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.
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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New York District Court Sentences Viktor Bout to 25 Years in Prison
Yesterday in the Southern District of New York, a federal judge sentenced Viktor Bout, aka the “Merchant of Death,” to 25 years in prison and also ordered a $15 million dollar forfeiture. The sentencing of Bout comes several months after a three-week jury trial which concluded in November 2011.
The investigation of Bout began in late 2007 as part of a sting operation. Before the official investigation had begun, Bout had been listed on the Specially Designated Nationals List (SDN List), administered by the Office of Foreign Assets Control (OFAC), in 2004. To build a case against Bout, the U.S. government used two confidential sources to go undercover and try to elicit an arms deal with him. Specifically, the U.S. agents allegedly made an arrangement for Bout to provide arms to the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Columbia or FARC) in order to facilitate an attack on American helicopters.
The method of arrest of Bout sparked international attention. In 2008, the U.S. agents were able to convince Bout to a meeting in Thailand, where he arrested shortly thereafter. Thailand, caught in the middle between a political battle between the U.S. and Russia for approximately two years while Bout was being held there, ultimately granted the United States’ request to extradite Bout in order to face prosecution.
Bout was prosecuted and convicted on charges of conspiring to kill U.S. nationals, U.S. officers and employees, conspiring to acquire and export anti-aircraft missiles, and conspiring to provide material support to a designated foreign terrorist organization, FARC. The crime of conspiracy is complete when one intentionally enters the conspiracy and commits an overt act in furtherance thereof. The crime that is the object of the conspiracy need not come to fruition. In other words, the U.S. government’s case hinged on the fact that they were able to get Bout to agree to provide arms to FARC, and were able to indict him once he committed an act in furtherance of the agreement.
Prosecutors sought life in prison for Bout; however, U.S. District Judge Shira A. Scheindlin disagreed with such a sentence and imposed only the mandatory minimum of 25 years in prison. As indicated by her comments, the judge was obviously concerned with the manner in which the case came about, mainly the fact that U.S. agents approached Bout in a planned sting operation, not the other way around. There was no evidence to support the assertion that Bout would have ever committed a crime punishable under U.S. law if he had not been lured in by U.S. agents.
Despite the high publicity of this case, including the international implications, the judge was able to look at the evidence and issue a reasonable sentence. Bout still maintains his innocence, and will most likely continue this case on to the appellate level.
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.
FinCEN Implements New Rule Requiring U.S. Banks to Seek Information from Foreign Banks on Iranian Financial Ties
On October 5, 2011 the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) delivered to the Federal Register a final rule to implement section 104(e) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) to complement Treasury’s ongoing efforts to protect the international financial system from abuse by Iran. The rule becomes law upon its publication in the Federal Register.
The new rule will be published in 31 C.F.R. Section 1060.300 and is entitled “Reporting obligations on foreign bank relationships with Iranian-linked financial institutions designated under IEEPA and IRGC-linked persons designated under IEEPA.”
The goal of this new rule is to further separate the U.S. financial system from Iran by ensuring that no foreign banks with which U.S. institutions have corresponding accounts with have any ties to suspect Iranian financial institutions. The outcome of this rule will be to further isolate the Government of Iran, disrupt its ability to develop weapons of mass destruction or support terrorism, and encourage the broader international financial system to isolate Iran if it wants to benefit from doing business with the United States.
The rule accomplishes these goals by requiring a U.S. bank, upon a request from FinCEN, to inquire into whether any of the foreign banks with which it holds a correspondent account has dealings or accounts associated with the Government of Iran, blocked Iranian banks, or the Revolutionary Guards (IRGC). The rule also requires, upon request, inquiries into a foreign bank’s transfers of funds for or on behalf of, directly or indirectly, an Iranian-linked financial institution or IRGC associated entity designated under IEEPA within the preceding 90 calendar days.
The new rule also requires that the U.S. bank request from the foreign bank a notification if the foreign bank subsequently establishes an account for an Iranian-linked financial institution designated under IEEPA at any time within 365 calendar days from the date of the foreign bank’s initial response. A laundry list of requirements is listed in the new regulation dictating the specific disclosures a bank must report to Treasury with regards to financial dealings involving Iranian entities designated pursuant to IEEPA and any of the foreign banks with which the U.S. bank has a correspondent account. U.S. banks have 45 days after a request from FinCEN to file their initial report. A U.S. bank will also have 10 days to file a report to FinCEN if they are subsequently informed that a foreign bank they hold an account with opens an account with an Iranian-linked financial institution.
This line of inquiry will ultimately determine whether or not that foreign financial institution itself will be prohibited from maintaining or opening, in the United States, a correspondent account or payable-through account. As authorized by Congress in CISADA, if the Secretary of the Treasury determines that the foreign financial institution knowingly engages in certain specified activities, that foreign financial institution will not be allowed to maintain or open such accounts with U.S. financial institutions. Those specified activities include facilitating a significant transaction or transactions or providing significant financial services for a financial institution whose property or interests in property are blocked pursuant to IEEPA. This prohibition is specifically aimed at disrupting Iran’s proliferation of weapons of mass destruction or delivery systems for weapons of mass destruction, or in connection with Iran’s support for international terrorism, or for the IRGC or any of its agents or affiliates whose property or interests in property are blocked.
Failure of a U.S. bank to comply with FinCEN’s request for inquirt into the Iranian-linked affairs of a foreign financial institution will subject the U.S. bank to both civil and criminal penalties as enumerated in 31 U.S.C. Sections 5321(a) and 5322.
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.
F.B.I. Shifting its Focus from Ordinary Crime to National Security and Intelligence Gathering
The N.Y. Times is reporting that agents at the Federal Bureau of Investigation (FBI) are more likely to be hunting potential threats to national security than for ordinary criminals in recent years.
This finding comes from data collected detailing the bureau’s activities the last 2 years. The data was part of an internal FBI report that the NY Times successfully obtained under the Freedom of Information Act (FOIA). The report details the FBI’s shift from a law-enforcement agency focused on solving crimes to a domestic intelligence agency whose mission is to detect potential threats before they can reach fruition.
In order to accomplish this transition the FBI instituted a policy to investigate every single national security tip, no matter how dubious the tip may be. Further, if the FBI receives a national security related tip from another agency, like the CIA or OFAC, the FBI will immediately open a more intensive investigation instead of starting with an “assessment.” (A couple of posts about the FBI’s new operations guide regarding assessments and investigations were discussed previously here, and here)
The FBI’s shift away from investigating ordinary crime to prioritizing national security related issues has already had a significant impact. So the critical question that needs to be asked is: What exactly are national security related issues? The U.S. government has expressly stated at one time or another through its various agencies and institutions that crimes related to money laundering, bank secrecy, smuggling, currency transaction reporting, trade sanctions, tax evasion, and narcotics production and trafficking are all national security related issues. As this list demonstrates, the government has unequivocally focused its attention on terrorism finance as one of the major ways of securing national security.
Coupling the government’s focus on terrorism finance with the FBI’s new focus on national security issues probably means more criminal investigations of people in immigrant groups with links to the Middle East, South America, Africa, and East Asia for activities that, in fact, are not at all related to national security. Additionally, this change in federal law enforcement policy coupled with a newly invigorated focus on terrorism finance also means more criminal investigations and scrutiny of traditional white collar activities and financial transactions. Thus, as everyday activities are increasingly linked to national security the general public will be subjected to increased government scrutiny.
Although many traditional protections offered to people that are targets of criminal investigations have eroded since September 11, the FBI is still, at its heart, a law enforcement agency receptive to this country’s legal standards associated with criminal investigations and trials (i.e. reasonable suspicion, probable cause, and beyond a reasonable doubt). However, as the FBI increases its intelligence gathering operations, the need for an effective federal defense attorney becomes even more important. Because the FBI will be subjecting more everyday activities to investigations for “intelligence gathering,” a knowledgeable federal defense attorney will be needed to explain to agents cultural nuances, federal regulatory policies, and foreign policy concerns applicable to a particular client’s situation. This level of knowledge in an attorney is vital to ensuring that the FBI doesn’t misinterpret the findings of an investigation which can ultimately lead to an erroneous indictment or conviction.
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.
Goldman Sachs’ dealings with Libya under scrutiny for potential FCPA violations
The Securities and Exchange Commission (SEC) is looking into Goldman Sachs’ relationships with the Libyan Investment Authority. Back in 2007, Libyan leader Moammar Gadhafi attracted banks and securities firms when he launched the $40 billion fund.
SEC officials are looking into, among other things, a $50 million fee Goldman agreed to pay the Libyan Investment Fund as part of a plan to help the fund recoup losses.
Although the fee was never paid, the money was to be passed on to Palladyne International Asset Management BV, an entity run by the son-in-law of the head of Libya’s state-owned oil company. Negotiations stalled before the violence in Libya broke out and payment never actually took place.
While no formal investigation has been launched, the SEC has made inquiries. It would not be surprising to see this develop into a formal investigation. Given the federal government’s new found appreciation for enforcing the Foreign Corrupt Practices Act of 1977 (FCPA), it seems likely that the SEC will attempt to determine whether the $50 million fee Goldman agreed to pay can be construed as a bribe made to a foreign government official or employee of a state-owned company.
The FCPA, as amended, 15 U.S.C. 78dd-1, et seq., makes it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. The FCPA accomplishes this in two distinct ways:
(1) Prohibiting the payment of anything of value to officials of foreign governments (the “anti-bribery” provision); and
(2) Requiring accurate accounts and effective internal accounting controls (the “books and records” provisions).
Given the fact that the $50 million payment was not made, there will likely not be a “books and records” violation. However, the FCPA does make it unlawful to “promise to pay . . . or . . . promise to give . . . anything of value.” Stated plainly, a promised or attempted bribery of foreign government officials is unlawful under the “anti-bribery” provision of the FCPA. All Goldman can do at the moment is comply with the inquiries and its own document retention policies and hope that the government does not pursue a full investigation. Once a full investigation begins, Goldman will have to be careful not to get caught up in any of the “cover up” crimes like obstruction of justice and false statements. Additionally, federal prosecutors have not been shy about utilizing their full arsenal of tools to obtain convictions from entities it thinks have done something wrong. For example, federal prosecutors today coordinate their investigations with a very diverse group of regulatory and enforcement agencies.
This is why every U.S. person engaged in international trade must remain vigilant on many legal fronts. It is not uncommon to have multiple U.S. regulatory and statutory regimes simultaneously in play at any given moment. For example, any investigation into Goldman for their activities with Libya will not only implicate the SEC, but also the Department of Justice, the Department of Treasury Office of Foreign Assets Control, and possibly the Department of Commerce. The tools available to the government to coerce convictions are plentiful.
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.
