United States: Export, Customs & Trade Enforcement Highlights, Summer 2006

• The Department of Treasury, Office of Foreign Assets Control ("OFAC") announced that it reached settlement agreements with the following entities:

• Augsburg College in Minneapolis, Minn. has paid $9,000 to settle allegations that it violated the Cuban embargo regulations on four occasions between January 2000 and June 2004. OFAC alleged that Augsburg acted without an OFAC license or outside the scope of its license by arranging travel to, from, and within Cuba for other organizations. OFAC maintained that Augsburg was not licensed to act as a travel service provider; it was not affiliated with and did not share a joint OFAC license with these organizations.
• Chevy Chase Bank of Bethesda, Md., agreed to pay $3,352.86 to settle allegations that it violated the Iranian Transactions Regulations ("ITR") on July 8, 2002. OFAC alleged that Chevy Chase processed an unauthorized funds-transfer with payment information referencing services of Iranian origin.
• Downey Savings and Loan of Newport Beach, Calif., has paid $44,898.65 to settle allegations that it violated the ITR between 1996 and 2000. OFAC alleged that Downey operated 23 accounts for 20 account holders who had informed Downey that they were permanent residents of Iran. Downey voluntarily disclosed this matter to OFAC.
• Exel Global Logistics, Inc. of Hayward, Calif., has paid $6,226.50 to settle allegations that it violated the ITR between February and September 2001. Exel voluntarily disclosed to OFAC that it had coordinated shipments to Iran.
• GasTech Engineering Corp. of Tulsa, Okla., ("GasTech") entered into a plea agreement to settle charges that it violated the ITR by exporting its engineering and procurement services to the National Iranian Gas Company for the development of a gas-processing plant to be constructed in Iran. Pursuant to the plea agreement, GasTech plead guilty in May 2006 to conspiracy to violate the ITR, and was sentenced to probation and a $50,000 criminal fine. In addition to the criminal fine imposed by the U.S. District Court, GasTech agreed to also pay $33,000 to settle allegations of violations of the ITR occurring between January 2001 and December 2002. GasTech also agreed to implement a corporate compliance program.
• OFAC assessed a penalty in the amount of $2,750 against Jarden Zinc Products, Inc. of Greenville, Tenn., ("Jarden") for violating the Sudanese sanctions regulations in October 2001, by exporting merchandise to Sudan without OFAC authorization. Jarden voluntarily disclosed the violation to OFAC.

• On May 1, 2006, the Department of Justice announced that three company owner/operators in New Jersey were sentenced to federal prison terms ranging from 18 months to 44 months, and one to a period of home confinement, for illegally exporting items used in defense systems such as radar, smart weapons and electronic warfare, to entities controlled by the Chinese government. The defendants also agreed to forfeit the $391,337 which they earned from the exports.

• On May 4, 2006, the Department of Justice announced that David S.C. Tatum of Lexington, Ky., pleaded guilty to making false statements to federal agents regarding violations of the U.S. trade embargo against Iran. The charges arose from an investigation by the Commerce Department Office of Export Enforcement ("OEE") and the Immigration and Customs Enforcement ("ICE") into a scheme by Robert Quinn and Michael Holland of Clark Material Handling Corporation to sell U.S.-origin forklift components to an Iranian forklift truck manufacturer. (Please see Spring 2006 Sentinel at www.reedsmith.com/_db/_documents/0605sentinel.pdf for additional information).

• On May 9, 2006, the Department of Commerce, Bureau of Industry and Security ("BIS") announced that Extreme Networks, Inc. of Santa Clara, Calif. entered a settlement agreement under which it will pay a $35,000 civil penalty to settle charges that it exported a computer network switching hardware to a listed entity, the Beijing University of Aeronautics and Astronautics, without a license, with knowledge that a violation of the regulations would occur and for false statements concerning their authority to export.

• On May 10, 2006, BIS announced that Ingersoll-Rand Company of Woodcliff Lake, N.J. entered into a settlement agreement with BIS under which it will pay a $680,000 civil penalty to settle charges of improperly exporting diaphragm pumps, without the required license, to India and Israel, by misrepresenting facts on an SED, and acting with knowledge that a violation would occur.

• On May 18, 2006, the Department of Justice announced that Ernest Koh Chong Tek was convicted by a federal grand jury in Brooklyn, N.Y. of violating the trade embargo against Iran for obtaining U.S. aircraft parts which can be used in the C-130 military transport plane and the P-3 Naval aircraft, and diverted those aircraft parts to Malaysia for transshipment to Iran. He was also convicted of laundering money from his bank in Singapore through accounts in the United States to support the activity.

• Ju Wang was charged by a federal grand jury in Albany, N.Y., with violating the Export Administration Regulations ("EAR") and the International Traffic in Arms Regulations ("ITAR") by exporting aviation reference systems for use in missile and torpedoes to China without the required export license. On March 17, 2006, Wang pleaded not guilty and was later released on $250,000 bail, and was restricted to home confinement and barred from using a computer.

• On May 18, 2006, Dresser Italia of Napoli, Italy, entered into a settlement agreement with BIS under which it will pay an $820,000 civil penalty to settle charges of 120 export violations. The company allegedly caused unlicensed exports to Libya by ordering from a U.S. company various oil-industry-related items which were exported by the U.S. company through Italy to Libya without the required U.S. government authorization. Dresser was also charged with ordering, buying, storing, selling, and/or transferring items exported from the United States with knowledge that violations were occurring in connection with the export of the items; for the unlicensed reexport to Libya; and for causing exports to Iran without the required U.S. government authorization

• On May 18, 2006, DI UK LTD of Scotland entered into a settlement agreement with BIS under which it will pay a $122,100 civil penalty to settle charges of 37 export violations. Its division, Dresser Meter Division Natural Gas Solutions, allegedly caused the unlicensed reexport of various oil-industry-related items, from the United Kingdom to Libya. It also caused an unlicensed export by ordering from a U.S. company various oil-industry-related items which were exported by the U.S. company through the United Kingdom to Libya without the required U.S. government authorization, and for causing unlicensed exports to Iran.

• On May 18, 2006, Dresser, Inc. of Addison, Texas, entered into a settlement agreement with BIS under which it will pay a $110,000 civil penalty to settle charges of 33 export violations. The company allegedly caused the unlicensed export of various oil-industry-related items through Canada to Libya; through the United Kingdom to Libya; through the United Kingdom to Iran; through Germany to Libya; and through Italy to Libya.

• On May 18, 2006, Dresser Europe GmbH of Einbeck, Germany, entered into a settlement agreement with BIS under which it will pay a $19,800 civil penalty to settle charges of six export violations for its Viersen facility. The company allegedly ordered oil-industry-related items from a U.S. company which were then exported by the U.S. company through Germany to Libya without license. Dresser Europe ordered, bought, stored, sold, and/or transferred the items, knowing that these activities were in violation of U.S. law. It also acted with knowledge or reason to know that the items would be exported to Libya without the required U.S. authorization.

• On May 18, 2006, Dresser Instruments S.A. de C.V. of Tlalnepantla, Mexico, entered into a settlement agreement with BIS under which it will pay a $12,000 civil penalty to settle charges that it aided and abetted an unlicensed reexport of pressure gauges and other items from a U.S. company for sale to a company in Mexico with knowledge or reason to know that the items would be reexported to Cuba without authorization.

• On May 18, 2006, Dresser International, Inc. of Addison, Texas, entered into a settlement agreement with BIS under which it will pay a $6,600 civil penalty to settle charges that Dresser International’s Dubai branch caused a reexport to Iraq without the required U.S. government authorization by transferring oil-industry-related items that were reexported to Iraq. Dresser International also ordered, bought, stored, sold and/or transferred the items with knowledge or reason to know that the items would be reexported to Iraq without the required license.

• On May 18, 2006, DI Canada, Inc. of Ontario, Canada, entered into a settlement agreement with BIS under which it will pay a $6,600 civil penalty to settle charges that it reexported oil-industry-related items from Canada to Libya without the required U.S. government authorization, and that it caused export to Libya without the required license, by special ordering from a U.S. company oil-industry-related items which were exported by the U.S. company through Canada to Libya without the required license.

• On May 18, 2006 International Valves Ltd. of Suffolk, United Kingdom, entered into a settlement agreement with BIS under which it will pay a $3,300 civil penalty to settle charges that it reexported TK Spare Parts from the United Kingdom to Libya without the required U.S. government authorization.

• On May 24, 2006, BIS entered into a settlement agreement with Edsons Worldwide Services Inc. of Edina, Minn., ("Edsons") and its President, Eduard Medelevich Yamnik, for the export of fingerprint powders to Belarus without the required export license, after being notified that such a license was required and that the request for the license was being denied. BIS denied export privileges for Edsons and Yamnik for a period of 10 years.

• On June 1, 2006, the Department of Commerce issued an Order against Swiss Telecom of Toronto, Ontario denying the company’s export privileges for a period of 10 years for committing nine violations of U.S. export control laws and regulations. Specifically, the Department of Commerce determined that Swiss Telecom conspired to export and reexport U.S. origin telecommunications equipment on behalf of an Iranian end-user and to export that equipment to Iran without the required authorization.

• On June 5, 2006, Judge Larry A. Burns of the Southern District of California sentenced Arif Ali Durrani, a Pakistani national, to serve more than 12 years in prison. This sentence followed Mr. Durrani’s conviction by a jury that he violated the Arms Export Control Act by exporting more than 100 compressor blades for the General Electric J-85 military aircraft engine to foreign customers in the 1990s. The parts were allegedly destined for Iran. Mr. Durrani will also face deportation after his sentence is completed.

• On June 5, 2006, the Department of Commerce’s Office of Antiboycott Compliance, entered into a settlement agreement with WHC International Inc. of New Jersey ("WHC") to settle charges that WHC committed five violations of U.S. export control laws and regulations. Specifically, BIS alleged that WHC committed two violations of U.S. export control laws and regulations by furnishing information to Kuwait about business relationships with Israel, and committed three violations of U.S. export control laws and regulations for failing to report requests in a timely manner from the UAE and Kuwait to engage in a restrictive trade practice or foreign boycott. WHC and BIS agreed that WHC would pay a civil penalty in the amount of $13,000 to settle these charges.

• On June 9, 2006, BIS announced that it issued an order against Teepad Electronic General Trading of the United Arab Emirates ("Teepad") for committing five violations of U.S. export control laws and regulations and the ITR. The BIS order stated that Teepad conspired and acted in concert with others to export and reexport U.S.-origin telecommunications equipment to Iran between November 2001 and March 2002, and that it aided and abetted the export of those items to Iran. As part of this order, BIS denied Teepad’s export privileges for a period of 10 years.

• On June 9, 2006, BIS announced that it issued an order against Kailash Muttreja of MUTCO International in the Netherlands for committing two violations of U.S. export control laws and regulations for conspiring to export and reexport toxins from the United States to North Korea without the required Department of Commerce export license. BIS imposed a six-year denial order upon Muttreja for these violations. On June 27, 2006, BIS entered an order against MUTCO for these same violations. Pursuant to this order, BIS also suspended MUTCO’s export privileges for a six-year period.

• On June 14, 2006, State Metal Industries Inc. ("State Metal"), a scrap metal company, pleaded guilty in the U.S. District Court for the District of New Jersey to criminal charges that the company purchased surplus missile parts from the Department of Defense ("DoD") and sold them to a Chinese firm without the required authorizations from DDTC. The company’s vice president of purchasing, Michael Dorfman, also pleaded guilty to charges of making false statements to the DoD, by stating that the items would be melted down and made into metal ingots or bars, which would then be sold in the United States. Prosecutors claimed that instead of melting down the parts, State Metal sold them to a company owned in part by the Chinese government. Pursuant to the plea agreements, when sentenced on Sept. 28, 2006, State Metal faces three years of probation and a $250,000 fine, while Dorfman faces up to five years in prison and a $250,000 fine.

• On June 20, 2006, BIS announced that Manoj Bhayana, a citizen of India currently residing in Pittsburgh, was indicted by a federal grand jury on charges that he conspired to commit several violations of the U.S. export control laws and regulations related to the shipment of graphite products to the United Arab Emirates with potential nuclear and military applications. Bhayana allegedly falsified certain documents related to the shipments and tried to mislead enforcement officials when questioned.

• On June 20, 2006, BIS announced that it entered into a settlement agreement with Arrow Electronics, Inc. of Melville, N.Y. ("Arrow") for Arrow’s alleged violations of U.S. export control laws and regulations stemming from the export of electronic and computer components to Russia. Specifically, BIS alleged in a charging letter that on five occasions between 2000-2004, Arrow exported equipment controlled under ECCN 3A001 to Russia without first obtaining the required export licenses. Arrow voluntarily disclosed these violations. As part of the settlement agreement, Arrow agreed to pay a civil penalty in the amount of $20,000.

• On June 20, 2006, BIS announced that Tesmec U.S.A. Inc. of Alvarado, Texas ("Tesmec U.S.A.") and Tesmec S.p.A. of Curno, Italy ("Tesmec Italy"), entered into settlement agreements with the agency to settle charges that the companies attempted to export an EAR99 trencher to Libya without the required authorizations. BIS alleged that Tesmec U.S.A. committed two violations of U.S. export control laws and regulations by attempting to export a trencher to Libya, via its parent company in Italy, and by transporting the trencher from Alvaredo, Texas to Houston, Texas, knowing that a violation would occur. Tesmec U.S.A. settled these charges by paying a $12,600 civil penalty. With regard to Tesmec Italy, BIS alleged the company committed three violations of U.S. export control laws and regulations by acting with intent to evade the regulations by asking its U.S. subsidiary to remove the U.S.-origin markings from the trencher and by altering the accompanying technical documentation to conceal the fact that the trencher was of U.S. origin. BIS also alleged that Tesmec Italy violated U.S. export control laws and regulations by ordering the trencher from the U.S. for reexport to Libya, knowing that a violation would occur. Tesmec Italy paid a civil penalty in the amount of $24,300 to settle these charges.

• On June 23, 2006, BIS entered an order against Universal Technology, Inc. of Mount Laurel, N.J. ("Universal"), its President, Terry Tengfang Li, and its Chief Executive Officer, Pearl Li, for numerous violations of U.S. export control laws and regulations relating to the sale of certain electronic components to the PRC without the required export authorizations. Pursuant to this order, Universal was required to pay a civil penalty in the amount of $170,000, and both Universal and Mr. and Mrs. Li had their export privileges suspended for a period of 20 years.

• On June 23, 2006, BIS entered an order against BiB Industrie-Handel Dipl.Ing M. Mangelsen GmbH ("BiB") and Malte Mangelsen for committing nine violations of U.S. export control laws and regulations relating to the export and reexport of certain spare parts to Libya from the United States and the United Kingdom. Pursuant to this order, BiB and Mangelsen were each ordered to pay a civil penalty in the amount of $77,000, and had their export privileges denied for a period of 20 years.

• On June 29, 2006, BIS entered an order against Ihsan Medhat Elashi, a systems consultant for Infocom Corporation and President of Tetrabal Corporation of Seagoville, Texas, for committing 32 violations of U.S. export control laws and regulations. Specifically, BIS alleged that Elashi and his co-conspirators exported computers and software to Syria without the required export licenses, and that he took certain actions in violation of a prior denial of export privileges by making exports to Syria, Saudi Arabia, Jordan and Egypt. As part of this order, BIS required Elashi to pay a $330,000 civil penalty, and imposed a 50-year denial order against him.

This article is presented for informational purposes only and is not intended to constitute legal advice.