Chronicle's coverage of the ACS incident is by far the most complete version of the story I know of. I expect it to have some inaccuracies though. read below:
http://chronicle.com/daily/2007/05/2007051403n.htm

American Chemical Society, in Reversal, Reinstates 36 Iranian Members

By BURTON BOLLAG

The American Chemical Society announced on Friday that it had reversed an earlier decision to expel its members in Iran and will allow all 36 scientists in that country to rejoin. The group had earlier said that having such members put the society in violation of U.S. trade sanctions against Iran.

The decision to remove the Iranians drew protests from academics, especially from Iranians living in the United States.

But a statement placed on the society's Web site on Friday said that, after further reviewing its legal options and after consulting with the federal agency overseeing the trade sanctions, the society's Board of Directors had decided to reinstate the Iranians.

They will, however, be denied two benefits that other members receive: the group's career-development services, and reduced-price admission to the society's twice-yearly national meetings.

The society's one member in Sudan -- another country under U.S. trade sanctions -- had also been removed and was being invited back with the same restrictions. The society, which has 160,000 members and calls itself the world's biggest scientific association, would not disclose whether its members in Iran and Sudan work for academic institutions, government agencies, or industry.

The society's executive director, Madeleine Jacobs, said the original decision to remove the Iranians and the one Sudanese had been made by midlevel staff members without her knowledge or that of the society's board. She said no employee would be penalized for the action.

"We had a snafu, a breakdown of communications," Ms. Jacobs said in an interview. "We would not have rescinded membership if it had come to my attention." Although the expulsions were carried out in January, Ms. Jacobs said she and the society's other senior officials had learned of the move from an article in the journal Science only at the end of March.

Ms. Jacobs said the whole affair started almost a year ago, when the unidentified member in Sudan inquired about his or her eligibility for all membership benefits despite the U.S. trade laws barring American organizations from doing business with people in Cuba, Iran, North Korea, and Sudan, among other countries. The society's assistant general counsel, identified in the Science article as David T. Smorodin, conducted a review of U.S. government regulations and determined that the society was prohibited from having members in countries under trade sanctions.

The society then had an outside lawyer contact the agency overseeing the sanctions, the Treasury Department's Office of Foreign Assets Control, and, without identifying the chemical society, inquire about restrictions on foreign membership. That inquiry appeared to confirm Mr. Smorodin's conclusion, Ms. Jacobs said, and the midlevel decision was made to rescind membership for the 36 Iranians and one Sudanese.

The decision harked back to a 2003 controversy in which the Treasury Department said it was illegal for American research journals to edit papers from scientists in countries under U.S. trade sanctions -- a policy that was latter rescinded. Since then, the chemical society appears to have been the only scientific group to drop members in those countries, Ms. Jacobs said. But another group, the Institute of Electrical and Electronics Engineers, cut off nearly all services to its Iranian members to comply with the trade embargo in 2002, leading all but a few hundred of its 1,700 Iranian members to quit (The Chronicle, October 17, 2003). Acting under guidance from the Office of Foreign Assets Control, the institute was later able to reinstate most of those services.

Ms. Jacobs said it was understandable that staff members at the society would be concerned about compliance with the law because her group offers a wider range of services than do most scientific societies.

Still, when the chemical society's senior officials and board members learned about the decision, at the end of March, Ms. Jacobs said, they immediately arranged to meet with representatives of the Office of Foreign Assets Control. From those contacts, they concluded that the Iranians and Sudanese could be members if they were denied the two membership benefits from which they are now excluded.

The society has now applied to the Treasury Department office for a license to extend full membership to scientists in countries under trade sanctions. "We want to obey U.S. law while promoting scientific cooperation," said Ms. Jacobs.

The society said it had joined other scientific associations in working with the National Academy of Sciences to try to get clarification from the U.S. government about "what is and what isn't allowed" in terms of academic cooperation with scientists in embargoed countries, said Ms. Jacobs.

As for the Iranians, 22 had simply not been sent membership-renewal notices this spring. But the other 14 Iranians, whose memberships were not up for renewal, had received notices of expulsion. As a gesture to make up for the "personal distress and hardship" that step may have caused, Ms. Jacobs said, the $136 annual membership fee and the $58 annual postage fee for the society's magazine were being paid by an anonymous donor for one year.

Ms. Jacobs said the Iranians and Sudanese were all invited to rejoin in an e-mail message sent on Friday.