[Federal Register Volume 73, Number 191 (Wednesday, October 1, 2008)]
[Notices]
[Pages 57051-57055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23089]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security


Action Affecting Export Privileges; Balli Group PLC; Balli 
Aviation; Balli Holdings; Vahid Alaghband; Hassan Alaghband; Blue Sky 
One Ltd.; Blue Sky Two Ltd.; Blue Sky Three Ltd.; Blue Sky Four Ltd.; 
Blue Sky Five Ltd.; Blue Sky Six Ltd.; Blue Airways; Mahan Airways; 
Blue Airways Fze

    In the matter of:

Balli Group PLC, 5 Stanhope Gate, London, UK, W1K 1AH;
Balli Aviation, 5 Stanhope Gate, London, UK, W1K 1AH;
Balli Holdings, 5 Stanhope Gate, London, UK, W1K 1AH;
Vahid Alaghband, 5 Stanhope Gate, London, UK, W1K 1AH;
Hassan Alaghband, 5 Stanhope Gate, London, UK, W1K 1AH;

[[Page 57052]]

Blue Sky One Ltd. 5 Stanhope Gate London, UK W1K 1AH
Blue Sky Two Ltd., 5 Stanhope Gate, London, UK, W1K 1AH;
Blue Sky Three Ltd, 5 Stanhope Gate, London, UK, W1K 1AH;
Blue Sky Four Ltd, 5 Stanhope Gate, London, UK, W1K 1AH;
Blue Sky Five Ltd., 5 Stanhope Gate, London, UK, W1K 1AH;
Blue Sky Six Ltd., 5 Stanhope Gate, London, UK, W1K 1AH;
Blue Airways, 8/3 D Angaght Street, 376009 Yerevan, Armenia;
Mahan Airways, Mahan Tower, No. 21, Azadegan St,. M.A. Jenah Exp. 
Way, Tehran, Iran, Respondents;

and

Blue Airways FZE, a/k/a Blue Airways, <greek-i>G22 Dubai Airport 
Free Zone, P.O. Box 393754 DAFZA, Dubai, UAE;
Blue Airways, Riqa Road, Dubai 52404, UAE, Related Persons

Order Renewing Order Temporarily Denying Export Privileges

    Pursuant to Section 766.24 of the Export Administration 
Regulations, 15 CFR Parts 730-774 (2008) (``EAR'' or the 
``Regulations''), I hereby grant the request of the Bureau of Industry 
and Security (``BIS'') to renew for 180 days the Order Temporarily 
Denying the Export Privileges of Respondents Balli Group PLC, Balli 
Aviation, Balli Holdings, Vahid Alaghband, Hassan Alaghband, Blue Sky 
One Ltd., Blue Sky Two Ltd., Blue Sky Three Ltd., Blue Sky Four Ltd., 
Blue Sky Five Ltd., Blue Sky Six Ltd., Blue Airways and Mahan Air 
(collectively, ``Respondents'') and Blue Airways FZE and Blue Airways 
(collectively, the ``Related Persons''), as I find that renewal of the 
TDO is necessary in the public interest to prevent an imminent 
violation of the EAR.

I. Procedural History

    On March 17, 2008, I signed an Order Temporarily Denying the Export 
Privileges of the Respondents for 180 days on the grounds that its 
issuance was necessary in the public interest to prevent an imminent 
violation of the Regulations (``TDO''). Pursuant to Section 766.24(a), 
the TDO was issued ex parte and went into effect on March 21, 2008, the 
date it was published in the Federal Register. On July 18, 2008, I 
issued an Order adding Blue Airways FZE and Blue Airways, both of 
Dubai, United Arab Emirates, as Related Persons to the TDO in 
accordance with Section 766.23 of the Regulations.\1\ The TDO would 
expire on September 17, 2008, unless renewed in accordance with Section 
766.24 of the Regulations.
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    \1\ The Related Persons Order was issued in accordance with 
Section 766.23 of the Regulations, 15 CFR 766.23, and was published 
in the Federal Register on July 24, 2008.
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    On August 28, 2008, BIS, through its Office of Export Enforcement 
(``OEE''), filed a written request for renewal of the TDO against the 
Respondents for 180 days and served a copy of its request on the 
Respondents in accordance with Section 766.5 of the Regulations. On 
September 10, 2008, Balli Group PLC, Balli Aviation, Balli Holdings, 
Vahid Alaghband, Hassan Alaghband, Blue Sky One Ltd., Blue Sky Two 
Ltd., Blue Sky Three Ltd., Blue Sky Four Ltd., Blue Sky Five Ltd., and 
Blue Sky Six Ltd. (collectively, ``Balli'' or the ``Balli 
Respondents'') filed a written opposition to the request for renewal of 
the TDO. No opposition to renewal of the TDO was received by 
Respondents Blue Airways of Armenia or Mahan Air of Iran.

II. Discussion

A. Legal Standard

    Pursuant to section 766.24(d)(3) of the EAR, the sole issue to be 
considered in determining whether to continue a TDO is whether the TDO 
should be renewed to prevent an imminent violation of the EAR as the 
term ``imminent'' violation is defined in Section 766.24. ``A violation 
may be `imminent' either in time or in degree of likelihood.'' 15 CFR 
766.24(b)(3). BIS may show ``either that a violation is about to occur, 
or that the general circumstances of the matter under investigation or 
case under criminal or administrative charges demonstrate a likelihood 
of future violations.'' Id. As to the likelihood of future violations, 
BIS may show that ``the violation under investigation or charges is 
significant, deliberate, covert and/or likely to occur again, rather 
than technical and negligent[.]'' Id. A ``lack of information 
establishing the precise time a violation may occur does not preclude a 
finding that a violation is imminent, so long as there is sufficient 
reason to believe the likelihood of a violation.'' Id.

B. Arguments

    BIS's request for renewal of the TDO was based upon the facts 
underlying the issuance of the initial TDO, as well as evidence of 
continued actions by the Respondents that demonstrate a willingness to 
disregard U.S. export controls. The initial TDO was issued as a result 
of evidence that showed the Respondents engaged in conduct prohibited 
by the EAR by knowingly re-exporting to Iran three U.S.-origin 
aircraft, specifically Boeing 747s (``Aircraft 1-3''), items subject to 
the EAR, without the required U.S. Government authorization. Further 
evidence submitted by BIS indicated that Respondents were attempting to 
re-export an additional three U.S.-origin Boeing 747s to Iran 
(``Aircraft 4-6''), and had ignored a re-delivery order for Aircraft 4-
6 issued by BIS in accordance with Section 758.8(b) of the Regulation. 
In addition, as evidenced in BIS's renewal request and the Balli 
Group's opposition and ``supplemental disclosure'' dated September 10, 
2008, the record before me also indicates that Aircraft 1-3 continue to 
be flown on Mahan Air routes in violation of the Regulations and the 
TDO. It also shows that Aircraft 1-3 have been and continue to be flown 
in further violation of the Regulations and the TDO on the routes of 
Iran Air, an Iranian Government airline.\2\
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    \2\ Engaging in conduct prohibited by a denial order violates 
the Regulations. 15 CFR 764.2(a) and (k).
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    In its opposition to the request for renewal of the TDO, the Balli 
Group Respondents assert that OEE's request for renewal does not meet 
the legal requirements and that further violations are not imminent. 
The Balli Respondents also assert that any violations of the 
Regulations involving Aircraft 1-3, and any false or misleading 
statements by the Balli Respondents, were not done or made with 
knowledge and were instead based on a misunderstanding of the 
Regulations, including the term ``re-export''; that they have been 
fully cooperating with BIS and are making concerted efforts to recover 
Aircraft 1-3 from Blue Airways of Armenia; and that the resume of 
[REDACTED], upon which OEE relied in part in its renewal request, is 
uncorroborated.\3\ The Balli Respondents also assert that if BIS's goal 
is to prevent imminent or on-going violations of the EAR, BIS should 
limit renewal of the TDO to Respondents Blue Airways and Mahan Air 
only, and state that they do not contest that BIS has grounds to renew 
the TDO against Blue Airways and Mahan Air.
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    \3\ None of the Respondents appealed the initial TDO.
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C. Findings

    In determining whether to renew the TDO in order to prevent 
imminent violations of the Regulations, I have reviewed the entire 
record including BIS's original request for a TDO filed in March 2008, 
BIS's request to renew the TDO submitted on August 28, 2008, and the 
September 10, 2008 opposition submission filed by the Balli Respondent 
and its related supplemental disclosure that was filed

[[Page 57053]]

under separate cover and also is dated September 10, 2008.
    I find that violations of the Regulations have occurred involving 
the unlicensed re-export to Iran of Aircraft 1-3. While the Balli 
Respondents have asserted that they did not understand the restrictions 
on the re-export to Iran of U.S.-origin aircraft, their submission and 
related evidence are more probative of what violations have occurred, 
rather than calling into question BIS's evidence or its renewal 
request. Monthly Aircraft Reports, in the possession of the Balli 
Respondents per the stated lease agreements with Respondent Blue 
Airways, provide ample evidence that Aircraft 1-3 have been regularly 
being flown on Mahan Air routes, both before the Balli-Blue Airways 
lease agreements were extended in November 2007 and well into the TDO 
period.\4\ Moreover, these reports, as acknowledged in Balli's 
submission, also show Aircraft 1-3 regularly being flown on Iran Air 
routes. Rather than undercutting BIS's requests, as Balli suggests, 
this evidence shows that the scope of violations is greater and even 
more significant than indicated in BIS's initial and renewal requests.
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    \4\ The Monthly Aircraft Reports that were referenced by Balli 
in its September 10, 2008 submission do not appear to include such 
reports post-dating June 2008. The record indicates, however, that 
Aircraft 1-3 are still being operated in violation of the 
Regulations.
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    I also find that the July 2007 letters to Balli from Boeing 
explicitly alerted Balli that Boeing would not be able to service 
Aircraft 1-3 based on evidence that the aircraft were being operated 
contrary to U.S. export control laws and thus put the Balli Respondents 
on notice regarding potential violations involving the lease of 
Aircraft 1-3 to Blue Airways. Similarly, by letter dated October 10, 
2007, BIS warned the Balli Group, via its English counsel, that ``[i]t 
has come to BIS's attention there is evidence that during this lease 
agreement Blue Airways operated the three 747s aircraft by or for the 
benefit of an Iranian entity, specifically Mahan Air.''
    In spite of these warnings, the Balli Respondents contend that they 
remained without knowledge of any potential unlawfulness regarding 
their conduct--maintaining what they term their ``fundamental 
misunderstanding'' of U.S. trade prohibitions. Balli's Opposition, at 
9. They assert that they ``failed to focus on the underlying 
substantive legal concerns associated with Boeing and BIS 
communications'' because they believed they were part of a 
``disinformation campaign'' orchestrated by ``Iranian expatriate groups 
that have a long history of hostility to Balli interests and the 
Alaghband family[,]'' including ``militant opposition groups hostile to 
Iran, including the Mujahedin-e-Khalq.'' Balli's Supplemental 
Disclosure, at 15, attached to and referenced in Balli's Opposition; 
see also Balli's Opposition, at 9.
    I find this assertion to be entirely unsubstantiated and 
unpersuasive. As appears to occur throughout Balli's opposition, this 
assertion is not supported by any citation to any witness statement, 
whether sworn or unsworn, whether from one of the Balli Respondents or 
a third party. Moreover, evidence of or a finding of knowledge can be 
based not only on affirmative or positive knowledge, but also ``is 
inferred from evidence of the conscious disregard of facts known to a 
person and is also inferred from a person's willful avoidance of 
facts.'' Section 772.1, at definition of ``Knowledge.'' In sum, Balli's 
asserted explanation as to its claimed lack of knowledge is not 
credible or substantiated, and even if it were, knowledge would be 
established on the record here at least by a conscious disregard or 
willful ignorance.
    Similarly, to the extent that the Balli Respondents' rely on a lack 
of knowledge or lack of understanding ``defense,'' those efforts are 
unavailing. BIS has alleged that false statement violations have 
occurred concerning the destination and end-user of Aircraft 1-3. The 
record supports the conclusion that false or misleading statements were 
made, whether affirmatively or through concealment or omission of 
material facts. See Section 764.2(g) (Misrepresentation and Concealment 
of Facts). As noted above, at no point before last week did the Balli 
Respondents disclose Mahan Air's involvement (or Iran Air's). Moreover, 
after being warned by BIS (and Boeing), the Balli Respondents 
represented to BIS (through their English counsel) by letter dated 
November 16, 2007, that they ``ha[d] tightened contractual 
representations required from Blue Airways to make more explicit that a 
breach of U.S. export laws would constitute a breach of the leases * * 
*.'' The extension of the lease agreements signed by the Balli 
Respondents and Blue Airways in November 2007 (again shortly after BIS 
expressed its concern that the planes were being operated in violation 
of the Regulations) contains no such provision. In fact, the Balli 
Respondents now assert that such language was somehow covertly removed 
from the draft lease agreements by Blue Airways and that they, while 
being represented by a large London-based law firm signed the 
agreements anyway. At all relevant times, Balli knew that the aircraft 
were regularly being operated in and out of Iran.
    I also find that although the Balli Respondents have now turned 
over a number of documents to BIS regarding Aircraft 1-3 and Aircraft 
4-6, including in conjunction with a supplemental disclosure dated 
September 10, 2008 (the same day its opposition to renewing the TDO was 
filed), they have failed to produce any documents regarding lease 
payments by Blue Airways that are required under the terms of the lease 
agreements. The failure to produce to BIS, six months after the TDO 
issued and three months after the documents were specifically requested 
by BIS, what should be readily available information in any legitimate, 
arms length commercial transaction raises a significant concern on 
BIS's part. Parties that describe themselves, as the Balli Respondents 
do in relation to Aircraft 1-3, as ``passive investors'' with no 
operational role or interest, but focused instead on cash flow and 
opportunities to sell the aircraft should market conditions improve, 
could be expected to be particularly focused on such payment issues and 
documents.
    While BIS supports legitimate efforts to bring the violations to a 
halt, and has under consideration Balli's recent request to engage in 
certain negotiations with Blue Airways that Balli has indicated will be 
designed to accelerate recovery of Aircraft 1-3 from Blue Airways, such 
stated intentions are not a sufficient basis to sustain Balli's 
position that the TDO need not and should not be renewed. Moreover, 
according to Balli's own submissions, it was not until June 27, 2008, 
over three months after the TDO was issued, that Balli served Blue 
Airways with notices of breach or termination under the leases. This 
appears to be the only legal step taken to date by the Balli against 
Blue Airways, a step which Balli states Blue Airways has contested 
under the terms of the lease agreements. Similarly, the request for 
permission to negotiate an ``accelerated'' recovery of the aircraft was 
not taken until September 4, 2008, just two weeks before the TDO was 
set to expire. Neither the extent nor pace of these actions has stemmed 
or appears likely to stem the ongoing violations, nor does either 
contradict BIS's case or demonstrate that Balli's dealings with Blue 
Airways have been arms-length or that its only tie to Blue Airways is a 
contractual one.
    Finally with regard to Aircraft 1-3, the Balli respondents argue 
that there is

[[Page 57054]]

no ``substantive corroborating evidence'' concerning the resume of 
[REDACTED] referenced in BIS's renewal request. However, the record 
here clearly demonstrates, inter alia, that violations of the 
Regulations have occurred, that those violations involved Mahan Air, 
and that the Balli Respondents knew or had reason to know of those 
violations. The Balli Respondents nonetheless renewed the lease 
agreements with Blue Airways, misrepresented or concealed material 
facts during BIS's investigation, and have failed to take significant 
or diligent action against Blue Airways. The fact that the violations 
have also involved Iran Air, an Iranian Government airline, does not 
undermine the evidence relating to Mahan Air, given the evidence 
referenced by BIS that the Iranian Government is engaged in concerted 
covert efforts to acquire U.S.-origin aircraft. The evidence relating 
to Iran Air underscores, rather than undermines, the need for renewal 
of the TDO.
    Moreover, regardless of the weight accorded the [REDACTED] resume, 
the record demonstrates that violations are imminent; indeed, that they 
are ongoing. In short, in many ways, the Balli Respondents' arguments 
amount to a bald assertion that BIS should ``trust us,'' but the record 
here indicates the contrary.
    I have considered all of Balli's arguments regarding Aircraft 1-3 
and found them unpersuasive. With regard to Aircraft 4-6, absent 
additional or supplemental evidence showing that the planes have in 
fact been repossessed by the lender and that the Balli Respondents no 
longer have or claim any interest in those aircraft, I find it 
premature to remove Blue Sky Four Ltd., Blue Sky Five Ltd., or Blue Sky 
Six Ltd. from the TDO. BIS will consider appropriate supplemental 
submissions by the Balli Respondents regarding Aircraft 4-6.\5\
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    \5\ The Balli Respondents state in their submission that they 
were compelled to default on the loan financing for Aircraft 4-6, 
because BIS denied their request to re-negotiate or extend that 
financing. This assertion is unsubstantiated and without merit. I 
note, inter alia, that as with other actions taken relating Aircraft 
1-3, the Balli Respondents filed their request at the eleventh hour, 
that the lender itself never sought permission to enter into 
negotiations with the Balli Respondents, and that the Balli 
Respondents do not address the option of self-financing the aircraft 
through the Balli Group.
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    I find that the evidence presented by BIS demonstrates that the 
Respondents have violated the EAR and the TDO involving re-exports to 
Iran of Aircraft 1-3, that such violations have been significant, 
deliberate and covert, and that there is a likelihood of future 
violations. As such, a Temporary Denial Order (``TDO'') is needed to 
give notice to persons and companies in the United States and abroad 
that they should continue to cease dealing with the Respondents in 
export transactions involving items subject to the EAR. Such a TDO is 
consistent with the public interest to prevent or preclude violations 
of the EAR.
    Accordingly, I find pursuant to Section 766.24, that renewal of the 
TDO for 180 days is necessary in the public interest to prevent an 
imminent violation of the EAR.

III. Order

    It is therefore ordered:
    First, that the Respondents, BALLI GROUP PLC, 5 Stanhope Gate, 
London, UK, W1K 1AH; BALLI AVIATION, 5 Stanhope Gate, London, UK, W1K 
1AH; BALLI HOLDINGS, 5 Stanhope Gate, London, UK, W1K 1AH; VAHID 
ALAGHBAND, 5 Stanhope Gate, London, UK, W1K 1AH; HASSAN ALAGHBAND, 5 
Stanhope Gate, London, UK, W1K 1AH; BLUE SKY ONE LTD., 5 Stanhope Gate, 
London, UK, W1K 1AH; BLUE SKY TWO LTD., 5 Stanhope Gate, London, UK, 
W1K 1AH; BLUE SKY THREE LTD., 5 Stanhope Gate, London, UK, W1K 1AH; 
BLUE SKY FOUR LTD., 5 Stanhope Gate, London, UK, W1K 1AH; BLUE SKY FIVE 
LTD., 5 Stanhope Gate, London, UK, W1K 1AH; BLUE SKY SIX LTD., 5 
Stanhope Gate, London, UK, W1K 1AH; BLUE AIRWAYS, 8/3 D Angaght Street, 
376009 Yerevan, Armenia; and MAHAN AIRWAYS, Mahan Tower, No. 21, 
Azadegan St., M.A. Jenah Exp.Way, Tehran, Iran (each a ``Denied 
Person'' and collectively the ``Denied Persons''), and BLUE AIRWAYS 
FZE, a/k/a Blue Airways, <greek-i>G22 Dubai Airport Free Zone, P.O. Box 
393754 DAFZA, Dubai, United Arab Emirates and BLUE AIRWAYS, Riqa Road, 
Dubai 52404, United Arab Emirates (each a ``Related Person'' and 
collectively the ``Related Persons'') may not, directly or indirectly, 
participate in any way in any transaction involving any commodity, 
software or technology (hereinafter collectively referred to as 
``item'') exported or to be exported from the United States that is 
subject to the Export Administration Regulations (``EAR''), or in any 
other activity subject to the EAR including, but not limited to:
    A. Applying for, obtaining, or using any license, License 
Exception, or export control document;
    B. Carrying on negotiations concerning, or ordering, buying, 
receiving, using, selling, delivering, storing, disposing of, 
forwarding, transporting, financing, or otherwise servicing in any way, 
any transaction involving any item exported or to be exported from the 
United States that is subject to the EAR, or in any other activity 
subject to the EAR; or
    C. Benefiting in any way from any transaction involving any item 
exported or to be exported from the United States that is subject to 
the EAR, or in any other activity subject to the EAR.
    Second, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of the Denied Persons or 
Related Persons any item subject to the EAR;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by the Denied Persons or Related Persons of the ownership, 
possession, or control of any item subject to the EAR that has been or 
will be exported from the United States, including financing or other 
support activities related to a transaction whereby the Denied Persons 
or Related Persons acquires or attempts to acquire such ownership, 
possession or control;
    C. Take any action to acquire from or to facilitate the acquisition 
or attempted acquisition from the Denied Persons or Related Persons of 
any item subject to the EAR that has been exported from the United 
States;
    D. Obtain from the Denied Persons or Related Persons in the United 
States any item subject to the EAR with knowledge or reason to know 
that the item will be, or is intended to be, exported from the United 
States; or
    E. Engage in any transaction to service any item subject to the EAR 
that has been or will be exported from the United States and which is 
owned, possessed or controlled by the Denied Persons or Related 
Persons, or service any item, of whatever origin, that is owned, 
possessed or controlled by the Denied Persons or Related Persons if 
such service involves the use of any item subject to the EAR that has 
been or will be exported from the United States. For purposes of this 
paragraph, servicing means installation, maintenance, repair, 
modification or testing.
    Third, that, after notice and opportunity for comment as provided 
in section 766.23 of the EAR, any other person, firm, corporation, or 
business organization related to any of the Denied Persons by 
affiliation, ownership, control, or position of responsibility in the 
conduct of trade or related services may also be made subject to the 
provisions of this Order.
    Fourth, that this Order does not prohibit any export, reexport, or 
other transaction subject to the EAR where the only items involved that 
are subject to

[[Page 57055]]

the EAR are the foreign-produced direct product of U.S.-origin 
technology.
    In accordance with the provisions of Section 766.24(e) of the EAR, 
the Respondents may, at any time, appeal this Order by filing a full 
written statement in support of the appeal with the Office of the 
Administrative Law Judge, U.S. Coast Guard ALJ Docketing Center, 40 
South Gay Street, Baltimore, Maryland 21202-4022.
    In accordance with the provisions of Section 766.24(d) of the EAR, 
BIS may seek renewal of this Order by filing a written request not 
later than 20 days before the expiration date. The Respondents may 
oppose a request to renew this Order by filing a written submission 
with the Assistant Secretary of Commerce for Export Enforcement, which 
must be received not later than seven days before the expiration date 
of the Order.
    A copy of this Order shall be served on the Respondents and the 
Related Persons and shall be published in the Federal Register.
    This Order is effective immediately and shall remain in effect for 
180 days.

    Entered this 17th day of September, 2008.
Darryl W. Jackson,
Assistant Secretary of Commerce for Export Enforcement.
[FR Doc. E8-23089 Filed 9-30-08; 8:45 am]
BILLING CODE 3510-DT-P