Export Control Reform and Deregulation Lead Federal Prosecutors to Get Creative in Prosecuting Schemes to Export Military Technology to Potential Foreign Adversaries
On October 23, 2015, Mozaffar Khazaee was sentenced to 8 years in prison and ordered to pay $50,000 in fines for violating the Arms Export Control Act, 22 U.S.C. § 2778 (the “AECA”), by attempting to transfer to Iran proprietary, trade secret and export controlled material relating to the U.S. Air Force’s F-35 Joint Strike Fighter (JSF) Program. The sentence comes almost eight months after Mr. Khazaee pled guilty in February 015 to one count of the unlawful export of technical data from the United States in violation of the AECA. To the surprise of many, the Government originally charged and indicted Mr. Khazaee solely with the federal offense of Interstate Transportation of Stolen Property (“ITSP”) rather than a violation of the AECA and the International Traffic in Arms Regulations (“ITAR”), even though the stolen information was apparently well marked as “technical data” controlled under the ITAR. The prosecution demonstrates the challenges and difficulties confronted by law enforcement in light of recent and ongoing deregulation of aspects of international commercial arms sales by the Obama Administration.
According to court documents, from approximately 2009 through late 2013, Mr. Khazaee offered to provide and did provide documents containing stolen export controlled defense technology to gain employment with state-controlled Iranian technical universities. In or about November 2013, Mr. Khazaee attempted to send a container of stolen material to Iran, including thousands of technical manuals, specification sheets, test results, technical drawings and data and other proprietary material relating to military jet engines and the U.S. Air Force’s F-35 JSF Program and the F-22 Raptor. Mr. Khazaee allegedly stole the materials from U.S. defense contractors where he had formerly worked, and many of the documents were prominently labeled as “Export-Controlled” and stamped with “ITAR-controlled” warnings.
On January 9, 2014, Mr. Khazaee was arrested in Newark, New Jersey as he attempted to board a flight to Iran via Frankfurt, Germany. Rather than charge Mr. Khazaee with violations of the AECA, federal prosecutors initially filed a criminal complaint which was followed by an indictment in January 2015 charging Mr. Khazaee with the offense of ITSP. The ITSP offense carries a 10-year maximum sentence while the AECA offense carries a 20-year maximum sentence and a greater potential sentence under the U.S. Sentencing Guidelines. The choice of the less serious ITSP charge appears to reflect the growing challenges and difficulties faced by federal investigators and prosecutors as they confront uncertainty and ambiguity surrounding whether the AECA/ITAR controls the export of military technical information relating to weapons systems. Those uncertainties and ambiguities are heightened where the technical information relates to parts and components which are controlled for export only if “specially designed” or exclusively designed for a particular weapons system.
Under DDTC’s adoption and definition of the term “specially designed”, for example, an aircraft part or component used in the F-35 is not “specially designed” and thus not subject to export control under Category VIII(h)(1) “if it . . . was or is being developed with knowledge that it is or would be for use in or with both defense articles enumerated on the U.S. Munitions List and also commodities not on the U.S. Munitions List.” 22 C.F.R. § 120.41(b)(4). As applied to the instance of the F-35 part and technical information relating to its design, for example, “a part common to only the F-14 and F-35 is not specially designed for purposes of the ITAR.” 22 C.F.R. § 121.1, Note to Category VIII(h)(1). Thus, law enforcement officers investigating the alleged export of military technical information concerning an F-35 part must first learn from the original manufacturer or designer whether the part was exclusively designed for the F-35 or another one of the six military aircraft at Category VIII(h)(1). For those F-35 parts and components not enumerated on the United States Munitions List, for example, law enforcement officers may be unable to look to or rely upon the DDTC for the answer whether the ITAR controls the F-35 part and its related technical information. Instead, the manufacturer’s or designer’s subjective intent or knowledge may control whether the part was “specially designed”, thereby subjecting the technical information concerning that military aircraft part and its design to export control under the AECA/ITAR.
Such ambiguities and uncertainties created by placing the determination of AECA/ITAR coverage into the hands of private actors are great obstacles to investigators seeking to answer promptly and accurately whether an individual unlawfully and willfully sought to export and sell F-35 technology to China or another foreign nation. In the prosecution of Mr. Khazaee, the uncertainties were resolved with a guilty plea to a one-count Information which stated, in operative part, that Mr. Khazaee “knowingly and willfully exported . . . a 103-page document containing technical data that the [DDTC] has confirmed was designated as a defense article under Category XIX(g)”, which governs technical data directly related to certain enumerated gas turbine engines and associated equipment. Going forward, one may reasonably anticipate that well-informed and prudent federal investigators and prosecutors increasingly may steer clear of charges under the AECA/ITAR and instead rely upon less serious but more generally applicable federal offenses such as the charge of Interstate Transportation of Stolen Property to protect the national security interests and military technology of the United States.