A settlement agreement has been made by and between the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and Berkshire Hathaway Inc (“Berkshire”), a multinational conglomerate holding company based in Omaha Nebraska, on behalf of itself and its subsidiary IMC International Metalworking Companies B.V. and IMC’s wholly-owned subsidiary in Turkey, Iscar Kesici Takım Ticareti ve İmalatı Limited Şirketi (“Iscar Turkey”).
As stated in the Enforcement Release Document of OFAC, Iscar Turkey exported 144 shipments of cutting tools and related inserts, with a total value of $383,000 to two third-party Turkish distributors. Iscar Turkey knew that such goods would be shipped to a distributor in Iran for resale to Iranian end-users, including several entities, subject to the jurisdiction of the Government of Iran that would have been prohibited pursuant to the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (“ITSR”), if engaged in by a U.S. person or in the United States.
Pursuant to § 560.215(a) of the ITSR which implements § 218(b) of the Iran Threat Reduction and Syria Human Rights Act of 2012 (Pub. L. 112-158) and § 4 of Executive Order 13628 “an entity that is owned or controlled by a United States person and established or maintained outside the United States is prohibited from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran that would be prohibited pursuant to this part if engaged in by a United States person or in the United States.” Section 560.701(a)(3) further states that “a civil penalty (…) may be imposed on a United States person if an entity owned or controlled by the United States person and established or maintained outside the United States violates (…)the prohibition set forth in § 560.215.”
Violations occurred under the direction of certain senior managers of Iscar Turkey even though Berkshire and other Berkshire subsidiaries repeatedly communicated with Iscar Turkey regarding the U.S. sanctions against Iran and the application of it to Iscar Turkey’s operations, and sent their respective policies. Although Iscar Turkey’s employees tried to conceal their Iranian activities, employees of other Berkshire subsidiaries received specific information in emails that could have revealed that orders placed by Iscar Turkey may have been destined for Iranian end users and in contravention of their policies and procedures.
After receiving an anonymous tip in January 2016 regarding the apparent violations, Berkshire voluntarily self-disclosed the apparent violations to OFAC in May 2016.
OFAC determined that the transactions constitute apparent violations of § 560.215 of the ITSR, the apparent violations constitute an egregious case due to the actions of Iscar Turkey, and that Berkshire could be liable for the apparent violations of its foreign subsidiary, Iscar Turkey.
Berkshire has agreed to pay $4,144,651 to settle its potential civil liability for trade-related transactions and exports to Iran engaged in by its indirectly wholly owned Turkish subsidiary.
The settlement amount has been determined by taking the General Factors under the Enforcement Guidelines into consideration. OFAC considered mitigating factors such as the fact that Berkshire voluntarily self-disclosed the apparent violations; promptly responded to all of OFAC’s follow-on questions regarding its voluntary self-disclosure and cooperated throughout the investigation, and Iscar Turkey has not received a penalty notice or finding of violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations; as well as aggravating factors such as the fact that Iscar Turkey’s management willfully engaged in transactions with knowledge that such transactions violated prohibitions related to Iran and Iscar Turkey’s senior management intentionally concealed its dealings with Iran.
This note is intended for general information purposes only and should not be relied upon as a source of legal advice. Independent legal advice should be sought before taking any action based on information contained within this note for each particular case.