ACI Director David Farchy, representing ACI's Board of Directors, entered a guilty plea on behalf of the corporation June 22 before U.S. District Judge Gray Miller. Farchy also executed a written plea agreement which admitted that the corporation facilitated the manufacture of Multi-phase Flow Meters (MPFM) by a foreign affiliate for export to the Sudan. This facilitation violates IEEPA and the Sudanese Sanctions Regulations. Per the terms of the plea agreement, the corporation agreed to pay a total of $2 million in criminal fines, forfeiture and civil penalties and serve a four-year-term of probation.
During this probation, ACI must institute a compliance program specifically designed to ensure that no further violations of U.S. law will occur.
Additionally, the corporation must hire an unaffiliated third-party consultant with expertise in U.S. export control laws and sanctions regulations. This consultant will conduct external audits of ACI's compliance with U.S. export control laws and sanctions regulations regarding all exports or re-exports to sanctioned countries. Accepting the terms of the plea agreement, Judge Miller sentenced ACI to the probationary term and ordered ACI to pay a criminal fine of $760,000 and to forfeit $380,000, for a total criminal penalty of $1,140,000, and to pay $860,000 in civil penalties to OFAC. ACI must also institute the compliance program as agreed.
ACI is a Houston-based corporation engaged in designing, manufacturing and supplying MPFMs and its consumable parts used, among other things, in the oil and gas industry. ACI has a number of foreign affiliates. It was through its Venezuelan affiliate, Agarcorp de Venezuela (ADV), that ACI illegally facilitated exporting16 MPFMs to Sudan for use in the Melut Basin oil field. ACI's assistance to and facilitation of its foreign affiliate, ADV, in manufacturing MPFMs to export them to Sudan, was subject to the Sudanese Sanctions Regulations.
President William Jefferson Clinton signed Executive Order 13067 on Nov. 3, 1997, prohibiting certain individuals and entities from transacting directly or indirectly with Sudan. This order has been continuously extended each subsequent year by the president of the United States. Executive Order 13067 specifically finds that "the policies and actions of the government of Sudan, including continued support for international terrorism; ongoing efforts to destabilize neighboring governments, and the prevalence of human rights violations, including slavery and the denial of religious freedom, constitute an unusual and extraordinary threat to the national security and foreign policy of the United States," and declared a national emergency to deal with that threat. Executive Order 13067 imposed economic sanctions, including a trade embargo, on Sudan and prohibited, among other things, transactions with Sudan. The executive order was in effect at all times relevant to the charges in this case.
Specifically, the executive order prohibited the exportation or re-exportation, directly or indirectly, to Sudan of any goods, technology (including technical data, software or other information) or services from the United States or by a U.S. person, wherever located, or requiring the issuance of a license by a federal agency, except for donations of articles intended to relieve human suffering, such as food, clothing and medicine. Also specifically prohibited is the facilitation by a U.S. person, including but not limited to brokering activities, of the exportation or re-exportation of goods, technology or services to Sudan from any location. The executive order's definition of a "U.S. person" includes a corporation organized under the laws of the U.S. (including foreign branches).
Although it was made to appear that ADV alone was building and exporting the MPFMs to Sudan, ACI still provided assistance and technical support for designing and constructing the 16 MPFMs. ACI sold and caused to be shipped to ADV from the United States certain component parts needed for manufacturing the MPFMs. ACI assisted ADV in purchasing MPFM component parts from ACI's U.S. suppliers and fabricators by acting in a coordination capacity. ACI also assisted ADV with the engineering drawings needed to procure the parts from the U.S. fabricators and to assemble the various parts into the 16 MPFMs destined for Sudan. In addition, ACI helped with the arrangements for the letters of credit for MPFMs manufactured by ADV for end use in Sudan. ACI exported seven shipments of the component parts ordered from the U.S. vendors to ADV in Venezuela on or about April 22; May 9, 13 and 27; and June 3 and 27, 2005. These shipments originated in Houston prior to their export to Venezuela. ACI was aware that ADV would incorporate these parts into MPFMs for export to Sudan.
ACI also sold MPFM proprietary components directly to ADV for the Melut Basin Project. Beginning in or about June 2005, the proprietary components were shipped by ACI or under its direction from Houston through Miami, Fla., to ADV in Venezuela. Once ADV completed the assembling the MPFMs and concluded all necessary testing of the completed MPFM, the assembled parts were re-exported to the Republic of Sudan for use in the Melut Basin project.
The criminal investigation leading to the charges and the June 22, 2010, conviction and sentence was conducted by ICE's Counter Proliferations Group. The Office of Foreign Assets Control participated in the resolution of this case through a settlement agreement whereby the civil penalties imposed are to be paid by ACI. Assistant U.S. Attorney Melissa J. Annis, Southern District of Texas, prosecuted the case.
For more information, visit www.ice.gov.