Local Firms Fined as U.S. Steps Up Trade Oversight
By MICHAEL THURESSON
Staff Reporter
What began benignly enough as a research project looking at nutritional deficiencies among Iranian children landed UCLA’s School of Public Health on the wrong end of U.S. trade policy, costing it both the program and nearly $6,000 in fines.
The school ran afoul of guidelines set by the Treasury Department’s Office of Foreign Assets Control, which enforces civil penalties against companies found dealing with countries on which the government has imposed trade sanctions.
UCLA, which said the violation was inadvertent, was hit with the fine earlier this year, joining dozens of other companies and groups caught in OFAC’s stepped up enforcement since the terrorist attacks in 2001.
Locally, several companies were fined this year, including Ontario-based flashlight-maker Mag Instrument Inc. for exporting to Yugoslavia ($4,600 in June); Pasadena-based ST Travel Inc. for importing Cuban cigar bands ($2,948 in July); Long Beach-based MRP Group Inc. for providing travel-related services to Cuba ($2,500 in October); and Sanwa Bank of California, now part of Bank of the West, for providing services in Cuba ($72,220 in April).
The Dodgers also violated trade law and were fined $75,000 by the government as part of a 1999 dustup over the signing of two Cuban players. The fine came to light only last year.
The team’s fine came on top of the $200,000 it had to pay Major League Baseball when it was determined that two Cuban players Josue Perez and Juan Carlos Diaz were illegally scouted and underage when they were signed. The pair were declared free agents.
“There’s a lot more enforcement action with respect to this matter,” said Linda Weinberg, partner in the Washington office of Piper Rudnick LLP, which represents companies in litigation over the fines.
History of enforcement
The fines are nothing new to the OFAC, which dates back nearly two centuries to the War of 1812 when the federal government implemented sanctions against Great Britain for the harassment of American sailors.
It now enforces regulations against certain trading activity with Cuba, Iran, Iraq, Liberia, Libya, North Korea, Sudan, Zimbabwe, Myanmar and portions of the former Yugoslavia by tracking IRS records and auditing shipment records of transport companies.
The extent of the sanctions varies by country. Iran, for example, was first added to the list of sanctioned countries in 1979. The sanctions at first were limited to importing but in 1995 restrictions on exporting were passed.
Public Citizen, a non-profit consumer advocacy group, has estimated that OFAC collects millions of dollars in fines each year. Until last year, the agency kept the details of such fines confidential, but a Freedom of Information Act filing by Public Citizen opened its records.
Besides the Dodgers, the FOIA filing brought to light a fine levied against IMPCO Technologies Inc., a Cerritos-based fuel systems supplier, cited the same year for selling $37,000 of equipment to an entity in Iran in 1997.
Officials IMPCO did not return calls. Dodgers officials declined to comment.
In addition to its fine, UCLA was told it could not conduct research, move money, equipment or materials to Iran without a special license granted by OFAC. “UCLA continues to work closely with faculty to adhere to economic and trade sanctions,” said Lawrence Lokman, assistant vice chancellor of communications.
Companies involved in trade with Iran have struggled to obtain trade licenses and see UCLA’s case as typical. “We cannot determine the basis of (OFAC’s) approval or denial,” said Alireza Mahdavi, a partner at Total Transportation Concept Inc., an Inglewood-based shipping company.
Mahdavi, who was born in Iran, has seen his company’s U.S.-to-Iran exporting business shrink drastically since 1995, when new sanctions were placed on the country.
The threat of fines has also induced some companies to set up oversight of their trading activities. AMAC Corp., a Cypress-based shipping company and division of Japanese electronics giant Matsushita Electric Industrial Co., bought software in July that matches OFAC’s list of banned countries and terrorist-related organizations against its internal order processing system.
Mag Instrument learned its lesson too late. A shipment to Belgrade in 1999 valued at less than $10,000 was discovered by OFAC earlier this year. The sides settled on the $4,600 fine.
“We should have caught this but it was so small it slipped through,” said James Childs, partner at Jones Day, the law firm representing Mag Instrument.
The settlement amounts have been a point of contention for some companies because OFAC’s calculation method is unclear. Some fines, such as ST Travel’s, match the value of the cargo that was imported. “There are a variety of ways to determine the fine,” said Tara Bradshaw, a spokeswoman at the Treasury Department, who declined to elaborate.
