A criminal complaint filed by the United States in the U.S. District Court for the District of New Jersey on September 12, 2014, alleges that Alper Calik, a government contractor, knowingly and willfully (i) defrauded the United States Department of Defense (DoD) by claiming that Amphibious Assault Vehicle parts manufactured in Turkey were “domestic end products”, and (ii) exported items designated as defense articles on the United States Munitions List (e.g., submarine drawings), from the United States to Turkey, without first obtaining from the State Department a license or written authorization for such exports. These actions constituted fraud under 18 U.S.C. §1841, and violated the Arms Export Control Act (AECA), 22 U.S.C. §2778, and the International Traffic in Arms Regulations (ITAR), 22 CFR §§120-130, which implements the AECA. The Complaint.
In this case Defense Criminal Investigative Service (DCIS) learned that Calik, a citizen of Turkey and co-owner of Clifmax LLC and Tunamann LLC, under contracts his companies held with DoD to supply replacement parts for defense hardware items, apparently engaged in a scheme to defraud the U.S. by mislabeling items as “domestic end products” when they were not. They were made in Turkey.
Calik registered Clifmax and Tunamann in SAM as government contractors, identifying himself as the manager and providing a New Jersey address and point of contact. He also opened U.S. bank accounts in New Jersey for Clifmax and Tunamann -- to receive payments from the U.S. Government for performance of government contracts. But according to the complaint, both companies were simply shell companies, created by Calik to act as fronts for the actual manufacturing facilities which were located in Turkey. As a result, government contracts were awarded to Clifmax and Tunamann that could and would not have been awarded to a Turkish-based manufacturer.
According to the complaint, Calik repeatedly claimed to the DoD, falsely, that his companies – Clifmax and Tunamann – were U.S.-based manufacturers of the spare parts to be delivered under the government contracts. Stated another way, Calik expressly claimed that the parts supplied by Clifmax and Tunamann were “domestic end products”. And Calik did not stop there.
Calik also signed two separate Military Critical Technical Data Agreements with the DoD, on behalf of Clifmax and Tunamann, under which he certified that Clifmax and Tunamann were U.S. manufacturers, that he understood U.S. export control laws, and that he would not disseminate any drawings and technical data in violation of such export control laws. Based on these representations, Calik was provided with electronic access to drawings and technical data subject to U.S. export control regulations – which, allegedly, he promptly downloaded while he was outside the United States and provided to manufacturers located in Turkey – without an export license from the State Department. The Department of State is responsible for the export and temporary import of defense articles and services governed by the Arms Export Control Act and the International Traffic in Arms Regulations.
As we all know, the U.S. government takes seriously its rules regarding domestic end product designation and, not surprisingly, vigorously enforces its export control laws. While the facts of Mr. Calik’s case, as set forth in the criminal complaint, may appear to present blatant violations, the point is to understand and follow the rules and to take steps to ensure that those you team or subcontract with also follow the rules.
Lindsay Simmons is responsible for the contents of this article.
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