Directorate of Defense Trade Controls (DDTC) – US Department of State
- Qioptiq Agrees to US$25 Million Civil Penalty to Settle Charges of 163 ITAR Violations. Qioptiq S.a.r.l., a Luxembourg-based optics company, entered into a consent agreement with the DDTC to pay US$25 million in fines and remedial compliance measures to settle 163 alleged violations of the ITAR. The violations involved unauthorized exports and re-exports of military-grade night vision components and technical data without required licenses from the DDTC, which were committed by certain Thales High Technology Optic Group companies and their predecessors prior to Qioptiq’s acquisition from Thales France in December 2005. The DDTC will hold an acquiring company strictly liable for ITAR violations committed by the acquired company. The DDTC has long said that it considers an acquiring company to be strictly liable for export violations committed by the acquired company.
Some of the unauthorized transfers and retransfers of technical data arose in connection with a technical assistance agreement (TAA) between Thales Optem Inc. (US) and Thales Electro-Optics Pte Limited (Singapore). First, the US company started exporting technical data to the Singapore company prior to the execution of the TAA. Second, the US company exported enhanced night vision goggle (ENVG) technical data of ITT Night Vision, which was outside the scope of technical data to be transferred under the TAA. Moreover, the US company concealed the ENVG exports by marking the technical data as SNVG (special night vision goggle). An email to the Singapore company uncovered by the DDTC stating that the SNVG label was a “decoy” bolstered the DDTC’s charge ofmisrepresentation and omission of facts regarding these transactions allegedly made under the TAA.
Office of Foreign Assets Control (OFAC) – US Department of Treasury
- Lloyds TSB Bank Agrees to Record US$350 Million Penalty for Violations of Iranian Transactions and Sudanese Sanctions Regulations. Under deferred prosecution agreements (DPA) with the US Department of Justice and the New York District Attorney’s Office, Lloyds TSB Bank plc agreed to forfeit US$175 million to each entity for engaging in transactions in violation of the Iranian Transactions Regulations (ITR) and Sudanese Sanctions Regulations (SSR) and for violating New York’s falsifying business records statute. The US$350 million is the largest penalty imposed for a violation of US sanctions law and is roughly equal to the total dollar volume of the prohibited transactions.
Lloyds implemented a procedure to remove material information – such as customer names, bank names, and address – from payment messages received from UK subsidiaries of banks in Iran to avoid detection of the sanctioned parties by filters at nonaffiliated US financial institutions. By preventing US banks from detecting and rejecting these transactions, Lloyds caused US banks to provide prohibited services to Iran, a sanctioned country. Lloyds branches in Dubai and Tokyo also removed references to Iran from payment messages. The total value of the “stripping” transactions by Lloyds on behalf of the banks in Iran amounted to roughly US$300 million. Lloyds performed similar services, although on a smaller scale, for Sudan-based banks, which amounted to roughly US$20 million. Lloyds also engaged in US dollar trade finance transactions, such as letters of credit and guarantees, involving banks from countries subject to OFAC sanctions, principally, Iran and Sudan.
In addition to the record penalty, the DPAs are noteworthy because the court permitted the application of US sanctions law to a non-US person, whose prohibited activities occurred entirely outside the United States. Therefore, the basis for finding jurisdiction in this case must rest in the concept that Lloyds has a sufficient nexus with the US due to the fact that its conduct caused nonaffiliated US persons to commit OFAC violations.
OFAC did not take part in the DPAs. However, discussions are underway regarding these violations with OFAC, which agreed to credit the US$350 million payment toward any penalty it may decide to impose. Moreover, there is a broader investigation into the accessibility of the US financial system by sanctioned parties, with nine other internationally active banks reportedly under investigation.
- Stena Bulk Settles Allegations of Violating Sudanese Sanctions for US$426,486. Houston-based Stena Bulk Llc, a subsidiary of the Sweden-based oil tanker company, agreed to pay a civil penalty of US$426,486 to settle allegations that it violated the Sudanese Sanctions Regulations for assisting in the transportation of oil to Sudan and for exporting oil from Sudan without an OFAC license. Stena Bulk voluntarily disclosed these activities to OFAC.
- Priceline Settles Charges of Violating Cuban Assets Control Regulations. Priceline.com, Incorporated remitted US$12,250 to OFAC to settle allegations that it violated the Cuban Assets Control Regulations when its non-US subsidiaries arranged hotel reservations for Cuban nationals without an OFAC license. OFAC considers US-owned or controlled firms subject to these sanctions. Priceline submitted a voluntary disclosure regarding this matter to OFAC.
- Vonberg Valve Settles Allegations of Violating Iranian Transactions Regulations. Vonberg Valve, Inc., a manufacturer of hydraulic valves used in mobile and industrial hydraulic equipment, agreed to remit US$11,050 to settle allegations that it violated the Iranian Transaction Regulations by exporting goods to Iran without an OFAC license. Vonberg Valve failed to disclose this matter to OFAC voluntarily but has implemented improvements to its US sanctions compliance program.
- Cotech Settles Charges of Sudanese Sanctions. Cotech Inc. an exporter of US cotton located in New York, remitted US$6,000 for allegedly attempting to facilitate the shipment of goods from Sudan to Bangladesh in violation of the Sudanese Sanctions Regulations. Cotech did not voluntary disclose its actions to OFAC.
Bureau of Industry and Security (BIS) – US Department of Commerce
- Cabela’s Incorporated Assessed a Civil Penalty for Export Violations. Cabela’s Incorporated has agreed to pay US$680,000 to settle charges for several export violations. Cabela exported optical sighting devices without the required Department of Commerce license (59 instances on exports to Argentina, Brazil, Canada, Chile and Mexico from or about May 25, 2004, to May 6, 2005, and in 17 occasions to Finland, India, Ireland, Malaysia, Malta, Pakistan, South Africa, Sweden and Taiwan from May 12, 2004 to May 17, 2005). In these 76 instances, Cabela also failed to file Export Shipper’s Declarations with the US government.
- Pc Universe Inc. Settlement for Acting with Knowledge of a Violation. On December 4, 2008 Pc Universe Inc. agreed to pay US$37,500 to settle allegations that it violated EAR by selling, transporting and forwarding digital audio tape drives to Iran without authorization for this transaction and with knowledge of the US embargo to Iran.
- Buehler Limited Agrees to Pay US$200,000 for Export Without a License of Chemical Mixture Containing Chemical Precursor. Buehler and Buehler GmbH, an affiliate, exported and re-exported a product called Coolmet, a chemical mixture subject to EAR regulations in which Schedule 3 chemical precursor Triethanolamine must constitute at least 30 percent of the weight. This product was exported without a license to Israel, Thailand, Taiwan and to several other countries, and without the required authorizations and license to Iran.
- Engineering Physics Software Settles for Export Violations. On December 15, 2008 Engineering Physics Software was assessed a civil penalty of US$130,000 for engaging in prohibited conduct by exporting engineering software programs from the United States to Iran via the United Arab Emirates without the required OFAC authorization. Furthermore, Engineering Physics Software also exported to India and Pakistan to end-users listed in the BIS Entity List without the required license.
- Syrvet, Inc Settles for US$250,000 Civil Penalty. Syrvet, Inc agreed to pay US$250,000 to settle charges for 38 violations of the EAR. BIS alleged that Syrvet engaged in prohibited conduct by exporting electric cattle prods without the required license to end-users or to end-users that had an expired license, acting with knowledge of violation and false statements in the Shipper’s Export Declaration.
- Well-Being Enterprise Co Ltd Assessed Civil Penalty for Conspiracy to Export Without Required License. Well-Being Enterprise Co Ltd has settled 25 charges for a civil penalty of US$250,000. Well Being was charged with conspiracy to export items from the United States to Taiwan without the required export license, instructing a US affiliate (i) not to tell US suppliers that the items were to be exported to Taiwan and (ii) to refrain from mentioning the US affiliate’s name to the US supplier because it likely knew of the affiliate’s relationship with Well-Being. The company was charged with 22 counts of commanding or inducing an act by instructing the US affiliate to procure and export to Taiwan certain chemicals, metals and electronic components without the required license. Such metals included nickel powder, hafnium, zirconium and bismuth. These chemicals and metals are controlled under the EAR for nuclear proliferation reasons and require a license for export to Taiwan. In three related cases, a San Francisco-based company and two individuals have been barred from exporting items on the Commerce Control List for a period ranging from two to 20 years. Also, there was one count of exporting sodium fluoride to Taiwan without an export license.
- Thomas J. Diner and Amerisource Settle Allegations for Causing, Aiding and Abetting. On February 6, 2009, Thomas J. Diner and Amerisource Inc. settled alleged BIS charges. Both were charged with causing, aiding, adding and abetting to permit false representations in a Shipper’s Export Declaration to falsely represent that the item being exported from the United States was “UCAR-GRAPHITE.” Thomas J. Diner and Amerisource agreed to pay US$11,500 on civil penalties.
- Aircraft Parts to Iran. On January 26, 2009 Kesh Air International and its founder Hassan Saied Keshari pleaded guilty before a Florida court to conspiracy for their role in the illegal export of military and commercial aircraft parts to Iran. Kesh Air International purchased aircraft parts on behalf of purchasers in Iran and exported the aircraft parts to Iran by way of freight forwarders in Dubai, United Arab Emirates.
- Interpoint Corporation Agrees to Pay US$200,000 in Civil Penalties. Interpoint Corporation was charged with a total of 39 counts, seven of which were violations of export regulations after it exported DC to DC converters or electromagnetic interference filters to the People’s Republic of China with knowledge that they would be used in the design, development, production and use of rocket systems capable of a range of 300 kilometers. In addition to having knowledge of the violations, which added to the number of charges, Interpoint exported these products to a company on the BIS Entity List.
FCPA – US Department of Justice and Securities and Exchange Commission
- Mario Covino and Richard Morlok Plead Guilty to FCPA Violations: Covino and Morlok, former executives of a California-based valve company, each pled guilty to one count of conspiring to violate the FCPA. Each admitted to causing company employees and agents to pay more than US$600,000 to officials of a state-owned enterprise who had the authority to award contracts or influence projects’ technical specifications to favor the valve company. Sentencing for both individuals is scheduled for later this year. Each faces a maximum of five years in prison, three years supervised release and a US$250,000 fine, or twice the pecuniary gain or loss resulting from the offense, whichever is greater.
- ITT Corporation Settles Securities and Exchange Commission FCPA Action: The Securities and Exchange Commission (SEC) filed a settled civil action that alleged ITT Corporation (ITT) violated the FCPA’s books and records and internal controls provisions as a result of improper payments to officials in China by employees or agents of ITT’s wholly-owned China- based subsidiary, Nanjing Goulds Pumps Ltd. (NGP). The SEC’s complaint alleged that NGP employees or agents paid officials of China’s state-owned enterprises to influence the design of infrastructure projects to require NGP’s pumps. Without admitting or denying the SEC’s allegations, ITT consented to the entry of a final judgment permanently enjoining it from future books and records and internal controls violations. ITT will disgorge US$1,041,112 in profits and pay a US$250,000 penalty.
- KBR LLC, KBR, Inc., Albert Stanley and the Halliburton Company Agree to Pay More Than US$589 Million: Related actions were brought against Kellogg Brown & Root LLC (KBR LLC), Albert Stanley, KBR, Inc. and the Halliburton Company. 5 The underlying conduct concerned a decade-long scheme to bribe Nigeria’s government officials to obtain natural gas facilities contracts. Stanley admitted to meeting with the officials to ask them to designate representatives with whom the officials’ bribes should be negotiated. Stanley and KBR LLC admitted to authorizing a joint venture, to which KBR LLC was a party, to hire the officials’ designated “cultural advisors.” The joint venture paid “consulting fees” of more than US$182 million to the “cultural advisors,” who in turn made payments to the officials. The plea agreement entered into by Stanley and the DOJ provides for seven years in prison and US$10.8 million in restitution.6 KBR LLC agreed to pay a US$402 million criminal fine, retain a FCPA compliance monitor and undergo organizational probation for three years. To settle the SEC’s charges, KBR, Inc. and Halliburton agreed to pay US$177 million in disgorgement. KBR, Inc. must retain an FCPA compliance monitor for three years, and Halliburton must retain an independent FCPA compliance consultant. Stanley settled the SEC action against him by agreeing to permanent enjoinment of violating the FCPA. The combined US$579 million in penalties represents the largest penalties ever paid by a US company in the FCPA’s history.
- Con-Way, Inc. Settles SEC FCPA Allegations: The SEC alleged that Con-Way, Inc., an international freight transportation and logistics company, violated the FCPA’s internal controls and books and records provisions when a subsidiary outside the United States controlled by Con-Way made hundreds of payments to government officials. The improper payments were not accurately reflected in Con-Way's books and records. Con-Way also knowingly failed to implement a system of internal controls that would ensure compliance with the books and records and internal control provisions of the FCPA. The SEC issued a cease-and-desist order against Con-Way and ordered it to pay a US$300,000 civil penalty.
- Shu Quan-Sheng Pleads Guilty to Bribing Chinese Government Officials: Quan-Sheng, a US citizen and executive of AMAC International, a Virginia-based company, pled guilty to offering, promising, paying and authorizing the payment of bribes to government officials in China. The bribes were to induce and influence government officials’ decisions and to secure an improper advantage by awarding a hydrogen liquefier project to a France-based company that had retained Quan-Sheng as its representative. Quan- Sheng also pled guilty to two counts of violating the Arms Export Control Act. Sentencing is scheduled for April 2009. Quan-Sheng faces a maximum sentence of 10 years in prison and a US$1 million fine for each Arms Export Control Act violation and a maximum of five years in prison and a fine of US$250,000, or twice the gross gain or loss, for violating the FCPA.
- Aibel Group Ltd. Pleads Guilty to FCPA Violations and Will Pay US$4.2 Million: Aibel Group Ltd., a UK corporation, pled guilty to one count of conspiring to violate and one count of violating the FCPA. The 2008 prosecution arose out of Aibel’s breach of a Deferred Prosecution Agreement previously entered into with the DOJ. The original allegations concerned nearly 400 illegal payments to customs officials in Nigeria made by Aibel’s international freight forwarder. The freight forwarder made the bribe payments to gain preferential treatment for clearing Aibel’s goods through customs. In addition to the US$4.2 million fine, Aibel will serve two years of organizational probation.
- Misao Hioki Pleads Guilty to Conspiring to Violate the FCPA’s Anti-Bribery Provisions: Hioki pled guilty to conspiring to bribe officials in Latin America to obtain and retain business for his company and its US subsidiary. Hioki negotiated illegal payments with employees of state-owned enterprises and approved making the payments through local sales agents. Hioki concealed the payments within the agents’ commissions. Hioki also pled guilty to conspiring to rig bids, fix prices and allocate market shares. Hioki will serve two years in prison and pay a fine of US$80,000.
- Siemens AG and Subsidiaries Agree to Pay a Record US$800 Million: Siemens AG pled guilty to books and records and internal controls charges brought by the DOJ and consented to the SEC’s filing of a complaint that charged anti-bribery, books and records and internal control violations. Three Siemens AG subsidiaries also pled guilty to conspiring to violate provisions of the FCPA. At least 4,283 corrupt payments, totaling roughly US$1.4 billion, were used to bribe officials in return for business in nearly a dozen countries. An additional 1,185 payments to third parties, totaling approximately US$391 million, were used, at least in part, for illicit purposes. These systematic payments were not recorded properly, and Siemens AG failed to devise and maintain an adequate system of internal controls to prevent such payments. Siemens AG and its subsidiaries will pay US$800 million to US authorities in fines and disgorged profits. Siemens AG must also retain an internal monitor for four years. On the same day that Siemens AG settled FCPA allegations, it also settled with authorities in Germany for approximately US$569 million. Including the approximately US$287 million that Siemens previously paid to Germany in a related investigation and the reported US$850 million Siemens has paid in professional fees and compliance costs, the total cost more than US$2.5 billion.
- Fiat S.p.A. and Subsidiaries To Pay More Than US$17 Million: The DOJ and SEC alleged that Fiat S.p.A., CNH Global N.V., and subsidiaries controlled by both entities committed illegal acts arising out of the U.N. Oil for Food Program. Specifically, the DOJ charged two Fiat subsidiaries with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA. The DOJ also charged a third Fiat subsidiary solely with conspiracy to commit wire fraud. The SEC alleged that Fiat and CNH Global, a majority-owned subsidiary of Fiat, as well as subsidiaries controlled by both Fiat and CNH Global, violated the books and records and internal controls provisions of the FCPA. The underlying conduct concerned the alleged bribery of officials in Iraq, the improper recording of these bribes as “after sales service fees” and the failure of Fiat and CNH Global to design and maintain adequate systems of internal controls to detect and prevent such illegal payments. Fiat will pay more than US$17 million in penalties, disgorgement and prejudgment interest.