By Nick Larsen
Elan Pharmaceuticals, Inc. (Elan), a California company, recently agreed to pay $31,000 to settle charges that it was exporting controlled biological toxins to Belgium in violation of the Export Administration Regulations (EAR). As part of the settlement, Elan also agreed to perform an internal audit of its export compliance program.
The Commerce Department’s Bureau of Industry and Security (BIS) charged that at the time Elan committed these violations it knew that it would not obtain the required Department of Commerce export licenses.
BIS enforces export control laws to further U.S. national interests such as national security, foreign policy, and economic interests. The U.S. is obligated to control the export of biological toxins due to its membership in the Australia Group, a multinational group focused on controlling the proliferation of biological and chemical weapons.
When an EAR violation occurs, BIS may issue a warning letter or pursue an administrative sanction. A violation may also be referred to the Department of Justice for criminal prosecution. There are three types of administrative sanctions for violations of the EAR: a civil penalty, a denial of export privileges, and an exclusion from practice before BIS.
BIS generally analyzes several basic factors in determining which administrative sanctions are appropriate in each settlement. Many violations involve no more than simple negligence or carelessness and in most such cases, BIS will typically seek a settlement for payment of a civil penalty or resolve the matter with a warning letter. In cases involving gross negligence or willful blindness to the requirements of the EAR, the BIS is more likely to seek a denial of export privileges or an exclusion from practice, and/or a greater monetary penalty than it would otherwise seek.
One important mitigating factor is voluntary self-disclosure of a violation of the EAR. Voluntary self-disclosures receiving the greatest mitigating effect will typically be those concerning violations that no BIS investigation in existence at the time of the self-disclosure would have been reasonably likely to discover without the self-disclosure. Elan volunteered the information about its violations and cooperated fully with BIS in the follow-up investigation. Elan’s voluntary self-disclosure was likely an important factor in allowing the company to reach a relatively light settlement fine.
Other factors considered by BIS include whether a party's export compliance program uncovered a problem, thereby preventing further violations, and whether the party has taken steps to address compliance concerns raised by the violation, including steps to prevent reoccurrence of the violation.
For further information about export issues, please contact Conan Grames at cgrames@kmclaw.com.