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April 13, 2005 

Third Circuit Reinstates Conviction of Businessman Found Guilty of Engaging in Illegal Trade With Cuba

The U.S. Court of Appeals for the Third Circuit today reinstated the conviction of Stefan Brodie, a Philadelphia-area businessman who was found guilty by a jury in 2002 of conspiring to violate the U.S. embargo on Cuban, but then was acquitted by the trial judge.

By way of background, in October 2000, following an investigation that lasted nearly five years, the U.S. Attorney for the Eastern District of Pennsylvania indicted Bro-Tech Corp., a Delaware corporation that trades under the name "The Purolite Company", of making illegal sales of ion exchange resins to Cuba. Ion exchange resins are used for water and waste water treatment. Also indicted were Stefan Brodie, the company's co-owner, president and CEO, Stefan's brother Don Brodie, the company's co-owner and executive vice-president and James Sabzali, a Canadian citizen and the company's sales manager and director of marketing. Each of them was indicted on one count of conspiracy to violate the provisions of the Trading with the Enemy Act of 1917 ("TWEA") and the Cuban Assets Control Regulations ("CACRs") and 75 counts of substantive violations of TWEA and the CACRs. See Forbidden Trade, The U.S. Hard Line on Exports to Cuba (The Export Practitioner Nov. 2002).

The indictments alleged that during much of the 1990s, Bro-Tech sold ion exchange resins to Cuba through intermediary companies in Canada, Mexico and Europe. The indictment also alleged that several U.S. based employees of Bro-Tech were aware of and facilitated such sales and that several Canadian Bro-Tech employees, including James Sabzali, were reimbursed for their business-related travel to Cuba by staff located in the company's Pennsylvania headquarters. During the three-week trial held before Judge Mary A. McLaughlin in 2002, the prosecution and defense focused on whether the defendants had "knowingly" and "willingly" violated the provisions of U.S. law that prohibits U.S. persons from engaging in or facilitating the unlicensed sales of goods to Cuba.

The jury agreed with much of the government's case and convicted Bro-Tech of 45 counts of violating TWEA, Sabzali of 21 counts, Donald Brodie of 34 counts and Stefan Brodie of one count of conspiracy to violate TWEA. Sabzali's convictions were on counts relating to his role in certain sales to Cuba and his approval of reimbursements to a Canadian salesman for travel expenses to, from, and within Cuba. Donald Brodie's convictions arose from his "causing" and "approving" certain Cuban sales, and reimbursing employees for travel to Cuba, while in the United States.

As detailed in New Trials Ordered for Defendants Convicted for Illegal Sales to Cuba (The Export Practitioner August 2003), the trial judge granted all
four defendants a new trial on the ground that the government had made certain improper and inflammatory comments and argument during its opening and closing statements which prejudiced the jury. Subsequently, the government entered into a plea bargain with three of the defendants. Don Brodie pleaded guilty to one count of the indictment (involving his approval of expenditures in the amount of $4,187 for Mr. Sabzali's Cuba-related travel) and was sentenced to one year probation and fined $10,000. The Bro-Tech Corporation also pleaded guilty to one count, and was fined $250,000. Mr. Sabzali pleaded guilty to a superceding information charging a violation of 18 U.S.C. section 2 (aiding and abetting) and
18 U.S.C. section 545 (smuggling goods into the United States), and was sentenced to one year probation and fined $10,000.

In reviewing Stefan Brodie's motion for judgment of acquittal, Judge McLaughlin noted that the court must determine whether, "upon the evidence, giving full play to the right of the jury to determine credibility, weigh the evidence, and draw justifiable inferences of fact, a reasonable mind might fairly conclude guilt beyond a reasonable doubt." The trial judge also noted that "the question the Court must answer is whether a rational jury could find beyond a reasonable doubt that the defendant knowingly and willfully joined a conspiracy to violate TWEA and the CACRs." In reviewing the evidence presented at trial, the trial judge found that very little evidence presented by the government during the six days of its case-in-chief related to Stefan Brodie. The judge also found that there was no direct evidence presented demonstrating his involvement in any of the sales or reimbursements of expenses alleged in the indictment. As a result, the trial judge found that there was insufficient evidence of Stefan Brodie's knowing and willful participation in the charged conspiracy and therefore granted the motion for acquittal. See United States v. Brodie, 268 F. Supp. 2d 408 (E.D. Pa. 2002).

The U.S. government appealed the trial judge's decision to grant Stefan Brodie's motion for judgment of acquittal to the Third Circuit. After reviewing the evidence presented during the trial in detail, the Third Circuit held that "we are satisfied that a reasonable jury could conclude beyond a reasonable doubt that the Defendant had actual knowledge of the law violated, the facts constituting the offense and the illicit purpose of the conspiracy." The Court also concluded "that a reasonable jury could find the knowledge requirements of the crime met on a theory of willful blindness" and found that the evidence presented during the trial "paints a convincing picture of the Defendant as a company president who deliberately stuck his head in the sand regarding the involvement of the U.S. entity in the prohibited transactions."

In the opinion's conclusion, the Third Circuit's noted that "deciding a motion for judgment of acquittal in a conspiracy case built entirely on circumstantial evidence is not an easy task, and was made all the more difficult in this case by the complexities of the underlying substantive law and voluminous record." However, after reviewing the government's evidence against Stefan Brodie, the Third Circuit found that the trial judge erred in entering the judgment of acquittal and reinstated the jury's guilty verdict.

This must-read opinion, which contains a very detailed account of the evidence presented at trial regarding the efforts that Bro-Tech and its senior executives took to sell its products to Cuba, can be found at the following link:



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