Trade Agreements

November 13, 2018

Naum Morgovsky and Irina Morgovsky were sentenced following their guilty pleas for conspiracy to illegally export components for the production of night-vision and thermal devices to Russia in violation of the Arms Export Control Act, and for laundering the proceeds of the scheme.  The defendants purchased products using their U.S. business, Hitek International, representing that the products would not be exported.  The couple then shipped the products to Moscow-based Infratech using a variety of front companies and shipping methods.  They were sentenced to 108 months and 18 months, respectively, were assessed a $1 million fine, and forfeited $223 thousand.  DOJ

September 6, 2018

The owner of New Jersey-based defense contracting firm, Bright Machinery Manufacturing Group Inc (BMM), has been charged with defrauding the Department of Defense and violating the Arms Export Control Act. From 2010 to 2015, Ferdi Gul—currently at large in Turkey—submitted bids and was awarded 346 contracts worth $7 million to manufacture military parts within the U.S., including torpedoes, firearms, and mine clearance systems. Instead, Gul had the parts made in Turkey, submitted false quality control paperwork, and sent the parts back to the U.S. to DoD customers. In subsequent testing by the DoD, some of the parts were shown to be essentially unusable. If found and convicted, Gul could be imprisoned for a maximum of 160 years and be ordered to pay up to $3.5 million. USAO NJ

August 8, 2018

The former CEO of Wellco Enterprises, Inc., Vincent Lee Ferguson, was sentenced to 41 months in federal prison for his role in a scheme to sell boots to the Department of the Defense and others as "Made in the U.S.A.," when the boots were, in fact, made in China.  The company instructed its Chinese manufacturing facility to include tear-away "Made in China" labels on the boot uppers, and then instructed employees at Wellco's New Jersey facility to remove the labels.  The company sold over $8 million in fraudulently-marked boots.  USAO E.D.Tenn.

June 8, 2018

New Jersey couple Babu Metgud and Shubhada Kalyani, who operated defense contractor Shubhada Industries, were ordered to pay more than $232,000 for overcharging the Defense Logistics Agency for, and failing to disclose the origin of, munition vehicle light assemblies it had acquired from third parties and marked up by 5,400%. The case was decided on the government’s summary judgement motion. USAO EDPA

October 27, 2017

JGB Enterprises, Inc. agreed to pay $150,460 to settle charges it violated the False Claims Act by billing the Army for repair kits for the Army’s tank recovery vehicle which included parts from unapproved sources.  DOJ (NDNY)

March 7, 2017

Chinese telecom equipment maker ZTE Corporation agreed to enter a guilty plea and pay a $430 million penalty for conspiring to violate the International Emergency Economic Powers Act by illegally shipping U.S.-origin items to Iran.  ZTE simultaneously reached settlements with the Department of Commerce’s Bureau of Industry and Security (BIS) and the Department of the Treasury’s Office of Foreign Assets Control for a total government payout of $892 million.  In addition, the BIS suspended an additional $300 million which ZTE will pay if it violates the settlement.  See DOJ Press Release.  The settlements relate to ZTE’s shipment of roughly $32 million worth of U.S.-origin items to Iran without obtaining the proper export licenses from the U.S. government.  The products were supplied in connection with two Iranian contracts for the installation of cellular and landline network infrastructure. Whistleblower Insider

June 14, 2016

Erdal Kuyumcu, the CEO of New York-based Global Metallurgy LLC, pleaded guilty to one count of conspiring to violate the International Emergency Economic Powers Act, in connection with the export of specialty metals from the United States to Iran.  Kuyumcu and others conspired to obtain over 1,000 pounds of the metallic powder from a U.S.-based supplier for export to Iran.  To hide the true destination of the goods from the U.S. supplier, Kuyumcu and a co-conspirator arranged for the metallic powder to be shipped first to Turkey and then to Iran.  DOJ

June 10, 2016

Amin al-Baroudi was sentenced to 32 months in prison for conspiring to export U.S.-origin goods from the United States to Syria in violation of sanctions imposed on Syria by the U.S. government.  According to court documents, Baroudi admitted that from at least December 2011 through March 2013 he and his co-conspirators exported U.S. tactical equipment to Syria for the purpose of supplying and arming Ahrar al-Sham and other insurgent groups in Syria whose stated goal is to overthrow the Assad government and install an Islamic state.  DOJ