Archive for the ‘Denied & Restricted Parties’ Category

Middle Man in Illegal Exports Debarred for 8 Years

Tuesday, September 6th, 2016 by Danielle McClellan

By: Danielle McClellan

Walter Anders and his company Terand, Inc. (he was the sole employee) of Huntersville, NC has been debarred for 8 years for his connection in exporting carbon fiber to Singapore. Anders and his company were used as a middle man to send illegal exports from a company in Middlewtown, NY to a company in Singapore in exchange for multiple $1,400 kick backs.

In 2012, Performance Engineered Nonwovens, of Middletown, NY, was contacted by BIS and told that their license to export T300 carbon fiber (ECCN 1C210.a) to Singapore was revoked due to the concerns surrounding the recipient. Performance Engineered Nonwovens then sought out to find a way to conceal the shipments to Singapore, cue Walter Anders and Terand.  Within a few weeks Anders and the president of Performance Engineered Nonwovens, Peter Gromacki, agreed to have Terand falsely act as the US exporter of record for exports of the items to Singapore in return for a $1,400 commission for each successful export.

Terand created and issued commercial invoices on letterhead that falsely named Terand as the exporter and falsely stated that, “This commodity technology exported from the United States is in accordance with the Export administration Regulations.” The company also acted as the intermediary between Performance Engineered Nonwovens and the freight forwarder, providing instructions to the forwarder, signing any and all required shipping documents, and receiving status reports on the progress of exports to Singapore. Terand also appeared as the US Principal Party in Interest (USPPI) on all of the Shipper’s Export Declarations (SED) that were filed.

Over the course of 2012 Terand made 8 exports of T300 carbon fiber to Singapore (approximately 6,557kg). Gromacki (Performance Engineered Nonwovens president) ensured that this process would continue and told Walter Anders that, “You continue to play a crucial role. I cannot export without your help and hence the commission checks will continue to flow in your direction.”

Walter Anders and his company, Terand, have been charged with 8 counts of Causing, Aiding, and/or Abetting Unlicensed Exports. The 8 illegal exports were valued at $288,736, Anders received $11,200 in commissions and 8 years of debarment.

Federal Register: https://www.federalregister.gov/articles/2016/08/19/2016-19819/in-the-matter-of-walter-anders-10701-huntersville-commons-drive-suite-c-huntersville-nc-28078-terand

Entrapment or Conspiracy? Either Way…Woman Sentenced to Over 4 Years in Prison for Conspiracy to Export to China

Tuesday, September 6th, 2016 by Danielle McClellan

By: Danielle McClellan

Wenxia Man, aka Wency Man, 45 of San Diego, was sentenced this month to 50 months in prison for conspiring to violate the Arms Export Control act by trying to export and cause the export of fighter jet engines, an unmanned aerial vehicle (drone) and related technical data to the People’s Republic of China.

Wency Man ran a family business with her husband that produced small electronic components used in cell phones and some radio devices. Around March 2011 she began trying to find jet fighter industry sources to help her find out what it would take to export a fighter jet to China. One of her “jet fighter industry source” contacts alerted federal authorities to Man and an undercover investigation was launched. Eventually Man began communicating with an undercover agent who said he worked for a fictitious company in Broward County; he told Man he could get her the following items on her list:

  • Pratt & Whitney F135-PW-100 engines used in the F-35 Joint Strike Fighter;
  • Pratt & Whitney F119-PW-100 turbofan engines used in the F-22 Raptor fighter jet;
  • General Electric F110-GE-132 engines designed for the F-16 fighter jet;
  • General Atomics MQ-9 Reaper/Predator B Unmanned Aerial Vehicle, capable of firing Hellfire Missiles; and
  • Technical data for each of these defense articles

Wency was trying to get all of the listed items sent to Xinsheng Zhang in China. Zhang works for the China military and the items would have been used by the government of China. Man explained to the undercover agent that Zhang was a “technology spy” and wanted stealth technology. The drone that he wanted was $50 million, and that didn’t include any of the fighter jets.

On June 9, 2016, Man was convicted of one count of conspiring to export and cause the export of defense articles without the required license, although it should be noted that this export would never have been approved by the US government. Man’s lawyer attempted to have the jury verdict thrown out based on the fact that, “It was our position that there was no conspiracy and that she was entrapped,” Alex Strassman (Man’s lawyer) said. “It was pretty clear what would have happened if the government would have left her alone. Nothing more would have happened.”

Fast forward a few months and Wency has been sentenced to 50 months in prison which proves that conspiring can be just as bad as following thru…even if there was almost zero percent chance of your plan actually becoming a reality.

Read More: https://www.justice.gov/opa/pr/california-woman-sentenced-50-months-prison-conspiring-illegally-export-fighter-jet-engines

Editor’s Note:  This story reminded me of the great song by Emerson, Lake and Palmer.  –JB

Wency Man

She had ITAR drones
And tech data by the score
All advanced technology
For export out the door

Ooooh, what a Wency Man she was
Ooooh, what a Wency Man she was

 

Hot section and stealth
They made up her bed
A technology spy
By which she was led

Ooooh, what a Wency Man she was

Ooooh, what a Wency Man she was

 

She procured technology
For her country and Peking
Of her honor and her glory
The people would sing

Ooooh, what a Wency Man she was

Ooooh, what a Wency Man she was

A conviction found her
“You’re guilty” the judge cried
No lawyer could save her
But she didn’t get fried
Ooooh, what a Wency Man she was
Ooooh, what a Wency Man she was

BIS Renews Temporary Denial Order for Mahan Airways, Skyco and Many Others

Tuesday, August 9th, 2016 by Danielle McClellan

On July 7, 2016 BIS extended the Temporary Denial Order (TDO) on the basis of preventing an imminent violation of the EAR for 180 days for the following entities:

  • Mahan Airways
  • Pjman Mahmood Kosarayanifard
  • Mahmoud Amini, Kerman Aviation
  • Sirjanco Trading LLC
  • Ali Eslamian
  • Mahan Air Gernal Trading LLC
  • Skyco (UK) Ltd.
  • Equipco (UK) Ltd.
  • Mehdi Bahrami
  • Al Naser Airlines
  • Ali Abdullah Alhay
  • Bahar Safwa General Tradeing
  • Sky Blue Bird Group
  • Issam Shammout

Order: https://efoia.bis.doc.gov/index.php/component/docman/doc_download/1069-e2467?Itemid=

China Telecomm Giant ZTE Gets Another Temporary Reprieve from US Export Denial List

Tuesday, July 12th, 2016 by Danielle McClellan

By: John Black

The Commerce Department’s Bureau of Industry and Security (BIS) announced that it is extending the temporary general license for ZTE to effectively suspend ZTE’s denial list status until August 30, 2016.  BIS originally put ZTE on its Entity List on March 8, 2016, based on BIS’ allegations that ZTE, including its senior management, established a complex network as part of its efforts to illegally transfer US technology to Iran and other prohibited destinations.  The original denial prohibited all transfers from anywhere in the world of US origin items to ZTE as well as exports from outside the United States of non-US origin items with more than 25% US controlled content and certain foreign items produced directly from using US technology.  The original listing was clearly the biggest EAR penalty ever imposed in my 32 years in this field.

As previously reported in this newsletter, on March 24, 2016 BIS announced a general license that effectively temporarily suspended until June 30, 2016, the denial  against:

  • Zhongxing Telecommunications Equipment (ZTE) Corporation (also referred to as ZTEC)
  • ZTE Kangxun Telecommunications Ltd.

Now BIS has extended that general license for these two entities through August 31, 2016.  It is easy to infer from this that ZTE must have originally refused to cooperate with BIS regarding the diversions to prohibited destinations, but after being placed on the Entity List ZTE rounded up a hoard of Washingotn lawyers and came crawling on its knees to BIS promising to cooperate and take decisive remedial actions.  The extension indicates that ZTE is continuing to cooperate with BIS, at least as much as is necessary to get the suspension of its denial extended until the end of August.

These two ZTE entities remain on the EAR Entity List:

  • Beijing 8 Star International Co.
  • ZTE Parsian

For more information go to:  http://www.bis.doc.gov/index.php/regulations/federal-register-notices#fr41799

Export Business Manager Pleads Guilty to Attempted Illegal Exports to Iran

Friday, May 27th, 2016 by Danielle McClellan

By: Danielle McClellan

Asim Fareed (age 51) of North Brunswick, NJ operated an export business in Somerset, NJ that agreed to ship items purchased by customers in Iran. Fareed provided false documentation to the US Department of Commerce for export purposes between 2013 and 2015. He created invoices that contained false information related to the identity and geographic location of the purchasers of the goods. The items were supposed to be shipped from the US to the UAE and then onto Iran. The items never were actually shipped.

Asim Fareed agreed to enter a plea to conspiracy to provide false statements in connection to the illegal export of goods to Iran. “The Office of Export Enforcement vigorously pursues violators of our nation’s export control laws, which are in place to further and protect our national security and foreign policy.  As in this instance, we work closely with our colleagues at HSI and other law enforcement agencies in prosecuting this case,” said Jonathan Carson, Special Agent in Charge, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office.
“This case demonstrates how far individuals will go to circumvent U.S. export laws to export goods to countries like the Islamic Republic of Iran,” said Angel M. Melendez, special agent in charge of HSI in New York. “The Iran Trade Embargo prohibits Americans from supplying goods, technology and services to Iran directly or indirectly. HSI is committed to aggressively pursuing those who conduct illegal business with Iran.”
The case was investigated by the Department of Commerce, Office of Export Enforcement and U.S. Immigration and Custom Enforcement’s (ICE), Homeland Security Investigations (HSI).  Assistant U.S. Attorney Todd K. Hinkley is prosecuting the case.
More information: https://www.justice.gov/usao-mdpa/pr/new-jersey-man-charged-conspiracy-provide-false-statements-related-export-prohibited

BIS Partially Reverses Historic EAR Penalty on ZTE—Red Flags Remain for All ZTE Transactions

Wednesday, April 6th, 2016 by Danielle McClellan

By: John Black

In the March 24, 2106 Federal Register the Bureau of Industry and Security  temporarily reversed part of the most significant export control penalty in at least 32 years (i.e., as long as I have been in export compliance) which BIS imposed when it placed Chinese telecommunications giant ZTE in the EAR Entity List on March 8, 2016. The result of that action was to prohibit all exports and reexports of all items subject to the EAR to four named ZTE entities—this penalty far exceeds the multi-million dollar penalties BIS has imposed on others who have violated the EAR. For me, the only EAR action that approaches the significance of the ZTE penalty is the addition of 20 plus Delft companies to the Denial List back in the 1980s.

Please see Doug Jacobson’s excellent article on the original BIS action against ZTE after this article.

On March 24, 2016, BIS announced a temporary general license authorizing the use of EAR license exceptions and No License Required (NLR) according to the EAR in place prior to BIS adding these two ZTE entities that were put on the Entity List on March 8, 2016:

  • Zhongxing Telecommunications Equipment (ZTE) Corporation (also referred to as ZTEC)
  • ZTE Kangxun Telecommunications Ltd.
  • These two ZTE entities remain on the EAR Entity List:
  • Beijing 8 Star International Co.
  • ZTE Parsian

By creating a temporary general license that is valid through June 30, 2016, BIS gives some relief to companies all over the world who do business with these two important entities which are critical companies that contribute significantly to ZTE’s global sales of over $16 billion. No doubt, in response to BIS’ addition of ZTE to its Entity List, ZTE and its lawyers flooded into a wide range of US Government entities requesting some sort of relief from the historically significant penalty.  I would have to guess that many non-ZTE companies expressed their concern to the US Government about how they were being harmed by the listing of ZTE.

Of course,  BIS may at any time cancel the temporary general license. Not only that, but the general license expires at the end of June if BIS takes no further action.   If you do business with ZTE, you should prepare for the worst even if you benefit now from the temporary general license.

Your Compliance Challenge Now:  Red Flags When Dealing with ZTE

Many exporters and reexporters have overlooked the fact that it may be prudent to consider that there is a Red Flag indicating a high risk of illegal diversion of EAR items any time you do business with any ZTE company. In its original action against ZTE, BIS published documents showing how ZTE constructed a network of entities to hide illegal shipments to Iran. In the case of ZTE, the illegal diversion scheme was not limited to the actions of a few unscrupulous sales people but involved senior ZTE officials creating a complex system, which may demonstrate that ZTE policy has been to make significant efforts to hide intentional violations of US trade controls.

It is unusual for BIS to publish such documents that show the evidence and background of illegal actions.  Without a doubt, everyone now knows that ZTE, at a high level, has taken extensive actions both to intentionally violate US trade controls and to hide its violations. So, now that you know it, thanks to BIS publishing evidence, it can be argued that you should presume there is a significant risk of ZTE illegally diverting the items it gets from you to unauthorized countries or recipients (e.g., the two ZTE entities that remain on the Entity List).  If there is a Red Flag that indicates a risk that ZTE will illegally divert the items it gets from you, that means that you should exercise more than average due diligence for your transfers of items controlled by the EAR to any ZTE entity. That does not mean that you may not do business with ZTE, but it does mean it would be prudent to ask additional questions or obtain additional assurances in writing from ZTE to give you confidence that ZTE will not illegally transfer your items.

If OFAC Denies Your License Application…Stop!

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

Great Plains Stainless Co. (GPS) of Tulsa, Oklahoma has agreed to pay $214,000 to settle allegations that it violated the Office of Foreign Assets Controls (OFAC) regulations in 2009. GPS sold goods that its Chinese vendor shipped from Shanghai to GPS’s customer in Dubai via MN Sahand, a vessel that is considered blocked property (EO 13382). GPS also created new bogus trade documents, with references to the blocked vessel to be removed and then transferred these altered documents to its Dubai customer to facilitate the release of the goods that were held at the port in Dubai.

GPS did not voluntarily disclose these violations to OFAC, the maximum penalty could have been $500,000. The settlement amount is reflective of the following:

  • GPS acted willfully since they altered the bill of lading
  • They disregarded verbal and written guidance from OFAC stating that the company should consult with OFAC’s Licensing Division before engaging in the transaction
  • GPS had submitted a license application to OFAC seeking authorization for this transaction and was denied but followed thru with the transaction
  • They did not have a compliance program in place at the time of the alleged violations.
  • The company has not received a penalty notice or Finding of Violation from OFAC in the past five years
  • GPS had no reason to know that the blocked vessel was to be used for the shipment until the vessel’s sailing date
  • They are a small company
  • GPS took remedial measures to prevent future violations

Read the full document at: http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20150724_gps.pdf

$500,000 Penalty for Illegal Pump Exports

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

Lewis Pumps Division d/b/a Weir Minerals Lewis Pumps (Envirotech) has been fined $500,000 for exporting globe, gate, and butterfly valves (ECCN 2B350) to China, Russia, and other illegal destinations without licenses. The charging letter indicates that between December 2007 and July 2011 the company exported these items on 32 occasions at an approximate value of $1.4 million.

The $500,000 fine isn’t as bad as it may seem. Envirotech must pay $150,000 up front and the remaining $350,000 will be suspended and waived after two years as long as the company doesn’t commit any violations during those two years. What may be much more painful than the $150,000 fine, the company has agreed to two audits of their export compliance program. The results of the audit must be submitted to the Department of Commerce. The first audit will cover the 12 month period prior to the Order (July 2015) and must be received by BIS no later than 3 months from the Order. That’s a quick turnaround for a comprehensive audit not to mention that the Order states that the audit will be, “substantial with the Export Management and Compliance Program (ECMP) sample audits module, and shall include an assessment of Envirotech’s compliance with the regulations.”

Order and Charging Letter: http://efoia.bis.doc.gov/index.php/component/docman/cat_view/18-export-violations/34-export-violations-2015?Itemid=

No More Oil from Yuzhno-Kirinskoye Field

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

The Bureau of Industry and Security (BIS) has added the Russian oil and gas field, the Yuzhno-Kirinskoye Field to the Entity List. This field is located in the Sea of Okhotsk and has been reported to contain substantial reserves of gas and oil. Due to this information the US Government has decided that exports, reexports, and transfers (in-country) of items subject to the EAR to Yuzhno-Kirinskoye will require a BIS license.

This field will be listed on the Entity List under the destination of Russia effective August 7, 2015. The rule will also change the following:

Clarify the introductory text of the Entity List to specify that the embargoes and other special controls part of the EAR is also used to add entities to the Entity List

  • The first sentence of the introductory text of the Entity List to add a reference to part 746. This clarification to the introductory text will make it clear that this Supplement lists certain entities subject to license requirements for specified items under this part 744 and part 746 of the EAR.

Change the Russian industry sector sanctions by clarifying the additional prohibition on those informed by BIS also includes end-uses that are within the scope of the Russian Industry sector sanctions.

  • In § 746.5 (Russian industry sector sanctions), this final rule revises the second sentence of paragraph (a)(2) for the additional prohibition on those informed by BIS to add the term ‘‘end- use’’ after the term ‘‘end-user.’’ This change clarifies that the additional prohibition described in this paragraph (a)(2), as part of the BIS ‘‘is informed’’ process, may be based on an end-user or end-use when BIS determines there is an unacceptable risk of use in, or diversion to, the activities specified in paragraph (a)(1) of this section in Russia. This clarification does not change the scope of § 746.5, but rather clarifies the cases in which BIS will use the ‘‘is informed’’ process to assist exporters, reexporters, and transferors to ‘‘know’’ when an export, reexport, or transfer (in-country) is subject to the license requirements specified in § 746.5.

Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-08-07/pdf/2015-19274.pdf

US and EU Impose Economic Sanctions in Response to the Crisis in Ukraine

Tuesday, May 6th, 2014 by Brooke Driver

By: A. Esslinger, L. Grove & L. Van Buren
(Source: Anita Esslinger, anita.esslinger@bryancave.com)

As part of the broad and ongoing international response to the crisis in Ukraine, the United States, the European Union and other countries have imposed or announced economic sanctions against persons involved in the crisis. While not explicit, the US sanctions include measures that will allow the United States to impose sanctions on persons that threaten peace and security in Ukraine, including those who are asserting governmental authority in the Crimean region. As yet, however, no person has been identified as a target of the sanctions. In contrast, the European Union’s sanctions specifically target former Ukrainian President Viktor Yanukovych and seventeen other members of his former regime, but at this time avoid targeting the Russian Federation.

Persons and entities that are engaging in business involving Ukraine and Russia should keep a close eye on these sanctions and future developments in order to comply with the law.

United States:

On March 6, President Obama signed an Executive Order imposing sanctions against and prohibiting entry into the United States by persons determined to be involved in the Ukrainian crisis. Persons targeted by these sanctions include those who (a) are involved in the breakdown of or threats to democratic processes or institutions, peace, security, stability, sovereignty, territorial integrity, or the proper disposition of assets in Ukraine; (b) have been determined “to have asserted governmental authority over any part or region of Ukraine without the authorization of the Government of Ukraine;” or (c) are either leaders of entities involved in such activities, have provided assistance or support for such activities or for a person sanctioned for such activities, or are owned or controlled by or acting on behalf of a person sanctioned for such activities.

Among other things, the Executive Order freezes sanctioned persons’ property and interests in property in, or that come into, the United States or that are in the control or possession of US persons (including persons in the United States, US citizens and permanent resident aliens, and US entities and their foreign branches). The Executive Order also prohibits the contribution or provision of funds, goods, or services by, to, or for the benefit of any sanctioned person-including donations of humanitarian articles-and the receipt of any funds, goods, or services from any sanctioned person.

The Executive Order does not yet list any person designated as a target of the sanctions. Administration officials have said that about a dozen persons are now subject to the travel ban although the list is being withheld for privacy reasons. Officials also have said that more people would be added to the travel ban over the coming days.

The United States had previously taken softer actions to protest Russia’s involvement with Ukraine, such as suspending trade, military, and multilateral engagement with Russia (including the G-8 summit). By including those asserting governmental authority over any part of Ukraine without the authority of the Ukrainian government the U.S. sanctions also target officials of Crimea who are cooperating with the Russian invasion. The Executive Order also provides the US Government sufficient latitude to designate officials of the Russian Federation who, in the US Government’s view, engage in such actions, threaten the peace or territorial integrity of Ukraine or provide material assistance for such activities.

US Secretary of State John Kerry has reportedly characterized the Executive Order as merely providing a tool. The US Congress is also considering legislation to deal with the crisis.

European Union:

On March 5, the Council of the European Union adopted a Regulation directly applicable in all the EU Member States, imposing sanctions against former Ukrainian president Viktor Yanukovych and seventeen other members of his former regime. Notably, these sanctions did not include any Russian nationals or entities. The former Ukrainian leaders are under investigation by the new Ukrainian government for embezzlement of state funds and the illegal transfer of those funds outside of Ukraine.

The Regulation applies with immediate effect. With limited exceptions, it requires funds and economic resources of the designated persons to be frozen and prohibits making available, directly or indirectly, funds or economic resources to or for the benefit of the designated persons. The term “economic resources” means all kinds of assets, including goods. Thus, supply of goods to designated persons is prohibited. The Regulation also requires certain reporting to competent authorities in the relevant EU Member States, such as with respect to information on accounts and amounts frozen in accordance with the Regulation.

The reach of the Regulation is broad, applying: 1) within the EU; 2) to individuals who are nationals of an EU member state, wherever located; 3) to all EU legal persons (companies and organizations incorporated or constituted under the laws of an EU member state), wherever they are in the world; and 4) to any legal person in respect of any business done in whole or in part within the EU.

Notably, while talk of travel and visa restrictions against the former regime was mentioned in previous European Council talks, no official announcement of such restrictions has yet been made, although they may be applied without public notice.

Meanwhile, the Council continued to meet in emergency session on March 6 and voted to suspend talks with Russia on a wide-ranging economic pact and a visa agreement. Further sanctions in line with the US asset freeze and travel ban aimed directly at Moscow will be held in reserve pending the outcome of diplomatic efforts.

Other Nations:

So far, the US remains the only nation to announce that it may impose sanctions against Russia. Several non-EU European nations, including Switzerland, Lichtenstein and Norway, have also announced asset freezes and travel bans on former Yanukovych regime members, but stopped short of sanctions on Russia. US neighbor Canada has also moved swiftly to follow the sanctions on the former Ukrainian president; but, although it has suspended participation in the Russian-Canadian Intergovernmental Economic Commission and recalled its ambassador to Russia, it too has taken no further steps against Russia.

Events in Ukraine continue to move quickly. Great vigilance is the order of the day.