Comtech Telecomm Settles OFAC Violations for $894,111
Comtech and its subsidiary EF Data sell advanced communications systems, software, and services. The violations arose when these companies indirectly exported warrantied satellite equipment and facilitated services and training to a Sudanese government-owned entity that was prohibited under OFAC’s Sudan sanctions program.
The Sudan Sanctions Program was eliminated in October 2017. The activities at issue in this enforcement action occurred while the Sudan Sanctions Program was in effect.
Starting in June 2014 and continuing for over a year until October 2015, Comtech and EF Data illegally exported satellite equipment under warranty, provided ongoing telephone support, and facilitated training with respect to the equipment to the Sudanese Civil Aviation Authority.
EF Data and its subsidiary located in Montreal, Canada, prepared a price quote of satellite equipment under warranty , telephone support and training for a Canadian satellite communications equipment manufacturer. The sales agreement listed the ultimate destination of the equipment as Sudan. EF Data’s sales agreement also included telephone support and technical training services in connection with the equipment.
Before shipping the equipment to the Canadian Company, EF Data’s credit Manager alerted other senior EF Data managers that the proposed transaction raised export issues because the end user was in Sudan. EF Data’s Director of Logistics and Export Compliance learned that the ultimate consignee was SCAA. EF Data’s screening software generated an alert to EF Data about the OFAC Export restrictions for Sudan. To address this issue, EF Data’s Logistics Manager attempted to shift export compliance responsibilities to the Canadian equipment company.
Despite all of these warnings and circumstances, EF Data shipped the satellite equipment to the Canadian company in two shipments, knowing that the Canadian company then integrated the equipment into a satellite-enabled network of earth-based telecommunications stations. The Canadian company shipped the V-SAT Network to SCAA at the Khartoum Airport for use at 14 locations in Sudan.
From September 29, 2014, to October 2, 2014, EF Data’s subsidiary trained seven SCAA employees on the equipment’s use in Montreal, Canada.
Comtech voluntarily disclosed the apparent violations to OFAC in October 2014, Comtech’s Senior Vice President and EF Data’s President sent an email to EF Data’s Logistics Director instructing him to secure an OFAC license to provide warranty services. The next month, November 2014, EF Data applied for an OFAC license to provide SCAA with services for the setup, support, operation and related services. After the application was denied, EF Data refiled its application in February 2015.
While the application was pending, EF Data’s subsidiary continued to provide telephone support until October 2015. Separately, in March 2015, EF Data’s former Director of Logistics approved a warranty request to loan (and export from the United States) four hardware units to the Canadian company to fix a problem SCAA was experiencing with its hardware. OFAC denied EF Data’s license application to provide such warranty services on March 13, 2016.
During the OFAC investigation, Comtech made several significant personnel changes, including: (1) adding a Vice President tasked with trade compliance at EF Data’s Arizona facility, (2) committing to hire an additional trade compliance position to support that Vice President, and (3) committing to create a new position of Senior Trade Compliance Officer and/or Chief Trade Compliance Officer at Comtech’s New York headquarters.
Comtech and EF Data received credit for voluntary disclosure of the apparent violations but was penalized for ignoring the screening red flag, and approving warranty services while an application for an OFAC license was pending.
OFAC also noted that EF Data provided shifting explanations in response to OFAC subpoenas and a request for information, and its subpoena response included an internal email that was manipulated by EF Data’s former Director of Logistics to omit certain relevant language, requiring OFAC to expend significant additional time and resources to complete itrs investigation.