U.S. Court Sentences Defendant to 9 Years’ Imprisonment, $1 Million Fine for Arms Export Control Act and Money Laundering Offenses

On November 13, the U.S. District Court for the Northern District of California sentenced the operator of a U.S. business, Naum Morgovsky, to 108 months’ imprisonment, a $1 million fine, and forfeiture of $222,929.61, on his plea to charges of conspiring to illegally export components for the production of night-vision and thermal devices to Russia in violation of the Arms Export Control Act (AECA), and for laundering the proceeds of the scheme.  Morgovsky’s wife, Irina Morgovsky, also pleaded guilty to conspiracy to violate the AECA and misuse of a passport, and was sentenced on October 31 to 18 months’ imprisonment for her role in the conspiracy.

The Department of Justice press release stated that according to their guilty pleas, which occurred during the second day of jury selection in their case on June 12, 2018, Naum and Irina Morgovsky

admitted that from at least April 2012 until Aug. 25, 2016, they conspired to export without the necessary license to a company called Infratech in Moscow, Russia, numerous night and thermal vision components, including image intensifier tubes and lenses.  The couple used their U.S. business, Hitek International, to purchase these components and misrepresented to the sellers that the products would not be exported.  The couple then shipped the products to Russia using a variety of front companies and shipment methods.  Further, defendants knew the night and thermal vision components they exported were on the U.S. Munitions List and that they therefore were not permitted to export the items without a license from the Department of State, Directorate of Defense Trade Controls, which they never sought.

The sentencing judge also found that Naum Morgovsky had taken steps to conceal his crimes so that he and Irina Morgovsky could continue to operate their illegal export business without detection, and that he laundered the proceeds of the AECA crimes.  The government also alleged that Naum Morgovsky used numerous front companies and the identity of at least one deceased person in furtherance of their scheme.

Note: Some attorneys have referred to the “complexity” of the AECA, and one recent commentary has characterized the overall multi-departmental bureaucratic process for reviewing and approving defense exports as “understaffed and organized in a way that can make the approval process inefficient and redundant.”  The Morgovskys’ actions, however, did not involve misunderstanding of fine distinctions in the International Traffic in Arms Regulations (ITAR), or bureaucratic delays in processing export-control paperwork.  Both defendants knew that the night and thermal vision components that they sought to export were unmistakably on the U.S. Munitions List, never sought the license that would therefore have been required, misrepresented to the sellers from whom they bought the components that the components would not be exported, and used numerous front companies and engaged in identity theft in the course of shipping the components to Russia.

In this respect, at least, the Department of Justice’s approach in this Administration to prosecuting AECA violations appears consistent with the approach in the Obama Administration.  Both Administrations have pursued and successfully prosecuted AECA cases when the items in question were on the U.S. Munitions List – such as weapons and weapons parts, sensors for use in high-level applications, and parts designed for missile and space applications – and there was evidence that the defendants knew it was illegal to export such items.  As a final note, Naum Morgovsky’s sentence, though longer than many AECA defendants, is not the longest sentence for an AECA defendant in recent years.

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