Enforcement opened its investigation after AL U.S., the principal U.S.-based subsidiary of Alfa Laval AB with its head office in Richmond, Virginia, filed a self-disclosure with OFAC. In the disclosure, AL U.S. stated that its operations located in Exton, Pennsylvania (“AL Tank”), might have “implicated the ITSR” by facilitating a business opportunity between Iran-based Alborz Pakhsh Parnia Company (“Alborz”) and AL Middle East that ultimately led to the exportation of U.S.-origin AL Tank products to Iran. The export also involved AL Iran, a subsidiary of Alfa Laval AB, and a Dubai company. The Dubai company was falsely listed as the end-user on invoices at the behest of AL Middle East for U.S.-origin AL Tank products that were in fact destined for Alborz in Iran.
AL Tank’s Referral of an Iranian Business Opportunity
On May 27, 2015, the CEO of Alborz emailed AL Tank to inquire about purchasing its Gamajet cleaning units, describing his company as based in Iran. AL Tank’s U.S.-based portfolio manager for tank cleaning equipment responded to the email by providing a recommendation for AL Tank products, pricing information, product descriptions and specifications, and an offer to prepare a quote. In replying, the CEO of Alborz specifically asked the portfolio manager at AL Tank, “is there the possibility of delivery to our country [Iran]? Please explain about condition of delivery.”
The portfolio manager then forwarded the email to a tank cleaning portfolio manager at Alfa Laval Denmark (“AL Denmark”), on August 7, 2015, asking “who would be the best contact for Iran for an oil&gas inquiry?” AL Denmark recommended as a good point of contact a sales manager in the sanitary division for the Middle East region at AL Middle East, who in turn recommended another AL Middle East employee, the manager for the Middle East region. The regional manager for AL Middle East and the portfolio manager for AL Tank exchanged emails between August 11 and August 17, 2015 discussing whether AL Tank could quote or sell items from the United States to Iran. On August 17, 2015, the portfolio manager for AL Tank referred the CEO of Alborz to the AL Middle East regional manager as the point of contact for sales to Alborz.
Formation of the Conspiracy
Following the referral, the sales manager for AL Middle East and AL Iran’s general manager communicated with Alborz regarding potential sales to Iran that would use AL Middle East’s distributor relationship with the Dubai company. The sales manager for AL Middle East then traveled to Iran in late January 2016 in order to meet with Alborz, where they discussed how to export Gamajet products into Iran.
Shortly afterwards, on February 5, 2016, AL Denmark asked the portfolio manager for AL Tank to set up a meeting with the sales manager for AL Middle East to discuss exporting goods into Iran. Just over two weeks later, on February 23, 2016, the owner of the Dubai company emailed the sales manager and the senior sales engineer for AL Middle East a memo from Alborz (the “Alborz memo”) with the following message: “… Alborz Pakhsh Parnia Company is
one of the oil products distribution company at gas stations in Iran which distributes the oil products in gas stations of all over the country. Our company wants to purchase a number of Gamma-jet equipment from Alfa Laval Company ….” To that end, the Alborz memo outlined a strategy for importing U.S.-origin goods into Iran, involving AL Iran, AL Middle East, and the Dubai company.
Prior to the March 26, 2016 export, Alfa Laval Group’s General Counsel sent a memo on January 27, 2016 to Alfa Laval employees regarding an export control update on Iran in response to the Joint Comprehensive Plan of Action. This memo noted that “any transactions involving US persons, USD, or US origin/content products are still prohibited under the remaining US sanctions on Iran.” This memo was emailed to the employees of AL Middle East and AL Iran on January 31, 2016, including those involved in the conspiracy at AL Middle East and AL Iran. This demonstrates that the managers from AL Middle East and AL Iran had knowledge of U.S. sanctions prohibitions on Iran prior to the March 26, 2016 export.
The Exportation/Re-exportation of U.S.-Origin Goods to Iran
Following the plan laid out in the Alborz Memo, AL Middle East caused AL Tank, a U.S. person, to export two Gamajet 10 cleaning machines and accessories to Iran. On March 5, 2016, the senior sales engineer at AL Middle East sent the Dubai company a proforma invoice for the Gamajet products worth $18,585.36. The next day, “[the Dubai company] requested its bank to transfer $18,585.36 to AL Middle East in payment for the Gamajet equipment ultimately destined for Alborz in Iran,” according to a memo from the Dubai company to a bank in Dubai.
On March 7, 2016, the portfolio manager for AL Tank then sent the senior sales engineer at AL Middle East with an updated “Gamajet Quotation Invoice,” which increased the number of Gamajet products at the request of the Dubai company. The following day, the senior sales engineer at AL Middle East confirmed the order, and the portfolio manager for AL Tank told the senior sales engineer at AL Middle East to send the purchase order to AL U.S.’s Americas Distribution Center. The portfolio manager for AL Tank also asked the senior sales engineer at AL Middle East for the name of the end user, to which the senior sales engineer at AL Middle East replied, “this machine is for [the Dubai company], UAE.” In an interview, the senior sales engineer at AL Middle East stated, “the identification of [the Dubai Company] rather than Alborz was at the instruction of the [sales manager for AL Middle East].”
On March 8, 2016, the senior sales engineer at AL Middle East issued an “Order Confirmation” to the Dubai company, while AL Middle East issued an invoice for the transaction on March 17, 2016. On March 26, 2016, two Gamajet 10 cleaning machines and accessories were exported by Alfa Tank to the UAE for subsequent delivery to the Dubai company. Consistent with the Alborz memo, the Dubai company then supplied the Gamajet products to Alborz in Iran.
Attempts to Further the Conspiracy
Shortly after the March 26, 2016 shipment, AL Middle East appears to have begun organizing additional sales of Gamajet products on behalf of Alborz in the same manner as the
initial sale, as indicated between an email exchange between the senior sales engineer at AL Middle East and the portfolio manager for AL Tank between April 9 and April 12, 2016:
Senior sales engineer at AL Middle East: As you know that we have sold 2 sets of gamajet, pump and lance. Customer actually wants to make a mobile unit for this one. Is there any special instructions for how to make this mobile unit.[?] We have to support them in each and every stage because they are planning to build 20 more mobile units if they succeed with these two.”
The email suggests that Alborz is the customer the senior sales engineer at AL Middle East is referring to in order to acquire more Gamajet Cleaning Machines, and highlights AL Middle East’s intent to fulfil future requests from Alborz.
Subsequently, from April 27, 2016 to May 4, 2016, the senior sales engineer at AL Middle East and the Dubai company communicated about the potential sale of additional Gamajet equipment to Alborz, showing an intent to pursue additional deals. On May 4, 2016, the senior sales engineer at AL Middle East sent the Dubai company a “Quotation” invoice for a Gamajet 10 dual nozzle with a total value of $5,170.
As described below, the April and May inquiries did not result in U.S.-origin Gamajet products actually being sent to Iran. However, had the U.S. Government not intervened (as described below), it is clear that AL Middle East fully intended to further the objective of its conspiracy by supplying products in the May 4, 2016 Quotation to Iran as it did in the March 26, 2016 export. Had the twenty Gamajet units order come to fruition as expressed and contemplated in the April email, Alborz would have received approximately $181,453.60 worth of U.S.-origin AL Tank products.
Termination of the Conspiracy
On April 13, 2016, the U.S. Department of Commerce Bureau of Industry and Security (“BIS”) requested a post-shipment verification from AL U.S. regarding the March 26, 2016 export of the Gamajet products. The BIS Export Control Officer’s post-shipment verification report stated the Dubai company provided documentation showing that the exports in question were re-exported to Iran.
As a result of BIS’s inquiry, AL U.S. hired outside counsel in July of 2016 to conduct an internal investigation of the Apparent Violations. The findings of the investigation from AL U.S. were submitted to OFAC on January 23, 2017. In those findings, AL U.S. stated:
AL US came to understand that employees at AL Middle East and AL Iran introduced Alborz to [the Dubai company] for the purpose of identifying this distributor (rather than Alborz) as the ultimate consignee and customer on transactional documents such that the transaction would not be identified as a prohibited export from the United States to Iran.
The transactions contemplated by AL Middle East on behalf of Alborz in the May 4, 2016 “Quotation” invoice to Iran ultimately did not take place, apparently as a result of BIS’s post-shipment verification inquiry and AL U.S.’s subsequent investigation, which resulted in the termination of the employees who partook in the conspiracy.