Uncommon Relationship Between BIS, Texas Police Raises Concerns

The Commerce Department is working with a police agency in rural Texas to help investigate illegally exported goods, an unorthodox relationship that has sparked concern among industry lawyers and led to disputed seizures.

The police agency, a small constable’s office in southeast Texas, works on a task force that seizes millions of dollars' worth of goods per year and has helped Commerce and Texas state attorneys successfully prosecute at least a dozen export seizure cases since 2018. The Texas agency’s lead officer on these investigations is paid entirely from the forfeited goods that he seizes, according to documents obtained through a public record request, an arrangement that defense lawyers have singled out in arguments against the seizures.

It appears to be the only such partnership between Commerce and local police in the country, one that Texas police and officials say allows them to support federal law enforcement and supplement funding for the local government. But in interviews, nearly a dozen former Commerce agents, Department of Justice officials and lawyers warned it may present legal, ethical and national security concerns.

“I never saw anything like this in my 20-year career,” said Richard Modesette, a former special agent in charge of the Bureau of Industry and Security's Houston field office. “To bring a local agency in to assist in a federal export crime just didn't happen.”

The unusual alliance underscores the challenges facing BIS, an often short-staffed agency, in handling enforcement issues with potential foreign policy implications that require extensive knowledge across a constantly changing set of export regulations. Although former BIS officials suggested the agency could use help from more officers, they said better options exist than local police.

“We have dedicated federal law enforcement agencies that look at export control and sanctions investigations. The FBI does it. [Immigration and Customs Enforcement] does it. Commerce does it,” said Jonathan Poling, who worked export control cases with the Justice Department and is now a trade lawyer with Akin Gump. “I think a question that might be raised is whether this is really a good use of local law enforcement resources.”

In separate interviews, Beau Price, the task force commander and a Polk County police officer, and Scott Hughes, the county’s Precinct 1 constable who helped create the group, stressed that their work is conducted under the guidance of federal officials and helps limit funding and exports destined for foreign terrorist groups.

While the task force could help federal agents find leads and learn more about illegally exported oilfield equipment -- which former officials said is commonly manufactured and sold in southeast Texas -- it can grow to be an issue without proper oversight, others warned.

“These violations really present the sort of uniquely federal interests that typically are best suited to federal law enforcement,” said Ryan Fayhee, a Hughes Hubbard trade lawyer who worked as the Justice Department's lead export control and sanctions prosecutor. “If funds are being forfeited from this illicit behavior, the idea that those funds should be committed to one single county in the United States when the threat and the concerns are really uniquely national -- that’s not the best and greatest use of law enforcement assets.”

Fayhee also said local officers could create issues that have “broader foreign relations and national security” implications. Mistaken arrests or incorrectly detained exports to a U.S. adversary could complicate a foreign relationship, he said. “If not properly supervised by federal authorities,” Fayhee said, “there is an issue here.”

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Commerce and other federal agencies first formed the task force with the Polk County Precinct 1 Constable office and other local agencies in May 2017, calling it the South East Texas Export Investigation Group (SETEIG). Police in nearby Harris County, Galveston County and others also work on the task force with Price, who coordinates with partner agencies for work assignments. Price said the government’s goal was to form a group that could use state police and prosecutors to target state violations -- such as money laundering and fraud -- that often accompany export violations.

Price has never received export enforcement training from the federal government, according to his personnel file and his supervisor. But he works closely with BIS officials and has more than 25 years of law enforcement experience. His personnel file shows he is certified as a master peace officer in Texas.

He has played a role in the seizure of millions of dollars in oilfield equipment, private jets, cars and ATVs destined for Iran, the United Arab Emirates and other countries, according to our review of hundreds of pages of court records and Polk County documents.

Price said the group was created to help federal agencies pull resources from local officers. “I think in most states, there isn't quite any export law,” he said in an interview. “We all realized the need for some action on the state level for offenses that were related to export that really had not been directly investigated.”

Price has been part of SETEIG since at least 2017, when he said he worked as an unpaid reserve officer. He signed a paid contract with Polk County soon after and began making about $7,400 a month in November 2020, or about $89,000 annually, county records show.

Although that figure would make him the county's highest-paid government official, Price said a large portion of his salary includes the normal benefits package given to full-time county employees. The county judge’s office lists his base salary at about $53,000 -- about the same as the county’s deputy sheriff -- with the remaining $35,000 accounting for insurance costs and a vehicle allowance, among other items.

His salary is paid “solely out of the funds” from goods that SETEIG seizes, according to a copy of his contract, which cites a Texas regulation that allows forfeited asset seizures to fund law enforcement activities. Other local police officers are also paid from SETEIG’s forfeited funds, which Hughes said is audited annually by the Texas attorney general.

Although the salaries are legal under Texas law, former BIS agents said federal enforcement officers are never paid directly from asset forfeitures, which could incentivize the officer to seize goods and lead to ethical violations.

“That to me is a serious conflict of interest,” said Adrienne Braumiller, a Texas-based export control lawyer and a member of a Commerce technical advisory committee.

While asset seizures don’t "usually" fund local officer salaries, the practice is not new, said Maria Haberfeld, a police ethics expert and professor at the John Jay College of Criminal Justice. It has been a polarizing law enforcement tactic for decades.

“Of course, there is some extra incentive here to engage in extra policing,” Haberfeld said. “It's an incentive for law enforcement officers to maybe work a bit harder, but not necessarily in an unethical way.”

Price said he doesn’t view his salary as a conflict of interest, and he doesn’t try to seize goods to fund his salary. “If we're able to legally do this, and the actions that we're taking by legally doing this are promoting the prosecution, investigation and seizure of goods from bad people,” he said, “then I do completely support it.” Price’s contract was renewed for six months in April.

It’s unclear how many other local officers work for SETEIG or on federal export investigations in Texas. A BIS spokesperson declined to comment on Price's salary but said the task force has allowed the agency to use local police to bolster its staffing and increase enforcement.

“Being able to draw on the expertise of Texas state police officers, the BIS enjoys the benefits of participating as a force multiplier to leverage staffing and resources and increase/enhance prosecutorial options resulting from joint investigations,” the spokesperson said in a recent email. SETEIG’s “focus is to pursue violations of Texas law that may originate from an export transaction,” the spokesperson added, and “identify federal export violations for federal authorities to pursue.” BIS said it doesn't receive any percentage of SETEIG's asset seizures and stressed that several other federal agencies are involved.

Those agencies include Homeland Security Investigations and CBP, both of which Price said he works “very closely” with. An HSI spokesperson said the agency is no longer involved in the group, and a CBP spokesperson didn’t respond to requests for comment.

“There's just not enough people to look into all these offenses,” Price said. “So being able to add the extra manpower and investigative eyes through a state level has been very good for our federal partners.”

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Before federal agents are given a gun and badge and allowed to investigate export violations, they must undergo training, former officials said. Agents may train at the Federal Law Enforcement Training Center or the FBI Academy and “often” receive specialized training within their own agencies, said Poling, a former federal export control prosecutor.

“It is typically not something you can give someone a quick course in and have any law enforcement officer be as qualified” as a federal agent, he said.

Even when working on export investigations with experienced federal agents from other agencies, such as CBP, former BIS agents said they usually had to train those CBP officials on export regulations, which can be dense and convoluted. They said similar training would be a challenge for a police officer with no federal enforcement experience but possible under the right supervision.

Price collaborates closely with BIS Texas’ field offices on federal export enforcement, often reviewing ongoing federal investigations, citing federal export regulations and continuing work already begun by BIS agents, according to more than a half-dozen of Price’s sworn affidavits since 2018.

Price and Precinct 1 Constable Hughes stressed that they conduct their export investigations under the guidance of federal officials. “When I allege a federal offense that I see in a case, it's not that I strolled in and picked up a file and just went through it arbitrarily by myself,” Price said. “That doesn’t happen.” He said federal agents sometimes inform him of a Texas crime that was committed as part of a broader export violation -- and vice versa -- which allows Price to help with the investigation.

In one February 2019 affidavit, Price said he helped investigate thousands of dollars' worth of turbine engine parts that were almost illegally exported to the UAE before being seized by a BIS special agent. Price wrote that the exporter failed to file Electronic Export Information in the Automated Export System, a federal document filing portal, based on information federal agents shared with him.

The UAE-based owner of the engine parts never responded to the charges and a court ordered the parts forfeited to Texas, awarding about $20,000 to local police.

Although at least a dozen SETEIG investigations have led to successful prosecutions, at least four cases were dismissed within the past year after being moved to federal courts. A case last year involving the seizure of a private Learjet plane was dismissed with prejudice in December because Texas attorneys filed the seizure notice in the wrong county -- nearby Harris County -- and couldn’t prove the jet was “proceeds gained” from a felony offense. The Harris County District Attorney's office declined to comment for this story.

In a June 2020 case, Price helped seize thousands of dollars in oilfield equipment that he said was set to be exported to T.S.D. srl, an Iranian “procurement company.” State lawyers eventually dropped the case in March, telling a federal court that “further prosecution wasn't financially justified” and that they had received “assurances from TSD srl that the seized goods would not be trafficked contrary to federal law.”

In another case dismissed in May, a federal judge said Texas officials failed to prove that a multimillion-dollar jet violated export regulations or was involved in a money-laundering and tax evasion scheme (see 2105110037). The judge wrote that Price’s affidavit contained “no evidence, beyond suspicion, stacked on suspicion.”

Although the judge said Price's affidavit lacked probable cause, Hughes said the dismissal wasn’t the fault of the police. “Yeah, there’s been dismissals, but it’s not been on our work product,” he said. “We’re not lawyers.”

Price said his affidavits are “reviewed, drafted and approved by prosecutors from each county that those cases were filed in,” but he said the criteria his affidavits must meet sometimes change when they are referred to a federal court. “It's kind of hard for me to write a state of Texas affidavit, and then have to apply it to an unknown jurisdiction at some unknown later point,” he said. “If the judge saw them differently on a federal level, that would be that judge's interpretation, and I'd respect his interpretation.”

In a case that’s still active, Price helped to seize a private Hawker 800 jet and told a federal judge during a trial conference that he believed the plane “might” be used in an “attack evoking the type on September 11, 2001,” but he had no evidence, Southern Texas District Judge Charles Eskridge wrote in a Feb. 11 memo. “When questioned directly to state evidence backing up such statement, Captain Price admitted that he had none,” Eskridge wrote. “He was then admonished to contain his remarks to actual and pertinent facts.”

In an interview, Price said he was asked at the time what he believed would be the “worst-case scenario” that the plane could be used for. He said his comments were misrepresented.

In another case, a Texas lawyer representing the owner of a jet seized by Price and BIS said he suspected Price seized the plane to help fund law enforcement activities, according to a transcript of a November case hearing. “It's pretty clear also that Polk County and others saw a very large ray of dollar signs,” Texas aviation lawyer Gary Evans told the judge.

Tommy Coleman, Polk County’s assistant criminal district attorney, told the judge that his team had no financial incentive and wasn’t part “of some profit motivated endeavor.” A federal judge dismissed the case with prejudice in December, citing a failure to file the seizure notice in the correct county and an inability to prove the jet was proceeds from a felony offense.

In an interview, Polk County District Attorney William Lee Hon said his office has worked with Price on only two cases. “What they have been up to has really been outside any involvement of this office,” he said.

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Although former Commerce officials said the task force, if not properly managed, could grow to become a concerning liability, Hughes, an elected official, is proud of the work SETEIG does. He publishes news releases about the group to the agency’s Facebook page and gives regular updates to county commissioners on its progress, saying the work is helping to limit funding and exports destined for foreign terrorist groups.

“We're stopping these killers, we're getting a little bit, just a piece of these killers’ money that are blowing our kids up,” Hughes said during a 2018 commissioners’ meeting. He also stressed that the county doesn’t pay Price’s salary, which is one less tax burden for residents. “You hear a lot of negative stuff about civil asset forfeitures. It is what it is,” Hughes said. “We have no game whatsoever other than to help the taxpayers of this county.”

Former government officials said federal agencies routinely partner with local agencies to tackle domestic crime and illegal imports, although they have never seen a task force focused on catching export violations. But that doesn’t mean the task force isn’t a good idea, some said. “This may be a unique, groundbreaking, creative way in which they're able to accomplish their duties,” said Modesette, who retired from BIS in 2008.

SETEIG has continued to expand since it formed in 2017, recently adding the Newton County Precinct 4 Constable office. It has opened more than 50 investigations and “examined” more than 100 others, Hughes said, adding that he hopes the task force expands to other parts of the country. BIS said it's “unaware” of efforts to expand the task force “at this time.”

Although it has “always been thought that the locals should only deal with the local drug dealers or criminal violators and leave the criminal organizations to the federal authorities,” Hughes said local law enforcement and prosecutors “have a lot to offer and much can be gained working together.” He hopes “similar organizations will come together.”

“This job is a good job,” Price said. “This is work that needs to be done and should have been done years ago.”

Deputy Managing Editor Brian Feito contributed research to this story.