Oil behemoth ExxonMobil was handed a $2m fine on July 20 from the US Treasury for breaching Ukraine-related sanctions in 2014.
During this time, current US Secretary of State Rex Tillerson was still the company’s CEO. He left the firm in 2016 to work under US President Trump.
The company has subsequently announced it will legally challenge the fine from Treasury Department’s Office of Foreign Assets Control (OFAC).
Exxon has accused the penalty of being “fundamentally unfair”. It said it was accused of violating sanctions against Russia in 2014, “when the company followed authoritative and specific guidance from the Obama administration that OFAC retroactively changed a year later”.
The oil firm had business with Igor Sechin, president of Russian state energy company Rosneft, who has sanctions imposed on him following the Russian annexation of Crimea, according to the US Treasury.
OFAC has charged Exxon with not disclosing the business activities which is a legal violation constituting “an egregious case”.
Two of Exxon’s US subsidiaries signed eight legal documents with Sechin in May 2014 for oil and gas operations in Russia after he was included in the sanctions in late April, OFAC has said.
Exxon argues that the fine constitutes a denial of due process under the Constitution and violates the Administrative Procedure Act.
“Market participants, including ExxonMobil, did not have notice of the interpretation OFAC now seeks to retroactively enforce,” says ExxonMobil’s filing in the US District Court.
“OFAC seeks to retroactively enforce a new interpretation of an executive order that is inconsistent with the explicit and unambiguous guidance from the White House and Treasury issued before the relevant conduct and still publicly available today,” it says.
Exxon claims OFAC has accepted that US officials repeatedly said sanctions against Sechin applied only to his personal affairs and not to companies that he managed or represented.
“When Sechin was added to the sanctions list in April 2014, the White House and Treasury Department in numerous briefings and media reports specifically stated the sanctions applied to him in his individual capacity and with respect to his personal assets, and not the business he manages,” says Exxon.
However, OFAC has denied that the regulations made any distinction and has argued that Exxon should have known it would be illegal to make agreements with Sechin on behalf of Rosneft.
Tillerson’s connections to the Russian Kremlin have been a point of contention ever since he was appointed Secretary of State.
The ‘Russia scandal’ appears to be one that President Trump is unable to shake as his son, Donald Trump Jr. is due to testify before the US Senate Committee next week about his connections with Russia.
Here is a chronology of the events leading to allegations of sanction violations, according to ExxonMobil:
- March 16, 2014. President Obama issues Executive Order 13661 Blocking Property of Additional Persons Contributing to the Situation in Ukraine.
- March 17, 2014. White House Fact Sheet: “Our current focus is to identify … individuals and target their personal assets, but not companies that they may manage on behalf of the Russian state.”
- March 17, 2014. White House Briefing:“[O]ur current focus is to identify these cronies of the Russian government and target their personal assets and wealth, rather than the business entities and industries that they may manage or oversee.”
- April 28, 2014. Treasury Department Briefing: Sanctions were applicable to Igor Sechin “individually.”
- April 28, 2014. Tony Blinken, White House deputy national security adviser, said on PBS NewsHour that Sechin was sanctioned in his “individual capacity” and that Rosneft was not designated, “minimising any impact or consequences on American companies.”
- April 28, 2014. New York Times: “US persons are not prohibited from dealing with Rosneft, including participating in meetings of the company board on which Mr. Sechin sits,” a Treasury Department official said.
- April 28, 2014. Foreign Policy magazine: “Sechin’s personal assets will be frozen, but Treasury officials said the designation wouldn’t impact US companies’ ability to do business with Rosneft because Sechin does not control the firm.”
- May 14, 2014. The president of ExxonMobil Development Company signs a document relating to a potential liquefied natural gas (LNG) plant in Far East Russia.
- May 15, 2014. ExxonMobil-Rosneft High Arctic Completion Deeds signed by president of ExxonMobil Exploration Company and Sechin, in his official capacity as president of Rosneft.
- May 16, 2014. Wall Street Journal: BP’s CEO, an American, “may participate in board meetings with Mr. Sechin as long as they are conducting Rosneft’s, and not Mr. Sechin’s, personal business, the Treasury Department said.”
- May 23, 2014. Sechin, acting in his official capacity as Rosneft’s president, countersigns the document relating to a potential LNG plant in Far East Russia.
- July 22, 2014. OFAC issues an administrative subpoena to ExxonMobil Development Company.
- July 30, 2014. OFAC acknowledges it has not yet come to a legal conclusion on whether Sechin’s signature violated sanctions
- June 29, 2015. OFAC issues pre-penalty notice to ExxonMobil.
- 26, 2016. OFAC dismisses the importance of the White House guidance at a meeting with ExxonMobil.
- July 20, 2017. OFAC issues penalty notice to ExxonMobil.
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