Embargo Violation Contradictions

Between an Embargo and a Hard Place
Export Law Blog, DC - April 30

Posted by Clif Burns

LogicaLogicaCMG, Inc., the U.S. subsidiary of U.K.-based LogicaCMG plc, pleaded guilty last Wednesday to violating the U.S. embargo on Cuba. According to a Department of Justice press release, the violation occurred in 2001 when New Hampshire based CMG, which was merged into LogicaCMG on December 30, 2002, configured and shipped a telecommunications server to Cuba through Panama. The server was designed to permit text messaging on the Cuban wireless telephone network. LogicaCMG agreed to pay a $50,000 fine. The company also entered into a settlement agreements with the Bureau of Industry and Security ("BIS") and the Office of Foreign Assets Control ("OFAC").

The conundrum for LogicaCMG is that its parent company, which almost surely approved the guilty plea, is subject to European Union Council Regulation 2271/96, which forbids LogicaCMG "whether directly or through a subsidiary" from complying with the U.S. embargo on Cuba. The Settlement Agreement with BIS, although not yet posted on the BIS website, almost certainly involves further representations from LogicaCMG that it will not further violate the Cuba embargo, normally enforced by conditioning a suspension of a denial of export privileges or suspension of all or part of a monetary fine on future compliance with U.S. export laws.

LogicaCMG is no doubt taking a calculated risk that the E.U. is unlikely to enforce Regulation 2271/96. To the best of my knowledge, the blocking regulation has only rarely been enforced if at all. Still, this is hardly a comfortable position for the company.