Archive for the ‘DOJ’ Category

Justice Publishes Summary of Major U.S. Export Enforcement, Economic Espionage, Trade Secret, and Embargo-Related Criminal Cases

Thursday, March 30th, 2017 by Danielle McClellan


(Source: Justice)

The U.S. Department of Justice (DoJ) has published its Summary of Major U.S. Export Enforcement, Economic Espionage, Trade Secret, and Embargo-Related Criminal Cases, (January 2014 to the present: updated February 17, 2017), available at here.

The list contains a brief description of some of the major export enforcement, economic espionage, theft of trade secrets, and embargo-related criminal prosecutions by the Justice Department since January 2014. These cases resulted from investigations by the Homeland Security Investigations (HSI) [formerly Immigration and Customs Enforcement (ICE)], the Federal Bureau of Investigation (FBI), the Department of Commerce’s Bureau of Industry and Security (BIS), the Pentagon’s Defense Criminal Investigative Service (DCIS), and other law enforcement agencies.

DOJ Publishes “Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations”

Tuesday, November 15th, 2016 by Danielle McClellan


(Source: Department of Justice, National Security Division)

The subject Guidance document is available for download HERE.  Below is a reprint of the Introduction of the 11-page document.

Foreign governments and other non-state adversaries of the United States are engaged in an aggressive campaign to acquire superior technologies and commodities that are developed, manufactured, and controlled in, and by, the United States. Such acquisitions – when conducted in contravention of U.S. law and policy – undermine the comparative and competitive advantages of U.S. industries and warfighters and, consequently, the national and economic security of the United States.

Thwarting these unlawful efforts is a top priority for the National Security Division (NSD) of the Department of Justice (DOJ). Working in partnership with U.S. Attorneys’ Offices, law enforcement and regulatory agencies, other U.S. government stakeholders, and our foreign government counterparts, NSD utilizes an “all-tools” approach to prevent and combat the unlawful export of commodities, technologies, and services, as well as to block trade and transactions with sanctioned countries and designated individuals and entities.

In particular, NSD has made it a priority to pursue willful export control and sanctions violations by corporate entities and their employees. Working with the U.S. Attorneys’ Offices, NSD aggressively directs and supports investigations of corporate criminal misconduct through grand jury subpoenas, search warrants, witness interviews, and other mechanisms to obtain evidence from multinational corporations operating in U.S. markets or utilizing the U.S. financial system. Where appropriate, NSD pursues international assistance to obtain the necessary evidence to build criminal cases. Where such investigations reveal willful violations of U.S. export controls and sanctions, NSD and U.S. Attorneys’ Offices seek to hold corporate entities criminally liable and prosecute culpable employees individually.Consequently, business organizations and their employees are at the forefront of our enforcement efforts. As the gatekeepers of our export-controlled technologies, business organizations play a vital role in protecting our national security. However, when NSD learns of willful violations of U.S. export controls and sanctions, NSD is committed to using all of its tools to protect our national security and deter similar criminal misconduct.

This Guidance memorializes the policy of NSD to encourage business organizations to voluntarily self-disclose criminal violations of the statutes implementing the U.S. government’s primary export control and sanctions regimes – the Arms Export Control Act (AECA), 22 U.S.C. § 2778, and the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1705.

This Guidance applies only to export control and sanctions violations. It sets forth the criteria that NSD, through the Counterintelligence and Export Control Section (CES) and in partnership with the U.S. Attorneys’ Offices, uses in exercising its prosecutorial discretion in this area and in determining the possible benefits that could be afforded to an organization that makes a voluntary self-disclosure (VSD), as defined below. This Guidance also implements in export control and sanctions cases the memorandum of the Deputy Attorney General dated September 9, 2015, promoting greater accountability for individual corporate defendants (DAG Memo on Individual Accountability), as well as the November 2015 revisions to the Principles of Federal Prosecution of Business Organizations set forth in the U.S. Attorneys’ Manual (USAM Principles). See USAM 9-28.000 and USAM 9-28.900.

Almost all criminal violations of U.S. export controls and sanctions harm the national security or have the potential to cause such harm.  This threat to national security informs how NSD and U.S. Attorneys’ Offices arrive at an appropriate resolution with a business organization and distinguishes these cases from other types of corporate wrongdoing. In determining what credit to give an organization that voluntarily self-discloses illegal export control or sanctions conduct, fully cooperates, and remediates flaws in its controls and compliance program, federal prosecutors must balance the goal of encouraging such disclosures and cooperation with the goal of deterring these very serious offenses. If successful, this Guidance will serve to further deter individuals and companies from engaging in export control and sanctions violations in the first place, encourage companies to implement strong export control and sanctions compliance programs to prevent and detect such violations, and, consistent with the DAG Memo on Individual Accountability, increase the ability of NSD and U.S. Attorneys’ Offices to prosecute individual wrongdoers whose conduct might otherwise have gone undiscovered or been impossible to prove.

This Guidance aims to provide greater transparency about what is required from companies seeking credit for voluntarily self-disclosing potential criminal conduct, fully cooperating with an investigation, and remediating. Accordingly, the Guidance first explains what constitutes a VSD, full cooperation, and timely and appropriate remediation. Second, the Guidance provides examples of aggravating factors that, if present to a substantial degree, could limit the credit an organization might otherwise receive, though the company would still find itself in a better position than if it had not submitted a VSD, cooperated, and remediated. Third, the Guidance explains the possible credit that may be afforded to a business organization that complies with the mandates set out below, including the disclosure of all relevant facts about the individuals involved in the wrongdoing. Finally, the Guidance provides sample scenarios that demonstrate the application of this policy.

Ordinarily, when an organization voluntarily self-discloses violations of U.S. export controls and sanctions, it presents its VSD to the appropriate regulatory agency under the procedures set forth in the agency’s regulations. It is not the purpose of this Guidance to alter that practice. Business entities should continue to submit VSDs to the Department of State, Directorate of Defense Trade Controls (DDTC) for violations of the International Traffic in Arms Regulations (ITAR); to the Department of Commerce, Bureau of Industry Security (BIS) for violations of the Export Administration Regulations (EAR); and to the Department of the Treasury, Office of Foreign Assets Control (OFAC), for violations of U.S. sanctions regulations. However, as discussed further below, when an organization, including its counsel, becomes aware that the violations may have been willful, it should within a reasonably prompt time also submit a VSD to CES.

This Guidance does not supplant the USAM Principles. Prosecutors must consider the ten factors set forth in the USAM when determining how to resolve criminal investigations of organizations. However, this Guidance does set forth the way that NSD and U.S. Attorneys’ Offices will evaluate credit for companies that voluntary self-disclose, fully cooperate, and remediate in export control and sanctions cases.

Full Document:

Justice Department Publishes Major Export Enforcement Cases

Tuesday, August 9th, 2016 by Danielle McClellan


(Source: Justice)

The link below provides a brief description of some of the major export enforcement, economic espionage, theft of trade secrets, and embargo-related criminal prosecutions by the Justice Department since January 2008. These cases resulted from investigations by the Homeland Security Investigations (HSI) [formerly Immigration and Customs Enforcement, (ICE)], the Federal Bureau of Investigation (FBI), the Department of Commerce’s Bureau of Industry and Security (BIS), the Pentagon’s Defense Criminal Investigative Service (DCIS), and other law enforcement agencies. This list of cases is not exhaustive and only represents select cases.

The Department of Justice, National Security Division, has posted its “SUMMARY OF MAJOR U.S. EXPORT ENFORCEMENT, ECONOMIC ESPIONAGE, TRADE SECRET AND EMBARGO-RELATED CRIMINAL CASES (January 2009 to the present: updated August 12, 2015)” at the DOJ website.

Compliance Professionals: The Federal Government is Coming for You!

Thursday, October 1st, 2015 by Danielle McClellan


By: Stephen Wagner

In my article on Personal Liability for Export Violations, originally published in February 2015, I warned that a federal appellate court had recently decided in United States v. Trek Leather, Inc., 767 F.3d at 1288, 96-99 (Fed. Cir. 2014) (en banc), that corporate officers may be held personally liable for civil penalties in cases in which import laws were violated.  I speculated that export enforcement agencies may use the ruling in Trek Leather to increase their assessments of civil penalties against the principals of export companies.

That speculation just turned into a virtual certainty.

In a move that will have far-reaching effect on exporters – as well as importers and any company whose activities are regulated by the federal government – the U.S. Department of Justice (DoJ) issued a memorandum dated September 9, 2015, on Individual Accountability for Corporate Wrongdoing.

The new guidelines prioritize the Justice Department’s focus on individual responsibility in cases involving both civil and criminal corporate wrongdoing, and set forth six steps that will strengthen the DoJ’s “pursuit of individual corporate wrongdoing”:

  1. In order to qualify for any [consideration for cooperation under the DoJ’s Principles of Federal Prosecution of Business Organizations], corporations must provide to the Department all relevant facts relating to the individuals responsible for misconduct.
  2. Criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
  3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
  4. Absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.
  5. Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any [decision not to bring civil claims or criminal charges against the individuals who committed the misconduct] in such cases.
  6. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

(Emphasis added.)

What does all of this mean for executives and employees working in export compliance?

It is important to understand that whenever a U.S. government enforcement agency such as the Office of Export Enforcement (OEE) in the Bureau of Industry and Security or Homeland Security Investigations (HSI) (on behalf of the Directorate of Defense Trade Controls) initiates an investigation, it follows DoJ guidelines with an eye toward bringing civil and/or criminal charges against the violators.  While individuals have always been subject to charges for criminal violations of export laws, rarely before have individual executives or compliance professionals in an export company faced civil charges and monetary penalties for export violations.

And then came Trek Leather, which put individuals on notice that they could be held personally liable for export violations and made to pay civil penalties in such cases.  (Over $570,000 for the president of Trek Leather.)  Now, these DoJ guidelines make clear that compliance professionals at all levels will be in the crosshairs when federal enforcement officials investigate a potential violation.

In fact, the DoJ memo makes it a prosecutorial requirement that formal consideration of potential charges against individuals be part of any process of resolving claims against the company in general.  Moreover, in the event that an investigation concludes with criminal or civil charges against a corporation and the investigators do not want to press charges (criminal or civil) “against the individuals who committed the misconduct,” such a decision must be approved in writing by the United States Attorney (the senior lawyer in every judicial district) or an Assistant Attorney General.  This high standard will make it incredibly difficult for charges to be brought against an exporter without charges being brought against the individual who is responsible for the violation.

These new Justice Department guidelines also create a two-way incentive for companies to offer up to investigators the individuals responsible for violations and for individuals to spill everything on their superiors who also knew of the behavior.  As seen in the first of the “six steps” above, companies cannot obtain leniency under federal charging (and sentencing) guidelines unless they provide “all relevant facts” regarding the individuals involved.  Turning to the individuals, the DoJ comments as follows:

“by focusing our investigation on individuals, we can increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation and provide information against individuals higher up the corporate hierarchy.”

(Emphasis added.)

This language clearly implies that – going forward – the initial focus of federal investigators will be not only presidents and chief compliance officers of the company, but also those employees who are responsible for day-in day-out export compliance matters and who, most likely, actually committed the violation.

As I and my colleague, Andrew Ittleman, discussed in our March 2015 webinar on personal liability for export violations, there are steps that companies and compliance professionals should take to help mitigate the risk of personal liability for civil penalties.  These steps include reviewing and updating company policies, indemnifications, insurance, and governance documents (e.g., bylaws or operating agreements) so as to address the new risks to individual employees presented by these DoJ guidelines.  However, as the new DoJ guidelines make clear (and as we discussed in the webinar), the best overall protection for compliance professionals is still to have a robust export compliance program and to faithfully execute that program every day.

Justice is Blind…Unless You’re a Native of China—In That Case, Assume the Position!

Thursday, October 1st, 2015 by Danielle McClellan


By: Danielle McClellan

Earlier this year (May 2015) a Chinese-American Physics Professor at Temple University was dragged from his home in handcuffs accused of emailing design schematics for a pocket heater to a colleague in China.  This pocket heater is not the device you put in your coat pocket at chilly November football games but is a sensitive piece of equipment used in superconductor research.  Dr. Xiaoxing Xi, Chairman of the Physics Department, was arrested in front of his daughters, stripped of his professional position, and restricted from having any communications with anyone at Temple University. DOJ Press Release:

Fast forward to last week…the government has dropped all charges against Dr. Xiaoxing Xi after finding out that the design schematics that they thought were for a pocket heater were actually for something else. Apparently, the prosecutors and FBI agents did not understand the design and jumped the gun when they saw the email with the blueprints. The US government is aggressively combating against outside and inside employees trying to steal government and corporate secrets…but that doesn’t excuse this.

Dr. Xi said this to the New York Times: I don’t expect them to understand everything I do. … But the fact that they don’t consult with experts and then charge me? Put my family through all this? Damage my reputation? They shouldn’t do this. This is not a joke. This is not a game.

Dr. Xi’s lawyer, according to the Times, went further and suggested that the prosecution targeted Dr. Xi because he was Chinese. If he was Canadian-American or French-American, or he was from the U.K., would this have ever even got on the government’s radar? I don’t think so.

It should also be noted that a similar case was dismissed a few months ago…seems that following the rules may not keep you out of trouble anymore if you are an American citizen of Chinses ancestry.

More Information:

Export Compliance Training? Important? You betcha!

Monday, April 4th, 2011 by John Black


By: John Black

The risks of fines of hundreds of thousands — or even millions — of dollars for violations make export compliance important.  The complicated, arcane, and voluminous regulations that impose incredible burdens on your day-to-day business activities make export compliance difficult.  A thorough and effective multi-level company training program makes a reasonable level of export compliance achievable.

A company needs three levels of training (more…)

The Check’s in the Mail (Export Control Reform [Again])

Wednesday, June 9th, 2010 by John Black


Editorial Analysis by John Black

I am old.  I can’t even count the number of times I have heard well intentioned high level government officials tell us that they plan to make significant reforms in the US export control system.  Some government officials have told me that they are going to make the system so transparent and user friendly that they will put consultants like me out of business.

It’s been 26 years for me in this business and numerous government pledges to make things better.  As far as I can tell, I am still here and there is still a huge demand for assistance in dealing with the infinite number of problems that US export controls create for companies who try to comply with the rules.  Yes, this reform could be different.

So, I apologize (for a change) in advance for being the cynic as a good number of my peers spout enthusiastically about Defense Secretary Gates’ call for comprehensive reform to the US export control system.  Reform certainly makes sense.  Comprehensive reform could both promote national security and make compliance a bit easier for companies.

Comprehensive reform is highly unlikely.  Adjustments to certain aspects of US export controls might be the better-than-nothing result we should hope for.  And, changes to the current system that will create a lot of extra work for us without actually improving anything is what we should fear.   (Well, this last scenario will probably be a gold mine for my seminar and consulting businesses.) (more…)

Businessman Pleads Guilty to Illegal Bribes

Thursday, October 22nd, 2009 by Danielle McClellan


By: Danielle McClellan

Joseph T. Lukas, a partner in Nexus Technologies Inc., has pled guilty in connection with a conspiracy to bribe Vietnamese government officials. Nexus was a privately owned export company that found US vendors for Vietnamese government contracts that involved underwater mapping equipment, bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. Lukas was in charge of the negotiations of these contracts with US suppliers. The Vietnamese officials included the commercial branches of Vietnam’s Ministries of Transport, Industry and Public Safety. (more…)

Man Arrested for Smuggling Military Aircraft Engines to Iran

Wednesday, September 2nd, 2009 by Danielle McClellan


By: Danielle McClellan

A suspected international arms dealer has been arrested on charges that he and an accomplice conspired to illegally export F-5 fighter jet engines and parts from the US to Iran. Jacques Monsieur, a Belgian national and resident of France has been a suspected arms dealer for decades and may have finally smuggled his last shipment. (more…)

Aircraft Parts Company Agrees to Spend $100,000 to Enhance Compliance Program

Thursday, July 30th, 2009 by Danielle McClellan


By: Danielle McClellan

According to a consent agreement, Air Shunt exported a J85-GE-21B engine actuator and engine ignition exciter (used on F-5 Freedom Fighter) to the UAE and an Ametek military helicopter gyroscope to Thailand. Air Shunt’s former Vice-President, John Nakkashian has been indicted related to these violations and disappeared soon after the company came over investigation. He has been named a fugitive from justice and possibly could be hiding in Armenia according to a recent DOJ press release…wonder if he will be receiving free tickets to Disney Land soon. (more…)