OAKLAND - The U.S. Attorney’s Office today announced charges against and guilty pleas by Farhad Nafeiy for violating sanctions by exporting software upgrades for commercial-grade telecommunications servers to the Islamic Republic of Iran (“Iran”), and for tax evasion. The plea was accepted by the Honorable Araceli Martínez-Olguín, United States District Judge. The announcement was made by United States Attorney for the Northern District of California Ismail J. Ramsey, Assistant Attorney General Mathew G. Olsen, Homeland Security Investigations (HSI) Special Agent in Charge Tatum King, and Special Agent in Charge of the IRS Criminal Investigation’s Oakland Field Office Darren Lian.
Nafeiy, 70, of Alamo, Calif., was charged with and pleaded guilty to a violation of the International Emergency Economic Powers Act (“IEEPA”). Under IEEPA, the President of the United States is granted authority to address unusual and extraordinary threats to the national security, foreign policy, or economy of the United States. Under that law, the President has issued orders prohibiting certain activities and transactions with Iran and the Government of Iran. The Department of Treasury’s Office of Foreign Assets Control (OFAC) has issued regulations, referred to as the Iranian Transactions and Sanctions Regulations (ITSR), implementing those orders. These sanctions on Iran generally prohibit, among other things, exporting or facilitating the export of U.S.-origin products to Iran and providing services to Iran.
Nafeiy obtained licenses—or approvals—from OFAC for advising non-Iranian telecommunications companies on doing business with Iran. However, those licenses did not authorize Nafeiy to provide any hardware, software, or technology directly to Iran. Nafeiy exceeded his OFAC licenses, thereby violating the ITSR and IEEPA, by directly providing software upgrades to telecommunications equipment in Iran. Nafeiy admitted in his plea agreement that he knew he exceeded these licenses when he did so. In his plea agreement, Nafeiy further admitted that the total amount of sales of such software upgrades to Iran was approximately $400,000. Nafeiy separately was charged with, and admitted to, evading his federal income taxes, and specifically not paying income tax on some of the proceeds of these sales.
On August 10, 2023, Nafeiy was charged by information with one count of violating IEEPA, in violation of 50 U.S.C. § 1705, and one count of tax evasion, in violation of 26 U.S.C. § 7201. Pursuant to the plea agreement, he pleaded guilty to both charges.
Judge Martínez-Olguín scheduled Nafeiy’s sentencing hearing for January 29, 2024. For the 50 U.S.C. § 1705 violation, Nafeiy faces a maximum statutory prison term of 20 years, a maximum fine of $1,000,000, and restitution, if appropriate. For the tax evasion charge, Nafeiy faces a maximum prison term of five years, a maximum fine of $250,000, and restitution of at least $79,124 to the IRS. As part of any sentence, the court may also order Nafaiy to serve a period of supervised release and to pay additional assessments, however, the court will impose a sentence only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by Assistant U.S. Attorney Benjamin Kingsley and Trial Attorney David Ryan of the National Security Division’s Counterintelligence and Export Control Section, with the assistance of Kathleen Turner of the U.S. Attorney’s Office. Former Trial Attorney Elizabeth Abraham provided valuable assistance in prior phases of the prosecution. The prosecution is the result of an investigation by Homeland Security Investigations and the Internal Revenue Service-Criminal Investigation.