Recent DDTC Debarment Shows Benefits of Cooperation, Law Firm Says

The State Department’s recently announced debarment of VTA Telecom (see 2305310040) highlights how cooperation with the government can lead to lower penalties, Miller & Chevalier said in a June 6 client alert. Although the Directorate of Defense Trade Controls didn’t “award credit” for VTA's disclosure, it did credit it for cooperating with DDTC’s investigation, which led to a debarment but no fine, the firm said. DDTC could have imposed a maximum $7.2 million penalty against the company.

Miller & Chevalier pointed to the Bureau of Industry and Security's penalty against VTA Telecom in 2021, which included a fine of more than $1.8 million after BIS said the company illegally exported goods to Vietnam (see 2110130007). The firm also noted that VTA Telecom was required by BIS to hire an international trade compliance director and take other remedial compliance steps, measures that weren’t required by DDTC.

“Even in enforcement actions where egregious circumstances are alleged, DDTC continues to afford benefits to companies who submit voluntary disclosures or who otherwise cooperate with its investigation,” the firm said. “While placing VTA under administrative debarment for ITAR purposes is an extraordinary penalty, it could have been coupled with a sizable fine.”

The firm also noted that DDTC didn’t appear to give VTA credit for exporting to a country whose strict licensing policy was lifted during the company’s shipments. DDTC’s charging letter “repeatedly emphasizes” that VTA’s alleged illegal exports involved Vietnam, which at the time was a proscribed country under the International Traffic in Arms Regulations, which meant that it was generally subject to a license review policy of denial. But even though DDTC lifted that ban on Vietnam in 2016 “while some of VTA's conduct was still taking place,” the agency didn’t treat that as a mitigating factor, Miller & Chevalier said.

DDTC “did not seem to apply any leniency due to Vietnam's ITAR status change,” the firm said, adding that the ITAR wasn’t officially revised to remove Vietnam as a proscribed country until later that year “after the conduct in question.”