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Summary of Major Us Export Enforcement, Economic Espionage

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Summary of Major Us Export Enforcement, Economic Espionage ______________________________________________________________________________ JANUARY 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 2008 to the present: updated January 23, 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. Military-Grade Accelerometers to South Korea – On December 19, 2014, Jae Shik Kim, a citizen of South Korea, had his initial court appearance in the Central District of California pursuant to an Indictment charging the defendant with violations of the Arms Export Control Act and the International Emergency Economic Powers Act. According to the indictment, Kim exported military-grade accelerometers from the U.S. to Iran without first obtaining a license. Kim was the president and CEO of Karham Eng., Corp., a company located in Seoul, South Korea. Beginning in December 2007 to March 2010, Kim and Karham conspired with individuals located in China and Iran to procure U.S.- origin aircraft parts that were used in the navigation systems of aircraft and missiles, and to export the parts from the U.S. to Iran. Trade Secrets to Competitors in China – On December 10, 2014, Janice Kuang Capener, a citizen of China, was sentenced in the District of Utah to 90 days in prison, 24 months supervised release, $100 special assessment, and a $3,000 fine. Capener pleaded guilty on September 11, 2014 to Count 3 of a second Superseding Indictment which charged the defendant with theft of trade secrets. Previously, on May 7, 2012, prosecutors unsealed an indictment charging Capener, Jun Luo and two companies, Sunhills International LLC, a California company established by Capener, and Zhejiang Hongchen Irrigation Equipment Co., LTD., with theft of trade secrets, wire fraud, and conspiracy to commit wire fraud in connection with the alleged theft of trade secrets from Orbit Irrigation Products, an irrigation company headquartered in Utah. According to court documents, Capener worked at Orbit from June 2003 through November 1, 2009, including serving as the chief of operations at Orbit's manufacturing plant in Ningbo, China. Capener allegedly stole Orbit’s trade secrets relating to sales and pricing and used that information for herself and others to the detriment of Orbit. Capener also allegedly worked with Luo, 1 Sunhills International and Zhejiang Hongchen Irrigation Equipment to devise a scheme to undermine Orbit's position in the marketplace using illegally obtained proprietary pricing information. Capener and Luo were arrested on May 4, 2012. On August 29, 2012, all charges against Luo, also a citizen of China, were dismissed. Zhejiang Hongchen Irrigation Equipment Co., Ltd., a Chinese company under contract with Orbit, pleaded guilty to Counts 1-5 of the original indictment and was sentenced to 36 months of probation, and ordered to pay a fine of $100,000 and restitution in the amount of $300,000 for its role in a scheme to defraud and conspiracy to commit wire fraud. This case was investigated by the FBI. Pressure Transducers to Iran – On Dec. 5, 2014, Sihai Cheng, a citizen of the People’s Republic of China (PRC), arrived in Boston from the United Kingdom. In Feb. 2014, he was arrested by the British authorities on U.S. charges during a trip to the United Kingdom. He was detained in the United Kingdom pending extradition to the United States. On Apr. 4, 2014, Cheng and a co- defendant were indicted along with two Iranian companies, Nicaro Eng. Co. and Eyvaz Technic Manufacturing Co., for conspiring to export American-made pressure transducers to Iran. Pressure transducers can be used in gas centrifuges to enrich uranium and produce weapons-grade uranium. Cheng and Seyed Abolfazl Shahab Jamili, an Iranian national, were indicted by a federal grand jury in the District of Massachusetts following an international investigation. The indictment alleges that between November 2005 and 2012, Cheng supplied thousands of parts that have nuclear applications, including U.S.-origin goods, to Eyvaz, an Iranian company involved in the development and procurement of parts for Iran's nuclear weapons program. In 2011, the Council of the European Union designated Eyvaz as an entity "involved in [Iran's] nuclear or ballistic missile activities" and imposed restrictive measures against it. In so doing, it found that Eyvaz had produced vacuum equipment, which it supplied to two of Iran's uranium nuclear enrichment facilities, Natanz and Fordow, and that it also had supplied pressure transducers to Kalaye Electric Company, an Iranian company which has been designated by the United States and United Nations as a proliferator of Weapons of Mass Destruction. Specifically, the indictment alleges that in 2005, Cheng began doing business with Seyed Jamili, an Iranian national who worked for Eyvaz and ran his own importing business in Iran. Since 2005, Cheng sold Jamili thousands of Chinese manufactured parts with nuclear applications knowing that these parts were destined for Iran. Beginning in February 2009, Cheng and Jamili conspired with others in the PRC to illegally obtain hundreds of U.S. manufactured pressure transducers manufactured by MKS Instruments, Inc., headquartered in Massachusetts, on behalf of Eyvaz. As a result of the illegal activities of Cheng and his co-conspirators, hundreds of MKS pressure transducers were illegally exported from the United States to China. Upon receipt of these parts in China, Cheng caused the MKS pressure transducers to be exported to Eyvaz or Jamili in Tehran, Iran, in violation of U.S. export laws. The indictment further alleges that by 2007, Iran was operating thousands of gas centrifuges at the Natanz uranium enrichment facility. Iran has sought and illicitly obtained MKS pressure transducers to use in its centrifuge plants. Publicly available photographs of Natanz (with then President Mahmoud Ahmadinejad) show numerous MKS pressure transducers attached to Iran's gas centrifuge cascades. Because pressure transducers can be used in gas centrifuges to convert natural uranium into a form that can be used in nuclear weapons, they are subject to export controls and cannot be shipped to China without an export license or to Iran at all. This case was investigated by the FBI, U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) and the Department of Commerce's Office of Export Enforcement. Embargo Violations by Alleged Arms Dealer – On December 4, 2014, Richard Ammar Chichakli, an associate of international arms dealer Viktor Bout, was sentenced in the Southern 2 District of New York to 60 months in prison, 2 years supervised release, $900 special assessment and $70,000 restitution. He was also ordered to forfeit $1,732,756. Chichakli was arrested in Australia in January 2013, and then extradited to the U.S. in May 2013. On December 13, 2013, he was convicted by a jury of conspiring with Bout and others to violate the International Emergency Economic Powers Act ("IEEPA") by attempting to purchase commercial airplanes from American companies, in violation of U.S. sanctions. Chichakli, a citizen of Syria and the U.S., was also found guilty of money laundering conspiracy, wire fraud conspiracy, and six counts of wire fraud, in connection with the attempted aircraft purchases. According to evidence at trial and documents previously filed in Manhattan federal court: Chichakli conspired with Bout and others to violate IEEPA by engaging in prohibited business transactions with companies based in the United States. The focus of these transactions was the purchase of commercial airplanes for a company that Bout and Chichakli controlled, and the ferrying of those aircraft to Tajikistan. At the time of these unlawful transactions, both Chichakli and Bout had been designated by the U.S. Treasury Department as Specially Designated Nationals ("SDNs"), which meant that individuals and businesses in the United States were prohibited from engaging in financial transactions with them. Chichakli sought to evade these SDN sanctions by, among other things, concealing his identity and his SDN listing, and by concealing Bout's involvement in the airplane transactions. In connection with this fraudulent scheme, Chichakli helped to make a series of wire transfer payments, totaling more than $1.7 million. These payments were sent from overseas bank accounts into accounts in the United States. Chichakli's co-conspirator, Bout, is currently serving a 25-year prison term as a result of his November 2011 conviction in the Southern District of New York in connection with his conspiring to sell millions of dollars of weapons to a designated foreign terrorist organization. This case was investigated by the DEA- Special Operations Division. Aluminum Tubes to Iran – On December 4, 2014, in the Northern District of Illinois, Nicholas Kaiga of Brussels and London, pleaded guilty to one count of attempting to violate the export
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