On May 20, 2009, Gulf International Bank of New York, the U.S. branch of Gulf International Bank of Bahrain, agreed to pay a civil penalty of $49,850 to settle allegations that it violated the antiboycott provisions of the Export Administration Regulations (“EAR”). The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) alleged that, on eight occasions between 2002 and 2004, the bank, in connection with transactions involving the sale of goods from the United States to Syria, furnished prohibited information about another person’s business relationship with a company known or believed to be restricted from having any business relationship with Syria or in another boycotting country. BIS also alleged that the bank, on 17 occasions during the same timeframe, failed to report to BIS its receipt of a request to engage in a restricted trade practice or boycott and failed to maintain certain records required by the EAR.
On Aug. 6, 2009, BIS and the Department of Treasury’s Office of Foreign Assets Controls (“OFAC”) entered into a joint settlement agreement with DPWN Holdings (USA) Inc. (formerly known as DHL Holdings (USA) Inc.) and DHL Express (USA) Inc. (collectively “DHL”) regarding allegations that DHL unlawfully aided and abetted the illegal exportation of goods to Iran, Syria, and Sudan, and failed to comply with the recordkeeping requirements of the EAR. BIS charged that on eight occasions between June 2004 and September 2004, DHL transported items subject to the EAR from the United States to Syria, and failed to retain air waybills for approximately 90 exports from May 2004 to September 2004, as required by Part 762 of the EAR. OFAC charged that DHL violated various OFAC regulations between 2002 and 2006 with respect to thousands of shipments to Iran and Syria. DHL agreed to pay a civil penalty of $9.44 million and hire an expert on U.S. export control laws and sanctions regulations to conduct compliance audits through 2011.
On Aug. 13, 2009, FMC Technologies, Inc. agreed to pay a $610,000 civil penalty to settle allegations that it exported certain items typically utilized in the oil and gas industries in violation of the EAR. The allegations involved 78 unlicensed exports of butterfly and check valves classified under Export Control Classification Number (“ECCN”) 2B350, and controlled for chemical and biological weapons reasons to a variety of countries. BIS reported that FMC voluntarily disclosed the violations and actively cooperated in the investigation.
On Sept. 15, 2009, five foreign subsidiaries of Thermon Manufacturing Company of San Marcos, Texas, agreed to pay $176,000 in civil penalties to settle allegations that between October 2006 and June 2006, they participated in unlicensed exports and re-exports of EAR99 heat-tracing equipment manufactured in the United States to Iran, Syria, Libya, and listed entities in India, in violation of the EAR. Thermon Manufacturing claimed that its subsidiaries did not inform the U.S.-based headquarters that they were conducting such transactions even though Thermon Manufacturing had informed the subsidiaries that such actions were prohibited. When Thermon Manufacturing ultimately learned of the transactions. it voluntarily disclosed the violations to BIS.
On Sept. 15, 2009, Foxsemicon Integrated Technologies, Inc. (“FITI”) of Taiwan paid a $250,000 civil penalty to settle allegations that, between August 2005 and May 2006, it committed 31 violations of the EAR related to the unlicensed export of pressure transducers from the United States to the People’s Republic of China. FITI’s U.S.-based wholly owned subsidiary, Foxsemicon LLC of San Jose, Calif., agreed to a $160,000 civil penalty that it aided and abetted FITI’s violations. BIS alleged that at the time the unauthorized exports were made, FITI knew that licenses were required for the items, yet it made no attempt to apply for licenses to authorize the shipments.
Department of Treasury Actions
In April 2009, EFEX Trade, LLC (“EFEX”) of West Palm Beach, Fla., remitted $2,000 to OFAC to settle allegations that the company violated the Cuban Assets Control Regulations in February 2006. The alleged violation related to unlicensed remittance forwarding-services that Cuba or a Cuban national had an interest, and which EFEX did not voluntarily disclose to OFAC.
In April 2009, Varel Holdings, Inc. of Dallas, Texas (“Varel”), remitted $110,000 to OFAC to settle allegations that it violated the Cuban Assets Control Regulations. OFAC alleged that, between June 2005 and June 2006, a foreign subsidiary of Varel made 11 unlicensed exports of goods in which Cuba or Cuban nationals had an interest. Varel voluntarily disclosed the unlicensed exports to OFAC.
In July 2009, MGE UPS Systems, Inc. of Costa Mesa, Calif. (“MGE UPS”), now known as American Power Conversion Corporation, remitted $10,341 to OFAC for violating the Cuban Assets Control Regulations in September 2005. MGE UPS sold electrical regulators ultimately destined for Cuba without having voluntarily disclosed the sales to OFAC.
In July 2009, First Incentive Travel, Inc., of Kissimmee, Fla. (“FIT”), remitted $8,250 to settle allegations that it violated the Cuban Assets Control Regulations in October 2006. OFAC alleged that FIT provided travel-related services in which Cuba or Cuban nationals had an interest, without an OFAC license and without voluntarily disclosing the transactions to OFAC.
In August 2009, Australia and New Zealand Bank Group, Ltd. of Melbourne, Australia (“ANZ”), remitted $5.75 million to settle allegations that it violated the Sudanese Sanctions Regulations and the Cuban Assets Control Regulations from 2004 to 2006 by actively manipulating SWIFT messages to conceal references to Sudan or Cuba, and names of entities subject to U.S. sanctions. The settlement covered 16 transactions in the aggregate amount of approximately $28 million alleged to have violated the Sudanese Sanctions Regulations, and 15 transactions in the aggregate amount of $78 million alleged to have violated the Cuban Assets Control Regulations. OFAC reduced the total potential penalty based on ANZ’s substantial cooperation, its prompt and thorough remedial response, and the fact that ANZ had not been subject to an OFAC enforcement action in the five years preceding the transactions at issue. As part of its remedial response, ANZ re-engineered its operating model to enhance its ability to identify and resolve operational gaps and weaknesses, and established more effective controls with respect to potential OFAC violations.
In August 2009, Thermon Manufacturing Company of San Marcos, Texas, violated the Sudanese Sanctions Regulations on several occasions between January 2004 and November 2005. OFAC alleged that Thermon engaged in and facilitated the export and/or re-export of heat-tracing equipment, directly or indirectly, to Sudan in three separate transactions. Thermon voluntarily disclosed this matter to OFAC, and reported to OFAC corrective measures and improvements to its OFAC compliance procedures it had taken in response to its discovery of the alleged violations.
Department of Justice Actions
On June 11, 2009, Traian Bujduveanu was sentenced in federal district court in Florida to 35 months imprisonment and three years of supervised release for his role in a conspiracy to illegally export military and dual-use aircraft parts to Iran, in violation of the International Emergency Economic Powers Act and the Arms Export Control Act. Bujduveanu’s co-defendant, Hassan Keshari, and his corporation, Kesh Air International, were sentenced in May 2009. As part of his plea, Bujduveanu admitted that he used his Plantation, Fla., corporation, Orion Corporation, to sell aircraft parts to Keshari for purchasers in Iran, by way of freight forwarders in Dubai, United Arab Emirates. All of the parts supplied by Bujduveanu were manufactured in the United States, designed exclusively for military use, and are designated as “defense articles” by the U.S. Department of State in the U.S. Munitions List.
On June 29, 2009, Joseph T. Lukas, a former executive of Philadelphia-based Nexus Technologies Inc., pleaded guilty in connection with his involvement in a conspiracy to bribe Vietnamese government officials in exchange for lucrative contracts to supply equipment and technology to Vietnamese government agencies between 1999 and 2005, in violation of the Foreign Corrupt Practices Act (“FCPA”). At sentencing, scheduled for April 2010, Lukas faces a maximum sentence of 10 years in prison.
On July 10, 2009, Frederic A. Bourke Jr. was found guilty by a federal jury in New York of conspiracy to violate the FCPA and the Travel Act, and making false statements to the FBI. Evidence presented at trial convinced the jury that Bourke was a knowing participant in a scheme to bribe government officials in Azerbaijan with several hundred million dollars in cash, shares of stock, and other gifts to ensure that Bourke would win an auction to supply the State Oil Company of the Azerbaijan Republic (“SOCAR”). The evidence also showed that from 1997 to 1998, Bourke and several business partners conspired to pay millions of dollars worth of bribes to Azeri government officials to ensure that their investment consortium would gain, in secret partnership with Azeri officials, a controlling interest in SOCAR and its substantial oil reserves. Bourke faces a maximum penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss resulting from the alleged violations.
On July 30, 2009, Helmerich & Payne Inc. (H&P) entered into an agreement with the Department of Justice (“DOJ”) to settle allegations that it made improper payments to government officials in Argentina and Venezuela in violation of the FCPA. The illegal payments were made to facilitate the import and export of goods in violation of local regulations and evade higher duties and taxes on the same goods. The settlement agreement requires H&P to pay a $1 million penalty, implement rigorous internal controls, and cooperate fully with the DOJ.
On July 31, 2009, Ousama Naaman of the United Arab Emirates was indicted in the U.S. District Court for the District of Columbia for his alleged participation in an eight-year conspiracy to defraud the United Nations Oil for Food Program, and bribe Iraqi officials in connection with the sale of a chemical additive used in the refining of leaded fuel, in violation of the FCPA. Naaman was arrested July 30, 2009 in Frankfurt, Germany, and the U.S. government is currently seeking his extradition from Germany to the United States. According to the indictment, from 2001 to 2003, acting on behalf of a publicly traded U.S. company, Naaman offered and paid 10 percent kickbacks to the Iraqi government in exchange for five contracts under the Oil for Food Program.
On July 31, 2009, Control Components Inc. (“CCI”), a California-based company, pleaded guilty to violating the FCPA and the Travel Act in a decade-long scheme to secure contracts in approximately 36 countries by paying bribes to officials and employees of various state-owned companies. CCI designs and manufactures service control valves for use in the nuclear, oil and gas, and power generation industries. According to the plea agreement, from 2003 to 2007, CCI paid approximately $4.9 million in bribes, in violation of the FCPA, to officials from various foreign state-owned companies, and approximately $1.95 million in bribes, in violation of the Travel Act, to officers and employees of foreign privately owned companies. As part of the plea agreement, CCI agreed to pay an $18.2 million criminal fine, create a comprehensive anti-bribery compliance program, and retain an independent compliance monitor to report periodically to the Department of Justice.
On Sept. 2, 2009, Jacques Monsieur, a Belgian national and resident of France suspected of international arms-dealing for decades, was arrested on charges relating to a conspiracy to illegally export F-5 fighter jet engines and parts from the United States to Iran, in violation of the International Emergency Economic Powers Act and the Arms Export Control Act. According to the indictment, Monsieur and his co-conspirator, Dara Fatouhi, have been actively working with the Iranian government to procure military items for the Iranian Revolutionary Guard. The U.S. government took action after Monsieur met with an undercover U.S. agent in Paris and London, requesting information about obtaining forged U.S. shipping and export authorization documents that would falsely indicate the items would be sold in Colombia.
On Sept. 3, 2009, Leo Winston Smith, the former director of sales and marketing for Pacific Consolidated Industries LP (“PCI”), pleaded guilty to charges related to the bribery of a UK Ministry of Defense official in order to obtain lucrative equipment contracts with the UK Royal Air Force, in violation of the FCPA. According to the plea agreement, Smith and the President of PCI, Martin Eric Self, created a sham marketing agreement between PCI and a relative of a UK Ministry of Defense official to facilitate the payment of more than $70,000 in bribes. Self pleaded guilty in November 2008 and was sentenced to two years probation. Smith’s sentencing is scheduled for December 2009 and he faces a maximum of eight years in prison.
Securities and Exchange Commission Actions
In May 2009, the Securities and Exchange Commission (“SEC”) announced the filing of a settled FCPA enforcement action against Thomas Wurzel, the former President of ACL Technologies, Inc. (“ACL”), a former indirect wholly owned subsidiary of United Industrial Corporation (“UIC”). The SEC alleged that Wurzel authorized payments to an Egyptian agent with knowledge that the agent would offer, provide, or promise at least a portion of such payments to Egyptian Air Force officials for the purpose of awarding business to ACL and UIC. The SEC determined that the payments to the Egyptian agent resulted in ACL being awarded a contract with gross revenues of $5.3 million. Wurzel agreed to pay a $35,000 civil penalty.
On July 31, 2009, the SEC filed a civil enforcement action against Nature Sunshine Products Inc. (“NSP”), a Utah corporation that manufactures nutritional and personal care products; its CEO Douglas Faggioli; and its former CFO Craig D. Huff for violating the FCPA (along with several anti-fraud, reporting, and recordkeeping provisions of federal security laws) with respect to the sale of products in Brazil. According to the SEC complaint, NSP made undocumented cash payments to Brazilian customs brokers in an effort to circumvent medicinal registration requirements in Brazil. Notably, the SEC charged Faggioli and Huff with violating the FCPA’s books and records and internal controls provisions based on their position as “control persons,” even though the SEC did not allege that the executives had personal knowledge of the payments. NSP has agreed to pay a civil penalty of $600,000, and Faggioli and Huff were each fined $25,000.