Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 23, 1995 TAG: 9503230063
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: JOHN SOLOMON ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Long
The government came down with full force in 1990 on a small Texas company\ that ran afoul of trade embargo laws by making a $400 payment to Vietnam after\ one of its planes flew over the country.
But just two years later, when major airlines like Delta and Northwest disclosed they had been making the payments on a much larger scale, Washington barely reprimanded them.
The vastly different treatment, by the same Treasury Department office, had the government's own enforcers complaining about ``selective prosecution'' and ``preferential treatment,'' documents obtained by The Associated Press show.
The action recently prompted an investigation by the Treasury inspector general, the department's internal watchdog.
The matter involves the Office of Foreign Assets Control, which enforces U.S. trade embargoes, and airlines' practice of paying foreign governments a fee known as an overflight payment when their planes fly through a country's airspace.
When a country is under a U.S. embargo, such payments are prohibited without permission from the Office of Foreign Assets Control.
In 1990, the office prosecuted to the maximum BaseOps International of Houston for paying $400 to Vietnam and $200 to Cuba without the necessary licenses. The company pleaded guilty to violating the Trading with the Enemy Act.
Its president, Donald Lewis, was sent to prison for six months for making false statements about the Cuba payment, and he and the company paid $30,000 in fines for the Vietnam payment.
In a news release at the time of the guilty pleas, office Director R. Richard Newcomb declared that the case sent a ``strong message'' that anyone attempting to deal with embargoed nations would ``be vigorously pursued and prosecuted.''
But the get-tough message didn't last long.
Less than two years later, at least four major companies disclosed they had been making similar but much larger payments.
Northwest said it had paid about $73,000 a year since 1987 for flights over Vietnam. Delta said it paid Vietnam about $140,000 a year since 1989. Federal Express put its total from 1989 to 1992 at $234,000, while United said it paid a total of $400,000.
This time, Newcomb gave the airlines written reprimands and licenses to make future payments legal, overruling his staff's strong recommendations for criminal prosecution.
Two section chiefs took the rare action of objecting to their boss in writing.
The criminal investigator who handled the first prosecution recently gave a statement to the inspector general as part of the ongoing investigation that describes the internal uproar Newcomb's decision caused.
``These decisions by Newcomb caused expressions of outrage and heated debate within the office,'' agent Steve Plitman wrote in the affidavit.
Plitman added that Newcomb's decision came ``despite potential accusations of `selective prosecution' and the appearance of granting preferential treatment to the large airlines.''
Newcomb did not return phone calls to his office seeking comment.
The office's conduct is being reviewed by both a federal grand jury in Washington and the inspector general after earlier AP stories raised questions about other embargo enforcement cases.
BaseOps President Lewis, a Vietnam War veteran, said in an interview that BaseOps routinely applied for overflight licenses but had made an oversight in the Vietnam matter.
He said Newcomb's office singled him out for ``an accounting error, a technicality'' because he had alienated the office during a previous run-in over an attempt to take other veterans back to Vietnam.
He said the office's actions left the impression that it can ``beat up the little guy'' but ``is afraid of [the big companies] because of their size.'' He added he is consulting with his attorney on possible legal action.
In interviews, officials for the larger airlines said they were unaware of the BaseOps case, but that they had made legitimate mistakes and disclosed them once they were discovered.
``If you voluntarily disclose, it creates a different situation,'' said Doyle Cloud, vice president of government and regulatory affairs at Federal Express.
``If the U.S. government criminally prosecutes companies for disclosing errors, the incentive there would be for all corporations not to disclose,'' Cloud said.
According to officials familiar with the case, Newcomb viewed the two cases differently because BaseOps was caught breaking the law through an investigation, while the major airlines disclosed their breaches. He would have preferred a civil fine but the office didn't have such authority at the time, they said.
But Newcomb's staff argued that BaseOps set a precedent that couldn't be ignored and the big airlines, with their large legal staffs, could not possibly have forgotten about one of America's oldest and most famous embargoes.
by CNB