Tuesday, November 08, 2016

Export Control Prosecutions

Canadian companies and individuals should be aware that a Canadian and U.S. authorities are actively pursuing prosecutions for improper export of controlled goods to sanctions countries.

In 2011 Mahmoud Yadegari was sentenced by a Canadian Court to four years in prison for exporting Canadian transducers to Iran (*1)

After a trial by judge alone, the appellant was convicted of the following nine offences (he was acquitted of count 9 (an additional count of forgery):

1)     Count 1 – attempting to knowingly sell, supply or transfer restricted goods to a person in Iran or for the benefit of Iran, without first obtaining a certificate of exemption, contrary to the United Nations Act, R.S.C. 1985, c. U-2 (the “UN Act”) and the Regulations Implementing the United Nations Resolutions on Iran, SOR/2007-44 (the “Iran Regulations”)

2)     Count 2 – attempting to export or transfer restricted goods without first obtaining an export permit, contrary to the Export and Import Permits Act, R.S.C. 1985, c. E-19 and associated regulations;

3)     Counts 3, 4 and 5 – failing to report the restricted nature of the goods in question, or their proper value, and making a false or deceptive statement in writing to customs officials, contrary to the Customs Act, R.S.C. 1985, c. 1 (2nd Supp.);

4)     Count 6 – attempting to export controlled nuclear equipment without first obtaining an export licence, contrary to the Nuclear Safety and Control Act, S.C. 1997, c. 9 (the “NSCA”) and associated regulations; and

5)     Counts 7, 8 and 10 – knowingly making a false waybill and knowingly using a forged waybill and end-use certificate when attempting to export the pressure transducers from Canada, contrary to the forgery provisions of the Criminal Code, R.S.C. 1985, c. C-46 (the “Code”).

The United States has been encouraging the Canadian government to more aggressively prosecute such breaches.

Recently a Canadian-Iranian business man has been sentenced in the U.S. to three years in prison for conspiring to violate Iran sanctions. The case highlights that Canadian companies and individuals who purchase American goods and attempt to re route the goods through Canada can find themselves subject to prosecution in the U.S. (*2):

Preet Bharara, the United States Attorney for the Southern District of New York, and John P. Carlin, Assistant Attorney General for National Security, announced that ALI REZA PARSA, a Canadian-Iranian dual citizen and resident of Canada, was sentenced on Friday, May 20, 2016, to three years in prison for his participation in a conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”) and the Iranian Transactions and Sanctions Regulations (“ITSR”).  PARSA was arrested in October 2014 following an investigation by the Federal Bureau of Investigation (“FBI”) and United States Department of Commerce, Bureau of Industry and Security (“BIS”).  PARSA pled guilty on January 20, 2016, before U.S. District Judge Ronnie Abrams, who imposed Friday’s sentence. 
Manhattan U.S. Attorney Preet Bharara said: “As he admitted in court, Ali Reza Parsa conspired to purchase high-tech electronic components – some used in the production of rockets and missiles – from American companies for eventual delivery to Iran through Canada.  He has now been sentenced to three years in prison for his violation of federal law.”
Assistant Attorney General John P. Carlin said: “Over the course of six years, Parsa repeatedly violated export control laws and aided Iranian entities in procuring high-tech electronic components that have both commercial and military uses.  With this sentence, he will be held accountable for circumventing important U.S. laws designed to protect our national security interests.  One of our top national security priorities remains safeguarding our national assets from those who may wish to do us harm.”
According to the Indictment filed against PARSA and other court documents publicly filed in this case and statements made in court proceedings, including Friday’s sentencing:
Between approximately 2009 and 2015, PARSA conspired to obtain high-tech electronic components from American companies for transshipment to Iran and other countries for clients of PARSA’s procurement company in Iran, Tavan Payesh Mad, in violation of U.S. economic sanctions.  To accomplish this, PARSA used his Canadian company, Metal PM, to place orders with U.S. suppliers and typically had the parts shipped to him in Canada or to a freight forwarder located in the United Arab Emirates, and then transshipped from these locations to Iran or to the location of his Iranian company’s client.  PARSA provided the U.S. companies with false destination and end-user information about the components in order to conceal the illegality of these transactions. 
PARSA’s criminal scheme targeted numerous American technology companies.  The components that PARSA attempted to procure included cryogenic accelerometers, which are sensitive components that measure acceleration at very low temperatures.  Cryogenic accelerators have both commercial and military uses, including in applications related to ballistic missile propellants and in aerospace components such as liquid-fuel rocket engines.
In addition, following his arrest and while incarcerated at the Metropolitan Detention Center, PARSA continued to violate the IEEPA and the ITSR  by conducting business for Metal PM and Tavan Payesh Mad, including by ordering parts from German and Brazilian companies for Iranian customers.  PARSA subsequently directed a relative to delete email evidence of his ongoing business transactions while in jail, emphasizing the need for secrecy in their dealings.

Neither PARSA nor any other individual or entity involved in transactions that gave rise to his conviction applied for or obtained a license from the U.S. Department of the Treasury’s Office of Foreign Assets Control for the transactions.

(*1) R. v. Yadegari 2011 ONCA 287.
(*2) May 23 2016 Press Release Dept. of Justice U.S. Attorney’s Office, Southern District of N.Y.


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