. District Court for the Southern District of Iowa sentenced Henderson to time served, to be followed by two years of supervised release.
On September 24, 2009, Aviation Services International, B.V. (“ASI”), a Dutch aviation services company, its director and sales manager pleaded guilty in the District of Columbia to federal charges related to a conspiracy to illegally export aircraft components and other items from the United States to entities in Iran via the Netherlands, the United Arab Emirates and Cyprus. The indictment charged each with conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”) and the Iranian Transactions Regulations by exporting aircraft components and other goods to Iran without obtaining licenses from the Treasury Department’s Office of Foreign Assets Control (“OFAC”). From about October 2005 to about October 2007, the defendants negotiated purchases of materials on behalf of Iranian customers for U.S.-origin goods that were restricted from being transshipped into Iran. The defendants provided false end-user certificates to certain U.S. companies to conceal that customers in Iran would be the true recipients of the goods. The two individual defendants each face a potential sentence of five years in prison and a maximum fine of $250,000, or twice the pecuniary gain or loss. ASI agreed to pay a $100,000 fine and serve corporate probation for five years.
On September 25, 2009, GE Homeland Protection, Inc. (“GE-HP”) entered into a settlement agreement with the U.S. government for $22,000 to settle allegations that GE-HP violated the EAR four times in 2004 by exporting spare parts for explosive detection systems from the United States to South Korea, and from its distribution center in France to South Africa, without first obtaining the proper licenses from BIS. These unlicensed exports took place after GE-HP submitted a voluntary self-disclosure to the Department of Commerce that disclosed violations of the EAR involving the same items at issue in the settlement agreement.
On September 25, 2009, Electronic Cable Specialists, Inc. (“ECS”) entered into a settlement agreement with the U.S. government for $27,500 to settle allegations that ECS committed six violations of the EAR in 2005 and 2006 involving the unlicensed export of accelerometers classified under ECCN 7A101 to Malaysia and Indonesia. In addition, ECS failed to file the required Shipper’s Export Declaration (“SED”) with the U.S. government via the Automated Export System.
On September 29, 2009, Griffin & Howe, Inc. entered into a settlement agreement with the U.S. government for $67,000 to settle allegations that Griffin & Howe committed six violations of the EAR in 2005 and 2006 involving the unlicensed export of optical sighting devices classified under ECCN 0A987 to Zambia, and shotguns classified under ECCN 0A984 to Canada and Chile.
On October 1, 2009, Novamet Specialty Products Corporation agreed to pay a $700,000 civil penalty to settle allegations that it exported nickel powders without a license in violation of the EAR. BIS alleged that on 28 occasions between April 2003 and January 2008, Novamet exported nickel powders without the required export licenses to the People’s Republic of China, Singapore, Taiwan, Thailand, India, Israel, the Dominican Republic, and Mexico. Under the EAR, nickel powders are controlled for nuclear non-proliferation reasons. Novamet also agreed to complete an internal export compliance audit and submit the results of that audit to BIS.
On October 1, 2009, three Chinese nationals, Alex Wu, Annie Wei, and Eric Lee, and two corporations, Chitron Electronic, Inc. and Shenzhen Chitron Electronics Co. Ltd., were charged in a 38-count indictment in federal court for conspiring over a 10-year period to illegally export defense articles, designated on the United States Munitions List (“USML”), and commerce-controlled electronics components to end-users in China, including several Chinese military entities. The defendants were also charged with illegally exporting electronics components to the Shanghai Academy of Spaceflight Technology, an organization that is designated on the Department of Commerce’s Entity List. Each individual defendant faces up to 20 years imprisonment, to be followed by three years of supervised release, and a $1 million fine. The two corporate defendants face up to a $1 million fine for each count in the indictment charging them with illegal export of defense articles, and a $500,000 fine for each remaining count.
On October 15, 2009, Utech Products, Inc. agreed to pay a $125,000 civil penalty to settle allegations that it committed six violations of the EAR from 2004 through 2006 involving the unlicensed export of oscilloscopes controlled under 3A292, from the United States to Pakistan without the proper BIS licenses. The oscilloscopes were controlled for nuclear non-proliferation reasons and were valued at approximately $91,000.
On October 29, 2009, FSI International, Inc. agreed to pay a $450,000 civil penalty to settle allegations that it committed 66 violations of the EAR from 2003 through 2006 involving the unlicensed export of fluoropolymer-coated valves and pumps controlled under 2B350, from the United States to China, Israel, Malaysia, Taiwan, and Singapore without the proper BIS licenses.
On November 5, 2009, Laura Wang-Woodford, a U.S. citizen who served as a director of Monarch Aviation Pte, Ltd. (“Monarch”), a Singapore-based company that imported and exported military and commercial aircraft components, was sentenced in federal court in Brooklyn, New York, to 46 months’ incarceration for conspiring to export controlled aircraft components to Iran. The court ordered Wang-Woodford to forfeit $500,000 to the United States Treasury Department. According to the indictment, between January 1998 and December 2007, Wang-Woodford exported controlled U.S. aircraft parts from the United States to Monarch and Jungda International Pte Ltd. (“Jungda”) in Singapore and Malaysia, and then re-exported those items to companies in Iran without obtaining the required U.S. government licenses. As part of the charged conspiracy, the defendants falsely listed Monarch and Jungda as the ultimate recipients of the parts on export documents filed with the U.S. government.
On December 9, 2009, Tara Technologies Corporation agreed to pay a $27,000 civil penalty to settle allegations that it committed three violations of the EAR in March 2006 involving the unlicensed export of edge-welded metal bellows controlled under 3B001.e, from the United States to China.
On December 9, 2009, Keithlay Instruments International Corp. (“KIIC”) of India agreed to pay a $125,000 civil penalty to settle allegations that it committed three violations of the EAR in 2003. KIIC worked in concert with another Indian company to enable the Vikram Sarabhai Space Center (“VSSC”) to obtain items manufactured by KIIC’s U.S. parent company and subject to the EAR, including electronic instruments classified under ECCN 3A992 and designated as EAR99. VSSC is an Indian Space Research Organization designated in the Entity List in Supplement No. 4 of the EAR. In order to evade the requirements of the EAR, KIIC established a transaction structure whereby VSSC ordered the items at issue through Rajaram Engineering, Inc. of Bangalore, India, rather than directly from KIIC, and made it appear as if Rajaram Engineering was the purchaser and end-user of the items.
On December 22, 2009, Thralow, Inc. agreed to pay a $110,000 civil penalty to settle allegations that it committed 445 violations of the EAR between 2003 and 2006 involving the unlicensed export of rifle scopes controlled under 0A987 from the United States to more than 30 countries around the world.
On December 29, 2009, Hailin Lin and Ning Wen each agreed to pay a $1.36 million civil penalty to settle allegations that they each committed 124 violations of the EAR between 1992 and 2004, when they conspired with others to export electronic components controlled under ECCNs 3A001 and 3A002 from the United States to China without the proper licenses. Lin, Wen, and the conspirators conducted the transactions under the auspices of Wen Enterprises, a company that Lin operated out of her own home.
Department of Treasury Actions
In September 2009, Barwil Agencies NA, Inc. (“Barwil”), of Pasadena, Texas, agreed to remit $84,000 to settle allegations of violations of the Iranian Transactions Regulations occurring on or about January 2007. OFAC alleged that Barwil engaged in transactions related to services of Iranian origin and facilitated transactions by non-U.S. persons that involved the payment of port expenses for a vessel’s port call in the Iranian port of Bandar Mahshahr, without an OFAC license. Barwil did not voluntarily disclose the alleged violations to OFAC but demonstrated cooperation during OFAC’s review of the matter, and as a remedial measure made revisions to its compliance program.
In September 2009, Gold & Silver Reserve, Inc. (“GSR”), of Melbourne, Florida, was assessed $2.95 million for its violations of the Iranian Transactions Regulations occurring between September 2003 and December 2006. GSR exported financial services, without a license, by activating 56,739 “e-currency” accounts through its website for persons located in Iran. GSR did not voluntarily disclose the violations to OFAC.
On December 16, Credit Suisse, Switzerland’s second-largest bank, agreed to pay $536 million to settle allegations that it helped its clients in Iran, Libya, and Sudan avoid sanctions by concealing their identities when they did business with entities in the United States. From 2002 to 2006, Credit Suisse processed more than $700 million worth of payments through the United States for banks that are subject to OFAC sanctions. Credit Suisse employed elaborate procedures to ensure that the involvement of sanctioned parties was not apparent to the U.S. banks involved in the transactions, including the use of code names to disguise the identities of certain sanctioned entities.
On December 22, 2009, OFAC announced a $217 million settlement with Lloyds TSB Bank, plc (“Lloyds”) concerning Lloyds’ intentional manipulation and deletion of information about U.S.-sanctioned parties in wire transfer instructions routed through third-party banks located in the United States. Lloyds had previously entered into deferred prosecution agreements with the Department of Justice (“DOJ”) and with the New York County District Attorney’s office for similar conduct. From June 2003 through August 2006, Lloyds routed at least 4,281 electronic-funds transfers totaling nearly $37 million through third-party banks located in the United States in apparent violation of the IEEPA and OFAC regulations related to Iran, Sudan, and Libya. As part of its settlement, Lloyds will conduct annual reviews of its polices, procedures, and a sampling of U.S. currency payments to determine whether any of those payments subject to U.S. regulations are being illegally processed.
On September 11, 2009, Gerald and Patricia Green, Los Angeles-area film executives, were found guilty in U.S. District Court for the Central District of California of conspiracy to violate the FCPA and money-laundering laws of the United States, as well as of substantive violations of the FCPA and money-laundering laws. The Greens were charged with paying kickbacks to the former governor of the Tourism Authority of Thailand (“TAT”) in exchange for receiving contracts to manage and operate Thailand’s yearly “Bangkok International Film Festival,” in addition to contracts to provide an elite tourism “privilege card” marketed to wealthy foreigners. Specifically, according to the superseding indictment, the Greens paid approximately $1.8 million in bribes to the former governor through numerous bank accounts in Singapore, the UK, and the Isle of Jersey in the name of the former governor’s daughter and a friend of the former governor. The contracts received by the Greens resulted in more than $13.5 million in revenue to businesses they owned. In its December 14, 2009 pre-sentence report, the DOJ requested life in prison for Mr. Green.
On September 30, 2009, AGCO Corporation (“AGCO”), a U.S. agricultural equipment-maker based in Duluth, Georgia, agreed to pay approximately $20 million in combined fines and penalties to resolve charges related to kickbacks its European subsidiaries, including AGCO Ltd. in the UK, paid under the U.N. Oil-for-Food Program. According to the agreement and the information, between 2000 and 2003, AGCO Ltd. paid approximately $553,000 to the former government of Iraq to secure three contracts by inflating the price of the contracts by 13 to 21 percent before submitting the contracts to the U.N. for approval. The company concealed from the U.N. that the price of the contracts had been inflated, and then used the additional funds to pay a kickback to the former Iraqi Ministry of Agriculture.
On November 12, 2009, Paul G. Novak, a former consultant for Willbros International Inc., a subsidiary of Houston-based Willbros Group Inc., pleaded guilty to engaging in a conspiracy to pay more than $6 million in bribes to government officials of the Federal Republic of Nigeria and officials from a Nigerian political party in violation of the FCPA. In his plea, Novak admitted that from approximately late 2003 to March 2005, he conspired with others to pay more than $6 million to various Nigerian government officials and party officials to assist Willbros in obtaining and retaining the Eastern Gas Gathering System Project, which was valued at approximately $387 million. To fund the bribes, Novak and his alleged co-conspirators used a Willbros subsidiary, Willbros West Africa Inc. (“WWA”), to enter into agreements with two consulting companies Novak represented. Without providing any services, the consulting companies invoiced WWA and were paid from a Willbros bank account in Houston, Texas, to accounts in Lebanon. Novak later used money from the Lebanese accounts to pay bribes to various Nigerian officials.
On November 13, 2009, the DOJ announced that Charles Paul Edward Jumet of Virginia pleaded guilty in federal court in Richmond, Virginia, after a two-count criminal indictment charged him with conspiring to make corrupt payments to foreign government officials in Panama for the purpose of securing business for Ports Engineering Consultants Corporation (“PECC”), thereby conspiring to violate the FCPA. PECC, a company incorporated under the laws of Panama, was affiliated with Overman Associates, an engineering firm based in Virginia Beach, Virginia. According to Jumet’s plea, PECC was created so Jumet and Overman Associates could obtain a maritime contract from the Panamanian government through corrupt means. Jumet admitted that from at least 1997 through approximately July 2003, he and others conspired to make corrupt payments totaling more than $200,000 to the former administrator and deputy administrator of Panama’s National Maritime Ports Authority, and to a former, high-ranking elected executive official of the Republic of Panama.
On December 7, 2009, DOJ announced that it had charged two executives of an unnamed Florida-based telecommunications company and the president of Florida-based Telecom Consulting Services Corp. with violating the FCPA, as well as two former Haitian government officials for conspiracy to commit money laundering for their alleged roles in the foreign bribery, wire fraud and money-laundering scheme. According to the indictment, from November 2001 through March 2005, the telecommunications company paid more than $800,000 to shell companies to be used for bribes to foreign officials of the Republic of Haiti’s state-owned national telecommunications company, Telecommunications D’Haiti (“Haiti Teleco”). The alleged corrupt payments, authorized by the telecommunications company’s president and vice president, were paid to government officials at Haiti Teleco for the purpose of obtaining business advantages for the company, including receiving preferred telecommunications rates and monetary credits toward amounts owed. The payments were allegedly made through various shell companies, and the defendants created false records claiming the payments were for “consulting services,” which were never performed.
On December 11, 2009, the SEC charged Bobby Benton of Houston, Texas, a former vice president of Pride International, Inc. (“Pride”), with violations relating to bribes paid to foreign officials in Mexico and Venezuela. The SEC’s complaint alleges that in December 2004, Benton authorized the bribery of a Mexican customs official in return for favorable treatment regarding customs deficiencies identified during an inspection of a supply boat. The complaint also alleged that from approximately 2003 to 2005, a manager of a Pride subsidiary in Venezuela authorized the bribery of an official of Venezuela’s state-owned oil company in order to secure extensions of three drilling contracts. Benton, in an effort to conceal these payments, redacted references to bribery in documents responding to an internal audit report. He also signed two false certifications in connection with audits and reviews of Pride’s financial statements denying any knowledge of bribery.
On December 31, 2009, UTStarcom Inc. (“UTSI”) agreed to pay the DOJ $1.5 million in criminal fines and the SEC an additional $1.5 million in penalties to resolve FCPA violations taking place in China and Thailand. According to the DOJ’s press release, UTSI “arranged and paid for employees of Chinese state-owned telecommunications companies to travel to popular tourist destinations in the United States, including Hawaii, Las Vegas and New York City.” Although the trips were described as training at UTSI facilities, UTSI had no facilities at the destinations, nor was any training actually conducted.