Overview

This case details the attempts of an unnamed individual – Individual A – to procure controlled Aluminium tubing. Individual A owns companies in the UAE – Super Alloys LLC – and in Malaysia –  NBH Industries and appears to be based in Iran. After being refused a license for the export of controlled aluminium cylinders to his company in the UAE, the individual sought to exploit loopholes in US export controls to tranship the goods via Brussels Malaysia, possibly for and end use in Iran. Individual A allegedly enlisted Nicholas Kaiga, European businessman, to facilitate the evasion of US controls. Kaiga is currently in US custody.

Initial Attempt

In 2007 UAE-based company owned by Individual A, ’Super Alloys LLC’, attempted to purchase 1800ft of Aluminium tube from an American company. Super Alloys, is believed to be a company registered to a post office box in Dubai.

Upon receiving the order, the American company began to prepare the materials and approached Individual A for end user details for inclusion on the export licence. Individual A claimed that the tubes would be ‘used for oil companies in the UAE… for low pressure steam transmission’.[1]

The US company applied to the Department of Commerce for a licence, which was refused. This refusal came after a phone call between a Department of Commerce official and a Super Alloys LLC representative who revealed that the company’s owner was in Iran. A visit by an Dept. of Commerce official revealed that the only company to be listed at the address provided by  Super Alloys LLC  was ‘Sina Mountain General Trading’, which the ECO believed to be an Iranian company. Indeed, a Linked In profile shows that a ‘Partner’ at Sina Mountain had previously worked at Bank Saderat for 30 years, perhaps indicating the company’s links to Iran.[2]

Following the license application refusal, the US company also decided not to ship other non-controlled goods that were being prepared for export to Super Alloys LLC. These included steel tubing and steel bars.

Transhipment via Belgium and Malaysia

Undeterred by the denial of the export licence, the owner of Super Alloys LLC – Individual A – ultimately attempted to take advantage of a loophole in US export control regulations that would allow the goods to be shipped without a licence to Belgium. Individual A allegedly co-opted Nicholas Kaiga, a European businessman and Managing Director of Industrial Metals & Commodities, into then transhipping the goods to Malaysia.

Industrial Metals & Commodities, a firm founded in 2009, is listed at an address in Brussels, apparently in a residential neighbourhood. The complaint notes that ‘nowhere at that address do there appear to be facilities suitable for receiving, storing or processing’ the shipped metals.[3]

In order to facilitate the shipment, Kaiga allegedly falsified the end user undertaking submitted to the Department of Commerce, suggesting that the end use for the tubes was resale to an ultimate consignee in Belgium for use in manufacturing ‘commercial helicopter parts’.[4] The ultimate consignee was identified as ‘Aerospace Industrial Metals & Commodities’ – a company which appears not to exist – and the address listed was the same as that listed for Industrial Metals and Commodities.

However, Kaiga actually went on to ship the goods from Belgium to a second company linked to Individual A, NBH Industries in Malaysia. Records show that NHB is a registered company, of which over half of the shares are held by an individual with a name similar to Individual A[5]. Department of Commerce telephone conversations with NBH industries to conduct a post-shipment verification revealed that the company was located within a ‘virtual office’ run by a company called ‘Sevcorp’. The employee with which the Commerce official spoke revealed that the managing director of NBH Industries was based in Iran.

The US authorities appear to have picked up the case following the initial refused license application. They substituted the AL7075 with AL6061, a material whose characteristics make it unsuitable for use in centrifuge rotors and which is thus not controlled. As such, if the goods were destined for Iran’s nuclear programme, the efforts of the US authorities were successful in thwarting the Iranian attempt this time around.  It is unclear whether the Aluminium was shipped to Iran from Malaysia. The complaint only details its transfer to Malaysia. However, when Individual A noticed that the product had been substituted, he sent an email with pictures of the product attached from an Iranian IP address.

Kaiga’s Involvement

Kaiga from Brussels, Belgium has left a significant digital shadow, including a detailed Linkedin profile. This details his role as ‘MD EMEA’ of ‘Industrial Metals & Commodities’.[6]This entry indicates that his role was ‘Overall, leading and managing European operations including sales, support and facilities’, and highlights the importance he placed in ‘reinforc[ing] and extend[ing] the unique / strong IMC culture, which is a strategic differentiator for us’. The profile also details that he worked as ‘Sales and account representative’ at ‘AMI Inc, AMI Metals Europe, The aerospace material specialist’, a US-owned airspace materials supplier, for 6 months in 2005/2006. He may have had experience in handling export licensing in this role.

Kaiga’s company which is alleged to have been involved in the transaction, Industrial Metals & Commodities SPRL, is said to have had a Brussels-registered address 16 Rue Goffart, 1050 Ixelles, Brussels. As noted in the complaint, the address is in a residential neighbourhood. Reports suggest that the company was declared bankrupt by the Commercial Court of Brussels in October 2012.^[7]

Kaiga also registered his company in the UK in August 2012 — as Industrial Metals & Commodities Ltd — at a London address, Unit 12, 20 Lamb Street, London, E1 6EA.[8] The ‘unit’ appears to be a residential flat above a commercial property in Old Spitalfields Market. The UK branch of his company is not mentioned in official documents such as the complaint against him.

In this scheme, Kaiga’s involvement was as facilitator – allowing Individual A to acquire the aluminium in breach of US controls. Kaiga was also allegedly also complicit in substantially undervaluing the shipment ($5.90 per foot as opposed to $39.67 per foot) to reduce tax burden and in providing the details of a non-existent company — Aerospace Industrial Metals & Commodities SPRL – to facilitate the delivery.[9] However, he is thus far the only involved individual to face justice for his actions.

Kaiga was arrested during a visit to the United States and was changed subject to the provisions of IEEPA and presidential executive order 132222 as the US Export Administration Act of 1979 actually expired in 2001 but has not yet been re-enacted. If convicted, he faces up to 20 years in prison.

Timeline

September 2007	Initial enquiry made to US company
November 2007	US firm applies for an export license
January 2008	License rejected by US BIS
2009	Kaiga sets up company in Belgium
June 2010	Steel shipment (non-controlled) made to Kaiga’s company in Belgium
January 2011	Second steel shipment made to Kaiga’s Belgian company
March 2011	Second steel shipment shipped from Belgium to Malaysia
August 2011	Kaiga tells US company that Aluminium will stay in Belgium
November 2011	Aluminium (wrong spec.) shipped to Belgium
February 2012	Aluminium shipped to Malaysia
August 2012	ECO calls Malaysian firm – told that Director is located in Iran
August 2012	Kaiga registers company in the UK
October 2012	Kaiga’s company declared bankrupt in Belgium
25 June 2013	Kaiga arrested
November 2013	Kaiga appears in court, pleads not guilty

Individual A

Individual A, the individual controlling the UAE and Malaysian-based companies and working to procure the goods destined for Iran is not named in official documentation. However, the documents suggest that he is based in Iran. On multiple occasions, Individual A sent an email from an IP address which is believed to have been located in Iran. When the Department of Commerce official contacted the Malaysian ‘virtual office’ in which NBH is said to be based, the employee claimed that individual A was based in Iran.

The Materials

The material sought in this case was 15ft cylinders of Aluminium 7075T6 with a diameter of 4.125 inches. This grade and diameter of material appears to be the same as that used in the rotor Iran’s IR1 centrifuge. If used as rotor materials, this shipment would be sufficient for at least one centrifuge cascade, and potentially as many as three if flow-forming was employed[10]. During the period in question, reports by the IAEA show that Iran continued to expand the number of centrifuges installed at its Natanz enrichment site, and while it cannot be determined with certainty based upon the available information, it is very possible that procurement attempt could have directly aided Iran’s centrifuge programme.

Conclusions

This case appears to be an excellent example of the system working as intended. Specifically:

• The exporter applied for a licence in line with its legal obligations.
• The licence was rejected as there were reasons to doubt the true end use.
• The exporter continued to exercise due diligence, sharing suspicions with the national authority.
• The national authority substituted the goods with low-risk equivalents in order to facilitate a prosecution.
• An individual who attempted to work around the controls and supply a programme of concern was arrested.

The case does nonetheless highlight the on-going need for vigilance if prohibited programmes in Iran and elsewhere are to be constrained.

Sources Used Throughout

Department of Justice Press Release:

http://www.justice.gov/usao/iln/pr/chicago/2013/pr1030_01.html

Indictment: http://www.justice.gov/usao/iln/pr/chicago/2013/pr1030_01a.pdf

Compliant: http://www.justice.gov/usao/iln/pr/chicago/2013/pr1030_01b.pdf

[1] Criminal Complaint, available from: http://www.justice.gov/usao/iln/pr/chicago/2013/pr1030_01b.pdf.

[2] Profile accessed at Linkedin.com

[3] Criminal Complaint

[4] Criminal Complaint, p.19

[5]Criminal Complaint

[6] ‘Nicholas Kaiga’, Linkedin Profile, available at http://www.linkedin.com/in/nkaiga, accessed 5 November 2013. (Profiles of both Kaiga and the company no longer existed as of 14 Sep 2016)

[7] ‘Faillissement Industrial Metals & Commodities Sprl’, available at http://www.faillissementsdossier.be/nl/faillissement/585060/industrial-metals-commodities-sprl.aspx.

[8] ‘INDUSTRIAL METALS & COMMODITIES LTD’, Dellam Corporate Information Limited, available at http://www.dellam.com/08183184-INDUSTRIAL%20METALS%20%26, accessed 5 November 2013.

[9] Criminal Complaint, p.20.

[10] The IR1 centrifuge rotor is made up of four cylinders that are connected by three maraging steel bellows. The IR1 has an approximate effective rotor length of 1.8 meters, although it is unclear precisely how long each rotor segment of Aluminium cylinder is. Nonetheless, the 1800ft (or 548.64m) is sufficient material for 1.5-2 cascades worth of centrifuges. Flow forming could further elongate the tubes.