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Trade Embargo Office Stripped Of Its Enforcement Divisions

May 5, 1995

WASHINGTON (AP) _ The federal agency charged with implementing U.S. trade embargoes, under investigation for its own action in several cases, has been stripped of its investigative and enforcement division.

Treasury officials said the action was designed to make trade embargo enforcement more efficient and was unrelated to the ongoing investigation of the Office of Foreign Assets Control.

OFAC’s enforcement division, and its five criminal investigators, will be reassigned to the Customs Service this month.

``There will still be enforcement of OFAC regulations, but it will now happen at Customs,″ Treasury spokesman Howard Schloss said. ``We did this to enhance enforcement and coordination.″

Schloss called the move an outgrowth of the Clinton administration’s ``reinventing government″ initiative.

The move, initiated this week by Assistant Treasury Secretary for Enforcement Ronald A. Noble, is a setback for longtime OFAC director R. Richard Newcomb, who has tried since the 1980s to raise the agency’s profile and who persuaded Congress to give his agency criminal investigators.

Newcomb, a career government employee who has headed OFAC through the Reagan, Bush and Clinton administrations, referred a reporter’s call to Treasury spokesmen.

A series of Associated Press stories over the last year disclosed several cases in which Newcomb failed to follow his staff’s repeated urgings to take criminal action against major American businesses suspected of violating the high-profile embargoes against Haiti and Vietnam.

The Treasury Department’s inspector general, the agency’s internal watchdog, opened a formal investigation last fall into OFAC’s conduct.

That investigation has broadened in recent weeks to include OFAC’s conduct in other trade embargo matters, including those dealing with Libya and Iraq, according to officials familiar with the probe. They spoke only on condition of anonymity.

In addition, the U.S. attorney’s office in Washington subpoenaed documents from OFAC last fall and has interviewed witnesses before a grand jury concerning the Haiti case involving Texaco.

The AP stories reported that Newcomb:

_Repeatedly ignored staff recommendations in 1992 and 1993 for criminal action against Texaco even after OFAC investigators concluded the oil company had paid the outlaw Haitian junta millions of dollars and distributed millions of gallons of oil despite the U.S. embargo. Documents quoted Newcomb as saying he was acting as he was in the case at the behest of former Treasury Secretary Nicholas Brady. No penalty has ever been levied against Texaco, which denies any wrongdoing.

_Instructed his investigators to stop working on a major criminal probe in 1991 into allegations that American companies, through a New York bank, were illegally doing business with Vietnam. Newcomb then took steps that compromised the investigation being run by the Customs Service, resulting in no criminal penalties against any of the suspected violators.

_Overruled the recommendations of his staff in 1992 that major airlines be prosecuted for making hundreds of thousands of dollars in overflight payments to Vietnam without the necessary license. Just a year earlier, OFAC prosecuted and sent to prison a small airline president for making just $400 in the same payments without a license. Newcomb’s decision drew protests about ``selective enforcement’ from his own staff.

For the last several years, OFAC has both formulated trade embargo policy and enforced it, interpreting how its own rules apply to alleged violators.

The move will now place enforcement of OFAC’s trade embargo rules at a separate agency with a long history of enforcement _ the Customs Service.

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