2 indicted after HSI investigation for alleged efforts to supply Iran with US materials for gas centrifuges to enrich uranium

Accused Iranian procurement agent arrested in the Philippines

WASHINGTON — A federal grand jury in the District of Columbia has returned a superseding indictment charging Parviz Khaki, a citizen of Iran, and Zongcheng Yi, a resident of China, for their alleged efforts to obtain and illegally export to Iran U.S.-origin materials that can be used to construct, operate and maintain gas centrifuges to enrich uranium, including maraging steel, aluminum alloys, mass spectrometers, vacuum pumps and other items. Khaki is also accused of conspiring to procure radioactive source materials from the United States for customers in Iran. The indictment is the result of an extensive investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

The superseding indictment, which was returned late yesterday, was announced by ICE Director John Morton; Assistant Attorney General for National Security Lisa Monaco; and U.S. Attorney Ronald C. Machen Jr., District of Columbia.

The superseding indictment charges Khaki, age 43, aka Martin, and Yi, aka Yi Cheng, aka Kohler, aka Kohler Yi, each with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) by conspiring with others to cause the export of U.S. goods to Iran without the required U.S. Treasury Department license. Both defendants are also charged with one count of conspiracy to defraud the United States; two counts of smuggling; two counts of illegally exporting U.S. goods to Iran in violation of IEEPA; and one count of conspiracy to commit money laundering.

Khaki was arrested May 24, 2012, by authorities in the Philippines in connection with a U.S. provisional arrest request stemming from a March 8, 2012 indictment in the District of Columbia. Yi, who is purported to be the managing director of Monalila Co. LTD, a company in Guangzhou City, China, remains at large.

Both defendants face a maximum potential sentence of 20 years in prison for conspiring to violate IEEPA; five years in prison for conspiring to defraud the United States; ten years in prison for each smuggling count; 20 years in prison for each IEEPA count and 20 years in prison for conspiracy to commit money laundering.

"By dismantling this complex conspiracy to deliver nuclear-related materials from the United States to Iran, we have disrupted a significant threat to national security," said ICE Director Morton. "Homeland Security Investigations will continue to pursue those who exploit U.S. businesses to illegally supply foreign governments with sensitive materials and technology that pose a serious risk to America and its allies."

"Today's indictment sheds light on the reach of Iran's illegal procurement networks and the importance of keeping U.S. nuclear-related materials from being exploited by Iran. Iranian procurement networks continue to target U.S. and Western companies for technology acquisition by using fraud, front companies and middlemen in nations around the globe. I applaud the authorities in the Philippines and the many U.S. agents, analysts and prosecutors who worked on this important case," said Assistant Attorney General Monaco.

"This new indictment shows that we have no tolerance for those who try to traffic in commodities that can be used to support Iran's nuclear program," said U.S. Attorney Machen. "It also underscores our commitment to aggressively enforcing export laws."

According to the indictment, from around October 2008 through January 2011, Khaki, Yi and others conspired to cause the export of goods from the United States to Iran in violation of the embargo. At no time during this period did the defendants have a license or authorization from the Treasury Department to export any U.S. goods to Iran.

In carrying out the conspiracy, the indictment alleges that Khaki directed Yi and others to contact U.S. companies about purchasing U.S.-origin goods. Yi and other conspirators then placed orders and purchased goods from various U.S. companies and had the goods exported from the United States through China and Hong Kong to Khaki and others in Iran. Yi and others allegedly made a variety of false statements to U.S. companies on behalf of Khaki to conceal that Iran was the final destination and end-user of the goods and to convince U.S. companies to export these items to a third country.

Efforts to Export to Iran U.S. Materials for Gas Centrifuges to Enrich Uranium

For example, the indictment alleges that Dec. 6, 2008, Khaki asked an individual in China to obtain 20 tons of C-350 maraging steel from the United States for Khaki's customer in Iran. In the months that followed, Khaki also had communications with Yi about purchasing 20 tons of maraging steel from a U.S. company with which Yi was in contact. Maraging steel is a special class of high-strength steel known for possessing superior strength without losing malleability. The enhanced strength of maraging steel makes it particularly suited for use in gas centrifuges for uranium enrichment.

In March 2009, Khaki allegedly began communicating with an undercover U.S. federal agent posing as an illegal exporter of U.S. goods. The agent told Khaki that the U.S. company (referenced above) could not sell Khaki the maraging steel because doing so was illegal, but that he (the undercover agent) could potentially help export the steel for a fee. Khaki allegedly replied to the agent with questions about price and payment. In the months that followed, Khaki continued to communicate with the agent in an effort to acquire and export the maraging steel to Iran, noting in one instance, "you know and I know this material are [sic] limited material and danger goods..." Khaki also discussed his desire to make money from the transaction.

The indictment also alleges that in late 2008, Khaki reached out to an individual in China about procuring 20 tons of 7075-O aluminum alloy 80mm rods and 20 tons of 7075-T6 aluminum alloy 150 mm rods from the United States or Europe. In one communication, Khaki explained to the individual that the aluminum alloy had to be American made because his Iranian customer had previously found that Chinese aluminum alloy was of poor quality.

Khaki also allegedly sought to obtain mass spectrometers from the United States. In a May 2009 email request to the undercover federal agent, Khaki specified that one magnetic mass spectrometer he sought was for the isotopic analysis of gaseous uranium hexafluoride. Uranium hexafluoride is the chemical compound used in the gas centrifuge process to enrich uranium. Khaki and Yi also conspired to obtain other items from U.S. companies that can be used for gas centrifuges, including measuring instruments, pressure transducers, vacuum pumps and other accessories, according to the charges.

Efforts to Export to Iran Radioactive Materials

The indictment further alleges that Khaki sought to obtain radioactive source materials from the United States. In May 2009, for instance, Khaki sent an email to the undercover agent asking the agent to purchase radioactive sources and test materials from a U.S. company. Attached to the email was a list of products, including barium-133 source and europium-152 source, as well as contact information for the U.S. company.

In January 2011, Khaki contacted the undercover agent again requesting that he purchase various radioactive sources. In one email to the agent, Khaki allegedly sent a product catalogue for radioactive sources, including cobalt-57 source, and in another email he requested the agent purchase cadmium-109 source.

Exports to Iran of Lathes and Nickel Alloy Wire through Hong Kong, China

The indictment alleges the defendants caused the illegal export of lathes and nickel alloy 120 wire from the United States through China to Iran. In February 2009, Khaki asked Yi to contact a U.S. company about procuring two Twister Speed Lathes. Yi allegedly purchased these items and arranged for them to be shipped from the United States to Hong Kong and ultimately to Iran in June 2009.

In another transaction Jan. 26, 2009, Khaki allegedly asked a conspirator to contact a U.S. company about purchasing nickel alloy 120. At Khaki's request, the conspirator sent a U.S. company an order for nickel alloy, falsely stating that a company in China was the purchaser. In June 2009, the U.S. company shipped the nickel alloy to Yi in Hong Kong, who shipped it on to Iran, according to the charges.

This investigation was conducted by HSI special agents. Assistance was provided by authorities in the Philippines. The prosecution is being handled by the U.S. Attorney's Office for the District of Columbia and Trial Attorney Brandon L. Van Grack of the Counterespionage Section of the Justice Department's National Security Division. The Office of International Affairs in the Justice Department's Criminal Division also provided assistance.

The magnitude and scope of the threats facing the United States has never been greater than today. This is due in part to individuals exporting military items overseas and sending products to sanctioned or embargoed countries. This jeopardizes the safety of our soldiers, citizens and national interests. HSI aims to prevent terrorist groups and hostile nations from illegally obtaining U.S. military products and sensitive technology, including weapons of mass destruction. The Counter-Proliferation Investigations Unit, part HSI's National Security Investigations Division, oversees a broad range of investigations related to export law violations. It enforces U.S. export laws involving military items and controlled dual-use goods, as well as products going to sanctioned or embargoed countries. Learn more at www.ICE.gov/HSI.

The public is reminded that an indictment contains mere allegations. Defendants are presumed innocent unless and until proven guilty in a court of law.