New Jersey man admits smuggling $65 million in sensitive electronics to Russian military, security services

NEWARK, N.J. — A New Jersey man pleaded guilty in federal court Thursday to his role in an international conspiracy in which $65 million worth of sensitive electronics were sent illegally to Russian military and security services.

This guilty plea resulted from an extensive joint investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the FBI, and the U.S. Department of Commerce, with the assistance of the police departments of Union County and Mountainside, New Jersey.

Alexander Brazhnikov Jr., 36, a naturalized U.S. citizen born in Moscow, pleaded guilty to an information charging him with one count of conspiracy to commit money laundering, one count of conspiracy to smuggle electronics from the United States, and one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA).

“As he admitted in court, Brazhnikov was responsible for nearly 2,000 illegal shipments of regulated, sensitive electronics components, many of which wound up in the hands of Russian military and security forces,” U.S. Attorney Paul Fishman said. “He also admitted going to extraordinary lengths to conceal the nature and destination of the shipments, as well to hide the tens of millions of dollars in illegal proceeds generated by the scheme. Shutting down schemes like this keep all of us safer.”

Brazhnikov Jr. was arrested at his home on June 26, 2014, following the joint investigation. From January 2008 through June 2014, he was the owner, chief executive officer, and principal operator of four New Jersey microelectronics export companies, each of which were used in the various conspiracies uncovered by the investigation. Following his arrest, federal agents seized $4,075,237 in proceeds related to the charged offenses, as well as real property and other assets valued at more than $600,000.

“Today's plea represents a collaborative effort among law enforcement agencies,” Sidney Simon, special agent in charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office, said. “I commend our colleagues at the FBI and Homeland Security Investigations for their efforts. The Office of Export Enforcement will continue to pursue violators of our export control laws by leveraging our unique authorities to protect national security.”

“Alexander Brazhnikov Jr. significantly undermined the national security of the United States by procuring sophisticated, high-tech electronic components and smuggling them into Russia, thereby enhancing the capabilities of the Russian Intelligence Service, and contributing to the modernization of both the Russian Military Service and the Russian Nuclear Weapons Program,” Richard M. Frankel, FBI special agent in charge, Newark, said. “Now, Brazhnikov must face the consequences of his actions and the full power of U.S. jurisprudence.”

According to documents filed in this case and statements made in court, Brazhnikov Jr. and his companies are part of a sophisticated procurement network that has surreptitiously acquired large quantities of license-controlled electronic components from American manufacturers and vendors, and illegally exported those items to Russia on behalf of Russian business entities that were authorized to supply them to the Ministry of Defense of the Russian Federation, the Federal Security Service of the Russian Federation (the FSB), and Russian entities involved in the design of nuclear warheads, weapons, and tactical platforms.

Court records alleged the defendant conspired with his father, Alexander Brazhnikov Sr., owner of a Moscow-based procurement firm whose agents helped initiate the purchase of electronics components from United States vendors and manufacturers on behalf of the conspirators’ clients in Russia. Brazhnikov Jr. finalized the purchase and acquisition of the requested components from the various distributors, then repackaged and shipped them to Moscow. He routinely falsified the true identity of the end-user of the components and the true value of the components in order to avoid filling out required export control forms. Brazhnikov Jr. purposefully concealed the true destination of the parts that were exported by directing that the shipments be sent to various “shell” addresses in Russia – some of which have been identified as vacant storefronts and apartments – which were established and controlled by the Moscow-based network. All shipments initially directed to the shell addresses were redirected to a central warehouse controlled by the conspirators’ Moscow-based network.

The funds for the network’s illicit transactions were obtained from the various Russian purchases and initially deposited into one of the conspirators’ primary Russia-based accounts. Disbursements for purchases were made from that primary Russian account through one or more foreign accounts held by shell corporations in the British Virgin Islands, Latvia, Marshall Islands, Panama, Ireland, England, United Arab Emirates, and Belize, and ultimately into one of the defendant’s U.S.-based accounts. The network’s creation and use of dozens of bank accounts and shell companies abroad was intended to conceal the true sources of funds in Russia, as well as the identities of the various Russian defense contracting firms receiving U.S. electronics components.

The money laundering conspiracy charge to which Brazhnikov Jr. pleaded guilty carries a maximum potential penalty of 20 years in prison and a $500,000 fine. The smuggling and IEEPA conspiracy charges carry a maximum potential penalty, per count, of five years in prison and a $250,000 fine. Sentencing is scheduled for Sept. 15, 2015. Brazhnikov Jr. also agreed to the entry of a forfeiture money judgment of $65 million.