Pinnacle Aircraft Parts, Inc. Reaches Settlement With OFAC For Violation Of Reporting, Procedures, And Penalties Regulations

Nov 17, 2010   

On November 16, 2010, the Office of Foreign Assets Control (“OFAC”), of the U.S. Department of the Treasury announced that it reached a settlement with Pinnacle Aircraft Parts, Inc. (“Pinnacle”) for alleged violations of OFACs Reporting, Procedures, and Penalties Regulations (“RPPR”). The alleged violations stem from Pinnacles sale and delivery of a jet engine destined for Iran in February 2004. OFAC is a part of the U.S. Department of the Treasury and administers and enforces economic sanctions against targeted foreign countries, regimes, terrorists, international narcotics traffickers, among others.

OFAC alleged that Pinnacle violated the RPPR, found at 31 C.F.R. part 501, when it failed to provide documents in response to an administrative subpoena issued by OFAC as part of its investigation into Pinnacles jet engine sale. The administrative subpoena ordered Pinnacle to provide copies of all transactional documents and all other documents pertaining to the payment or transportation of the jet engine shipment. According to OFAC, while Pinnacle responded to the subpoena with 260 pages of documents, Pinnacles outside counsel failed to submit a copy of an e-mail that indicated that the engine was likely destined for Iran as well as other documents concerning the terms of sale.

Compounding the problem for Pinnacle was the fact that Pinnacle did not voluntarily self-disclose the error to OFAC. As a result of Pinnacles actions, Pinnacle faced a penalty of $250,000. However, this amount was reduced in the settlement agreement to $225,000. The settlement amount reflects OFACs consideration of several factors including that Pinnacle had no prior OFAC enforcement history, Pinnacle agreed to settle the matter, and that Pinnacle relied in good faith on the advice of legal counsel in not producing the e-mail and other documents. OFAC did note that while Pinnacle did rely on the advice of counsel, it remained the party that is legally responsible for compliance with OFAC regulations. As a result, the actions of Pinnacles counsel are attributable to Pinnacle for the purposes of calculating a base penalty and settlement amount.

For more information regarding OFAC and strategies on maintaining compliance with federal regulations, please contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com.