By: Tom McVey, Williams Mullen, (202) 293-8118, firstname.lastname@example.org
Editor’s Note: Do you remember the employee who didn’t care too much about compliance because he (or she) knew that only the company gets in trouble for export violations and that employees don’t have anything to worry about? Apparently they need to talk to Tom McVey….
A resident of Massachusetts pleaded guilty on January 20, 2012 to violations of ITAR in connection with the export of 55 antennae from the United States. The case is illustrative for export professionals on a number of levels as described further below.
According to the Department of Justice release, Rudolf Cheung (“Defendant”) was the head of research and development at a private company that manufactures antennae. In this capacity, he designed a library of antennae over recent years, some of which are used in the US space program and others for military applications.
According to the release, during 2006 his company received a request for the export of certain antennae to Singapore and Hong Kong. The company’s export compliance officer advised the customer that, to make the export, the company would be required to comply with ITAR licensing requirements. The customer refused to comply, and the compliance officer cancelled the order. After learning that the company had blocked the order, Defendant entered into discussions with a person outside the company (“Co-Conspirator C” according to the Justice Department release) to export the antenna without the knowledge of the company. Under the plan, Co-Conspirator C approached the company to purchase the antennae in a domestic transaction, and then exported the antennae and sold them to the purchaser in Singapore and Hong Kong without the requisite export licenses. During this period, Defendant was aware that the antennae were being exported to Singapore and Hong Kong without the license in violation of ITAR.
The Defendant was arrested and charged with criminal ITAR violations in the U.S. District Court For the District of Columbia. He pleaded guilty and is currently awaiting sentencing. He faces a potential sentence of up to five years in prison, a $250,000 fine and a three-year term of supervised release. The purchaser in Singapore/Hong Kong is being charged separately and extradited to the United States for prosecution.
Since the US company had an export compliance officer and compliance program, and previously stopped the original attempted export, the US company was not prosecuted in the case.
The case is instructive for two reasons. First, this reconfirms what we already know – that federal officials will prosecute individuals (as well as companies) for criminal export violations. Second, a sound export compliance program can protect a company and its owners from export liability, even when one of its own employees is engaged in illegal activity. Even when an export violation occurs, a compliance program demonstrates the good faith efforts of the company to comply with the law and can save the company from liability. A link to the Department of Justice press release is at http://www.bis.doc.gov/news/2012/doj01202012.htm.