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Summary of Major Us Export ______________________________________________________________________________ MAY 2015 NSD WWW.JUSTICE.GOV (202) 514-2007 SUMMARY OF MAJOR U.S. EXPORT ENFORCEMENT, ECONOMIC ESPIONAGE, TRADE SECRET AND EMBARGO-RELATED CRIMINAL CASES (January 2009 to the present: updated May 13, 2015) Below is a brief description of some of the major export enforcement, economic espionage, theft of trade secrets, and embargo-related criminal prosecutions by the Justice Department since January 2008. These cases resulted from investigations by the Homeland Security Investigations (HSI) [formerly Immigration and Customs Enforcement, (ICE)], the Federal Bureau of Investigation (FBI), the Department of Commerce's Bureau of Industry and Security (BIS), the Pentagon's Defense Criminal Investigative Service (DCIS), and other law enforcement agencies. This list of cases is not exhaustive and only represents select cases. WMD Materials to North Korea –On April 24, 2015, Yueh-Hsun Tsai, a.k.a. “Gary Tsai”, was sentenced in the Northern District of Illinois to 3 years of probation and a fine of $250. On March 16, 2015, Hsien Tai Tsai, a.k.a. “Alex Tsai”, was sentenced to 2 years imprisonment and $100 special assessment. Previously, on October 10, 2014, Alex Tsai pleaded guilty to conspiracy to defraud the United States in its enforcement of regulations targeting proliferators of weapons of mass destruction. In his plea agreement, Alex Tsai admitted that he engaged in illegal business transactions involving the export of U.S. origin goods and machinery. On December 16, 2014, his son, Gary Tsai, pleaded guilty to a superseding information charging him with making a false bill of lading. In his plea agreement, Gary Tsai admitted to arranging the export of a grinder to Taiwan by falsely identifying the consignee of the shipment. On June 6, 2013, Alex Tsai, who the U.S. government has linked to the supply of weapons machinery to North Korea, and Gary Tsai, were indicted in the Northern District of Illinois for allegedly conspiring to violate U.S. laws designed to thwart the proliferation of weapons of mass destruction. On May 1, 2013, both Alex Tsai and Gary Tsai were arrested pursuant to criminal complaints filed on April 19, 2013. Alex Tsai, who was believed to have resided in Taiwan, was arrested in Tallinn, Estonia, and later extradited to the United States. Gary Tsai, who is from Taiwan and is a U.S. legal permanent resident, was arrested at his home in Illinois. Each were charged with conspiring to defraud the United States in its enforcement of laws prohibiting the proliferation of weapons of mass destruction; conspiracy to violate the International Emergency Economic Powers Act (IEEPA) by conspiring to evade the restrictions imposed on Alex Tsai and two of his companies by the U.S. Treasury Department, and money laundering. Agents had been investigating the pair, as well as Individual A (a Taiwanese associate of Alex Tsai), and a network of companies engaged in the export of U.S. origin goods and machinery that could be used to produce weapons of mass destruction. The investigation revealed that Alex and Gary Tsai and Individual A were associated with at least three companies based in Taiwan - Global Interface Company, Inc., Trans Merits Co., Ltd., and Trans Multi Mechanics Co., Ltd. - that have purchased and then exported, and attempted to purchase and then export, from the United States 1 machinery used to fabricate metals and other materials with a high degree of precision. On January 16, 2009, the Treasury Department designated Alex Tsai, Global Interface, and Trans Merits as proliferators of weapons of mass destruction, isolating them from the U.S. financial system and prohibiting any U.S. person or company from doing business with them. In announcing the order, the Treasury Department said that Alex Tsai was designated for providing support for, or goods or services in support of the Korea Mining Development Trading Corporation (KOMID), which was designated as a proliferator by the U.S. in 2005. The Treasury Department asserted that Alex Tsai "has been supplying goods with weapons production capabilities to KOMID and its subordinates since the late 1990s, and he has been involved in shipping items to North Korea that could be used to support North Korea's advanced weapons program." After the OFAC designations, Alex and Gary Tsai and another individual allegedly continued to conduct business together, but attempted to hide Alex Tsai's and Trans Merit's involvement in those transactions by conducting business under different company names, including Trans Multi Mechanics. This investigation was conducted by the FBI, ICE-HSI and BIS. High-Tech Microelectronics and Uninterruptible Power Supplies to Iran – On April 17, 2015, in the Southern District of Texas, a 24-count indictment was unsealed charging four corporations and five individuals with facilitating the illegal export of high-tech microelectronics, uninterruptible power supplies and other commodities to Iran, in violation of the International Emergency Economic Powers Act (IEEPA). The indictment alleges Houston-based company Smart Power Systems Inc. (SPS); Bahram Mechanic and Tooraj Faridi, both of Houston; and Khosrow Afghahi of Los Angeles, were all members of an Iranian procurement network operating in the United States. Also charged as part of the scheme are Arthur Shyu, and the Hosoda Taiwan Limited Corporation in Taiwan; Matin Sadeghi, and Golsad Istanbul Trading Ltd. in Turkey; and the Faratel Corporation, co-owned by Mechanic and Afghahi in Iran. The indictment was returned under seal on April 16, 2015, and unsealed as Mechanic and Faridi made their initial appearances. Afghahi was taken into custody and will make an initial appearance in the Central District of California. Sadeghi and Shyu are believed to be out of the country and warrants remain outstanding for their arrests. In conjunction with the unsealing of these charges, the Department of Commerce is designating seven foreign nationals and companies, adding them to its Bureau of Industry and Security Entity List. The indictment alleges these individuals and companies received, transshipped or otherwise facilitated the illegal export of controlled commodities by the defendants. Designation on the Entity List imposes a license requirement before any commodities can be exported from the United States to these persons or companies and establishes a presumption that no such license will be granted. According to the indictment, Mechanic and Afghahi are the co-owners of Iran-based Faratel and its Houston-based sister company SPS. Faratel designs and builds uninterruptible power supplies for various Iranian entities, including Iranian government agencies such as the Iranian Ministry of Defense, the Atomic Energy Organization of Iran, and the Iranian Centrifuge Technology Company. SPS designs and manufactures uninterruptible power supplies in cooperation with Faratel. Faridi currently serves as a vice president of SPS. Shyu is a senior manager at the Hosoda Tawain Limited Corporation, a trading company located in Taiwan, while Sadeghi is an employee of Golsad Istanbul Trading, a shipping company located in Turkey. The indictment alleges that between approximately July 2010 and the present, Mechanic and the others engaged in a conspiracy to obtain various commodities, including controlled United States-origin microelectronics. They then allegedly exported these to Iran, while carefully evading the government licensing system set up to control such exports. The microelectronics shipped to Iran allegedly included microcontrollers and digital signal processors. According to the indictment, these commodities have various applications and are frequently used in a wide range of military systems, including surface-air and cruise missiles. Mechanic’s network allegedly sent at least $24 2 million worth of commodities to Iran. According to court documents, Mechanic, assisted by Afghahi and Faridi, regularly received lists of commodities, including United States-origin microelectronics, sought by Faratel in Iran. Mechanic would approve these orders and then send the orders to Shyu in Taiwan, according to the indictment. Shyu would allegedly purchase the commodities utilizing Hosoda Taiwan Limited and then ship the commodities to Turkey, where Sadeghi would act as a false buyer via his company, Golsad Istanbul Trading Ltd. The indictment further alleges that Sadeghi would receive the commodities from Shyu and then ship them to Faratel in Iran. Mechanic required his co-conspirators to notify him and obtain his approval for each of the transactions completed by the network, according to the allegations. The individual defendants each face up to 20 years in federal prison, while the corporate defendants face fines of up to $1 million for each of the IEEPA counts, upon conviction. Mechanic, Afghahi and Shyu are also charged with conspiring to commit money laundering and substantive money laundering violations, each charge carries a maximum potential term of imprisonment of 20 years. Mechanic further faces a charge of willful failure to file foreign bank and financial accounts for which he faces up to five years in federal prison. The charges also carry the possibility of substantial fines upon conviction. This case was investigated by the FBI, Department of Commerce, and the IRS. Munitions to Egypt – On April 1, 2015, in the Eastern District of New York, AMA United Group, Malak Neseem Swares Boulos and Amged Kamel Yonan Tawdraus pleaded guilty to violating U.S. export regulations in connection with the attempted shipment of munitions samples from New York City to Egypt. AMA United Group, an Egyptian procurement agent, entered a guilty plea to violating the Arms Export Control Act. Boulos and Tawdraus, Egyptian citizens and partners in AMA United Group, pleaded guilty to failing to file required export information relating to the international shipment of a landmine and multiple bomb bodies. According to court filings and facts presented during the plea proceeding, Boulos and Tawdraus were arrested after attempting to close a deal to acquire and export the items, which were included on the U.S.
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