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Jim Chester

Officers Seize 17 Vehicles and Assess $93,500 in Fines

By Export, Import, International Business

Recently, U.S. Customs and Border Protection officers working outbound operations at the Santa Teresa port of entry seized 17 vehicles and assessed penalties totaling $93,500.

The discovery was made when CBP officers, conducting routine outbound enforcement operations in the vehicle export facility, detected issues with the paperwork linked to several vehicles destined for Mexico. Further investigation resulted in the seizure of 17 vehicles attempting to circumvent the CBP exportation process by presenting fraudulent export paperwork. Each of the 17 violations carries a fine of $5,500. A total of $93,500 in fines and penalties were assessed against the exporter. All 17 vehicles were also seized by CBP.

“This entire episode is curious because there was really nothing to gain here other than a small savings in time,” said CBP Santa Teresa assistant port director Fred Hutterer. “CBP does not charge a fee to process vehicles for export.”

The CBP vehicle export process is fairly simple. An exporter presents his original certificate of title or certified copy of the certificate of title and the CBP export cover sheet with the vehicle’s information (VIN/make/model) to CBP officers. The copies are date and time stamped which initiates the 72-hour requirement of the vehicle to remain in the United States prior to the formal export. During this 72-hour window CBP performs a series of checks to make sure the vehicle is eligible for export. After the 72 hours have elapsed the exporter will present the original title and the vehicle to CBP for verification. Once CBP determines that all requirements have been met the vehicle can be exported.

CBP officers at the Santa Teresa port process approximately 36,000 vehicles for export annually. The Santa Teresa port of entry is the only designated vehicle export location in the El Paso area.


Members of Counterfeit Nike Sneaker Ring Face Up to 5 Years in Prison and $250,000 Fine

By Customs IP Enforcement, Export, Import, Intellectual Property, International Business, International IP, News

Registered Trademark of Nike

Five individuals have pleaded guilty to conspiring to import misclassified merchandise. Each faces up to five years in federal prison and a $250,000 fine. This case is being investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

“The trademark laws in the United States were created to protect the investment of American manufacturers such as Nike as well as consumers,” said U.S. Attorney William J. Hochul Jr., Western District of New York. “These laws are designed to create a level playing field for businesses and protect consumers who might unwittingly purchase inferior counterfeit goods. Our office will continue to aggressively enforce customs laws for the benefit of American businesses and those who purchase their products.”

“Selling counterfeit goods is stealing,” said James C. Spero, special agent in charge of HSI Buffalo. “HSI is committed to ensuring the legitimate copyright holders are protected from individuals who are only motivated by greed. People and organizations which produce and sell counterfeit products undermine the U.S. economy; create inferior and sometimes dangerous products; and jeopardize public safety.”

Xiao Cheng Lin, 50, and his wife, Ling Zhen Hu, 51, both of New York, pleaded guilty before U.S. District Judge Richard J. Arcara to conspiring to import misclassified merchandise. Hu, a native of China, worked for an individual who imported thousands of pairs of sneakers from China that bore the Nike “swoosh” logo and Nike labeling, but were not genuine Nike sneakers. Hu then negotiated the sale of large quantities of the mislabeled sneakers to Malik Bazzi, 44, of Montreal, who then sold them to customers throughout the United States — including in Buffalo — via his warehouses in Manhattan and Brooklyn. Bazzi is currently scheduled to be sentenced Feb. 1, 2013. Hu admitted that she negotiated the sale of 7,500 pairs of sneakers to Bazzi.

Lin, also a native of China, worked with his wife, delivering the 7,500 pairs of sneakers to Bazzi. The HSI investigation revealed that Bazzi’s customers then sold the counterfeit Nike sneakers on the street and in retail stores to customers for about half the price of genuine Nike sneakers.

As part of their plea agreements, both Lin and Hu agreed to abandon any claim to more than $600,000 and dozens of pairs of counterfeit sneakers seized from their New York residence following their 2007 arrest.

The defendants were arrested along with 21 others. To date, 20 of the defendants have been convicted.

On Sept. 5, 2012, LaKeith Fowler, 32, of Dallas, pleaded guilty before Judge Arcara to conspiring to traffic in counterfeit sneakers. Fowler, one of Bazzi’s customers, purchased and sold approximately 12,000 pairs of counterfeit Nike sneakers he obtained from Bazzi from April to September 2007. Fowler sold the sneakers in a retail store he owned in the Dallas-area. As part of his plea agreement, Fowler agreed to forfeit two bank accounts to the government which contain over $44,000 in deposits. The accounts were used to conduct counterfeit sneaker transactions.

On Sept. 7, 2012, Davion Briant, 37, of Milwaukee, also pleaded guilty before Judge Arcara to conspiring to traffic in counterfeit sneakers. Briant, another of Bazzi’s customers, purchased and sold approximately 4,500 pairs of counterfeit Nike sneakers he obtained from Bazzi from April to September 2007. Briant owned a retail store in the Milwaukee-area where he sold the counterfeit sneakers.

On Sept. 10, 2012, Hussien Sara, 30, of New York, pleaded guilty before Judge Arcara to conspiring to traffic in counterfeit sneakers. Sara worked in Bazzi’s warehouses where, on behalf of Bazzi, he took delivery of over 13,000 pairs of counterfeit sneakers from several suppliers, including Hu and Lin. In addition, Sara assisted in packaging the sneakers for shipment to Bazzi’s customers located throughout the United States.

Lin and Hu will be sentenced Jan. 24, 2013; Fowler Dec. 14, 2012; Briant Jan. 7, 2013; and Sara Jan. 11, 2013. All will be sentenced by Judge Arcara in Buffalo.


Jim Chester Speaks at Dallas Association of Young Lawyers Luncheon

By Grab Bag, News

J. F. (Jim) Chester, founding partner in the Dallas-based global business & technology law firm of CHESTER pllc, recently presented on the legal implications of representing multiple clients to an audience of young attorneys at an event sponsored by the Dallas Association of Young Lawyers (DAYL).

The title of the presentation, which was held at the Belo Mansion, the Dallas Bar Association’s headquarters in Dallas, Texas, was: “Who’s Your Client (for Transactional Attorneys)?” Chester co-presented on a panel with Dan Baucum and John Andrews.  Chester and the other panelists discussed how to avoid ethical dilemmas while representing multiple clients.  The discussion covered scenarios and solutions to common representation issues that arise in corporate, estate planning, and family practices.

DAYL regularly holds informational luncheons, such as the recent event presented by Chester, as part of its Lunch and Learn program, which was created about three years ago as a way to help DAYL members get practical and substantive information that they may not be getting in the workplace.

Chester reports, “I was honored to participate in this DAYL program.  Avoiding ethical issues is important for all lawyers, including young attorneys. It’s great that the DAYL provides programs such as this one to allow young attorneys to learn from a range of more experienced practitioners.”

CHESTER pllc is a Dallas, Texas law firm providing comprehensive legal services to innovation-based companies doing business in the US, around the world, and on the web.  Its mission (and passion) is helping entrepreneurs and emerging companies solve problems and protect their interests. CHESTER pllc delivers value by providing business-savvy, cost-effective solutions to legal challenges.  The firm offers a wide array of business legal solutions, such as business entity formation (LLCs, corporations, etc.), trademarks and other intellectual property, technology transactions, domestic and international contracts, and e-commerce matters.  Additional information about the firm and its attorneys may be found at

What Controls: Online Terms or a Written Contract?

By Blog, Internet / eCommerce, News, Technology Transactions

In the case of Fadal Machining Centers, LLC  v. Compumachine, Inc., the Ninth Circuit decided that the arbitration clause found in the terms and conditions on a company website was binding on the parties.

Fadal Machining Centers (“Fadal”) manufactures machines and Compumachine is one of Fadal’s exclusive distributors. The two parties had a distribution agreement that included a forum selection provision. Including this provision meant that the parties agreed to bring suits against each other in a previously agreed upon forum. This implies that the parties could sue each other under the contract. However, when Fadal sued Compumachine over unpaid invoices, the district court dismissed the case because each of Fadal’s invoices referred to Fadal’s website for terms and conditions of sale and those online terms said that non-payment claims had to be submitted to arbitration. Fadal appealed, but the Ninth Circuit Court of Appeals affirmed the district court’s decision.

The lesson for companies is this: be careful about what terms and conditions you post online. Although these online terms and conditions may never be officially entered into by a contract in writing, they can still be binding when they are incorporated by reference.

Read the case in its entirety here.

SOURCE: United States Court of Appeals for the Ninth Circuit

CHESTER pllc Selected for Inclusion in Dallas Chic CEO “Black Book”

By Blog, News

(Photo by Chic CEO)

CHESTER pllc was recently selected to be included in the Chic Black Book, a directory of trusted organizations that San Diego-based Chic CEO, Inc. (“Chic-CEO”) recommends to small business owners.  CHESTER pllc was one of just three legal service providers in the entire Dallas-Ft. Worth area to be included.

Chic-CEO, which maintains the web site, provides a variety of services and resources to entrepreneurial women in cities throughout the United States.  In response to daily requests for recommendations of trusted service providers, Chic-CEO created the Chic Black Book to be a “go-to” guide its clients. In addition to recommendations for legal representation, the Dallas Chic Black Book has recommendations for bookkeeping services, marketing and brand specialists, website designers, and a number of other services that are commonly requested by emerging companies.

Jim Chester, founding member and managing attorney at CHESTER pllc, states, “We whole-heatedly support the work of groups like Chic-CEO, who assist entrepreneurs with getting the information and resources they need to be successful, and are honored to have been selected for inclusion in this highly-selective directory.”

CHESTER pllc is a Dallas, Texas law firm providing comprehensive legal services to innovation-based companies doing business in the U.S., around the world, and on the web.  Its mission (and passion) is helping entrepreneurs and emerging companies solve problems and protect their interests. CHESTER pllc delivers value by providing business-savvy, cost-effective solutions to legal challenges.  The firm offers a wide array of business legal solutions, such as business entity formation (LLCs, corporations, etc.), trademarks and other intellectual property, technology transactions, contracts, e-commerce and dispute resolution.  Additional information about the firm and its attorneys may be found at

Hong Kong Jewelry Exporter Faces Nearly $2 million in Fines and Restitution

By Blog, Export, Import, International Business

Recently, a Hong Kong-based jewelry exporter pleaded guilty to customs fraud charges and faces nearly $2 million in fines and restitution in a scheme discovered by U.S. Customs and Border Protection’s (CBP) Regulatory Audit Unit and investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

Fai Po Jewellery (H.K.) Co., LTD, admitted to intentionally submitting false invoices to the government in connection with the importation of merchandise in order to avoid paying more than $1 million in customs duties. The company was also ordered to pay an $800,000 criminal fine and restitution of $1,017,737. Additionally, the company was ordered to pay the cost of the investigation in the amount of $144,324 and was placed on three years’ probation.

HSI special agents found that from early 2007 to late 2009, Fai Po enclosed false invoices in their direct shipments to U.S. purchaser ShopNBC while sending the actual full value invoice to the purchaser by email. Fai Po advised the purchaser to ignore the invoice enclosed in the shipment because it was there only to avoid customs clearance issues.

Since Fai Po was acting as both the exporter and importer, the company was responsible for customs duties, not the U.S. purchaser. The purchaser paid the higher amount listed on the true invoice, while Fai Po declared to the government the lower value on the fraudulent invoice. The purchaser was not aware of Fai Po’s scheme and didn’t receive any benefit from it.

“A few deliberate pen strokes on a customs declaration form amounted to the theft of more than $1 million from the American people,” said Brad Bench, special agent in charge of HSI Seattle, who oversees investigations in Alaska. “The defendant apparently believed its actions would go unnoticed, but it didn’t count on CBP’s ability to detect this anomaly or HSI’s commitment to holding those who commit customs fraud accountable.”

The fraud was detected by CBP when an audit revealed a discrepancy between the actual value of the gold jewelry shipment and what was stated on the fraudulent invoices.

Under the terms of probation, Fai Po is required to appoint a responsible corporate officer who will be required to prepare and submit quarterly reports to the U.S. Probation Office to ensure that no similar conduct occurs in the future.


U.S. Sanctions Ban Iranian Players’ Access to War of Warcraft

By Blog, Internet / eCommerce, OFAC / Sanctions

Mists of Pandaria, a new update of War of Warcraft that is coming out later this year, is now unlikely to be accessible to players in Iran. (Photo by Blizzard Entertainment)

The Guardian reports that last week, Blizzard Entertainment’s online message board started receiving messages from Iranian players complaining that they could not access the War of Warcraft’s servers. The War of Warcraft is a massively multiplayer online role-playing game which is tremendously popular.

Since then, the company posted a statement on the message board stating, “What we can tell you is that United States trade restrictions and economic sanction laws prohibit Blizzard from doing business with residents of certain nations, including Iran. [. . .] This week, Blizzard tightened up its procedures to ensure compliance with these laws, and players connecting from the affected nations are restricted from access to Blizzard games and services.”

The statement further explained that U.S. sanctions also prevent Blizzard from providing any refunds, credits, transfers, or other service options to accounts in other countries that have similar sanctions.

The Guardian explains that “World of Warcraft is the world’s largest subscription-based online multiplayer game, with around 10 million users. Participants pay a monthly fee to explore its vast landscapes, engaging in quests and upgrading their in-game characters.”

According to Public Radio International, War of Warcraft fans in Cuba, Libya, North Korea and Syria are in the same boat. U.S. sanctions restrict residents in these countries from playing War of Warcraft as well.

Customs seizes $18 million in Counterfeit Contact Lenses and Merchandise

By Blog, Customs IP Enforcement, International IP

Special agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and officers from the Federal Food and Drug Administration (FDA), the Puerto Rico Police Department (PRPD), the San Juan Police Department (SJPD) and the Puerto Rico Department of Health’s Office of Investigations seized more than $18 million in counterfeit contact lenses and merchandise during the execution of several search warrants in eight different municipalities of Puerto Rico.

On Aug. 21, HSI special agents and partner law enforcement officers worked in teams to execute 17 federal search warrants at stores in the municipalities of San Juan, Caguas, Añasco, Bayamon, Ponce, Moca, Isabela and Naranjito, Puerto Rico. They seized 4,000 counterfeit Fresh Look contact lenses by Novartis, with an estimated manufacturer’s retail price (MSRP) of $200,000, along with 200,000 pieces of counterfeit merchandise from companies like Coach, Gucci, Ray Ban, Michael Kors, Rolex, Bulgari, Hublot, Nautica, Tous, Tiffany & Co., and Nike, among others. HSI special agents seized 25,000 counterfeit watches with an approximate MSRP of more than $3 million and 200 pairs of sneakers with an approximate MSRP of $32,000. The total MSRP of seized merchandise was approximately $18 million.

“The illegal importation and sale of counterfeit goods is a significant problem that affects our economy, impacts American jobs and innovation, puts the public’s health and safety at risk and at times threatens our national security,” said Angel Melendez, acting special agent in charge for HSI San Juan. “Consumers should know that if they buy pirated and unlicensed products, they are hurting legitimate businesses and they may also be facilitating criminal activity.”


$75 Million in Total Export Penalties for Illegally Helping China Develop Attack Helicopter

By Export, International Business, ITAR, Technology Transactions

Pratt & Whitney Canada Corp. (PWC), a Canadian subsidiary of the Connecticut-based defense contractor United Technologies Corporation (UTC),  pleaded guilty to violating the Arms Export Control Act and making false statements in connection with its illegal export to China of U.S.-origin military software used in the development of China’s first modern military attack helicopter, the Z-10.

In addition, UTC, its U.S.-based subsidiary Hamilton Sundstrand Corporation (HSC) and PWC have all agreed to pay more than $75 million as part of a global settlement with the Justice Department and State Department in connection with the China arms export violations and for making false and belated disclosures to the U.S. government about these illegal exports.  Roughly $20.7 million of this sum is to be paid to the Justice Department.  The remaining $55 million is payable to the State Department as part of a separate consent agreement to resolve outstanding export issues, including those related to the Z-10.  Up to $20 million of this penalty can be suspended if applied by UTC to remedial compliance measures.  As part of the settlement, the companies admitted conduct set forth in a stipulated and publicly filed statement of facts.

Today’s actions were announced by David B. Fein, U.S. Attorney for the District of Connecticut; Lisa Monaco, Assistant Attorney General for National Security; John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); Ed Bradley, Special Agent in Charge of the Northeast Field Office of the Defense Criminal Investigative Service (DCIS); Kimberly K. Mertz, Special Agent in Charge of the FBI New Haven Division; David Mills, Department of Commerce Assistant Secretary for Export Enforcement; and Andrew J. Shapiro, Assistant Secretary of State for Political-Military Affairs.

The Charges

Today in the District of Connecticut, the Justice Department filed a three-count criminal information charging UTC, PWC and HSC.  Count One charges PWC with violating the Arms Export Control Act in connection with the illegal export of defense articles to China for the Z-10 helicopter.  Count Two charges PWC, UTC and HSC with making false statements to the U.S. government in their belated disclosures relating to the illegal exports.  Count Three charges PWC and HSC with failure to timely inform the U.S. government of exports of defense articles to China.

While PWC has pleaded guilty to Counts One and Two, the Justice Department has recommended that prosecution of UTC and HSC on Count Two, and PWC and HSC on Count Three be deferred for two years, provided the companies abide by the terms of a deferred prosecution agreement with the Justice Department.  As part of the agreement, the companies must pay $75 million and retain an Independent Monitor to monitor and assess their compliance with export laws for the next two years.

The Export Scheme

Since 1989, the United States has imposed a prohibition upon the export to China of all U.S. defense articles and associated technical data as a result of the conduct in June 1989 at Tiananmen Square by the military of the People’s Republic of China.  In February 1990, the U.S. Congress imposed a prohibition upon licenses or approvals for the export of defense articles to the People’s Republic of China.  In codifying the embargo, Congress specifically named helicopters for inclusion in the ban.

Dating back to the 1980s, China sought to develop a military attack helicopter.  Beginning in the 1990s, after Congress had imposed the prohibition on exports to China, China sought to develop its attack helicopter under the guise of a civilian medium helicopter program in order to secure Western assistance.  The Z-10, developed with assistance from Western suppliers, is China’s first modern military attack helicopter.

During the development phases of China’s Z-10 program, each Z-10 helicopter was powered by engines supplied by PWC.  PWC delivered 10 of these development engines to China in 2001 and 2002.  Despite the military nature of the Z-10 helicopter, PWC determined on its own that these development engines for the Z-10 did not constitute “defense articles,” requiring a U.S. export license, because they were identical to those engines PWC was already supplying China for a commercial helicopter.

Because the Electronic Engine Control software, made by HSC in the United States to test and operate the PWC engines, was modified for a military helicopter application, it was a defense article and required a U.S. export license.  Still, PWC knowingly and willfully caused this software to be exported to China for the Z-10 without any U.S. export license.  In 2002 and 2003, PWC caused six versions of the military software to be illegally exported from HSC in the United States to PWC in Canada, and then to China, where it was used in the PWC engines for the Z-10.

According to court documents, PWC knew from the start of the Z-10 project in 2000 that the Chinese were developing an attack helicopter and that supplying it with U.S.-origin components would be illegal.  When the Chinese claimed that a civil version of the helicopter would be developed in parallel, PWC marketing personnel expressed skepticism internally about the “sudden appearance” of the civil program, the timing of which they questioned as “real or imagined.”  PWC nevertheless saw an opening for PWC “to insist on exclusivity in [the] civil version of this helicopter,” and stated that the Chinese would “no longer make reference to the military program.” PWC failed to notify UTC or HSC about the attack helicopter until years later and purposely turned a blind eye to the helicopter’s military application.

HSC in the United States had believed it was providing its software to PWC for a civilian helicopter in China, based on claims from PWC.  By early 2004, HSC learned there might an export problem and stopped working on the Z-10 project.  UTC also began to ask PWC about the exports to China for the Z-10.  Regardless, PWC on its own modified the software and continued to export it to China through June 2005.

According to court documents, PWC’s illegal conduct was driven by profit.  PWC anticipated that its work on the Z-10 military attack helicopter in China would open the door to a far more lucrative civilian helicopter market in China, which according to PWC estimates, was potentially worth as much as $2 billion to PWC.

Belated and False Disclosures to U.S. Government

These companies failed to disclose to the U.S. government the illegal exports to China for several years and only did so after an investor group queried UTC in early 2006 about whether PWC’s role in China’s Z-10 attack helicopter might violate U.S. laws.  The companies then made an initial disclosure to the State Department in July 2006, with follow-up submissions in August and September 2006.

The 2006 disclosures contained numerous false statements.  Among other things, the companies falsely asserted that they were unaware until 2003 or 2004 that the Z-10 program involved a military helicopter.  In fact, by the time of the disclosures, all three companies were aware that PWC officials knew at the project’s inception in 2000 that the Z-10 program involved an attack helicopter.

Today, the Z-10 helicopter is in production and initial batches were delivered to the People’s Liberation Army of China in 2009 and 2010.  The primary mission of the Z-10 is anti-armor and battlefield interdiction.  Weapons of the Z-10 have included 30 mm cannons, anti-tank guided missiles, air-to-air missiles and unguided rockets.

“PWC exported controlled U.S. technology to China, knowing it would be used in the development of a military attack helicopter in violation of the U.S. arms embargo with China,” said U.S. Attorney Fein.  “PWC took what it described internally as a ‘calculated risk,’ because it wanted to become the exclusive supplier for a civil helicopter market in China with projected revenues of up to two billion dollars.  Several years after the violations were known, UTC, HSC and PWC disclosed the violations to the government and made false statements in doing so.  The guilty pleas by PWC and the agreement reached with all three companies should send a clear message that any corporation that willfully sends export controlled material to an embargoed nation will be prosecuted and punished, as will those who know about it and fail to make a timely and truthful disclosure.”

“Due in part to the efforts of these companies, China was able to develop its first modern military attack helicopter with restricted U.S. defense technology.  As today’s case demonstrates, the Justice Department will spare no effort to hold accountable those who compromise U.S. national security for the sake of profits and then lie about it to the government,” said Assistant Attorney General Monaco.  “I thank the agents, analysts and prosecutors who helped bring about this important case.”

“This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses,” said ICE Director Morton.  “I am hopeful that the conviction of Pratt & Whitney Canada and the substantial penalty levied against United Technologies and its subsidiaries will deter other companies from considering similarly ill-conceived business practices in the future.  American military prowess depends on lawful, controlled exports of sensitive technology by U.S. industries and their subsidiaries, which is why ICE will continue its present campaign to aggressively investigate and prosecute criminal violations of U.S. export laws relating to national security.”

“… [These] charges and settlement demonstrate the continued commitment of the Defense Criminal Investigative Service (DCIS) and fellow agencies to protect sensitive U.S. defense technology from being illegally exported,” said DCIS Special Agent in Charge Bradley.  “Safeguarding our military technology is vital to our nation’s defense and the protection of our war fighters both home and abroad.  We know that foreign governments are actively seeking U.S. defense technology for their own development.  Thwarting these efforts is a top priority for DCIS.  I applaud the agents and prosecutors who worked tirelessly to bring about this result.”

“Preventing the loss of critical U.S. information and technologies is one of the most important investigative priorities of the FBI,” said FBI Special Agent in Charge Mertz.  “Our adversaries routinely target sensitive research and development data and intellectual property from universities, government agencies, manufacturers, and defense contractors.  While the thefts associated with economic espionage and illegal technology transfers may not capture the same level of attention as a terrorist incident, the costs to the U.S. economy and our national security are substantial.  Violations of the Arms Export Control Act put our nation at risk and the FBI, along with all of our federal agency partners, are committed to ensuring that embargoed technologies do not fall into the wrong hands.  Those who violate these laws should expect to be held accountable.  An important part of the FBI’s strategy in this area involves the development of strategic partnerships.  In that regard, the FBI looks forward to future coordination with UTC and its subsidiaries to strengthen information sharing and counterintelligence awareness.”

“Protecting national security is our top priority,” said Assistant Secretary of Commerce for Export Enforcement Mills.  “Today’s action sends a clear signal that federal law enforcement agencies will work together diligently to prevent U.S. technology from falling into the wrong hands.”

Assistant Secretary Shapiro, of the State Department’s Bureau of Political and Military Affairs, said, “Today’s $75 million settlement with United Technologies Corporation sends a clear message:  willful violators of U.S. arms export control regulations will be pursued and punished.  The successful resolution of this case is the byproduct of the tireless work of our compliance officers and highlights the relentless commitment of the State Department to protect sensitive American technologies from being illegally transferred.”

Virginia Company to Pay $8.82 Million Criminal Penalty for FCPA Violations

By FCPA, International Business

Data Systems & Solutions LLC (DS&S), a company based in Reston, Va., that provides design, installation, maintenance and other services at nuclear and fossil fuel power plants, has agreed to pay an $8.82 million criminal penalty to resolve violations of the Foreign Corrupt Practices Act (FCPA).

The department filed a two-count criminal information in the Eastern District of Virginia charging DS&S with conspiring to violate, and violating, the FCPA’s anti-bribery provisions.

According to court documents, DS&S paid bribes to officials employed by the Ignalina Nuclear Power Plant, a state-owned nuclear power plant in Lithuania, to secure contracts to perform services for the plant.   To disguise the scheme, the bribes were funneled through several subcontractors located in the United States and abroad.   The subcontractors, in turn, made repeated payments to high-level officials at Ignalina via check or wire transfer.

The department also filed a deferred prosecution agreement with DS&S.   Under the terms of the agreement, the department will defer prosecution of DS&S for two years.   In addition to the monetary penalty, DS&S agreed to cooperate with the department, to report periodically to the department concerning DS&S’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.   If DS&S abides by the terms of the deferred prosecution agreement, the department will dismiss the criminal information when the agreement’s term expires.

The agreement acknowledges DS&S’s extraordinary cooperation, including conducting an extensive, thorough and swift internal investigation; providing to the department extensive information and evidence; and responding promptly and fully to the department’s requests.   In addition, DS&S has engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments; instituting a more rigorous compliance program; enhancing its due diligence protocol for third-party agents and subcontractors; strengthening its ethics policies; providing FCPA training for all agents and subcontractors; and establishing heightened review of most foreign transactions.