Pinnacle Aircraft Parts, Inc., based in Miami, Florida, just paid $225,000 to the U.S. Office of Foreign Assets Control ("OFAC") regarding OFAC’s investigation of a jet engine that may have been shipped to Iran. This case is unique in that OFAC did not assess the fine because the jet engine was actually shipped to Iran, but because Pinnacle Aircraft Parts failed to properly comply with it subpoena to provide all records about that shipment.
OFAC certainly has the authority to issue an administrative subpoena, and to demand documents for any alleged sale of a jet engine to Iran. See 31 CFR Section 501.602, which states:
Every person is required to furnish under oath, in the form of reports or otherwise, from time to time and at any time as may be required by the Director, Office of Foreign Assets Control, complete information relative to any transaction,…
Pinnacle received such a subpoena demanding "all correspondence and other documents" related to the payment and transportation of the jet engine. Through its outside legal counsel, Pinnacle provided 260 pages of responsive documents, however, according to the OFAC’s Enforcement Information notice for November 16, 2010.
[Pinnacle] failed to submit a copy of a post-sale e-mail – which Pinnacle had provided to its [legal] counsel – indicating that the aircraft engine was likely destined for Iran…
OFAC determined that the failure to produce the responsive document was "egregious", resulting in almost the maximum penalty of $250,000. OFAC concluded that Pinnacle "knowingly withheld" the relevant documentation. Pinnacle’s unfortunate reliance on the incorrect advice of its outside legal counsel, usually a huge mitigating factor, only resulted in a 10% discount.
I have only one question for the lawyer or law firm that advised its client not to disclosure the e-mail to OFAC: Did you attend the International Law Section of the Florida Bar’s September 24, 2010 seminar on OFAC at which I discussed this very topic? See prior Blog post dated August 30, 2010 entitled "Forbidden Places for Tourism and Trade".