In the Matters of: Trilogy International Associates, Inc., William Michael Johnson, Respondents; Final Decision and Order, 9259-9267 [2018-04404]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security

[Federal Register Volume 83, Number 43 (Monday, March 5, 2018)]
[Notices]
[Pages 9259-9267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04404]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[Docket Number 15-BIS-0005 (consolidated)]


In the Matters of: Trilogy International Associates, Inc., 
William Michael Johnson, Respondents; 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 January 25, 2018. The RDO 
is dated January 24, 2018. BIS submitted a timely response to the 
RDO, while Respondent has not filed a response to the RDO.

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[[Page 9260]]

I. Background

    On October 2, 2015, the Bureau of Industry and Security (``BIS'') 
issued a Charging Letter to Respondent Trilogy International 
Associates, Inc. (``Trilogy International'' or ``Trilogy''), alleging 
that Trilogy committed three violations of Section 764.2(a) of the 
Export Administration Regulations (``EAR'' or ``Regulations''),\2\ by 
exporting national-security-controlled items to Russia without the 
required BIS licenses. On the same date, BIS also issued a Charging 
Letter to William Michael Johnson (``Johnson''), Trilogy's President 
and General Manager, alleging that Johnson committed three violations 
of Section 764.2(b) of the Regulations by causing, aiding, and/or 
abetting Trilogy's unlawful exports.
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    \2\ The Regulations are codified at 15 CFR parts 730-774 (2017). 
The violations charged occurred in 2010. The Regulations governing 
the violations at issue are found in the 2010 version of the Code of 
Federal Regulations. The 2017 Regulations govern the procedural 
aspects of this case.
    The Regulations issued pursuant to the Export Administration Act 
of 1979, as amended, 50 U.S.C. 4601-4623 (Supp. III 2015) (available 
at https://uscode.house.gov) (the ``Act'' or ``EAA''). 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 15, 2017 (82 FR 39,005 (Aug. 
16, 2017)), has continued the Regulations in effect under the 
International Emergency Economic Powers Act (50 U.S.C. 1701, et seq. 
(2012)).
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    The Charging Letter issued against Trilogy (``Trilogy Charging 
Letter'') included the following specific allegations:

Charges 1-3 15 CFR 764.2(a)--Engaging in Prohibited Conduct

    1. On or about January 23, 2010, April 6, 2010, and May 14, 
2010, respectively, Trilogy International engaged in conduct 
prohibited by the Regulations by exporting items subject to the 
Regulations and controlled on national security grounds to Russia 
without the required BIS export licenses.
    2. The items involved were an explosives detector and a total of 
115 analog-to-digital converters. The items were classified under 
Export Control Classification Numbers 1A004 and 3A001, respectively, 
controlled as indicated above on national security grounds, and 
valued in total at approximately $76,035.
    3. Each of the items required a license for export to Russia 
pursuant to Section 742.4 of the Regulations.
    4. Trilogy International exported the items to TAIR R&D Co. Ltd. 
(``TAIR R&D Co.''), a Russian company. TAIR R&D Co. employed 
Alexander Volkov, who had previously formed Trilogy International 
along with William Michael Johnson (``Johnson''). At all times 
pertinent hereto, Johnson was President and General Manager of 
Trilogy International, directed or controlled its operations, and 
participated in the export transactions at issue.
    5. After receiving requests for the items from TAIR R&D Co., 
Trilogy International procured the items from suppliers in the U.S. 
and abroad. Once in possession of the items, Trilogy International 
issued invoices, signed by Johnson and dated January 20, March 4, 
and April 15, 2010, respectively, to TAIR R&D Co. for the sale and 
export of the items from the United States to Russia.
    6. Trilogy then exported the items from the United States to 
TAIR R&D Co. in Russia on or about January 23, 2010, April 6, 2010, 
and May 14, 2010, respectively.
    7. As alleged above, each of the national-security-controlled 
items at issue required a license for export to Russia pursuant to 
Section 742.4 of the Regulations. However, no license was sought or 
obtained by Trilogy International in connection with any of the 
exports at issue.
    8. By exporting these items without the required BIS export 
licenses, Trilogy International committed three violations of 
Section 764.2(a) of the Regulations.

Trilogy Charging Letter at 1-2.\3\
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    \3\ The Trilogy Charging Letter also includes a Schedule of 
Violations that provides additional detail concerning the underlying 
transactions. The Charging Letter, including the Schedule of 
Violations, will be posted on BIS's ``eFOIA'' webpage along with a 
copy of this Order (and a copy of the RDO).
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    The Charging Letter against Johnson (``Johnson Charging Letter'') 
included the following specific allegations:

Charges 1-3 15 CFR 764.2(b)--Causing, Aiding, or Abetting a Violation

    1. Between on or about January 20, 2010, and May 14, 2010, 
Johnson caused, aided, and/or abetted three violations of the 
Regulations, specifically, three exports from the United States to 
Russia of items subject to the Regulations without the required BIS 
export licenses.
    2. The items involved were an explosives detector and a total of 
115 analog-to-digital converters, classified under Export Control 
Classification Numbers 1A004 and 3A001, respectively, controlled on 
national security grounds, and valued in total at approximately 
$76,035.
    3. Each of the items at issue required a BIS license for export 
to Russia pursuant to Section 742.4 of the Regulations.
    4. At all times pertinent hereto, Johnson was President and 
General Manager of Trilogy International Associates Inc. (``Trilogy 
International'''), of Modesto, California, and directed or 
controlled Trilogy International's operations.
    5. Johnson also participated in and facilitated the transactions 
at issue, including, inter alia, procuring the items from suppliers 
after receiving requests from TAIR R&D Co. Ltd. (``TAIR R&D Co.''), 
a Russian company that employed Alexander Volkov, with whom Johnson 
had previously formed Trilogy International.
    6. Johnson placed orders with U.S. suppliers for the analog-to-
digital converters at issue and was listed as the purchaser of those 
items on supplier invoices dated January 21, 2010, and May 12, 2010, 
respectively.
    7. Johnson also signed Trilogy International invoices dated 
January 20, March 4, and April 15, 2010, respectively, in connection 
with the sales and exports to TAIR R&D Co. at issue, and provided 
these invoices along with the items to a freight forwarder.
    8. The items were then shipped on behalf of Trilogy 
International to TAIR R&D Co. in Russia on or about January 23, 
2010, April 6, 2010, and May 14, 2010, respectively.
    9. As alleged above, each of the national-security-controlled 
items at issue required a license for export to Russia pursuant to 
Section 742.4 of the Regulations. However, no license was sought or 
obtained by Johnson or Trilogy International in connection with any 
of the exports at issue.
    10. By causing, aiding, and/or abetting the export of these 
items without the required BIS export licenses, Johnson committed 
three violations of Section 764.2(b) of the Regulations.

Johnson Charging Letter at 1-2.\4\
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    \4\ The Johnson Charging Letter, like the Trilogy Charging 
Letter, also includes a Schedule of Violations that provides 
additional detail concerning the underlying transactions and that 
will be included as part of the Charging Letter posted on BIS's 
eFOIA webpage. See note 3, supra.
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    On June 17, 2016, Respondent Trilogy and Respondent Johnson 
(collectively, ``Respondents'') filed a joint answer to the Charging 
Letters, and the proceedings against Trilogy and Johnson were 
subsequently consolidated.
    Following discovery, BIS filed its Motion for Summary Decision 
pursuant to Section 766.8 of the Regulations on January 13, 2017, as to 
all charges against Trilogy and all charges against Johnson. On the 
same date, Respondents filed their Motion for Summary Dismissal as to 
all charges against them, relying upon the argument that a third party, 
the freight forwarder, bore responsibility for the unlicensed exports.
    On February 8, 2017, the ALJ issued an ``Initial Decision'' denying 
Respondents' Motion for Summary Dismissal and granting summary decision 
for BIS on the three Section 764.2(a) unlicensed export charges against 
Trilogy. However, the ALJ denied summary decision for BIS with respect 
to the three Section 764.2(b) causing, aiding, or abetting charges 
against Johnson. The ALJ treated Trilogy and Johnson as a single, 
collective party and as a result concluded that the Section 764.2(b) 
charges were ``multiplicious'' of the underlying Section 764.2(a) 
unlicensed export charges.
    Following opportunity for briefing on sanctions issues, the ALJ 
issued an ``Initial Decision Imposing Sanctions''

[[Page 9261]]

on April 24, 2017, in which the ALJ also treated Respondents as a 
single, collective entity or individual, and indicated that a civil 
penalty of $100,000 and a seven-year denial of export privileges would 
be imposed. On April 28, 2017, a ``Notice of Errata'' issued, signed by 
a paralegal specialist that was designed to correct the title of the 
ALJ's April 24, 2017 decision from ``Initial Decision Imposing 
Sanctions,'' to ``Recommended Decision Imposing Sanctions,'' and to 
make corresponding changes to some of the text of that decision.
    The case was thereafter referred to the Under Secretary's Office as 
of May 2, 2017. On May 30, 2017, then-Acting Under Secretary Daniel O. 
Hill issued an order (``Remand Order'') vacating the Notice of Errata 
and remanding this consolidated proceeding for the ALJ to, inter alia, 
issue a single RDO in accordance with the provisions of Section 
766.17(b)(2) of the Regulations and address all charges on the merits 
against each of the respondents. In the Remand Order, the Acting Under 
Secretary determined that the ALJ had erred in treating the two 
respondents collectively, and directed that on remand the ALJ treat the 
respondents as distinct parties and reconsider his denial of summary 
decision with regard to the Section 764.2(b) charges against Respondent 
Johnson. In this regard, the Acting Under Secretary determined that it 
is ``well established that a corporate officer can be charged with 
causing, aiding or abetting the corporation's underlying violations.'' 
Remand Order, at 2.
    On January 24, 2018, after providing the parties opportunity for 
further briefing and based upon the record before him, the ALJ issued 
the RDO, in which he concluded that Respondent Trilogy had committed 
the three violations of Section 764.2(a) of the Regulations alleged in 
the Trilogy Charging Letter, and that Respondent Johnson committed the 
three violations of Section 764.2(b) alleged in the Johnson Charging 
Letter. The ALJ determined that, in accordance with Section 766.8 of 
the Regulations, BIS established that there are no genuine issues of 
material fact and that BIS is entitled to summary decision as a matter 
of law as to all the charges at issue. The ALJ set out detailed 
findings of undisputed material fact in the RDO regarding each of the 
charges, RDO, at 5-7, including that ``Johnson directed, controlled, 
and performed Trilogy's operations at all times relevant to the charges 
. . . and acted on behalf of Trilogy.'' Id. at 5, ] 3.\5\ In addition 
to finding that Johnson directed and controlled Trilogy's operations, 
the ALJ also found that Johnson took specific actions in connection 
with each of the unlawful unlicensed exports, including in connection 
with procuring the items, preparing and signing documentation for the 
sale of the items to TAIR R&D Co., and/or providing directions to the 
freight forwarder regarding the export of the items to Russia. See id. 
at 5-7, ]] 3, 6, 10-11, 14-15, 17-18.
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    \5\ In connection with transaction at issue in the Charge 1 of 
the Charging Letters, RDO Finding of Fact No. 12 states that on or 
about January 23, 2010, ``Johnson was the U.S. Principal Party in 
Interest (``USPPI'')/exporter that exported the E-3500 explosives 
detector at issue from the United States to Russia.'' RDO, at 6, ] 
12 (footnote omitted; parenthetical in original). After a review of 
the RDO, I find that the reference to Johnson there, rather than 
Trilogy, as the USPPI/exporter, clearly was not intended by the ALJ. 
Throughout the rest of the RDO, the ALJ refers to Trilogy as the 
USPPI/exporter. See, e.g., RDO, at 10 (``Trilogy, as the USPPI/
exporter, had the legal obligation to determine any license 
requirements and obtain the needed export licenses in connection 
with each of the exports at issue here.''); at 11 (``The record is 
undisputed, Respondent Trilogy sent three shipments . . . [and] 
Respondent Trilogy violated 15 CFR 764.2(a) by shipping these 
materials to Russia on three separate occasions.''); see generally 
RDO, at 8-11. Moreover, BIS alleged and submitted evidence to show 
that Trilogy was the USPPI/exporter for each of the transactions and 
charges at issue, see Charging Letters and BIS's Motion for Summary 
Decision, and the ALJ found that Trilogy was the USPPI/exporter for 
the exports at issue in Charges 2 and 3. RDO, at 7, ]] 16 and 19.
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    The ALJ determined that Respondents had not provided any evidence 
showing the existence of any genuine issues of material fact and that 
Respondents had failed to factually or legally substantiate their 
argument that it was the freight forwarder, rather than Respondents, 
that bore responsibility for the unlawful unlicensed exports. RDO, at 
8-12. The ALJ rejected Respondents' purported defense, which was based 
primarily on an unsigned power of attorney form that Respondents 
asserted authorized the forwarder ``to handle necessary export 
paperwork,'' RDO, at 10 (quoting, in part, Respondents' Answer), 
because Trilogy, as the USPPI/exporter, had the legal obligation to 
determine any license requirements and obtain the necessary licenses in 
connection with the exports at issue. RDO, at 10 and n. 14 (discussing 
and quoting, in part, Section 758.3 of the Regulations).
    With regard to sanctions, the ALJ recommended that I impose a 
$50,000 civil penalty against Trilogy and a $50,000 civil penalty 
against Johnson, and that I should also issue denial orders suspending 
the export privileges of both Respondents for a period of seven years. 
In making this recommendation, the ALJ reiterated and expanded upon his 
previous finding, in his April 24, 2017 decision, that Respondents 
engaged in a willful and reckless course of conduct involving 
unlicensed exports of national-security-controlled items to TAIR R&D 
Co. in Russia. RDO, at 13-14; April 24, 2017 Decision at 7-8. ``The 
undisputed facts show Respondents maneuvered to procure national 
security items and then to export them from the United States, without 
seeking authorization from BIS or procuring the requisite license. As 
the April 24, 2017 Order recognizes, Respondents were willful and 
reckless.'' RDO, at 13-14. The ALJ also found that in addition to 
failing to fulfill their licensing obligations regarding the export of 
the items at issue to Russia, Respondents also failed to seek pertinent 
information regarding these export transactions and the foreign parties 
interested in them. ``Moreover, the record shows Respondents failed to 
learn details related to the financing of the illicit transactions, 
provided through Trilogy Netherlands, with the ultimate source of the 
financing being unknown to Respondents.'' RDO, at 15 (citing 
Respondents' deposition testimony).\6\
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    \6\ In the deposition testimony cited by the ALJ, Respondents 
asserted that although they believed that an investor group paid 
TAIR R&D Co. for the items, they did not know the identity of the 
investor group. Johnson Deposition Transcript, at page 91, line 5 to 
page 92, line 10, filed as part of Exhibit 3 to BIS's Brief on 
Sanctions dated March 17, 2017. Respondents asserted that after they 
procured the items, Trilogy Netherlands, a Dutch company, paid for 
the items that Respondent Trilogy ordered, while Trilogy 
Netherlands, in turn, received funds from TAIR R&D Co. to pay the 
manufacturers and suppliers. See Exhibit 3 to BIS's Brief on 
Sanctions, dated March 17, 2017, at page 94, line 1 to page 95, line 
14. Respondents also asserted that they had no role in Trilogy 
Netherlands. See id.
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    The ALJ, in making his sanctions recommendations, also rejected 
Respondents' efforts throughout this proceeding to shift responsibility 
to the freight forwarder. See RDO, at 14. The ALJ further found that 
Respondents generally exhibited a ``flippant attitude towards 
regulatory control'' and ``have yet to acknowledge the seriousness of 
the violations nor shown any remorse for these failures.'' RDO, at 15. 
The ALJ also saw no evidence that the Respondents have taken any 
corrective compliance measures or that they possess the ability or 
willingness to comply with the Regulations. See id.
    Finally, the ALJ found that BIS precedent supported his recommended 
sanctions against Respondents. RDO, at 15-16.

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

[[Page 9262]]

of the Regulations. BIS submitted a timely response to the RDO pursuant 
to Section 766.22(b). Respondents have not submitted any response to 
the RDO, nor have they submitted any reply to BIS's response.
    The RDO contains a detailed review of the record relating to both 
merits and sanctions issues in this case, including in light of the 
Remand Order. I find that the record amply supports the ALJ's findings 
of fact and conclusions of law that Respondent Trilogy committed the 
three violations of Section 764.2(a) of the Regulations alleged in the 
Charging Letter issued to Trilogy, and that Respondent Johnson 
committed the three violations of Section 764.2(b) of the Regulations 
alleged in the Charging Letter issued to Johnson. The ALJ correctly 
concluded that BIS is entitled to summary decision pursuant to Section 
766.8 of the Regulations as to all of the charges at issue based upon 
the indisputable evidence of record. In doing so, the ALJ correctly 
determined that Respondent Trilogy was the USPPI/exporter and thus had 
the legal obligation under the Regulations to determine licensing 
requirements and obtain the necessary licenses for the export 
transactions at issue, rightly rejecting Respondents' persistently 
proffered, but unsubstantiated, defense that the freight forwarder bore 
responsibility for the unlawful exports at issue. The ALJ also 
correctly determined that Respondent Johnson caused, aided, or abetted 
Trilogy's unlawful exports, finding in that regard that Johnson 
directed and controlled Trilogy and its operations, and also finding 
that Johnson took one or more specific actions in connection with each 
of the exports at issue.
    After further consideration of the penalties initially assessed, I 
find that they are not sufficient considering the serious nature of the 
violations. Therefore I am modifying both the civil penalty and the 
denial order. I am modifying the civil penalty assessed against each 
Respondent from $50,000 to $100,000, and adding an additional three 
years to the seven-year denial order bringing it to ten years. The RDO 
and the record indicate that Respondents participated in sustained 
procurement and export activities with at least one known Russian 
entity regarding national-security-controlled items, while willfully 
ignoring, or, at best, blinding themselves to their compliance 
obligations. The RDO and record also show that Respondents have refused 
to acknowledge their compliance obligations during this proceeding or 
accept responsibility for their actions despite their clear violations 
of the Regulations. The ALJ also correctly determined that Respondents' 
rejection of their export control responsibilities and apparent failure 
to adopt corrective measures raises additional concerns about their 
ability and willingness to comply with the Regulations now or in the 
future. Thus, in sum, given the high degree of culpability exhibited by 
Respondents' willful and/or reckless conduct, the serious nature of the 
violations at issue, and the importance of deterring the Respondents 
and others from violating the Regulations in the future, I agree that 
the imposition of both preventive relief and monetary penalties against 
Respondents are necessary and appropriate to sanction Respondents and 
prevent and deter future violations of the Regulations. Therefore, I 
modify the seven-year denial order against each Respondent to ten 
years, as well as modifying the civil penalty by increasing to $100,000 
per Respondent to reflect seriousness of the conduct at issue as 
described above.\7\
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    \7\ The ALJ did not specifically address the terms of the denial 
orders to be imposed against Respondents. I conclude that the 
standard denial order found in Supplement No. 1 to Part 764 of the 
Regulations is appropriate in this situation. Nothing in the RDO 
suggests that the ALJ intended to recommend a non-standard denial 
order.
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    Accordingly, based on my review of the RDO and entire record, I 
affirm the findings of fact and conclusions of law in the RDO and 
modify the recommended sanctions as described above.\8\
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    \8\ As noted, supra, my review of the RDO indicates that the ALJ 
clearly intended to indicate in the RDO that Respondent Trilogy was 
the USPPI/exporter with regard to each of the transactions at issue. 
See note 5 supra. My determination to affirm the findings of fact 
and conclusions of law is based on this understanding of the RDO.
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    Accordingly, it is therefore ordered:
    First, a civil penalty of $100,000 shall be assessed against 
Trilogy International Associates Inc. (``Trilogy''), the payment of 
which shall be made to the U.S. Department of Commerce within 30 days 
of the date of this Order.
    Second, a civil penalty of $100,000 shall be assessed against 
William Michael Johnson (``Johnson''), the payment of which shall be 
made to the U.S. Department of Commerce within 30 days of the date of 
this Order.
    Third, pursuant to the Debt Collection Act of 1982, as amended (31 
U.S.C. 3701-3720E (2000)), the civil penalties owed under this Order 
accrue interest as more fully described in the attached Notice, and, if 
payment is not made by the due date specified herein, the party that 
fails to make payment will be assessed, in addition to the full amount 
of the civil penalty and interest, a penalty charge and administrative 
charge.
    Fourth, for a period of ten years from the date of this Order, 
Trilogy International Associates, Inc. and William Michael Johnson, 
both with last known addresses of P.O. Box 342, Altaville, CA 95221 and 
552 Lee Lane, Box 342/21, Angels Camp, CA 95222, and when acting for or 
on their behalf, their successors, assigns, employees, agents, or 
representatives (each a ``Denied Person'' and collectively the ``Denied 
Persons'') may not, directly or indirectly, participate 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 engaging 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 from any other activity subject to the Regulations.
    Fourth, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of a Denied Person any item 
subject to the Regulations;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by a 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 a 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 a Denied Person of any item subject to 
the Regulations that has been exported from the United States;
    D. Obtain from a 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

[[Page 9263]]

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 a Denied Person, or 
service any item, of whatever origin, that is owned, possessed or 
controlled by a 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.
    Fifth, after notice and opportunity for comment as provided in 
Section 766.23 of the Regulations, any person, firm, corporation, or 
business organization related to a Denied Person or the Denied Persons 
by ownership, control, position of responsibility, affiliation, or 
other connection in the conduct of trade or business may also be made 
subject to the provisions of this Order.
    Sixth, this Order shall be served on Respondents Trilogy 
International Associates, Inc. and William Michael Johnson and on BIS, 
and shall be published in the Federal Register. In addition, the ALJ's 
Recommended Decision and Order shall be published in the Federal 
Register.
    This Order, which constitutes final agency action in this matter, 
is effective immediately.

    Issued this 26th day of February 2018.
Mira R. Ricardel,
Under Secretary of Commerce for Industry and Security.

UNITED STATES DEPARTMENT OF COMMERCE BUREAU OF INDUSTRY AND SECURITY 
WASHINGTON, DC 20230

    In the Matters of: Trilogy International Associates, Inc., 
William Michael Johnson, Respondents

Docket Number 15-BIS-0005 (consolidated)

RECOMMENDED DECISION AND ORDER GRANTING SUMMARY DECISION ON REMAND

    This matter comes before the undersigned administrative law 
judge (ALJ) pursuant to a remand order issued by the Acting Under 
Secretary of Commerce for Industry and Security (Under Secretary) on 
May 30, 2017. The Under Secretary's order vacated in part, affirmed 
in part, and remanded two rulings issued by the undersigned on 
February 8, 2017 and April 24, 2017.\1\ The remand order primarily 
directs the ALJ to reconsider its partial denial of the Bureau of 
Industry and Security's (BIS or Agency) January 13, 2017 Motion for 
Summary Decision, and orders the ALJ to issue a single Decision and 
Order in accordance with Section 766.17(b)(2).
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    \1\ The Under Secretary's Order affirmed the ALJ's findings of 
fact and partial issuance of summary decision and instructed the ALJ 
not to disturb the factual findings made in the ALJ's April 24, 2017 
and February 7, 2017 decisions.
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    As set forth below, upon reconsideration, the undersigned finds 
there are no genuine issues as to any material facts and BIS is 
entitled to summary decisions against Trilogy International 
Associates, Inc. and William Michael Johnson. Therefore, BIS' 
January 13, 2017 Motion for Summary Decision is GRANTED. 
Furthermore, because this Order Granting Summary Decision disposes 
of this matter entirely, the undersigned issues this Recommended 
Decision and Order to the Under Secretary as permitted by 15 CFR 
766.8.\2\
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    \2\ Title 15 C.F.R. Sec.  766.8 permits the ALJ to issue a 
recommended decision if granting a motion for summary decision.
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Procedural Background

    On October 2, 2015, the Agency filed separate Charging Letters 
against Respondent Trilogy International Associates, Inc. 
(Respondent Trilogy) (docket number 15-BIS-0004) and Respondent 
William Michael Johnson (Respondent Johnson) (docket number 15-BIS-
0005).\3\ Respondent Trilogy's Charging Letter alleges the 
corporation violated Section 764.2(a) of the Export Administration 
Regulations (EAR or Regulations) by exporting national-security 
controlled items to Russia on three separate occasions in 2010, 
without the requisite BIS licenses.\4\ Respondent Johnson's Charging 
Letter alleges he violated Section 764(b) of the regulations by 
aiding and abetting Respondent Trilogy's three unlicensed exports to 
Russia, in his capacity as president of the corporation.\5\
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    \3\ Trilogy International Associates, Inc. was, apparently, a 
lawfully constituted corporation under the laws of the State of 
California and the State of Nevada at times relevant to the 
Complaint. The undersigned ALJ gleans from the discovery that 
Trilogy is not presently a lawfully constituted corporation in 
either state. (Response to Interrogatories Nos. 1-5).
    \4\ Those items consisted of an explosives detector and several 
analog-to-digital converters; items listed under Agency Export 
Control Classification as Numbers 1A004 and 3A001, respectively, and 
controlled for reasons of national security).
    \5\ The Charging Letters allege the International Emergency 
Economic Powers Enhancement Act of 2007, Pub. L. No. 110-96, 121 
Stat. 1011 (2007) and 15 C.F.R. part 766 allows the imposition of a 
civil penalty ``up to the greater of $250,000.00 per violation or 
twice the value of the transaction that is the basis of the 
violation.'' By contrast, the Agency's Motion alleges that 15 C.F.R. 
Sec.  764.3 allows the imposition of a monetary sanction of up to 
$289,238.00 per violation.
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    On December 21, 2015, Respondents filed an e-mail response to 
the Agency's Charging Letters, but did not address all of the 
allegations. Subsequently, on June 17, 2016, Respondents filed a 
lengthy written denial (Answer) alleging the Charging Letters are 
politically-motivated and that a third-party was responsible for any 
violations of law or regulation.
    The Agency filed a Motion for Summary Decision on January 13, 
2017, in accordance with the provisions of 15 C.F.R. Sec.  766.8. On 
the same day, Respondents filed a competing Motion for Summary 
Dismissal (Cross Motion). Respondents supplemented the Cross Motion 
with a three-page attachment to an e-mail to the undersigned and the 
Agency.\6\ On February 1, 2017, the Agency filed its response to the 
Cross Motion.
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    \6\ The undersigned considers the attachment as part of the 
Cross Motion.
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    On February 8, 2017, the undersigned ALJ issued an Initial 
Decision, granting in part and denying in part BIS' Motion for 
Summary Decision.\7\ The February 8, 2017 Order considered the two 
charging letters (issued separately to Respondents) multiplicious, 
and referred to the two Respondents in the collective. Essentially, 
the ALJ held Respondent Johnson's actions to be those of Respondent 
Trilogy, and found the Agency could only sanction Respondent Trilogy 
as a company, not Respondent Johnson as an individual. To this end, 
the ALJ denied Summary Decision against Respondent Johnson, but 
granted Summary Decision against Respondent Trilogy. The February 8, 
2017 Order directed the parties to submit additional briefing on the 
appropriate amount of sanctions against Respondent Trilogy.
---------------------------------------------------------------------------

    \7\ The February 8, 2017 Order denied Respondent's cross Motion 
for Summary Decision. The Under Secretary's Remand did not disturb 
the ruling against Respondent, and it is not revisited here. 
Respondent's request for Summary Decision remains DENIED.
---------------------------------------------------------------------------

    After receiving the parties' briefs on sanction, the undersigned 
issued a separate order on April 24, 2017, levying a fine in the 
amount of $100,000.00 against Respondent Trilogy and denying 
Respondent Trilogy's export privileges for a period of seven years. 
However, the undersigned inadvertently titled the April 24, 2017 
Order as an ``Initial Decision.'' To correct the error, among 
others, the undersigned directed a Notice of Errata be entered on 
May 10, 2017, which changed the title of the undersigned's decision 
from ``Initial Decision Imposing Sanctions'' to ``Recommended 
Decision Imposing Sanction.''
    On May 10, 2017, BIS filed a ``Response to Notice of Errata'' 
which asked the Under Secretary to vacate the ALJ's decisions and 
remand with instructions. On May 30, 2017, the Under Secretary 
Vacated the ALJ's Erratum Order, affirmed the ALJ's ultimate finding 
that Respondent Trilogy committed three violations of Section 
764.2(a), but reversed the ALJ's conclusion that the charges against 
Respondent Trilogy and Respondent Johnson were multiplicious. The 
Under Secretary also held ``a corporate officer can be charged with 
causing, aiding or abetting the corporations' underlying 
violations.'' The remand order instructed the ALJ to treat the 
charges against Respondent Johnson distinct from those against 
Respondent Trilogy. Ultimately, the Under Secretary ordered the ALJ 
to reconsider BIS' Motion for Summary Decision, but only to the 
charges against Respondent Johnson. If the ALJ recommended denial of 
the Summary Decision against Respondent Johnson, the Under Secretary 
instructed the ALJ to resolve the remaining charges pursuant to Part 
766 of the regulations. The Order also required the ALJ to ``provide 
the parties opportunity for briefing, including as to proposed 
sanctions.''

[[Page 9264]]

    Pursuant to the Under Secretary's Order, the undersigned issued 
an Order on September 12, 2017, directing the parties to submit 
briefs addressing the appropriate sanction that should be levied 
against Respondent Johnson. BIS, through counsel, filed its brief 
concerning a Respondent Johnson sanction on September 25, 2017. To 
date, Respondents have not filed any reply, nor otherwise complied 
with the undersigned's September 12, 2017 Order.

FINDINGS OF FACTS

    Upon review of the record, the ALJ finds the following facts 
undisputed and admitted by Respondents.
    1. At all times relevant to this matter, Trilogy International 
Associates, Inc. (``Trilogy'') was a California and Nevada 
corporation, headquartered in California at William Michael 
Johnson's personal residence. (Deposition Transcript (``Tr.''), at 
38; Responses to Interrogatories Nos. 1 and 2).
    2. William Michael Johnson (``Johnson'') was the president and 
general manager of Trilogy at all times relevant to the charges in 
the Complaint. (Response to Interrogatory No. 3; Responses to 
Requests for Admissions Nos. 1 and 2).
    3. Johnson directed, controlled, and performed Trilogy's 
operations at all times relevant to the charges in the Complaint and 
acted on behalf of Trilogy. (Response to Request for Admission No. 
3).
    4. TAIR R&D Co. (``TAIR'') is a Russian company and was at all 
times relevant to the Complaint Respondents' sole customer. (Tr. at 
29; Response to Requests for Admission, Nos. 5-6).
    5. Periodically, TAIR would request to purchase items from 
Respondents, who then procured those items for export to TAIR; some 
of which were manufactured and located in the United States. (Tr. at 
21, 29; Answer, p. 1-2; International Invoice dated January 20, 
2010; International Invoice dated March 4, 2010, International 
Invoice dated April 15, 2010).
    6. On or about December 7, 2009, Johnson obtained an E-3500 
explosives detector from Scintrex Trace Corp. (``Scintrex''), 
located in Ottawa, Canada. (Declaration of Agency Special Agent 
(``S/A'') Patrick Tinling at ] 5; Purchase Order).\8\ On or about 
that same date, Johnson signed and issued to Scintrex a purchase 
order for the E-3500 explosives detector. Id.
---------------------------------------------------------------------------

    \8\ The E-3500 explosive detector is the item at issue in Charge 
1 of the Complaint. Respondent referred to this item as ``E-3500 and 
accessories, a. Trace detector spectrometer'' in its e-mail to 
freight forwarder Mainfreight, Inc., regarding this export. (Email 
from Respondent to Kalief Brown of Mainfreight, Inc.) The item was 
listed as a ``Trace Detector Spectrometer'' in the Automated Export 
System (``AES'') Record for this export, with a stated value of 
$46,135. The stated value matched the amount Respondents invoiced 
TAIR for their sale of the item to TAIR. (Respondent's Response to 
Request for Admission No. 10). A copy of the Trilogy-TAIR invoice 
was attached to the email that Respondent sent Mainfreight, Inc. 
with Respondent's direction concerning export of the item to TAIR.
---------------------------------------------------------------------------

    7. On or about December 30, 2009, Scintrex sent the E-3500 
explosives detector to Trilogy in Tuolumne, California. (Tr. at 46; 
UPS Waybill; Scintrex Packing List; S/A Tinling Declaration at ] 5).
    8. The E-3500 explosives detector is an item subject to 15 
C.F.R. Sec.  734.3(a)(1) and is classified on the Commerce Control 
List (``CCL'') under Export Control Classification Number (``ECCN'') 
1A004.d. (Agency License Determination E1025550; S/A Tinling 
Declaration; ] 8).\9\
---------------------------------------------------------------------------

    \9\ The item and its related export by Respondent were subject 
to the regulations given that the item was located in the United 
States. 15 C.F.R. Sec.  734.3(a)(1). The item became subject to the 
Agency once Respondent procured it and had it shipped to it in 
California. Id.
---------------------------------------------------------------------------

    9. Export of an E-3500 explosives detector to Russia is 
controlled on national security grounds and required an Agency 
license for export to Russia at all times relevant to the charges in 
the Complaint. (Agency License Determination E1025550).
    10. On or about January 20, 2010, Johnson prepared an 
international invoice to TAIR for the E-3500 explosives detector. 
(Tr. at 54-55; International Invoice dated January 20, 2010; 
Response to Request for Admission No. 10; S/A Tinling Declaration at 
] 4.a).
    11. On or about January 22, 2010, Johnson delivered an E-3500 
explosives detector and a related international invoice to 
Mainfreight, Inc. for export to TAIR in Russia. (Tr. at. 46, 54-55; 
E-mail from Johnson to Kalief Brown of Mainfreight, Inc.; S/A 
Tinling Declaration, at ] 4; Response to Request for Admission No. 
7).
    12. On or about January 23, 2010, Johnson was the U.S. Principal 
Party in Interest (``USPPI'')/exporter,\10\ that exported the E-3500 
explosives detector at issue from the United States to Russia. (Tr. 
at 46, 54--55; Automated Export System (``AES'') Record for January 
23, 2010 export; Air Waybill; S/A Tinling Declaration, at ]] 3, 4.a, 
7).
---------------------------------------------------------------------------

    \10\ Under the regulations, ``principal parties in interest'' 
are ``[t]hose persons in a transaction that receive the primary 
benefit, monetary or otherwise, of the transaction. Generally, the 
principals in a transaction are the seller and the buyer. In most 
cases, the forwarding or other agent is not a principal party in 
interest.'' 15 C.F.R. Sec.  772.1.
---------------------------------------------------------------------------

    13. No export license was obtained for the export of the E-3500 
explosives detector to Russia. (Tr. at 56--57; S/A Tinling 
Declaration, at ] 10).
    14. On or about January 21, 2010, Johnson, on behalf of Trilogy, 
placed an order with a United States supplier for 115 analog-to-
digital converter devices,\11\ of which 28 were eventually obtained 
by Respondents. (Responses to Requests for Admission Nos. 20-22; 
Analog Devices Invoice; S/A Tinling Declaration, at ]] 4.b, 6).
---------------------------------------------------------------------------

    \11\ These 28 converters are the items at issue in Charge 2 of 
the Complaint. (The same type of AD9268 converters are at issue in 
Charge 3. Id.). Respondent exported these AD9268 converters to TAIR 
along with other computer/electronics goods, including an AD9910 
synthesizer. (Trilogy International Invoice dated March 4, 2010).
---------------------------------------------------------------------------

    15. On or about March 4, 2010, Johnson signed and issued an 
international invoice for the analog-to-digital converters. 
(Response to Request for Admission No. 24; International Invoice; S/
A Tinling Declaration, at ] 4.b).
    16. On or about April 6, 2010, Trilogy was the United States 
Principal Party in Interest (``USPPI''), that exported 28 analog-to-
digital converters from the United States to Russia (AES Record for 
April 6, 2010 export; Air Waybill; S/A Tinling Declaration at ]] 3, 
4.b, 7).
    17. On or about May 11, 2010, Johnson, on behalf of Trilogy, 
placed an order with another U.S. supplier for additional analog-to-
digital converters, which were then obtained by Respondents. 
(Response to Requests for Admissions Nos. 34-36; Arrow Electronics, 
Inc. Invoice; S/A Tinling Declaration at ]] 4.b, 6).
    18. On or about April 15, 2010, Johnson, on behalf of Trilogy, 
signed and issued an international invoice for the additional 
analog-to-digital converters. (Response to Request for Admission No. 
38; International Invoice dated April 15, 2010; S/A Tinling 
Declaration at ] 4.c).
    19. On or about May 14, 2010, Trilogy, as the United States 
Principal Party in Interest (``USPPI''), exported an additional 87 
analog-to-digital converters from the United States to Russia. (Tr. 
at 69; AES Record for Trilogy International Export to TAIR on or 
about May 14, 2010; Air Waybill; S/A Tinling Declaration at ]] 3, 
4.c, 7).\12\
---------------------------------------------------------------------------

    \12\ These AD9268 converters are the items at issue in Charge 3 
of the Complaint. The Trilogy International invoice for these 
converters items lists their sale price as $22,620.
---------------------------------------------------------------------------

    20. The analog-to-digital converters at issue are items subject 
to 15 C.F.R. Sec.  734.3(a)(1), classified on the CCL under ECCN 
3A001.a.5.a.5. (Agency License Determination E1020930; S/A Tinling 
Declaration at ] 8).
    21. Export of the analog-to-digital converters to Russia is 
controlled on national security grounds and required an Agency 
license for export to Russia at all times relevant to the Complaint. 
(Agency License Determination E1020930).
    22. Neither Trilogy, nor Johnson obtained an Agency export 
license for the export of either the E-3500 explosives detector or 
the analog-to-digital converters before exporting same to TAIR in 
Russia. (S/A Tinling Declaration at ] 10).

Analysis

    Having made the foregoing findings of fact largely based on 
Respondents' admissions, the undersigned now turns to whether BIS is 
entitled to summary decision as a matter of law. 15 C.F.R. Sec.  
766.8.
    The Agency bears the burden of proving the allegations in the 
Complaint by the ``preponderance of the evidence'' standard of proof 
typically applicable in administrative or civil litigation. See In 
the Matter of lhsan Medhat Elashi, 71 Fed. Reg. 38843, 38847 (July 
10, 2006). Applying this standard of proof, the Agency is entitled 
to summary decision pursuant 15 C.F.R. Sec.  766.8 upon a showing 
``there is no genuine issue as to any material fact,'' and thus, it 
``is entitled to a summary decision as a matter of law.'' Id.
    As set forth below, the record demonstrates there remain no 
genuine issues of material fact and the Agency is entitled to 
summary decision as a matter of law as to all of the charges at 
against Respondents. All the evidence in this case shows Respondents

[[Page 9265]]

Trilogy and Johnson violated 15 C.F.R. Sec.  764.2(a) and 15 C.F.R. 
Sec.  764.2(b).

Trilogy Violations of 15 C.F.R. Sec.  764.2(a)

    The Charging Letters allege Respondent Trilogy violated 15 
C.F.R. Sec.  764.2(a) on three instances when it sent explosives 
detectors and analog-to-digital converters to Russia on January 22, 
2010, April 6, 2010, and May 14, 2010. Pursuant to section 764.2(a), 
the Agency argues Respondents were not permitted to make these three 
shipments without a license or authorization from BIS. Specifically, 
Section Sec. 764.2(a), provides:

    Engaging in prohibited conduct. No person may engage in any 
conduct prohibited by or contrary to, or refrain from engaging in 
any conduct required by, the EAA, the EAR, or any order, license or 
authorization issued thereunder.

Similarly, Title 15 C.F.R. Sec.  742.4 specifically requires a license 
for ``all items in ECCN [Export Control Classification Number] on the 
CCL [Commerce Control List] that include NS Column 1 in the Country 
Chart column of the License Requirements'' section.\13\ BIS contends 
the three Russian shipments falls under sections 764.2(a) and 742.4 
because: 1) the explosive detectors and converters are listed on the 
Commerce Control List, classified under ECCN 1A004.d, and controlled on 
national security grounds for export to Russia; and 2) the analog-to-
digital converters are items subject to the Regulations and at all 
times relevant were listed on the Commerce Control List, classified 
under ECCN 3A001.a.5.a.5, and controlled on national security grounds 
for export to Russia.
---------------------------------------------------------------------------

    \13\ (a)License requirements. It is the policy of the United 
States to restrict the export and reexport of items that would make 
a significant contribution to the military potential of any other 
country or combination of countries that would prove detrimental to 
the national security of the United States. Accordingly, a license 
is required for exports and reexports to all destinations, except 
Canada, for all items in ECCNs on the CCL that include NS Column 1 
in the Country Chart column of the ``License Requirements'' section. 
A license is required to all destinations except those in Country 
Group A:1 (see supplement no. 1 to part 740 of the EAR), for all 
items in ECCNs on the CCL that include NS column 2 in the Commerce 
Country Chart column of the ``License Requirements'' section except 
those cameras in ECCN 6A003.b.4.b that have a focal plane array with 
111,000 or fewer elements and a frame rate of 60 Hz or less. A 
license is required to all destinations except those in Country 
Group A:1 (see supplement no. 1 to part 740) for those cameras in 
ECCN 6A003.b.4.b that have a focal plane array with 111,000 or fewer 
elements and a frame rate of 60 Hz or less and for cameras being 
exported or reexported pursuant to an authorization described in 
Sec.  742.6(a)(2)(iii) or (v) of the EAR. The purpose of the 
controls is to ensure that these items do not make a contribution to 
the military potential of countries in Country Group D:1 (see 
supplement no. 1 to part 740 of the EAR) that would prove 
detrimental to the national security of the United States. License 
Exception GBS is available for the export and reexport of certain 
national security controlled items to Country Group B (see Sec.  
740.4 and supplement no. 1 to part 740 of the EAR). (emphasis 
added).
---------------------------------------------------------------------------

    Respondent Trilogy provided no evidence showing the corporation 
made these shipments with a license, makes no argument the items were 
outside the scope of the licensure requirements in 764.2(a) and 742.4, 
nor provides any evidence to dispute BIS' evidence. Instead, Respondent 
argues that the corporation secured a third-party, Mainfreight, Inc., 
to properly comply with BIS regulations and claims Trilogy ``only 
initiated'' the export transactions. In support of his position, 
Respondent notes the corporation gave power of attorney to Mainfreight, 
Inc. in 2009, authorizing ``Mainfreight SFO to handle necessary export 
paperwork'' and when doing so he assumed competence on the part of 
Mainfreight SFO. While recognizing Mainfreight, Inc, ``failed in their 
responsibilities on three occasions'' Respondent Trilogy insists the 
corporation in no way authorized Mainfreight SFO ``to violate federal 
[law] on [Respondents'] behalf.'' Respondent's Answer, Id. Respondent's 
argument ultimately asserts Mainfreight, Inc. is the culpable party 
here, not Trilogy. See Respondent's Counter Motion. Respondent's 
arguments are not persuasive.
    Assuming, for the sake of argument, that Mainfreight, Inc., agreed 
to take on all licensing responsibilities, Trilogy, as the USPPI/
exporter, remained obligated, as a matter of law, to determine whether 
a license was required under the regulations and to seek any such 
required license from BIS. Title 15 C.F.R. Sec.  758.3(a) clearly 
states:

    Export transactions. The United States principal party in 
interest is the exporter, except in certain routed transactions. The 
exporter must determine licensing authority (License, License 
Exception, or NLR), and obtain the appropriate license or other 
authorization. The exporter may hire forwarding or other agents to 
perform various tasks, but doing so does not necessarily relieve the 
exporter of compliance responsibilities.

    Respondent does not allege that these export transactions were 
routed transactions; \14\ therefore, per the regulations, Trilogy, as 
the USPPI/exporter, had the legal obligation to determine any license 
requirements and obtain the needed export licenses in connection with 
each of the exports at issue here. Trilogy's failure to do so resulted 
in three violations of 15 C.F.R. Sec.  764.2(a).
---------------------------------------------------------------------------

    \14\ In order for these transactions to have been routed export 
transactions, Respondent Trilogy International, as the USPPI, would 
had to have obtained from TAIR, as the foreign principal party in 
interest, ``a writing wherein the foreign principal party in 
interest expressly assumes responsibility for determining licensing 
requirements and obtaining license authority.'' 15 C.F.R. Sec.  
758.3(b). Respondent could not have proven that these transactions 
constituted routed export transactions even if it had raised such a 
defense.
---------------------------------------------------------------------------

    Ultimately, Respondent Trilogy's defense does not create a dispute 
of a material fact; it does not counter the evidence cited by BIS. 
Because Respondent Trilogy failed to produce any evidence to counter 
the evidence cited by BIS showing the three violations of 15 C.F.R. 
Sec.  764.2(a), the undersigned will GRANT BIS' motions for Summary 
Decision on these charges. The record is undisputed, Respondent Trilogy 
sent three shipments on January 22, 2010, April 6, 2010, and May 14, 
2010 respectively. These shipments are controlled by 764.2(a) and 742.4 
because: 1) the explosive detectors and converters are listed on the 
Commerce Control List, classified under ECCN 1A004.d, and controlled on 
national security grounds for export to Russia; and 2) the analog-to-
digital converters are items subject to the Regulations and at all 
times relevant were listed on the Commerce Control List, classified 
under ECCN 3A001.a.5.a.5, and controlled on national security grounds 
for export to Russia. Respondent Trilogy violated 15 C.F.R. Sec.  
764.2(a) by shipping these materials to Russia on three separate 
occasions.

Johnson Violation of 15 C.F.R. Sec.  764.2(b)

    The Agency also alleges Respondent Johnson violated the regulations 
when he facilitated the corporation's three unlawful shipments. 
Specifically, the Agency claims Respondent Johnson caused aided or 
abetted Respondent Trilogy, through his actions as president of the 
company, when he took action to initiate the unauthorized shipments in 
January 20, 2010, March 4, 2010, and April 15, 2010.
    Pursuant to 15 C.F.R. Sec.  764.2(b), ``[n]o person may cause or 
aid, abet, counsel, command, induce, procure, or permit the doing of 
any act prohibited, or the omission of any act required, by the EAA, 
the EAR, or any order, license or authorization issued thereunder.'' 
Here, Respondent Johnson's actions facilitated the corporation's 
violations. At a minimum, Respondent Johnson aided Respondent Trilogy 
by simply preparing the international invoices to TAIR for the 
explosives detectors on January 20, 2010. Similarly, Respondent Johnson 
aided and abetted Respondent Trilogy when he prepared the invoices for 
the converters on March 4, 2010, and April 15, 2010. However, the 
Agency correctly notes all of the actions taken by

[[Page 9266]]

Respondent Trilogy were done through Respondent Johnson.
    Pursuant to the Under Secretary's May 30, 2017 Remand Order, BIS 
can take action against Respondents separate and apart from each other, 
even for the same acts. BIS correctly notes at least one federal court 
acknowledges an agent's action can constitute both proof of a company's 
primary violations and proof of the agent aiding and abetting 
violations. S.E.C. v. Koenig, 2007 WL 1074901 (N.D. ILL. Apr. 5, 2007). 
Accordingly, the undersigned concludes Respondent Johnson aided and 
abetted Respondent Trilogy when it took steps to further the illegal 
shipments for the company.
    Respondent Johnson provides no evidence to counter the Agency's 
evidence, and makes no argument that he did not take the alleged 
actions to further the shipments to Russia. Again, his only defense, 
discussed above, is that Mainfreight, Inc., bore the responsibility to 
comply with Agency regulations, but ``failed in their responsibilities 
on three occasions.'' This defense failed as applied to Respondent 
Trilogy's three violations of 15 C.F.R. Sec.  764.2(a) and for similar 
reasons, fails when applied to Respondent Johnson's violations of 15 
C.F.R. Sec.  764.2(b).

SANCTION

    Title 15 C.F.R. Sec.  764.3 sets forth the permissible sanctions 
BIS may seek against regulatory violators and permits up to $289,238 
per violation, or twice the value of the transaction upon which the 
penalty is imposed, and a denial of Respondents' export privileges 
under the regulations. The maximum total civil penalty which can be 
imposed upon Respondent would be $867,894 and/or a denial of export 
privileges for the three proved violations. The regulations do not 
place any limit on the length of the time period for denial of export 
privilege orders under 15 C.F.R. Sec.  764.3.
    In its post-remand brief, the Agency argues BIS guidance on pre-
litigation settlements and the outcomes of previous BIS export control 
cases provide useful guideposts to determine the sanction in this case. 
BIS also relies on the guidance in Supplement No. 1 to Part 766 of the 
Regulations (Penalty Guidance) to determine the appropriate sanction. 
Under the Penalty Guidance, the undersigned may consider factors such 
as: the degree of culpability (including whether reckless, knowing, or 
willful conduct was involved), whether there were multiple violations, 
and the timing of settlement. 15 C.F.R. Party 766, Supp. No. 1. The 
Penalty Guidance also discusses aggravating factors that may be 
accorded ``great weight,'' including whether the party's conduct 
demonstrated a serious disregard for export compliance 
responsibilities, and whether the violation was significant in view of 
the sensitivity of the items involved and/or the reason for controlling 
them to the destination in questions.
    The undersigned agrees Respondents' violations warrant sanctions. 
The undisputed facts show Respondents maneuvered to procure national 
security items and then to export them from the United States, without 
seeking authorization from BIS nor procuring the requisite license. As 
the April 24, 2017 Order recognizes, Respondents were willful and 
reckless. Given the Under Secretary did not disturb this finding, the 
undersigned again finds the willfulness and recklessness relevant 
actions when determining a sanction in this matter. Even if the 
undersigned determined there was neither willful nor reckless activity, 
the record supports a finding that Respondents acted with gross 
negligence. Indeed, one of Respondents' defenses demonstrates the 
point.\15\
---------------------------------------------------------------------------

    \15\ Although Respondents did not respond to the court's 
instruction to file a brief addressing sanctions, the court 
considers his other defenses as arguments in mitigation.
---------------------------------------------------------------------------

    Specifically, as noted above, Respondents argue that Mainfreight, 
Inc., agreed to take on all licensing responsibilities, and it was 
Mainfreight that failed to comply with BIS regulations in this case. 
While the undersigned need not revisit why this is not a tenable 
defense, it is relevant to point out that even assuming there was some 
delegable duty under the regulations, Respondents would still be at 
fault for failing to identify Mainfreight's deficiencies.
    For example, had Respondents produced evidence that the agent, 
Mainfreight, Inc., fraudulently informed Respondent Johnson that it 
acquired the requisite license, and produced evidence reasonably 
showing it complied with BIS regulations, the undersigned could 
potentially consider this mitigating evidence. However, Respondents 
produced no evidence of this and instead relies on the blanket argument 
that Mainfreight, Inc., bore responsibility. What is more, Respondents 
produced no evidence showing it monitored Mainfreight, Inc., set forth 
any procedures to detect and deter noncompliance, nor show why it was 
reasonable to rely on Mainfreight to fulfill BIS' requirements in any 
way. Therefore, not only does Respondents' delegation argument not 
excuse the conduct in this matter, it does not mitigate the severity of 
the actions.
    Moreover, the record shows Respondents failed to learn details 
related to the financing of the illicit transactions, provided through 
Trilogy Netherlands, with the ultimate source of financing being 
unknown to Respondents. Johnson Depo. Tr., Exh. 3 to BIS's Brief on 
Sanctions, at page 91, line 5 to page 92, line 10. Such avoidance of 
these details shows Respondents' failure to act diligently to prevent 
these export transactions, or to seek proper permission from BIS. 
Tinling Declaration, Exh. 2 to BIS's Brief on Sanctions, at ] 5.
    The undersigned also observes Respondent Johnson's conduct 
illustrates a flippant attitude toward regulatory control. As an 
example, Respondent Johnson straightaway acknowledged he failed to 
comply with California state regulations in a separate instance because 
``simply not complying appropriately with whatever in the hell the 
regulations were'' because ``[y]ou know, I didn't pay much attention to 
them.'' Johnson Depo. Tr. Exh. 3 to BIS' Brief on Sanctions, p. 11, 3-
12.
    Finally, Respondents' have yet to acknowledge the seriousness of 
the violations nor shown any remorse for these failures. Again, 
Respondents fail to even make arguments to the undersigned concerning 
the appropriate sanction here, show how he has corrected these issues, 
or might correct these issues in the future.
    Ultimately, after considering the regulations, the Penalty Guidance 
and other BIS authority, the undersigned finds a $50,000.00 sanction 
against Respondent Trilogy, and a $50, 000.00 sanction against 
Respondent Johnson appropriate. Furthermore, the undersigned finds both 
Respondent Trilogy and Johnson's export privileges should be suspended 
for seven years. BIS authority in similar cases supports such a 
sanction by analogy. See Matter of Yavuz Cizmeci (Order dated March 23, 
2015); In the Matter of Gregorio L. Salazar (Order dated Dec. 10, 
2015), In the Matter of Manoj Bhayana (Final Decision and Order dated 
March 28, 2011).

CONCLUSION AND RECOMMENDATION

    The undersigned issues this Recommended Decision and Order pursuant 
to 15 C.F.R. Sec.  766.17(b)(2). The Agency's Motion for Summary 
Decision against Respondent Trilogy and Johnson is GRANTED.
    The undersigned recommends the Under Secretary find each of the 
Section

[[Page 9267]]

764.2(b) charges PROVED. The undersigned further recommends the Under 
Secretary levy a fine in the amount of 50,000.00 against Respondent 
Trilogy; levy a fine in the Amount of 50,000.00 against Respondent 
Johnson; and suspended both Trilogy and Johnson's exporting privileges 
for seven years.

    Done and dated this 24th day of January, 2018, Baltimore, MD.
Bruce Tucker Smith,
Administrative Law Judge, United States Coast Guard.

CERTIFICATE OF SERVICE

    I hereby certify that I have served the foregoing Recommended 
Decision and Order Granting Summary Decision on Remand the following:

Zachary Klein, Esq., Attorney for Bureau of Industry and Security, 
Office of Chief Counsel for Industry and Security, U.S. Department of 
Commerce, Room H-3839, 14th Street & Constitution Avenue NW, 
Washington, D.C. 20230, Email: [email protected], (Electronically and 
first class mail).
Trilogy International Associates, Inc. Attn: William Michael Johnson, 
President and General Manager, P.O. Box 342, Altaville, CA 95221, 
Email: inc.com">[email protected]inc.com, (Electronically and first class mail).
ALJ Docketing Center, Attention: Hearing Docket, Clerk 40 South Gay 
Street, Room 412, Baltimore, MD 21202-4022, (Hand delivered).


    Done and dated this 24th day of January 2018, Baltimore, MD.

Lauren M. Meus,
Hearing Docket Clerk, United States Coast Guard.

[FR Doc. 2018-04404 Filed 3-2-18; 8:45 am]
 BILLING CODE P