The U.S. Attorney’s Office for the District of Columbia announced Thursday that a subsidiary of the Dutch aerospace company Fokker Technologies Holding BV will forfeit $21 million for selling U.S.-made goods to Iran, Sudan and Burma in violation of trade sanctions.
As part of a five-year scheme, Fokker Services provided aircraft parts, technology and services to the countries, which have been sanctioned by the United States. The company admitted to more than 1,110 shipments of banned parts to the three countries.
The $21 million represents the value of the transactions that officials at the company detailed in a voluntary, self-disclosure statement made to U.S. prosecutors in 2010.
“For years, Fokker Services treated U.S. export laws as inconveniences to be ‘worked around’ through deceit and trickery,” U.S. Attorney Ronald C. Machen Jr. said in a statement. “Today’s prosecution sends a clear message that there will be consequences for those who seek to profit from violating and circumventing U.S. trade laws.”
According to court documents, Fokker Services relied on a number of “work-arounds” in U.S.-sanctioned countries that were “specifically designed to continue the company’s profit earnings in the sanctioned countries’ markets.”
The documents state, “On one occasion, Fokker Services provided a U.S. aerospace company with a work order that falsely represented that the aircraft part belonged to an airplane owned by a Portuguese airline when, in reality, the part actually belonged to an Iran Air aircraft. The U.S. aerospace company fixed the part and returned it to Fokker Services, who then shipped the part to Iran.”
The outcome of the case drew criticism from some former law enforcement officials, who believe Fokker and its executives should have faced criminal penalties and a much stiffer fine.
Eric A. Dubelier, a partner at Reed Smith who, as an assistant U.S. attorney, prosecuted several high-profile export cases, said the forfeiture fine did not send a strong message to those who want to do business with Iran.
“With this forfeiture business, what you’re saying is if you do business with Iran illegally and you earn revenue from it, and if we don’t catch you, you get to keep it,” he said. “And if we do catch you, all you need to do is pay the money back.”
Some U.S. officials believe that the Fokker subsidiary made its June 2010 disclosure only after it realized that U.S. investigators suspected the company of illegal dealings with sanctioned countries — something Fokker’s attorney denies. For the disclosure to have validity, prosecutors have to accept that it is true and correct.
In 2007, federal prosecutors unsealed a criminal complaint against a Dutch firm, Aviation Services International, and its owner, Robert Kraaipoel. The Dutch executive and his son began cooperating with U.S. authorities, providing information that led to a number of spinoff investigations and later a record $619 million fine against the ING Bank of the Netherlands.
Officials familiar with the Fokker case, who spoke on the condition of anonymity to discuss the probe, said U.S. investigators interviewed the Kraaipoels in 2007 and 2008 and learned about their business dealings with Fokker Services
In September 2009, the Justice Department announced that ASI and Kraaipoel and his son had pleaded guilty to conspiracy to export aircraft components and other goods to Iran.
Fokker executives “found religion after they thought they were going to get caught,” said a former U.S. official.
David D. DiBari, an attorney for Fokker, said the company was aware of the case against ASI and the Kraaipoels. But he said that did not cause the disclosure: Fokker “did the self-disclosure after [company officials] determined [the company] had some historical issues,” he said.
A law enforcement official close to the case said prosecutors considered charging several Fokker employees but decided against it.
“We debated whether we had the evidence, that we had somebody willfully violating the law,” the official said. “In the end, we determined we didn’t have enough to prosecute these individuals.”
As for the $21 million fine, the official said one of the determinations in reaching a deferred prosecution agreement involves looking at the relative financial health of a company.
The official said prosecutors could have hit Fokker with massive financial penalties based on the number of financial transactions, “but we would have severely hurt the health of the company.”
“I think it would have been a disproportionate penalty for their conduct,” the official said.