In December 2010, the U.S. Department of Commerce, Bureau of Industry and Security ("BIS") imposed a $3.75 million fine against PPG Industries, Inc. and its subsidiary in China, PPG Paints Trading (Shanghai) Co., Ltd., for alleged unlawful exports of high performance coatings to Pakistan via China. The fine, which settled both civil and criminal charges against the company, is one of the highest ever imposed by BIS for possible violations of the Export Administration Regulations ("EAR"). Miller & Chevalier previously wrote about the charges and settlement in an International Alert available here.
Despite the settlement, the enforcement fallout continues. The U.S. Government has continued to pursue charges against PPG employees involved in the illegal exports, making good on its promise to hold individuals liable for export control violations.
Xun Wang, a Chinese citizen and former Managing Director of PPG Paints Trading, was recently arrested and indicted for her role in the violations. Specifically, according to the indictment, Wang engaged in a scheme to export and reexport the coatings without the required license and concealed the ultimate destination of the coatings. Criminal charges remain pending against Wang, and civil charges may also be forthcoming.
Curtis Hickox, a U.S. citizen and former Regional Sales Manager of PPG Industries, was also recently charged for his role in the violation. Specifically, according to settlement documents issued by BIS, Hickox took actions to disguise the coatings exports as domestic sales. Unlike Wang, only civil charges have been filed against Hickcox. BIS imposed a $500,000 fine to settle those charges, although most of the fine will be waived if Hickcox completes an export compliance training program. More significantly, BIS also barred him from participating in any export transaction for 15 years.
The above cases represent BIS's new strategy to pursue enforcement actions against individuals much more aggressively. Although BIS has always pursued individuals for possible export control violations, it has historically refrained from doing so when an individual committed the acts leading to the violations within the scope of his/her employment. In that situation, BIS has ordinarily observed the common law doctrine of respondeat superior, holding an employer liable for its employees' acts and thus pursuing an enforcement action against only the corresponding corporate entity. But since 2009, BIS officials have publicly warned the export community of its intent to pursue concurrent actions against culpable employees, separate from any action it may also pursue against their employers.
The export community and, more specifically, company employees involved in exports should heed the above cases as further warnings. And based on more recent statements from BIS officials, the agency remains committed to holding company employees liable in their individual capacity for acts giving rise to export control violations, even if those acts were performed within the scope of employment and BIS also pursues an enforcement action against the employer. No less significant, the U.S. Government will also pursue criminal charges and seek severe penalties against individuals. As the actions against the former PPG employees illustrate, penalties may include arrest and denial of export privileges -- consequences that are obviously disastrous for any individual working in the export field.
Update: After publication of this Miller & Chevalier Update, BIS yet again charged another PPG employee involved in the above-described exports. Howard Combs, then-Director of Business Development and Support at PPG Industries, was charged with one count of conspiracy to violate the EAR for, according to the settlement documents, disguising one of the export transactions as a domestic transaction and his role in arranging the export. BIS imposed a maximum $250,000 fine to settle that charge, although most of the fine will be waived if Combs commits no further violations of the EAR during a two-year period. More significantly, BIS also barred him from participating in any export transaction for five years.
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