Fokker Services B.V. Agrees to $21 Million Settlement for Alleged Violations of the ITSR and Sudanese Sanctions Regulations

Fokker Services B.V. (FSBV), a Netherlands-based aerospace company, reached a global settlement of $21 million with OFAC, BIS and the U.S. Attorney’s Office (USAO) for the District of Columbia in early June 2014 regarding allegations of 1,112 violations of the ITSR and of 41 violations of the Sudanese Sanctions Regulations. Specifically, the U.S. government alleged that, over a period of five years, FSBV indirectly exported or reexported aircraft spare parts to Iranian and Sudanese customers that were either procured or repaired in the United States to fill those customers’ orders, or that were U.S.-origin items subject to export licensing requirements. The OFAC base penalty alone carried potential civil liability of greater than $145 million, as OFAC deemed the alleged violations to be egregious even though FSBV had filed a voluntary self-disclosure. The $21 million settlement represents the value of FSBV’s alleged Iran and Sudan transactions and consists of a $10.5 million civil penalty to OFAC and BIS and a $10.5 million forfeiture pursuant to the deferred prosecution agreement with USAO.

Read OFAC’s summary, press releases from the DOJ and BIS, andWashington Post coverage.

Intersil Corporation Reaches $10 Million Settlement with the State Department on U.S. Export Control Allegations

Intersil Corporation, a California-based circuit maker, entered into aconsent agreement with the State Department in mid-June 2014, under which it agreed to pay a $10 million civil penalty in settlement of 339 alleged violations of the Arms Export Control Act (AECA) and the ITAR. Specifically, the State Department alleged that Intersil improperly classified U.S. Munitions List (USML) circuit components as subject to the Commerce Department's Commerce Control List (CCL) and thereby exported them without ITAR licenses to customers in various destinations, which were then re-exported without proper authorization. The alleged violations included export to China, which is subject to a U.S. arm’s embargo, and to entities on the State Department’s watch list, which are typically denied permission to receive ITAR items. The State Department will suspend a $4 million portion of the penalty if Intersil agrees to spend that amount on compliance enhancements. In that regard, Intersil agreed to set up a special internal compliance position to oversee the consent agreement, conduct two audits and provide additional training for employees. The State Department decided not to administratively debar Intersil based on the company’s voluntary disclosure, cooperation with the State Department’s investigation and implementation of extensive remedial measures. Read the State Department press release and Reuters coverage.

UAE Freight Forwarder Agrees to Pay $125,000 Penalty in Connection with Export and Reexport of Web Monitoring Devices to Syria

Aramex Emirates, LLC (Aramex), a freight forwarding company headquartered in Dubai, United Arab Emirates (UAE), agreed to a settlement of $125,000 with BIS in late May 2014 regarding allegations that it violated the EAR by shipping Internet traffic control and monitoring equipment to Syria without BIS authorization on two occasions. BIS alleged that Aramex agreed to receive shipments of network devices and software from another UAE freight forwarder and then forward them to Syria, knowing that the freight was of U.S. origin. According to BIS, the settlement amount, one half of the maximum possible civil penalty, reflects Aramex’s full cooperation with the BIS investigation. Under the settlement terms, Aramex is barred from publicly denying the BIS allegations, and BIS can issue a one-year revocation of the company’s export privileges if Aramex fails to pay the penalty on time. Read the BIS press release for more information.

State Department Administratively Debars Spanish National and Associated Entities for Violations of the AECA and ITAR

Pursuant to the default order and recommendation of an Administrative Law Judge (ALJ), in early June 2014, the Bureau of Political-Military Affairs at the State Department imposed on Spaniard Carlos Dominguez and three of his Madrid-based companies an administrative debarment from all activity subject to the ITAR. The default order resulted from the State Department’s referral to the ALJ of its charging letter after the subject parties failed to respond to formal charges within the allotted timeframe. The State Department had charged that Mr. Dominguez and his companies violated the AECA and the ITAR on 366 occasions by reexporting and retransferring U.S.-origin defense articles (in this case, night vision devices) without authorization and engaging in practices to evade detection (for example, by changing company names and utilizing third-party purchasers upon State Department notification of ineligibility to participate in defense trade). The debarment marks the first time the State Department initiated an administrative proceeding against foreign persons by referral of a charging letter to an ALJ and underscores the range of penalties at the State Department’s disposal for ITAR violations against foreign entities, even where, as stated by the State Department, the alleged violations did not result in direct harm to U.S. national security or foreign policy interests. Read the State Department summary, the Charging Letter, and theAdministrative Debarment Order.