• Penalty imposed against Exxon related to contracts with Russian oil company Rosneft
  • Rosneft is not a prohibited party but its president is
  • OFAC alleges that “senior-most” Exxon management were involved
  • Exxon responds with suit against OFAC

On July 20, 2017, the U.S. Treasury Department Office of Foreign Assets Control (OFAC) announced that ExxonMobil (Exxon) must pay a $2 million penalty for violating U.S. sanctions on Russia.  On the same day, Exxon responded by suing OFAC.

Continue Reading U.S. Penalizes Exxon for Violating U.S. Sanctions on Russia, May Have Complicated How U.S. Companies do Business in Russia

I provided insight for an article published by The New York Times on the $2 million fine that the U.S. Treasury Department charged Exxon Mobil for violating Russian sanctions.  Exxon apparently entered into eight contracts with Rosneft, the Russian state oil company, signed by Rosneft CEO Igor Sechin, who is a prohibited party under U.S. sanctions on Russia.  Exxon was apparently under the impression that the Rosneft CEO could sign the contracts so long as the company was not doing business with him individually. The Treasury Department’s announcement of the penalty refers to the involvement in the matter of Exxon’s “senior-most” executives, which would seem to include Rex Tillerson, who was Exxon’s CEO at the time and is now the U.S. Secretary of State. Exxon has subsequently sued the Treasury Department related to this matter.

The full article, “Stakes for Exxon in Sanctions Case Go Far Beyond a $2 Million Fine,” was published by The New York Times on July 21, 2017, and is available online.

I commented on an article published in RealClearDefense, on the impact of the April executive order highlighting the Trump administration’s intention to renew the focus on sourcing domestic resources and employees for government contracts. The order requires increased enforcement of current “Buy American” laws, which date back to the Depression-era statutes Congress passed in 1933. The Office of Management and Budget (OMB) and the Commerce Department released follow-up guidance in late June requiring all federal agencies to prepare a compliance plan by September 15, 2017.

Continue Reading “Buy American” Rules Have Major Implications for Defense

A recent report from the Department of Defense (DoD) Inspector General (IG) identified a number of significant flaws regarding the Defense Logistics Agency’s (DLA) compliance with the Buy American Act (BAA) and the Berry Amendment.  The IG’s findings will likely result in a renewed focus on both BAA and Berry Amendment compliance.  As a result, contractors are likely to experience increased frustration as they seek to remain aligned with DLA policies.  The IG’s report also draws further attention to the previously discussed government-wide effort by President Trump to both enhance compliance with the BAA as presently drafted and potentially strengthen the BAA through legislative action in the future.

Continue Reading DoD IG Report Highlights Flaws in DLA Compliance with Buy American Act and Berry Amendment

The GAO recently denied Leidos Innovations Corporation’s protest of a determination that Leidos was ineligible to receive a $272 million award by the U.S. Army despite Leidos having both the highest-rated technical proposal and the lowest evaluated cost.  The GAO decision, which affirmed the agency’s determination that Leidos was non-responsible because one of Leidos’ subcontractors did not have the necessary base access, is an important reminder that prime contractors should thoroughly vet their subcontractors to ensure, to the extent possible, all necessary qualifications are satisfied for the associated contract.

Continue Reading Proposals are Only as Strong as their Weakest Link: GAO Affirms Non-responsiblity Determination Based on Subcontractor’s Lack of Base Access

  • Proposed legislation would extend sanctions on Russia and Iran
  • New restrictions aimed at Russian energy sector and cybercriminals
  • Legislation may pit Senate against House and the president

On June 19, 2017, the U.S. Senate overwhelmingly passed a bill mandating sanctions against Russia and Iran and a 30-day congressional review period should the president attempt to reduce those sanctions.

The bill remains in the House after congressional leaders challenged the fact that the revenue-raising bill did not originate in the House. The White House nonetheless is in the unenviable position of having to defend (or oppose) the implementation of sanctions against both Iran and Russia while attempting to conduct diplomacy with the Kremlin.  With a veto-proof majority in at least one chamber, the president’s options appear limited.

Continue Reading Senate Passes Russia and Iran Sanctions Legislation

On April 18, 2017, Donald Trump signed a Presidential Executive Order on Buy American and Hire American (EO). As we reported at the time, Section 3 of the EO directed the heads of all federal agencies to, among other things: (1) assess the monitoring of, enforcement of, implementation of, and compliance with Buy American laws within their agencies; (2) assess the use of BAA waivers within their agencies; and (3) develop and propose policies to ensure federal funds maximize the use of materials produced in the United States. It also ordered the Department of Commerce (DOC) and the Office of Management and Budget (OMB) to issues guidance to agencies about how to comply with their obligations.

Continue Reading U.S. Government Guidance on Buy American Executive Order Could Signal Impending Headaches for Government Contractors

I provided insights for an article in Compliance Reporter discussing the Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017 and the heightened compliance measures financial institutions may face if the bill is passed in the Senate. The bill would put forth an increased ability for regulators to crack down on questionable activity occurring beyond U.S. borders by reviewing records of coordinating institutions stateside.

Continue Reading Senate AML Bill Would Raise KYC Burdens

  • California company accused of sanctions violations challenges U.S. Treasury Department
  • Appeals court generally sides with government but remands because of arbitrary and capricious decision related to five alleged violations
  • Traditional interpretation of “inventory exception” is considered by Court

It is rare for companies to go to court to fight penalties imposed by the Office of Foreign Assets Control (OFAC) for violations of U.S. sanctions. It is even more rare for a court to make any sort of finding against the agency.  Yet that is exactly what happened when the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) recently considered OFAC’s imposition of penalties against Epsilon Electronics (Epsilon) for alleged violations of U.S. sanctions against Iran.

Continue Reading Rare Court Case Sheds Light on U.S. Sanctions Enforcement

  • American Honda Finance Corporation pays for alleged violations of U.S. sanctions on Cuba
  • Violation committed by American Honda’s subsidiary in Canada
  • Penalty underscores breadth of U.S. jurisdiction, importance of compliance reviews

On June 8, the Office of Foreign Assets Control (OFAC) announced a monetary penalty against American Honda Finance Corporation (American Honda) for alleged violations of the Cuban Assets Control Regulations (CACR), the primary regulations by which the United States imposes economic sanctions on Cuba.  A copy of the OFAC press release announcing the penalty is available here.

Continue Reading The Long Arm of U.S. Sanctions: Penalty Imposed Against Canadian Subsidiary of U.S. Subsidiary of Japanese Company