Manoj Bhayana, Respondent; Final Decision and Order, 18716-18723 [2011-7847]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security

[Federal Register Volume 76, Number 65 (Tuesday, April 5, 2011)]
[Notices]
[Pages 18716-18723]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7847]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[10-BIS-0001]


Manoj Bhayana, Respondent; Final Decision and Order

    This matter is before me upon a Recommended Decision and Order 
(``RDO'') of an Administrative Law Judge (``ALJ''), as further 
described below.\1\
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    \1\ I received the certified record from the ALJ, including the 
original copy of the RDO, for my review on March 1, 2011. The RDO is 
dated February 28, 2011, and incorporates the ALJ's October 12, 2010 
Order Partially Granting BIS's Motion for Summary Decision. As 
discussed further infra, BIS moved for summary decision as to Charge 
Two of the Charging Letter in July 2010. The Order Partially 
Granting BIS's Motion for Summary Decision granted BIS summary 
decision on Charge Two, but reserved ruling as to the recommended 
sanction because Charge One was still pending. In order to expedite 
resolution of this matter, BIS withdrew Charge One in November 2010. 
The Order Partially Granting BIS's Motion for Summary Decision is 
part of the RDO, but where that Order is cited, for ease of 
reference, the citations are made directly to the pertinent pages of 
that Order, rather than citing it as an attachment to the RDO.
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I. Background

    As discussed in the RDO, the allegations in this case stem from an 
investigation by the Bureau of Industry and Security (``BIS'') of a 
sale and (unlicensed) export of graphite rods and pipes from the United 
States to Pakistan, via the United Arab Emirates (``UAE''), in which 
Respondent Manoj Bhayana directly participated. See RDO, at 2, 4. 
During the investigation, BIS sought to determine, inter alia, the type 
of graphite that had been exported by SparesGlobal, Inc. 
(``SparesGlobal''), of Pittsburgh, Pennsylvania, and the ultimate end-
user of the items. Respondent was SparesGlobal's primary sales 
representative for the transaction, working directly with the U.S. 
supplier (Ameri-Source, Inc.) and freight forwarder (K.C. International 
Transport, Inc.), and with SparesGlobal's customer (Taif Trading, LLC), 
a trading company located in Dubai, UAE. See RDO, at 4-5; Order 
Partially Granting BIS's Motion for Summary Decision, at 3, 5.\2\
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    \2\ See note 1, supra.
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    The transaction documentation included a mill test certificate 
certifying that the graphite being exported met the specifications for 
a type of graphite (CS grade extruded graphite) produced by UCAR Carbon 
Company, doing business as GrafTech International Ltd. (``UCAR/
GrafTech''). As he later admitted, Respondent Bhayana knew that the 
exported graphite items were not UCAR graphite and had not been 
produced by UCAR/Graftech. He also knew that the mill test certificate, 
which was on UCAR/GrafTech letterhead, had been created at Ameri-
Source, Inc. (``Ameri-Source''), not by UCAR/GrafTech. Respondent sent 
the mill test certificate to the freight forwarder to facilitate the 
export, which occurred in December 2003. RDO, at 4-5.
    During the course of BIS's investigation of this matter, in a 
September 7, 2004 e-mail to a BIS Special Agent, Respondent denied 
having any knowledge of the origin of the mill test certificate. 
Following months of additional investigation, BIS executed a search 
warrant at SparesGlobal in November 2004. Bhayana was present and was 
interviewed by BIS Special Agents. During that interview, Respondent 
provided the mill test certificate in response to the Special Agents' 
questions about the exported items, knowing, but not informing the 
agents, that the certificate contained false and misleading 
information. See RDO, at 5-6.
    In a Charging Letter issued on January 15, 2010, BIS alleged that 
Respondent Bhayana had committed two violations of the Export 
Administration Regulations (``EAR'' or ``Regulations'').\3\ Charge One 
alleged that Respondent had violated Section 764.2(b) of the 
Regulations when he caused, aided or abetted the submission of a false 
and misleading SED. In Charge Two, the remaining charge at issue 
here,\4\ BIS alleged that respondent violated Section 764.2(g) by 
making false and misleading statements to BIS Special Agents during the 
course of a BIS investigation.
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    \3\ The Regulations, which are currently codified at 15 CFR 
parts 730-774 (2010), were issued pursuant to the Export 
Administration Act of 1979, as amended (50 U.S.C. app. 2401-2420 
(2000)) (the ``Act''). Since August 21, 2001, the Act has been in 
lapse and the President, through Executive Order 13,222 of August 
17, 2001 (3 CFR, 2001 Comp. 783 (2002)), which has been extended by 
successive Presidential Notices, the most recent being that of 
August 12, 2010 (75 FR 50,681 (Aug. 16, 2010)), has continued the 
Regulations in effect under the International Emergency Economic 
Powers Act (50 U.S.C. 1701, et seq.). The violation remaining at 
issue in this case occurred in 2004. The Regulations governing the 
violation at issue are found in the 2004 version of the Code of 
Federal Regulations (15 CFR parts 730-774 (2004)). The 2010 
Regulations govern the procedural aspects of this case.
    \4\ As referenced supra at note 1 and as discussed further 
infra, BIS withdrew Charge One after BIS had moved for and been 
granted summary decision as to Charge Two.
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    Charge Two alleged, in full, as follows:

Charge 2: 15 CFR 764.2(g): False Statement Made to BIS During an 
Investigation

    Bhayana made false and misleading representations and statements 
in the course of a BIS investigation. On or about September 8, 2004, 
a BIS Special Agent asked about the mill certificate relating to the 
Shipper's Export Declaration (SED) filed on December 2, 2003, and 
referenced in Charge 1 above. In an e-mailed response to the Special 
Agent, Bhayana stated: ``The test certificate was provided by [our 
supplier] to us. We do not have any knowledge about its origin.'' On 
or about November 3, 2004, Bhayana was again asked about the mill 
certificate during an in-person interview with BIS Special Agents, 
and again provided copies of this forged mill certificate to the 
Special Agents. During this interview, Bhayana also gave the BIS 
Special Agents a signed written statement referencing the mill test 
certificate specifications or ``specs,'' in which, he indicated, 
``These specs which are being submitted here [to the Special Agents] 
are the material specs which were shipped under this shipment.'' In 
fact, Bhayana had worked with others to create the forged mill 
certificate falsifying the type of graphite rod being exported and 
knew that the certificate contained false information when he 
provided it to the Special Agents. When confronted later in the same 
interview by the Special Agents with evidence that the certificate 
had been forged, Bhayana signed a second written statement. In this 
second signed statement, Bhayana admitted that his earlier 
statements to the Special Agents were false. Specifically, Bhayana 
admitted that SparesGlobal's supplier, Ameri-Source, Inc., which was 
not the actual manufacturer or distributor of GrafTech's UCAR 
graphite, ``suppl[ied] * * * the certificate on [GrafTech] UCAR 
letterhead showing the [false] specs and mill test reports,'' and 
then ``prepared some certificate and faxed it to us for the 
approval.'' In so doing, Bhayana committed one violation of Section 
764.2(g) of the Regulations.

[[Page 18717]]

    Charging Letter, at 2.\5\
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    \5\ As a result of the investigation, criminal charges were 
brought against SparesGlobal, which in October 2007, pled guilty in 
the United States District Court for the Western District of 
Pennsylvania to conspiracy under 18 U.S.C. 371. BIS filed 
administrative charges against Ameri-Source (Case No. 08-BIS-15) and 
Ameri-Source director Thomas Diener (Case No. 08-BIS-16) in December 
2008. Ameri-Source and Mr. Diener settled those charges shortly 
after they were filed, with the final settlement orders issuing on 
February 6, 2009.

    Respondent has been represented by counsel throughout this 
litigation. In response to requests for admission served by BIS, 
Respondent made a series of admissions, including that he knew 
throughout the investigation that the exported graphite rods and pipes 
were not UCAR graphite and had not been produced by UCAR/GrafTech; that 
the mill test certificate had been created at Ameri-Source, not by 
UCAR/GrafTech or any UCAR/GrafTech affiliate; and that when he was 
interviewed by BIS Special Agents in November 2004, he knew, but did 
not inform the agents, that the mill test certificate he handed to them 
contained false and misleading information. See Order Partially 
Granting BIS's Motion for Summary Decision, at 6-7, 9-10.
    BIS moved for summary decision as to Charge Two on July 30, 2010, 
and as part of that motion requested that the ALJ recommend that 
Respondent's export privileges be denied for a period of at least two 
years. As set forth in his October 12, 2010 Order Partially Granting 
BIS's Motion for Summary Decision, the ALJ determined that Charge Two 
had been proven by BIS and granted the motion for summary decision as 
to that violation of Section 764.2(g), but reserved ruling on a 
recommended sanction because Charge One was still pending.
    On November 12, 2010, BIS withdrew Charge One of the Charging 
Letter in order to expedite resolution of this case. A briefing 
schedule was established on the issue of sanctions, and on November 23, 
2010, Respondent filed his Memorandum Regarding Possible Sanctions, 
contending at bottom that no sanction should be imposed against him. In 
his sanctions memorandum, Respondent asserted, inter alia, that he had 
started an ``export business'' after he had left SparesGlobal in 
November 2008, but that he could not afford to implement an effective 
export compliance program. See RDO, at 13-14 (discussing and citing 
Respondent's Memorandum Regarding Possible Sanctions, filed November 
23, 2010, at 11). In response, on December 6, 2010, BIS renewed its 
request for a denial order of at least two years in order, in sum, to 
sanction Respondent's violation of Section 764.2(g) appropriately and 
to prevent or deter future violations.
    On February 28, 2011, based on the entire record (including the 
findings and conclusions set forth in the Order Partially Granting 
BIS's Motion for Summary Decision), the ALJ issued the RDO to the 
parties, in which he recommended that a denial period of two years be 
assessed against Respondent Bhayana. The RDO contains a detailed review 
of the facts and applicable law relating to both merits and sanctions 
issues in this case.
    Based on the record, the ALJ determined, inter alia, that 
Respondent knowingly and willfully made false and misleading statements 
during the course of a BIS investigation and that those statements 
impeded and hampered the investigation. See RDO, at 8 (``Respondent 
willfully committed a violation of the EAR'' and ``knowingly tried to 
hide the fact that [the] mill test certificate contained false and 
misleading information when questioned on it by BIS investigators.''); 
id., at 9 (Respondent ``imped[ed] an export control investigation''); 
id., at 10 (``Respondent's violation * * * was an intentional decision 
to provide misleading and false information rather than comply with the 
requirements of the law and regulations''); id., at 11 (``Respondent's 
actions hampered BIS's investigation.''); and id., at 14 (a two-year 
denial order is an appropriate sanction in this case and ``necessary 
for deterring persons from providing false and misleading information 
that frustrates enforcing compliance with the regulations.'').
    The ALJ determined that Respondent had demonstrated a serious 
disregard for his export compliance responsibilities when he made the 
false and misleading statements at issue. See RDO, at 9, 13-14. The ALJ 
also determined that the record shows that Respondent admittedly does 
not have the resources to implement an effective compliance program in 
connection with the ``export business'' that Respondent claims to have 
started after he left SparesGlobal in late 2008.\6\ Id. at 13-14 
(quoting and citing Respondent's Memorandum Regarding Possible 
Sanctions, at 11). The ALJ found, furthermore, that compliance with the 
export control laws still is not a priority for Respondent and that 
Respondent's continued efforts to excuse his misconduct ``demonstrate[] 
Respondent's attitude towards ensuring compliance with the regulations 
still takes a backseat to personal factors.'' Id. (emphasis added).
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    \6\ As noted supra, BIS filing the Charging Letter in January 
2010, and the record also indicates that BIS issued a Proposed 
Charging Letter to Respondent in January 2009.
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    The ALJ rejected Respondent's repeated attempts to attribute his 
false statements to an asserted lack of export experience, training, or 
knowledge of the Regulations. The ALJ ruled that even accepting 
Respondent's assertions as true, his unlawful conduct did not result 
from such factors. ``Respondent's violation was not the result of a 
misinterpretation [of the Regulations], but instead was an intentional 
decision to provide misleading and false information rather than comply 
with the requirements of the law and regulations.'' RDO, at 10; see 
also id., at 12 (``Respondent's actions were not an unintentional or 
unknowing violation of the [R]egulations.''); see generally id., at 9-
13.
    The ALJ also rejected Respondent's efforts to attribute 
responsibility for his statements to his ``low level'' position at 
SparesGlobal or justify his misconduct based on his asserted fear that 
he would lose his job or work visa, concluding as follows:

    Even if this [assertion] is accepted as accurate, it does not 
provide a defense to making false statements to Government officials 
during a formal investigation. * * * When a person provides 
information or statements during an investigation, the law allows 
persons to either provide truthful statements or make an assertion 
of privilege. This applies equally to all individuals, even 
``lower'' level employees, during the course of investigations so 
[that] violations at all levels can be effectively investigated. In 
summary, Respondent chose to mislead the investigators and appease 
his bosses, instead of being truthful with BIS and complying with 
the regulations. Such a decision does not show a good-faith 
misinterpretation of the rules and is not a valid basis for 
mitigation of sanctions.
    RDO, at 12-13.

II. Review Under Section 766.22

    The RDO, together with the entire record in this case, has been 
referred to me for final action under Section 766.22 of the 
Regulations. I find that the record supports the ALJ's findings of fact 
and conclusions of law that Respondent violated Section 764.2(g) by 
making false and misleading statements and representations to BIS 
during the course of an investigation. In addition to other evidence 
submitted by BIS, Respondent effectively admitted the violation during 
discovery in response to BIS's requests for admission. Moreover, 
Respondent has not asserted in his response to the RDO that the ALJ 
committed any error as to the merits or that any of the ALJ's findings 
or conclusions on the merits is erroneous.

[[Page 18718]]

    I also find that the two-year denial order recommended by the ALJ 
upon his review of the entire record is appropriate, given the nature 
of the violations, the facts of this case, and the importance of 
deterring Respondent and others from seeking, through the provision of 
false and misleading information to BIS Special Agents, to thwart or 
impede BIS's enforcement of the Regulations.\7\ Those who make false or 
misleading statements to BIS Special Agents during the course of an 
investigation strike at the heart of BIS's efforts to protect and 
promote the national security. A denial order also is appropriate here 
given the ALJ's findings, which are fully supported by the record, that 
Respondent does not possess the resources or the necessary commitment 
to meet his compliance obligations under the export control laws.\8\
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    \7\ See, e.g., Guidance on Charging and Penalty Determinations 
in Settlement of Administrative Enforcement Cases (``Penalty 
Guidance''), Supplement No. 1 to part 766 of the Regulations, at ] 
III.A (Degree of Willfulness) (in cases involving a knowing or 
willful violation, a denial of export privileges is appropriate, 
and/or a greater monetary penalty than BIS typically would seek); 
see also id. (even in cases involving simple negligence, a denial 
order may be appropriate where, for example, the violation involves 
essential interests protected by the Regulations, the violation is 
of such a nature that a monetary penalty is an insufficient 
sanction, or the nature of the violation indicates that a denial 
order is needed to prevent future violations).
    Although focused on the settlement context, the Penalty Guidance 
can be instructive where considered and applied consistent with the 
factual context of a litigated case.
    \8\ See, e.g., Penalty Guidance, Supp. No. 1 to part 766, at ] 
IV.B (``An otherwise appropriate denial or exclusion order will be 
suspended on the basis of adverse economic consequences only if it 
is found that future export control violations are unlikely and if 
there are adequate measures (usually a substantial civil penalty) to 
achieve the necessary deterrent effect.'') (parenthetical in 
original).
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    Accordingly, based on my review of the entire record, I affirm the 
findings of fact and conclusions of law in the RDO without 
modification, but with one clarification. The RDO states at one point 
that ``[w]hile it may not fit clearly within Mitigation Factor 4 [of 
the EAR's Penalty Guidance], the fact that sensitive materials were not 
involved is given some weight in mitigation'' and that ``since 
Respondent's representation seems to concern a non-sensitive item, that 
is a factor that can be considered toward mitigation.'' Id. at 11. I 
note first that the violation at issue is for making false statements 
during an investigation, not for making or causing an unlicensed 
export. Moreover, the false statements made by Respondent went directly 
to the type and specifications of the items that had been exported, 
information that was crucial for BIS to assess whether the export at 
issue required a license and the extent to which it could harm the 
national security. Although the mitigation credit discussion quoted 
above did not affect the outcome of this case, I want to clarify that a 
respondent who makes false statements to BIS during an investigation 
cannot properly claim, and should not be accorded, mitigation credit 
relating to the subject of those false statements.
    In short, a respondent should not be allowed to reap any benefit 
from such false or misleading statements. With this clarification, I 
affirm the RDO.\9\
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    \9\ The RDO inadvertently included (as Attachment B) an outdated 
version of Section 766.22(e) of the Regulations, regarding a 
possible appeal of the Final Decision and Order. Section 766.22(e) 
recently was deleted. See Export Administration Regulations; 
Technical Amendments, 75 FR 33,682 (June 15, 2010). Thus, Respondent 
should disregard Attachment B of the RDO.
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    Accordingly, it is therefore ordered,
    First, that, for a period of two (2) years from the date that this 
Order is published in the Federal Register, Manoj Bhayana, of 65 W. 
Manila Avenue, Pittsburgh, Pennsylvania 15220, and his representatives, 
assigns, agents or employees (hereinafter collectively referred to as 
``Denied Person'') may not participate, directly or indirectly, in any 
way in any transaction involving any commodity, software or technology 
(hereinafter collectively referred to as ``item'') exported or to be 
exported from the United States that is subject to the Regulations, or 
in any other activity subject to the Regulations, including, but not 
limited to:
    A. Applying for, obtaining, or using any license, License 
Exception, or export control document;
    B. Carrying on negotiations concerning, or ordering, buying, 
receiving, using, selling, delivering, storing, disposing of, 
forwarding, transporting, financing, or otherwise servicing in any way, 
any transaction involving any item exported or to be exported from the 
United States that is subject to the Regulations, or in any other 
activity subject to the Regulations; or
    C. Benefitting in any way from any transaction involving any item 
exported or to be exported from the United States that is subject to 
the Regulations, or in any other activity subject to the Regulations.
    Second, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of the Denied Person any item 
subject to the Regulations;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by the Denied Person of the ownership, possession, or 
control of any item subject to the Regulations that has been or will be 
exported from the United States, including financing or other support 
activities related to a transaction whereby the Denied Person acquires 
or attempts to acquire such ownership, possession or control;
    C. Take any action to acquire from or to facilitate the acquisition 
or attempted acquisition from the Denied Person of any item subject to 
the Regulations that has been exported from the United States;
    D. Obtain from the Denied Person in the United States any item 
subject to the Regulations with knowledge or reason to know that the 
item will be, or is intended to be, exported from the United States; or
    E. Engage in any transaction to service any item subject to the 
Regulations that has been or will be exported from the United States 
and which is owned, possessed or controlled by the Denied Person, or 
service any item, of whatever origin, that is owned, possessed or 
controlled by the Denied Person if such service involves the use of any 
item subject to the Regulations that has been or will be exported from 
the United States. For purposes of this paragraph, servicing means 
installation, maintenance, repair, modification or testing.
    Third, that, after notice and opportunity for comment as provided 
in Section 766.23 of the Regulations, any person, firm, corporation, or 
business organization related to Manoj Bhayana by affiliation, 
ownership, control, or position of responsibility in the conduct of 
trade or related services may also be made subject to the provisions of 
this Order.
    Fourth, that this Order does not prohibit any export, reexport, or 
other transaction subject to the Regulations where the only items 
involved that are subject to the Regulations are the foreign-produced 
direct product of U.S.-origin technology.
    Fifth, that this Order shall be served on Manoj Bhayana and on BIS, 
and shall be published in the Federal Register. In addition, the ALJ's 
Recommended Decision and Order, except for the section related to the 
Recommended Order, shall also be published in the Federal Register.
    This Order, which constitutes the final agency action in this 
matter, is effective upon publication in the Federal Register.


[[Page 18719]]


    Dated: March 28, 2011.
Eric L. Hirschhorn,
Under Secretary of Commerce for Industry and Security.

Certificate of Service

    I hereby certify that, on this 29st day of March, 2011, I have 
served the foregoing DECISION AND ORDER signed by Eric L. Hirschhorn, 
Under Secretary of Commerce for Industry and Security, in the matter of 
Manoj Bhayana (Docket No: 10-BIS-0001) to be send via United Parcel 
Service postage pre-paid to:

Louis W. Emmi, Esquire, Attorney At Law, 201 Lebanon Shops, 300 Mt. 
Lebanon Boulevard, Pittsburg, PA 15234, (fax): 412-341-8464 (By 
Facsimile and United Parcel Service).
Adrienne Frazier, Joseph Jest, John Masterson, Attorneys for Bureau of 
Industry and Security, Office of Chief Counsel for Industry and 
Security, U.S. Department of Commerce, Room HCHB 3839, 14th Street and 
Constitution Ave., NW., Washington, DC 20230, (fax): 202-482-0085 
(Served via hand delivery).
Honorable Michael J. Devine, U.S. Coast Guard, U.S. Customs House, 40 
South Gay Street, Room 412, Baltimore, MD 20102, (fax): 410-962-5155, 
(By Facsimile and United Parcel Service).
ALJ Docketing Center, Attention: Hearing Docket Clerk, 40 S. Gay 
Street, Room 412, Baltimore, Maryland 20212-4022 (By Untied Parcel 
Service).
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Andrea A. Monroe

Office of the Under Secretary for Industry and Security

United States of America Department of Commerce Bureau of Industry and 
Security

    IN THE MATTER OF: Manoj Bhayana, Respondent.

Docket No. 10-BIS-0001

Recommended Decision and Order

Issued: February 28, 2011

Issued By: Hon. Michael J. Devine Presiding

Appearances

For the Bureau of Industry and Security
    Adrienne Frazier, Esq., Office of Chief Counsel for Industry & 
Security, U.S. Department of Commerce, Room H-3839, 14th Street & 
Constitution Ave., NW, Washington, DC 20230.
For Respondent Manoj Bhayana
    Louis W. Emmi, Esq., 201 Lebanon Shops, 300 Mt. Lebanon 
Boulevard, Pittsburgh, PA 15234.

I. Preliminary Statement

    This case arises from Manoj Bhayana's (Respondent) violation of the 
Export Administration Regulations (EAR or Regulations).\10\ On January 
15, 2010, the Bureau of Industry and Security (BIS or Agency) issued a 
Charging Letter against Respondent. In that Letter, BIS alleged 
Respondent committed two (2) violations of the Export Administration 
Act of 1979 (Act), as amended and codified at 50 U.S.C. App. Sec. Sec.  
2401-20 (2000), and the Export Administration Regulations (EAR or 
Regulations), as amended and codified at 15 CFR parts 730-74 (2000 & 
2007) \11\ while working for SparesGlobal, Inc (SparesGlobal). The 
charges read as follows:
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    \10\ The Export Administration Regulations, 15 CFR parts 730-
744, are issued under the Export Administration Act of 1979 (EAA). 
The Act is codified at 50 U.S.C. app. Sec. Sec.  2401-20 (2000), as 
amended by the Notice on August 13, 2009 (74 FR 41,325 (Aug. 14, 
2009)).
    \11\ The EAA and all regulations promulgated there under expired 
on August 20, 2001. See 50 U.S.C. App. 2419. Three days before its 
expiration, on August 17, 2001, the President declared the lapse of 
the EAA constitutes a national emergency. See Exec. Order. No. 
13222, reprinted in 3 CFR at 783-784, 2001 Comp. (2002). Exercising 
authority under the International Emergency Economic Powers Act 
(``IEEPA''), 50 U.S.C. 1701-1706 (2002), the President maintained 
the effectiveness of the EAA and its underlying regulations 
throughout the expiration period by issuing Exec. Order. No. 13222 
on August 17, 2001. Id. The effectiveness of the export control laws 
and regulations were further extended by successive Notices issued 
by the President; the most recent being that of August 15, 2007. See 
Notice: Continuation of Emergency Regarding Export Control 
Regulations, 72 FR 46, 137 (August 15, 2007). Courts have held that 
the continuation of the operation and effectiveness of the EAA and 
its regulations through the issuance of Executive Orders by the 
President constitutes a valid exercise of authority. See Wisconsin 
Project on Nuclear Arms Control v. United States Dep't of Commerce, 
317 F.3d 275, 278-79 (DC Cir. 2003); Times Publ'g Co. v. U.S. 
Department of Commerce, 236 F.3d 1286, 1290 (11th Cir. 2001).
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Charge 1 15 CFR 764.2(b)--Causing, Aiding or Abetting a Violation of 
the Regulations

    On or about December 2, 2003, Bhayana, while employed as a sales 
representative at SparesGlobal, Inc., caused, aided, abetted and 
permitted the submission of false and misleading representations and 
statements to the U.S. Government in connection with the preparation 
and submission of a Shipper's Export Declaration (SED), an export 
control document. The SED falsely represented and stated that the 
item being exported from the United States was ``UCAR-GRAPHITE'' and 
that the ultimate consignee was located in the United Arab Emirates 
(UAE). Bhayana and others created a forged mill certificate to 
indicate that the item was ``UCAR-GRAPHITE.'' Bhayana submitted the 
fraudulent mill certificate to the freight forwarder and told the 
freight forwarder that the ultimate consignee was in the UAE, when 
the actual ultimate consignee was in Pakistan. Based on the 
information provided by Bhayana, the freight forwarder filed the SED 
stating that the item was ``UCAR GRAPHITE'' and the ultimate 
consignee was in the UAE. In so doing, Bhayana committed one 
violation of Section 764.2(b) of the regulations.

Charge 2 15 CFR 764.2(g)--False Statement Made to BIS During an 
Investigation

    Bhayana made false and misleading representations and statements 
in the course of a BIS investigation. On or about September 8, 2004, 
a BIS Special Agent asked about the mill certificate relating to the 
Shipper's Export Declaration (SED) filed on December 2, 2003, and 
referenced in Charge 1 above. In an emailed response to the Special 
Agent, Bhayana stated: ``The test certificate was provided by [our 
supplier] to us. We do not have any knowledge about its origin.'' On 
or about November 3, 2004, Bhayana was asked again about the mill 
certificate during an in-person interview with BIS Special Agents, 
and again provided copies of this forged mill certificate to the 
Special Agents. During this interview Bhayana also gave the BIS 
Special Agents a signed written statement referencing the mill test 
certificate specifications or ``specs,'' in which he indicated, 
``These specs which are being submitted here [to Special Agents] are 
the material specs which were shipped under this shipment.'' In 
fact, Bhayana had worked with others to create the forged mill 
certificate falsifying the type of graphite rod being exported and 
knew that the certificate contained false information when he 
provided it to the Special Agents. When confronted later in the same 
interview by the Special Agents with evidence that the certificate 
had been forged, Bhayana signed a second written statement. In this 
second signed statement, Bhayana admitted that his earlier 
statements to the Special Agents were false. Specifically, Bhayana 
admitted that SparesGlobal's supplier, Ameri-Source, Inc., which was 
not the actual manufacturer or distributer of GrafTech's UCAR 
graphite, ``suppl[ied] * * * the certificate on [GrafTech] UCAR 
letterhead showing the [false] specs and mill test reports,'' and 
the ``prepared some certificate and faxed it to us for the 
approval.'' In so doing, Bhayana committed one violation of Section 
764.2(g) of the Regulations.

    On July 30, 2010, BIS filed a Motion for Summary Decision (BIS 
Motion) on Charge 2, asserting it was entitled to summary decision as a 
matter of law. Attached to its motion were fifteen (15) exhibits marked 
Government Exhibit (Gov't Ex.) 1-15. In support of the Motion BIS 
argued there were no genuine issues as to any material fact because of 
Bhayana's statements to BIS Special Agents during the course of a BIS 
investigation and due to Bhayana's admissions regarding the false mill 
certificate in the transaction that is the subject of this matter. 
BIS's Motion did not address Charge 1.
    On October 12, 2010, the undersigned issued an Order Partially 
Granting BIS's Motion for Summary Decision. In that Order, the 
undersigned found Charge 2 had been proven, but reserved ruling as to 
the recommended sanction for the violation because Charge 1 remained

[[Page 18720]]

pending. That Order included Findings of Fact and Ultimate Findings of 
Fact and Conclusions of Law and is included as Attachment A of this 
Recommended Decision and Order.
    On November 5, 2010, a prehearing conference was held to discuss 
scheduling concerns in light of the Order Partially Granting Summary 
Decision. During that prehearing conference call, BIS informed the 
undersigned and Respondent they intended to withdraw Charge 1. On 
November 12, 2010, BIS filed its Notice of Withdrawal of Charge 1.
    With the withdrawal of Charge 1, the only issue remaining is the 
appropriate sanction for the violation found proved in Charge 2. On 
November 23, 2010, Respondent filed his final written brief and closing 
arguments. On December 6, 2010, BIS submitted their final written brief 
and closing arguments. The following recommended findings of fact and 
recommended decision is based on a careful review of the facts and 
record as a whole including the parties final briefs, the facts found 
in the Order Partially Granting the BIS Motion for Summary Decision and 
the applicable law and regulations.

II. Recommended Findings of Fact

1. SparesGlobal, Inc., of Pittsburgh, PA, exported graphite rods and 
pipes from the United States on or about December 2, 2003. (BIS 
Motion--Ex. 5 at 3-4; Ex. 6).
2. Respondent was SparesGlobal's primary sales contact for this 
transaction. (BIS Motion--Ex. 5 at 1).
3. During the transaction, Respondent was in contact with the U.S. 
company that supplied the graphite rods and pipes for the 
transaction, Ameri-Source, Inc.; the freight forwarder for the 
transaction, K.C. International Transport, Inc.; and SparesGlobal's 
customer Taif Trading, LLC, located in Dubai, UAE. (BIS Motion--Ex. 
5 at 4-5).
4. The transaction documentation included a mill test certificate 
certifying that the graphite being exported met the specifications 
for a type of graphite (CS grade extruded graphite) produced by UCAR 
Carbon Company and Respondent sent this certificate to the freight 
forwarder, K.C. International Transport, Inc. to facilitate the 
export transaction at issue. (BIS Motion--Ex. 5 at 4-5; Ex. 8)
5. Respondent admitted that the exported graphite rods were not UCAR 
graphite and were not produced by UCAR/GrafTech. (BIS Motion--Ex. 5 
at 5).
6. Respondent knew the mill test certificate had been created by 
Ameri-Source, Inc., and that it had been created using UCAR/GrafTech 
letterhead. (BIS Motion--Ex. 5 at 6-8).
7. During a BIS investigation concerning this export transaction, in 
a September 7, 2004 email that he sent to a BIS Special Agent, 
Respondent denied having any knowledge of the origin of the mill 
test certificate. (BIS Motion--Ex. 5 at 7).
8. As part of BIS's investigation, Respondent was interviewed by BIS 
Special Agents at SparesGlobal's offices on or about November 3, 
2004. (BIS Motion--Ex. 5 at 7-8).
9. During the interview, Respondent handed the BIS Special Agents 
his file relating to this export transaction, which included the 
fraudulent mill test certificate. (BIS Motion--Ex. 5 at 7-8).\12\
---------------------------------------------------------------------------

    \12\ The legal analysis for the determination to grant the 
Motion for Summary Decision is contained in the discussion section 
of that Order. See Attachment A.
---------------------------------------------------------------------------

III. Recommended Ultimate Findings of Fact and

    Conclusions of Law
1. Respondent and the subject matter of this proceeding are properly 
within the jurisdiction of the BIS in accordance with the Export 
Administration Act of 1979 (50 U.S.C. App. Sec. Sec.  2401-2420) and 
the Export Administration Regulations (15 CFR parts 730-774).
2. When Respondent handed the file and the mill test certificate to 
the BIS Special Agents on or about November 3, 2004, he knew the 
certificate had been created at Ameri-Source and not by UCAR/
GrafTech or any UCAR/GrafTech affiliate. (BIS Motion--Ex. 5 at 7-8).
3. When Respondent handed the BIS Special Agents the file and mill 
test certificate on or about November 3, 2004, Bhayana knew the 
certificate contained false and misleading information. (Id.).
4. When Respondent handed the file and certificate to the BIS 
Special Agents on or about November 3, 2004, he knew, but did not 
inform the agents that some of the information in the file contained 
false, inaccurate, and/or misleading information. (Id.).
5. Respondent is found to have made false and misleading 
representations to BIS Special Agents during the course of an 
investigation subject to the EAR, a violation of 15 CFR 764.2(g).

IV. Recommended Sanction

A. Regulations

    Section 764.3 of the EAR establishes the sanctions that BIS may 
seek for the violations charged in this proceeding. The sanctions 
permitted include: (1) A civil penalty, (2) a denial of export 
privileges under the Regulations, and (3) an exclusion from practice. 
See 15 CFR 764.3. Supplement Number 1 to 15 CFR part 766 (Supplement 
No. 1) provides published nonbinding guidance on what BIS considers in 
making penalty determinations in considering settlement of civil 
administrative enforcement cases. Various factors are considered by BIS 
including the degree of willfulness, the destination involved, whether 
there were any related violations, and the timing of any settlement. 
Both parties have referenced Supplement No. 1 in their final arguments 
and briefs in support of their position in this matter.
    Both general factors and specific mitigating and aggravating 
factors are discussed in Supplement No. 1. Certain factors may be given 
greater weight than other factors. The Mitigating Factors include:

1. The party self-disclosed the violations (given great weight).
2. The party created an effective export compliance program (given 
great weight).
3. The violations resulted from a good-faith misinterpretation.
4. The export would likely have been granted upon request.
5. The party does not have a history of past export violations.
6. The party cooperated to an exception degree during the 
investigation.
7. The party provided substantial assistance in the BIS 
investigation.
8. The violation did not involve harm of the nature the regulations 
were intended to protect.
9. The party had little export experience and was not familiar with 
the requirement.
15 CFR part 766, Supp No. 1, at Sec.  III(B).

The Aggravating Factors include:

1. The party deliberately hid the violations (given great weight).
2. The party seriously disregarded export responsibilities (given 
great weight).
3. The violation was significant in view of the sensitivity of the 
item (given great weight).
4. The violation was likely to involve harm of the nature the 
regulations intended to protect.
5. The value of the exports was high, resulting in need to serve an 
adequate penalty for deterrence.
6. Other violations of law and regulations occurred.
7. The party has a history of past export violations.
8. The party lacked a systematic export compliance effort.
15 CFR part 766, Supp No. 1, at Sec.  III(B).

    By examining the basic factors associated with the violations and 
by considering the appropriate mitigating and aggravating 
circumstances, an appropriate penalty is determined. A review of the 
factors and circumstances specific to this case are discussed below.

B. Respondent's Violations

    In this case, Respondent is found to have provided false or 
misleading statements to a BIS Special Agent during the course of an 
investigation. (Order Partially Granting BIS's Motion for Summary 
Decision (Order)).\13\ As set

[[Page 18721]]

forth in the Ultimate Findings of Fact and Conclusions of Law, 
Respondent handed BIS Special Agents a file and mill test certificate 
that Respondent knew contained false and misleading information. (Order 
at 4). When Respondent handed the file and certificate to the BIS 
Special Agents, he knew, but did not inform the agents that some of the 
information in the file contained false, inaccurate, and/or misleading 
information. (Id.). Upon further investigation by BIS, Respondent 
admitted to his false statements. (Order at 6).
---------------------------------------------------------------------------

    \13\ The Order Partially Granting BIS's Motion for Summary 
Decision issued by this court on October 12, 2010 is Attachment A of 
this recommended decision and order. In that Order, Respondent was 
found to have violated Charge 2--providing false or misleading 
statements to a BIS Special Agent during the course of an 
investigation.
---------------------------------------------------------------------------

Aggravating Factors
    As addressed within the Ultimate Findings of Fact and Conclusions 
of Law, Respondent willfully committed a violation of the EAR. While 
Respondent has presented argument asserting his excuses for providing 
false information to BIS, he nevertheless knowingly and willfully 
provided misleading information. An aggravating factor that is given 
great weight is a party's deliberateness in hiding a violation, 
Aggravating Factor 1. 15 CFR part 766, Supp No. 1, at Sec.  III(B). In 
this case, Respondent knowingly tried to hide the fact that a mill test 
certificate contained false and misleading information when questioned 
on it by BIS investigators. The court finds Respondent attempted to 
deliberately hide a violation. It was only after further investigation 
and confrontation with BIS Special Agents that Respondent eventually 
admitted to his attempt to hide the true facts.
    An additional aggravating factor is when a party demonstrates a 
serious disregard for export compliance responsibilities, Aggravating 
Factor 2. Id. One such responsibility is to provide truthful statements 
to BIS Special Agents as they work to enforce our country's export 
control laws. In this case, Respondent seriously disregarded his export 
compliance responsibilities. While working as an exporter, Respondent 
is found to have misled BIS during the course of an investigation to 
enforce export controls. Respondent's explanation for his actions 
included his assertions that he was just a low level employee, that the 
value of the shipment was low, and that he might lose his job if he 
told the truth. Even if considered as accurate, Respondent's 
justifications for impeding an export control investigation demonstrate 
that compliance with his export responsibilities was of secondary 
importance. If an individual intends to engage in the export of goods, 
compliance with export controls is mandatory, and maintaining 
employment is not an excuse for violating the regulations.
    No other aggravating factors seem applicable in this case. No 
evidence was presented that would establish Respondent's violation had 
circumstances that fit within one of the other aggravating factors. 
While Respondent admits his current company has not created a 
systematic export compliance effort, no evidence was presented that 
shows he was responsible for or lacked a systematic export compliance 
effort at the time of the violation. However, as discussed above, two 
aggravating factors are found to exist that are given great weight when 
determining an appropriate sanction. First, Respondent made a 
deliberate attempt to hide or conceal the violation and second, 
Respondent's conduct demonstrated a serious disregard for export 
compliance responsibilities.
Mitigating Factors
    Within Respondent's Memorandum Regarding Possible Sanctions for his 
Violation (Memorandum), Respondent argues that several mitigating 
factors are relevant in his case. First, he suggests the violation was 
an isolated occurrence or the result of a good-faith misinterpretation. 
(See Memorandum at 7). This mitigation factor follows the general 
principle that while ignorance of the law is typically not an excuse 
for non-compliance, willful violations often receive higher penalties 
than unintentional violations. See Cheek v. U.S., 498 U.S. 192, 199 
(1991); See also Iran Air v. U.S., 996 F.2d 1253 (DC Cir. 1993). To 
support this assertion, Respondent states he was a low level employee, 
worked long hours and did not take vacations, and felt great pressure 
to obey his superior's orders. However, this does not present a good-
faith misinterpretation of the regulations. Instead, this argument 
highlights the fact Respondent knew he was misleading investigators. 
Even if his assertions are accepted as accurate, it demonstrates only 
that he decided to commit a violation because he felt pressure from the 
company to do so. Respondent's violation was not the result of a 
misinterpretation, but instead was an intentional decision to provide 
misleading and false information rather than comply with the 
requirements of the law and regulations.
    Respondent's second argument for mitigation is based upon the 
assertion that the product he lied about did not require a license to 
ship, thus falling within Mitigation Factor 4. See 15 CFR part 766, 
Supp No. 1, at Sec.  III(B). The record does not contain any evidence 
that shows the exported goods (graphite) were a prohibited item. BIS 
asserts this mitigation factor should not apply, since the items in 
question were materials subject to the EAR (15 CFR 734.3(a)) and 
Respondent was charged with making a false statement, not with making 
an unlicensed export. It appears the export transaction that formed the 
basis of the misrepresentation and violation would likely have been 
granted anyway. While it may not fit clearly within Mitigation Factor 
4, the fact that sensitive materials were not involved is given some 
weight in mitigation. If Respondent had made false statements about a 
highly sensitive and controlled item, such as nuclear material, that 
would certainly be an aggravating factor. Likewise, since Respondent's 
misrepresentation seems to concern a non-sensitive item, that is a 
factor considered towards mitigation.
    Respondent's third argument for mitigation is that he has not been 
found to have committed any past export violations, Mitigation Factor 
5. See id. No evidence has been provided showing Respondent has 
violated the EAR in the past. As such, Mitigation Factor 5 applies in 
this case.
    Respondent's fourth argument for mitigation is that he cooperated 
to an exceptional degree with BIS's efforts to investigate 
SparesGlobal's conduct, Mitigation Factor 6 and 7. See id. This 
argument is not persuasive. The central violation relevant to this case 
revolves around Respondent making false and misleading statements to 
BIS during the course of an investigation. Attempting to mislead the 
investigator does not equate to providing an exceptional degree of 
cooperating with BIS's investigation. To the contrary, Respondent's 
actions hampered BIS's investigation.
    Respondent's fifth argument for mitigation is that at the time of 
the violation he had little or no export experience and was not 
familiar with export practices, Mitigation Factor 9. See id. This 
mitigation factor is seemingly in place to account for individuals who 
unknowingly violate an export regulation, despite their good intentions 
to follow the regulations. In this case, even if Respondent had little 
export experience, it has been found he knowingly mislead 
investigators. Respondent's actions were not an unintentional or 
unknowing violation of the regulations. To the contrary, Respondent 
made a conscious effort to mislead in an attempt to appease his bosses. 
Since Respondent's violation is not a result of his inexperience with

[[Page 18722]]

export regulations, Mitigation Factor 9 is found not to apply to this 
case.
    Finally, Respondent also asserts throughout his pleadings that 
because he was a low level employee, seemingly more important people 
should be more culpable. Even if this is accepted as accurate, it does 
not provide a defense to making false statements to Government 
officials during a formal investigation. Allowing lower level employees 
to escape liability based on ignorance would provide an avenue to 
frustrate enforcement of legal export requirements. Additionally, 
violations by other persons or entities and actions against other 
persons or entities for violating the law are a collateral matter that 
is not demonstrated to be relevant to these proceedings. In response to 
Respondent's assertions, BIS contends the administrative proceedings 
against Respondent were apparently part of an enforcement effort 
against Respondent's employer, SparesGlobal.\14\ The Court's decision 
is limited to the matters properly presented in the record. When a 
person provides information or statements during an investigation, the 
law allows persons to either provide truthful statements or make an 
assertion of a privilege. This applies equally to all individuals, even 
``lower'' level employees, during the course of investigations so 
violations at all levels can be effectively investigated. In summary, 
Respondent chose to mislead the investigators and appease his bosses, 
instead of being truthful with BIS and complying with the regulations. 
Such a decision does not show a good-faith misinterpretation of the 
rules and is not a valid basis for mitigation of sanctions.
---------------------------------------------------------------------------

    \14\ The issues of selective prosecution or abuse of discretion 
in proceeding in this matter have not been raised in this matter.
---------------------------------------------------------------------------

C. Denial of Export Privileges

    In addition to the above mitigating factors, Respondent also argues 
that adverse financial hardships would result from a denial of export 
privileges. Respondent asserts that his only source of income is from 
his exporting business, which made $29,450 last year. (Memorandum at 
14). Furthermore, he states if he is prevented from working in the 
export field, he would lose his Green Card status and would be forced 
to return to India with his family. (Memorandum at 15).
    In accordance with the regulations, the financial impact of a 
denial of export privileges can be considered in determining if such a 
denial should be suspended. 15 CFR part 766, Supp No. 1, at Sec.  
IV(B). However, a denial of export privileges will only be suspended if 
it is found that future export control violations are unlikely and if 
there are adequate measures to achieve a necessary deterrent, usually a 
substantial civil penalty. Id. Here, since Respondent asserts he has 
limited means, providing a suspended civil penalty would not provide 
the intended future deterrence.
    Additionally, while Respondent has apparently accepted the court's 
ruling in regards to Charge Two, Respondent's arguments minimize his 
responsibility for his own lapse of judgment. In his Response, 
Respondent continues to attempt to excuse his actions by describing his 
lower level position with the company and excusing the behavior on the 
outside pressures he felt. The desire for continued employment is not a 
valid excuse for providing false and misleading information to 
investigators. Second, Respondent now runs his own company; however, he 
has not developed an effective export compliance program. (Memorandum 
at 11). Respondent excuses his failure to develop an effective export 
compliance program because ``[h]e is not currently in a financial 
position * * *'' to do so. (Id.) Such a response demonstrates 
Respondent's attitude towards ensuring compliance with the regulations 
still takes a backseat to personal factors. There could be pressure 
from a company he is working with to violate the regulations and the 
pressure to do so to maintain a profit would seem to be no different 
that the pressure from SparesGlobal to keep his job. Finally, the 
reference to any offers discussed during settlement negotiations by 
either party is generally inappropriate.
    While Respondent has pointed to mitigating factors that apply, 
including his otherwise clean exporting history and the non-sensitive 
nature of the parts he was exporting, I find that a two (2) year denial 
of export privileges as suggested by BIS is appropriate.
    Respondent seems to have many personal factors affecting his 
ability to comply with the export regulations. And, while the court is 
sympathetic to Respondent's predicament, the court's determination in 
this matter is limited to issuing a decision in keeping with the law 
and regulations to ensure compliance with the export regulations. The 
court finds the argument of BIS persuasive. An appropriate sanction is 
necessary for deterring persons from providing false and misleading 
information that frustrates enforcing compliance with the regulations. 
In this case, a two (2) year denial of export privileges is deemed 
appropriate. Respondent may continue to seek administrative clemency 
from the Undersecretary in keeping with 15 CFR Sec.  766.17(c) and 
766.22.

V. Recommended Order \6\

Redacted Section (Pages 15 to 18)

    Within thirty (30) days after receipt of this Recommended Decision 
and Order, the Under Secretary shall issue a written order, affirming, 
modifying, or vacating the Recommended Decision and Order. See 15 CFR 
766.22(c). A copy of the Agency regulations for Review by the Under 
Secretary can be found as Attachment B.

Hon. Michael J. Devine,

Administrative Law Judge.

Done and dated February 28, 2011 at Baltimore, Maryland.
Attachment A: Summary Decision Order of October 12, 2010.
Attachment B: Notice of Review and Appeal rights 15 CFR 766.22.

Attachment B

Notice of Review by Under Secretary

    15 CFR 766.22 Review by Under Secretary.
    (a) Recommended decision. For proceedings not involving violations 
relating to part 760 of the EAR, the administrative law judge shall 
immediately refer the recommended decision and order to the Under 
Secretary. Because of the time limits provided under the EAA for review 
by the Under Secretary, service of the recommended decision and order 
on the parties, all papers filed by the parties in response, and the 
final decision of the Under Secretary must be by personal delivery, 
facsimile, express mail or other overnight carrier. If the Under 
Secretary cannot act on a recommended decision and order for any 
reason, the Under Secretary will designate another Department of 
Commerce official to receive and act on the recommendation.
    (b) Submissions by parties. Parties shall have 12 days from the 
date of issuance of the recommended decision and order in which to 
submit simultaneous responses. Parties thereafter shall have eight days 
from receipt of any response(s) in which to submit replies. Any 
response or reply must be received within the time specified by the 
Under Secretary.
    (c) Final decision. Within 30 days after receipt of the recommended 
decision and order, the Under Secretary shall issue a written order 
affirming, modifying or vacating the recommended decision and order of 
the administrative law judge. If he/she vacates the recommended 
decision and order, the Under Secretary may refer the case back to the 
administrative law judge for further proceedings. Because of the time

[[Page 18723]]

limits, the Under Secretary's review will ordinarily be limited to the 
written record for decision, including the transcript of any hearing, 
and any submissions by the parties concerning the recommended decision.
    (d) Delivery. The final decision and implementing order shall be 
served on the parties and will be publicly available in accordance with 
Sec.  766.20 of this part.
    (e) Appeals. The charged party may appeal the Under Secretary's 
written order within 15 days to the United States Court of Appeals for 
the District of Columbia pursuant to 50 U.S.C. app. Sec.  2412(c)(3).

[FR Doc. 2011-7847 Filed 4-4-11; 8:45 am]
BILLING CODE 3510-DT-P