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Esco pays $2 million for Cuba sanctions violations

The Treasury Department’s Office of Foreign Assets Control (OFAC) said Thursday that Portland, Oregon-based Esco Corporation agreed to pay $2,057,540 to settle potential civil liability for apparent violations of the Cuban Assets Control Regulations, 31 C.F.R. part 515.

An Esco subsidiary in Canada bought nickel briquettes “made or derived from Cuban-origin nickel” from late 2007 to June 2011.

Esco makes metal parts for the mining, oil and gas, construction and other industries.

It self reported the apparent violations and OFAC called it a “non-egregious case.”

The total value of Esco’s purchases in apparent violation of the Cuba sanctions was about $6 million.

The base penalty for the violations was $3 million, OFAC said. The penalty was discounted because of Esco’s cooperation.

Esco is privately held. It filed a registration statement with the SEC for a $175 million IPO in 2012. The offering didn’t go ahead.

In an amendment to the SEC registration statement, Esco disclosed the potential sanctions offenses and said it could face penalties of up to $5.5 million.

“We learned that a foundry operated by one of our foreign subsidiaries had been purchasing and using material from a distributor that obtained the material from a supplier that procured the source material from Cuba,” the company said in the SEC registration statement.

“We voluntarily reported the violation to OFAC, stopped purchasing from the distributor, temporarily halted production at the foundry and sequestered all inventory containing Cuban material,” Esco said.

Esco has four foundries in Canada and about 30 plants worldwide.

The company has estimated revenues of about $1 billion and a global workforce of more than 5,000 employees.

OFAC’s November 13, 2014 enforcement information release is here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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