The rare case in which the penalty is more instructive for what happened to it than for what it alleged.
What OFAC alleged
OFAC designated Igor Sechin, the president of Rosneft, under the Ukraine-related order on 28 April 2014. Between about 14 and 23 May 2014, the presidents of ExxonMobil’s US subsidiaries signed eight legal documents related to oil and gas projects in Russia with Sechin. OFAC’s penalty notice says that this was dealing in the services of a blocked person, in violation of the Ukraine-Related Sanctions Regulations.
Rosneft itself was not blocked. OFAC’s notice records that it was on the sectoral list under other directives, “but those authorities are not implicated in this action.” The allegation concerned the person signing for it, not the company.
The warning signs OFAC cited
OFAC listed what it called warning signs. The Ukraine-related order and regulations (issued 8 May 2014, before the signings) defined “property” and “property interest” to include services and contracts, and White House and Treasury statements said US persons could not do business with those designated. A public FAQ, number 285 from 2013 and framed around the Burma programme, had said US parties should “be cautious in dealings with [a non-designated] entity to ensure that they are not providing funds, goods, or services to the SDN, for example, by entering into any contracts that are signed by the SDN.”
ExxonMobil’s response was that it read the public statements as distinguishing Sechin’s professional role from his personal capacity. OFAC said the regulations contain no such distinction.
The outcome in court
ExxonMobil sued. On 31 December 2019 Judge Jane Boyle of the Northern District of Texas granted its motion, declared that “OFAC’s Penalty Notice violates the Due Process Clause of the Fifth Amendment,” and vacated it. The court held that ExxonMobil “lacked fair notice that their conduct was prohibited”: the text of the regulations did not give fair notice of OFAC’s interpretation, and the public statements did not fill the gap. It noted that ExxonMobil had not asked OFAC for guidance, treating that as relevant but not decisive, and that the Burma FAQ concerned a different programme. It did not reach ExxonMobil’s other grounds. This page does not trace any proceedings after that order.
Why it belongs on this site
The question the case turned on is the same one ownership threshold structuring describes: how far a prohibition on dealing with a designated person reaches into dealings with a company he is not formally the owner of. OFAC’s 2014 guidance tells US persons to act with caution towards non-blocked entities in which a blocked person has a significant ownership interest or control by other means. The ExxonMobil case shows that guidance written as caution is not the same as a rule, and that an enforcement action built on it can fail.
What the record shows
- A designated official can sign for an undesignated company. That was OFAC’s theory of the violation.
- Fair notice depends on what was published before the conduct. The court’s reasoning rests on the regulations and statements that existed in May 2014, not on what OFAC later said they meant.