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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Steve Stecklow of The Wall Street Journal reports that  Iran's state shipping company has changed the names and ownership of most of its vessels to evade U.S. sanctions.  The Treasury Department has yet to update the blacklist that U.S. companies use to verify they are in compliance, according to a new report.

As a result, some firms are at risk of doing business with the company, Islamic Republic of Iran Shipping Lines, despite a ban that has been in place since 2008, says the report by the Wisconsin Project on Nuclear Arms Control, a Washington-based nonprofit watchdog.
The findings raise questions about the effectiveness of some of Washington's sanctions, which are aimed at pressuring the regime in Tehran not to build nuclear weapons—something Iran denies it is doing.

OFAC Director Adam J. Szubin said his agency "deliberates carefully about the timing of its public designations," adding, "We may choose to delay a public identification to allow for additional surveillance or to secure cooperation with foreign allies."  Mr. Szubin also said the Iranian company's actions signaled the sanctions were having an effect. "Since its designation [by the Treasury], IRISL has taken a number of steps to mask its commercial activities and disguise the ownership of its ships. IRISL's attempts to deceive third parties are consistent with its past practices, and a measure of the impact that U.S. sanctions have had."

The Treasury Department added IRISL, its vessels and related entities, to a list of blacklisted Iranian companies in September 2008, accusing it of shipping military-related cargo, including a chemical used in missiles, to Iran's defense ministry, through deceptive techniques. IRISL's cargoes are subject to inspection under a U.N. Security Council resolution. Tehran also faces sanctions by the U.N. and the European Union.
 

The Wisconsin Project report says IRISL has since renamed at least 80 of the 123 vessels in its shipping fleet—often dropping the word "Iran"—but that Treasury's current published list used by U.S. companies continues to include the old names. IRISL's vessels still carry the same unique ship-identification numbers required of all ships, but these numbers don't always appear on cargo documents, the Wisconsin Project reported. The report also states that IRISL, in another apparent sanctions-avoiding technique, has been transferring ownership of its ships to shell companies that don't appear on OFAC's list.
 

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Balli Aviation Ltd., a subsidiary of the United Kingdom-based Balli Group PLC, has plead guilty in the U.S. District Court for the District of Columbia to a two-count criminal information in connection with its illegal export of commercial Boeing 747 aircraft from the United States to Iran.
Under the plea agreement, Balli Aviation Ltd. agreed to pay a $2 million criminal fine and be placed on 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), that was also announced today, represents 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 nor Balli Group 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 information filed with the court, beginning in at least October 2005, through October 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. More particularly, 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 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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Mahmoud Reza Banki, a 33 year old management consultant at a major New York consulting firm -- was arrested last Thursday on an Indictment charging him with violating the Iran Trade Embargo and with operating an unlicensed money transfer business between the United States and Iran.

According to the Indictment Banki, a United States citizen and resident of New York, allegedly provided money transmitting services to residents of Iran by operating a "hawala," a type of informal value transfer system in which money does not physically cross international boundaries through the banking system. In the hawala system, funds are transferred by customers to a hawala operator, or "hawaladar," in one country, and corresponding funds, less any fees, are disbursed to recipients in another country by hawaladar associates on that end. Banki allegedly received wire transfers totaling approximately $4.7 million from companies and individuals --located in, among other places, Saudi Arabia, Kuwait, Latvia, Slovenia, Russia, Sweden, the Philippines, and the United States-- in a personal bank account he maintained for this purpose at Bank of America in Manhattan.

Generally, Banki did not know the wire originators personally. He received the funds with the understanding that an equivalent amount of Iranian currency would, in turn, be disbursed to intended recipients residing in Iran. Banki informed an Iran-based co-conspirator when funds had been received, and the co-conspirator then disbursed the funds, less any fees, in Iran. Banki allegedly used certain of the funds transferred into his Bank of America account to make joint investments in the United States with the Iran-based co-conspirator. Among other things, Banki used the funds to purchase a $2.4 million condominium in Manhattan; to invest in securities for his own benefit and that of the co-conspirator; and to make payments on his credit card accounts, including approximately $55,000 in one month alone in the summer of 2007.

BANKI is charged with violating the International Emergency Economic Powers Act( IEEPA), together with Executive Orders and United States Department of Treasury regulations; conducting an unlicensed money transmitting business; and conspiracy to commit those two crimes. If convicted, BANKI faces a maximum sentence of five years in prison on each of the conspiracy and unlicensed money transmitting counts, and 20 years in prison on the IEEPA violation count.

This case is being handled by the Office's Complex Frauds and Asset Forfeiture Units. Assistant United States Attorneys E. Danya Perry and Jason Hernandez are in charge of the prosecution. The charges and allegations contained in the Indictment are merely accusations, and the defendant Mahmoud Reza Banki is presumed innocent. 

Earlier today theNew York Post reported that Mr. Banki was denied bail.

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