Epsilon Electronics OFAC Civil Penalty: $4.1M (2014)

From on or about August 26, 2008, to on or about May 22, 2012, Epsilon — also doing business as Power Acoustik Electronics, Sound Stream, Kole Audio, and Precision Audio — committed apparent violations of § 560.204 of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560, by issuing 39 invoices for car audio and video equipment valued at $3,407,491, which was shipped to a company that reexports most, if not all, of its products to Iran and has offices in Tehran, Iran, and Dubai, the U.A.E. Epsilon knew or had reason to know that such goods were intended specifically for supply, transshipment, or reexportation, directly or indirectly, to Iran. Five of these invoices were issued after Epsilon received a cautionary letter from OFAC in January 2012, which explained that the ITSR generally prohibited the unauthorized exportation, reexportation, sale or supply of goods, technology, or services to Iran. It also appears that Epsilon attempted to hide or purposely obfuscate its sales to Iran when it changed a website to remove a photo gallery of Epsilon's products labeled "Iran," and that Epsilon attempted to mislead OFAC by providing false information in its subpoena responses and other letters to OFAC.

OFAC determined that Epsilon did not voluntarily self-disclose the violations to OFAC. OFAC further determined that the violations occurring before it issued a cautionary letter to Epsilon in January 2012 constitute a non-egregious case, while those occurring after the cautionary letter constitute an egregious case. Based on those determinations and the General Factors under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, OFAC assessed a penalty of $4,073,000 in its July 25, 2014 penalty notice.

On May 26, 2017, the U.S. Court of Appeals for the District of Columbia remanded this matter to OFAC for further consideration. See Epsilon Electronics, Inc., v. OFAC, 857 F.3d 913 (D.C. Cir. 2017). On further consideration, OFAC rescinded the 2014 penalty notice and entered into a settlement agreement with Epsilon. Further details about the settlement appear in OFAC's Enforcement Information of September 13, 2018.

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