The Defendants
·    The Parts Guys LLC, a company in Port Orange, Fla., that maintains a warehouse at the Middle Georgia Municipal Airport in Macon, as well as the president of The Parts Guys, Michael Edward Todd, who is a U.S. national.
o    Todd pleaded guilty to violating the Arms Export Control Act and faces a possible 40 years in prison.
·    Galaxy Aviation Services, a company in St. Charles, Ill., and its president, Hamid Seifi, also known as Hank Seifi, an Iranian-born U.S. national.
o    Seifi pleaded guilty to conspiracy to violate the AECA and violations of International Emergency Economic Powers Act, receiving 56 months in prison followed by three years of supervised release, a fine of $12,500 and forfeiture of $153,950, while Galaxy Aviation, which is now defunct, received a $400 special assessment.
·    Aerotechnic, a company in Pinsaguel, France, and its president, Philippe Sanchez, a French national, as well as Luc Teuly, a French national and the sales manager of Aerotechnic.  Each of these defendants remains a fugitive.
·    Aletra General Trading, a company in Dubai doing business as “Erman & Sultan Trading Co,” and Syed Amir Ahmed Najfi, an Iranian national and purchaser for Aletra. Najfi remains a fugitive.
·    They are Sabanican Company, a company in Tehran, and its president, Hassan Seifi, an Iranian national, as well as Reza Seifi, an Iranian national and the managing director of Sabanican Company.  Each of these defendants remains at large.

The Charges
·    Conspiring to export components for attack helicopters and fighter jets to Iran without obtaining the required U.S. export licenses.  These components included military parts for the Bell AH-1 attack helicopter, the UH-1 Huey attack helicopter, as well as the F-5 and F-4 fighter jets (All defendents).
·    Placing orders and purchased military aircraft parts, including those for the Bell AH-1 attack helicopter, from Todd and his company, The Parts Guys, in the United States.  Todd and other conspirators then attempted to and did cause the export of the aircraft parts to the U.A.E.  (Defendant Najfi & his firm).
·    Placing orders and purchasing U.S. aircraft parts from Todd and his company in Georgia — on behalf of Hassan Seifi, Reza Seifi and their company in Iran.  According to the charges, Todd and other conspirators then caused these aircraft parts to be exported to Iran via the defendants in France: Sanchez, Teuly and their company, Aerotechnic.

Maximum penalties (years in prison)
·    Conspiracy- 5
·    Violating the AECA- 20
·    Violating IEEPA- 20
·    Money laundering- 20
·    Making false statements- 5

More information: http://www.wltz.com/Global/story.asp?S=14963374

A company needs three levels of training

1)      Expert training: The core export compliance experts need to be experts on the rules

2)      Awareness training:  A wide range of company personnel need to trained to know what issues export rules create and how to handle them or whom to ask for help

3)      Executive training:  Top level management needs to understand the risks of violation and how export rules impact the company’s business activities so management can decide how much money and resources to spend on compliance.

This article will focus on expert training.  I will write articles later to discuss the other training.

A starting point for any company export compliance program is for the company to figure out what the rules are and how they apply they apply to the company’s products, technologies and activities.  This usually means that the company, depending on its size and export issues, appoints one or two, or maybe a few people to be the export compliance experts.  While someone new to export compliance theoretically could learn the rules by reading the rules, it is usually much better for the newbie to be taught what the rules say and how they work before digging into the voluminous, arcane, and complicated regulations.  There are various export control regulations—the Export Administration Regulations (EAR), the International Traffic in Arms Regulations (ITAR), the Foreign Trade Regulations (FTR), plus the various Office of Foreign Assets Control (OFAC) regulations—and the company needs to know if and how each of these regulations impacts the company.

And, unfortunately, a quick glance is not enough and common sense won’t help—who would think the ITAR regulates exports of items involved in sending TV signals for the Sunday football game to your house?  You need to learn what the rules actually say.  Beware of company folk lore—“we’ve always done it this way,” or “if we sell to the military its ITAR, but if we sell to somebody else it is not ITAR,” or “the ITAR does not let you put technical data in the ‘public domain.’”  You need to focus on learning the rules themselves.

Beware of oral information that contradicts the rules—whether from a government or other source.  Sure, maybe today the government interprets the word “green” to include “yellow” because yellow is a precursor to green.  But if the rules do not say that, and you act as if green does not include yellow, you have put yourself in a defendable position, to say the least.  Most of us do not talk to every government official in Washington so that we know the interpretation of the day — and we don’t know if 99% or only 0.01% of the government interprets green to include yellow.  Learn how to read the rules — then do what they say!

Once you start on the long path to becoming an expert on the rules, you have to figure out what procedures you will implement to help your company follow the rules.  Technically, in most cases, implementing procedures is optional because it is not a violation to fail to have compliance procedures.  It certainly is prudent, however, to implement compliance procedures if you want to do a good job on compliance.

Going to a live seminar is the best form of training.  There is nothing better than being able to interrupt a knowledgeable speaker and ask a question when it pops into your head.  A key part of live training may be the 5 minutes you spend at a break talking to the instructor about a specific issue.  Electronic or online training is better than nothing if your company is not willing to pay for live training, or if live training is otherwise not an option.

In any event, you need to make sure the people giving the training are experts on the rules.  They need to be able to give practical advice on the many different approaches you can take in implementing company procedures to follow the rules.  Verify the expertise of the trainers.  A person’s title or pay grade is not a key factor, nor is whether the person works in or outside of the government.  The best thing to do is talk to industry experts who actually have received training from the person giving the training you are considering.

Your goal should be to become an expert on the rules, or perhaps an expert on the rules that specifically impact your company.  This is a difficult task but you can do it.  (If I can do it, anybody can, trust me.)  To be an expert, you need regular and repeated training.  The first training you get to introduce you to the topic may be overwhelming, so just try to pick the most important issues—for example, take away the fact that you need to do export jurisdiction determinations and classifications for all of your hardware, technical data and software, but don’t worry if you didn’t memorize the second exception to the first prohibition in the antiboycott regulations.

Go to each training after the first with two objectives.  First, to hear people validate that what you think is true is true.  These export rules are often illogical and hard to believe so you might start doubting your understanding.  You will get value from just listening to somebody say that a convoluted rule means what you think it means.  You second objective is to learn more.  Eventually you need to understand the second exception to the first prohibition in the antiboycott regulations.  I know people who are experts and continue to attend the same seminar 5 – 10 times because they always get something new out of it.

If you are an export compliance professional, you need to embrace this reality:  The more you learn about the export compliance rules, the more difficult it becomes to comply with the rules.  Think about it:  A novice thinks export controls just mean taking care of exports of products.  As that person learns more he realizes that export compliance applies to hundreds of emails leaving his facility daily, and then that his employees with work visas present export compliance issues.  More and more training will not make your life easier, but will likely just add more things to your list of things do to as you learn about a rule you did not know about, or as you notice a different aspect of a rule.

As you can see, training is not a onetime event.  You should be training at least once a year, and I recommend twice a year in most cases.  I already discussed how the complexity of the rules calls for repeated training.  These rules also change.  The government procedures often change (hmm, the ITAR Agreement Guidelines come to mind!).  You need to stay up to date with changes and continue to grow and build your expertise.

Having well trained export compliance experts is good for your company.  Being a well-trained export compliance expert is good for you.  As your expertise grows, so does your confidence in your knowledge, and that puts you in a better position to tell your engineer “yes, it is true that we have to treat the employee with a work visa as an export issue.”  You will encounter people who want to comply with what the rules ought to say or what they would like for them to say.  You argue against those people by showing them what the rules say.  Your expertise will enable you to point to the rules as the basis for the positions you take so you can say “maybe it does not make sense, but this is what it says.”

And, of course, being well trained on export compliance is a valuable addition to your resume!

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John Black has been in the field of export controls since 1984, is a consultant with BSG Consulting and a regular speaker for The Export Compliance Training Institute (ECTI).  ECTI offers live seminars for US Companies and companies located overseas.  The current schedule of their seminars can be found at http://learnexportcompliance.com/schedule

This policy was brought on by the Government of Kyrgyzstan’s harsh response to demonstrators and the general disorder there.

As you can tell DDTC did not say it had stopped processing applications, it looks like that most applications will either  be put on hold or denied except in obvious cases where it is in the interests of the US Government that an application be approved.

Two interesting points:  First, the freight forwarder got nailed for arranging the export to a party on the Entity List.  This shows that forwarders and other parties involved in facilitating exports can be penalized for participating in illegal exports.  I have not heard that the actual exporter got penalized in this case.  I do not know who the exporter is, but I got this website when I googled Stack Sizer Screening Machine:  http://www.derrickcorp.com/webmodules/catCatalog/dtl_Product.aspx?ID=33 and that company is in Buffalo with G&W.  I do not know why the exporter got penalized but if I had to make a wild guess, I would say maybe the actual exporter did a voluntary disclosure and maybe the exporter did not warn G&W it was doing a disclosure so that G&W could do its own disclosure.

The second interesting point is that $20,000 penalty is not much of a deterrent.  I doubt you can use this case to convince your management that you should be doing a better job of screening against the denial lists.  In fact, an unscrupulous person could argue that it is cheaper to pay a $20k fine than to implement comprehensive denial list screening procedures.  Of course, penalties are based on an assessment of aggravating and mitigating factors.

http://efoia.bis.doc.gov/exportcontrolviolations/tocexportviolations.htm

According to the ASI settlement agreement:

• In January 2006 ASI violated the Iranian Transaction Regulations (ITR) when it shipped communications equipment from the United States via the Netherlands to Iran.

• In February 2007 ASI violated the ITR when it attempted to ship aerospace grade aluminum from the United States via Netherlands to Iran and when it exported those items from the United States to the Netherlands with knowledge the items were destined for Iran.  (Apparently that shipment was stopped in the Netherlands.)

• In March 2007 ASI violated the ITR when it attempted to ship polymide film from the United States indirectly to Iran.  In July 2007 ASI violated the ITR when it attempted to arrange for the goods to be shipped to a fictitious purchaser in Dubai.   (Apparently after the stuff above was stopped in the Netherlands they figured they should ship via Dubai.)

ASI and the two Kraaipoels each where charged with one charge of conspiracy to violate the EAR.  They were each fined the maximum amount of $250,000 per violation, but the penalty is suspended for three years if they don’t have additional violations.  The charging letters said that in committing their acts of conspiracy they “devised and employed a scheme to purchase these items from the US on behalf of Iranian customers and give US manufacturers false information regarding the ultimate destination, end-user and end-use of the items, thereby causing false export control documents to be submitted to the US Government.”

Unfortunately for these guys, the total value of the transactions was $63,511, and they probably didn’t get paid for the two transactions that apparently didn’t get to Iran.  Clearly, for the Kraaipoels, crime didn’t ‘paay.’

The settlement agreement describes an intricate scheme of processing code names, modifications to internal controls, and procedures designed to avoid any detection of involvement with Iranian banks in transactions processed through US banks. The 5,000 EFTs that were uncovered were all processed through Credit Suisse’s US subsidiary after the bank had altered information that would have otherwise been detected because of prohibited parties. The settlement also specified that several Credit Suisse executive and employees, including an individual responsible for compliance, were aware of the activities and the fact that US laws were being violated.

Credit Suisse voluntarily disclosed its own internal investigation of the illegal EFTs to OFAC in 2006, however the company failed to notify OFAC of another internal investigation it was conducting in a US dollar clearing bank for payments which involved sanctioned countries and persons. Credit Suisse did finally disclose this investigation to OFAC in 2007 but, by that point, OFAC had already launched its own investigation into these matters, causing Credit Suisse not to receive voluntary disclosure credit for those violations. The bank was charged with the following violations:
•    10 violations of Furnishing information about business relationships with boycotted countries or blacklisted persons involving transactions with Syria (15 CFR 760.2(d))
•    5 violations of Refusal to do business (15 CFR 760.2 (a))
•    5 violations of Furnishing to report the request to engage in a restrictive trade practice or foreign boycott (15 CFR 760.5)

The lessons to learn from this case are that international entities that are subject to US jurisdiction need to be aware of the risks involved in dealing with prohibited parties and when voluntarily disclosing any violations-disclose all violations, even suspected ones (OFAC’s economic sanctions enforcement guidelines offer a 50% reduction in fines with voluntary disclosure “credits”).

Information: http://www.treas.gov/offices/enforcement/ofac/civpen/penalties/12162009.pdf