U.S. Attorney's Office
Northern District
of Illinois

Press Contacts:
AUSA George Jackson III
(312)886-7645
AUSA/PIO Randall Samborn
(312)353-5318

FOR IMMEDIATE RELEASE
Thursday April 10, 2003

CHICAGO – A Wheeling firm that manufactures pipe-cutting tools was charged today with two federal felony offenses for allegedly violating a foreign trade embargo against Iran, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois. The defendant, E.H. Wachs Company, allegedly shipped pipe cutters and related equipment in 1995 and 1996 from its warehouse in Wheeling, through Canada, knowing that the products were destined for the National Iranian Gas Company (NIGC) in Iran, in violation of the Iranian embargo barring exports of such goods. Wachs manufactures pipe-cutting tools, including Trav-L-Cutters, and related parts and other items used in the construction and repair of gas and oil pipelines, which it sells worldwide.

The company was charged with one count each of violating the International Emergency Economic Powers Act and the Iranian Transactions Regulations in a two-count criminal information that was filed today in U.S. District Court. No individuals were charged. Through its lawyers, E.H. Wachs, has authorized the government to disclose that it has agreed to plead guilty to the charges at a later date, which has not yet been set.

An Executive Order issued in May 1995, pursuant to the International Emergency Economic Powers Act, prohibited the unauthorized exportation from the United States to Iran or the financing of such exportation, of any goods, technology or services except items intended to relieve human suffering. The prohibition, commonly known as the Iranian embargo, was also made part of the Code of Federal Regulations.

According to the charges, in 1993 and 1994, the NIGC invited bids to purchase approximately 50 pipe-cutting machines, related blades and other specified items. The bid invitations required that the successful bidder have an agent located in Iran in order to provide service for the pipe-cutting machines and to provide training for NIGC personnel on the use of the machines. In 1994, the NIGC initiated negotiations with Wachs and an unnamed Canadian company that had a subsidiary in Iran to purchase two Trav-L-Cutters from Wachs to use to train NIGC employees. The Canadian company was Wachs’ exclusive dealer for Iran, and their agreement provided that Wachs would pay the Canadian company a 10 percent commission on all sales of Wachs’ goods to companies located in Iran, even if the Canadian company did not participate in the transaction.

In late 1994, the Canadian company, on behalf of the NIGC, issued purchase and sales orders for two of Wach’s Trav-L-Cutters and related parts for $26,271. After the Iranian trade embargo took effect in May 1995, Wachs allegedly continued with plans to contract with the NIGC to sell pipe cutters and related items. In July 1995, the charges allege that Wachs wilfully violated the Iranian embargo by exporting pipe-cutting equipment from the United States to Canada, when Wachs employees were aware that the goods ultimately were destined for the NIGC in Iran without the required export authorization.

The charges further allege that in January 1995, Wachs issued to NIGC a quote of $4,669,643.90 for 50 Trav-L-Cutters and related items. Six months later, after the effective date of the trade embargo, a Wachs international sales coordinator issued a quote of $236,569.20 for 14 Trav-L-Cutters and other items, through a European company, which listed Pakistan as the ultimate destination for the items, when the Wachs employee knew that the ultimate destination was Iran. After further negotiations over the price and amount of the pipe cutters, in September 1996, Wachs allegedly violated the Iranian embargo and the Export Administration Regulations by shipping pipe cutters and related parts and items from the United States to Canada, knowing the goods were destines for the NIGC in Iran, without the required export authorization.

Mr. Fitzgerald announced the charges with Elissa A. Brown, Special Agent-in-Charge in Chicago of the Homeland Security Department’s Bureau of Immigration and Customs Enforcement, and Wendy B. Hauser, Special Agent-in-Charge in Chicago of the U.S. Commerce Department’s Bureau of Industry and Security, which togther conducted the investigation. The government is being represented by Assistant U.S. Attorney George Jackson III.

Upon conviction, E.H. Wachs faces a maximum penalty on each count of five years probation and a $500,000 fine. The Court, however, will determine the appropriate sentence to be imposed under the United States Sentencing Guidelines. The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.