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January 25, 2016

What Exporters can Learn from Hetran…Just Say No!

When it comes to export violations, it’s best to just say no.  FIMCO,[1] an Iranian corporation, was recently sentenced and ordered to pay a criminal fine, in addition to a civil penalty assessed by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), for conspiring to export to Iran a bar peeling machine and related parts (used to produce high-grade steel for automobile and aircraft parts) without the required authorization.  Hetran, a Pennsylvania-based company, and its President, Helmut Oertmann, also participated in the conspiracy and were jointly levied an $837,500 penalty by BIS in December 2014.

According to BIS, between June 2009 and July 2012, FIMCO and Hetran, along with other co-conspirators, developed a scheme to export the commodities, which were designated as EAR99, from Pennsylvania to Iran.  Oertmann directed Hetran to manufacture the machine and accepted partial payment ($337,500) from FIMCO.  Once the machine was manufactured, the plan was for Hetran to ship it to FIMCO in Iran via the UAE, falsely indicating on the shipping documents that the UAE was the ultimate destination of the items.  Hetran attempted the export in June 2012.  BIS’ Office of Export Enforcement (OEE) agents caught wind of the plan and visited Hetran’s offices for further investigation.  Even after Hetran became aware of BIS’ investigation, it continued with the conspiracy, making false statements to the OEE agents and meeting with FIMCO officials in July 2012 to finalize payment.  BIS subsequently ordered that the shipment be returned to the U.S.

The equipment was valued at over $895,000, a major potential sale for Hetran, but in the end Hetran not only lost the sale, it (together with Oertmann) was ordered to pay $337,500 (the amount of the partial payment it received from FIMCO) out-of-pocket.  The remaining $500,000 of the penalty assessed against Hetran and Oertmann was suspended for two years and will be waived at the end of that period provided that Hetran and Oertmann comply with the terms of the plea agreement.  If Hetran violates any of the settlement terms, BIS could also issue a denial of export privileges for a period of five years.  Both Oertmann and Hetran were also criminally prosecuted and sentenced to 12 months’ probation. 

FIMCO, the mastermind behind the scheme, as a part of its plea agreement, received a $100,000 criminal fine, a two-year suspended denial of its export privileges, an $837,500 civil penalty (with $250,000 conditionally suspended), and had its name added to the Entity List.[2]  FIMCO’s three officers are presently fugitives. 

[1] FIMCO changed its name to Falcon Instrumentation and Machinery FZE in the fall of 2012.
[2] The Entity List contains the names of foreign persons that are subject to specific licensing requirements, independent of, and in addition to, any licensing requirements imposed by the Export Administration Regulations.