2019 Recap Part III: Justice Department Convictions and Settlements

Iranian Businessman Sentenced to Prison For Illegal Exports to Iran

Pourghannad worked with two co-defendants, Ali Reza Shokri and Farzin Faridmanesh, to exports “many tons” of the carbon fiber, which can be used in missiles, aerospace engineering and gas centrifuges. While Shokri worked to procure the fiber, Pourghannad served as the financial guarantor for “large carbon fiber transactions,” the Justice Department said. Faridmanesh worked as the transshipper.

Around 2008, Shokri worked with a person in Turkey to arrange to export U.S. carbon fiber to an Iranian company owned by Shokri, the agency said. The company directly purchased the carbon fiber and arranged for it to be exported to Europe and the United Arab Emirates before reaching Iran. In 2009, Pourghannad and Shokri tried but failed to complete another illegal export when their co-conspirator in Turkey purchased carbon fiber from a U.S. supplier. The co-conspirator allegedly arranged for the materials to be shipped to a third country before being sent to Iran, but the authorities in the third country seized the shipment. The Justice Department did not name the third country.

In a third instance, Pourghannad, Shokri, and Faridmanesh arranged for the export of five tons of U.S. carbon fiber, which would be shipped through Georgia before arriving in Iran, the Justice Department said. The scheme involved changing the shipping labels on the carbon fiber to “acrylic” or “polyester” to evade U.S. export controls.

Four People Charged for Attempting Illegal Exports to China

Four people were charged with trying to illegally export military-related goods to China, the Justice Department said Nov. 1. The four people -- Fan Yang, Yang Tang, Ge Songtao and Zheng Yan -- were involved in an attempt to illegally export seven military-style inflatable boats and eight engines to China, the Justice Department said. Yang, Ge and Zheng were also charged with filing false information in the Automated Export System, while Fan, Yang and Ge were charged with illegal arms transfer offenses, including a law that bans certain arms transfers to non-U.S. residents. Convictions for filing false export information may result in a maximum five-year prison sentence, the Justice Department said.

Florida Resident Arrested After Trying to Illegally Export to Libya

A Florida resident was arrested for trying to illegally export dual-use goods to Libya, the Justice Department said in an Oct. 30 press release. Peter Sotis was charged with violations of the International Emergency Economic Powers Act and the Export Administration Regulations.

Sotis, owner of Add Helium, a diving company, allegedly conspired to transfer four rebreathers to a shipping company for export to Libya without the required Commerce Department licenses. Sotis tried to transfer the items, which are controlled under the EAR for national security reasons, after being told by a Commerce agent that the items could not be exported while a license was pending, the Justice Department said. A rebreather recycles a diver's breath, and a side effect is that it produces no bubbles, concealing a diver’s activities from being seen on the surface of water, thereby posing a security threat.

California Resident Indicted for Illegally Exporting Turtles to Hong Kong

A California resident was indicted for illegally exporting 11 packages of turtles to Hong Kong, the Justice Department said in an Oct. 23 press release. Keri Zhang Wang allegedly placed the box turtles and map turtles inside socks, which she placed inside shoe boxes “with packing materials.” She placed the shoebox “under bags of snacks and chips for shipping” and did not label the packages as containing turtles, the Justice Department said. The turtles are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora, and Zhang Wang did not have the required permits to export them, the press release said. Zhang Wang was charged with four counts of smuggling goods and four counts of Lacey Act false labeling. She faces a maximum 10-year prison sentence and a $250,000 fine.

Ohio Man Sentenced to Prison After Illegally Exporting to Iran

An Ohio man was sentenced to 20 months in prison for illegally exporting gas and oil pipeline parts to Iran for more than a decade, the Justice Department said in an Oct. 24 press release. Behrooz Behroozian used an intermediary company, Sumar Industrial Equipment, to hide the exports, which violated U.S. sanctions on Iran and the Emergency Economic Powers Act, the press release said. Behroozian allegedly exported “manifolds, valves and connectors” used in the pipelines and oil industry, earning about $40,000 per year. Behroozian also owned Dublin-based Comtech International, a self-proclaimed computer parts supplier that instead of computer parts shipped industrial equipment to Behroozian’s company in the United Arab Emirates before it was then exported to Iran.

US Takes Ownership of Sanctions-Evading North Korean Cargo Ship

The U.S. will take ownership of a North Korean cargo ship after it violated U.S. sanctions and United Nations Security Council resolutions, the Justice Department said in an Oct. 21 press release. The U.S. originally seized the ship, the “Wise Honest,” after it transported coal and “heavy machinery” to and from North Korea and used U.S. banks for various transactions. “This order of forfeiture sinks the Wise Honest’s career as one of North Korea’s largest sanctions-busting vessels,” Assistant Attorney General for National Security John Demers said in a statement, adding that the agency “will continue to pursue other property used to violate U.S. and international sanctions.”

Chinese National Sentenced to Prison for Attempting to Illegally Export to China

A Chinese national was sentenced to 40 months in prison after trying to export military and space-related technology to China without proper licenses, violating the International Emergency Economic Powers Act, the Justice Department said in an Oct. 18 press release.

Between 2016 and 2018, Tao Li worked with others in China to try to illegally export from the U.S. “radiation-hardened power amplifiers and supervisory circuits,” components used “primarily for military and space applications,” the press release said. The items required Bureau of Industry and Security export licenses due to the “significant contribution that the components could make to a foreign country’s military and space programs,” the Justice Department said. To avoid the license requirements, Li used aliases to contact U.S. people and companies to try to buy the components, saying he was willing to pay a “risk fee.” Li was arrested while planning to meet with an undercover agent in Arizona, the Justice Department said.

Li’s arrest is one of “many” cases of illegal attempts to export U.S. military technology to China, Assistant Attorney General John Demers said in a statement. “Such laws are in place to protect our national security, and the Department of Justice will continue to vigorously enforce them.”

Turkish Bank Worked With Iran to Violate US Sanctions, Justice Dept. Says

A Turkish government-owned bank was charged with fraud, money laundering and conspiracy to violate the International Emergency Economic Powers Act after working with Iran to evade U.S. sanctions, the Justice Department said in an Oct. 15 press release. The bank -- Turkiye Halk Bankasi A.S., also known as Halkbank -- helped run the “multimillions scheme” by deceiving U.S. regulators and foreign banks and lying to U.S. authorities, the press release said.

Halkbank used money-service business and front companies in Iran, Turkey and the United Arab Emirates to avoid restrictions on Iran’s access to the U.S. financial system, revenue from oil sales and supply of gold, the Justice Department said. The Central Bank of Iran, the National Iranian Oil Company and the National Iranian Gas Company deposited revenue from gas sales into Halkbank when selling to Turkey, accumulating “billions of dollars’ worth of funds” in the accounts.

Iran could not withdraw the money because of U.S. sanctions, so Halkbank used the accounts to conduct “several types of illicit transactions for the benefit of Iran,” including buying gold for the country. Halkbank also transferred the money to certain “Iranian customers” after labeling the sales as a “humanitarian exception” to U.S. sanctions, even though “no purchases of food or medicine actually occurred,” the Justice Department said. Halkbank ultimately transferred about $20 billion in funds to Iran, according to the press release.

Justice’s announcement follows charges levied against nine other defendants, including bank employees and Turkey’s former economy minister. “This is one of the most serious Iran sanctions violations we have seen,” Assistant Attorney General for National Security John Demers said in a statement, “and no business should profit from evading our laws or risking our national security.”

Iranian Citizen Sentenced to Prison for Illegally Exporting From US

An Iranian citizen was sentenced to 27 months in prison for conspiring to illegally export technology to Iran, the Justice Department said Sept. 24. Negar Ghodskani pleaded guilty to the charges in August and admitted using a front company he helped found, Malaysia-based Green Wave Telecommunication, to buy export-controlled technology from the U.S. and hide the ultimate end-user and destination, located in Iran.

US Man Sentenced to Prison for AECA Violations

A U.S. man was sentenced to three years in prison on charges that included conspiracy to violate the Arms Export Control Act, the Justice Department said in a Sept. 5 press release. In 2005 and again in 2010, Roger Sobrado submitted a “fraudulent application” to the Department of Defense “for access to export controlled drawings and technical data on behalf of a family member’s company,” the press release said. Sobrado said the drawings and data would only be accessed by U.S. citizens, but Sobrado allowed a family member, who was “illegally in the United States,” to download “hundreds of drawings that were sensitive in nature and that require special access.” The sentence also reflects charges of conspiracy to commit tax evasion and wire fraud.

Turkish Businessman Sentenced to Prison for Illegally Exporting Items to Iran

A Turkish businessman was sentenced to just more than two years in prison following his conviction for conspiring to illegally export marine equipment from the U.S. to Iran, the Justice Department said in a Sept. 3 press release. Resit Tavan, owner of Istanbul-based Ramor Dis Ticaret, tried to export “specialized” equipment, including outboard engines, marine power generators and power boat propulsion equipment known as “surface drives,” the press release said.

Between 2013 and 2015, Tavan bought the equipment, manufactured in Wisconsin, on behalf of Iran-based Qeshm Madkandalou Shipbuilding Cooperative, the Justice Department said. Tavan also worked with Iranian officers associated with Qeshm Madkandalou to use the U.S. origin goods to build a “prototype high-speed missile attack boat” for Iran’s military, the press release said. Tavan used his company in Turkey to buy the goods before re-exporting them to Iran.

Pennsylvania Man Sentenced to Six Months in Prison for Illegal Wildlife Exports

A federal court in Philadelphia sentenced an exporter of protected wildlife to six months in prison for smuggling terrapins to Canada in violation of the Lacey Act, the Justice Department said in an Aug. 29 press release. David Sommers of Levittown, Pennsylvania, had pleaded guilty in February to Lacey Act false labeling violations related to the misdeclaration of diamondback terrapins on a commercial invoice and international air waybill he submitted to a carrier for a shipment to Canada.

Diamondback turtles are protected under the Convention on International Trade in Endangered Species (CITES), DOJ said. On the invoice and air waybill, Sommers had said the diamondback terrapins were book valued at $10. He also took steps to evade detection by binding the terrapins for shipping in duct tape and stuffing them in socks so they couldn’t claw at the package. That runs against International Air Transport Association guidelines for the human shipment of animals, DOJ said.

Canadian authorities had intercepted the shipment and tied the associated FedEx account to Sommers. In addition to several covert buys by undercover agents, Sommers was also caught collecting terrapin eggs by New Jersey wildlife officers. A search that was subsequently conducted by New Jersey found evidence of the shipment to Canada. Sommers then admitted to those agents that he had sold about 1,000 terrapins to buyers in the U.S. and Canada over the preceding five years.

Overall, Sommers earned more than $530,000 from his illegal scheme, according to sentencing documents filed by the U.S. government. The Eastern Pennsylvania U.S. District Court ordered Sommers to pay $250,000 in restitution. It also sentenced Sommers to three years of supervised release following his sentence, including six months of home detention.

Iranian Resident Charged With Illegally Shipping Controlled Goods to Iran

An Iranian resident was arrested after he tried to illegally ship “computer numerical control machines” from the U.S. to Iran, the Justice Department said in an Aug. 20 press release. Mehdi Hashemi is charged with violating the International Emergency Economic Powers Act by trying to ship the machines, which are “used to process raw materials, such as metals, to precise standards,” the press release said. The machines are controlled for “nuclear non-proliferation and anti-terrorism reasons.” Hashemi pleaded not guilty.

The Justice Department said Hashemi bought the machines from U.S. and Canadian suppliers and “made arrangements to ship” them to the United Arab Emirates “under false and forged invoices and packing lists.” Hashemi then planned to forward the goods from the UAE to Iran, the press release said, on behalf of a Tehran-based company “that claimed to manufacture textiles, medical and automotive components, and spare parts.” If convicted of all charges in the 21-count indictment, Hashemi faces a maximum penalty of 320 years in prison.

US Citizen Sentenced to Prison for Illegal Arms Transfers

A naturalized U.S. citizen was sentenced to 30 years in prison after pleading guilty to several export violations, including illegally transferring missile systems and unlicensed arms brokering, the Justice Department said in an Aug. 20 press release. Rami Najm Sledgehammer, who was living in Egypt at the time of the offenses, transferred “a wide array of surface-to-air missile systems” around the world, the Justice Department said, including to clients in Libya, the United Arab Emirates, Iraq and Hezbollah.

In 2015, Ghanem conspired to use Russian-made missile systems “by brokering the services of mercenary missile operators to a militant faction in Libya,” the press release said. Ghanem negotiated the salaries for the “mercenary missile operators,” organized their travel and offered them a $50,000 bonus “if they were successful in their mission of shooting down” Libyan government airplanes.

U.S. authorities began investigating Ghanem in 2014 after a Los Angeles-based company told Homeland Security Investigations that Ghanem had tried to buy their military equipment, the press release said. During an undercover operation, HSI agents discovered Ghanem was also trying to illegally buy sniper rifle and “night-vision optics” and said he was looking into buying helicopters and fighter jets for clients in Iran.

Ghanem was arrested during the undercover operation after making two down payments on $220,000 worth of defense-related goods, including sniper rifles, pistols, silencers and laser sights, the Justice Department said. U.S. authorities also found “evidence of other large-scale arms brokering activities, including millions of rounds of ammunition, anti-tank missiles, and the scheme to transfer and use anti-aircraft missiles.” Ghanem planned to sell $250 million worth of weapons to a militant group in Libya and rocket-propelled grenade launchers to Egypt, and tried to traffic “counterfeit currency, looted antiquities and black-market diamonds,” the Justice Department said.

Four Chinese Nationals, Company Charged With IEEPA Violations, Sanctions Evasion

Four Chinese nationals and a Chinese company were charged with violating the International Emergency Economic Powers Act and U.S. sanctions after they did business with sanctioned North Korean companies, the Justice Department said in a July 23 press release. The charges were brought against Ma Xiaohong, her company Dandong Hongxiang Industrial Development Co. Ltd. (DHID) and three of the company’s top executives: general manager Zhou Jianshu (Zhou), deputy general manager Hong Jinhua (Hong) and financial manager Luo Chuanxu (Luo).

Ma, Zhou and Hong conspired to create more than 20 front companies to do business with North Korea-based Korea Kwangson Banking Corporation (KKBC), which was sanctioned by the U.S. in 2009, the press release said. Between 2009 and 2015, they allegedly established front companies in the British Virgin Islands, the Seychelles, Hong Kong, Wales, England and Anguilla. They also created bank accounts in the names of the front companies at Chinese banks that then maintained “correspondent accounts” in the U.S., the press release said.

Ma, Zhou and Hong used the accounts for financial transactions through the U.S. banking system when completing sales to North Korea, the Justice Department said. This hid KKBC’s involvement with the U.S. banks, and transactions were processed without being detected by the U.S. banks or blocked by the Weapons of Mass Destruction Proliferators Sanctions Regulations program.

DHID’s “core business” was trade with KKBC, which provided financial services for North Korea-based Tanchon Commercial Bank and Korea Hyoksin Trading Corporation. Both Tanchon and Hyoksin had ties to the Korea Mining Development Trading Company, the country’s “premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons,” the Justice Department said.

Ma, Zhou and Hong each face a maximum prison sentence of 20 years and a $1 million fine for charges of violating the IEEPA, a maximum five-year prison sentence and $250,000 fine for conspiracy to violate the IEEPA and defraud the U.S., and a maximum 20-year prison sentence and a $500,000 fine for “conspiracy to launder monetary instruments,” the press release said.

Iranian Citizen Pleads Guilty to Violations of IEEPA, Iran Sanctions Regulations

An Iranian citizen pleaded guilty to violating the International Emergency Economic Powers Act and Iran sanctions after she tried to illegally export gas turbine parts from the U.S. to Iran, the Department of Justice said in a July 19 press release. Mahin Mojtahedzadeh faces a maximum 20-year prison sentence and $1 million fine when sentenced in November.

Between 2013 and 2017, Mojtahedzadeh, president and managing director of Dubai-based export company ETCO-FZC, used the company to evade U.S. sanctions against Iran, DOJ said. Mojtahedzadeh coordinated with companies in Canada and Germany to buy more than $3 million worth of turbine parts from two distributors in New York before shipping the parts from the respective countries to ETCO’s customers in Iran, the press release said. Mojtahedzadeh and the companies did not have proper export licenses to ship the parts.

Two of Mojtahedzadeh’s co-conspirators, Olaf Tepper and Mojtaba Biria, both citizens of Germany, already have pleaded guilty. Tepper, founder and managing director of Energy Republic GmbH in Germany, pleaded guilty to IEEPA violations, was sentenced to prison and had his export privileges stripped. Biria, the technical managing director for Energy Republic, pleaded guilty to similar charges and faces sentencing in August, DOJ said.

Florida Resident Charged With AECA, ITAR Violations

A Florida resident was arrested for export violations after he illegally shipped hundreds of assault rifle parts to an Argentine weapons trafficking organization, the Justice Department said in a July 12 press release. Cristian German Barrera, who was charged with conspiracy to violate the Arms Export Control Act and the International Traffic in Arms Regulations, did not have the proper license to export AR-15 assault rifle parts to Argentina, the Justice Department said. U.S. Homeland Security Investigations officials worked with Argentine law enforcement to seize the weapons parts, which included long arms, handguns, a mortar round and more than 30,000 rounds of ammunition, the press release said.

Los Angeles Resident Found Guilty of Conspiring to Illegally Export Semiconductor Chips to China

A Los Angeles resident was found guilty of conspiring to illegally export semiconductor chips to China, violating the International Emergency Economic Powers Act, the Department of Justice said in a July 2 press release. Yi-Chi Shih faces a maximum prison sentence of 219 years.

Shih illegally gained access to a “protected computer” of a U.S. company that makes “wide-band, high-power semiconductor chips,” or “monolithic microwave integrated circuits (MMICs),” before exporting the chips, the press release said. The company's semiconductor chips are used by the U.S. military for dual-use items, including missiles and fighter jets, DOJ said.

As part of the scheme, Shih accessed the company’s computer systems with a co-conspirator by “posing as a domestic customer” who was looking to buy “custom-designed MMICs” that would be used only in the U.S., DOJ said. However, after obtaining the MMICs, Shih illegally exported the circuits to China without the proper license from the Commerce Department, the press release said.

Shih shipped the chips to Chengdu GaStone Technology Company (CGTC), which was building a MMIC manufacturing company in China, the press release said. Shih previously served as the president of CGTC, which was added to Commerce’s Entity List in 2014, DOJ said, due to the “illicit procurement of commodities and items for unauthorized military end use in China.”

Shih used his Hollywood Hills-based company Pullman Lane Productions LLC “to funnel funds provided by Chinese entities to finance the manufacturing of MMICs by the victim company,” the press release said. Pullman Lane was funded by a Beijing company that was also placed on Commerce’s Entity List.

Along with violating the IEEPA, Shih was also found guilty of mail fraud, wire fraud, subscribing to a false tax return, making false statements to a government agency and conspiracy to gain unauthorized access to a protected computer to obtain information. Shih’s co-conspirator Kiet Ahn Mai, pleaded guilty to one count of smuggling and faces a maximum prison sentence of 10 years at sentencing in September. A court is still deciding on forfeiture allegations in Shih’s indictment that could force Shih to surrender “hundreds of thousands of dollars.”

“The FBI is committed to protecting institutions from adversaries who seek to steal sensitive American technology under the guise of research,” Assistant Director in Charge Paul Delacourt of the FBI’s Los Angeles Field Office said in a statement. “We will continue to work collaboratively with our federal partners to identify and hold accountable individuals who plunder our research or intellectual property at the expense of the American people and our national security.”

Two Floridians Charged With Conspiracy in Illegal Exports of Rifle Parts

John Peterson and Brunella Zuppone were arrested June 26 and charged with “conspiracy to violate and attempted violations of the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR),” the U.S. Attorney's Office for the Southern District of Florida said in a June 28 news release. The pair are alleged to have tried to “illegally export to Argentina defense articles, specifically, parts and components for AR-15 assault rifles, which were smuggled across international borders by a transnational weapons trafficking group in Argentina,” the Justice Department said. Neither had required licenses from the State Department for exporting such goods, it said.

Freight Forwarder Pleads Guilty to Illegally Exporting Containers

The owner of Rapid Export Services in Miami pleaded guilty on June 12 to one count of illegally smuggling goods from the U.S., the U.S. Attorney’s Office for the Southern District of Florida said in a June 20 news release. Juan Carlos Rodriguez Espinoza “faces a maximum statutory sentence of up to 10 years in prison, three years of supervised release, and a $250,000 fine,” the Department of Justice said. Rodriguez is said to have received 13 containers of alcohol and cigarettes in 2016 from Panama. He then arranged for the containers to be held in-bond at a bonded warehouse operated by Double Ace, Inc.

The bonded warehouse later exported the containers to the Dominican Republic at the request of Rodriguez, the DOJ said. “Rodriguez, based on instructions he received from his client in the Dominican Republic, instructed employees at Double Ace to change the commodity description on the outgoing bills of lading,” it said. “Rodriguez instructed the employees at Double Ace to change the commodity description to the following commodities: paper, raw material, synthetic textiles or hospital supplies (as opposed to cigarettes and alcohol). Rodriguez acted with the intent to conceal the nature of the goods from the customs authorities in the Dominican Republic. Rodriguez knew that providing false information on the bills of lading was contrary to the laws and regulations of the United States.”

Woman Pleads Guilty to Helping to Export Aircraft Parts to Iran

New Jersey resident Joyce Eliabachus pleaded guilty to charges related to her role in illegally smuggling millions of dollars worth of aircraft parts to the U.S., the U.S. Attorney’s Office for District of New Jersey said in a June 11 news release. “Eliabachus and others allegedly ran an international smuggling ring that shipped $2 million in aircraft parts to multiple Iranian airlines, including a company that has provided financial, material, and technological support to the Islamic Revolutionary Guard Corps,” U.S. Attorney Craig Carpenito said. “This arrest, which was made possible by a close collaboration between our office and our partners at Homeland Security Investigations and the Office of Export Enforcement, has snuffed out another source of funds and goods to overseas entities that may endanger our national and economic security.” Eliabachus was the principal officer of Edsun Equipments LLC, an aviation parts trading company run out of her Morristown, New Jersey, residence, the Justice Department said.

Iranian Citizen Charged With Violating US Export Laws, Sanctions

An Iranian citizen who lived for a time in Turkey was charged in two separate indictments for violating U.S. export laws, including several counts of conspiracy to export goods to Iran and to a Specially Designated National, the Department of Justice said in a June 4 press release. Peyman Amiri Larijani -- operations manager for Kral Havacilik IC VE DIS Ticaret Sirketi (Kral Aviation) -- was indicted on 34 counts of violating export laws in 2015 and four counts in 2016.

Between 2010 and 2012, Larijani and “co-conspirators” allegedly bought U.S. aircraft parts from U.S. companies, wiring the money through U.S. banks and hiding the end-use for the goods, the press release said. Larijani and others then exported the parts from the U.S. to Istanbul, Turkey, where the products were shipped to several airlines, including Mahan Air, which was designated as a SDN by the Treasury Department for supporting Iran’s Islamic Revolutionary Guard Corps-Qods Force. Larijani also tried to acquire U.S. aircraft engines for Mahan Air without first obtaining licenses from the U.S., DOJ said.

“The Department is committed to vigorous enforcement of the sanctions placed on Iran for its oppressive and destabilizing behavior,” Assistant Attorney General John Demers said in a statement. “Sanctions evasion weakens the power of sanctions to change Iran’s behavior and makes us all less safe.”

Among more than 35 combined charges, Larijani is accused of trying to evade the Emergency Economic Powers Act, the Iranian Transactions and Sanctions Regulations and the Export Administration Regulations (EAR). The Commerce Department has placed Mahan Air on its Denied Parties List and Kral Aviation on its Entity List, according to the press release. If convicted, Larijani faced up to 20 years in prison.

Arms Broker Charged Over Deal Making Without State Department Approval

Ara Dolarian, owner of arms brokering company Dolarian Capital Inc., is facing criminal charges over the illegal brokering of arms sales, the Department of Justice said in a May 20 news release. Although the State Department denied applications from Dolarian to broker arms deals, the company “allegedly attempted to broker a multi-million dollar transfer of high‑explosive bombs, rockets, military-grade firearms, and aircraft-mounted cannons from Eastern Europe and South Africa to the government of Nigeria,” said the U.S. Attorney’s Office for the Eastern District of California. “Without approval from the State Department, Dolarian allegedly accepted approximately $8.3 million from Nigeria and its broker,” the DOJ said. Those funds were then funneled through numerous shell companies and were used by Dolarian to pay off various expenses, it said. Dolarian is alleged to have willfully violated the International Traffic in Arms Regulations prohibitions on “brokering activities” without State approval, according to the complaint.

US Seizes North Korean Ship for Sanctions Violations

The U.S. seized a North Korean cargo ship for violating U.S. and international sanctions after it transported coal and “heavy machinery” and used U.S. banks for various transactions, the Department of Justice said in a May 9 press release.

From November 2016 to April 2018, the ship, called the Wise Honest, was used by Korea Songi Shipping Company, an affiliate of Korea Songi General Trading Corporation, to export coal from North Korea and import machinery. Kwon Chol Nam, a representative for the shipping company, used U.S. dollars to pay for “numerous improvements, equipment purchases, and service expenditures” for the ship, using “unwitting” U.S. banks, the department said.

The department said in the complaint that payments of more than $750,000 were sent through U.S. banks related to a March 2018 coal shipment by the ship. During that shipment, “foreign maritime authorities” intercepted the ship, DOJ said, and discovered that it had not been broadcasting its automatic identification system (AIS) since August 2017, which is required by “maritime regulations.” Shippers tried to hide the Wise Honest’s association with North Korea in shipping documents, listing false countries for the ship’s nationality and product origin, the press release said.

In a statement, U.S. Attorney Geoffrey Berman said the “scheme” was designed to allow North Korea to purposely evade U.S. sanctions and deliver “high-grade coal to foreign buyers.” Berman also said the machine imports were “helping expand North Korea’s capabilities and continuing the cycle of sanctions evasion.”

“This sanctions-busting ship is now out of service,” Assistant Attorney General for National Security John Demers said in a statement. “North Korea, and the companies that help it evade U.S. and U.N. sanctions, should know that we will use all tools at our disposal -- including a civil forfeiture action such as this one or criminal charges -- to enforce the sanctions enacted by the U.S. and the global community.” In March, the Treasury’s Office of Foreign Assets Control issued an updated 19-page guide on identifying and avoiding North Korea’s illegal shipping practices.

Scooter Exports Meant for Iran Result in Prison Sentence

Darus Zehrbach of West Virginia received a six-month prison sentence for making a false statement involving the exportation of electric scooters destined for Iran, the U.S. Attorney’s Office for the Northern District of West Virginia said in a news release. “In February 2015, Zehrbach received a letter from the Office of Foreign Assets Control, denying his application for a license to export electric scooters to Iran,” the Justice Department said. “In June 2016, Zehrbach exported eight electric scooters to the United Arab Emirates, knowing that the scooters would be shipped to Iran.” Zehrbach admitted to telling a Commerce Department agent "that a shipment he sent to Iran had originated in China when in fact that shipment originated in the United States."

New Jersey Defense Contractor Pleads Guilty to Illegally Accessing ITAR-Controlled Data

A New Jersey defense contractor pleaded guilty to a charge of conspiracy to violate the Arms Export Control Act in U.S. District Court for the District of New Jersey, the Department of Justice said in a news release. Oben Cabalceta owned two New Jersey companies, Owen's Fasteners Inc. and United Manufacturer LLC. Cabalceta admitted to defrauding the Department of Defense by “providing military equipment parts that were not what he had contracted to provide and illegally accessing technical information because he was not a United States citizen,” the DOJ said.

Defense contracted with Cabalceta's companies for military parts that “would be the exact product provided by authorized manufacturers,” the DOJ said. In addition to defrauding the DoD, Cabalceta in 2005 and 2010 “caused his brother-in-law, Roger Sobrado, to submit to the DoD a fraudulent application for access to export controlled drawings and technical data on behalf Owen’s,” the DOJ said. “In 2015, Cabalceta caused an accomplice to submit to the DoD a fraudulent application for access to export controlled drawings and technical data on behalf Owen’s.” Sobrado pleaded guilty in October 2018, the DOJ said.

According to the charging document, Cabalceta never applied for nor received a license “or other authorization from the [Directorate of Defense Trade Controls] to export directly or indirectly [International Traffic in Arms Regulations]-controlled technical data from” the U.S. "It was the object of the conspiracy to willfully export ITAR-controlled technical data related to the design and manufacture of defense hardware items and spare parts without the requisite license or other written approval from the United States Department of State for financial gain," U.S. Attorney Craig Carpenito said.

New Jersey Man Planned to Illegally Export Weapons, Ammunition

A New Jersey man was sentenced to 46 months in prison after he planned to illegally export firearms and ammunition to Paraguay, the Department of Justice said in an April 18 press release. Pedro Vergara bought at least 13 guns and thousands of rounds of ammunition between May 2017 and November 2017, according to the release, and planned to sell them on the black market. Vergara hid the guns in shipping boxes and transported them from New Jersey to a shipping company in New York, the DOJ said, where he planned to smuggle them into Paraguay. Vergara also removed the serial numbers from at least 10 of the guns to conceal “ownership interest,” the release said. In addition to the prison sentence, Vergara was also sentenced to two years of supervised release and fined $10,000.

Court Approves Funds Seizure Said to be Related to Exports to North Korea, Syria

A federal judge approved the civil forfeiture of nearly $150,000 that was said to be laundered "to further [business owner Tsai Hsien-Tsai's] exportation of goods for the benefit of North Korean and Syrian entities involved in the respective regimes’ weapons programs," the Department of Justice said in an April 3 news release. The complaint alleged that Taiwan-based Trans Multi and its owner, also known as Alex Tsai, had laundered U.S. money related to illegal dealings with Syria and North Korea, the DOJ said. “The Court found that these blocked funds were the product of Tsai’s attempts to sell tools to a Syrian company using U.S. Dollars and a series of front companies,” U.S. Attorney Jessie Liu said. “Sanctions laws are critical to our national security and foreign policy interests, and this case demonstrates that we will seek significant remedies against those companies that violate them.”

The Treasury's Office of Foreign Asset Control designated Tsai, his wife and two companies he controlled in 2009, the DOJ said. "Between April and June of 2012, OFAC blocked $148,500 in the process of being transferred from a bank account in Hong Kong controlled by Tsai to a Taiwanese bank account in the name of his daughter as it traveled through the United States correspondent banking system," it said. The complaint was filed in 2016.

U.S. District Court for the District of Columbia Judge Richard Leon ruled that "there was no genuine dispute of material fact with respect to the government’s complaint, and that the Court could 'easily conclude' that the funds involved in this suit stemmed from Tsai’s attempts to evade sanctions."

New Jersey Freight Forwarder Pleads Guilty to ITAR Violations

Michael Stashchyshyn, who owned a freight forwarder company in Parsippany, New Jersey, pleaded guilty March 20 to one charge of "conspiracy to violate the Arms Export Control Act," the Justice Department said in a March 21 news release. "In connection with the guilty plea, the court was advised that Stashchyshyn conspired with others to export night sighting equipment, firearm parts, and ammunition to Ukraine without the requisite license issued by the State Department," said the U.S. Attorney’s Office for the Western District of Pennsylvania. The items were bought in the U.S. and sent to Stashchyshyn, who "then shipped the items to an individual in Ukraine in violation of U.S. law and regulations. The items shipped are contained on the Federal Munitions List and are controlled by the International Traffic in Arms (ITAR) regulations. They are illegal to ship without a license from the State Department, which the defendant and his co-conspirators did not have."

Australian Gets Two Years in Jail for Exporting Aircraft Parts to Iran

A federal judge sentenced David Levick of Australia to two years in jail as a result of illegally exporting aircraft parts to a company in Iran, the Department of Justice said in a March 21 news release. The sentencing follows a 2012 indictment and extradition from Australia in December 2018. Levick was the general manager of ICM Components in Australia in 2007 and 2008 when he solicited purchase orders from someone representing a trading company in Iran. Levick then placed orders with U.S. companies for aircraft parts and other items that the Iranian person could not have directly purchased from the U.S. without government approval, the DOJ said. "When necessary, Levick used a broker in Tarpon Springs, Florida, through whom orders could be placed for the parts to further conceal the fact that the parts were intended for transshipment" to Iran, it said. "Levick intentionally concealed the ultimate end-use and end-users of the parts from manufacturers, distributors, shippers, and freight forwarders located in the United States and elsewhere. In addition, Levick and others structured their payments between each other for the parts to avoid trade restrictions imposed on Iranian financial institutions by other countries. Levick and ICM wired money to companies located in the United States as payment for the parts."

Estonia Extradites Russian Citizen to Face Charges in US Over Smuggled Microelectronics Exports

Valery Kosmachov was extradited from Estonia to face federal charges in the U.S. related to a "scheme to illegally procure sophisticated electronic components" and smuggle them to Russia, the Department of Justice said in a March 20 news release. The indictment was filed in September 2017 but was only unsealed on March 20, said the U.S. Attorney’s Office for the Northern District of California. Kosmachov was arrested in September 2018 and extradited to the U.S. on March 14, the DOJ said.

Kosmachov and an alleged co-conspirator, Sergey Vetrov, were charged in the indictment, it said. Vetrov and Kosmachov, a Russian national and naturalized citizen of Estonia, used their Estonia-based companies "as procurement 'fronts' to obtain controlled U.S.-origin microelectronics, in part by misrepresenting that the end-users for the components were located in Estonia," the DOJ said. "The components included dual-use programmable computer chips capable of operating in austere environments making them useful in both civilian and military applications. Once in possession of the chips in Estonia, the co-defendants allegedly later smuggled them into the Russian Federation, in part by using laundered funds."

The DOJ said "Kosmachov, Vetrov, and their two companies are charged with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and one count of conspiracy to commit international money laundering." While Kosmachov is scheduled to next appear in court on March 28, Vetrov remains "at large," the DOJ said.

A conviction could result in a lengthy sentence for Kosmachov. He faces "a maximum 20-year term of imprisonment for each IEEPA and money laundering-related count, and a maximum 10-year sentence for each count of smuggling," the DOJ said. The prosecution follows an investigation that involved the Bureau of Industry and Security, Homeland Security Investigations, CBP, the Internal Revenue Service and the U.S. Marshals Service, with assistance from the DOJ's Office of International Affairs.

A BIS export privileges denial order from 2018 may describe some of what is alleged in the indictment, which the DOJ didn't immediately make available. Eastline Technologies OU, a company co-owned by Kosmachov and Vetrov, created an Electronic Export Information filing in the Automated Export System that listed Estonia as the ultimate destination and Eastline as the ultimate consignee, even though Eastline admitted that was not the case. "Based on a review of EEI filings in AES for 2018, Eastline continued to order U.S.-origin items and have them delivered to its package forwarder in the U.S., for consolidation and export," BIS said.

Among other things, the BIS Office of Export Enforcement said it was concerned that the "strategy of using a package forwarder in the United States to consolidate orders placed with multiple U.S. manufacturers or suppliers, rather than having the items exported directly by the manufacturers or suppliers themselves, may be part of a concerted effort to conceal their activities."

Lawyer Pleads Guilty to Charges Related to Scrap Metal Export Scheme

Richard Luthmann, a Staten Island, New York, lawyer, pleaded guilty to wire fraud conspiracy and extortion on March 18, the Justice Department said in a news release. "Beginning in summer 2015, Luthmann, co-defendant George Padula and the victim participated in a scheme in which they contracted with overseas companies to sell and ship them containers of valuable scrap metal, but instead packed the containers with cheap filler material, such as concrete blocks," the DOJ said. "As part of the scheme, Luthmann registered shell companies, including Omni Metal Corporation, with the New York Department of State and recruited a client of his law practice to be the nominal president of Omni." In late 2016, the victim was threatened with a gun in the presence of Padula not to contact police.