$1m fine for breach of export controls highlights need for parent companies to monitor subsidiaries' activities, says expert

Out-Law News | 13 Oct 2014 | 12:16 pm | 1 min. read

The Belgian subsidiary of Texas oil firm Robbins & Myers, a US-registered company, has agreed to pay penalties "more than 50 times greater than the proceeds of its sales" after it admitted to breaching export controls when it shipped components used in oil extraction equipment to Syria in 2006.

Oil and gas expert William Park of Pinsent Masons, the law firm behind Out-Law.com, said that the case was a reminder of the need for parent companies to put effective systems in place to monitor the activities of their subsidiaries. Otherwise, they could risk becoming exposed to potential violations of export controls or sanctions, he said.

The case also highlighted the strict approach of the US Department of Justice (DoJ) to cases of this nature, he said.

"Whilst the total value of the four shipments was modest, Robbins & Myers Belgium's disregard for the instruction their parent company issued and their subsequent attempts to cover their trail from DoJ investigators have clearly not assisted their cause," he said. "Where companies are found to have knowingly breached export controls, the US authorities will use all their powers to secure substantial and significant penalties against offenders."

"Sanctions may get most of the headlines – particularly the extension of sanctions against the Russian and Iranian oil and gas sectors – but companies must not lose sight of requirements placed upon them by export controls," he said.

The Belgian company admitted to four breaches of the US International Emergency Economic Powers Act and the Export Administration Regulations as part of a plea agreement with the DoJ. The agreement included a fine of $250,000 for each of the four shipments and a period of corporate probation, as well as forfeiting the $31,716 that was its gross profit from the four shipments. The company also entered into a separate civil settlement with the Department of Commerce for $600,000.

In May 2006, an internal audit of the Belgian company had identified that previous shipments had likely been in breach of US law. However, it ignored instructions from its US parent company to stop shipments to Syria. The four shipments that the charges related to contained components milled from US-origin steel and were sent to a customer with operations in Syria between August and October 2006. According to court documents, employees of the Belgian company also tried to hide documents relating to the shipments from US government investigators.

"This case shows that the US will vigorously enforce its export laws against companies doing business with Syria, a state-sponsor of terrorism and home to one of the most brutal regimes on earth," said US Attorney Ronald Machen.

"The DoJ will hit companies that do business with Syria where it hurts most: the bottom line. This company will pay fines, penalties and forfeitures more than 50 times greater than the proceeds of its sales," he said.