International Trade Law News

Published by Jacobson Burton Kelley PLLC

Balli Aviation Ltd., a subsidiary of the United Kingdom-based Balli Group PLC (collectively "Balli"), pleaded guilty today in the U.S. District Court for the District of Columbia to a two-count criminal information in connection with its illegal export of commercial Boeing 747 aircraft from the United States to Iran.

In a related civil enforcement case, Balli entered into a joint settlement agreement with the Treasury Department's Office of Foreign Assets Control (OFAC) and the Commerce Department's Bureau of Industry and Security (BIS) to settle alleged violations of U.S. export controls and sanctions laws..

Under the criminal plea agreement, Balli agreed to pay a $2 million criminal fine and be placed on corporate probation for five years. In the civil settlement with BIS and OFAC, Balli agreed to pay a $15 million civil penalty (payable in five installments over two years) to settle alleged violations of the Iranian Transactions Regulations and Export Adminstration Regulations. The terms of the civil settlement agreement provide that $2 million of Balli's civil penalty will be suspended and waived if Balli remains in compliance with U.S. export control laws.

According to count one of the criminal information, from 2005 through 2008, Balli conspired to export three Boeing 747 aircraft from the United States to Iran via a subsidiary without first having obtained the required export license from BIS or authorization from OFAC, in violation of the EAR and Iranian Transactions Regulations. The criminal information also states that the Boeing 747 was purchased  with financing obtained from Mahan Airlines, the first private airline in Iran. (Mahan Airlines prominently features the Boeing 747 on its home page).

Count two of the information states that Balli violated a Temporary Denial Order (TDO) issued by BIS in March 2008 that prohibited the company from conducting any transaction involving any item subject to the EAR. The Justice Department alleged Balli subsequently violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft.

In the civil case, Balli was charged with conspiracy to violate the EAR by working with the Iranian airline to export the U.S.-origin aircraft to Iran. BIS also charged Balli with one count of acting contrary to the terms of a TDO by attempting to sell and export three additional 747s to Iran.

In addition to the civil monetary penalties, BIS suspended Balli's export privileges for five years (as noted, Balli was previously subject to a BIS TDO that was later lifted), although BIS agreed to suspend the denial order as long as the penalty is timely paid and the company remains compliant with the EAR. Mahan Airways remains on BIS's Denied Persons List.

In addition, the civil settlement agreement requires Balli to hire an unrelated third-party consultant with expertise in U.S. export control laws and sanctions regulations to conduct audits of Balli's U.S. export control and sanctions compliance on an annual basis during the next five years and to submit the audit results to BIS and OFAC.

The OFAC and BIS joint settlement agreement, which contain additional details on Balli's alleged activities, can be found here (pdf).

SIDEBAR: On a somewhat related note, last month marked the 40th anniversary of the first commercial flight of the Boeing 747 from New York to London by its launch customer Pan American World Airways.  The Flightglobal website has put together a special section marking the 40th anniversary of the Boeing 747 here.

Labels: BIS, OFAC, Sanctions; Iran