Cryostar SAS gets caught exporting cryogenic submersible pumps to Iran

[Guest DOJ]

Cryostar SAS, formerly known as Cryostar France (“CRYOSTAR”), a French corporation, headquartered in Hesingue, France, was sentenced today before Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia to a criminal fine of $500,000 and corporate probation of two years, announced U.S. Attorney Jeffrey A. Taylor and Darryl W. Jackson, Assistant Secretary for Export Enforcement, Department of Commerce.

 

In April 2008, CRYOSTAR pled guilty to one count of Conspiracy, one count of Export without an Export License, and one count of Attempted Export without an Export License.

 

The evidence in this case established that CRYOSTAR, with business locations around the world including in the United States, specialized in the design and manufacturing of cryogenic equipment, such as pumps, turbines, compressors and automatic filling stations that were used to transport and process natural gases at extremely cold temperatures. Ebara International Corp., Inc. (“Ebara”) was a Delaware corporation with its principal place of business in Nevada. Ebara engaged in the business of designing and manufacturing cryogenic pumps for various uses, including for pumping fluid hydrocarbons that have been cooled to cryogenic temperatures (280 degrees below zero). Ebara specialized in the design and manufacturing of cryogenic equipment, such as pumps, turbines, compressors and automatic filling stations that were used to transport and process natural gases at extremely cold temperatures. “TN” was a French company with a U.S. subsidiary.

 

In 2001, TN arranged to purchase cryogenic submersible pumps from Ebara for delivery to an Iranian company for installation at the 9th and 10th Olefin Petrochemical Complexes in Iran. CRYOSTAR agreed to facilitate this transaction by serving as the middleman for TN and Ebara, by purchasing the pumps from Ebara, by reselling them to TN (which forwarded the pumps to Iran), and by falsely indicating that the final purchaser was a French company that would install the pumps in France, when all parties to the transaction knew that the ultimate and intended destination of the pumps was Iran.

 

The conspirators developed a plan to conceal the export of cryogenic pumps to Iran, under which Ebara would sell and export the pumps to CRYOSTAR in France, which would then resell the pumps to TN, with the ultimate and intended destination being Iran. The conspirators set forth the plan on a “matrix,” which they used as a roadmap, including various procedures to be followed by each company to protect their conduct from detection by United States law enforcement, which included the following:

 

1) requiring that all paperwork be passed through the London office of Ebara which would eliminate references to Iran and TN on paperwork going to Ebara in the United States and which would replace Ebara references with the letterhead and template of CRYOSTAR on engineering drawings, letters and reports on paperwork going to TN and Iran;

 

2) creating false purchase orders

I) from CRYOSTAR to Ebara stating that CRYOSTAR, not TN, was the purchaser, and France, not Iran, was the ultimate and intended destination and

ii) from TN to CRYOSTAR stating that CRYOSTAR, not Ebara, was the supplier, and that France, not the United States, was the country of origin for the pumps;

 

3) permitting only limited witness testing of the pumps in the United States by TN and not at all by the Iranian customer;

 

4) transferring responsibility for all installation, commissioning, maintenance, testing, and training in Iran from Ebara to CRYOSTAR and allowing participation by Ebara personnel from Ebara’s London office only in “extreme situations” and no participation by Ebara personnel from the United States “under any circumstances”;

 

5) omitting all Ebara labels and stamps on the pumps’ component parts before export to conceal the true country of their origin;

 

6) replacing Ebara labeling and stamping of the pumps’ component parts and

accompanying shipping documents with CRYOSTAR identifiers after export to France so the country of their origin appeared to be France rather than the United States;

 

7) purchasing as many component parts as possible from non-U.S. suppliers and

importing them into the United States for assembly by Ebara to avoid using parts with U.S. certificates of origin and addressing questions from U.S. suppliers regarding end-users; and

 

8) shipping the pumps from the United States through Canada, and then to France for re-labeling, before shipment to Iran for installation at the 9th Olefin Petrochemical Complex.

 

Following the procedures set forth in the “matrix,” the conspirators manufactured four pumps, and shipped them, in January 2003, for installation at the 9th Olefin Petrochemical Complex in Iran, (“First CRYOSTAR Order”). The total value of the First CRYOSTAR Order was approximately $746,756.

 

The conspirators prepared three additional pumps to be shipped to Iran in the fall of 2003, for installation at the 10th Olefin Petrochemical Complex in Iran (“Second CRYOSTAR Order”). The total value of the Second CRYOSTAR Order was approximately $1,125,055. The conspirators halted shipment of the Second CRYOSTAR Order because of this investigation.

 

The conspirators attempted to cover up their illegal conduct by creating false correspondence confirming that none of the pumps were sent, or were intended to be sent, to Iran.

 

None of the conspirators sought and obtained export licenses for either the First CRYOSTAR Order or the Second CRYOSTAR Order.

 

Ebara and its former president pled guilty and were sentenced at an earlier stage in this investigation.

 

CRYOSTAR’s guilty plea and sentencing are the result of an investigation by the U.S. Department of Commerce, Bureau of Industry and Security.

 

In announcing today’s sentence, U.S. Attorney Taylor and Assistant Secretary Jackson commended the efforts of Commerce Special Agent Norma Curtis. They also praised Assistant U.S. Attorney Jonathan M. Malis, who prosecuted the case.