Short Take: Subcontractor Illegal Export/Import of Military Articles
February 22, 2015
By: Lindsay Simmons
The Assistant Attorney General for National Security, the U.S. Attorney of the Northern District of Illinois, the Internal Revenue Service, and the Department of Defense Criminal Investigative Service recently announced the indictment of an Illinois company, its president, and a former employee for unlawfully exporting and importing military articles, including components used in night vision systems and a battle tank sourced to the U.S. Armed Forces.
According to the indictment, Vibgyor Optical Systems Inc. manufactured items to be supplied to the U.S. Department of Defense (DOD) but, instead of manufacturing the items in Illinois, as represented by the company to its prime contractors, Vibgyor illegally sent the technical data for and samples of the military items to manufacturers in China. Once manufactured – in China – Vibgyor then re-imported the items and sold them to the DOD through various prime contractors.
Vibgyoy conducted this manufacturing scheme from 2006 to 2014 as part of a conspiracy to defraud the United States, in violation of the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR). (The AECA prohibits the export or import of defense articles without first obtaining a license from the State Department. And, under ITAR, any person seeking to import items designated as defense articles on the U.S. Munitions Import List is required to obtain a permit.)
First, Vibgyor won subcontracts to supply components and systems to DOD prime contractors by misrepresenting the country of manufacture for the items it supplied. Then, Bharat Verma, an employee, falsely claimed that the items Vibgyor supplied were manufactured domestically, when they had been manufactured in China. Finally, Vibgyor accomplished the prohibited manufacture of these items in China, by exporting technical data for and samples of the military items to manufacturers in China.
The U.S. Attorney was quoted as stating that “the Arms Export Control Act and the International Traffic in Arms Regulations are vital to preventing embargoed countries from gaining access to our sensitive military technology, and to ensuring that our armed forces are not issued substandard equipment.”
The offenses charged each are punishable by up to five years’ imprisonment, with a maximum possible penalty of 20 years in prison and a fine up to $1,000,000.
Lindsay Simmons is responsible for the contents of this Short Take.
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