Carbon fiber maker Zoltek Cos. Inc. agreed to pay $7.8m (€6.8m) and settle its potential civil liability for 26 apparent US trade sanction violations.
Relying for years on advice from outside counsel in Hungary, senior executives at Zoltek approved a Hungarian subsidiary's purchases of the organic compound acrylonitrile from a Belarus entity that was on the blocked list of the US Department of the Treasury's Office of Foreign Assets Control.
Zoltek, now a subsidiary of Toray Industries Inc., is based in Bridgeton, Missouri, near St. Louis.
Nobuya Ando, as Zoltek CEO, chief operating officer and president, accepted terms and signed the 11-page agreement 7 Dec. The Treasury Department announced the settlement 20 Dec.
The US office said that Zoltek voluntarily self-disclosed the apparent violations with those occurring prior to February 2015 constituting a non-egregious case and those after that month being an egregious case.
The subsidiary in Nyergesújfalu, Hungary, operates as Zoltek Vegyipari Zártkörûen Mûködõ Részvénytársaság, a private limited company.
Zoltek ZRT began purchasing the chemical from the Polymir open joint-stock company of Novopolotsk, Belarus, starting no later than 14 Nov 2007, and continued through the time period of the apparent violations.
Naftan open joint-stock company, also in Novopolotsk, acquired Polymir on 1 Dec 2008, and was already under US trade sanctions as a wholly owned subsidiary of the government's Belarusian State Concern for Oil and Chemistry, known as Belneftekhim.
"Between on or about 18 Jan 2012, to on or about 27 Oct 2015, Zoltek US appears to have approved 26 purchases of acrylonitrile ... between Zoltek ZRT and Naftan," the agreement said. "From 25 Feb 2015 through 27 Oct 2015, Zoltek ... approved 13 spot purchases by Zoltek ZRT related to the purchase of 8,582.7 tonnes of Naftan-produced acrylonitrile from third-party trading companies ... totaling $10,390,920."
In total, the sales conferred "$18m to a Belarusian government entity," the settlement said.
In the manufacturing process, acrylonitrile is dissolved in organic or aqueous solvents, becomes a precursor and evolves into polyacrylonitrile on its way to making PAN-based carbon fiber.
The government said that Zoltek "acted with reckless disregard for US economic sanctions requirements and/or failed to exercise a minimal degree of caution or care in avoiding the conduct" and that multiple personnel at Zoltek and Zoltek ZRT "were aware of — and participated in — the conduct that led to the apparent violations."
For those acts, the statutory maximum civil monetary penalty amount was $37.8m (€33m), and the base civil monetary penalty amount was $12m (€10.5m).
To minimise any reoccurrence, Zoltek expanded its director of global compliance position to include US sanctions' issues, began using sanctions software to screen vendors on a daily basis and created "a 'learning academy' to train all new and current Zoltek employees on US economic sanctions and adherence to US export controls."
Tokyo-based Toray acquired Zoltek for about $584m (€512.5m) in February 2014 and operates the manufacturer of large tow carbon fibers as a wholly owned subsidiary. In addition to the Hungary location, Zoltek production occurs in St. Charles and St. Peters, Missouri, and El Salto, Mexico, near Guadalajara.
Zsolt Rumy founded the business in 1975 and served as CEO and president until the sale to Toray.
In its final 10K security filing, Zoltek reported a profit of $8.1m (€7.1m) on sales of $140m (€123m) for the fiscal year ended 30 Sept 2013. Carbon fibers accounted for $106m (€93m) and technical fibers for $32m (€28m).
As of 2013, major Zoltek customers included wind turbine manufacturer Vestas Wind Systems A/S of Copenhagen, Denmark, and composite fabrics maker Saertek GmbH & Co. KG of Saerbeck, Germany.
Zoltek shares traded on the Nasdaq market from 1992 until the Toray acquisition.