Kalashnikov USA Target of U.S. Congressman's Sanctions Probe

(Bloomberg) -- A U.S. congressman called on the Treasury Department to investigate whether Kalashnikov USA, which makes AK-47-style guns in Florida, violated sanctions on Russian arms makers, after a Bloomberg report revealed its executives had ties to a Russian manufacturer.

Democrat Ted Deutch, of Florida, asked John E. Smith, director of the office of foreign assets control at Treasury, to investigate whether Kalashnikov USA imported parts from Concern Kalashnikov JSC, the sanctioned state company that makes AK-47s. Deutch also asked Smith’s office to investigate business ties between the U.S. and Russian companies and its employees, according to a letter sent Wednesday.

Deutch said he’s seeking to learn if "the importation of parts and components" violates sanctions.

In March, Bloomberg Businessweek reported how interlocking companies, some created since the U.S. imposed sanctions on arms makers to punish Russian President Vladimir Putin for supporting separatists in Ukraine, connect Kalashnikov USA executives to the CEO and biggest shareholder of Kalashnikov Concern, Alexey Krivoruchko.

The U.S. attorney’s office in Miami has opened an investigation into RWC Group, Kalashnikov Concern’s sole U.S. distributor in 2012, and is seeking records related to the company, according to a grand jury subpoena sent to the city of Pompano Beach, Florida, where the Kalashnikov plant is located.

Kalashnikov had planned to export 200,000 guns a year to the U.S. through RWC, as of January 2014. The sanctions, imposed in 2014, ban any U.S. person or company from doing business with Kalashnikov Concern.

Deutch described the situation as a "serious national security matter."

In a statement Thursday, Laura Burgess, a spokeswoman for Kalashnikov USA, said the company is aware of Deutch’s letter.

“Kalashnikov USA is a privately held U.S. company that operates in accordance with all applicable U.S. laws, including but not limited to the International Traffic in Arms Regulations and U.S. economic sanctions programs,” Burgess said in the statement. “As a ‘U.S. Person’ under such laws, Kalashnikov USA does not conduct business with the Russian company, Kalashnikov Concerns.”

An OFAC spokesman said the agency doesn’t comment on investigations, and won’t confirm or deny whether one exists.

To contact the reporters on this story: Michael Smith in Miami at mssmith@bloomberg.net, Polly Mosendz in New York at pmosendz@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider

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