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Time to Revisit Your Export Control Compliance Program: Photonics Manufacturer is Latest Company Raided by U.S. Government Agents for Suspected Violations

January 2013Advisories

Last week, Agiltron, a photonics company headquartered in Woburn, MA, was raided by over 100 federal agents representing a variety of U.S. government agencies, including the FBI, Homeland Security, and Immigration and Customs Enforcement. Reports are now surfacing that the raid involved a criminal investigation of suspected U.S. export control violations. The agents spent the entire day at Agiltron’s facility, and were seen carting away boxes of materials and computer equipment.

While we likely won’t know for some time whether or not there was, in fact, wrongdoing at Agiltron, this type of event reveals the high stakes of engaging in international trade, and the critical importance of ensuring compliance with U.S. export control laws and regulations. Agiltron manufactures components, modules, and subsystems for optical communication, sensor, security, medical, environmental, instrumentation, aerospace, and defense applications. The company also regularly engages in trade around the world. Operating in this environment requires particular care.

U.S. export control laws and regulations, including the U.S. Commerce Department’s Export Administration Regulations, the U.S. State Department’s International Traffic in Arms Regulations, and special sanction programs administered by the U.S. Treasury Department’s Office of Foreign Assets Control, impose numerous obligations on U.S. businesses engaged in international trade, and sometimes even impact companies that are not directly engaged in international trade. Penalties for violating these export control regimes can be severe. Strict liability applies, and a company, as well as its individual employees, can be found liable for violating laws and regulations they did not know existed. Penalties range from civil and criminal fines of up to $1M per violation, to loss of export privileges, debarment from federal contracting and imprisonment.

Federal agencies have ramped up their enforcement activities significantly since 9/11. This increase in enforcement activity has, in part, coincided with the formation of interagency task forces headed by various U.S. Attorneys offices to coordinate export control investigations and prosecutions among various federal agencies.

Agiltron’s situation brings to mind the recent compliance issues at Rocky Mountain Instruments, a technology company based in Colorado. Rocky Mountain was raided in a similar fashion several years ago following an employee’s report to federal authorities of possible wrongdoing by the company relating to U.S. export control requirements. The cost of dealing with the ensuing investigation, as well as the loss of business due to bad press, led the company to declare bankruptcy. Rocky Mountain eventually emerged from bankruptcy, but not before entering into a plea agreement with the U.S. Justice Department which involved the payment of significant civil fines and loss of certain export privileges. At least one individual within the company also faced criminal prosecution for violating U.S. export control requirements, resulting in a plea agreement and forfeiture of the proceeds of his misbehavior.

The best defense against this sort of federal action and the inevitable aftermath is to obtain a clear understanding of your U.S. export control compliance obligations, followed by training of personnel and deployment of properly crafted compliance procedures at all levels within your organization.

For additional information regarding U.S. export controls on satellites and related items, or help with any other export control compliance matter, please contact Attorneys Kerry T. Scarlott or Denis M. King as follows.

Kerry T. Scarlott
617.574.3572
[email protected]

Denis M. King
617.574.6432
[email protected]

This newsletter should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and any specific legal questions you may have.

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