[Federal Register Volume 71, Number 125 (Thursday, June 29, 2006)]
[Notices]
[Pages 37042-37051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5778]


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DEPARTMENT OF COMMERCE

[Docket Nos. 04-BIS-25 and 04-BIS-26]


Under Secretary for Industry and Security; In the Matter of: BiB 
Industrie-Handel Dipl.Ing M. Mangelsen GmbH and Malte Mangelsen 
Respondents; Decision and Order

    On November 17, 2004, the Bureau of Industry and Security (``BIS'') 
initiated two separate administrative actions against BiB Industrie-
Handel Dipl.Ing M. Mangelsen GmbH (``BiB'') and Mr. Malte Mangelsen 
(``Mangelsen''), in his individual capacity. BIS alleged that BiB and 
Mangelsen each committed nine violations of the Export Administration 
Regulations (Regulations) \1\, issued under the Export Administration 
Act of 1979, as amended (50 U.S.C. app. Sec. Sec.  2401-2420 (2000)) 
(the Act).\2\
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    \1\ The Regulations are currently codified at 15 CFR Parts 730-
774 (2006). The charged violations occurred between 2001 and 2003. 
The Regulations governing the violations at issue are found in the 
2001 through 2003 versions of the Code of Federal Regulations (15 
CFR Parts 730-774 (2001-2003)). The 2006 Regulations establish the 
procedures that apply to this matter.
    \2\ From August 21, 1994 through November 12, 2000, the Act was 
in lapse. During that period, the President, through Executive Order 
12924, which had been extended by successive Presidential Notices, 
the last of which was August 3, 2000 (3 CFR, 2000 Comp. 397 (2001)), 
continued the Regulations in effect under the International 
Emergency Economic Powers Act (50 U.S.C. 1701-1706 (2000)) 
(``IEEPA''). On November 13, 2000, the Act was reauthorized and it 
remained in effect through August 20, 2001. Since August 21, 2001, 
the Act has been in lapse and the President, through Executive Order 
13222 of August 17, 2001 (3 CFR, 2001 Comp. 783 (2002)), which has 
been extended by successive Presidential Notices, the most recent 
being that of August 2, 2005 (70 FR 45273 (August 5, 2005)) has 
continued the Regulations in effect under IEEPA.
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    The charges against each Respondent are as follows:
    Charge 1 alleges that from September 2001 and continuing through 
June 2002, BiB and Mangelsen conspired and acted in concert with others 
to arrange for the export from the United States to Libya of items 
subject to the Regulations that required U.S. Government authorization 
in violation of the Regulations. The items were spare parts for 
hydraulic shears. This was alleged as a violation of Sec.  764.2(d) of 
the Regulations.
    Charge 2 alleges that during the same period, BiB and Mangelsen 
took actions with intent to evade the Regulations by obtaining the 
spare parts that are the subject of Charge 1 from a U.S. manufacturer, 
through co-conspirators in the United States and the United Kingdom, 
for eventual shipment to Libya without obtaining the required U.S. 
Government authorization. This activity was alleged as a violation of 
Sec.  764.2(h) of the Regulations.
    Charges 3 and 4 allege that on two separate occasions on September 
30, 2002, Mr. Mangelsen, on behalf of BiB, took actions with the intent 
to evade the Regulations by forwarding to the U.S. manufacturer 
requests for price and shipping information for spare parts intended 
for Libya without obtaining the required U.S. Government 
authorizations. These actions were alleged by BIS as a violation of 
Sec.  764.2(h) of the Regulations.
    Charges 5 and 6 allege that on two occasions, February 14 and 26, 
2003, Mangelsen and BiB took actions with the intent to evade the 
Regulations by using an ``Enquiry'' to solicit pricing and shipping 
information for spare parts destined for Libya without obtaining the 
required U.S. Government authorization. In this instance, the parts 
were for pumping equipment located in a project in Libya. This was 
alleged as a violation of Sec.  764.2(h) of the Regulations.
    Charge 7 alleges that on May 12, 2003, Mangelsen, on behalf of BiB, 
took actions with intent to evade the Regulations by soliciting a 
government informant in the United States to contact a U.S. company for 
pricing and shipping information for spare parts destined for Libya 
without obtaining the required U.S. Government authorization. The parts 
involved in this charge were cone crusher and screen plant spare parts. 
This was a violation of Sec.  764.2(h) of the Regulations.
    Charges 8 and 9 allege that on two occasions on June 6, 2003, 
Mangelsen, on behalf of BiB, took actions with the intent to evade the 
Regulations by soliciting a government informant to contact U.S. 
companies for pricing and shipping information for two separate orders 
for spare parts destined for Iran without obtaining the required U.S. 
Government authorization. These activities were also alleged as 
violations of Sec.  764.2(h) of the Regulations.
    On July 12, 2005, Mangelsen, on behalf of himself and BiB, filed an 
answer to BIS's charging letter in which he denied any wrongdoing. On 
January 9, 2006, the Administrative Law Judge (``ALJ'') issued an Order 
consolidating the cases against BiB and Mangelsen in the interest of 
judicial economy. On February 9, 2006, the ALJ issued a Modified 
Scheduling Order that established a time frame for the submission of 
evidence and arguments by the parties. Pursuant to the Order, on March 
10, 2006, BIS filed a Memorandum and Submission of Evidence to 
Supplement the Record. On April 11, 2006, Mangelsen, on behalf of 
himself and BiB, filed an Answer to BIS's March 10, 2006, Memorandum 
and Submission of Evidence. On April 25, 2006, BIS submitted a Rebuttal 
Memorandum to Mangelsen's April 11, 2006 Answer.
    Thereafter, on May 23, 2006, based on the record before him, the 
ALJ issued a Recommended Decision and Order in which he found that BiB 
and Mangelsen each committed seven violations of the Regulations. 
Specifically, the ALJ found BiB and Mangelsen committed the offenses 
contained in Charges 1-7. The ALJ, however, found that BIS did not 
prove by a preponderance of the evidence Charges 8-9. The ALJ 
recommended each Respondent be assessed a $77,000 civil penalty and 
denied export privileges for a period of twenty years. In responsive 
pleadings, BIS did not contest the findings and recommendations made by 
the ALJ. In a letter dated May 29, 2006, Respondents continued to claim 
no wrongdoing.
    The ALl's Recommended Decision and Order, together with the entire 
record in this case, has been referred to me for final action under 
Sec.  766.22 of the Regulations. I find that the record supports the 
ALl's findings of fact and conclusions of law. BiB and Mangelsen are 
each liable for violating Charges 1-7. Charges 8 and 9 have not been 
established by a preponderance of the evidence. I also find that the 
penalty recommended by the ALJ is appropriate, given the nature of the 
violations, the lack of mitigating circumstances, and the importance of 
preventing future unauthorized exports.
    I do note, however, several modifications to the ALJ's Recommended 
Order. First, in footnote 6 of the ALJ's decision, he states that since 
the charges in this case fall under Section 760 of the Regulations, 
``an alternative definition for `person' found in 15 CFR 760.1(a) will 
be used when analyzing the individual charges.'' The charges in this 
case do not fall under Section 760 of the Regulations, which is the 
``Restrictive Trade Practices or Boycotts'' chapter of the Regulations. 
The appropriate definition of the term ``person'' to be used in 
deciding this

[[Page 37043]]

case is the one found in Sec.  772.1 of the Regulations (15 CFR 772.1). 
I also note that on several instances the ALJ cites to 15 CFR 160.1(a) 
when he discusses the term ``person''. The Code of Federal Regulations 
does not contain a 15 CFR 160; that section of the CFR is ``Reserved''. 
I assume these are typographical errors and that the ALJ intended to 
cite to 15 CFR 760.1(a) to which he referred in footnote 6. For the 
reasons previously discussed, the correct definition of ``person'' for 
the purposes of deciding this case is the one contained in 15 CFR 772.1 
of the Regulations.
    Second, the ALJ inserts knowledge as an element that the BIS needed 
to prove to support the conspiracy in Charge 1 (See ALJ Recommended 
Order, page 18). Case law has established that knowledge is not 
necessarily an element in a conspiracy offense. In U.S. v. Feola, 420 
U.S. 671 (1975), the Supreme Court ruled that, if proof of knowledge is 
not necessary to establish a substantive offense, such knowledge does 
not have to be proved to establish conspiracy to commit that offense. 
In this case, the substantive offense would have been the export of 
hydraulic shears spare parts to Libya without the proper export 
authorization, a violation of Sec.  764.2(a) of the Regulations. Case 
law has held that knowledge is not an element of proof necessary to 
establish a violation of Sec.  674.2(a). In the Matter of Yu Yi. 03-
BIS-11 ); Iran Air v. Kugleman. 996 F.2d 1253 (D.C. Cir., 1993). 
Therefore, the ALJ was not correct in his discussion of knowledge as an 
element of proof in this case.
    Neither of the matters discussed above affect the findings and 
conclusions made by the ALJ in this case. Based on my review of the 
entire record, I affirm the findings of fact and ultimate conclusions 
of law in the ALJ's Recommended Decision and Order, consistent with 
this Decision.
    Accordingly, It is therefore ordered,
    First, that a civil penalty of $77,000 is assessed against each 
Malte Mangelsen and BiB Industrie-Handel Dipl.Ing M. Mangelsen GmbH 
which shall be paid to the U.S. Department of Commerce within thirty 
days from the date of entry of this Order.
    Second, pursuant to the Debt Collections Act of 1982, as amended, 
31 U.S.C. 3701-20E, the civil penalty owed under this Order accrues 
interest as provided and if payment is not made by the due date 
specified, Mr. Mangelsen and BiB will be assessed, in addition to the 
full amount of the civil penalty and interest, a penalty and 
administrative charge.
    Third, that, for a period of twenty years from the date of entry of 
this Order, Malte Mangelsen, P.O. Box 10 55 47, Bremen, Germany, 28055, 
and when acting for or on his behalf, his representatives, agents, 
assigns, or employees and BiB Industrie-Handel Dipl.Ing M. Mangelsen 
GmbH, P.O. Box 10 55 47, Bremen, Germany, 28055, and all of its 
successors and assigns, and, when acting for or on behalf of BiB, its 
officers, representatives, agents, and employees (hereinafter 
collectively referred to as ``Denied Persons''), may not, directly or 
indirectly, participate in any way in any transaction involving any 
commodity, software or technology (hereinafter collectively referred to 
as ``item'') exported or to be exported from the United States that is 
subject to the Regulations, or in any other activity subject to the 
Regulations, including, but not limited to:
    A. Applying for, obtaining, or using any license, License 
Exception, or export control document;
    B. Carrying on negotiations concerning, or ordering, buying, 
receiving, using, selling, delivering, storing, disposing of, 
forwarding, transporting, financing, or otherwise servicing in any way, 
any transaction involving any item exported or to be exported from the 
United States that is subject to the Regulations, or in any other 
activity subject to the Regulations; or
    C. Benefiting in any way from any transaction involving any item 
exported or to be exported from the United States that is subject to 
the Regulations, or in any other activity subject to the Regulations.
    Fourth, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of the Denied Persons any 
item subject to the Regulations;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by the Denied Persons of the ownership, possession, or 
control of any item subject to the Regulations that has been or will be 
exported from the United States, including financing or other support 
activities related to a transaction whereby the Denied Persons acquires 
or attempts to acquire such ownership, possession or control;
    C. Take any action to acquire from or to facilitate the acquisition 
or attempted acquisition from the Denied Persons of any item subject to 
the Regulations that has been exported from the United States;
    D. Obtain from the Denied Persons in the United States any item 
subject to the Regulations with knowledge or reason to know that the 
item will be, or is intended to be, exported from the United States; or
    E. Engage in any transaction to service any item subject to the 
Regulations that has been or will be exported from the United States 
and that is owned, possessed or controlled by the Denied Persons, or 
service any item, of whatever origin, that is owned, possessed or 
controlled by the Denied Person if such service involves the use of any 
item subject to the Regulations that has been or will be exported from 
the United States. For purposes of this paragraph, servicing means 
installation, maintenance, repair, modification or testing.
    Fifth, that, after notice and opportunity for comment as provided 
in Section 766.23 of the Regulations, any person, firm, corporation, or 
business organization related to the Denied Person by affiliation, 
ownership, control, or position of responsibility in the conduct of 
trade or related services may also be made subject to the provisions of 
this Order.
    Sixth, that this Order does not prohibit any export, reexport, or 
other transaction subject to the Regulations where the only items 
involved that are subject to the Regulations are the foreign-produced 
direct product of U.S.-origin technology.
    Seventh, that this Order shall be served on the Denied Persons and 
on BIS, and shall be published in the Federal Register. In addition, 
the ALJ's Recommended Decision and Order, except for the section 
related to the Recommended Order, shall be published in the Federal 
Register.
    This Order, which constitutes the final agency action in this 
matter, is effective immediately.

    Dated: June 23, 2006.
David H. McCormick,
 Under Secretary of Commerce for Industry and Security.

Instructions for Payment of Civil Penalty

    1. The civil penalty check should be made payable to: U.S. 
Department of Commerce.
    2. The check should be mailed to: U.S. Department of Commerce, 
Bureau of Industry and Security, Export Enforcement Team, Room H-6883, 
14th Street and Constitution Avenue, NW., Washington, DC, Attn: Sharon 
Gardner.

Recommended Decision and Order

    Before: HON. PETER A. FITZPATRICK Administrative Law Judge, United 
Stated Coast Guard.
    Appearances: GREGORY MICHELSEN and MELISSA B. MANNINO.

[[Page 37044]]

    For the Bureau of Industry and Security.
    MALTE MANGELSEN.
    For Respondents--Pro se.

II. Summary of Decision

    This case involves covert operations occurring in 2001 through 2003 
by Respondents BiB Industrie-Handel Dipl.Ing M. Mangelsen GmbH, of 
Bremen, Germany (``BiB'') and its Managing Director, Mr. Malte 
Mangelsen of Bremen, Germany (``Mr. Mangelsen''), to unlawfully export 
spare shear press machine parts to Libya by routing the shipments 
through Europe in violation of the Export Administration Act of 1979 
(``Act'' or ``EAA'') and the Export Administration Regulations 
(``EAR''). See 50 U.S.C. app. Sec. Sec.  2401-20 (1991), amended by 
Pub. L. 106-508, 114 Stat. 2360 (Supp. 2002) (EAA); 15 CFR Parts 730-74 
(1997-1999) (EAR or Regulations). The EAA and its underlying 
regulations establish a ``system of controlling exports by balancing 
national security, foreign policy and domestic supply needs with the 
interest of encouraging export to enhance * * * the economic well 
being'' of the United States. See Times Publ'g Co. v. United States 
Dep't of Commerce, 236 F.3d 1286, 1290 (11th Cir. 2001); see also 50 
U.S.C.. app. Sec. Sec.  2401-20.\1\
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    \1\ The EAA and all regulations under it expired on August 20, 
2001. See 50 U.S.C. app. 2419. Three days before its expiration, the 
President declared that the lapse of the EAA constitutes a national 
emergency. See Exec. Order. No. 13222. Exercising authority under 
the International Emergency Economic Powers Act (``IEEPA''), 50 
U.S.C. 1701-1706 (2002), the President maintained the effectiveness 
of the EAA and its underlying regulations throughout the expiration 
period by issuing Exec. Order. No. 13222 on August 17, 2001. Id. The 
effectiveness of the export control laws and regulations were 
further extended by Notices issued by the President in 2002, 2003, 
2004, and 2005. See 67 FR 53721 (Aug. 14, 2002). See also 68 FR 
47833 (Aug. 7, 2003); 69 FR 48763 (Aug. 6, 2004); 70 FR 45273 (Aug. 
2, 2005). Courts have held that the continuation of the operation 
and effectiveness of the EAA and its regulations through the 
issuance of Executive Orders by the President constitutes a valid 
exercise of authority. See Wisconsin Project on Nuclear Arms Control 
v. United States Dep't of Commerce, 317 F.3d 275, 278-79 (D.C. Cir. 
2003); Times Publ'g Co. 236 F.3d at 1290 (2001).
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    Here, the Bureau of Industry and Security, United States Department 
of Commerce (``Bureau'' or ``BIS'') alleges nine violations of the EAR 
by Respondents and seeks denial of the Respondents' export privileges 
from the United States for a period of 20 years as well as assessment 
of $99,000 in civil penalties for each Respondent, Mr. Mangelsen and 
BiB.
    The Bureau has presented substantial, reliable and probative 
evidence on the record to support the first seven charges. Mr. 
Mangelsen filed two Answers but did not dispute the contents of the 
record. Most of the evidence in this record is therefore uncontested. 
The remaining charges (Charges 8-9), however, are not found proved. 
There is not a preponderance of the evidence to establish that 
Respondents took actions with intent to evade the Bureau's Regulations 
requiring a license to ship to Iran.
    Overall, BIS' s request for a Denial Order and assessment of civil 
penalties is well founded, but the civil penalty amounts have been 
reduced. Since only seven of the nine violations are proved, a $77,000 
civil penalty against each Respondent is deemed appropriate. 
Additionally, a twenty year Denial Order against each Respondent is 
ordered.

III. Preliminary Statement

    On November 17, 2004, BIS initiated two separate administrative 
actions against BiB and Mr. Mangelsen, in his individual capacity. The 
Bureau alleged that BiB and Mangelsen both committed nine violations of 
the EAR by conspiring to violate the Regulations and taking actions to 
evade the Regulations.\2\
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    \2\ The Regulations are currently codified in the Code of 
Federal Regulations at 15 CFR Parts 730-774 (2005). The charged 
violations occurred from 2001 to 2003. The Regulations governing the 
violations at issue are found in the 2001 to 2003 versions of the 
Code of Federal Regulations (15 CFR Parts 730-774 (2001-2003)). The 
2005 Regulations establish the procedures that apply to this matter.
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    The charges against each Respondent are as follows:
    Charge 1 alleges that from September 2001 and continuing through 
June 2002, BiB and Mr. Mangelsen conspired and acted in concert with 
others to violate the Regulations by arranging for the export from the 
United States to Libya of items subject to the Regulations without the 
required U.S. Government authorizations.
    Charge 2 alleges that during the same period, BiB and Mangelsen 
took actions with intent to evade the Regulations by obtaining spare 
parts from U.S. manufacturer through an intermediary in the United 
Kingdom for eventual shipment to Libya without obtaining the required 
U.S. Government authorization.
    Charges 3 and 4 allege that on two occasions on September 30, 2002, 
Mr. Mangelsen, on behalf of BiB, took actions with the intent to evade 
the Regulations by forwarding to the U.S. based supplier requests for 
price and shipping information for spare parts intended for Libya 
without obtaining the required U.S. Government authorization.
    Charges 5 and 6 allege that on two occasions, on February 13 and 
26, 2003, Mangelsen and BiB took actions with the intent to evade the 
Regulations by using an ``Enquiry'' to solicit pricing and shipping 
information for spare parts destined for Libya without obtaining the 
required U.S. Government authorization.
    Charge 7 alleges that on May 12, 2003, Mr. Mangelsen, on behalf of 
BiB, took actions with intent to evade the Regulations by soliciting a 
government informant in the United States to contact a U.S. company for 
pricing and shipping information for spare parts destined for Libya 
without obtaining the required U.S. Government authorization.
    Charges 8 and 9 allege that on two occasions on June 6, 2003, Mr. 
Mangelsen, on behalf of BiB, took actions with the intent to evade the 
Regulations by soliciting a government informant to contact U.S. 
companies for pricing and shipping information on two separate orders 
for spare parts destined for Iran without obtaining the required U.S. 
Government authorization.\3\
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    \3\ The charge sheet headings for Charges 8 and 9 reference 
Libya whereas the allegations contained therein and in the Agency's 
Memorandum reference Iran.
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    On July 12, 2005, Mr. Mangelsen, on behalf of himself and BiB, 
filed an Answer to the Bureau's charging letter denying liability for 
the above referenced violations. His primary defense is based on lack 
of the Bureau's jurisdiction and lack of applicability of the 
Regulations.
    On August 5, 2005, the Coast Guard Chief Administrative Law Judge 
assigned the undersigned to preside over this matter and ordered that 
if ``BIS does not demand a hearing and/or Respondent does not 
demonstrate good cause for failing to request a hearing, this matter 
shall be adjudicated under 15 CFR 766.15 and proceed without a 
hearing.'' BIS did not request a hearing and Respondents has not shown 
good cause for failing to request a hearing.
    Subsequently, on January 9, 2006, an Order Granting Consolidation 
and Scheduling Order was issued consolidating the cases involving 
Mangelsen and BiB. Thereafter, on February 9, 2006, the undersigned 
issued an Order Modifying Scheduling Order ordering the parties to 
submit such ``affidavits, declarations, depositions, admissions, 
answers to interrogatories, or stipulations to supplement the present 
record.'' The February 9, 2006 Order further placed the parties on 
notice that the case would

[[Page 37045]]

proceed without a hearing and that ``proceeding without a hearing does 
not relieve the parties from the necessity of proving the facts and 
supporting their charges or defenses.''
    On March 10, 2006, the Bureau filed a Memorandum and Submission of 
Evidence to Supplement the Record moving for the undersigned to 
recommend to the Under Secretary of Commerce for Industry and Security 
(``Under Secretary'') \4\ that the export privileges of BiB and Mr. 
Mangelsen be denied for twenty (20) years and that BiB and Mangelsen 
each be ordered to pay a $99,000 civil penalty to the Department of 
Commerce.
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    \4\ Pursuant to Section 13(c)(1) of the Act and Section 766.17(b 
) (2) of the Regulations, in export control enforcement cases, the 
ALJ issues a recommended decision and order which is reviewed by the 
Under Secretary, who issues the final decision for the agency.
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    On April 11, 2006, Mr. Mangelsen, on behalf of himself and BiB, 
filed an Answer to the Bureau's March 10, 2006 Memorandum and 
Submission of Evidence to Supplement the Record. With respect to all 
charges, Mangelsen asserted the overall defense of lack of jurisdiction 
and applicability stating that ``BiB * * * as a German Company has not 
violated the U.S. Laws.'' With respect to Charge 1, Mangelsen contended 
that because all parties involved ``knew, to which destination these 
parts should be delivered, there was of course no Conspiracy 
involved.'' With respect to Charges 2-7, Mangelsen contended that the 
U.S. company ``knew that this machine was located in Libya'' and that 
it should have informed him that it ``can't make the quote and that 
this Enquiry would have been closed,'' but instead that the U.S. 
company ``quoted knowing that they violated U.S. export regulations.'' 
Mangelsen further contended that the ``suggestion of Mr. Flanders was a 
trap to lock Mr. Mangelsen to prison for judging him guilty and issuing 
a penalty.''
    Mr. Mangelsen did not respond to Charges 8-9 in his August 11, 2006 
Answer. He did, however, indicate in his July 12, 2005 Answer to the 
initial Bureau complaint that ``BiB definitely never ever has supplied 
anything to the Iran.'' Mangelsen requested that ``no further actions 
be taken against [Mangelsen or] BiB.''
    On April 25, 2006, the Bureau filed a Rebuttal Memorandum to 
Mangelsen's April 11, 2006 Answer. The Rebuttal Memorandum incorporates 
the same facts as the initial Complaint and adds a Rebuttal to 
Mangelsen's defense of entrapment. BIS argues that Mr. Mangelsen waived 
his right to this defense and, in the alternative, Mangelsen was 
predisposed to commit the prohibited conduct and therefore is barred 
from using the defense of entrapment.

IV. Recommended Findings of Fact

    These Findings of Fact are based on the documentary evidence, such 
as affidavits, declarations, depositions, admissions, Answers to 
interrogatories, or stipulations to supplement the present record, and 
the entire record. The facts of this case are as follows:
    1. Mr. Malte Mangelsen is a German Citizen and the managing 
director of BiB. (Exhibit 9 at 1; Mangelsen Answer of 4/11/2006 at 4).
    2. BiB, a German company, is in the business of exporting and 
reexporting spare machine parts for a shear press. (Mangelsen Answer of 
4/11/2006 at 4).
    3. In January 1986, in response to Libya's repeated use and support 
of terrorism against the United States, other countries, and innocent 
persons, the U.S. initiated economic sanctions against Libya through 
the Libyan Sanctions Regulations (31 CFR 550) and the Export 
Administration Regulations (15 CFR 730). See 69 FR 23626-01 (Apr. 29, 
2004).
    4. On April 23, 2004, in response to Libya's continued effort to 
completely dismantle its weapons of mass destruction and missile 
programs, and adhere to its renunciation of terrorism, the President of 
the United States announced the termination of the application of the 
Iran and Libya Sanctions Act with respect to Libya. Id.
    5. During the time period in question, it was a violation of the 
Regulations to export or reexport items subject to the EAR and the 
Libyan Transactions Regulations to Libya without a license from the 
Office of Foreign Assets Control of the U.S. Department of the Treasury 
(``OFAC''). See 15 CFR 746.4(b)(1) (2003).
    6. During the time period in question, it was a violation of the 
Regulations to export items subject to both the Iranian Transactions 
Regulations and the EAR to Iran without a license from OFAC. See 15 CFR 
746.7(a) (2003).
    7. On September 21, 2001, Mr. Malte Mangelsen, on behalf of BiB, 
contacted Pacific Press & Shear Co. (``Pacific Press'') to obtain a 
price quotation for spare machine parts for hydraulic shears, using 
BiB's Reference Number 213b102. (Exhibit 6). Mr. Mangelsen made the 
request ``CNF Bremen,'' meaning that the price quote would include 
Pacific Press's cost for ``cargo and freight'' to the destination port 
of Bremen, Germany. (Exhibit 6; Exhibit 10).
    8. Pacific Press is a United States based company located in Mt. 
Carmel, Illinois. (Exhibit 6; Exhibit 13).
    9. On September 24, 2001, Mr. Mangelsen, on behalf of BiB, 
submitted a revised request for a price quotation under Reference 
Number 213b102. The revised request was ``CNF Bremen.'' (Exhibit 7).
    10. Prior to January 8, 2002, PacificPress quoted Mr. Mangelsen and 
BiB a price regarding Reference Number 213b102. (Mangelsen Answer of 4/
11/2006 at 1).
    11. On or about January 8, 2002, BiB caused a wire transfer payment 
of approximately $7,751 to be made to Pacific Press's bank account as 
payment for the spare parts. (Exhibit 8).
    12. Despite the shipping term ``CNF Bremen,'' Mr. Mangelsen 
admitted throughout the case that Bremen was not the ultimate 
destination but that the spare parts in question were ultimately 
destined for Libya. (Exhibit 9 at 1; Exhibit 10 at 2-6; Mangelsen 
Answer of 2/16/2004 at 1).
    13. On February 8, 2002, a BIS Special Agent, posing as a 
representative of Pacific Press using the name David Flanders 
(``Flanders''), contacted Mr. Mangelsen via telephone regarding a 
shipment order Pacific Press was to execute for BiB. Flanders recorded 
the conversation and the details are as follows. (Exhibit 10).
    a. Mr. Mangelsen acknowledged that Libya was the intended 
destination for the shipment.
    b. Flanders advised Mangelsen that it would be a crime to export 
the parts to Libya without an appropriate export license, even if they 
were shipped initially from the United States to Germany.
    c. Mangelsen asked if Flanders could resolve the problem.
    d. Flanders suggested that, under the veil of secrecy, Mr. 
Mangelsen find a company ``stateside'' so Pacific Press could make a 
domestic sale and the stateside company could subsequently ``do 
whatever they want with it.''
    e. Mr. Mangelsen agreed to find a company and have that company 
contact Pacific Press. Mangelsen asked whether this would alleviate the 
problem and Flanders indicated there would be no problem.
    f. Flanders reiterated that it would be illegal for Flanders to 
ship the items to Germany with the knowledge that they were destined 
for Libya.
    14. On February 14, 2002, Mr. Mangelsen, on behalf of BiB, e-mailed 
Pacific Press advising that the stateside point of contact for domestic 
delivery of the parts would be Mr. John Clements

[[Page 37046]]

of Minequip Corporation (``Minequip''). (Exhibit 11).
    15. Minequip is located in Miami, Florida. (Exhibit 16).
    16. On February 25, 2002, Flanders called Mr. Clements to discuss a 
transaction whereby Pacific Press would sell the spare parts to 
Minequip domestically. Flanders advised that it would be illegal for 
Mr. Clements to subsequently ship to Great Britain without a U.S. 
license and with the knowledge that the parts were destined for Libya; 
Mr. Clements acknowledged this information. (Exhibit 12 at 3).
    17. Subsequently, on April 22, 2002, Mr. Clements called Pacific 
Press and stated that he was willing to be the exporter for BIB's 
order, Reference Number 213b102. (Exhibit 14). On April 23, 2002, 
Pacific Press notified Mr. Mangelsen of the same via e-mail. (Exhibit 
14). On April 26, 2002, Mangelsen responded to Pacific Press via e-mail 
and agreed that Mr. Clements would act as his domestic agent in 
obtaining the items destined for Libya. (Id.; Exhibit 9).
    18. On April 29, 2002, Pacific Press shipped the parts to Mr. 
Clements on behalf of BiB. (Exhibit 16).
    19. Based on the facts of the case, a Federal Grand Jury in the 
Southern District of Illinois indicted Mr. Mangelsen and four others 
for conspiracy to violate the IEEPA. (Exhibit 1 at 1).
    20. The four others indicted for conspiracy to violate the IEEPA 
are as follows:
    a. Mr. Clements and Minequip: Mr. Clements is the president of 
Minequip, which is the domestic company BiB used as a middleman between 
Pacific Press,\5\ located in the U.S., and the company located in 
Europe that would ultimately ship to Libya. (Exhibit 1 at 1).
---------------------------------------------------------------------------

    \5\ Pacific Press was not indicted in the conspiracy.
---------------------------------------------------------------------------

    b. Mr. Jeffrey Woodbridge (``Mr. Woodbridge'') and Sigma 
Enterprises Limited (``Sigma''): Mr. Woodbridge is the general manager 
of Sigma, a company located in Europe which BiB used to ultimately ship 
to Libya after the receiving parts from the middleman in the U.S. 
(Exhibit 1 at 1).
    21. On April 28, 2003, Mr. Clements pled guilty to conspiracy to 
violate the IEEPA and was sentenced to two years probation and was 
assessed a $1,000 fine. (Exhibit 2 at 1, 2, 4).
    22. On April 28, 2003, Minequip pled guilty to conspiracy to 
violate the IEEPA and was sentenced to one year probation and was 
assessed a $4,000 fine. (Exhibit 3 at 1, 2, 4).
    23. On November 13, 2002, Mr. Woodbridge pled guilty to conspiracy 
to violate the IEEPA and was sentenced to three years probation and was 
assessed a $7,000 fine. (Exhibit 4 at 1,2,4).
    24. On January 17, 2003, Sigma pled guilty to conspiracy to violate 
the IEEPA and was assessed to a $20,000 fine. (Exhibit 5 at 2).
    25. On May 16, 2002, the Department of Treasury issued to the 
United States Customs Services an of OFAC license authorizing the 
surreptitious export of the spare parts purchased by BiB in furtherance 
of the law enforcement investigation. (Exhibit 15).
    26. On May 22, 2002, Mr. Clements shipped the spare parts to Mr. 
Woodbridge of Sigma in the United Kingdom on BiB's behalf. Mr. 
Mangelsen repeatedly admitted that that their ultimate destination was 
Libya. (Exhibit 9 at 1; Exhibit 16).
    27. Prior to December 16, 2004, Mr. Mangelsen received the parts 
from Mr. Woodbridge, and subsequently sold and shipped the spare parts 
to Libya. (Exhibit 9 at 1).
    28. On two occasions on September 30, 2002, Mr. Mangelsen forwarded 
to Pacific Press requests for price and shipping information for spare 
parts intended for Libya with no intention of obtaining the required 
U.S. Government authorization. (Exhibit 10 at 2; Exhibit 18).
    29. In an October 1, 2002 e-mail, Mr. Mangelsen told ``Flanders,'' 
the BIS Agent purportedly acting as a representative of Pacific Press, 
that the parts were destined for the same machines as under the 
previous order and that he would inform Pacific Press of the identity 
of the person Pacific Press could sell to domestically who would act as 
the U.S. exporter. (Exhibit 19). Mr. Mangelsen admitted that the 
machines under the previous order are located in Libya. (Exhibit.9 at 
1).
    30. On February 13, 2003, Mangelsen, on behalf of BiB, requested 
that Mr. Clements provide pricing and shipping information for spare 
parts ``CNF Bremen.'' (Exhibit 20). The BiB reference number was 
016b302. (Exhibit 20).
    31. On February 26, 2003, Mr. Mangelsen requested a another price 
quotation from Mr. Clements for parts for Goulds Pump 3171S Series 
under BiB reference number 077b2051 to be shipped ``CNF Bremen.'' 
(Exhibit 21).
    32. On March 11, 2003, Mr. Clements placed a recorded telephone 
call to Mangelsen as part of an ongoing Bureau investigation. In that 
conversation, Mangelsen acknowledged that the items referenced in BiB 
order numbers 016b302 and 077b2051 were ultimately destined for Libya. 
Mr. Mangelsen further detailed how the items would be shipped through 
Germany and subsequently transshipped to Libya. (Exhibit 22 at 2-4).
    33. On May 12, 2003, Mangelsen, on behalf of BiB, requested 
Clements to contact another U.S. company (Kolberg-Pioneer Inc. & PDQ). 
Mr. Mangelsen had previously been unsuccessful in retaining that 
company as a supplier because it ``assumed the destination'' was Libya 
and refused to supply the parts directly to Mangelsen and BiB. 
Mangelsen's request was for Mr. Clements to obtain a quote for pricing 
and shipping information for Cone Crusher and Screen Plant Spare Parts. 
(Exhibit 25; Exhibit 26).
    34. Consistent with the previous course of dealings detailed above, 
the purpose of Mr. Mangelsen's request was for Clements to obtain a 
quote, purchase the items domestically from the U.S. company, and then 
export the items to BiB or its designee, who would eventually ship to 
Libya. (Exhibit 25; Exhibit 26).
    35. On June 6, 2003, Mr. Mangelsen, on behalf of BiB, asked 
Clements to contact another U.S. company for pricing and shipping 
information on two separate orders for spare parts ``without informing 
them about the destination.'' (Exhibit 27; Exhibit 28). Mr. Mangelsen 
made these requests in an Enquiry under the headings ``Re: TI Kixon and 
Other Parts for Iran'' and ``Re: Foxboro Parts for Iran.'' (Exhibit 27; 
Exhibit 28). V.

V. Discussion

A. Application of the Export Administration Act and Regulations to 
Respondents

    As a preliminary matter, Mr. Mangelsen contended on behalf of 
himself and BiB that the Bureau lacks jurisdiction over the relevant 
transactions. He asserted that because he is from Germany and BiB is a 
German company, U.S. export laws do not apply. This argument is 
rejected.
    The authority delegated by Congress to the President of the United 
States under the EAA is extensive. The EAA gives the President 
authority to regulate or prohibit the export of goods, technology, and 
information ``to the extent necessary to further the foreign policy of 
the United States or fulfill its international obligation.'' See 50 
U.S.C. app. Sec.  2405(a)(1).
1. BIS Authority Over These Items
    The instant case involves spare machine parts supplied by Pacific 
Press of Mt. Carmel, Illinois for shipment abroad to Libya. (Exhibit 
10). Based on the above referenced authority, the

[[Page 37047]]

Regulations specify that ``all U.S. origin items wherever located'' are 
subject to the EAR and are therefore ``items * * * over which BIS 
exercises regulatory jurisdiction under the EAR.'' 15 CFR 734.3(a)(1)-
(a)(2). The Regulations further specify that ``item'' simply means 
``commodities, software, and technology.'' 15 CFR 772.1. Replacement 
parts for a hydraulic shear press are commodities, and since their 
supplier was located in Illinois, they were of U.S. origin. They are 
therefore subject to the EAR, giving BIS regulatory authority.
2. BIS Authority Over Mr. Mangelsen and BiB
    At the time in question, the EAR affirmatively stated that ``[y]ou 
will need a license from BIS to reexport all items subject to the EAR * 
* * to Libya.'' 15 CFR 746.4 (2003). While there are several narrow and 
not pertinent exceptions to this license requirement, there are no 
exceptions to this requirement in the EAR for locality or nationality 
of the person or company responsible for the reexport. See 15 CFR 
746.4(2)(i)-(ii). On the contrary, the term ``you'' means ``any * * * 
natural person, including a citizen of the United States or any foreign 
country [or] any firm.'' 15 CFR 772.1.
    The OFAC's Iran Transactions Regulations similarly prohibited the 
reexportation of any goods, technology or services from the United 
States to Iran without express authorization from OPAC and or BIS. See 
31 CFR 560.204-560. This prohibition includes the exportation of any 
goods ``to any person in a third country undertaken with knowledge or 
reason to know that such goods * * * are intended specifically for 
supply, transshipment, or reexportation, directly or indirectly, to 
Iran or the Government ofIran.'' See 31 CFR 560.204(a).
    Section 746.7 of the EAR incorporates the OFAC's Iran Transactions 
Regulations by reference. It provides that ``[n]o person may export or 
reexport items subject to both the EAR and OFAC's Iranian Transactions 
Regulations without prior OFAC authorization.'' 15 CFR 746.7. As with 
the Regulations regarding Libya, there are no exceptions to this 
requirement in the EAR for locality or nationality of the person or 
company responsible for the reexport. Instead, the term ``person'' 
means a ``natural person, including a citizen or national of the United 
States or of any foreign country [or] any firm.'' 15 CFR 772.1.\6\
---------------------------------------------------------------------------

    \6\ This definition does riot apply to part 760 of the EAR 
(Restrictive Trade Practices or Boycotts). 15 CFR 772.1. Since the 
actual charged offenses fall in part 760 of the EAR, an alternative 
definition for ``person'' found in 15 CFR 760.1(a) will be used when 
analyzing the individual charges. The differences between the 
definition of ``person'' found in Section 760.1 and that which is 
found in Section 772.1 is irrelevant for the purposes of this 
proceeding.
---------------------------------------------------------------------------

    From the plain language of the export laws and Regulations, it is 
clear that the EAA and EAR were intended to apply extraterritorially, 
regardless of a person's or company's nationality or locality, so long 
as items subject to the EAR are involved. In the Matter of Mahdi, 68 FR 
57,406-02 (Oct. 3, 2003). Thus, it is immaterial that Mr. Mangelsen is 
German or that BiB is located in Germany and is a German company. To 
hold otherwise would contravene existing law and regulations, and would 
completely undermine the effectiveness of the EAA and the EAR.

B. Violations of the Export Administration Act and Regulations

    The Agency has the burden of proving the allegations in the 
Charging Letter by reliable, probative, and substantial evidence. See 5 
U.S.C. 556(d). The Supreme Court has held that 5 U.S.C. 556(d) adopts 
the traditional ``preponderance of the evidence'' standard of proof. 
Dir., Office of Workers' Comp. Programs v. Greenwich Collieries, 512 
U.S. 267, 290 (1994) (the preponderance of the evidence, not the clear-
and-convincing standard, applies in adjudications under the APA) 
(citing Steadman v. S.E.C., 450 U.S. 91 (1981)). To prevail under this 
standard, BIS must establish that it is more likely than not that the 
Respondents committed the violations alleged in the Charging Letter. 
See Herman & Maclean v. Huddleston, 459 U.S. 375, 390 (1983). In other 
words, the Agency must demonstrate ``that the existence of a fact is 
more probable than its nonexistence.'' Concrete Pipe & Products v. 
Construction Laborers Pension Trust, 508 U.S. 602, 622 (1993). To 
satisfy the burden of proof, BIS may rely on direct and/or 
circumstantial evidence. See generally Monsanto Co. v. Spray-Rite Serv. 
Corp., 465 U.S. 752, 764-765 (1984).
    The Bureau has separately charged that both Mr. Mangelsen, in his 
individual capacity, and BiB based on the actions ofMr. Mangelsen, as 
its managing director, violated Sections 764.2(d) and 764.2(h) of the 
EAR. The separate cases against Mr. Mangelsen and against BiB have been 
consolidated into a single case, but the Bureau nevertheless seeks 
sanction against Mangelsen and BiB separately.
    The Regulations are clear that ``no person'' may conspire to 
violate or act to evade the Regulations. See 15 CFR 767.2(d)-(h). A 
``person'' is ``any individual, or any association or organization, 
public or private, which is organized, permanently established, 
resident, or registered to do business, in the United States or any 
foreign country.'' 15 CFR 160.1(a). Despite the fact that he is German, 
Mr. Mangelsen is therefore a correct party to this action and 
separately responsible for his own actions and conduct whether or not 
he is acting on BiB's behalf.
    Furthermore, ``any firm'' or ``organization'' is a ``person'' under 
the EAR, and it is well settled that a company can be held liable for 
the actions of its officers and employees committed within the scope of 
employment and in furtherance of the employer's business. 15 CFR Sec.  
772.1; see also 15 CFR 160.1(a); see, e.g., United States v. Bi-Co 
Pavers. Inc., 741 F.2d 730, 737 (5th Cir. 1984); United States v. 
Sherpix, 512 F.2d 1361, 1367 n. 7 (D.C. Cir. 1975). BiB is in the 
international exporting and reexporting business. (Exhibit 2). Mr. 
Mangelsen's arrangement for the reexportation of spare machine parts 
falls squarely within the scope of his employment as managing director 
and was clearly done in the furtherance of BiB's business. Because the 
doctrine of respondeat superior is applicable in export cases, BiB is 
also a correct party and is separately responsible for Mr. Mangelsen's 
actions.
1. Conspiracy To Export Spare Parts to Libya Without the Required U.S. 
Government Authorization
    Mr. Mangelsen and the company Respondent, BiB, have been charged 
under EAR Sec.  764.2(d) with conspiracy to violate the EAR. The charge 
alleges that Mangelsen and BiB conspired to export spare parts to Libya 
without the required government authorization in violation of Sec.  
746.4 (2003) of the EAR. The undersigned finds the charge proved by a 
preponderance of the evidence against both Mangelsen and BiB.
    The Regulations provide: ``No person may conspire or act in concert 
with one or more persons in any manner or for any purpose to bring 
about or to do any act that constitutes a violation of the EAA, the 
EAR, or any other order, license or authorization issued thereunder.'' 
15 CFR 764.2(d). Conspiracy is an inchoate offense that can be 
committed regardless of whether the object of the venture is achieved. 
See United States v. Plummer, 221 F.3d 1298, 1306 (11th Cir. 2000). See 
also

[[Page 37048]]

Iannelli v. United States, 420 U.S. 770, 777 (1975). Thus, to succeed 
under Sec.  764.2(d), the Agency must merely establish that: (1) Two or 
more persons formed an agreement to violate the EAA or EAR; (2) the 
Respondent knowingly participated in the conspiracy; and (3) an overt 
act was committed in furtherance of a common scheme. See generally 50 
U.S.C. app. 2410(a).
    a. Agreement to Violate the EAA or EAR. On September 21, 2001 and 
on September 24, 2001, Mr. Mangelsen, on behalf of BiB, contacted 
Pacific Press to obtain a price quotation for spare machine parts for 
hydraulic shears, using BiB's Reference Number 213b102. (Exhibit 6; 
Exhibit 7).
    On February 8, 2002, a Bureau Special Agent, posing as a 
representative of Pacific Press and using the name David Flanders 
(``Flanders''), contacted Mr. Mangelsen via telephone regarding the 
above referenced shipment order and recorded the conversation. During 
the conversation, Mr. Mangelsen acknowledged that Libya, not Germany, 
was the intended final destination for the shipment. (Exhibit 10). 
Flanders advised Mr. Mangelsen that it would be a crime to export the 
parts to Libya without an appropriate export license, even if they were 
shipped initially from the United States to Germany. Mr. Mangelsen 
asked if Flanders could resolve the problem. (Exhibit 10). Flanders 
suggested that, under the veil of secrecy, Mr. Mangelsen find a company 
``stateside'' so Pacific Press could make a domestic sale and the 
stateside company could subsequently ``do whatever they want with it.'' 
(Exhibit 10).
    Mr. Mangelsen agreed to find such a company and have that company 
contact Pacific Press. (Exhibit 10). Mr. Mangelsen asked whether this 
would alleviate the problem and Flanders affirmed, but Flanders 
reiterated that it would be illegal for him to ship the items with the 
knowledge that they were destined for Libya. (Exhibit 10).
    In the face of this information, on February 14, 2002, Mr. 
Mangelsen, on behalf of BiB, e-mailed Pacific Press advising that the 
stateside point of contact for domestic delivery of the parts would be 
Mr. John Clements of Minequip, a Miami company. (Exhibit 11; Exhibit 
16). On February 25, 2002, Flanders called Mr. Clements to discuss a 
transaction whereby Pacific Press would ship the spare parts to 
Minequip domestically. (Exhibit 12). Flanders advised that it would be 
illegal for Mr. Clements to subsequently ship to Europe without a 
license and with the knowledge that the parts were destined for Libya; 
Mr. Clements acknowledged this information. (Exhibit 12).
    Based on the conversation between Flanders and Mr. Clements, it is 
clear that Mr. Mangelsen and Clements previously formed an agreement 
whereby Clements would receive the parts from Pacific Press and would 
export those parts to Mr. Mangelsen in Germany, who would reexport them 
to Libya without obtaining a license. The agreement between Mr. 
Mangelsen and Mr. Clements clearly qualifies as an agreement between 
two or more persons to create conspiracy liability under the EAR.
    The agreement discussed above between Mr. Mangelsen and Mr. 
Clements would, if carried out, violate both the EAA and EAR. At the 
time in question, the EAR affirmatively stated that ``[y]ou will need a 
license from BIS to reexport all items subject to the EAR * * * to 
Libya.'' 15 CFR 746.4 (2003). As discussed above, the parts in the 
instant case are subject to the EAR by virtue of being of U.S. origin 
and Mr. Mangelsen and BiB both fit the definition of ``you.'' See 15 
CFR 772.1; Id. at 734.3(a)(1)-(a)(2). The term ``reexport'' means ``an 
actual shipment or transmission of items subject to the EAR from one 
foreign country to another foreign country.'' 15 CFR 734.2(b)(4). Thus, 
if Mr. Mangelsen were to carry out the agreement to its full extent and 
actually ship the replacement parts from Germany to Libya without a 
license, the Regulations would be violated.
    b. Knowing Participation and Overt Act. On February 14, 2002, Mr. 
Mangelsen, on behalf of BiB, e-mailed Pacific Press advising that the 
stateside point of contact for domestic delivery of the parts would be 
Mr. John Clements of Minequip. (Exhibit 11). Subsequently, on April 22, 
2002, Mr. Clements called Pacific Press and stated that he was willing 
to be the exporter for BiB's order, Reference Number 213b102. (Exhibit 
14). On April 23, 2002, Pacific Press notified Mr. Mangelsen of the 
same via e-mail, and on April 26, 2002, Mr. Mangelsen responded via e-
mail and agreed that Mr. Clements would act as his domestic agent in 
obtaining the items destined for Libya. (Id.; Exhibit 9). All of the 
above actions of Mr. Mangelsen and Mr. Clements are overt acts in 
furtherance of the conspiracy; in his April 11, 2006 Answer, and 
throughout the case file, Mr. Mangelsen admitted his knowing 
participation in the same.
    The udersigned, therefore, finds Charge 1 proved by preponderance 
of the evidence against both Mr. Mangelsen and BiB.
2. Actions to Evade the Regulations' Requirements for Export To Libya
    Mr. Mangelsen and the company Respondent, BiB, have been charged 
under EAR Sec.  764.2(h) with eight counts \7\ of taking actions to 
evade the EAR Sec.  746.4 (2003) license requirement for exporting to 
Libya. The undersigned finds the first six of the eight counts proved 
by a preponderance of the evidence against both Mr. Mangelsen and BiB 
and will analyze them in turn in this part. However, the undersigned 
does not find the last two counts proved by a preponderance of the 
evidence against either Mr. Mangelsen or BiB and will analyze them 
separately in the next part.
---------------------------------------------------------------------------

    \7\ Charges 2-9.
---------------------------------------------------------------------------

    The Regulations provide: ``No person may engage in any transaction 
or take any other actions with intent to evade the provisions of the 
EAA, the EAR, or any order, license or authorization issued 
thereunder.'' 15 CFR 764.2(h). Evasion is an ``act of eluding, dodging, 
or avoiding, or avoiding by artifice.'' Blacks Law Dictionary 554 (6th 
ed.1990).
    a. Receiving the Spare Parts. In connection with the above 
mentioned conspiracy, Mr. Mangelsen and BiB obtained spare parts from a 
U.S. manufacturer through an intermediary in the United States (Mr. 
Clements of Minequip) and subsequently in the United Kingdom (Mr. 
Woodbridge of Sigma) for eventual shipment to Libya. (Exhibit 9). It is 
patently obvious from the recorded telephone conversations between Mr. 
Mangelsen and Flanders, and between Mr. Clements and Flanders, that 
Mangelsen arranged and executed the above referenced routing maneuver 
in response to Flanders' advice that it would be against U.S. 
Regulations to export to Europe when the intended destination was 
Libya. Thus, Mr. Mangelsen's attainment of the spare parts in 
connection with said routing maneuver was clearly done with the intent 
to elude, dodge, and avoid the requirement that he obtain a license.
    The action of receiving the spare parts after structuring the 
transaction through a separate U.S. broker and shipping the spare parts 
to an alleged final destination in Europe, with the intent to evade 
U.S. Government authorization requirements applicable to exports to 
Libya, amounted to a violation of Section 764.2(h) of the Regulations 
by both Mr. Mangelsen and BiB.
    b. Forwarding Requests for Pricing and Shipping Information. In 
connection with, and as the above referenced conspiracy discussion

[[Page 37049]]

illustrates, on September 30, 2002, Mr. Mangelsen and BiB forwarded to 
Pacific Press two requests for price and shipping information for spare 
parts intended for Libya, with no intention of obtaining the required 
U.S. Government authorization. (Exhibit 18). These requests were 
Clearly done with the intent to elude, dodge, and avoid the requirement 
that he obtain a license.
    Subsequent to the above mentioned referenced conspiracy, on 
February 13, 2003, Mr. Mangelsen, on behalf of BiB, asked Mr. Clements 
at Minequip for pricing and shipping information for additional spare 
parts by submitting an ``Enquiry'' with BiB reference number 018b302. 
(Exhibit 20). Thirteen days later on February 26, 2003, Mr. Mangelsen 
asked Mr. Clements for a further price quotation for parts for Goulds 
Pump 3171S Series under BiB reference number 077b2051. (Exhibit 21).
    On March 11,2003, Mr. Clements placed a recorded telephone call to 
Mr. Mangelsen wherein Mr. Mangelsen conceded that the items referenced 
in BiB order numbers 018b302 and 077b2051 were destined for Libya, as 
was the case with the previous conspiracy. Mr. Mangelsen further 
detailed how the items would be shipped through Germany and 
subsequently transshipped to Libya to avoid U.S. Government 
restrictions on exports to Libya. (Exhibit 22). Consistent with the 
course of dealings discussed above, Mr. Mangelsen's forwarding of such 
requests to Pacific Press in connection with said routing maneuver was 
clearly done with the intent to elude, dodge, and avoid the requirement 
that he obtain a license.
    Over two months later on May 12, 2003, Mr. Mangelsen, on behalf of 
BiB, requested for Mr. Clements to contact a U.S. company for pricing 
and shipping information for Cone Crusher and Screen Plant Spare Parts. 
(Exhibit 25). During the request, Mr. Mangelsen noted that the company 
previously ``assumed the destination'' of Libya and refused to supply 
the parts directly to Mr. Mangelsen. (Exhibit 25). This was the exact 
same concern Flanders expressed to Mangelsen with respect to the above 
mentioned conspiracy. (Exhibit 10; Exhibit 25). Mangelsen was 
essentially asking Clements to again act as the domestic contact for 
the U.S. company as Mr. Clements had done previously for Pacific Press. 
Consistent with the course of dealings discussed above, Mangelsen made 
his requests to Clements to create a similar routing maneuver with the 
intent to elude, dodge, and avoid the requirement that he obtain a 
license.
    By forwarding to Pacific Press all of the above mentioned requests 
in connection with the conspiracy and with the intent to evade U.S. 
Government authorization requirements applicable to exports to Libya, 
Mr. Mangelsen and BiB are each liable for six violations of Sec.  
764.2(h) of the Regulations.
3. Actions to Evade the Regulations' Requirements for Export to Libya/
Iran
    Mr. Mangelsen and the company Respondent, BiB, have been charged 
under EAR Sec.  764.2(h) with taking two further actions to evade the 
EAR Sec.  746.4 (2003) license requirement for exporting to Libya. The 
heading in the charge sheet for Counts 8 and 9 refers to actions to 
evade the EAR Sec.  746.4 (2003) license requirement for exporting to 
Libya, whereas the supporting allegations, analysis, and exhibits 
involve actions to evade the EAR Sec.  746.7 license requirement for 
exporting to Iran. The undersigned will analyze these counts under both 
Sec.  746.4 (2003), for Libya and Sec.  746.7 for Iran and finds that 
neither charge is proved.
    With respect to a charge for actions to evade the EAR Sec.  746.4 
(2003) license requirement for exporting to Libya, there is no evidence 
whatsoever to support the charge. On June 6, 2003, and on an 
unidentified date, Mr. Mangelsen and BiB forwarded to Mr. Clements two 
requests for price and shipping information for spare parts. (Exhibit 
27; Exhibit 28). The June 6, 2003 request regarded ``TI Kixon and other 
parts for Iran'' and included the comment ``please can you quote me the 
following items of Kixon without informing them about the 
destination.'' (Exhibit 27). The other request regarded ``Foxboro Parts 
for Iran'' and included the comment ``please can you quote me the 
following items of Foxboro without informing them of the destination.'' 
There is nothing in either request to indicate a connection to a 
shipment to Libya and therefore cannot be regarded as actions to evade 
the Regulations requiring a license to export to Libya.
    With respect to a charge for actions to evade the EAR Sec.  746.7 
(the licensing requirement for exporting to Iran), the undersigned does 
not find to a preponderance of the evidence to conclude that 
Respondents took actions to evade this Regulation. The EAR provides 
that ``[n]o person may export or reexport items subject to both the EAR 
and OFAC's Iranian Transactions Regulations without prior OFAC 
authorization.'' 15 CFR 746.7. Mr. Mangelsen's requests to Mr. Clements 
relating to Iran indeed appear quite similar to his previous requests 
relating to Libya as they both regard prohibited countries. These 
requests therefore create a fair amount of suspicion Mr. Mangelsen was 
taking an action to evade the license requirements for exporting to 
Iran as Mr. Mangelsen previously took actions to evade the license 
requirements for exporting to Libya. However, BIS has not provided any 
supporting evidence and has stopped short of proving it is more 
probable than not said requests were made with the intent to evade the 
EAR license requirement for exporting to Iran. The undersigned does not 
find these charges proved.

C. Respondent's Entrapment Defense Is Rejected

    On April 11, 2006, Mr. Mangelsen filed an Answer to BIS's March 14, 
2006 Memorandum and asserted entrapment as an affirmative defense. He 
stated that the ``suggestion of Mr. Flanders was a trap to lock Mr. 
Mangelsen to prison for judging him guilty and issuing a penalty.'' Mr. 
Mangelsen's entrapment defense is rejected on the merits, and in the 
alternative, is deemed waived.
1. Rejected on the Merits
    To prove entrapment, Mr. Mangelsen must ``establish two related 
elements: Agency inducement of the crime and a lack of predisposition 
on the part of the defendant to engage in criminal conduct.'' In the 
Matter of Ceaser Electronics, Inc., 55 FR 53,016-02 (Dec. 26, 1990) 
(citing United States v. Jenrette, 744 F.2d 817 (D.C. Cir. 1984), cert. 
denied, 471 U.S. 1099 (1984)).
    With respect to the conspiracy, the undersigned rejects this 
defense on the basis of Mr. Mangelsen and BiB being predisposed to 
conspiring to export to Libya without a license. The record shows that, 
before ever having contact with a Bureau agent, Mr. Mangelsen and BiB 
reached out to Pacific Press and requested pricing information for a 
shipment clearly intended for Libya without informing Pacific Press of 
the intended destination. (Exhibit 7; Exhibit 10 at 1-2). During a 
telephone call between Mr. Mangelsen and Flanders,\8\ Flanders informed 
Mr. Mangelsen that he discovered the intended destination and that this 
was a problem. (Exhibit 10 at 1-2). When Flanders asked whether Mr. 
Mangelsen knew that Libya was the intended destination, Mr. Mangelsen 
simply giggled and then became elusive. (Exhibit 10 at 2). Once 
Flanders indicated a willingness to work out a plan to disguise the 
shipment, Mr. Mangelsen immediately became candid

[[Page 37050]]

about the intended destination and showed eagerness to take an active 
role in arranging a routing maneuver to disguise the shipment and avoid 
obtaining the required license. (Exhibit 10 at 2-4). Someone who was 
not predisposed to said conspiracy would be more hesitant and less 
willing to be an active participant. Based on these facts, the 
undersigned finds that it is more likely than not that Mr. Mangelsen 
and BiB were predisposed to conspiring to ship to Libya without a 
license.
---------------------------------------------------------------------------

    \8\ Flanders was a BIS agent posing as an international 
compliance director for Pacific Press.
---------------------------------------------------------------------------

    With respect to the charges for actions to evade the EAR, the 
undersigned finds that Mr. Mangelsen and BiB have been unable to 
establish either prong of the defense. The record shows that Mr. 
Mangelsen and BiB received parts and sent numerous requests for pricing 
and shipping information on their own accord with the clear intent to 
evade the regulations. Thus, no inducement is present. Further, Mr. 
Mangelsen and BiB were clearly predisposed to taking actions to evade 
the regulations as they made their initial request to Minequip without 
disclosing the intended destination of Libya before ever speaking with 
a Bureau agent and continued to take actions independently of any 
contact with the Bureau agent. (Exhibit 7; Exhibit 10).
2. Waived
    The Regulations are clear that ``[t]he respondent must answer the 
charging letter within 30 days after being served with notice of the 
issuance of a charging letter, or within 30 days of the notice of any 
supplemental or amendment to a charging letter.'' 15 CFR 766.6(a). The 
Regulations further state that ``[a]ny defense or partial defense not 
specifically set forth in the answer shall be deemed waived, and 
evidence thereon may be refused, except for good cause shown.'' 15 CFR 
766.6(b). Mr. Mangelsen did not assert entrapment in his July 12, 2005 
Answer to the Charging Letter and for the first time asserted this 
defense in his April 11, 2006 Answer. Mr. Mangelsen did not provide any 
``cause'' for submitting this late additional defense and it is 
therefore deemed waived.

VI. Ultimate Findings of Fact and Conclusions of Law

    1. Mr. Mangelsen, BiB, and the subject matter of this proceeding 
are properly within the jurisdiction of the Bureau of Industry and 
Security in accordance with the Export Administration Act of 1979 (50 
U.S.C.. app. 2401-20) and the Export Administration Regulations (15 CFR 
730-74).
    2. Mr. Malte Mangelsen is a ``person'' under both 15 CFR 160.1(a) 
and 15 CFR 772.1 and meets the definition of ``you'' under 15 CFR 
772.1.
    3. Mr. Mangelsen is therefore a correct party to this proceeding 
and separately responsible for his actions whether or not acting on 
behalf of BiB and regardless of his citizenship.
    4. BiB is a ``person'' under both 15 CFR 160.1(a) and 15 CFR 772.1 
and meets the definition of ``you'' under 15 CFR 772.1.
    5. BiB is therefore a correct party to this proceeding and 
separately responsible for the actions of its managing director Mr. 
Mangelsen by operation of the doctrine of Respondeat Superior.
    6. The Bureau has established by a preponderance of the evidence 
that the Respondents violated Sec.  764.2( d) by forming an agreement 
with Mr. Clements and subsequently transmitting correspondence related 
thereto whereby spare parts for a shear press would be reexported to 
Libya without a license in violation of Sec.  746.4 (2003).
    7. The Bureau has established by a preponderance of the evidence 
that the Respondents violated Sec.  764.2(h) by obtaining spare parts 
for a shear press in connection with the above mentioned conspiracy 
whereby said spare parts would be routed through Europe to their 
eventual destination of Libya to evade the Sec.  746.4 (2003) 
requirement of obtaining a license to reexport to Libya.
    8. The Bureau has established by a preponderance of the evidence 
that the Respondents violated Sec.  764.2(h) by forwarding to Mr. 
Clements a request for pricing and shipping information for spare parts 
intended for Libya on September 30, 2002 to evade the Sec.  746.4 
(2003) requirement of obtaining a license to reexport to Libya.
    9. The Bureau has established by a preponderance of the evidence 
that the Respondents violated Sec.  764.2(h) by forwarding to Mr. 
Clements a second request for pricing and shipping information for 
spare parts intended for Libya on September 30, 2002 to evade the Sec.  
746.4 (2003) requirement of obtaining a license to reexport to Libya.
    10. The Bureau has established by a preponderance of the evidence 
that the Respondents violated Sec.  764.2(h) by forwarding to Mr. 
Clements a request for pricing and shipping information for spare parts 
intended for Libya on February 13, 2003 to evade the Sec.  746.4 (2003) 
requirement of obtaining a license to reexport to Libya.
    11. The Bureau has established by a preponderance of the evidence 
that the Respondents violated Sec.  764.2(h) by forwarding to Mr. 
Clements a request for pricing and shipping information for spare parts 
intended for Libya on February 26, 2003 to evade the Sec.  746.4 (2003) 
requirement of obtaining a license to reexport to Libya.
    12. The Bureau has established by a preponderance of the evidence 
that the Respondents violated Sec.  764.2(h) by asking Mr. Clements to 
obtain pricing and shipping information from another U.S. Company on 
behalf of BiB for spare parts intended for Libya on May 12, 2003 to 
evade the Sec.  746.4 (2003) requirement of obtaining a license to 
reexport to Libya.
    13. The Bureau has not established by a preponderance of the 
evidence that the Respondents violated Sec.  764.2(h) by forwarding a 
request to Mr. Clements for pricing and shipping information for spare 
parts regarding ``TI Kixon and other parts for Iran'' and including the 
comment ``please can you quote me the following items of Kixon without 
telling them about the destination'' on June 6, 2003. The Bureau has 
not established by a preponderance of the evidence that it was done to 
evade the Sec.  746.4 (2003) requirement of obtaining a license to 
reexport to Libya or to evade the Sec.  746.7 requirement of obtaining 
a license to reexport to Iran.
    14. The Bureau has not established by a preponderance of the 
evidence that the Respondents violated Sec.  764.2(h) by forwarding a 
request to Mr. Clements for pricing and shipping information for spare 
parts regarding ``Foxboro parts for Iran'' and including the comment 
``please can you quote me the following items of Foxboro without 
telling them about the destination.'' The Bureau has not established by 
a preponderance of the evidence that it was done to evade the Sec.  
746.4 (2003) requirement of obtaining a license to reexport to Libya or 
to evade the Sec.  746.7 requirement of obtaining a license to reexport 
to Iran.

VII. Sanction

    Based on the gravity of the offenses, the Agency's proposed 
sanction of a 20 year denial of U.S. export privileges for both Mr. 
Mangelsen and BiB is appropriate under Part 764.3(a)(2). However, the 
Agency's proposed sanction of a $99,000 civil penalty for each Mr. 
Mangelsen and BiB will be reduced. The undersigned found only 7 out of 
9 charges proved, and the maximum civil penalty allowed is $11,000 per 
violation.\9\ Therefore, the

[[Page 37051]]

maximum civil penalty that can be imposed against each Mr. Mangelsen 
and BiB is $77,000. Despite the fact that the U.S. has since lifted the 
embargo against Libya, the maximum civil penalty against Mr. Mangelsen 
and BiB is deemed appropriate.
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    \9\ See 50 U.S.C. app. 2410(c)(1); 15 CFR 6.4(a)(6) (2006); 15 
CFR 764.3(a)(1) (2006). It should be noted that the maximum civil 
penalty has fluctuated during the last decade and that the actual 
civil penalty for each violation in question could be as high as 
$12,000. Pursuant to Section 4 of the Federal Civil Penalties 
Inflation Adjustment Act of 1990, 28 U.S.C. Sec.  2461, as amended 
by the Debt Collection Improvement Act of 1996, 31 U.S.C. 3701, the 
Agency adjusted the maximum civil penalty for inflation in 1997 from 
$10,000 to $11,000. 15 CFR 6.4(a)(1) (1997). In 2000, the Agency 
again adjusted it for inflation from $11,000 to $12,000. Id. at 
Sec.  6.4(a)(6) (2000). It was not until 2003 that the Agency 
reduced maximum civil penalty from $12,000 to $11,000, where it has 
since remained. Id. at Sec.  6.4(a)(6) (2003-06). While the conduct 
in question occurred from 2001 to 2003, BIS has indicated that it 
wishes to seek an $11,000 ``maximum civil penalty.'' The undersigned 
will therefore treat $11,000 as the maximum civil penalty for the 
purpose of this action only.
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    During the course of Mr. Mangelsen and BiB's violation of the 
regulations and as is apparent from Mr. Mangelsen'scorrespondence, Mr. 
Mangelsen has a blatant disregard for U.S. export laws and regulations. 
He appears to believe he is entitled to avail himself to privileges of 
exporting from the U.S., but acts as though he need not comply with its 
laws or regulations. To aggravate this, Mr. Mangelsen and BiB have 
demonstrated a propensity to disguise their efforts to evade U.S. 
export laws and regulations. The clear disregard for U.S. export laws 
and regulations combined with the propensity to disguise efforts to 
evade the same more than justifies issuing the maximum civil penalty 
against both Mr. Mangelsen and BiB.

VIII. Recommended Order

[Redacted Section]

    Please be advised that under 15 CFR 766.17(b)(2) the administrative 
law judge shall immediately certify the record, including the original 
copy of the recommended decision and order, to the Under Secretary for 
review in accordance with 15 CFR 766.22. Please be further advised that 
15 CFR 766.22 is included in Attachment A of this decision.
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    \10\ United States Coast Guard Administrative Law Judges perform 
adjudicatory functions for the Bureau of Industry and Security with 
approval from the Office of Personnel Management pursuant to a 
memorandum of understanding between the Coast Guard and the Bureau 
of Industry and Security.

    Done and dated May 23, 2006 at Norfolk, VA.
Peter A. Fitzpatrick,
Administrative Law Judge, U.S. Coast Guard.\10\
[FR Doc. 06-5778 Filed 6-28-06; 8:45 am]
BILLING CODE 3510-33-M