[Federal Register Volume 72, Number 39 (Wednesday, February 28, 2007)]
[Notices]
[Pages 8967-8969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-905]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[Docket No. 05-BIS-10


In the Matter of: William Kovacs, 24 Georgetown Road, Boxford, MA 
01921, Respondent; Final Decision and Order

    This matter is before me upon a Recommended Decision and Order of 
an Administrative Law Judge (``ALJ''), as further described below.
    In a charging letter filed on June 28, 2005, the Bureau of Industry 
and Security (``BIS'') alleged that Respondent, William Kovacs, 
committed six violations of the Export Administration Regulations 
(``Regulations'')\1\, issued under the Export Administration Act of 
1979, as amended (50 U.S.C. app. 2401-2420 (2000)) (the ``Act''),\2\ 
related to the illegal export of an industrial furnace to the Beijing 
Research Institute of Materials and Technology (``BRIMT'') in the 
People's Republic of China. The export of the furnace, which took place 
in 1999, required a license because the exporter, Elatec (Kovacs' 
company), knew or had reason to know at the time of the export that the 
item would be used in the design, development, production, or use of 
missiles in or by China, as described in 744.3(a)(2) of the 
Regulations. A license application submitted for the export was 
explicitly denied by BIS before the export occurred, and no license for 
the export was ever obtained.
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    \1\ The charged violations occurred from 1998, 1999 and 2001. 
The Regulations governing the violations at issue are found in the 
1998, 1999 and 2001 versions of the Code of Federal Regulations (15 
CFR parts 730-774 (1998-1999, 2001)). Actions taken during this 
administrative enforcement proceeding are governed by the 
Regulations in effect at the time such actions take place.
    \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 3, 2006, (71 FR 44,551 (August 7, 2006)), has 
continued the Regulations in effect under IEEPA.
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    The charging letter alleged that Kovacs sold, transferred, 
forwarded and/or disposed of the furnace with knowledge that a 
violation would subsequently occur, that Kovacs conspired to export the 
furnace without a license, that Kovacs caused the furnace to be 
exported without a license, and that Kovacs took actions with the 
intent to evade the Regulations in connection with the furnace export. 
Further, the charging letter alleged that Kovacs made two false 
statements to the U.S. Government during the investigation of the 
illegal export.
    In accordance with 766.3(b)(1) of the Regulations, on June 28, 
2005, BIS mailed the notice of issuance of the charging letter by 
certified mail to Kovacs at his last known address. The notice of 
issuance of a charging letter was received and signed for by Kovacs on 
July 5, 2005. To date, Kovacs has not filed an answer to the charging 
letter with the ALJ, as required by the Regulations.
    In accordance with 766.7 of the Regulations, BIS filed a Motion for 
Default Order on January 11, 2007. This Motion for Default Order 
recommended that Kovacs be denied export privileges under the 
Regulations for a period of 5 years and be assessed a monetary penalty 
of $66,000. Under 766.7(a) of the Regulations, ``[f]ailure of the 
respondent to file an answer within the time provided constitutes a 
waiver of the respondent's right to appear,'' and ``on BIS's motion and 
without further notice to the respondent, ]the ALJ] shall find the 
facts to be as alleged in the charging letter.'' Based upon the record 
before him, the ALJ held Kovacs in default.
    On January 26, 2007, the ALJ issued a Recommended Decision and 
Order in which he found that Kovacs committed one violation each of 
Sec.  764.2(b), (d), (e) and (h) of the Regulations, and two violations 
of Sec.  764.2(g) of the Regulations. The ALJ also recommended the 
penalty of denial of Kovacs' export privileges for five years and a 
monetary penalty of $66,000.
    The ALJ'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 ALJ's findings of fact and 
conclusions of law. I also find that the penalty recommended by the ALJ 
is appropriate, given the nature of the violations and the facts of 
this case, and the importance of preventing future unauthorized 
exports.
    Based on my review of the entire record, I affirm the findings of 
fact and conclusions of law contained in the ALJ's Recommended Decision 
and Order.
    Accordingly, it is therefore ordered,
    First, that a civil penalty of $66,000 is assessed against Kovacs 
which shall be paid to the Department of Commerce within 30 days from 
the date of entry of this Order. Payment shall be made in the manner 
specified in the attached instructions.
    Second, that pursuant to the Debt Collection Act of 1982, as 
amended (31 U.S.C. Sec. Sec.  3701-3720E (2000)), the civil penalty 
owed under this Order accrues interest as more fully described in the 
attached Notice, and, if payment is not made by the due date specified 
herein, Kovacs will be assessed, in addition to the full amount of the 
civil penalty and interest, a penalty charge and an administrative 
charge, as further described in the attached Notice.
    Third, that, for a period of five years from the date of this 
Order, William Kovacs, 24 Georgetown Road, Boxford, MA 01921, and when 
acting for or on behalf of Kovacs, his representatives, agents, assigns 
and employees (hereinafter collectively referred to as the ``Denied 
Person''), 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. Benefitting 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.

[[Page 8968]]

    Fourth, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of the Denied Person any item 
subject to the Regulations;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by the Denied Person 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 Person 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 Person of any item subject to 
the Regulations that has been exported from the United States;
    D. Obtain from the Denied Person 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 Untied 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 Person, 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 Sec.  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 Person 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: February 22, 2007.
Mark Foulon,
Acting Under Secretary of Commerce for Industry and Security.
Attachments

Notice

    The Order to which this Notice is attached describes the reasons 
for the assessment of the civil monetary penalty. It also specifies the 
amount owed and the date by which payment of the civil penalty is due 
and payable.
    Under the Debt Collection Act of 1982, as amended (31 U.S.C. 3701-
3720E (2000)), and the Federal Claims Collection Standards (31 CFR 
parts 900-904 (2002)), interest accrues on any and all civil monetary 
penalties owed and unpaid under the Order, from the date of the Order 
until paid in full. The rate of interest assessed respondent is the 
rate of the current value of funds to the U.S. Treasury on the date 
that the Order was entered. However, interest is waived on any portion 
paid within 30 days of the date of the Order. See 31 U.S.C.A. 3717 and 
31 CFR 901.9.
    The civil monetary penalty will be delinquent if not paid by the 
due date specified in the Order. If the penalty becomes delinquent, 
interest will continue to accrue on the balance remaining due and 
unpaid, and respondent will also be assessed both an administrative 
charge to cover the cost of processing and handling the delinquent 
claim and a penalty charge of 6 percent per year. However, although the 
penalty charge will be computed from the date that the civil penalty 
becomes delinquent, it will be assessed only on sums due and unpaid for 
over 90 days after that date. See 31 U.S.C.A. 3717 and 31 CFR 901.9.
    The foregoing constitutes the initial written notice and demand to 
respondent in accordance with Sec.  901.2(b) of the Federal Claims 
Collection Standards (31 CFR 901.2(b)).

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, Room H-6622, 14th Street and 
Constitution Avenue, NW., Washington, DC. Attn: Jennifer Kuo.

Recommended Decision and Order

    On June 28, 2005, the Bureau of Industry and Security (``BIS''), 
U.S. Department Commerce, issued a Charging Letter initiating this 
administrative enforcement proceeding against William Kovacs 
(``Kovacs''). The Charging Letter alleged that Kovacs committed six 
violations of the Export Administration Regulations (currently codified 
at 15 CFR parts 730-774 (2006)) (``Regulations''),\1\ issued under the 
Export Administration Act of 1979, as amended (50 U.S.C. App. 2401-2420 
(2000)) (``Act'').\2\ In accordance with Sec.  766.7 of Regulations, 
BIS moved for the issuance of an Order of Default against Kovacs for 
his failure to file an answer to the allegations in the Charging letter 
issued by BIS within the time period required by law.
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    \1\ The charged violations occurred during 1998, 1999 and 2001. 
The Regulations governing the violations at issue are found in the 
1998, 1999 and 2001 versions of the Code of Federal Regulations (15 
CFR parts 730-774 (1998-1999, 2001)). 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 
12,924, 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 
13,222 of August 17, 2001, 3 CFR, 2001 Comp. 783 (2002), as extended 
by the Notice of August 3, 2006, 71 FR 44551 (Aug. 7, 2006), has 
continued the Regulations in effect under the IEEPA.
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A. Legal Authority for Issuing an Order of Default

    Section 766.7 of the Regulations states that BIS may file a motion 
for an order of default if a respondent fails to file a timely answer 
to a charging letter. That section, entitled Default, provides in 
pertinent part:

    Failure of the respondent to file an answer within the time 
provided constitutes a waiver of the respondent's right to appear 
and contest the allegations in the charging letter. In such event, 
the administrative law judge, on BIS's motion and without further 
notice to the respondent, shall find the facts to be as alleged in 
the charging letter and render an initial or recommended decision 
containing findings of fact and appropriate conclusions of law and 
issue or recommend an order imposing appropriate sanctions.

15 CFR 766.7 (2005).

    Pursuant to Sec.  766.6 of the Regulations, a respondent must file 
an answer to the charging letter ``within 30 days after being served 
with notice of the issuance of the charging latter * * *'' initiating 
the proceeding.

[[Page 8969]]

B. Service of the Notice of Issuance of Charging Letter

    In the case, BIS served notice of issuance of the Charging Letter 
in accordance with Sec.  766.3(b)(1) of the Regulations when it sent a 
copy of the Charging Letter by certified mail to Kovacs at his last 
known address on June 28, 2005. The notice of issuance of a charging 
letter was received and signed for by Kovacs on July 5, 2005.

C. Summary of Violations Charged

    The Charging Letter issued by BIS included a total of six (6) 
charges related to the illegal export of a manufacturing furnace to the 
Beijing Research Institute of Materials and Technology (``BRIMT'') in 
the People's Republic of China. The export of the furnace, which took 
place in 1999, required a license because the exporter, Elatec (Kovacs' 
company), knew or had reason to know at the time of the export that the 
item would be used in the design, development, production, or use of 
missiles in or by China, as described in Sec.  744.39a)(2) of the 
Regulations. A license application submitted for the export was 
explicitly denied by BIS before the export occurred, and no license for 
the export was over obtained.
    The Charging Letter alleged that Kovacs sold, transferred, 
forwarded and/or disposed of the furnace with knowledge that a 
violation would subsequently occur, that Kovacs conspired to export the 
furnace without a license, that Kovacs caused the furnace to be 
exported without a license, and that Kovacs took actions with the 
intent to evade the Regulations in connection with the furnace export. 
Furthermore, the Charging Letter alleged that Kovacs made two false 
statements to the U.S. Government during the investigation of the 
illegal export.

D. Penalty Recommendation

[Redacted Section]

E. Conclusion

    Accordingly, I am referring this Recommended Decision and Order to 
the Under Secretary of Commerce for Industry and Security for review 
and final action for the agency, without further notice to the 
Respondent, as provided in Sec.  766.7 of the Regulations.
    Within 30 days after receipt of this Recommended Decision and 
Order, the Under Secretary shall issue a written order affirming, 
modifying, or vacating the Recommended Decision and Order. See 15 CFR 
766.22(c).

Dated: January 26, 2007.

The Honorable Joseph N. Ingolia,

Chief Administrative Law Judge.

[FR Doc. 07-905 Filed 2-27-07; 8:45 am]
BILLING CODE 3510-DT-M