[Federal Register Volume 76, Number 65 (Tuesday, April 5, 2011)]
[Notices]
[Pages 18716-18723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-7847]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
[10-BIS-0001]
Manoj Bhayana, Respondent; Final Decision and Order
This matter is before me upon a Recommended Decision and Order
(``RDO'') of an Administrative Law Judge (``ALJ''), as further
described below.\1\
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\1\ I received the certified record from the ALJ, including the
original copy of the RDO, for my review on March 1, 2011. The RDO is
dated February 28, 2011, and incorporates the ALJ's October 12, 2010
Order Partially Granting BIS's Motion for Summary Decision. As
discussed further infra, BIS moved for summary decision as to Charge
Two of the Charging Letter in July 2010. The Order Partially
Granting BIS's Motion for Summary Decision granted BIS summary
decision on Charge Two, but reserved ruling as to the recommended
sanction because Charge One was still pending. In order to expedite
resolution of this matter, BIS withdrew Charge One in November 2010.
The Order Partially Granting BIS's Motion for Summary Decision is
part of the RDO, but where that Order is cited, for ease of
reference, the citations are made directly to the pertinent pages of
that Order, rather than citing it as an attachment to the RDO.
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I. Background
As discussed in the RDO, the allegations in this case stem from an
investigation by the Bureau of Industry and Security (``BIS'') of a
sale and (unlicensed) export of graphite rods and pipes from the United
States to Pakistan, via the United Arab Emirates (``UAE''), in which
Respondent Manoj Bhayana directly participated. See RDO, at 2, 4.
During the investigation, BIS sought to determine, inter alia, the type
of graphite that had been exported by SparesGlobal, Inc.
(``SparesGlobal''), of Pittsburgh, Pennsylvania, and the ultimate end-
user of the items. Respondent was SparesGlobal's primary sales
representative for the transaction, working directly with the U.S.
supplier (Ameri-Source, Inc.) and freight forwarder (K.C. International
Transport, Inc.), and with SparesGlobal's customer (Taif Trading, LLC),
a trading company located in Dubai, UAE. See RDO, at 4-5; Order
Partially Granting BIS's Motion for Summary Decision, at 3, 5.\2\
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\2\ See note 1, supra.
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The transaction documentation included a mill test certificate
certifying that the graphite being exported met the specifications for
a type of graphite (CS grade extruded graphite) produced by UCAR Carbon
Company, doing business as GrafTech International Ltd. (``UCAR/
GrafTech''). As he later admitted, Respondent Bhayana knew that the
exported graphite items were not UCAR graphite and had not been
produced by UCAR/Graftech. He also knew that the mill test certificate,
which was on UCAR/GrafTech letterhead, had been created at Ameri-
Source, Inc. (``Ameri-Source''), not by UCAR/GrafTech. Respondent sent
the mill test certificate to the freight forwarder to facilitate the
export, which occurred in December 2003. RDO, at 4-5.
During the course of BIS's investigation of this matter, in a
September 7, 2004 e-mail to a BIS Special Agent, Respondent denied
having any knowledge of the origin of the mill test certificate.
Following months of additional investigation, BIS executed a search
warrant at SparesGlobal in November 2004. Bhayana was present and was
interviewed by BIS Special Agents. During that interview, Respondent
provided the mill test certificate in response to the Special Agents'
questions about the exported items, knowing, but not informing the
agents, that the certificate contained false and misleading
information. See RDO, at 5-6.
In a Charging Letter issued on January 15, 2010, BIS alleged that
Respondent Bhayana had committed two violations of the Export
Administration Regulations (``EAR'' or ``Regulations'').\3\ Charge One
alleged that Respondent had violated Section 764.2(b) of the
Regulations when he caused, aided or abetted the submission of a false
and misleading SED. In Charge Two, the remaining charge at issue
here,\4\ BIS alleged that respondent violated Section 764.2(g) by
making false and misleading statements to BIS Special Agents during the
course of a BIS investigation.
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\3\ The Regulations, which are currently codified at 15 CFR
parts 730-774 (2010), were issued pursuant to the Export
Administration Act of 1979, as amended (50 U.S.C. app. 2401-2420
(2000)) (the ``Act''). Since August 21, 2001, the Act has been in
lapse and the President, through Executive Order 13,222 of August
17, 2001 (3 CFR, 2001 Comp. 783 (2002)), which has been extended by
successive Presidential Notices, the most recent being that of
August 12, 2010 (75 FR 50,681 (Aug. 16, 2010)), has continued the
Regulations in effect under the International Emergency Economic
Powers Act (50 U.S.C. 1701, et seq.). The violation remaining at
issue in this case occurred in 2004. The Regulations governing the
violation at issue are found in the 2004 version of the Code of
Federal Regulations (15 CFR parts 730-774 (2004)). The 2010
Regulations govern the procedural aspects of this case.
\4\ As referenced supra at note 1 and as discussed further
infra, BIS withdrew Charge One after BIS had moved for and been
granted summary decision as to Charge Two.
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Charge Two alleged, in full, as follows:
Charge 2: 15 CFR 764.2(g): False Statement Made to BIS During an
Investigation
Bhayana made false and misleading representations and statements
in the course of a BIS investigation. On or about September 8, 2004,
a BIS Special Agent asked about the mill certificate relating to the
Shipper's Export Declaration (SED) filed on December 2, 2003, and
referenced in Charge 1 above. In an e-mailed response to the Special
Agent, Bhayana stated: ``The test certificate was provided by [our
supplier] to us. We do not have any knowledge about its origin.'' On
or about November 3, 2004, Bhayana was again asked about the mill
certificate during an in-person interview with BIS Special Agents,
and again provided copies of this forged mill certificate to the
Special Agents. During this interview, Bhayana also gave the BIS
Special Agents a signed written statement referencing the mill test
certificate specifications or ``specs,'' in which, he indicated,
``These specs which are being submitted here [to the Special Agents]
are the material specs which were shipped under this shipment.'' In
fact, Bhayana had worked with others to create the forged mill
certificate falsifying the type of graphite rod being exported and
knew that the certificate contained false information when he
provided it to the Special Agents. When confronted later in the same
interview by the Special Agents with evidence that the certificate
had been forged, Bhayana signed a second written statement. In this
second signed statement, Bhayana admitted that his earlier
statements to the Special Agents were false. Specifically, Bhayana
admitted that SparesGlobal's supplier, Ameri-Source, Inc., which was
not the actual manufacturer or distributor of GrafTech's UCAR
graphite, ``suppl[ied] * * * the certificate on [GrafTech] UCAR
letterhead showing the [false] specs and mill test reports,'' and
then ``prepared some certificate and faxed it to us for the
approval.'' In so doing, Bhayana committed one violation of Section
764.2(g) of the Regulations.
[[Page 18717]]
Charging Letter, at 2.\5\
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\5\ As a result of the investigation, criminal charges were
brought against SparesGlobal, which in October 2007, pled guilty in
the United States District Court for the Western District of
Pennsylvania to conspiracy under 18 U.S.C. 371. BIS filed
administrative charges against Ameri-Source (Case No. 08-BIS-15) and
Ameri-Source director Thomas Diener (Case No. 08-BIS-16) in December
2008. Ameri-Source and Mr. Diener settled those charges shortly
after they were filed, with the final settlement orders issuing on
February 6, 2009.
Respondent has been represented by counsel throughout this
litigation. In response to requests for admission served by BIS,
Respondent made a series of admissions, including that he knew
throughout the investigation that the exported graphite rods and pipes
were not UCAR graphite and had not been produced by UCAR/GrafTech; that
the mill test certificate had been created at Ameri-Source, not by
UCAR/GrafTech or any UCAR/GrafTech affiliate; and that when he was
interviewed by BIS Special Agents in November 2004, he knew, but did
not inform the agents, that the mill test certificate he handed to them
contained false and misleading information. See Order Partially
Granting BIS's Motion for Summary Decision, at 6-7, 9-10.
BIS moved for summary decision as to Charge Two on July 30, 2010,
and as part of that motion requested that the ALJ recommend that
Respondent's export privileges be denied for a period of at least two
years. As set forth in his October 12, 2010 Order Partially Granting
BIS's Motion for Summary Decision, the ALJ determined that Charge Two
had been proven by BIS and granted the motion for summary decision as
to that violation of Section 764.2(g), but reserved ruling on a
recommended sanction because Charge One was still pending.
On November 12, 2010, BIS withdrew Charge One of the Charging
Letter in order to expedite resolution of this case. A briefing
schedule was established on the issue of sanctions, and on November 23,
2010, Respondent filed his Memorandum Regarding Possible Sanctions,
contending at bottom that no sanction should be imposed against him. In
his sanctions memorandum, Respondent asserted, inter alia, that he had
started an ``export business'' after he had left SparesGlobal in
November 2008, but that he could not afford to implement an effective
export compliance program. See RDO, at 13-14 (discussing and citing
Respondent's Memorandum Regarding Possible Sanctions, filed November
23, 2010, at 11). In response, on December 6, 2010, BIS renewed its
request for a denial order of at least two years in order, in sum, to
sanction Respondent's violation of Section 764.2(g) appropriately and
to prevent or deter future violations.
On February 28, 2011, based on the entire record (including the
findings and conclusions set forth in the Order Partially Granting
BIS's Motion for Summary Decision), the ALJ issued the RDO to the
parties, in which he recommended that a denial period of two years be
assessed against Respondent Bhayana. The RDO contains a detailed review
of the facts and applicable law relating to both merits and sanctions
issues in this case.
Based on the record, the ALJ determined, inter alia, that
Respondent knowingly and willfully made false and misleading statements
during the course of a BIS investigation and that those statements
impeded and hampered the investigation. See RDO, at 8 (``Respondent
willfully committed a violation of the EAR'' and ``knowingly tried to
hide the fact that [the] mill test certificate contained false and
misleading information when questioned on it by BIS investigators.'');
id., at 9 (Respondent ``imped[ed] an export control investigation'');
id., at 10 (``Respondent's violation * * * was an intentional decision
to provide misleading and false information rather than comply with the
requirements of the law and regulations''); id., at 11 (``Respondent's
actions hampered BIS's investigation.''); and id., at 14 (a two-year
denial order is an appropriate sanction in this case and ``necessary
for deterring persons from providing false and misleading information
that frustrates enforcing compliance with the regulations.'').
The ALJ determined that Respondent had demonstrated a serious
disregard for his export compliance responsibilities when he made the
false and misleading statements at issue. See RDO, at 9, 13-14. The ALJ
also determined that the record shows that Respondent admittedly does
not have the resources to implement an effective compliance program in
connection with the ``export business'' that Respondent claims to have
started after he left SparesGlobal in late 2008.\6\ Id. at 13-14
(quoting and citing Respondent's Memorandum Regarding Possible
Sanctions, at 11). The ALJ found, furthermore, that compliance with the
export control laws still is not a priority for Respondent and that
Respondent's continued efforts to excuse his misconduct ``demonstrate[]
Respondent's attitude towards ensuring compliance with the regulations
still takes a backseat to personal factors.'' Id. (emphasis added).
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\6\ As noted supra, BIS filing the Charging Letter in January
2010, and the record also indicates that BIS issued a Proposed
Charging Letter to Respondent in January 2009.
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The ALJ rejected Respondent's repeated attempts to attribute his
false statements to an asserted lack of export experience, training, or
knowledge of the Regulations. The ALJ ruled that even accepting
Respondent's assertions as true, his unlawful conduct did not result
from such factors. ``Respondent's violation was not the result of a
misinterpretation [of the Regulations], but instead was an intentional
decision to provide misleading and false information rather than comply
with the requirements of the law and regulations.'' RDO, at 10; see
also id., at 12 (``Respondent's actions were not an unintentional or
unknowing violation of the [R]egulations.''); see generally id., at 9-
13.
The ALJ also rejected Respondent's efforts to attribute
responsibility for his statements to his ``low level'' position at
SparesGlobal or justify his misconduct based on his asserted fear that
he would lose his job or work visa, concluding as follows:
Even if this [assertion] is accepted as accurate, it does not
provide a defense to making false statements to Government officials
during a formal investigation. * * * When a person provides
information or statements during an investigation, the law allows
persons to either provide truthful statements or make an assertion
of privilege. This applies equally to all individuals, even
``lower'' level employees, during the course of investigations so
[that] violations at all levels can be effectively investigated. In
summary, Respondent chose to mislead the investigators and appease
his bosses, instead of being truthful with BIS and complying with
the regulations. Such a decision does not show a good-faith
misinterpretation of the rules and is not a valid basis for
mitigation of sanctions.
RDO, at 12-13.
II. Review Under Section 766.22
The RDO, together with the entire record in this case, has been
referred to me for final action under Section 766.22 of the
Regulations. I find that the record supports the ALJ's findings of fact
and conclusions of law that Respondent violated Section 764.2(g) by
making false and misleading statements and representations to BIS
during the course of an investigation. In addition to other evidence
submitted by BIS, Respondent effectively admitted the violation during
discovery in response to BIS's requests for admission. Moreover,
Respondent has not asserted in his response to the RDO that the ALJ
committed any error as to the merits or that any of the ALJ's findings
or conclusions on the merits is erroneous.
[[Page 18718]]
I also find that the two-year denial order recommended by the ALJ
upon his review of the entire record is appropriate, given the nature
of the violations, the facts of this case, and the importance of
deterring Respondent and others from seeking, through the provision of
false and misleading information to BIS Special Agents, to thwart or
impede BIS's enforcement of the Regulations.\7\ Those who make false or
misleading statements to BIS Special Agents during the course of an
investigation strike at the heart of BIS's efforts to protect and
promote the national security. A denial order also is appropriate here
given the ALJ's findings, which are fully supported by the record, that
Respondent does not possess the resources or the necessary commitment
to meet his compliance obligations under the export control laws.\8\
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\7\ See, e.g., Guidance on Charging and Penalty Determinations
in Settlement of Administrative Enforcement Cases (``Penalty
Guidance''), Supplement No. 1 to part 766 of the Regulations, at ]
III.A (Degree of Willfulness) (in cases involving a knowing or
willful violation, a denial of export privileges is appropriate,
and/or a greater monetary penalty than BIS typically would seek);
see also id. (even in cases involving simple negligence, a denial
order may be appropriate where, for example, the violation involves
essential interests protected by the Regulations, the violation is
of such a nature that a monetary penalty is an insufficient
sanction, or the nature of the violation indicates that a denial
order is needed to prevent future violations).
Although focused on the settlement context, the Penalty Guidance
can be instructive where considered and applied consistent with the
factual context of a litigated case.
\8\ See, e.g., Penalty Guidance, Supp. No. 1 to part 766, at ]
IV.B (``An otherwise appropriate denial or exclusion order will be
suspended on the basis of adverse economic consequences only if it
is found that future export control violations are unlikely and if
there are adequate measures (usually a substantial civil penalty) to
achieve the necessary deterrent effect.'') (parenthetical in
original).
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Accordingly, based on my review of the entire record, I affirm the
findings of fact and conclusions of law in the RDO without
modification, but with one clarification. The RDO states at one point
that ``[w]hile it may not fit clearly within Mitigation Factor 4 [of
the EAR's Penalty Guidance], the fact that sensitive materials were not
involved is given some weight in mitigation'' and that ``since
Respondent's representation seems to concern a non-sensitive item, that
is a factor that can be considered toward mitigation.'' Id. at 11. I
note first that the violation at issue is for making false statements
during an investigation, not for making or causing an unlicensed
export. Moreover, the false statements made by Respondent went directly
to the type and specifications of the items that had been exported,
information that was crucial for BIS to assess whether the export at
issue required a license and the extent to which it could harm the
national security. Although the mitigation credit discussion quoted
above did not affect the outcome of this case, I want to clarify that a
respondent who makes false statements to BIS during an investigation
cannot properly claim, and should not be accorded, mitigation credit
relating to the subject of those false statements.
In short, a respondent should not be allowed to reap any benefit
from such false or misleading statements. With this clarification, I
affirm the RDO.\9\
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\9\ The RDO inadvertently included (as Attachment B) an outdated
version of Section 766.22(e) of the Regulations, regarding a
possible appeal of the Final Decision and Order. Section 766.22(e)
recently was deleted. See Export Administration Regulations;
Technical Amendments, 75 FR 33,682 (June 15, 2010). Thus, Respondent
should disregard Attachment B of the RDO.
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Accordingly, it is therefore ordered,
First, that, for a period of two (2) years from the date that this
Order is published in the Federal Register, Manoj Bhayana, of 65 W.
Manila Avenue, Pittsburgh, Pennsylvania 15220, and his representatives,
assigns, agents or employees (hereinafter collectively referred to as
``Denied Person'') may not participate, directly or indirectly, in any
way in any transaction involving any commodity, software or technology
(hereinafter collectively referred to as ``item'') exported or to be
exported from the United States that is subject to the Regulations, or
in any other activity subject to the Regulations, including, but not
limited to:
A. Applying for, obtaining, or using any license, License
Exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying,
receiving, using, selling, delivering, storing, disposing of,
forwarding, transporting, financing, or otherwise servicing in any way,
any transaction involving any item exported or to be exported from the
United States that is subject to the Regulations, or in any other
activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item
exported or to be exported from the United States that is subject to
the Regulations, or in any other activity subject to the Regulations.
Second, that no person may, directly or indirectly, do any of the
following:
A. Export or reexport to or on behalf of the Denied Person any item
subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted
acquisition by the Denied Person of the ownership, possession, or
control of any item subject to the Regulations that has been or will be
exported from the United States, including financing or other support
activities related to a transaction whereby the Denied Person acquires
or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition
or attempted acquisition from the Denied Person of any item subject to
the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item
subject to the Regulations with knowledge or reason to know that the
item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the
Regulations that has been or will be exported from the United States
and which is owned, possessed or controlled by the Denied Person, or
service any item, of whatever origin, that is owned, possessed or
controlled by the Denied Person if such service involves the use of any
item subject to the Regulations that has been or will be exported from
the United States. For purposes of this paragraph, servicing means
installation, maintenance, repair, modification or testing.
Third, that, after notice and opportunity for comment as provided
in Section 766.23 of the Regulations, any person, firm, corporation, or
business organization related to Manoj Bhayana by affiliation,
ownership, control, or position of responsibility in the conduct of
trade or related services may also be made subject to the provisions of
this Order.
Fourth, that this Order does not prohibit any export, reexport, or
other transaction subject to the Regulations where the only items
involved that are subject to the Regulations are the foreign-produced
direct product of U.S.-origin technology.
Fifth, that this Order shall be served on Manoj Bhayana and on BIS,
and shall be published in the Federal Register. In addition, the ALJ's
Recommended Decision and Order, except for the section related to the
Recommended Order, shall also be published in the Federal Register.
This Order, which constitutes the final agency action in this
matter, is effective upon publication in the Federal Register.
[[Page 18719]]
Dated: March 28, 2011.
Eric L. Hirschhorn,
Under Secretary of Commerce for Industry and Security.
Certificate of Service
I hereby certify that, on this 29st day of March, 2011, I have
served the foregoing DECISION AND ORDER signed by Eric L. Hirschhorn,
Under Secretary of Commerce for Industry and Security, in the matter of
Manoj Bhayana (Docket No: 10-BIS-0001) to be send via United Parcel
Service postage pre-paid to:
Louis W. Emmi, Esquire, Attorney At Law, 201 Lebanon Shops, 300 Mt.
Lebanon Boulevard, Pittsburg, PA 15234, (fax): 412-341-8464 (By
Facsimile and United Parcel Service).
Adrienne Frazier, Joseph Jest, John Masterson, Attorneys for Bureau of
Industry and Security, Office of Chief Counsel for Industry and
Security, U.S. Department of Commerce, Room HCHB 3839, 14th Street and
Constitution Ave., NW., Washington, DC 20230, (fax): 202-482-0085
(Served via hand delivery).
Honorable Michael J. Devine, U.S. Coast Guard, U.S. Customs House, 40
South Gay Street, Room 412, Baltimore, MD 20102, (fax): 410-962-5155,
(By Facsimile and United Parcel Service).
ALJ Docketing Center, Attention: Hearing Docket Clerk, 40 S. Gay
Street, Room 412, Baltimore, Maryland 20212-4022 (By Untied Parcel
Service).
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Andrea A. Monroe
Office of the Under Secretary for Industry and Security
United States of America Department of Commerce Bureau of Industry and
Security
IN THE MATTER OF: Manoj Bhayana, Respondent.
Docket No. 10-BIS-0001
Recommended Decision and Order
Issued: February 28, 2011
Issued By: Hon. Michael J. Devine Presiding
Appearances
For the Bureau of Industry and Security
Adrienne Frazier, Esq., Office of Chief Counsel for Industry &
Security, U.S. Department of Commerce, Room H-3839, 14th Street &
Constitution Ave., NW, Washington, DC 20230.
For Respondent Manoj Bhayana
Louis W. Emmi, Esq., 201 Lebanon Shops, 300 Mt. Lebanon
Boulevard, Pittsburgh, PA 15234.
I. Preliminary Statement
This case arises from Manoj Bhayana's (Respondent) violation of the
Export Administration Regulations (EAR or Regulations).\10\ On January
15, 2010, the Bureau of Industry and Security (BIS or Agency) issued a
Charging Letter against Respondent. In that Letter, BIS alleged
Respondent committed two (2) violations of the Export Administration
Act of 1979 (Act), as amended and codified at 50 U.S.C. App. Sec. Sec.
2401-20 (2000), and the Export Administration Regulations (EAR or
Regulations), as amended and codified at 15 CFR parts 730-74 (2000 &
2007) \11\ while working for SparesGlobal, Inc (SparesGlobal). The
charges read as follows:
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\10\ The Export Administration Regulations, 15 CFR parts 730-
744, are issued under the Export Administration Act of 1979 (EAA).
The Act is codified at 50 U.S.C. app. Sec. Sec. 2401-20 (2000), as
amended by the Notice on August 13, 2009 (74 FR 41,325 (Aug. 14,
2009)).
\11\ The EAA and all regulations promulgated there under expired
on August 20, 2001. See 50 U.S.C. App. 2419. Three days before its
expiration, on August 17, 2001, the President declared the lapse of
the EAA constitutes a national emergency. See Exec. Order. No.
13222, reprinted in 3 CFR at 783-784, 2001 Comp. (2002). Exercising
authority under the International Emergency Economic Powers Act
(``IEEPA''), 50 U.S.C. 1701-1706 (2002), the President maintained
the effectiveness of the EAA and its underlying regulations
throughout the expiration period by issuing Exec. Order. No. 13222
on August 17, 2001. Id. The effectiveness of the export control laws
and regulations were further extended by successive Notices issued
by the President; the most recent being that of August 15, 2007. See
Notice: Continuation of Emergency Regarding Export Control
Regulations, 72 FR 46, 137 (August 15, 2007). Courts have held that
the continuation of the operation and effectiveness of the EAA and
its regulations through the issuance of Executive Orders by the
President constitutes a valid exercise of authority. See Wisconsin
Project on Nuclear Arms Control v. United States Dep't of Commerce,
317 F.3d 275, 278-79 (DC Cir. 2003); Times Publ'g Co. v. U.S.
Department of Commerce, 236 F.3d 1286, 1290 (11th Cir. 2001).
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Charge 1 15 CFR 764.2(b)--Causing, Aiding or Abetting a Violation of
the Regulations
On or about December 2, 2003, Bhayana, while employed as a sales
representative at SparesGlobal, Inc., caused, aided, abetted and
permitted the submission of false and misleading representations and
statements to the U.S. Government in connection with the preparation
and submission of a Shipper's Export Declaration (SED), an export
control document. The SED falsely represented and stated that the
item being exported from the United States was ``UCAR-GRAPHITE'' and
that the ultimate consignee was located in the United Arab Emirates
(UAE). Bhayana and others created a forged mill certificate to
indicate that the item was ``UCAR-GRAPHITE.'' Bhayana submitted the
fraudulent mill certificate to the freight forwarder and told the
freight forwarder that the ultimate consignee was in the UAE, when
the actual ultimate consignee was in Pakistan. Based on the
information provided by Bhayana, the freight forwarder filed the SED
stating that the item was ``UCAR GRAPHITE'' and the ultimate
consignee was in the UAE. In so doing, Bhayana committed one
violation of Section 764.2(b) of the regulations.
Charge 2 15 CFR 764.2(g)--False Statement Made to BIS During an
Investigation
Bhayana made false and misleading representations and statements
in the course of a BIS investigation. On or about September 8, 2004,
a BIS Special Agent asked about the mill certificate relating to the
Shipper's Export Declaration (SED) filed on December 2, 2003, and
referenced in Charge 1 above. In an emailed response to the Special
Agent, Bhayana stated: ``The test certificate was provided by [our
supplier] to us. We do not have any knowledge about its origin.'' On
or about November 3, 2004, Bhayana was asked again about the mill
certificate during an in-person interview with BIS Special Agents,
and again provided copies of this forged mill certificate to the
Special Agents. During this interview Bhayana also gave the BIS
Special Agents a signed written statement referencing the mill test
certificate specifications or ``specs,'' in which he indicated,
``These specs which are being submitted here [to Special Agents] are
the material specs which were shipped under this shipment.'' In
fact, Bhayana had worked with others to create the forged mill
certificate falsifying the type of graphite rod being exported and
knew that the certificate contained false information when he
provided it to the Special Agents. When confronted later in the same
interview by the Special Agents with evidence that the certificate
had been forged, Bhayana signed a second written statement. In this
second signed statement, Bhayana admitted that his earlier
statements to the Special Agents were false. Specifically, Bhayana
admitted that SparesGlobal's supplier, Ameri-Source, Inc., which was
not the actual manufacturer or distributer of GrafTech's UCAR
graphite, ``suppl[ied] * * * the certificate on [GrafTech] UCAR
letterhead showing the [false] specs and mill test reports,'' and
the ``prepared some certificate and faxed it to us for the
approval.'' In so doing, Bhayana committed one violation of Section
764.2(g) of the Regulations.
On July 30, 2010, BIS filed a Motion for Summary Decision (BIS
Motion) on Charge 2, asserting it was entitled to summary decision as a
matter of law. Attached to its motion were fifteen (15) exhibits marked
Government Exhibit (Gov't Ex.) 1-15. In support of the Motion BIS
argued there were no genuine issues as to any material fact because of
Bhayana's statements to BIS Special Agents during the course of a BIS
investigation and due to Bhayana's admissions regarding the false mill
certificate in the transaction that is the subject of this matter.
BIS's Motion did not address Charge 1.
On October 12, 2010, the undersigned issued an Order Partially
Granting BIS's Motion for Summary Decision. In that Order, the
undersigned found Charge 2 had been proven, but reserved ruling as to
the recommended sanction for the violation because Charge 1 remained
[[Page 18720]]
pending. That Order included Findings of Fact and Ultimate Findings of
Fact and Conclusions of Law and is included as Attachment A of this
Recommended Decision and Order.
On November 5, 2010, a prehearing conference was held to discuss
scheduling concerns in light of the Order Partially Granting Summary
Decision. During that prehearing conference call, BIS informed the
undersigned and Respondent they intended to withdraw Charge 1. On
November 12, 2010, BIS filed its Notice of Withdrawal of Charge 1.
With the withdrawal of Charge 1, the only issue remaining is the
appropriate sanction for the violation found proved in Charge 2. On
November 23, 2010, Respondent filed his final written brief and closing
arguments. On December 6, 2010, BIS submitted their final written brief
and closing arguments. The following recommended findings of fact and
recommended decision is based on a careful review of the facts and
record as a whole including the parties final briefs, the facts found
in the Order Partially Granting the BIS Motion for Summary Decision and
the applicable law and regulations.
II. Recommended Findings of Fact
1. SparesGlobal, Inc., of Pittsburgh, PA, exported graphite rods and
pipes from the United States on or about December 2, 2003. (BIS
Motion--Ex. 5 at 3-4; Ex. 6).
2. Respondent was SparesGlobal's primary sales contact for this
transaction. (BIS Motion--Ex. 5 at 1).
3. During the transaction, Respondent was in contact with the U.S.
company that supplied the graphite rods and pipes for the
transaction, Ameri-Source, Inc.; the freight forwarder for the
transaction, K.C. International Transport, Inc.; and SparesGlobal's
customer Taif Trading, LLC, located in Dubai, UAE. (BIS Motion--Ex.
5 at 4-5).
4. The transaction documentation included a mill test certificate
certifying that the graphite being exported met the specifications
for a type of graphite (CS grade extruded graphite) produced by UCAR
Carbon Company and Respondent sent this certificate to the freight
forwarder, K.C. International Transport, Inc. to facilitate the
export transaction at issue. (BIS Motion--Ex. 5 at 4-5; Ex. 8)
5. Respondent admitted that the exported graphite rods were not UCAR
graphite and were not produced by UCAR/GrafTech. (BIS Motion--Ex. 5
at 5).
6. Respondent knew the mill test certificate had been created by
Ameri-Source, Inc., and that it had been created using UCAR/GrafTech
letterhead. (BIS Motion--Ex. 5 at 6-8).
7. During a BIS investigation concerning this export transaction, in
a September 7, 2004 email that he sent to a BIS Special Agent,
Respondent denied having any knowledge of the origin of the mill
test certificate. (BIS Motion--Ex. 5 at 7).
8. As part of BIS's investigation, Respondent was interviewed by BIS
Special Agents at SparesGlobal's offices on or about November 3,
2004. (BIS Motion--Ex. 5 at 7-8).
9. During the interview, Respondent handed the BIS Special Agents
his file relating to this export transaction, which included the
fraudulent mill test certificate. (BIS Motion--Ex. 5 at 7-8).\12\
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\12\ The legal analysis for the determination to grant the
Motion for Summary Decision is contained in the discussion section
of that Order. See Attachment A.
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III. Recommended Ultimate Findings of Fact and
Conclusions of Law
1. Respondent and the subject matter of this proceeding are properly
within the jurisdiction of the BIS in accordance with the Export
Administration Act of 1979 (50 U.S.C. App. Sec. Sec. 2401-2420) and
the Export Administration Regulations (15 CFR parts 730-774).
2. When Respondent handed the file and the mill test certificate to
the BIS Special Agents on or about November 3, 2004, he knew the
certificate had been created at Ameri-Source and not by UCAR/
GrafTech or any UCAR/GrafTech affiliate. (BIS Motion--Ex. 5 at 7-8).
3. When Respondent handed the BIS Special Agents the file and mill
test certificate on or about November 3, 2004, Bhayana knew the
certificate contained false and misleading information. (Id.).
4. When Respondent handed the file and certificate to the BIS
Special Agents on or about November 3, 2004, he knew, but did not
inform the agents that some of the information in the file contained
false, inaccurate, and/or misleading information. (Id.).
5. Respondent is found to have made false and misleading
representations to BIS Special Agents during the course of an
investigation subject to the EAR, a violation of 15 CFR 764.2(g).
IV. Recommended Sanction
A. Regulations
Section 764.3 of the EAR establishes the sanctions that BIS may
seek for the violations charged in this proceeding. The sanctions
permitted include: (1) A civil penalty, (2) a denial of export
privileges under the Regulations, and (3) an exclusion from practice.
See 15 CFR 764.3. Supplement Number 1 to 15 CFR part 766 (Supplement
No. 1) provides published nonbinding guidance on what BIS considers in
making penalty determinations in considering settlement of civil
administrative enforcement cases. Various factors are considered by BIS
including the degree of willfulness, the destination involved, whether
there were any related violations, and the timing of any settlement.
Both parties have referenced Supplement No. 1 in their final arguments
and briefs in support of their position in this matter.
Both general factors and specific mitigating and aggravating
factors are discussed in Supplement No. 1. Certain factors may be given
greater weight than other factors. The Mitigating Factors include:
1. The party self-disclosed the violations (given great weight).
2. The party created an effective export compliance program (given
great weight).
3. The violations resulted from a good-faith misinterpretation.
4. The export would likely have been granted upon request.
5. The party does not have a history of past export violations.
6. The party cooperated to an exception degree during the
investigation.
7. The party provided substantial assistance in the BIS
investigation.
8. The violation did not involve harm of the nature the regulations
were intended to protect.
9. The party had little export experience and was not familiar with
the requirement.
15 CFR part 766, Supp No. 1, at Sec. III(B).
The Aggravating Factors include:
1. The party deliberately hid the violations (given great weight).
2. The party seriously disregarded export responsibilities (given
great weight).
3. The violation was significant in view of the sensitivity of the
item (given great weight).
4. The violation was likely to involve harm of the nature the
regulations intended to protect.
5. The value of the exports was high, resulting in need to serve an
adequate penalty for deterrence.
6. Other violations of law and regulations occurred.
7. The party has a history of past export violations.
8. The party lacked a systematic export compliance effort.
15 CFR part 766, Supp No. 1, at Sec. III(B).
By examining the basic factors associated with the violations and
by considering the appropriate mitigating and aggravating
circumstances, an appropriate penalty is determined. A review of the
factors and circumstances specific to this case are discussed below.
B. Respondent's Violations
In this case, Respondent is found to have provided false or
misleading statements to a BIS Special Agent during the course of an
investigation. (Order Partially Granting BIS's Motion for Summary
Decision (Order)).\13\ As set
[[Page 18721]]
forth in the Ultimate Findings of Fact and Conclusions of Law,
Respondent handed BIS Special Agents a file and mill test certificate
that Respondent knew contained false and misleading information. (Order
at 4). When Respondent handed the file and certificate to the BIS
Special Agents, he knew, but did not inform the agents that some of the
information in the file contained false, inaccurate, and/or misleading
information. (Id.). Upon further investigation by BIS, Respondent
admitted to his false statements. (Order at 6).
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\13\ The Order Partially Granting BIS's Motion for Summary
Decision issued by this court on October 12, 2010 is Attachment A of
this recommended decision and order. In that Order, Respondent was
found to have violated Charge 2--providing false or misleading
statements to a BIS Special Agent during the course of an
investigation.
---------------------------------------------------------------------------
Aggravating Factors
As addressed within the Ultimate Findings of Fact and Conclusions
of Law, Respondent willfully committed a violation of the EAR. While
Respondent has presented argument asserting his excuses for providing
false information to BIS, he nevertheless knowingly and willfully
provided misleading information. An aggravating factor that is given
great weight is a party's deliberateness in hiding a violation,
Aggravating Factor 1. 15 CFR part 766, Supp No. 1, at Sec. III(B). In
this case, Respondent knowingly tried to hide the fact that a mill test
certificate contained false and misleading information when questioned
on it by BIS investigators. The court finds Respondent attempted to
deliberately hide a violation. It was only after further investigation
and confrontation with BIS Special Agents that Respondent eventually
admitted to his attempt to hide the true facts.
An additional aggravating factor is when a party demonstrates a
serious disregard for export compliance responsibilities, Aggravating
Factor 2. Id. One such responsibility is to provide truthful statements
to BIS Special Agents as they work to enforce our country's export
control laws. In this case, Respondent seriously disregarded his export
compliance responsibilities. While working as an exporter, Respondent
is found to have misled BIS during the course of an investigation to
enforce export controls. Respondent's explanation for his actions
included his assertions that he was just a low level employee, that the
value of the shipment was low, and that he might lose his job if he
told the truth. Even if considered as accurate, Respondent's
justifications for impeding an export control investigation demonstrate
that compliance with his export responsibilities was of secondary
importance. If an individual intends to engage in the export of goods,
compliance with export controls is mandatory, and maintaining
employment is not an excuse for violating the regulations.
No other aggravating factors seem applicable in this case. No
evidence was presented that would establish Respondent's violation had
circumstances that fit within one of the other aggravating factors.
While Respondent admits his current company has not created a
systematic export compliance effort, no evidence was presented that
shows he was responsible for or lacked a systematic export compliance
effort at the time of the violation. However, as discussed above, two
aggravating factors are found to exist that are given great weight when
determining an appropriate sanction. First, Respondent made a
deliberate attempt to hide or conceal the violation and second,
Respondent's conduct demonstrated a serious disregard for export
compliance responsibilities.
Mitigating Factors
Within Respondent's Memorandum Regarding Possible Sanctions for his
Violation (Memorandum), Respondent argues that several mitigating
factors are relevant in his case. First, he suggests the violation was
an isolated occurrence or the result of a good-faith misinterpretation.
(See Memorandum at 7). This mitigation factor follows the general
principle that while ignorance of the law is typically not an excuse
for non-compliance, willful violations often receive higher penalties
than unintentional violations. See Cheek v. U.S., 498 U.S. 192, 199
(1991); See also Iran Air v. U.S., 996 F.2d 1253 (DC Cir. 1993). To
support this assertion, Respondent states he was a low level employee,
worked long hours and did not take vacations, and felt great pressure
to obey his superior's orders. However, this does not present a good-
faith misinterpretation of the regulations. Instead, this argument
highlights the fact Respondent knew he was misleading investigators.
Even if his assertions are accepted as accurate, it demonstrates only
that he decided to commit a violation because he felt pressure from the
company to do so. Respondent's violation was not the result of a
misinterpretation, but instead was an intentional decision to provide
misleading and false information rather than comply with the
requirements of the law and regulations.
Respondent's second argument for mitigation is based upon the
assertion that the product he lied about did not require a license to
ship, thus falling within Mitigation Factor 4. See 15 CFR part 766,
Supp No. 1, at Sec. III(B). The record does not contain any evidence
that shows the exported goods (graphite) were a prohibited item. BIS
asserts this mitigation factor should not apply, since the items in
question were materials subject to the EAR (15 CFR 734.3(a)) and
Respondent was charged with making a false statement, not with making
an unlicensed export. It appears the export transaction that formed the
basis of the misrepresentation and violation would likely have been
granted anyway. While it may not fit clearly within Mitigation Factor
4, the fact that sensitive materials were not involved is given some
weight in mitigation. If Respondent had made false statements about a
highly sensitive and controlled item, such as nuclear material, that
would certainly be an aggravating factor. Likewise, since Respondent's
misrepresentation seems to concern a non-sensitive item, that is a
factor considered towards mitigation.
Respondent's third argument for mitigation is that he has not been
found to have committed any past export violations, Mitigation Factor
5. See id. No evidence has been provided showing Respondent has
violated the EAR in the past. As such, Mitigation Factor 5 applies in
this case.
Respondent's fourth argument for mitigation is that he cooperated
to an exceptional degree with BIS's efforts to investigate
SparesGlobal's conduct, Mitigation Factor 6 and 7. See id. This
argument is not persuasive. The central violation relevant to this case
revolves around Respondent making false and misleading statements to
BIS during the course of an investigation. Attempting to mislead the
investigator does not equate to providing an exceptional degree of
cooperating with BIS's investigation. To the contrary, Respondent's
actions hampered BIS's investigation.
Respondent's fifth argument for mitigation is that at the time of
the violation he had little or no export experience and was not
familiar with export practices, Mitigation Factor 9. See id. This
mitigation factor is seemingly in place to account for individuals who
unknowingly violate an export regulation, despite their good intentions
to follow the regulations. In this case, even if Respondent had little
export experience, it has been found he knowingly mislead
investigators. Respondent's actions were not an unintentional or
unknowing violation of the regulations. To the contrary, Respondent
made a conscious effort to mislead in an attempt to appease his bosses.
Since Respondent's violation is not a result of his inexperience with
[[Page 18722]]
export regulations, Mitigation Factor 9 is found not to apply to this
case.
Finally, Respondent also asserts throughout his pleadings that
because he was a low level employee, seemingly more important people
should be more culpable. Even if this is accepted as accurate, it does
not provide a defense to making false statements to Government
officials during a formal investigation. Allowing lower level employees
to escape liability based on ignorance would provide an avenue to
frustrate enforcement of legal export requirements. Additionally,
violations by other persons or entities and actions against other
persons or entities for violating the law are a collateral matter that
is not demonstrated to be relevant to these proceedings. In response to
Respondent's assertions, BIS contends the administrative proceedings
against Respondent were apparently part of an enforcement effort
against Respondent's employer, SparesGlobal.\14\ The Court's decision
is limited to the matters properly presented in the record. When a
person provides information or statements during an investigation, the
law allows persons to either provide truthful statements or make an
assertion of a privilege. This applies equally to all individuals, even
``lower'' level employees, during the course of investigations so
violations at all levels can be effectively investigated. In summary,
Respondent chose to mislead the investigators and appease his bosses,
instead of being truthful with BIS and complying with the regulations.
Such a decision does not show a good-faith misinterpretation of the
rules and is not a valid basis for mitigation of sanctions.
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\14\ The issues of selective prosecution or abuse of discretion
in proceeding in this matter have not been raised in this matter.
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C. Denial of Export Privileges
In addition to the above mitigating factors, Respondent also argues
that adverse financial hardships would result from a denial of export
privileges. Respondent asserts that his only source of income is from
his exporting business, which made $29,450 last year. (Memorandum at
14). Furthermore, he states if he is prevented from working in the
export field, he would lose his Green Card status and would be forced
to return to India with his family. (Memorandum at 15).
In accordance with the regulations, the financial impact of a
denial of export privileges can be considered in determining if such a
denial should be suspended. 15 CFR part 766, Supp No. 1, at Sec.
IV(B). However, a denial of export privileges will only be suspended if
it is found that future export control violations are unlikely and if
there are adequate measures to achieve a necessary deterrent, usually a
substantial civil penalty. Id. Here, since Respondent asserts he has
limited means, providing a suspended civil penalty would not provide
the intended future deterrence.
Additionally, while Respondent has apparently accepted the court's
ruling in regards to Charge Two, Respondent's arguments minimize his
responsibility for his own lapse of judgment. In his Response,
Respondent continues to attempt to excuse his actions by describing his
lower level position with the company and excusing the behavior on the
outside pressures he felt. The desire for continued employment is not a
valid excuse for providing false and misleading information to
investigators. Second, Respondent now runs his own company; however, he
has not developed an effective export compliance program. (Memorandum
at 11). Respondent excuses his failure to develop an effective export
compliance program because ``[h]e is not currently in a financial
position * * *'' to do so. (Id.) Such a response demonstrates
Respondent's attitude towards ensuring compliance with the regulations
still takes a backseat to personal factors. There could be pressure
from a company he is working with to violate the regulations and the
pressure to do so to maintain a profit would seem to be no different
that the pressure from SparesGlobal to keep his job. Finally, the
reference to any offers discussed during settlement negotiations by
either party is generally inappropriate.
While Respondent has pointed to mitigating factors that apply,
including his otherwise clean exporting history and the non-sensitive
nature of the parts he was exporting, I find that a two (2) year denial
of export privileges as suggested by BIS is appropriate.
Respondent seems to have many personal factors affecting his
ability to comply with the export regulations. And, while the court is
sympathetic to Respondent's predicament, the court's determination in
this matter is limited to issuing a decision in keeping with the law
and regulations to ensure compliance with the export regulations. The
court finds the argument of BIS persuasive. An appropriate sanction is
necessary for deterring persons from providing false and misleading
information that frustrates enforcing compliance with the regulations.
In this case, a two (2) year denial of export privileges is deemed
appropriate. Respondent may continue to seek administrative clemency
from the Undersecretary in keeping with 15 CFR Sec. 766.17(c) and
766.22.
V. Recommended Order \6\
Redacted Section (Pages 15 to 18)
Within thirty (30) days after receipt of this Recommended Decision
and Order, the Under Secretary shall issue a written order, affirming,
modifying, or vacating the Recommended Decision and Order. See 15 CFR
766.22(c). A copy of the Agency regulations for Review by the Under
Secretary can be found as Attachment B.
Hon. Michael J. Devine,
Administrative Law Judge.
Done and dated February 28, 2011 at Baltimore, Maryland.
Attachment A: Summary Decision Order of October 12, 2010.
Attachment B: Notice of Review and Appeal rights 15 CFR 766.22.
Attachment B
Notice of Review by Under Secretary
15 CFR 766.22 Review by Under Secretary.
(a) Recommended decision. For proceedings not involving violations
relating to part 760 of the EAR, the administrative law judge shall
immediately refer the recommended decision and order to the Under
Secretary. Because of the time limits provided under the EAA for review
by the Under Secretary, service of the recommended decision and order
on the parties, all papers filed by the parties in response, and the
final decision of the Under Secretary must be by personal delivery,
facsimile, express mail or other overnight carrier. If the Under
Secretary cannot act on a recommended decision and order for any
reason, the Under Secretary will designate another Department of
Commerce official to receive and act on the recommendation.
(b) Submissions by parties. Parties shall have 12 days from the
date of issuance of the recommended decision and order in which to
submit simultaneous responses. Parties thereafter shall have eight days
from receipt of any response(s) in which to submit replies. Any
response or reply must be received within the time specified by the
Under Secretary.
(c) Final decision. Within 30 days after receipt of the recommended
decision and order, the Under Secretary shall issue a written order
affirming, modifying or vacating the recommended decision and order of
the administrative law judge. If he/she vacates the recommended
decision and order, the Under Secretary may refer the case back to the
administrative law judge for further proceedings. Because of the time
[[Page 18723]]
limits, the Under Secretary's review will ordinarily be limited to the
written record for decision, including the transcript of any hearing,
and any submissions by the parties concerning the recommended decision.
(d) Delivery. The final decision and implementing order shall be
served on the parties and will be publicly available in accordance with
Sec. 766.20 of this part.
(e) Appeals. The charged party may appeal the Under Secretary's
written order within 15 days to the United States Court of Appeals for
the District of Columbia pursuant to 50 U.S.C. app. Sec. 2412(c)(3).
[FR Doc. 2011-7847 Filed 4-4-11; 8:45 am]
BILLING CODE 3510-DT-P