Trends In International Litigation : International Business Lawyer & Attorney : Ed Joffe : Joffe & Joffe Law Firm : Miami, Florida Global Customs & Trade Issues

Balli Aviation Ltd., a subsidiary of the United Kingdom-based Balli Group PLC, was sentenced today in the U.S. District Court for the District of Columbia to pay a $2 million fine and to serve a five-year corporate period of probation after pleading guilty on Feb. 5, 2010, to a two-count criminal information in connection with its illegal export of commercial Boeing 747 aircraft from the United States to Iran.

Consistent with the plea agreement, U.S. District Judge Ellen Segal Huvelle sentenced Balli Aviation Ltd. to a maximum fine of $2 million and corporate probation for five years. The $2 million fine, combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), is one of the largest fines for an export violation in BIS history.

Under the terms of the related civil settlement, Balli Group PLC and Balli Aviation Ltd. have agreed to pay a civil penalty of $15 million, of which $2 million will be suspended if there are no further export control violations. In addition, Balli Aviation Ltd. and Balli Group PLC are denied export privileges for five years, although this penalty will be suspended provided that neither Balli Aviation, Ltd. nor Balli Group PLC commits any export violations and pays the civil penalty. Under the terms of the settlement, Balli Group PLC and Balli Aviation, Ltd. will also have to submit the results of an independent audit of its export compliance program to BIS and OFAC for each of the next five years.
According to count one of the criminal information filed with the court, beginning in at least October 2007, through July 2008, Balli Aviation Ltd. conspired to export three Boeing 747 aircraft from the United States to Iran without first having obtained the required export license from BIS or authorization from OFAC, in violation of the Export Administration Regulations (EAR) and the Iranian Transactions Regulations. Specifically, the information states that Balli Aviation Ltd., through its subsidiaries, the Blue Sky Companies, purchased U.S.-origin aircraft with financing obtained from an Iranian airline and caused these aircraft to be exported to Iran without obtaining the required U.S. government licenses. Further, Balli Aviation Ltd. entered into lease arrangements that permitted the Iranian airline to use the U.S.-origin aircraft for flights in and out of Iran.

Count two of the criminal information states that Balli Aviation Ltd. violated a Temporary Denial Order (TDO) issued by BIS on March 17, 2008, that prohibited the company from conducting any transaction involving any item subject to the EAR. Starting in or about March 2008 and continuing through about August 2008, Balli Aviation Ltd. willfully violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft which went to the Export Administration Regulations.

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 As reported by Jim Garamone of the American Forces Press Service, on April 20,2010, Defense Secretary Robert M. Gates told members of Business Executives for National Security that the United States must totally revamp the Cold War-era export control system, because it does not adequately protect crucial American capabilities and makes it nearly impossible to quickly share needed capabilities with allies and partners.

The current export-control system is a Cold War artifact, the secretary noted. “As a result,” he said, “its rules, organizations and processes are not set up to deal effectively with those situations that could do us the most harm in the 21st century – a terrorist group obtaining a critical component for a weapon of mass destruction, or a rogue state seeking advanced ballistic missile parts.“Most importantly,” he added, “the current arrangement fails at the critical task of preventing harmful exports while facilitating useful ones.”

Gates proposed a tiered approach to export control that he said would allow the United States to build higher walls around truly crucial technologies while lowering walls around others. One flaw of the current system, he said, is that it makes no differentiation among technologies, and the lists are endless.

Our plan relies on four key reforms: a single export-control list, a single licensing agency, a single enforcement/coordination agency and a single information technology system,” the secretary said.

The nation currently has two export-control lists: one maintained at the State Department and one by Commerce. “The single list, combined with a single licensing agency, would allow us to concentrate on controlling those critical technologies and items – the ‘crown jewels’ – that are the basis for maintaining our military technology advantage, especially technologies and items that no foreign government or company can duplicate,” Gates said.

It would be a tiered system, the secretary explained, with truly critical technologies at the top cascading down to lesser technologies. Items could move from one group to another as their sensitivity changes, he said.

A single licensing agency would have jurisdiction over both munitions and dual-use technologies. This, Gates said, would streamline the licensing process and reduce confusion. Obama will decide where this agency would be located later this spring, the secretary added.

Consolidating enforcement also will strengthen the system, Gates said. “Those who endanger our troops and compromise our national security will not be able to hide behind jurisdictional uncertainties or game the system,” the secretary said. “Violators will be subject to thorough investigation, prosecution and punishment severe enough to deter lawbreaking.”

We will turn these principles and proposals into action through a three-phased process that will unfold over the course of the next year,” he said. The first phase will see the transition to a single list and the single licensing agency. The second phase will transition to a single information technology system and implement the tiered control list.

“These changes, which can be made through executive action, represent substantial progress and momentum towards reform,” he said. “But they are by themselves insufficient to fully meet the challenge at hand. We need a final, third phase.”

That phase will require congressional action, Gates said, adding that he looks forward to working with senators and representatives to craft the right approach.

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Four individuals and three Miami businesses have been indicted on charges involving the export of electronics to a U.S. designated terrorist entity in Paraguay.

Samer Mehdi, 37, of Paraguay, Khaled T. Safadi, 56, of Miami, FL, Ulises Talavera, 46, of Miami, FL, Emilio Jacinto Gonzalez-Neira, 43, of Paraguay, Cedar Distributors, Inc. (Cedar), a Miami-based freight forwarding company owned by defendant Safadi, Transamerica Express of Miami, Inc. (Transamerica), a Miami-based freight forwarding company owned by defendant Talavera, and Jumbo Cargo, Inc. (Jumbo), a Miami-based freight forwarding company owned by defendant Gonzalez-Neira, were indicted on charges of conspiracy, 18 U.S.C. § 371, violating the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701-1706, and smuggling electronic goods from the United States to Paraguay, 18 U.S.C. § 554. The Indictment also seeks the forfeiture of an amount equal to the value of the electronics that were illegally exported. If convicted, the individual defendants face up to 20 years’ imprisonment on the IEEPA charges, 10 years’ imprisonment on the smuggling charges, and 5 years’ imprisonment on the conspiracy charge. The companies each face up to five years’ probation on all charges, and fines of up to $1,000,000 on the IEEPA charges, and $250,000 on the smuggling and conspiracy charges, respectively.

This investigation was initiated in 2007 by ICE, FBI, CBP and DOC, as part of the Joint Terrorism Task Force (JTTF). According to the allegations in the Indictment, from at least as early as March 2007 through and continuing to at least January 2008, freight-forwarders Talavera, through Transamerica, and Gonzalez-Neira, through Jumbo, exported Sony brand electronics, including Playstation 2 consoles and digital cameras, to defendant Samer Mehdi, owner of Jomana Import Export, an electronics business located within the Galeria Page, a shopping center in Ciudad del Este, Paraguay. Safadi, through Cedar, was a distributor of the electronics to the freight-forwarders.
Since December 6, 2006, the shopping center known as Galeria Page in Ciudad del Este, Paraguay, has been designated as a Specially Designated Global Terrorist (SDGT) entity by OFAC, pursuant to Executive Order 13224. Consequently, any transaction or dealing by a U.S. person with Galeria Page, including any transaction or dealing with an entity within Galeria Page, is prohibited. The OFAC designation banned trade with Galeria Page and all tenants located therein. At all relevant times to the Indictment, it is alleged that the defendants were aware that shipping to Galeria Page was prohibited.
To conceal the true destination of the prohibited shipments, the defendants created fake invoices that contained false addresses and also listed fictitious ultimate consignees on the required Shippers Export Declarations (SEDs), and other necessary export paperwork. Locations referenced in these false documents, as well as corresponding emails, ensured that the electronics would reach the prohibited intended destination. Additionally, wire transfer payments from Mehdi in Paraguay to the U.S.-based distributors were routed through various facilities to mask their true origin.
An Indictment is only an accusation and a defendant is presumed innocent until and unless proven guilty.
 

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