Where Industry and Security Intersect
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Good morning. I appreciate having the chance to speak to you today about Export Enforcement. You will have many opportunities throughout Update to hear about what's new in the organization. Let me direct your attention to some of those. The main Enforcement panel is scheduled for later this morning. Tomorrow afternoon there will be a presentation on the Licensing and Enforcement Action Program. Following that, I will chair a panel introducing you to our proposals for simplifying the export clearance process.
This morning I would like to do something different rather than the traditional "state of Export Enforcement" talk that I usually give at Update. Instead I want to take a moment to remind you of a very important point -- You can make a difference working in partnership with Export Enforcement. It is a message that I hope you will keep in mind as you attend Update and learn more about the laws, regulations and requirements that make up our export control system.
During the past year, Export Enforcement focused its efforts on large complex investigations. Currently, we have over 1,700 active investigations. Many of these resulted from tips and leads you provided. I want to say thank you. You are doing your part to contribute to a safer world and a good export environment.
In Export Enforcement, we are concerned about a number of things. Let me give you a quick reminder of what some of those are.
You know from reading the papers that export violations are occurring. We need to work together to make sure that illicit brokers, front companies, middlemen and bad end-users cannot evade our controls. A sample of our cases since last summer's Update provides a very good reason for you to be concerned and to continue doing your part by keeping us informed.
Last July, a team of special agents stopped a man from boarding a plane in Detroit bound for Lebanon. He was attempting to export night vision equipment, sophisticated global positioning systems, and a thermal imaging camera to the Hizballah in Lebanon. This was an exciting case for us. The FBI discovered that the suspect was obtaining high tech equipment and called BXA to find out if the equipment was controlled. It was. The licensing officer moved fast and alerted Enforcement. The suspect was put under 24 hour surveillance. We knew the suspect was going to Lebanon, but we didn't know exactly when. We put an agent on stand-by awaiting word from the FBI that the suspect was leaving for the airport.
When the suspect left his home with the luggage, the agent got the call. We had coordinated with Customs, and Customs arranged for the suspect's bags to be inspected at the airport. In the luggage, the agents found the GPS modules, the night vision equipment, and the thermal imaging camera plus incriminating paperwork. Customs pulled the suspect out of the line at Customs control and conducted a search. The suspect had an additional GPS system in his carry-on luggage. Based on what was found at the airport, we obtained a search warrant for the suspect's home and office, which yielded information about other terrorist activities.
Not only was this a good case, but it was the first case brought under the Antiterrorism and Effective Death Penalty Act. We intend to do more on the counterterrorism front. In January of this year, BXA published a regulation imposing a license requirement on exports to terrorists and terrorist organizations. This regulation will enhance our ability to combat terrorism.
Many of our cases involve sanctions violations. Let me tell you about another "hot case." It began when Enforcement's LA office passed a lead to our Miami office stating that a small firm in Melbourne, Florida was attempting to buy industrial pumps for end-users in Libya. Over the next six months, our agents painstakingly collected information and evidence on this individual's operations without alerting him of the interest of U.S. authorities. We used an undercover agent as part of this work. Much of the initial evidence was acquired during the course of approximately twenty-five 300-mile round trips. Our agents discovered evidence of a sophisticated diversion network with the capacity to export tens of millions of dollars worth of U.S. goods. Firms and individuals were operating in the United States, Canada, the United Kingdom, Cyprus and Jordon with the objective of circumventing U.S. embargoes of terrorist supporting countries.
The owner of the Florida company was sentenced to two years in prison and two years probation for illegally exporting pumps and industrial equipment and machinery to Iran, Iraq and Libya. A Canadian-based Iraqi has been arrested and charged with illegally procuring millions of dollars worth of industrial goods for Iran and Iraq from firms throughout the United States. Our agents detained U.S. goods valued in excess of $150,000 en route to Iran and froze over $50,000 of foreign conspirator's cash in U.S. bank accounts. The end result is that our agents shut down that diversion network.
In another sanctions case, the owner of a company pled guilty for illegally exporting controlled equipment to Iran after stating that the equipment was going to the UAE. In this case, a concerned business person called U.S. Customs because he was suspicious about the deal. Customs called us, and we set up a joint undercover operation. The agents learned that the intended destination for the goods was somewhere in the Middle East. Undercover work continued in Las Vegas and California. The suspect admitted on tape that he was sending the goods to Iran. In order to pursue the investigation, our agents provided him with a sample which he shipped to the UAE. The investigative work provided probable cause which allowed our agents and Customs officials to execute a joint search warrant. They uncovered incriminating evidence.
The suspect was sentenced to seven years in prison for his role in a conspiracy to ship impregnated alumina and gas turbine parts to Iran. Impregnated alumina can be used for many things, including making cluster bombs.
Antiboycott efforts are also going well. We have an important criminal case on-going. For the first time ever, we executed a search warrant in a boycott case. We expect the AUSA to take the case to the grand jury any day now.
A final case is one that has been covered extensively in the press: Last July, the Russian subsidiary of a major U.S. company pled guilty to charges of exporting $1.5 million worth of high performance computers to a Russian nuclear weapons lab. This case began in January 1997. Victor Mikhalov -- then head of the Russian ministry responsible for Russian nuclear weapons development -- boasted that Russia had acquired U.S. high performance computers. We conducted an intensive investigation, including the analysis of hundreds of documents. We found that the computers were manufactured in Germany, shipped to the Netherlands, trucked to Moscow and then trucked to the nuclear weapons facility, Arzamas-16.
As a result of our work, a judge imposed a criminal fine of $8.5 million, the maximum permitted. The Commerce Department ordered the U.S. company to pay the maximum civil penalty of $171,000. We also denied the export privileges of the Russian subsidiary for two years. Commerce suspended imposition of the denial period but with extensive reporting requirements and restrictions on the subsidiary's ability to use certain license exceptions.
Based on these examples, I think you'll agree that Export Enforcement's special agents are working hard to stop export control violations. We need your involvement.
Partnership with Export Enforcement means that you are working in your own company's interest as well as the public's interest. At last year's Update, Export Enforcement told you the costs of being involved in a loser transaction -- high legal fees go along with the administrative and criminal process. There are also the costs associated with investigations and the negative publicity your company receives when it is involved in a bad transaction. Being a good corporate citizen is good business.
By helping us catch the bad guys, you also help limit your vulnerability to those who want to use your company's products in ways you don't intend or who are willing to break the rules to make money that you can't make by following the rules. Alerting us to any information, concerns, or suspicions you have can make a difference in putting those folks out of action.
In conclusion, if you know of violations, please contact us. Mark Menefee, Director of Export Enforcement, and his special agents will be around throughout Update to hear from you. Let me take a moment to introduce Mark.
There is nothing he and his agents would rather do than talk with you. I'd like to leave you with one final thought: If your competitor is breaking the law, help us find him a new home!
Thank you and keep up the good work.
In April of 2002 the Bureau of Export Administration (BXA) changed its name to the Bureau of Industry and Security(BIS). For historical purposes we have not changed the references to BXA in the legacy documents found in the Archived Press and Public Information.