Economic Sanctions:

Enforcement Roundtable

Discussion December 2013

Christina Dugger Polly Greenberg

Chief Assistant U.S. Attorney Chief, Economic Crimes Bureau

U.S. Attorney’s Office – ED of NY N.Y. County District Attorney’s

Office

Sean O’Malley Steven Pelak

V.P. – Deputy Chief Investigator Holland & Hart LLP

for Enforcement Washington, D.C.

Federal Reserve Bank of N.Y.

Thank You

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Criminal Law & Economic

Sanctions Compliance: Axiom #1

The #1 and most important Axiom of the

criminal law and economic sanctions

compliance work,

Do Not Be in the Wrong Place at

the Wrong Time . . . . . .

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Criminal Law & Economic

Sanctions Compliance: Axiom #2

The #2 and second most important axiom

of the criminal law and economic

sanctions compliance work,

HOPE that your Client or Counterparty is

not in the Wrong Place at the Wrong Time . . .

. . .

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Outline of Topics for Roundtable Discussion

I. Common Questions for the Enforcement Agencies Who, What, How, and Why

II. A Few Observations to Consider in Communicating with Enforcement Agencies

III. Where is Enforcement Headed in 2014?

IV. Open Questions – Ask at Will Throughout

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1. How is your Office Involved in Economic

Sanctions Enforcement?

How is your agency or Office involved in the investigations

and administrative enforcement actions or criminal

prosecution of economic sanctions violations?

2. How is your Office Organized to Handle?

How is your office organized to handle such investigations

or enforcement actions?

How many personnel in your office are involved or have

been involved in such matters?

Common Questions

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3. Past Investigations & Enforcement Actions In the recent past, what have been a few examples of matters which your

office has handled in this arena?

How -- How did the matter arise?

What -- What was the final result or resolution?

Why -- If there was (were) any particular factor(s) which led you to the

enforcement action, what was it or what were they?

Mitigation -- If there were any particular factors which led you to reduce

or lower the penalty initially sought, what were they?

No Action -- If your Office has handled or considered an alleged

violation which did not result in a public enforcement action, what

factors led your Office to take No Action?

Did the matter nonetheless obtain or achieve any deterrent value or greater

compliance with any sanctions program? How?

Insert Case Examples???

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U.S. v. Richard

Phillips

Iranian Embargo Case

USAO-E.D. New York Prosecution

Carbon Fiber – “Dual Use” Goods or Technology

Potential End Use: Missiles

Potential Use: Centrifuges for Uranium Enrichment

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The Sting

Phillips: As long as you -- can swear

on your wife’s life that you’re not

setting me up for a fall with the

Federal Government, I will take you

at your word.

Undercover Agent: Oh God, no.

Phillips: All right.

Defendant Reveals his Plans to the

Undercover Agent

Phillips: By December I plan on having an office

in the Philippines.

UC Agent: Okay.

Phillips: So - at that point in time the Feds can’t

even say anything because I’m no longer in this

country, you’re selling it to an individual in the

Philippines, and you don’t give a f*** what they do

with it.

UC Agent: Got it.

2014 Enforcement Priorities?

4. What Next? – Where are the

Enforcement Agencies headed with

economic sanctions enforcement

investigations and actions in 2014???

For 2014, what priority or focus do you anticipate

for your office in this arena?

Do the reported negotiations concerning the

Iranian nuclear program and possible lessening

of international sanctions influence your

approach or focus in this arena?

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Corporate Compliance Programs

5. Observations or Recommendations? -- What

Examples of Compliance Measures have been

impressive?

Recommendations for Corporate Compliance?

Which internal compliance practices or actions have

you found most impressive or beneficial in terms of

demonstrating to you that the company had an

effective compliance program, was intent upon

complying with the law, and was worthy of avoiding or

a reduction in liability? 17

6. Presentations & Disclosures Recommendations?

What general & specific recommendations for In-

House or Outside Counsel might you offer if counsel

is making a presentation to your Office in support of a

declination or a reduced penalty?

What form, style, type, or characteristics of

disclosures or defense presentations have you found

most helpful or persuasive?

Which form, style or type have you found of lesser

value to your consideration whether to prosecute or to

take an enforcement action or whether to accept a

mitigated or reduced penalty?

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6. Voluntary Disclosures to Enforcement

Agencies How are Voluntary Disclosures by companies which

discover sanctions violations committed by their

employees treated or considered in this arena by the

enforcement agencies?

Is there a policy to provide a “pass” or declination if a

company makes a self-initiated, truthful, complete, and

voluntary disclosure?

May there be a Mandatory Duty to report a sanctions

related violation to an administrative enforcement

agency?

See U.S. v. UTC/Pratt & Whitney Canada

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Among other reasons: See the Summary of Cases, IED

Cases, U.S. v. Khaki, etc.

Iran, Syria, Sudan, Hezbollah, . . .

October 23, 1983, June 25, 1996, . . .

Judicial Findings of Facts regarding Iranian initiation,

funding, planning, and direction of the murder, torture, and

hostage taking of U.S. citizens:

264 F.Supp.2d 46; 238 F.Supp.2d 1; 184 F.Supp.2d 13;

172 F.Supp.2d 128; 124 F.Supp.2d 97.

Nasir bin Hamd al-Fahd – May 2003: Legal/Religious

Justification for use of a nuclear weapon

Why important?

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Among other reasons:

Increased Federal Law Enforcement Activity – FBI Foreign

Counterintelligence efforts

A Picture is worth a 1,000 words.

Why important to U.S. and You?

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FBI Windbreakers

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Additional Questions for the

Enforcement Agencies?

Questions???

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When to communicate or visit with

a Prosecutor?

1. Never, if possible.

2. Decide to Visit.

The biggest decision

Do not visit just to see what happens or to

obtain information – Curiosity did kill the Cat.

Know the Facts – Do not Guess or Assume

that the facts show no criminal wrongdoing,

i.e., no willful conduct.

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When to Visit a Prosecutor?

3. If Never is not an option: Do Not

Delay.

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How Best to Communicate with an

Enforcement Agency or a Prosecutor?

1. Not a Law School Exam

Not a Spot the Issue Project

Focus upon the primary issue: Willful

Conduct?

2. Internal Investigations – Acknowledge

Limitations and Errors

Do not oversell

Human nature – The FBI’s own Experience

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How Best to Communicate with an

Enforcement Agency or a Prosecutor?

3. Provide Actual Proof of an Effective

Compliance Program and Internal Controls

Who was/is in charge? -- The retired

salesman syndrome.

Was the Compliance Office and Officer

provided real authority and responsibility?

Or was the Compliance Officer selected as

Larry was selected . . . . ?

Not the Method to Select a Compliance Officer

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How Best to Communicate with an

Enforcement Agency or Prosecutor?

3. Provide Actual Proof of an Effective

Compliance Program and Internal Controls

Have employees been disciplined for past

violations? – Including managerial officials?

Has the Company pursued prior hotline tips of

violations?

Has the company rewarded the honest

employee in the past?

Examples saved?

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Questions for Compliance Officers

How are you Saving, Collecting and Organizing prior examples of your effective and real compliance program: Prior examples of violations of policy or law in which

employees been disciplined, including managerial officials (e.g., even letters to file)?

Prior examples of internal investigations, including internal investigations arising from internal hotline tips?

Prior examples of instances in which the company rewarded the honest employee in the past?

Save Prior Examples -- ???

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How Best to Communicate with an

Enforcement Agency or Prosecutor?

4. Do not be afraid of saying: “We

don’t know the answer.”