Tag Archives: Brent Carlson

How Not to Stand Out Like a Sore Thumb (Part 1): A Fresh Look at the “Willful” Intent Standard for Criminal Liability in Export Controls and Sanctions Corporate Enforcement

by Brent Carlson and Michael Huneke

Photos of the authors.

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

“The ‘willfulness’ standard for criminal prosecutions appears nearly insurmountable to reach.”

So concluded a “90-Day Review Report” issued January 2, 2024 by the Chairman of the Foreign Affairs Committee of the U.S. House of Representatives, following congressional hearings in May and December 2023.[1] The report further contended that “the statutory requirement to prove ‘willfulness’” for there to be a criminal violation of U.S. export controls (and sanctions) is a “high bar” that “often results in [the Department of Commerce’s Bureau of Industry & Security (“BIS”)] export enforcement personnel pursuing administrative enforcement actions with lower penalties,” compared to the alternative (unstated but implied by the report) of U.S. Department of Justice (“DOJ”) personnel pursuing criminal penalties.[2]

This conclusion is not accurate. BIS is not itself responsible for criminal enforcement, yet it has partnered closely with the DOJ’s National Security Division—including by co-leading the inter-agency Disruptive Technology Strike Force launched on February 16, 2023—to bring several high-profile convictions or resolutions. Nor is the requirement to prove willfulness “insurmountable” for U.S. federal prosecutors, whose cases achieve the standard regularly and can do so not only with direct evidence of intent but also indirect evidence, i.e., the relevant facts and circumstances. Such facts and circumstances often—especially in the eyes of jurors—make the willful nature of criminal evasion schemes stand out like a sore thumb. Continue reading →

Boards of Directors Lovin’ It after McDonald’s? A Fresh Look at Directors’ Duty of Oversight in the New Era of Sanctions & Export Control Corporate Enforcement

by Brent Carlson and Michael Huneke

Photos of the authors.

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

In this era of heightened geopolitical tensions with a renewed focus on national security, a perfect storm of liability risk is brewing for boards of directors.

Sanctions and export controls violations can be costly and dangerous, with multi-billion-dollar fines and jail sentences imposed in 2023.

For companies engaged in international trade, these events engage directors’ fiduciary duties. Looking to bellwether Delaware corporate law, Delaware’s Chancery Court recently reiterated in the McDonald’s shareholder litigation that directors’ Caremark duty of oversight is a function of their duty of loyalty. As such, this reinforces the limits of the protections directors would otherwise have if it were instead a function of the duty of care—under both the business judgment rule and “exculpation,” i.e., the option corporations have to excuse in their certificates of incorporation directors’ liability for breaches of their duty of care (but not of loyalty).[1] Directors’ duty of oversight further requires ensuring that they receive information regarding any “central compliance risks,” not just “mission critical” risks, and that there is an appropriate response to red flags. Continue reading →

An Ounce of Prevention is Worth a Pound of Cure . . . or an Imposed Compliance Monitorship: A Fresh Look at the DOJ’s Corporate Enforcement Toolkit Applied to Sanctions and Export Controls Enforcement

by Brent Carlson and Michael Huneke

Photos of the authors

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

In our last article, we discussed the evolution of export controls penalties.[1] Beyond monetary penalties, the U.S. Department of Justice (“DOJ”) has additional items in its corporate enforcement toolkit that dramatically increase the cost of non-compliance. These include the DOJ’s new policies requiring companies to claw back or withhold executive compensation, requiring CEOs and chief compliance officers to make pre-release compliance certifications, and expanding the grounds for appointing independent compliance monitors.

Such corporate enforcement trends significantly increase the value of making front-end investments to avoid the “pound of cure.” In this post, we take a “fresh look” at these trends with an eye towards sanctions and export controls enforcement and offer practical guidance for dealing with them. Continue reading →

From Peanuts to Prison Time – A Fresh Look at the Evolution of Export Controls Penalties

by Brent Carlson and Michael Huneke

Photos of the authors

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

New export controls rules recently issued by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) have set the corporate compliance world abuzz, as export controls continue to increase everywhere amid accelerating economic and geopolitical competition. Multinational companies are placed in an increasingly precarious position, caught between superpowers in a “disordered,” multipolar world. The consequences of failing to navigate successfully through myriad export controls regimes are only going to grow more severe, with the U.S. government signaling that a wave of increasing enforcement activity is on the way.

In this installment of our Fresh Looks series, we examine the evolution of export controls penalties, from where they are today to where they are heading tomorrow. The U.S. Department of Justice (“DOJ”) has called export controls and economic sanctions the “new FCPA” and included both among America’s national security enforcement priorities. This provides an important—and unambiguous—signal of the directional trends underway for export controls enforcement. Continue reading →

Slow is Smooth, Smooth is Fast: A Fresh Look at Planning and Executing Internal Investigations into Allegations of Sanctions or Export Controls Evasion

by Brent Carlson and Michael Huneke

Photos of the authors.

From left to right: Brent Carlson, Michael Huneke (Photos courtesy of the authors)

“Slow is Smooth, Smooth is Fast.” U.S. Navy SEALs and Aikido martial arts masters have valued this mantra as a reminder that deliberate, thoughtful action is—unexpectedly—the quickest way to accomplish your objectives in the face of chaotic circumstances.

Next in our “fresh look” series on economic sanctions and export controls compliance—and the convergence of both with anti-corruption compliance following the declaration by the DOJ that sanctions are the “new FCPA”—we apply this principle to responding to allegations of sanctions or export controls evasion. Continue reading →

Know Your Customer, But Also Yourself: A Fresh Look at Sanctions & Export Controls Risk Assessments in the Era of the “New FCPA”

by Brent Carlson and Michael Huneke

Photos of the authors

From left to right: Brent Carlson, Michael Huneke (Photos courtesy of the authors)

We have written recently about liability pitfalls caused by misperceived “loopholes” in sanctions and export controls regimes.[1] We have also written about the meaning and practical implications of the U.S. government’s emphasis on sanctions enforcement as the “new FCPA,” discussing how to identify and respond to circumstances posing a high probability of sanctions or export controls evasion.[2]

Having identified these new priority issues, what is the first step towards a solution? Risk assessments are the starting point.[3] Assess your own risk, but do so in an updated—and more effective—manner that reflects the evolving economic sanctions and export controls enforcement environment. Here are some suggestions to help with the assessment.

Continue reading →

When Loopholes Create Liability Pitfalls: A Fresh Look at Export Controls

by Brent Carlson

Photo of the author

Photo courtesy of the author

Export controls have been around for decades, but the pace of change has accelerated dramatically in recent years propelled by powerful geopolitical and national security drivers. The US Department of Justice (“DOJ”) has made it clear that sanctions and export controls constitute a new top enforcement priority.[1] With twenty-five new dedicated prosecutors on the DOJ roster, increasingly it will not just be the Department of Commerce’s Bureau of Industry and Security (“BIS”) knocking on the door anymore.

The rapid pace of change has left many companies struggling to catch up with new risk management challenges. Certain assumptions and practices around export controls, which may have been widely accepted in the past, have become not only obsolete but increasingly landmines leading to disastrous potential criminal liability.

In addition to administrative penalties which are on the rise, the criminal penalties are steep, up to one million dollars and twenty years imprisonment per violation.[2]  However, by adopting a white collar enforcement perspective to export controls compliance, companies and individuals may avoid creating unnecessary potential criminal liability pitfalls.

Continue reading →