Archive
Richard Chichakli Arrested and Facing IEEPA Charges for Alleged Association with ‘Merchant of Death’
Last Thursday, the Southern District of New York announced the arrest of Richard Ammar Chichakli in Australia. Chichakli has been charged with violations under the International Emergency Economic Powers Act (IEEPA), money laundering, wire fraud, and conspiracy.
It is alleged that Chichakli is an associate of Viktor Bout, dubbed the “Merchant of Death” by law enforcement authorities and the press for his dealings in international arms trafficking. Bout allegedly established an international network to facilitate arms trafficking, and furnished arms to the former regime of Charles Taylor in Liberia. Bout was convicted in November 2011 in the Southern District of New York for allegedly selling weapons to the Fuerzas Armadas Revolucionarias de Colombia, FARC, and is currently serving his 25-year sentence.
Chichakli’s indictment focuses mainly on his alleged connections to Bout’s network of arms trafficking. The U.S. Government believes that Chichakli assisted in the management and operations of several of Bout’s airline companies that facilitated the transportation of illegal weaponry. The U.S. followed the lead of the United Nations, in that once the U.N. Security Council designated Chichakli in 2004, the U.S. followed thereafter. On April 26, 2005, Chichakli was placed on the Specially Designated Nationals List (SDN List) by the Office of Foreign Assets Control (OFAC) under the Liberia sanctions program.
The indictment alleges that in order to evade U.S. sanctions, Chichakli pursued airline operations under the guise of the names of others, and used the airline, named Samar Airlines, to engage in the transportation of illegal arms. It is further alleged that Chichakli attempted to purchase two airplanes from a U.S. aviation company. The indictment also cites money laundering, wire fraud, and conspiracy for the transfer funds in the amount of $1.7 million related to arms trafficking that passed through the U.S. financial system.
The U.S. has pursued Chichakli for years, and finally arrested him with the help of Australian authorities. Chichakli could have benefited from attempting to contact the U.S. Government first and contesting his designation through a formal administrative process. Pursuing a request for reconsideration through OFAC allows a designated person or entity to contest the designation and also provide reasons and evidence in support of the wrongful designation.
At this point, Chichakli is facing multiple federal charges that are rooted in IEEPA violations. The national security implications alone are difficult to overcome. If Chichakli argues that he did not engage in the overt acts willfully, and attacks the circumstantial evidence against him, it might work in his favor. The other course of action, which may be his best option, is to begin plea negotiations. If he can provide substantial assistance to the U.S. Government, his ultimate sentence may be reduced.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.
New York Man Accused of Illegally Exporting Defense Articles
Mark Henry, a United States citizen and a resident of Queens, New York, was arrested on December 6, 2012, in connection with an alleged scheme to illegally export defense articles and goods with military applications from the U.S. to Taiwan and China.
From April 2009 through September 2012, Henry allegedly operated an export company based in New York City, Duhua Electronics Corporations. According to the indictment, Henry shipped goods from suppliers located in the U.S. to customers in Asia, specifically China and Taiwan. Henry allegedly shipped military-grade materials that can be used as a protective coating for rocket nozzles, which are designated as defense articles on the U.S. Munitions List, to customers in Taiwan. He also allegedly attempted to ship microwave amplifiers, which have both commercial and military uses and are listed on the Commerce Control List (CCL), to China. The indictment states that Henry did not apply for or receive the requisite licenses for these shipments.
Henry has been charged with conspiracy to violate the Arms Export Control Act (AECA), willfully violating the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR), and attempting to violate the International Emergency Economic Powers Act (IEEPA).
The Government has the burden to prove that Henry willfully and knowingly violated AECA, ITAR, and IEEPA. Henry may have a good defense if he can argue that he did not know his duty under the law regarding the requirement to obtain export licenses and/or approval for the items. The materials that were allegedly exported to Taiwan, which can be used for protective coating in rocket nozzles, clearly require a license under the CCL. However, the items that Henry allegedly attempted to export to China, microwave amplifiers, were dual-use items and may have been safe to export under the Export Administration Regulations (EAR). Dual-use items are those that may be used either for military purposes or for commercial purposes, and depending on their intended use, may be safe to export with a license.
The fact that Henry may have been exporting both kinds of items, those that definitely require a license and those that may not, seems to indicate the Henry might have simply been unaware of the law and his obligation to seek an exporting license or approval to export dual-use items. This argument may be useful when raising defenses against the Government’s accusations that he willfully violated the law.
Henry is also facing a conspiracy charge. The indictment contains unindicted co-conspirators. The Government typically does this when it believes that foreign co-conspirators are involved, but since they are located elsewhere and are not U.S. persons, the Government will have trouble pursuing a case against them. The indictment also cites to U.S. companies that supplied the goods to Henry. As inferred from the indictment, the U.S. companies are most likely cooperating with the Government in the case against Henry in order to alleviate their own liability. To prove conspiracy, the Government does not have to prove willfulness, which gives them a fallback in case Henry as a strong argument on other charges discussed above.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.
Iranian Company, Subsidiaries, and Officers Accused of Illegal Exporting to Iran; U.S. Persons Face the Fallout
An Iranian corporation, its subsidiaries, and several of its officers and business partners have been charged in Alexandria, Virginia, accused of allegedly exporting more than $30 million in computer goods from U.S. companies to Iran, in violation of the Iranian sanctions program administered by the Department of Treasury’s Office of Foreign Asset Control (OFAC).
The case was originally filed under seal in July 2012, but was made public in December after two alleged conspirators were arrested in Los Angeles, California. The two U.S. persons arrested were Alireza Beshcari and Mikaeil Ghahramani.
Business Machinery World Wide (BMWW aka Jahan Goster, Co.) is an Iranian company that imports computer and related equipment and redistributes such equipment to persons and entities in Iran. BMWW has three subsidiary companies located in Dubai, United Arab Emirates. BMWW, its subsidiaries, and nine officers and individuals have been charged with conspiracy to defraud the United States and conspiracy to violate the International Emergency Economic Powers Act (IEEPA).
According to an affidavit filed in support of the criminal complaint, several U.S. persons are allegedly included in the conspiracy. In addition to the two individuals identified above, Amir Mazlomian is also included in the indictment as a U.S. person. Other U.S. entities cited to in the indictment include Photo Craft, Inc., located in Burke, Virginia, and Compudirect3000, located in Irvine, California. Photo Craft and Compudirect3000 have not been indicted nor charged in the criminal complaint.
The Government claims that it has direct evidence of involvement by U.S. persons in the form of emails, shipping forms, and other communications with BMWW and its subsidiaries. The Government is going to use such evidence to prove that the U.S. defendants had knowledge of the Iran sanctions and were willfully violating them by conspiring with others to exporting computer related goods to Iran via Dubai.
Because Beshcari, Ghahramani, and Mazlomian have been charged with conspiracy, the Government only has to prove that they entered into an agreement to export computer related goods ultimately destined for Iran. Further, they must prove that they engaged in acts in furtherance of the conspiracy. From a defense perspective, trying to argue against a conspiracy charge can be extremely difficult, particularly because the Government does not have to prove that the defendants acted willfully.
The criminal case is still in its early stages. Although two U.S. persons have been arrested, the case has not set a trial date as of today. This may give the U.S. persons a chance to cooperate with the Government in an effort to receive a reduced sentence. Plea negotiations are not always the best course, but the evidence in this case is mostly in the form of written communications, which tend to easily sway jurors.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.
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Two Extradited from Singapore in Connection with Plot to Illegally Export Military Antennas
Two foreign nationals, Hia Soo Gan Benson (Benson Hia) and Lim Kow Seng (Eric Lim), have been extradited from Singapore to stand trial in the District of Columbia in connection with an alleged fraud conspiracy involving the unlawful export of military antennas from the United States to Singapore and Hong Kong. The indictment, originally filed on June 23, 2010, also alleges that the ultimate object of a second conspiracy was to conceal from the U.S. Government that the true destination of another set of antennas was Iran.
According to the indictment both Benson and Seng are charged with 6 criminal counts. Two of the counts are distinct conspiracy charges. The first conspiracy relates to the defendants’ roles in procuring antennas from the United States that were eventually shipped to Iran through Singapore, Malaysia, and Thailand. The second conspiracy relates to the defendants’ roles in procuring a different kind of antenna from the United States without first applying for a license from the State Department’s Directorate of Defense Trade Control (DDTC).
In relation to the above-mentioned conspiracies, the defendants have also been charged with one count of false statements (18 U.S.C. 1001) in connection with license applications filed with the Bureau of Industry and Security (BIS), one count of false statements (18 U.S.C. 1001) in connection with statements made to Customs and Border Protection (CBP) in the second conspiracy, one count of smuggling (18 U.S.C. 554) in connection with the second conspiracy, and one count of illegally exporting controlled products with DDTC licenses (22 U.S.C. 2778) in violation of the Arms Export Control Act (AECA).
With regards to the defendants’ specific cases, it may be important for defense counsel to explore whether the two distinct counts of conspiracy are superfluous, especially given the similar conduct and goals involved with both conspiracies. If a review of discovery actually unveils the two conspiracies to in fact be one large conspiracy, defense counsel may decide to move the court to dismiss one of the conspiracy counts.
More telling however, is the U.S. Government’s continued focus on prosecuting export related crimes. This is also consistent with what many people in this field have been dicussing. For example, in 2008 the Department of Justice formed the Export and Anti-proliferation Global Law Enforcement (EAGLE) Task Force. The goal of this task force was to bring together the different federal agencies focused on counter-proliferation work and allow them to share resources and knowledge in this complex area, as well as increase the number of prosecutions in this area.
This level of coordination of resources and increased focus by the federal government requires defense counsel to be even more vigilant. Protecting a defendant’s Constitutional rights becomes even more important because many of the federal agencies working together in this task force may not be familiar with rights afforded criminal defendants because they are civil administrative bodies, and not law enforcement agencies. Moreover, many foreign nationals may not be familiar with the rights afforded to defendants in the U.S. criminal justice system. As such, advising foreign clients to assert their Fifth Amendment rights at various stages of an investigation (including extradition) becomes even more critical in this new era of federal coordination in export control cases.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.
Disadvantaged Defendants: Federal Conspiracy and U.S. Economic Sanctions
Conspiracy is frequently charged in federal criminal cases. In the simplest terms possible, a conspiracy exists whenever two or more people agree to commit a criminal offense. Since most white collar crimes involve multiple actors, U.S. Attorney’s commonly utilize conspiracy charges when indicting white collar defendants. For example, the federal government has recently indicted individuals and firms in the United Arab Emirates, France, U.S., and Iran for violating and conspiring to violate the Iran embargo and various U.S. export laws and fraud laws. Because the federal conspiracy law does not merge with the underlying offense being conspired, these defendants can serve sentences for both the underlying offenses and the overarching conspiracy charge. This is unlike other inchoates crime like attempt or solicitation, which merge into the underlying offense if the offense is actually completed. However, for many of the defendants in this case the possibility of serving time for a separate conspiracy charge is probably not the worst consequence of being charged with conspiracy.
The defendants in this case are most disadvantaged by the conspiracy charge because the government can now bring together at a single trial all defendants who were allegedly part of the conspiracy, including minor participants and those with little direct evidence against them. In a case as complex and far reaching as this one, a co-conspirator who served as a shipping clerk with little knowledge as to the scope of the conspiracy he was involved in can be tried alongside the sophisticated corporate officer who designed the entire scheme.
Another key disadvantage to defendants implicated in a large conspiracy is the expanded scope of evidence that can be used against them. First, the nature of a conspiracy charge expands the scope of relevant evidence that can be used against the defendants. For example, evidence as to any co-conspirators’ acts in furtherance of the conspiracy may be admissible in the trial that includes all the defendants. Second, co-conspirator statements made during and in furtherance of a conspiracy are admissible under the “co-conspirators exception” to the hearsay rule.
Additionally, a defendant charged with a conspiracy such as this one faces significantly expanded liability. This is because co-conspirators are often vicariously liable for the substantive offenses committed by other co-conspirators. In this case, the shipping clerk who signed forms with the understanding that the parts sent to France would end up in Iran would not only be liable for his own actions, but will also be liable for the actions of every other participant in the conspiracy, including any unlicensed money transfers, other willful evasions of the sanctions, frauds, etc.
The conspiracy also allows the government to bring the case in any district where the conspiratorial agreement was entered into or where any co-conspirator committed any act in furtherance of the conspiracy. This means that the government can choose to bring the case where it is most advantageous to the prosecutors or where it is least convenient for the defendants. In a global case such as this one, the government’s ability to choose from a long list of eligible sites for venue can be powerful.
Lastly, conspiracy also extends the the statute of limitations because the time does not begin to run until all the goals of the conspiracy have been accomplished or abandoned. For example, the statute of limitations for violations of IEEPA or the Iranian Transactions Regulations is five years, but as long as any one co-conspirator commits a single overt act every five years the conspiracy is considered ongoing and every co-conspirator remains indefinitely liable.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Source: DOJ Looking to Prosecute Individual Bankers in HSBC Money Laundering Investigation
A source close to the investigation against HSBC Holdings Plc said that the Department of Justice is looking to prosecute individual bankers. “I understand that they are meticulously doing interviews with one primary objective driven by the Justice Department on this case, which is to identify and prosecute any individuals within the bank for which the evidence will support such an action. Prosecuting individuals is their number one priorty,” the source said on condition of anonymity.
The Justice Department initiated the investigation against HSBC because of bulk cash the bank received from money-changing firms in Mexico. Due to its receipt of this bulk cash HSBC is suspected of handling money belonging to the Mexican drug cartels. Although the Mexican drug cartels are a matter of national concern, Justice’s decision to prioritize prosecuting individual bankers may be motivated by another event hitting closer to the Department’s home.
The Justice Department was criticized last August after it reached a deal with Barclays Bank to settle alleged violations of the Trading with the Enemy Act and the International Emergency Economic Powers Act. Barclays violated U.S. sanction programs, and after being unable to determine the culprits internally, was offered a cash settlement deal by the Department. The very judge who approved the settlement said “the public has very little confidence in white collar crime prosecutions. It’s proceedings like these [that raise questions about] fairness and justice . . . People plead guilty to criminal conduct . . . [The Bank] can pay [money] for their justice – that is what the public sees.” The judge characterized the deal as a sweetheart deal and openly criticized Justice as to why no one was ultimately held responsible for the crimes the bank committed. Even Capitol Hill decried the Department of Justice for this deal and lack of individual criminal convictions.
It is with this backdrop of public disbelief, from the judge, Capitol Hill, and the people, that Justice has decided to repair its image by pursuing money laundering prosecutions against individual HSBC bankers. The circumstances surrounding the HSBC investigation may well be signalling the end of the prominent use of deferred prosecution agreements and cash settlements for white collar criminal matters. Given the embarrassment they suffered from their handling of the Barclays case, federal prosecutors may be less willing to accept deals. Prosecutors may instead focus on attaining criminal convictions (with prison time) of the actors involved in white collar criminal cases. A welcomed sign for most, but a dangerous position for some whose culpability is difficult to determine given the often murky line distinguishing legitimate economic activity and white collar crime.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
The Ninth Circuit Reaffirms Constitutionality of IEEPA Violations
This past week the Ninth Circuit Court of Appeals upheld the conviction of a man who exported thermal imaging cameras without proper licenses from the United States to China. Those who do not obtain such licenses from the United States Department of Commerce violate 50 U.S.C. 1705 a statute carrying criminal penalties under the International Emergency Economic Powers Act (IEEPA).
The Defendant in the case,United States v. Gou, was a Chinese engineer who had been unsuccessfully attempting for some time to purchase thermal imaging cameras. In late 2007 the Defendant was able to convince his accomplice to assist him in purchasing these cameras. These men, along with a third accomplice, were able to purchase thermal imaging cameras and send them to China. These activities were not licensed by the Department of Commerce.
The Defendant went to trial and was convicted. On appeal, he argued that IEEPA was unconstitutionally vague and violated due process. The court found this argument unpersuasive stating that although the export controls covering the export of the thermal imaging cameras constituted a complex regulatory scheme, if all the statutes and regulations are read together the law is not vague. In other words, the Ninth Circuit held that vagueness challenges will be rejected if premised on the complexity of a regulatory scheme.
In reaching this conclusion the Ninth Circuit articulated a test to determine vagueness as it relates to an IEEPA violation. The Ninth Circuit stated that, “the test is whether the text of the statute and its implementing regulations, read together, give ordinary citizens fair notice with respect to what the statute and regulations forbid, and whether the statute and regulations read together adequately provide for principled enforcement by making clear what conduct of the defendant violates the statutory scheme. City of Chicago v. Morales, 527 U.S. 41, 56 (1999).”
In essence, since the regulations, if read in their entirety, apprise individuals of what products cannot be shipped to other countries and apprise law enforcement of what goods are to be policed, they are not vague and satisfy constitutional requirements of due process. Furthermore, the Ninth Circuit stated that the scienter requirement within the IEEPA statute further protected against the complexity of the regulatory scheme, because that requirement placed upon the government the burden of proving beyond a reasonable doubt that a Defendant knew that he needed a license to export the products in question. In other words, in these types of cases ignorance of the licensing requirements is a defense.
The takeaway from the Guo case is that complexity and vagueness are not the same thing. Therefore, despite how complex the law may appear to be, parties are still required to follow it. This is bad news for those parties seeking to engage in international transactions; they not only need to know that export controls exist, they need to fully understand those laws. While the ignorance as a defense precedent is helpful to federal defense attorneys, as can be seen in the Guo case and others, the government time and time again has been able to meet the burden placed upon them when prosecuting IEEPA violations.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
