Sec probes Oregon firm over Cuban nickel.

Federal officials are investigating Portlandbased Esco Corp. for using nickel obtained from Cuba in violation of the trade embargo, OregonLive.com reported Mar. 17.

Esco lawyers said they expect the company to face fines of no more than $5.5 million, but acknowledge penalties could be more, according to a public filing with the U.S. Securities and Exchange Commission.

Disclosure of the violation by a Canadian subsidiary comes at a delicate moment for Esco, a company whose managers have been trying to take the manufacturer public on the Nasdaq exchange. Esco announced its plans in May for a $175 million public offering that has since languished.

The Cuban disclosure was contained in a 317-page amended IPO document filed by Esco and appearing on the SEC's website.

"We learned that a foundry operated by one of our foreign subsidiaries had been purchasing and using material from a distributor that obtained the material from a supplier that procured the source material from Cuba," said the statement.

"We voluntarily reported the violation to OFAC, stopped purchasing from the distributor, temporarily halted production at the foundry and sequestered all inventory containing Cuban material. In July 2011, we resumed production at the foundry with material provided by another supplier and subsequently received a license to sell most of the inventory that contained Cuban material."

The OFAC investigation could take months to complete, said the company, warning that penalties could be significant because each purchase of Cuban material and each sale of a product containing the material could result in a fine of up to $65,000.

Esco has four foundries in Canada, among about 30 plants worldwide. It's possible a Canadian subsidiary of Esco did business with a Cuban supplier without perhaps realizing the ramifications.

The Cuban connection could embarrass Esco, which makes parts such as teeth for gigantic mining shovels. But a $5.5 million fine would hardly set the company back. The SEC filing showed Esco's net sales jumped to $1.12 billion in 2011, up 32% from $850 million in 2010. Gross profit grew 34%, from $223 million in 2010 to $299 million last year.