Daily Management Review

Buffet's Berkshire Hathaway to pay $4.1M fine for violation of Iran sanctions regime


Berkshire Hathaway investment company, owned by billionaire Warren Buffett, will pay a fine to settle a dispute with the US Treasury Department about the violation of sanctions against Iran. One of the Turkish companies owned by the holding's subsidiary has been supplying instruments to Iran for several years in an effort to gain market share.

Rick Obst
Rick Obst
Berkshire Hathaway, an investment holding owned by billionaire Warren Buffet ($79.4 billion, according to Forbes Real-Time), has agreed to pay $4.1 million to settle a dispute with the U.S. Treasury Department about the violation of sanctions against Iran, The Wall Street Journal reported.  

US sanctions against Iran prohibit US companies and their foreign subsidiaries from dealing with the Iranian government and its structures. However, according to the agency, one of the indirect subsidiaries of the holding - Turkish Iscar - from 2012 to 2016 sold cutting tools and related wafers to two Turkish distributors in the knowledge that they would resell them to Iran. The US Treasury Department's Office of Foreign Assets Control (OFAC) claims that the final recipients of the tools were Iranian government organisations.

Iscar Turkey is a subsidiary of IMC International Metalworking Companies B.V., which is owned by Berkshire. In total, according to OFAC, it has fulfilled 144 orders worth $383,000. As a result, the goods were resold to Iran, which "represents a particularly serious and obvious violation of the law" and requires "strict enforcement measures".

It follows from the text of the settlement agreement that Berkshire itself reported the alleged offences to OFAC, having received anonymous information about them in January 2016. It turned out that Iscar Turkey had started a business relationship with an Iranian distributor in 2012 when the company’s managers were confident that US and EU sanctions against Iran would inevitably be lifted and tried to take a position in the Iranian market. Later on, Iscar Turkey employees tried to hide the transactions with Iran by using fictitious names, euro payments and false assurances that the business complied with the rules.

According to OFAC, the illegal activities were not detected within the holding: Berkshire subsidiaries, from which Iscar Turkey purchased goods for supply to Iran at their request, could have concluded that these were violations. But only one of them informed Iscar Turkey that such transactions were prohibited.

OFAC thanked Berkshire for their cooperation in the investigation and for the steps taken to address the irregularities.

source: forbes.com