Archives for March 2017

Spanish Court Agrees to Hear Case Against Syrian Officials for War Crimes

March 29, 2017 by Jacob Rasch Leave a Comment

On March 27, 2017, Judge Eloy Velasco of Spain’s national court (Audiencia Nacional) agreed to hear a case brought by a Spanish citizen against high-ranking officials in the Syrian government for alleged war crimes committed in the Syrian Civil War. The complaint was filed by a woman going by the name of Amal, who is a hairdresser in Madrid, on behalf of her brother Abdul, a 43-year old Syrian delivery van driver killed in Syria in 2013.

The complaint names nine high-ranking officials in the government of Bashar al-Assad, including Vice President Farouk al-Sharaa, a former foreign minister; Ali Mamlouk, head of the National Security Bureau; Gen. Jamil Hassan, head of air force intelligence, as well as the senior officers in the prison in which Abdul was interred. Abdul had gone missing in 2013, and his whereabouts were unknown until photographs of his beaten, tortured corpse surfaced in 2015 as part of a release of a cache of over 50,000 photographs of brutality in the Syrian Civil War taken by a military photographer code-named Caesar.

Judge Velasco ruled that, under international law, relatives of deceased victims of crimes are themselves victims, and Amal’s Spanish citizenship gave the Spanish court the jurisdiction to hear the case. Spain has garnered an international reputation as a jurisdiction in which it is possible to seek justice for war crimes and crimes against humanity committed elsewhere.

The case will, according to lawyers with the legal advocacy group representing Amal, Guernica 37 International Justice Chambers, “allow the courts to investigate the torture and execution of thousands of civilians” perpetrated by the Assad regime in military detention centers.

The lack of an international tribunal for prosecuting the crimes of the still-ongoing Syrian Civil War has forced victims to search for nations willing to claim jurisdiction in order to seek justice. In Germany, the German federal prosecutor has agreed to hear witness testimony in a case accusing six Syrian officials of war crimes and crimes against humanity. The case was filed by the European Center for Constitutional and Human Rights, a German human rights organization, as well as two Syrian lawyers.

SOURCE: Nick Cumming-Bruce, High-Ranking Syrian Officials Could Face Reckoning in Landmark Spain Case, N.Y. Times, Mar. 28, 2017, at A9.

Venezuelan Inspector General Alleges Fraud in Oil Rig Deal with Saudi Company

March 17, 2017 by Jacob Rasch 1 Comment

On March 6, 2017, the Venezuelan Inspector General’s office recommended that the Public Prosecutor’s office investigate possible corruption in a deal between the Venezuelan government and Saudi oil company PetroSaudi. The Inspector General’s office recommended that the Public Prosecutor charge five executives of the Venezuelan state-run oil company, Petroleos de Venezuela S.A. (PdVSA) of embezzling public funds in connection with the lease of an oil rig owned by PetroSaudi.

The rig, the PetroSaudi Saturn, was rented by PdVSA in connection with an offshore oil project entitled “Marsical Sucre”. However, this project has yet to produce any actual oil, despite the $1.3 billion price tag of the lease between PetroSaudi and PdVSA. The Inspector General has accused the PdVSA executives of paying a highly inflated lease rate to PetroCaribe, with the charge being that the amount was inflated so that the excess money could then be embezzled.

Such a project would be labeled a boondoggle even in normal economic times — though such waste and possible graft was commonplace at PdVSA during the oil boom of the 2000s — but the collapse of the oil market over the last several years has launched Venezuela’s economy into deep recession, putting heavy pressure on the Venezuelan government. Both the Public Prosecutor’s office and the Inspector General’s office launched separate investigations into the PetroSaudi Saturn deal earlier this month.

The rig is the second one purchased by PetroSaudi, a company founded in 2005 by Saudi royal family member Turki Bin Abdullah Al Saud, for doing business in Venezuela. The first such rig, the Neptune Discoverer, was financed by embattled Malaysian bank 1MDB; the U.S. Department of Justice alleges that $700 million in financing of that deal was diverted and not used for the purchase of the rig, though the DoJ has not yet accused PetroSaudi of wrongdoing. The Saturn rig was leased by PdVSA from PetroSaudi in September 2010 at $485,000 a day for seven years, without a bidding process. Venezuelan lawmaker Luis Parra argued that the rig should have cost about $230,000 a day, and added: “There’s no reason whatsoever to justify the difference between the average price and the exorbitant price PetroSaudi charged PdVSA” for the Saturn. Both the Discoverer and the Saturn have been poorly equipped for the jobs they were contracted for, and have completed fewer than 10 wells out of 70 planned.

A London court ordered PdVSA on March 13, 2017, to pay more than $130 million in unmade payments to PetroSaudi. PdVSA is suing PetroSaudi in the United Nations arbitration court in Paris for allegedly failing to meet the terms of the Saturn contract.

More information can be found in a Wall Street Journal article linked here: https://www.wsj.com/articles/petrosaudi-used-funds-from-1mdb-venture-to-finance-venezuela-project-1489570206

Federal Judge in Hawaii Issues TRO Halting Trump’s Revised Travel Ban

March 16, 2017 by Jacob Rasch Leave a Comment

On March 15, 2017, Hawaii U.S. District Court Judge Derrick K. Watson issued a nationwide temporary restraining order halting implementation of President Trump’s travel ban executive order, which had been set to go into effect the next day. The decision, made in the course of a suit filed against the ban by the state of Hawaii, was one of two decisions handed down by federal judges on the day to block the executive order from taking effect. The revised executive order was issued in an attempt to put Trump’s initial travel ban executive order on more solid legal footing after that order had been injoined by the Ninth Circuit Court of Appeals.

In the decision, Watson draws attention to the President’s statements as a candidate calling for a ban on Muslims entering the country, as well as statements made by advisors to the President, and determines that those statements suggest that the order’s true intent is religious discrimination. Judge Watson states:

The Government appropriately cautions that, in determining purpose, courts should not look into the ‘veiled psyche’ and ‘secret motives’ of government decision makers and may not undertake a ‘judicial psychoanalysis of a drafter’s heart of hearts.’ The Government need not fear. The remarkable facts at issue here require no such impermissible inquiry. For instance, there is nothing ‘veiled’ about this press release: ‘Donald J. Trump is calling for a total and complete shutdown of Muslims entering the United States.’

While Justice Department lawyers argued that the purpose of the order related to national security and its intent was secular in nature, Judge Watson concluded that, “These plainly-worded statements, made in the months leading up to and contemporaneous with the signing of the Executive Order, and, in many cases, made by the Executive himself, betray the Executive Order’s stated secular purpose,” Watson wrote.

The government also argued that the limited nature of the order, applying only to visa applicants from six majority-Muslim countries, demonstrated that its intent was non-discriminatory. Judge Watson, however, disagreed, stating: “The illogic of the Government’s contentions is palpable. The notion that one can demonstrate animus toward any group of people only by targeting all of them at once is fundamentally flawed.”

In addition, Judge Watson points to interviews with Trump advisors such as one conducted with Senior Advisor Stephen Miller in which Miller states that, “Fundamentally, [despite “technical” revisions meant to address the Ninth Circuit’s concerns in Washington,] you’re still going to have the same basic policy outcome [as the first].”

In addition to Judge Watson’s decision, a federal judge in Maryland injoined the order more narrowly, choosing to only halt the portion of the order that suspended the issuance of visas to citizens of the six listed Muslim countries.

President Trump, speaking at a rally later that night, decried the decision as political, and stated that the replacement executive order was a “watered-down” version of the first, ill-equipped to address the danger present. “Let me tell you something, I think we ought to go back to the first one and go all the way,” Trump said. “The danger is clear, the law is clear, the need for my executive order is clear.”

Judge Watson’s decision can be read here: https://assets.documentcloud.org/documents/3518059/Read-the-federal-judge-s-ruling-on-Trump-s-new.pdf.

Justice Department Announces Indictments of Russian Hackers in Yahoo Hacks

March 15, 2017 by Jacob Rasch Leave a Comment

On March 15, 2017, the U.S. Department of Justice announced that it had indicted four Russian nationals, including two members of the FSB, the Russian spy agency, in connection with the hacking of the servers of American web giant Yahoo in 2014. The charges include hacking, wire fraud, trade secret theft and economic espionage, and are part of the largest hacking case ever brought by the United States.

The indicted FSB officers are Dmitry Dokuchaev and Igor Sushchin, his superior, both of whom worked for the arm of the FSB that investigates cyber crimes. Dokuchaev, who had reportedly agreed to work for the FSB as part of an agreement to avoid prosecution for fraud, was arrested and charged with treason in Moscow in January amid allegations that he had provided information to the CIA. The two non-government-affiliated hackers indicted in the case are Alexsey Belan, a notorious cyber-criminal who has been charged by the U.S. twice before in relation to separate incidents, and Karim Baratov, a Kazakh-born Canadian citizen arrested in Canada on Tuesday.

The 2014 hack, which at the time was considered the largest in Yahoo history, involved 500 million Yahoo user accounts, giving the hackers access to Yahoo email accounts as well as access to other Yahoo web services such as photo-sharing site Flickr and blogging service Tumblr. The FSB likely orchestrated the hack in order to gain information about Yahoo users, which could include high-value targets including U.S. government officials.

The U.S. does not have an extradition treaty with Russia, who would regardless be unlikely to cooperate with an investigation that implicates their own government. Thus, Dokuchaev, Sushchin, and Baratov, all in Russia as of now, are unlikely to be extradited to the U.S. barring their travel to a jurisdiction more willing to cooperate with a U.S. extradition request. However, indictments for state-sponsored criminal action can be used as a tool to curb said state-sponsored criminal action. This is not the first time the U.S. has responded to state-sponsored hacking with criminal indictments; in 2014, the U.S. indicted 5 members of the Chinese People’s Liberation Army for trying to steal trade secrets from U.S. private enterprise.

While these indictments are unrelated to the allegations that state-sponsored Russian hackers interfered in the U.S. election, they may provide a road map for a U.S. response to such allegations.

This press release announcing the indictments can be found here: https://www.justice.gov/opa/pr/us-charges-russian-fsb-officers-and-their-criminal-conspirators-hacking-yahoo-and-millions.

Chinese Telecommunications Company ZTE Reaches $100 Million Settlement With OFAC

March 7, 2017 by Jacob Rasch Leave a Comment

On March 7, 2017, the U.S. Department of Treasury announced that the Office of Foreign Assets Control (OFAC) had reached a settlement with Zhongxing Telecommunications Equipment (ZTE) Corporation of $100,871,266. The settlement, which is a part of a total resolution between ZTE and the U.S. government of $1.192 billion, relates to the Chinese telecommunications giant’s multi-year effort to circumvent and subsequently conceal their circumvention of U.S. sanctions against Iran. The settlement is OFAC’s largest to date with a non-financial entity.

In the press release announcing the settlement, the Treasury Department described ZTE’s action as a “multi-year and systemic practice of utilizing third-party companies to surreptitiously supply Iran with a substantial volume of U.S.-origin goods, including controlled goods appearing on the Commerce Control List.” The Treasury Department states in the release that ZTE utilized third parties to actively conceal their involvement in selling goods to Iran, and that top-level executives not only approved this plan, but had full knowledge of the legal risks of doing so before entering into contracts that were contingent on their selling goods to Iran.

Additionally, when ZTE’s business with Iran became public knowledge in 2012, the company assured the United States that it intended to cease this activity. However, in 2013, the company decided to resume this clandestine program, and “under the direction of its leadership, ZTE deleted evidence and provided the U.S. government with altered information to hide the fact that it had resumed its unlawful business with Iran.”

If ZTE’s criminal plea is approved in federal court, the resolution would also include the imposition of $430,488,798 in combined criminal fines and forfeitures on ZTE as part of a plea agreement with the U.S. Department of Justice, and a $661,000,000 penalty – of which $300,000,000 is suspended during a seven-year probationary period – to the U.S. Department of Commerce.

In addition to the financial penalty, the settlement dictates that ZTE maintain policies and procedures that minimize the possibility that they subsequently engage in the circumvention of U.S. export control law or economic sanctions. The settlement requires oversight from an independent auditor for a period of three years.

The press release can be found here: https://www.treasury.gov/press-center/press-releases/Pages/sm0023.aspx.

The text of the settlement can be found here: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20170307_zte_settlement.pdf.

Trump Issues Executive Order Revising Travel Ban

March 7, 2017 by Jacob Rasch Leave a Comment

On March 6, 2017, President Donald Trump released an executive order in which he rescinded and modified the controversial Executive Order 13769, his travel ban on immigrants from seven Muslim-majority countries. This new executive order is considerably more limited than the previous iteration signed on January 27. Most importantly, the order now only applies to people seeking new visas; visas that had already been approved as of the signing of Executive Order 13769, and the permanent residency status of those who hold passports from the banned countries, will be considered valid. In the implementation of Executive Order 13769, hundreds of people with valid visas and permanent residency status were barred from re-entering the country and either detained at airports or returned to their country of origin, leading to widespread protests at airports around the country. This aspect of the order underwent particular scrutiny by the Ninth Circuit Court of Appeals when that court decided to uphold a temporary restraining order from a district court barring implementation of the order until it had been properly adjudicated.

While the 120-day ban on refugees entering the United States still remains a part of the order, as does the 90-day ban on visa issuance to the listed countries, the new order removes Iraq from the blacklisted countries, leaving Syria, Yemen, Iran, Libya, Somalia, and Sudan. The inclusion of Iraq, whose government is a U.S. ally in the fight against the Islamic State, drew considerable criticism, and was used as a basis for the claim that the travel ban was intended to target Muslim immigrants rather than being driven by the political situation in the listed countries. Additionally, dual nationals whose citizenship includes one of the countries impacted by the ban will no longer be barred from seeking U.S. visas.

It remains to be seen whether the modifications to the ban will allow it to pass muster with the courts. While the new order resolves many of the individual concerns the Ninth Circuit had with the previous order, including a clarification of the status of permanent residents and current visa holders (whom the court decided had clear constitutional due process rights on which the previous order impinged), it does not resolve the fundamental question regarding whether this order, immutably by its character, amounts to a Muslim ban.

The full text of the revised order can be found here: https://www.whitehouse.gov/the-press-office/2017/03/06/executive-order-protecting-nation-foreign-terrorist-entry-united-states.

U.S. Federal Agents Raid Caterpillar Headquarters to Investigate Offshore Tax Practices

March 3, 2017 by Jacob Rasch Leave a Comment

On March 2, 2017, agents representing the U.S. attorney’s office for the Central District of Illinois, the Internal Revenue Service, and two other agencies raided three Peoria, Illinois buildings owned by construction equipment manufacturing company Caterpillar Inc., in relation to Caterpillar’s offshore tax practices. These tax practices involve the use of a subsidiary corporation based in Switzerland, known as CSARL.

In a statement, Caterpillar spokeswoman Corrie Heck Scott confirmed that “law enforcement is present in various Peoria-area Caterpillar facilities executing a search warrant.” She also stated that, “Caterpillar is cooperating” with law enforcement.

Caterpillar CEO Jim Umpleby also released a statement in which he confirmed the raids and apologized to his employees. “This morning, a number of our colleagues in the Peoria area were surprised when federal authorities arrived to execute a search warrant,” the statement read. “I’m sorry that we had to experience this today,”

The tax strategy, designed by the accounting firm then known as PriceWatterhouseCoopers, involved the transfer of the rights to Caterpillar’s profits to CSARL, a wholly-owned subsidiary. Rather than paying the 29 percent effective tax rate it would owe on the profits had they remained in the United States, Caterpillar only paid a rate of 4 to 6 percent that it had negotiated directly with the Swiss government.

These tax practices were the subject of a formal Congressional inquiry in 2014, in which it was concluded that the scheme, in which Caterpillar had transferred over $8 billion in profits to CSARL, allowed Caterpillar to slash its U.S. tax bill by $2.4 billion over the course of 13 years; however, the inquiry did not conclude that Caterpillar’s practices had been illegal. In 2015, Caterpillar was served with a grand jury subpoena for documents related to the movement of cash between its U.S. business and its Swiss subsidiary.

Caterpillar, whose stock prices fell 4.3 percent on the day of the raid, has been the subject of recent praise from President Trump. While Trump railed against corporate expatriation of profits throughout his campaign, it remains to be seen how his administration intends to deal with the issue.

Malaysia Charges Two In Murder of Kim Jong-Nam

March 1, 2017 by Jacob Rasch 1 Comment

Malaysian authorities announced March 1, 2017, that they had brought charges against the two women who had been arrested on February 13 for the murder of Kim Jong-Nam, half brother of North Korean leader Kim Jong-Un. Siti Aisyah, 25, of Indonesia, and Doan Thi Huong, 28, of Vietnam, are accused of using a water gun to poison Kim with a deadly nerve agent, called Agent VX.

Simultaneously, the North Korean government has sent diplomatic delegations to Beijing and Kuala Lumpur in an effort to repair the damage caused by the assassination. The North Korean diplomats sent to Kuala Lumpur include the former deputy ambassador to the United Nations, Ri Dong-il; a key objective of the delegation is securing the release of Mr. Kim’s body to North Korea. The delegation to Beijing includes a high-ranking official in Vice Foreign Minister Ri Gil-song — earlier this week, the North Korean government condemned the Chinese government’s decision to adhere to the sanctions regime imposed on the purchase of North Korean coal by the UN.

In addition to the arrests of Aisyah and Huong, Malaysian authorities have also arrested Ri Jong-chol, a North Korean national, and are said to be seeking seven other North Koreans for their involvement in the assassination. There has been widespread speculation, and accusations from the South Korean government, that the killing of Kim Jong-Nam was orchestrated by the North Korean government at the behest of Kim Jong-Un in an effort to consolidate power. There is no word on whether the Malaysian government intends to levy charges on Ri or the seven others suspected of involvement.

Takata Corporation To Pay $1 Billion After Pleading Guilty in Airbag Scheme

March 1, 2017 by Jacob Rasch Leave a Comment

On February 27, 2017, the Department of Justice announced that the Takata Corporation, a major global supplier of automotive safety equipment, had pleaded guilty to one count of wire fraud and agreed to pay $1 billion in relation to its marketing and selling of defective airbags. Takata, a multinational corporation based in Japan but with production facilities on four continents, admitted to defrauding customers and automakers by manipulating airbag inflator test data to make its airbags seem more safe than they in fact were.

“For over a decade, Takata lied to its customers about the safety and reliability of its ammonium nitrate-based airbag inflators,” said Acting Assistant Attorney General Blanco. “Takata abused the trust of both its customers and the public by allowing airbag inflators to be put in vehicles knowing that the inflators did not meet the required specifications. Today’s sentence shows that the department will work tirelessly to hold responsible those who engage in this type of criminal conduct.”

The plea agreement is structured thusly: $850 million will be paid by Takata to a fund for airbag replacement and recall costs incurred by auto manufacturers who had been given defective airbags. $125 million will be given to those who had been physically injured by Takata’s defective airbags (and have not already reached a separate settlement with the company). In addition, Takata will pay a $25 million fine, and has been given three years probation.

At least 16 deaths have been attributed to the defective airbags, which have led to the recall of a record 42 million vehicles. The press release announcing the settlement can be found here: https://www.justice.gov/opa/pr/takata-corporation-pleads-guilty-sentenced-pay-1-billion-criminal-penalties-airbag-scheme.

Ex-CIA Agent Convicted in Italy Has Sentence Commuted, Will Not Be Extradited

March 1, 2017 by Jacob Rasch Leave a Comment

Ex-CIA officer Sabrina De Sousa, convicted in an Italian court in absentia for her role in the extraordinary rendition of Egyptian cleric Osama Hassan Mustafa Nasr (also known as Abu Omar), had her sentence partially commuted by order of Italian President Sergio Mattarella. After announcing that De Souza’s sentence had been commuted by a year, from four years to three, the Italian government announced on March 1, 2017 that they would no longer seek extradition of De Souza, thereby allowing for her release.

De Souza, who was born in India holds both U.S. and Portuguese citizenship, was arrested and detained by Portuguese authorities as she was attempting to return to India to visit her ailing mother. Though she denied involvement in the plot, De Souza was one of 23 Americans convicted in absentia for the kidnapping of Abu Omar on a street in Milan on February 17, 2003. De Souza, whose sentence had initially been set for seven years before being reduced to four, had been in a battle over her extradition to Italy for several years.

In announcing the commutation, President Mattarella stated he had based his decision on “the attitude of the sentenced party, the fact that the United States has discontinued the practice of extraordinary renditions and the need to weigh up the penalty with that of others convicted of the same offenses.” Abu Omar, in a telephone interview with Adnkronos Internation, stated he was “satisfied” with President Mattarella’s decision, and that “De Sousa has suffered enough.”

The act of imprisoning De Sousa for an act committed while acting in an official capacity as an agent of the United States would likely have strained the relationship between the U.S. and Italy in a time of great uncertainty regarding the strength of the U.S.’ commitment to its European allies.