Archive for the ‘Aerospace’ Category

Commerce Amends Missile Technology Control Sections of EAR

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

On May 21, BIS announced a final rule that went into effect May 27, 2014. This rule adjusts aspects of the EAR, 15 CFR Parts 772 and 774 based on changes to the Missile Technology Control Regime (MTCR) Annex signed off by MTCR member countries at the October 2013 Plenary meeting in Rome and at the 2013 Technical Experts Meeting in Bonn, Germany. The rule revises eight ECCNs: 1B102, 1B117, 1D001, 1D018, 1D101, 6A107, 9A101, and 9B106. BIS also added new ECCN 9A102 to control turboprop engine systems (plus parts and related items) specially designed for items controlled in 9A012 for MT reasons and having a maximum power great than 10kW. BIS also revised the definitions of “payload” and “repeatability.” For more information, click here.

Maryland Man Imprisoned for 8 Years for Participating in Conspiracy to Help Iran Launch First Satellite

Thursday, January 30th, 2014 by Brooke Driver

By: Brooke Driver

Nader Modanlo, a born Iraqi and naturalized U.S. citizen living in Potomac, Maryland, was recently sentenced to eight years in prison, three years of probation and a whopping $10,000,000 fine for violating the International Emergency Economic Powers Act, money laundering and obstructing bankruptcy proceedings. A number of government agencies were involved in constructing the case against Modanlo, including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the Internal Revenue Service’s Criminal Investigation and the Defense Criminal Investigative Service.

The 53-year-old took part in a complex conspiracy (that took place between the years of 2000 and 2007) to illegally provide satellite related services to Iran. According to the evidence presented at trial, Modanlo used his expertise as a mechanical engineer and his background in finance and strategic policy as they relate to space-based telecommunications to facilitate the creation and launch of Iran’s first satellite.

In 1994, as the principal owner and president of Final Analysis, Inc., Modanlo began a working relationship with POLYOT, an aerospace company owned by the Russian government. Between the years 1995 and 2000, Final Analysis provided POLYOT with telecommunication satellites. Modanlo filed for and received the required licenses for these transactions.

However, in 2001, after Final Analysis was forced into bankruptcy, Modanlo founded New York Satellites Industries, running the company out of his own home. While working for Final Analysis, Modanlo began his illegal contract with POLYOT to construct and launch a remote sensing and telecommunications satellite for Iran, an agreement he honored under the name of his new company. Knowing that direct financial transactions would be difficult due to the sanction against the country, Modanlo and a number of other interested parties, including a former Iranian ambassador, met in Switzerland to discuss the details of the launch and the money exchange. To solve the problem, they formed a fake company called Prospect Telecom and opened a Swiss bank account under that name. Investors transferred funds to this account for the project, including $10,000,000 that was almost immediately sent to Modanlo’s New York Satellite Industries bank account as payment for his help in the launch, which took place October 2005. In the two years following the launch, Modanlo made false statements and withheld information regarding the ownership and aim of Prospect Telecom in bankruptcy proceedings.

Making Up License and Agreement Numbers Will Get You in Trouble: Former Honeywell Compliance Officer Debarred for Falsifying Government Authorizations

Tuesday, December 31st, 2013 by Brooke Driver

By: Brooke Driver

On November 25, 2013, the State Department announced that LeAnne Lesmeister of Honeywell has been debarred for three years from participating in any activities that are subject to the International Traffic in Arms Regulations as a result of her multiple violations of the Arms Export Controls Act. Given the nature of the charges against her, it is quite surprising that DDTC has not yet decided to enforce either civil or criminal penalties. Apparently, Lesmeister, who had worked as Honeywell’s Clearwater, Florida branch senior export compliance officer for 27 years, committed 21 ITAR violations during the period between 2008 and 2012, when she circumvented Honeywell’s compliance program by fabricating Department of State authorizations. Based on these counterfeit licenses, Honeywell exported defense articles—including technical data—and provided defense services to various foreign persons without Department approval, in violation of the AECA and ITAR.

DDTC issued the charging letter against Lesmeister in July, but received no answer from the accused. As Lesmeister did not contest the charges against her (or bother to respond at all), the Department considered the violations verified and debarred the former Honeywell employee. The charging letter contains a variety of startling evidence of Lesmeister’s crimes and disregard for U.S. law, such as the following:

Lesmeister used fake DSP-5 license numbers or reused numbers from previously approved licenses to Honeywell for unrelated products or, in other cases, numbers from previously approved licenses to unrelated applicants where a Honeywell entity sometimes appeared as a party, but often not at all.

With intent to falsify an approved technical assistance agreement, Lesmeister reportedly assured a Honeywell employee that “we are expecting to see approval within about a week at max, all staffed agencies have responded so it is just a matter of getting the licensing office to finalize.”

Regarding a fake DSP-5 license and forged technical assistance agreement, Lesmeister commented to two Honeywell employees, “[t]hey ended up sending it to me – it ain’t pretty but it is official.”

Several of the alleged violations related to Honeywell’s Miniature Inertial Measurement Unit, which provides stability and pointing for various types of spacecraft. Recipients of the illicit products included a number of foreign space programs, such as Europe’s Galileo satellite navigation system, Europe’s Exomars Mars exploration mission, Argentina’s Arsat program and Eutelsat’s W6A telecommunications satellite. In addition, end users of the illegal transactions were located throughout Europe and South America and in the countries of Canada and Israel. Honeywell voluntarily disclosed these violations upon discovery, and cooperated fully with the Department, implementing remedial measures to address the conditions that allowed one employee, in a position of authority, to execute numerous and intentional export compliance violations. Honeywell’s first move, of course, was to fire Lesmeister in June of 2012, just four days after she was charged. As a result, it seems, of the company’s efforts and transparency, the Department has not yet issued any charges against Honeywell, which is somewhat surprising, considering certain descriptions of Lesmeister’s fabrications in the charging letter that detail some very obvious red flags; Lesmeister’s fabricated  DSP-5 licenses were described as “low-quality scan[s],” included “page numbers [that] were not sequential” and contained obvious discrepancies (“the country of ultimate destination was inconsistent with the end-users listed”).

Honeywell spokesman Scott Sayres claims, however, that the company will not make the same mistake again:

“Honeywell is committed to acting with integrity in all our business dealings. That’s why we immediately and voluntarily reported to the U.S. Department of State the discrepancies we discovered in export authorization documentation that led to this decision. We also took strong corrective action, including initiating a comprehensive review of our processes to ensure this type of misconduct doesn’t happen again. Appropriate disciplinary action was taken and the employee is no longer with the company. This was an isolated departure from Honeywell’s values and should not taint the hard work and honesty of our nearly 140,000 people world-wide.”

In this case, we can learn from the bad habits of others. A more balanced internal check system and routine audits would have proved helpful here. Perhaps, if Lesmeister had not enjoyed unchallenged authority, she would not have been able to fake her job for four years (and maybe 27 years).

Owner of Allied Components Faces 20 Years Behind Bars for Lying to the Department of Defense and Sharing Military Submarine Component Information with India

Wednesday, December 4th, 2013 by Brooke Driver

By: Brooke Driver

Mama always told you that lying never pays, and Robert Luba would certainly agree. The 47-year-old owner and general manager of the New Jersey-based company Allied Components LLC admitted in court on October 23 to illegally emailing information to India about a component of a nuclear-powered U.S. submarine and providing faulty aircraft parts to the U.S. Defense Department.  Allied Components had been contracted by the Department of Defense to manufacture a wing-pin product for an F-15 fighter jet, but chose to slack and ordered the product from an Indian-based company—and did not even do that well. The Indian-made wing-pins did not match the specifications for the aircraft, putting its potential pilots and passengers in danger. Prosecuting attorney Paul Fishman articulated the gravity of Luba’s corner-cutting in a released statement:

“The conduct admitted by Luba shows a callous disregard for the safety of our armed forces…By recklessly providing sub-standard parts for sophisticated weapons systems and sharing sensitive information with a foreign state, Luba not only jeopardized the lives of men and women on the front lines of our national defense, he put all Americans at risk, all in the name of making a buck.”

Luba has already agreed to pay the defense department $173,000, a large chunk of which will go to repairs for the dysfunctional F-15s, but he will suffer a much higher price on his sentencing date, February 19. At this time, the presiding judge can choose to demand that Luba pay up to $1,250,000 and serve up to 25 years in prison for his combined violations.

Aeroflex’s Inaccurate Classifications Caused Others’ Violations and Cost it $8 Million

Tuesday, September 3rd, 2013 by Brooke Driver

By: John Black and Brooke Driver

DDTC described Aeroflex Inc. as having a “Corporate-wide failure to properly determine export control jurisdiction. Despite the fact that in 2006, DDTC issued to Aeroflex a Commodity Jurisdiction determination showing how DDTC considers Aeroflex’s product to be on the U.S. Munitions List, Aeroflex failed to apply that rationale while classifying other products and failed to share that information broadly among all units of the company.

Certainly, two obvious practical lessons are 1) If a CJ shows you how DDTC wants you to classify your products, you should use that as clear guidelines to follow to classify products.  2)  If one part of your company gets that CJ guidance, DDTC considers that your whole company received the guidance, so you should make sure you share important government classification rulings broadly within your company, because the government will hold everybody in your company responsible for knowing, even if many people were never told.

The technical aspects of the wrong classifications are an interesting read and relate to certain electronic components with performance capabilities that make them particularly useful in space applications. In short, Aeroflex argued that since an electronic component did not meet the five hardening criteria in USML Category XV(d), the electronic component was not on the USML. DDTC countered with the argument that the components are not in XV(d), but their performance characteristics mean they are specifically designed for space applications, so they are controlled in Category XV(e).

An interesting aspect of this case is that many of Aeroflex’s charges were based on Aeroflex causing other parties to illegally export or reexport its components, because the company told those parties that the components were not on the USML. As a result, many of the sensitive components ended up going to sensitive users and sensitive countries—yes, China. So we see that inaccurate classifications not only can cause you to export or reexport illegally; they can give you violations, because inaccurate classifications cause you to cause others to export or reexport illegally.

Aeroflex has agreed to settle with the State Department concerning its whopping 158 alleged ITAR violations, occurring between the years of 1999 and 2009. Throughout this time period, Aeroflex business units disclosed hundreds of ITAR violations, mainly due to a failure to correctly establish jurisdiction over defense articles and technical data.

While the two-year Consent Agreement technically states that Aeroflex will pay a civil penalty of $8 million, DDTC has agreed to suspend $4 million if Aeroflex uses that amount to improve its compliance program, including extensive improvement of compliance policies and procedures, the engagement of an Internal Special Compliance Official, two audits of its compliance program during the two-year Agreement term and compliance training for staff and principals. DDTC said that debarment was unnecessary at this time, because:

  • Aeroflex disclosed most of its violations
  • Cooperated with Department reviews
  • Implemented or planned extensive remedial measures since 2008

It seems that Aeroflex has learned its (expensive) lesson, and although the price is high, the Department’s relative leniency proves that, in this case, Aeroflex made the right decision by choosing to own up to its mistakes.

BIS Deletes Misleading Jurisdiction Claim over T-37

Friday, May 1st, 2009 by Danielle McClellan

Effective May 6, 2009, the Commerce Department revised the Commerce Control List (CCL) to remove all references to the CCL having export/reexport jurisdiction over the T-37 military jet trainer aircraft and specially designed components. Although the T-37 appeared on the CCL, the CCL did not have jurisdiction over the T-37 because the US Munitions List in the International Traffic in Arms Regulations had jurisdiction over the T-37. BIS removed the misleading CCL claim of jurisdiction over the T-37 to reduce confusion by the public.

“Gee, They Looked Like Model Airplane Components to Me!” Says Not-the-Smartest-Violator

Friday, February 13th, 2009 by Danielle McClellan

Yaming Nina Qi Hanson of Silver Spring, Maryland has been charged with exporting autopilot circuits to China without a license. Yaming’s husband, Harold Hanson has been named a co-conspirator but has not yet been charged. (more…)

CSIS: US Export Controls Harming US Space Industry

Sunday, March 30th, 2008 by Danielle McClellan

The Center for Strategic and International Studies, a Washington research group has released a 63 page report on the Health of the US Space Industrial Base and the Impact of Export Controls. The main concern from the report was that the US export controls that were tightening almost 10 years ago are hindering the US share of the global space markets.

The US tightened space technology-transfer rules in 1999 after investigators found China has acquired sensitive technology from US built commercial satellites. When the new rules were implemented they put commercial communications satellites, subsystems, and components on a munitions list that became subject to State Department licensing even if the product could be easily purchases worldwide.

The overall health of the top-tier manufactures in the industry such as Lockheed Martin Corp., Boeing Co. and Northrop Grumman Corp. all had “good financial health” despite the US industry’s loss of shares overseas. The report shows that Russia, China and others are gaining space market share aided by the US policy. Jeffery Foust, a space and telecommunications expert at Futron Corp explained that the US policy backfired in space. “The US is actually hurting national security by making it more difficult for the space companies it depends on to compete in the global market,” he said.

The study concluded that the ability for the government and industry to meet program execution commitments is inadequate and that there was a unanimous agreement that the export control process can be improved without adversely affecting national security.

More information:

Wang-Woodford Arrested for Sending Helicopter Components to Iran via Singapore

Friday, February 1st, 2008 by Danielle McClellan

Laura Wang-Woodford, director of Monarch Aviation Pte, Ltd. (“Monarch”) of Singapore was arrested and has been arraigned on a 20-count federal indictment. Wang-Woodford is accused of exporting components for Chinook military helicopters from the US to Singapore and then to Iran in violation of the International Emergency Powers Act, after identifying them as commercial components.

Ms Wang-Woodford and her husband ran Monarch, which has been importing and exporting military and commercial aircraft components for more than 16 years. Brian Woodford remains fugitive since his wife was arrested on December 23, 2007 at San Francisco International Airport.

The indictment charges consist of charges of:

  1. Conspiring to export aircraft parts to Iran
  2. Several counts of exporting aircraft parts to Iran against the IEEPA
  3. Conspiring to export defense articles without a license
  4. Exporting and attempting to export defense articles without a license in violation of the AECA and ITAR
  5. Conspiring to launder the proceeds of the unlawful export of defense articles
  6. Illegal export of US military aircraft components
  7. Falsely identifying components in export documents filed to the US government
  8. Conspiring to transmit funds from Singapore to Cincinnati, Ohio with the intent to promote the illegal export scheme in violation of the federal money laundering statutes

(more…)

Another US Administration Says ITAR License Review Will Get Better

Tuesday, January 22nd, 2008 by John Black

President Bush issued an Export Control Directive on January 22, 2008, the directive is presumed to improve the way in which the Department of State responds to the many licenses it receives for the export of defense equipment, services, and technical data. Bush promised, “a more efficient and transparent export license process” and better “dispute resolution mechanisms” but was sure to include that there will remain a strong monitor on protecting national security.

The specific changes include:

  1. Additional financial resources and intelligence support to provide timely adjudication of defense trade licenses
  2. New guidelines requiring decisions by the U.S. Government on defense trade export license applications within 60 days unless there is strong reason for additional time which must be approved
  3. The electronic licensing system will be upgraded to allow all types of defense trade licenses and their submission
  4. An interagency will be created to allow for timely resolution of licensing jurisdiction issues under the Commodity Jurisdiction process
  5. A multi-agency working group will be created to improve procedures for export enforcement investigations

(more…)