This is a real-world sanitized example for education, training and discussion. The following real-world case study was authored by John Priecko.
You are the junior Empowered Official (EO) at a defense contractor’s major production facility in the Southeast United States registered with the Directorate of Defense Trade Controls. Your Business Unit (BU) manufactures and exports Significant Military Equipment with a national security interest under both the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR). You joined the company a year ago and are still trying to get things in order in a compliance culture set in its ways. Your immediate super- visor and other more senior EO is Director of International Business. His boss is the Vice President (VP) of Contracts who reports to the BU President/General Manager (PGM). The VP of Contacts is also dotted line to the Corporate Headquarters (CH) lawyer assigned to your BU.
Several years before you were hired, CH started a comprehensive trade compliance program. Due to the unique sensitivity of your BU products & services and concerns about unresolved compliance issues, headquarters has scheduled a comprehensive audit of your BU to be overseen by a contracted, independent, savvy and unbiased outside consultant who has a team of two other knowledgeable professionals (one from your CH; another from one of the other BUs).
For the next two years your BU PGM, comes up with reasons to delay the audit. The senior EO, VP of Contracts and assigned BU lawyer at CH all support the PGM. When the audit finally does take place some serious long-term violations of the EAR & ITAR are identified. The audit team through the Corporate General Counsel (CGC) requests more detailed information on the transactions. The PGM encourages you to not respond and essentially drags his feet not allowing you to provide the requested details. As this is playing out, a team of enforcement agents arrive unannounced at your BU with a subpoena seizing records, computers and other documents.
As the investigation progresses, the CGC advises you that CH has waived the Attorney Client Privilege, put you on administrative leave and recommends you retain your own counsel.
What are the Red Flags in this situation indicating there are trade compliance, management, regulatory and other problems that need to be dealt with in a timely manner?
What are the positive indications in this situation?
Are there any important trade compliance best practices missing in this case study?
If you are the junior EO, what do you do now, what are your options and what might you expect based on what has taken place?
What could have been done to get this on the right track before it got out-of-hand?