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Indictments, Convictions, and More

Mitchell Silberberg & Knupp International Trade Alert

March 2011

by Susan Kohn Ross

Glaxo Lawyer’s Indictment Dismissed


In our November 2010 Alert, we reported the indictment of Lauren Stevens, former in-house lawyer at Glaxo Smith Kline (GSK). The FDA claimed doctors were marketing a drug for off-brand uses, i.e., uses other than those approved by the FDA. GSK was asked to provide documentation, and, according to the FDA, certain materials supposedly incriminating to GSK’s case were purportedly withheld by Ms. Stevens, laying the basis for the indictment. Specifically, she was charged with six (6) counts that claimed obstruction of justice, falsification and concealment of documents, and false statements.

Now, some six (6) months later, that indictment has been dismissed by the judge on a showing that Ms. Stevens relied on the advice of counsel, other in-house GSK lawyers, as well as outside counsel. The dismissal was done without prejudice, meaning the Department of Justice may seek another indictment after losing because it failed to properly present the advice of counsel defense to the grand jury that originally indicted Ms. Stevens.

Woncity Bags an Antidumping Indictment

Anyone who deals regularly with Customs knows that collection of antidumping duty is a high priority for the agency. Now comes word of the arrest of Jin Qing Huang, who owns Baltimore-based Woncity Inc. The indictment supporting the arrest accuses Mr. Huang and the company of a total of ten (10) counts of conspiracy, smuggling, making false statements, and false classification of goods. The indictment asserts that Mr. Huang and Woncity failed to pay the antidumping duties on plastic grocery and shopping bags from China. Additional allegations claim undervaluation, understated quantity, and misclassification, leading to having failed to pay $1.15 million in antidumping duties.

Mr. Huang faces a maximum sentence of 77 years in prison. The amount sought by way of forfeiture is the $1.15 million underpaid, with additional fines against him and Woncity of $250,000 for each of the ten (10) counts filed against each defendant.

Export Scheme Conviction Upheld

The Ninth Circuit has upheld the conviction of Zhi Yong Guo for knowingly and willingly conspiring to export and attempt to export controlled thermal imaging cameras without a license.

These thermal imaging cameras convert heat energy to live video, thereby allowing the user to see images day and night. The Bureau of Industry and Security (BIS) has jurisdiction over these licensed goods. Guo, an engineer who worked in China, owned a company that developed photoelectric technologies. As part of his business, he became interested in acquiring U.S.-made thermal imaging cameras, but was only able to succeed once he talked a U.S. friend into helping him.

Guo convinced his friend to purchase these restricted cameras from FLIR Systems. A second friend was enlisted who agreed to receive the cameras and export them, and received a commission for his troubles. FLIR’s export control staff became suspicious because these cameras were being delivered to a printing company and so alerted BIS. BIS began to track the first friend.

When Guo later came to the U.S., his first friend (Chao) helped him get a visa but also ordered more cameras to be shipped to the printer. Chao picked up the cameras and packed them into the shoes and clothing in his suitcase. A few days later Guo and Chao went to LAX with the intention to fly back to China. They surrendered their bags for screening and were arrested after they passed through security. Chao pled guilty and assisted the government in its case against Guo.

Guo challenged his conviction, arguing that the statute under which he was convicted was too vague. 50 U.S.C. § 705(a) provides for criminal penalties for anyone who "willfully commits, willfully attempts to commit, or willfully conspires to commit ... an unlawful act ...." Admitting the export classification and control regime is highly complex, the court nonetheless held the standard is not whether figuring out the regulations is easy. Rather, the question is did the defendant get fair notice about what is permitted and what is forbidden. The court went on to hold that the government had to prove two elements: 1) defendant knew beyond a reasonable doubt a license was required; and 2) defendant intended to violate the law. It seems apparent the outcome was influenced by the fact the thermal imaging cameras were hidden in personal effects. Such activity is seen as telegraphing a wish to conceal one’s actions.

Government Reorganization for Trade Agencies

On March 11, 2011, President Obama signed a Presidential Memorandum to establish the Government Reform for Competitiveness and Innovation Initiative, which is designed to provide input to the President and Congress during the process of restructuring and streamlining the federal agencies that deal with international trade, import, and export. The Memorandum can be found here.

The departments and agencies likely impacted are Commerce, Energy, State, U.S. Trade Representative, International Trade Administration, Foreign Agricultural Service, Export-Import Bank, Agency for International Development, Overseas Private Investment Corp., Small Business Administration, U.S. Trade and Development Agency, and the Office of Foreign Assets Control. Exactly how they will be impacted remains to be seen.

More Changes to Textile Rules

In the March 17, 2011, Federal Register, Customs changed the reporting requirements for the manufacturers identification number (MID) for textiles. In amending 19 C.F.R. § 102.23, the MID requirement going forward identifies the manufacturer as the entity that performed the origin-conferring operation. This notice also finally does away with the requirement to file a Textile Declaration. The Federal Register notice can be found here.


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