PAGENO="0001"
ADMINISTRATION AND ENFORCEMENT OF U0S0
EXPORT CONTROL PROGRAMS
0)2 ~
HEARINGS
BEFORE THE
SUBCOM~IITTEE ON OVERSIGHT
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SECOND CONGRESS
FIRST SESSION
APRIL 18; AND MAY 1, 1991
Serial 102-.72
Printed for the use of the Committee on Ways and Means
~/5~ j3/~1~?
U.S. GOVERNMENT PRINTING OFFICE
51-840 WASHINGTON 1992
For sale by the U.S. Govemment Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN O-~6-O38452-4
PAGENO="0002"
COMMITTEE ON WAYS AND MEANS
SAM M. GIBBONS, Florida
J.J. PICKLE, Texas
CHARLES B. RANGEL, New York
FORTNEY PETE STARK, California
ANDY JACOBS, JR., Indiana
HAROLD E. FORD, Tennessee
ED JENKINS, Georgia
THOMAS J. DOWNEY, New York
FRANK J. GUARINI, New Jersey
MARTY RUSSO, Illinois
DON J. PEASE, Ohio
ROBERT T. MATSUI, California
BERYL ANTHONY, JR., Arkansas
BYRON L. DORGAN, North Dakota
BARBARA B. KENNELLY, Connecticut
BRIAN J. DONNELLY, Massachusetts
WILLIAM J. COYNE, Pennsylvania
MICHAEL A. ANDREWS, Texas
SANDER M. LEVIN, Michigan
JIM MOODY, Wisconsin
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
BILL ARCHER, Texas
GUY VANDER JAGT, Michigan
PHILIP M. CRANE, Illinois
DICK SCHULZE, Pennsylvania
BILL GRADISON, Ohio
BILL THOMAS, California
RAYMOND J. McGRATH, New York
ROD CHANDLER, Washington
E. CLAY SHAW, JR., Florida
DON SUNDQUIST, Tennessee
NANCY L. JOHNSON, Connecticut
JIM BUNNING, Kentucky
FRED GRANDY, Iowa
DAN ROSTENKOWSKI, Illinois, Chairman
ROBERT J. LEONARD, Chief Counsel and Staff Director
PHILLIP D. MOSELEY, Minority Chief of Staff
SUBCOMMITTEE ON OVERSIGHT
J.J. PICKLE, Texas, Chairman
BERYL ANTHONY, JR., Arkansas DICK SCHULZE, Pennsylvania
HAROLD E. FORD, Tennessee E. CLAY SHAW, JR., Florida
CHARLES B. RANGEL, New York DON SUNDQUIST, Tennessee
ANDY JACOBS, JR., Indiana JIM BUNNING, Kentucky
ED JENKINS, Georgia
MARTY RUSSO, Illinois
(II)
PAGENO="0003"
CONTENTS
Page
Press releases of March 28 and April 11, 1991, announcing the hearings 2
WITNESSES
U.S. Department of Defense, Henry D. Sokoiski, Deputy for Non-Proliferation
Policy, Office of the Assistant Secretary for International Security Affairs;
Peter M. Sullivan, Assistant Director, Defense Technology Security Admin-
istration; and Richard Speier, Office of Non-Proliferation Policy 8
U.S. Customs Service:
Steven C. Davis, Senior Special Agent, Sacramento, Calif 116
David E. Burns, former Special Agent, Sacramento, Calif 130
Dennis J. Bass, Senior Special Agent, Baltimore, Md 164
Hon. Carol Hallett, Commissioner of Customs; and John C. Kelley, Direc-
tor, Strategic Investigations Division 414
U.S. Department of Commerce:
Frank W. Deliberti, Director, Office of Export Enforcement, Bureau of
Export Administration; and Leonard S. Patak, Special Agent in Charge
of Export Enforcement, Dallas, Tex 214
Frank W. Deliberti, Director, Office of Export Enforcement, Bureau of
Export Administration; Randall Sike, Special Agent in Charge; and
Jerry M. Hobbs, Special Agent, Office of Export Enforcement, San Jose,
Calif 242
Hon. Kenneth A. Cutshaw, Deputy Assistant Secretary for Export En-
forcement, Bureau of Export Enforcement, and lain Baird, Director,
Office of Export Licensing 483
U.S. Department of the Treasury, R. Richard Newcomb, Director, Office of
Foreign Assets Control, Office of Enforcement 356
U.S. Department of State, Charles A. Duelfer, Deputy for Defense Trade to
the Assistant Secretary, and Director, Center for Defense Trade, Bureau of
Politico-Military Affairs 542
Bryen, Stephen D., Silver Spring, Md. (former Deputy Under Secretary of
Defense for Trade Security Policy and Director, Defense Technology Securi-
ty Administration) 29
Casperson, Robert J., C-TEK Computers, Inc., Kirkland, Wash 283
Helmy, Abdelkader, Lompoc, Calif 134
Hinkleman, Leslie, Alcolac International, Inc., Baltimore, Md 194
Moody, Hon. Jim, a Representative in Congress from the State of Wisconsin.... 345
Moore, Portia R., San Francisco, Calif (former assistant U.S. attorney for the
Western District of Washington) 259
Mukkar, Shiv Mohan, Raybrook, N.Y 289
Stark, Hon. Fortney Pete, a Representative in Congress from the State of
California 314
APPENDIXES
A. U.S. General Accounting Office, letter dated April 12, 1991, from Allan I.
Mendelowitz, Director, International Trade, Energy, and Finance Issues.... 597
B. U.S. Department of State, letter dated April 26, 1991, from Janet G.
Mullins, Assistant Secretary, Legislative Affairs 603
C. Hon. Richard L. Thornburgh, letter dated April 22, 1991, from Chairman
J.J. Pickle, Subcommittee on Oversight, Committee on Ways and Means... 615
(III)
PAGENO="0004"
Iv
Page
D. U.S. Department of Justice, letter dated April 25, 1991, from W. Lee Rawis,
Assistant Attorney General, Office of Legislative Affairs 616
E. U.S. Department of Justice, letter dated May 24, 1991, from W. Lee Rawls,
Assistant Attorney General, Office of Legislative Affairs 617
F. Hon. Richard L. Thornburgh, letter dated June 12, 1991, from Chairman
J.J. Pickle, Subcommittee on Oversight, Committee on Ways and Means ... 624
G. U.S. Department of Justice, letter dated August 1, 1991, from W. Lee
Rawls, Assistant Attorney General, Office of Legislative Affairs 627
H. Additional background information:
1. Helmy case 636
2. Helmy wiretaps 690
3. Alcolac case 772
4. Global case 849
5. C-TEK case 880
PAGENO="0005"
ADMINISTRATION AND ENFORCEMENT OF U.S.
EXPORT CONTROL PROGRAMS
THURSDAY, APRIL 18, 1991
HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON OVERSIGHT,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:36 a.m., in room
1100, Longworth House Office Building, Hon. J.J. Pickle (chairman
of the subcommittee) presiding.
[The press releases announcing the hearings follow:]
(1)
PAGENO="0006"
2
FOR IMMEDIATE RELEASE PRESS RELEASE #6
THURSDAY, MARCH 28, 1991 SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
1135 LONGWORTH HOUSE OFFICE BLDG.
WASHINGTON, D.C. 20515
TELEPHONE: (202) 225-5522
THE~ HONORABLE J. J. PICKLE (D., TEXAS), CHAIRMAN,
SUBCOMMITTEE ON OVERSIGHT, COMMITTEE ON WAYS AND MEANS,
U. S. HOUSE OF REPRESENTATIVES,
ANNOUNCES SUBCOMMITTEE INVESTIGATION INTO
THE ADMINISTRATION AND ENFORCEMENT OF
U.S. EXPORT CONTROL PROGRAMS
The Honorable J. J. Pickle, (D., Texas), Chairman of the
Subcommittee on Oversight, Committee on Ways and Means, U.S. House of
Representatives, announced today that the Subcommittee on Oversight
has been conducting an investigation into the administration and
enforcement of U.S. export control programs involving the Middle East.
The Subcommittee will examine U.S. Customs Service (Customs)
enforcement activities in the area, and review specific cases
involving the activities of Customs and the Department of Commerce
associated with their enforcement of the U.S. export control laws.
The Subcommittee is also examining the Department of the
Treasury's (Treasury) Office of Foreign Assets Control (OFAC) which
administers trade and financial sanctions against selected foreign
countries. OFAC is currently developing a list of foreign individuals
and firms who have been designated as agents of the Iraqi Government,
and who will be prohibited from doing business with U.S. persons or
companies. The Subcommittee will consider this OFAC list and other
OFAC activities to determine what additional measures could be taken
by Treasury to stem the proliferation and spread of weapons of mass
destruction. Also, the Subcommittee will review Treasury's overall
role in formulating, implementing, and enforcing trade and financial
sanctions against Iraq and other Middle-Eastern countries which may
pose a threat to the security of the United States.
Hearings on these matters have been tentatively scheduled for
April 18 and May 1, 1991. The Subcommittee will issue a press release
early next month announcing the date, time, and place of these
hearings and the witnesses invited to appear before the Subcommittee.
In announcing the investigation, Chairman Pickle stated: "Over
the past several years, U.S. companies have sold Iraq computers,
electronics equipment, machine tools, chemicals, and other supplies
worth billions for use in Iraqi programs to develop nuclear weapons,
missiles, and poison gas. Some of these sales were made with the
approval of Uncle Sam. What Saddam couldn't obtain legally, he
acquired through sophisticated Iraqi underground purchasing networks
that made extensive use of dummy corporations and international
merchants of death. I am particularly concerned that some U.S.
individuals and corporations, directly or indirectly, have assisted
Saddam in his efforts. Saddam managed to exploit the export control
systems in the U.S. and other industrialized nations to build weapons
factories and procure the raw matsrimlm rc zco~ry to moka weap~n3
mass destruction.
"Iraq is just part of the problem. The proliferation of chemical,
biological, nuclear, missile technology, and materials represents an
immediate threat to the security of the world community. The
Subcommittee's investigation hopes to shed some light on who is
acquiring sophisticated technology, machinery, and other dangerous
materials, how potential adversaries are able to circumvent U.S.
export control laws, and the overall effectiveness of the U.S. export
control system.
"Unless efforts are made to improve the Federal Government's
ability to recognize illegal acquisition attempts, countries like Iraq
will continue to succeed in getting chemical, biological, and nuclear
capabilities with our help. The question remains whether U.S. export
control systems are a match for a potential adversary who is
desperately bidding to develop a sophisticated weapons arsenal."
PAGENO="0007"
3
FOR IMMEDIATE RELEASE PRESS RELEASE #8
THURSDAY, APRIL 11, 1991 SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
1135 LONGWORTH HOUSE OFFICE BLDG.
WASHINGTON, D.C. 20515
TELEPHONE: (202) 225-5522
THE HONORABLE J. J. PICKLE (D., TEXAS), CHAIRMAN,
SUBCOMMITTEE ON OVERSIGHT, COMMITTEE ON WAYS AND MEANS,
U. S. HOUSE OF REPRESENTATIVES,
ANNOUNCES SUBCOMMITTEE HEARINGS ON THE ADMINISTRATION
AND ENFORCEMENT OF U. S. EXPORT CONTROL PROGRAMS
The Honorable J. J. Pickle (D., Texas), Chairman of the
Subcommittee on Oversight, Committee on Ways and Means, U.S. House
of Representatives, announced today that the Subcommittee on
Oversight will hold hearings to review the administration and
enforcement of U.S. export control programs involving the Middle
East. The Subcommittee will examine U.S. Customs Service (Customs)
enforcement activities in the area, and review specific cases
involving the activities of Customs and the Department of Commerce
(Commerce) associated with their enforcement of the U.S. export
control laws. In addition, the Subcommittee will examine the
administration of trade and financial sanctions against selected
foreign countries by the Department of the Treasury's Office of
Foreign Assets Control (OFAC). (See Subcommittee Press Release #6,
dated March 28, 1991, for additional information on the oversight
investigation.)
The hearings have been scheduled for Thursday, April 18, 1991,
and Wednesday, May 1, 1991, beginning at 9:30 a.m., in the main
Committee hearing room, 1100 Longworth House Office Building. The
Subcommittee will receive testimony from representatives of the
OFAC, Customs, Commerce, the Department of Defense, and other
invited witnesses concerning the threat of proliferation and the
effectiveness of U.S. export control program enforcement efforts.
Customs and Commerce agents will provide testimony concerning
specific cases of illegal exports and diversion schemes involving
such commodities as mustard gas precursors, ballistic missile
components, combat attack helicopters, cluster bombs, and
sophisticated computer equipment with military weaponry
applications. The Subcommittee has subpoenaed several witnesses
found guilty of violating U.S. export control, money laundering, and
other Federal statutes.
In announcing the hearings, Chairman Pickle stated: "With the
end of the Cold War and recent efforts to relax export restrictions
on the sale of high technology products to the Soviet Union and
other East European countries, concerns regarding export controls
have now shifted from an East-West emphasis, to the proliferation of
sensitive technology, weapons, and other materials to third-world
nations. There are countries who have clandestine programs to
develop chemical, biological, and nuclear capacities and
sophisticated missile delivery systems. These countries seeking to
develop unconventional warfare capabilities and indigenous
production facilities have established complex procurement networks
to acauire everything from basic chemicals and missile nose cones to
high-tech computer systems with military applications. We need to
assess the effectiveness of our current export control programs in
stopping the proliferation of weapons of mass destruction."
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Persons submitting written comments for the printed record of
the hearing should submit six (6) copies by the close of business,
Wednesday, May 22, 1991, to Robert J. Leonard, Chief Counsel,
Committee on Ways and Means, U.S. House of Representatives, Room
1102 Longworth House Office Building, Washington, D.C. 20515.
(MORE)
PAGENO="0008"
4
-2--
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted
for the printed record or any written comments in response to a request for written comments must conform to the
guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be
maintained in the Committee files for review and use by the Committee.
1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper
and may not exceed a total of 10 pages.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit
material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications
will be muintained in the Committee files for review and use by the Committee.
3. Statements must contain the name and capacity in which the witness will appear or, for written comments,
the name and capacity of the person submitting the statement, as well as any clients or persons, or any
organization for whom the witness appears or for whom the statement is submitted.
4. A supplemental sheet must accompany each statement listing the name, full address, a telephone number
where the witness or the designated representative may be reached and a topical outline or summary of the
comments and recommendations in the full statement. This supplemental sheet will not be included in the
printed record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits
or supplementary material submitted solely for distribution to the Members, the press and the public during the course
of a public hearing may be submitted in other forms.
PAGENO="0009"
5
Chairman PICKLE. The subcommittee will please come to order.
We have several panels today and several witnesses to hear, and
I am sure many questions from members, and responses from the
panel. I would serve notice to some of the panelists that testimony
will be taken under oath. I ask then the cooperation of all the
members and the audience to please take a seat.
We are here today to discuss a very grave and serious subject. As
the recent war in the Middle East demonstrated, all too clearly, it
is very likely that our troops will again be drawn into dispute be-
tween Third World nations in some manner. As we will see today,
Iraq is not the only Third World country that has been building a
formidable military, armed with an array of weapons of mass de-
struction. Iraq is not the only country that is illegally seeking com-
ponents for their weapons systems from the United States.
We will also see that the United States' businesses are either
wittingly, or unwittingly, assisting Third World countries in their
weapons development and production programs. These are serious
statements, if not accusations, which we will explore today.
I am also releasing the April 1991 U.S. General Accounting
Office report to the subcommittee on the U.S. controls on trade
with Middle Eastern countries. That report will be available upon
request or at the table. Among other things, the GAO reports that
in 1990, the United States exported over $10 billion to Egypt, Iran,
Iraq, Israel, Jordan, Kuwait, Yemen, Saudi Arabia, and Syria.
Needless to say, the United States is still one of the best sources of
high-technology products and know-how throughout the world.
That's good for the United States and good for United States
businesses. Historically we have limited the sale of some high-tech
know-how products to the Soviet Union and other Eastern bloc
countries for national security and policy reasons. Today, because
of welcome changes in our relationship with the Eastern bloc coun-
tries, we are decontrolling many of these products. Meanwhile, our
concerns are shifting to proliferation of weapons of mass destruc-
tion and the related delivery system for those weapons to Third
World countries.
The administration has recently promulgated new regulations
aimed at controlling proliferation to Third World countries. The
theory embodied in the new regulation is that we will control only
key components and materials that are absolutely necessary in
order to successfully develop weapons of mass destruction and de-
livery systems. The idea is to build high walls around a short list of
controlled items.
Today, we are going to examine just how high those walls are,
and I am not at all convinced that we have any walls at all, let
alone high walls. The four cases that we have scheduled for today
will illustrate how the game is played, who the players are, the
role of Customs and other Federal agencies, and the method of di-
version schemes used to circumvent our export laws. For the first
time, this committee will attempt to trace cases from beginning to
end. Frankly the scenarios that we will be examining will turn out
to be relatively unsophisticated, yet, they appear to be difficult to
detect given our current enforcement efforts. The commodities ex-
ported are dangerous and deadly, yet, they were caught as a result
PAGENO="0010"
6
of a lucky tip to the U.S. Government received from a business or
foreign source.
As far as I can determine, we have no independent focus or
meaningful, systematic enforcement program of our own, in the
first place, and that is why a U.S. citizen was able to illegally pro-
cure and then illegally smuggle sophisticated missile technology
and components to Egypt for use by Egypt and Iraq in developing
the Condor II missile and upgrading their SCUD-B missiles.
In the second case,, one low-level company official at a Baltimore-
based chemical manufacturer was able to arrange singlehandedly
for the illegal shipment of hundreds of tons of mustard gas ingredi-
ents to Iraq and Iran.
The third case illustrates how a foreign arms manufacturer can
both legally and illegally tap U.S. technology and products to de-
velop and produce cluster bombs and attack helicopters for Iraq
and other Third World countries.
The last case that we plan to look at today, demonstrates how
unfriendly foreign governments can use one of our closest trading
partners, Canada, to facilitate diversion of sensitive technology.
The question I think each of us will ask at the conclusion of
today's hearing is, how much of our vital technology is being smug-
gled across our borders every day without our knowledge? I don't
think anyone in the Federal Government knows or is set up to stop
it. I think you would also find that U.S. businesses and individuals
are players in export violations, either knowingly, or not.
While I am one of the strongest supporters of increasing our
level of international export trade, I also believe that U.S. business-
es should not participate in activities or policies contrary to our na-
tional security. The United States is known for its great salesmen,
business salesmen. We need to make sure that the goods we sell
are not later used against us by adversaries.
Frankly, I think you will find that the Department of Com-
merce's and the Department of State's systems of issuing licenses
as well as both Customs' and Commerce's enforcement efforts are
lacking.
I think that a little more investigation or probing into the licens-
ing process would provide suspicious results. Customs and Com-
merce have little means of detecting illegal export activities unless
it jumps out and smacks them in the face. As sure as I am sitting
here, there will be more Iraq's in the future, because the export
control system we now have in place cannot properly regulate the
export of sensitive and dangerous commodities.
I think it is clear that if we are going to prevent the use of U.S.
resources in development and production of Third World weapons
then we are going to have to take a serious look at the enforcement
of U.S. export controls. This subcommittee intends to do just that,
starting today.
Six different Federal agencies-the U.S. Customs Service, the De-
partments of Commerce, Defense, Treasury, Energy, and State-all
have critical responsibilities for developing and enforcing our
export programs. They need to answer some very hard questions.
We will continue with these hearings again on May 1, 1991. This is
then the first of two of the hearings, and the next one will be on
May 1. Now, that completes the Chair's opening statement.
PAGENO="0011"
7
Mr. Schuize, would you care to make a statement?
Mr. SCHULZE. Thank you, Mr. Chairman.
I am pleased to join you in opening our hearing on export con-
trols. One side effect of the Persian Gulf war is to focus the atten-
tion of the American public and press on the role of the United
States in supplying weapons technology to other countries. Unfor-
tunately, this is not a new story. About 50 years ago, the young
people of my generation went off to serve their country in Europe
and the Pacific and many of us remember photographs on the front
page of the paper, at that time, where huge boatloads of scrap
metal were being sold to the Japanese, and at the time, a very
prominent comment was that we sold the Japanese the scrap metal
from which they made the weapons to attack us at Pearl Harbor.
Today, our young men and women are returning after serving
their country in the Persian Gulf war. The added tragedy is that
we may have sold to Iraq some of the weapons parts and technolo-
gy which killed or injured our own soldiers. For example, U.S.
troops have been injured after the cease fire by live cluster bombs
in the field. These may have been Iraqi cluster bombs fused with
U.S. detonators. Also, 13 members of the National Guard from
Greensburg, Pa., were killed by the direct hit of a SCUD missile on
their barracks. U.S. technology and parts may have been used to
upgrade the SCUD missile used to attack Saudi Arabia and Israel.
Mr. Chairman, we never seem to learn from history-Pearl
Harbor, the Persian Gulf-who knows where the next location will
be where U.S. soldiers may be on the receiving end of U.S.-made
weapons?
My objective today is to learn how our export control program is
supposed to identify and control the export of weapons, parts and
technology. Case histories, which we will examine, demonstrate
both the success and the failings of the program. The success sto-
ries show that sometimes it may work fairly well, but quite frank-
ly, that's not good enough. The challenge is to plug the loopholes in
the current program without going overboard. That is, we must
prevent unstable and irresponsible countries from acquiring weap-
ons of mass destruction without putting our businesses in a com-
mercial straitjacket.
There are two competing goals. How can we preserve the dynam-
ic spirit of our open commercial system, but also strictly control
the export of certain parts and technology? It may not be easy, but
we must try and we must succeed. If we do not, then the next gen-
eration of American troops may pay the real price on the battle-
field in some God forsaken corner of the world.
Mr. Chairman, we can learn how to improve the effectiveness of
our export control program by studying the real life cases before us
today, and I look forward to hearing the testimony of our wit-
nesses. I might also add that perhaps, as Members of Congress, we
should be a little introspective and think of the role that we have
played in sending the message to the bureaucracy time after time
that we want you to weaken those controls and not make them
stronger.
When I say this, I think of the Toshiba case, when members of
this committee fought to weaken the sanctions against Toshiba
PAGENO="0012"
8
after it was proven that they transferred technology to enemy na-
tions.
I think of the vote last year on the Hyde amendment, which
would have stringently toughened the Export Control Act and
where the majority of the Members, even some here today, voted
against that effort to toughen that law. So, as we look, I would
hope that we would look for information and perhaps be a little in-
trospective and not just point the finger of blame, but see how we
can cure the situation so that we do not have a repeat in the
future.
I thank you, Mr. Chairman.
Chairman PICKLE. Thank you, Mr. Schulze.
Our first witness will be Henry Sokolski, the Deputy for Non-
Proliferation, Office of the Assistant Secretary of Defense for Inter-
national Security Affairs. I understand that you are accompanied
by Peter Sullivan, the Deputy Director, Defense Technology Securi-
ty Administration.
Do you gentlemen have a single statement or are you going to
make the statement, Mr. Sokolski?
Mr. S0K0LsKI. Yes.
Chairman PICKLE. You may proceed, sir.
STATEMENT OF HENRY D. SOKOLSKI, DEPUTY FOR NON-PROLIF-
ERATION POLICY, OFFICE OF THE ASSISTANT SECRETARY FOR
INTERNATIONAL SECURITY AFFAIRS, U.S. DEPARTMENT OF
DEFENSE, ACCOMPANIED BY PETER M. SULLIVAN, ASSISTANT
DIRECTOR, DEFENSE TECHNOLOGY SECURITY ADMINISTRA-
TION; AND RICHARD SPEIER, OFFICE OF NON-PROLIFERATION
POLICY
Mr. SOKOLSKI. Thank you, Mr. Chairman.
First, I want to thank the committee for holding this hearing
and taking an interest in a topic which is complex and usually not
very glamorous, and that is, enforcement and administration of our
export controls.
Effective administration and enforcement of our export controls
admittedly, for the most part, is not very flashy. Most of the time
it's not passing laws, or creating new multilateral regimes, but
without it none of these efforts can bear fruit.
Again, I commend this committee for taking the time and the
effort to focus so persistently on this issue. Before I begin address-
ing the specific issues posed in your letter of invitation, I first
would like to give you just a brief statement on the Department's
role in export administration, and export administration process.
I would first like to emphasize that DOD is not a licensing
agency. That responsibility lies with the Department of State for
munitions items, and with the Department of Commerce for dual-
use items. Of course, we, at DOD believe we are uniquely qualified
to gauge the military proliferation significance of a proposed trans-
fer. And, as I have stated numerous times before, we are happy to
review and become even happier when we review more from either
State or Commerce.
Defense, as part of its responsibilities under U.S. export controls,
provides assistance to intelligence and law enforcement agencies.
PAGENO="0013"
9
This ranges from providing expert analyses on identifying suspect
Government and technology to bringing their attention to possible
acquisition of control items.
The message I would like to get across today is that we can and
do have the tools to make our export controls, laws and agreements
effective. In fact, with increased concern about proliferation, in
particular, additional laws and regulations have recently come into
force, not only here, but I might add, also abroad. And control pri..
orities have begun to shift towards the security problems posed by
exports to destinations outside of the Soviet bloc.
In your invitation you posed a number of specific questions. I
would like to try and address them briefly by giving an overview of
the security threats posed by proliferation of advanced technologies
with a special focus on what the committee is concerned about,
which is dual-use technology.
To get a better grasp of these points, I will also be discussing
some of the specifics surrounding a particular development, the
Condor Missile. The focus on dual-use technology, highlighted re-
cently by news stories of Iraqi military schemes to procure comput-
ers for their missile development efforts, and other procurement
schemes to get other equipment is no accident.
Whereas, 30 or 40 years ago, our Nation's most advanced tech-
nologies-such as nuclear energy, missile and satellite technology,
computers, communication and navigation technologies-were prin-
cipally developed and advanced by our military and governmental
sectors, today, nearly the reverse is the case. The best computers,
some of the most innovative space launch systems, biochemical
technologies, nuclear reactors, communication and navigational
and satellite systems now come from the private sector and are
sold primarily as commercial goods.
Although our Government and military buy these goods, they
are by no means the largest or the most significant customers any
longer. Indeed, technologies once developed for military use are
now being made available for a vast variety of commercial applica-
tions.
As we trade in these technologies and broaden their beneficial
peaceful applications, there are unavoidable downside effects.
These technologies were originally devised, after all, to secure our
military super-power status and can be used by others for similar
purposes. Clearly, those who would wish us or a friend harm may
use these technologies against us if they acquire them. Given dual-
use developments, the vast oil wealth of many Middle East nations,
and the multitude of suppliers and transit points for military
useful technology-dual-use or otherwise-your committee has
rightly asked the question, can we cope?
In specific, can counterexport controls keep up? Are they rele-
vant?
The short answer that I want to give today, I believe, yes. If we
know what to focus on, dedicate sufficient assets on these objectives
and persist, specific security benefits clearly can be realized by
export controls and proper administration of such.
As you know, a number of militarily useful technologies and
pieces of equipment made their way into Iraqi hands. Some have
used this fact to argue that export controls do not work or that our
PAGENO="0014"
10
export controls are a failure. What I don't think we have focused
sufficiently on, however, are some instances which I hope will
become clear today in your detailed look at both the failures and
successes, where our export control efforts did pay off.
I think we need to focus on these to some extent, if only to figure
out what we can do better by building on what works. What I'd
like to do today then is to focus on one such success. I put that in
quotes, because I think we need to explain in what sense we mean
it to be a success. And I want also to spell out what went into
making it happen.
The specific case I have in mind is slowing the Condor Missile
program. This is a case in which my own office, the Office of Non-
Proliferation Policy, and the Defense Trade and Security Trade Ad-
ministration, which supports us on nonproliferation played a role,
along with Treasury, ACDA, State, Commerce and our intelligence
agencies.
The Condor II program was, at one time, a missile effort by Ar-
gentina, Egypt, and Iraq, supported by suppliers from advanced in-
dustrial nations in Europe. It originally was scheduled and on-line,
producing missile in Argentina, Egypt and Iraq, well before Desert
Storm. However, as you know, this particular missile was never
fielded in any of these nations, much less fired at us in the gulf.
Had the program been completed, our missile problems would
have been much, much more daunting and considerable than those
that we, in fact, faced in Desert Storm. I do not mean to belittle
what we did face, but only emphasize how much worse it would
* been if this program had been completed.
To understand why, we need only compare this Condor II pro-
gram with the Iraqi SCUD program. Roughly speaking, SCUDs,
even the upgraded ones, are basically World War II vintage tech-
nology. The Iraqis, in fact, had acquired several hundred from the
Soviets and went about modifying and upgrading these. The
Condor II, on the other hand, is similar to one of the most ad-
vanced missiles ever fielded, the Pershing II. It would have been
manufactured and been available possibly in much larger numbers
than the SCUDs within Iraq. Also the Condor II missile was intend-
ed to be much, much more accurate than existing SCUDs, and,
indeed, even more so than upgraded SCUDs. This, in turn, would
have made it orders of magnitude more lethal against point targets
than the SCUDs that were actually fired at our troops and allies.
Instead of missing their targets by kilometers, in most cases, the
Condor II~ miss distance was supposed to be measured in hundreds
of meters or less.
With such accuracies, and the numbers serial indigenous produc-
tion would have involved, Condors could have been used to perform
some of the strategic functions Iraq's air force and their SCUDs
could not: to knock out or stun our air operations from local air-
fields, paralyze our local logistical support from ports, and destroy
major air defense units and fixed command centers. These mis-
sions, moveover, could have been accomplished-and I emphasize
this point-.-without necessarily having to resort to chemical, biolog-
ical or nuclear warheads. Conventional munitions would have prob-
ably been sufficient if this program had been completed, to accom-
PAGENO="0015"
11
push the missions I have just listed, which would have spelled stra-
tegic failure for Desert Storm.
Finally, because the Condor was designed as a solid-fuel, multi-
stage missile we knew it would be more mobile-that is harder to
find-fly further and faster, and be much harder for our Patriot
radars to detect than any SCUD.
For these reasons, even before the U.S. formally announced its
adherence to the Missile Technology Control Regime in 1987, we
assigned a high priority to blocking the missile's development.
Using an enforcement infrastructure, that I will shortly describe,
we cracked down on U.S. exports that might have otherwise have
supported the Condor, urged other supplier nations to do likewise,
and discussed our concerns with the customer Governments of Ar-
gentina and Egypt.
Several key rules were followed in this effort. First, we blocked
exports even though peaceful civilian applications were claimed. In
fact, the Condor was alleged by its developers to be a peaceful sci-
entific sounding rocket. Despite this, the United States joined other
supplier nations in denying exports to the Condor program and
continued to do so to similar programs whether overtly military or
allegedly for scientific purposes, as sounding rockets or space-
launch vehicles.
Second, we focused our efforts on blocking as many critical tech-
nologies as we could. Example: guidance technology was perhaps
the most critical single determinant of whether a missile will be
militarily effective. It was a key focus in the interdiction of Condor
and it is a key constraint still with regard to blocking development
of other missiles today. Thus, for example, we have just begun in-
tense discussions with our allies, in the MTCR, to add items to the
control list, such as global positioning satellite navigation receivers
that might be useful for ballistic missile applications.
We also targeted production-related items for the Condor pro-
gram trying to keep as much of this equipment from the Condor
and other similar production projects as possible. Numbers matter.
If they get large numbers of accurate missiles anywhere, the mili-
tary operational consequences are much more profound.
Of course, we tried to block as many other exports to the Condor
as we could. This point I want to emphasize. We understood, how-
ever, that we might not succeed in blocking all of them, indeed, we
didn't. And this brings us to the third rule, which is that our aim
was, and still is, to block enough technology to make a difference.
Successful development in the case of ballistic missiles, like the
Pershing, involves the integration or harmonizing of some 250,000
parts and it is a very expensive proposition. I think, to some
extent, this is luckily the case not just for ballistic missiles, but a
good number of other significant military systems.
We consciously aim then to prevent enough of the key items
from being shipped long enough until either the targeted program's
financial or political support dried up, or until we, at least, had
some effective means to cope with the threat once it arrived. I
think by this criterion-and I emphasize this is a little different
criterion than we normally assign to ourselves-the efforts con-
cerning Condor were not only worthwhile, but had security payoffs
PAGENO="0016"
12
that were significant. Even though some components slipped
through, enough were denied or delayed to impact the program.
Additionally, Argentine and the Egyptian Governments actually
decided to help slow the program.
It was at this point that Iraq started to try and take whatever
they had gotten in the way of technology and apply it toward their
SCUDs. Consen, the multinational organization behind the missiles
development, continues to have difficulty securing all the technolo-
gy needed to complete the program. Meanwhile the United States,
Israel, and others are working on followons to the Patriot. Our
hope is that this work will be done before Condor-like missiles are
deployed in the future so that we have defenses that might work.
What produced our successes, as I described them, in slowing the
Condor and other similar problem programs? Clearly, the focus of
this committee is appropriate since it was key to the success.
Enforcement. Enforcement consisting of several key elements.
The first of these elements is intelligence. I am speaking not just of
intelligence collecting here-the amassing of raw reports, but of
analysis-assessing and organizing this information. In addition to
intelligence, however, a second element is needed-action.
Domestically, in the case of the Condor, we had to review our
own exports, matching intelligence about the Condor program with
technical assessments of the significance and alternative uses of ex-
ports. And we had to have a diplomatic understanding of the meas-
ures needed to support our own export restraint with complemen-
tary from other suppliers.
Of course, no domestic enforcement program can stop technology
transfers unless there is a corresponding international enforcement
effort. This brings me to the third element-the need for interna-
tional and diplomatic support. The establishment of multilateral
arrangements such as COCOM, the MTCR, the Zangger Committee,
Nuclear Suppliers Group, the Australia Group set the general
framework for international restraint. But when it comes to specif-
ics, much more needs to be done. Our diplomats, Customs officials,
and intelligence specialists, in the Condor case, for example, work
with their counterparts in the MTCR partner governments to
ensure that U.S. denials of exports were supported elsewhere, that
is, not undercut, and to identify Condor procurement overseas that
needed to be stopped.
As you can see, from what I've said, enforcement and administra-
tion of export controls is highly manpower intensive. In the Condor
case, we needed the involvement literally of hundreds of Govern-
ment officials around the world, and a high enough priority to
focus these officials on the effort. Again, I would like to think this
effort was warranted and I believe it was.
In my written testimony, I tried to address your questions on
COCOM liberalization, but for the sake of short time, I will pass
over that and allow that to be treated in questions and answers.
I would, however, like to do one thing in closing. And that is to
recognize three people in Defense-if there were other agencies
here, I would perhaps add to the list much more-whom I think
had the most to do, not only with the Condor, but with the enforce-
ment of export controls in general. You will be hearing from one of
them today, Mr. Steve Bryen, and in addition, Mr. Mike Maloof of
PAGENO="0017"
13
DTSA who is here and Dr. Richard Speier who works in my office.
Mr. Maloof works in DTSA. This is my counterpart, Peter Sullivan,
and Dr. Speier have been on this case for a good, long period of
time. Without their efforts and the efforts of people like them I
would not have been able to give the testimony I gave today.
Thank you. That concludes my testimony and both of us will be
able to, I hope, answer your questions.
[The prepared statement follows:]
PAGENO="0018"
14
STATEMENT OF MR. HENRY D. SOKOLSKI
DEPUTY FOR NON-PROLIFERATION POLICY
OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE
INTERNATIONAL SECURITY AFFAIRS
DEPARTMENT OF DEFENSE
Mr. Chairman:
I wish to thank the Committee for this opportunity to testify on
what we all agree is a very important topic.
Before addressing the specific issues posed in your letter
of invitation, I would first like to present a brief statement on
the Department of Defense's role in the export control process.
My office, the Office of Non-Proliferation Policy, is concerned
with threats posed by nuclear, chemical, and biological weapons
and their delivery systems. In addition to supporting research in
non-proliferation issues we articulate policy options to deal
with these issues. Additionally, we work closely with all concerned
DoD components in formulating DoD positions on the cases that are
referred to us for review by either the Departments of State or
Commerce. The Defense Technology Security Administration (DTSA)
reviews all other license applications referred to DoD for technology
security review. DTSA also provides support to my office.
I would like to emphasize, however, that DOD 18 not a licensing
agency. That responsibility lies with the Department of State
for munitions items and with the Department of Commerce for
"dual-use" items. We do believe, however, that DoD is uniquely
qualified to gauge the military or proliferation significance of
a proposed sale or transfer, and we are ready and eager to advise
either State or Commerce when they seek our advice.
DoD's role in the export control process varies considerably
given the nature of the export in question, as defined by the Arms
Export Control Act, the Export Administration Act, the Nuclear Non-
prc)liferation Act, and various practices and procedures established
by interagency agreement or executive directive.
Under the Arms Export Control Act, Defense reviews applications
for the export of defense articles and services. The Department
of State sends these munitions applications to DTSA for DoD review.
DTSA, in turn, automatically sends to my office all of their
missile and space technology related cases. My staff is responsible
for analyzing at least 1,500 of these cases per year, not only
for DoD, but also for the interagency proliferation review groups.
DoD's role in the area of reviewing dual-use technologies
under the Export Administration Act is somewhat different from its
handling of munitions cases.
DoD reviews most dual-use export applications for exports to
the Soviet Union and other so-called controlled countries. DoD
also reviews certain categories of dual-use exports to other
nations to determine the risk of diversion to the Soviet Union or
other proscribed countries.
Defense, as part of its responsibilities under U.S. export
controls, provides assistance to intelligence and law enforcement
agencies. This ranges from providing expert analyses on identifying
suspect government and technology to bringing to their attention
possible illegal acquisition of controlled items. Effective
administration and enforcement of export controls is not very flashy:
It is not passing laws or creating new multilateral regimes, but
without it, none of these other efforts can bear fruit.
PAGENO="0019"
15
I believe we do have the tools to make our export control
laws and agreements effective. In fact, with the increased concern
about proliferation, additional laws and regulations have recently
come into force both here and abroad; and control priorities have
begun to shift toward the security problems posed by exports to
destinations outside the Soviet-bloc. As I will explain shortly,
effective export controls for the Middle East and other non-Soviet
destinations is like our efforts to stem the flow of advanced
technology to the Soviets, a tedious and manpower intensive effort.
In your invitation, you posed a number of specific questions.
I would like to address them by briefly giving an overview of the
security threats posed by the proliferation of advanced technologies
with a special focus on dual-use technology. To get a bettei~ grasp
of these points, I will also be discussing some of the specifics
surrounding a particular development, the Condor missile program.
I should say from the outset that what constitutes technologies
of silitary concern is becoming increasingly diffuse and ambiguous.
For example, where non-proliferation once focused almost exclusively
on controlling the spread of specially designed nuclear equipment
and materials, now it encospases both munitions and dual-use controls
over nuclear, chemical, biological (COW), and mi~Tle technologies.
We not only are controlling the transfer of major components of
nuclear, CBW and missile systems, we also are controlling the
technology (know-how) and dual-use items that sight help produce
such systems or components.
Our concerns, however, hardly stop with the technologies
associated with weapons of sass destruction or the means for their
delivery. We also control for munitions items and a vast number of
dual-use items destined to the Soviet-bloc and other locations.
The focus on dual-use technology, highlighted recently by
news stories of Iraqi military schemes to procure computers for
their missile development efforts is no accident. Whereas 30 or
40 years ago our nation's most advanced technologies -- nuclear
energy, missile and satellite technology, computers, communications
and navigation -- were principally developed and advanced by our
military and governmental sectors, today nearly the reverse is
the case. The best computers, some of the most innovative space
launch systems, biochemical technologies, nuclear reactors,
communication, navigational and satellite systems now come from
private industry and are sold primarily as commercial goods.
Although our government and silitary buy these goods, they are by
no scans the largest or sost significant customers. Indeed,
technologies once developed for the military are now being made
available for a vast variety of civilian applications.
The benefits of this transformation are clear: Military
investments made some time ago are now enriching our entire economy
and our trading partners. Our long distance phone bills are cheaper,
our electrical power supply base no longer need depend on fossil
fuels, our planes and ships fly more safely and certain of their
course, and affordable, powerful computers have helped us in every
aspect of life.
PAGENO="0020"
16
As we trade in these technologies and broaden their beneficial
applications, though, there is an unavoidable downside. These
technologies were originally devised to secure our military
superpower status and can he used by others for sisilar purposes.
Clearly, those who would wish us or our friends harm may use
these technologies against us.
Given dual-use developments, the vast oil wealth of many Middle
East nations, and the multitude of suppliers and transit points
for militarily useful technology, your committee has rightly asked
the question, can we cope? In specific, can our export controls
keep up? Are they relevant?
The short answer, I believe, is yes.. If we know what to
focus our control efforts on, dedicate sufficient assets on these
objectives, and persist, specific security benefits can be realized.
As you know, a number of militarily useful technologies and
pieces of equipment made their way into Iraqi hands. Some have
used this fact to argue that export controls do not work or that
our export controls were a failure. What these people have not
focused on sufficiently, however, are the clear instances where our
export control efforts did pay off, and how we can do better by
building on what may have worked.
What I would like to do today, then, is focus on one such
"success," explain in what sense it was a success, and spell out
what went into making it happen. The specific case I have in
mind -- slowing the Condor II missile program -- is one in which my
own office, the Office of Non-Proliferation Policy, and the Defense
Technology Security Administration, which supports us on non-
proliferation, played a role along with Treasury, ACDA, State,
Commerce and our intelligence agencies.
The Condor II program was at one time an effort at missile
development by Argentina, Egypt, and Iraq, supported by suppliers
from advanced industrialized nations. It originally was scheduled
to be completed and on-line producing missiles in Argentina, Egypt
and Iraq well before Desert Storm. However, the missile was never
fielded in any of these nations, much less fired at us in the Gulf.
Had this program been completed, our missile problems would
have much more daunting and considerable than those we faced in
Desert Storm. To understand why, we need only compare it with
Iraqi SCUDs. Roughly speaking, SCUDs are World War II vintage
technology; the Iraqis had acquired several hundred from the Soviets
and went about modifying and upgrading these. The Condor II, on
the other hand, is similar in many ways to one of the most advanced
missiles ever fielded, the Pershing II. It would have been
manufactured and been available possibly in much larger numbers
within Iraq. Also, the Condor II missile was intended to be much
more accurate than existing SCUDs. This, in turn, would have made
it orders of magnitude more lethal against point targets than the
SCUDs that were actually fired at our troops and allies. Instead
of missing their targets by kilometers, the Condor II miss distance
was supposed to be measured in hundreds of meters or less.
PAGENO="0021"
17
With such accuracies and the numbers serial indigenous
production would have involved, Condors could have been used to
perform some of the strategic functions Iraq's air force and the
SCUDs could not: to knock out or stun our air operations from
local air fields, paralyze our logistical support from local
ports, and destroy our major air defense units and fixed command
centers. These missions, moreover, could have been accomplished
without necessarily having to resort to chemical, biological or
nuclear warheads. Conventional munitions would have been sufficient.
Finally, because the Condor was designed as a solid fueled,
multistaged missile, we knew It would be: more mobile (harder to
find); capable of longer ranges; faster; and be much harder for our
Patriot radars to detect than any SCUD.
For these reasons, even before the U.S. formally announced
its adherence to the Missile Technology Control Regime (MTCR) in
1987, we assigned an extraordinarily high priority to blocking the
missile's development. Using an enforcement infrastructure that
I will shortly describe, we cracked down on U.S. exports that
might have supported the Condor, urged other supplier nations to
do likewise, and discussed our concerns with the customer governments
of Argentina and Egypt.
Several key rules were followed in this effort. First, we
blocked exports even though "peaceful," civilian applications were
claimed. In fact, the Condor was alleged by its developers to
be a peaceful "scientific" rocket. Despite this, the U.S. joined
with other supplier nations in denying exports to the Condor program
and continue to do so to similar programs -- whether overtly military
or allegedly for such "scientific" purposes as sounding rockets
and space launch vehicles (SLVs).
Second, we focused our efforts on blocking critical technologies.
Guidance and control technology is perhaps the most critical single
determinant of whether a missile will be militarily effective. This
was a key focus in interdiction of Condor and is a key concern with
regard to blocking development of other missiles today. Thus,
recently, we began intense discussions with other MTCR partners to
add items that we will all control -- such as global positioning
satellite navigation receivers useful for ballistic missile
applications, i.e., ones that can operate at high altitudes and at
very high speeds.
Another key technology with Condor and other advanced missiles
is stage separation technology. The reason why is simple: With
staging technology, Third World missiles can be made to go further,
faster, and allow the final armed stage to be such smaller. All
of these things make defending against these missiles such more
difficult. We are trying to make sure that other advanced missile
programs now do not get this technology. We also targeted production-
related items for the program, trying to keep as much of this equipment
from the Condor and other similar production projects as possible,
even though such of this equipment might have civil applications.
PAGENO="0022"
18
5
Of course, we tried to block as many other exports to the
Condor as we could. We understood, though, that we might not
succeed in blocking all of them. This brings us to the third rule,
which is that our aim was and is to block enough technology to
make a difference. Successful development of a ballistic missile
like the Pershing II involves the integration or harmonizing of
some quarter of a million parts, and it is a very expensive
proposition. Luckily, this1ithe case, not just for ballistic
missiles, but for most other significant military systems.
We consciously aimed, then, to prevent enough of the key
items from being shipped long enough until either the target
program's financing or political support dried up or until we had
an effective military means to cope with the threat once it arrived.
By this criterion, I think our efforts concerning the Condor were
worthwhile. Even though some components slipped through, enough
were denied or delayed to impact the program. Additionally, the
Argentine and Egyptian governments actually decided to help slow
the program. Consen, the multinational organization behind the
missile's development, continues to have difficulty securing all
of the technology needed to complete the program. Meanwhile, the
U.S., Israel, and others are working on follow-ons to the Patriot.
Our hope is that this work will be done before any Condor-like
missiles are deployed.
What produced our "successes" in slowing the Condor and other
similar problem programs? Enforcement, which, in turn, consists
of several key elements.
The first of these is intelligence. I am speaking not just
of intelligence collection -- the amassing of raw reports -- but
of analysis -- assessing and organizing this information. In the
case of the Condor, for example, we had to stay on top of an
extremely complex transnational procurement network, which at
various times included organizations based here in the U.S., a
multinational procurement organization based in Europe and inter-
national financing. Keeping tabs on this international network
required a multilateral intelligence effort complemented by inter-
agency cooperation in the United States.
We fully expect the requirement for this kind of intelligence
effort to grow, not diminish, in the future, as those associated
with Condor and other troublesome programs realize that simple
ruses -- like the claim that a program is "peaceful" -- will not
open the doors to the technology that they seek. Instead, more
complicated clandestine purchasing networks that can obfuscate
the nature, destination, and end-use of their purchases are expected.
Intelligence, however, is not enough. Enforcement's second
element -- action -- is essential. Domestically, in the case of
Condor, we had to review our own exports -- matching intelligence
about the Condor program with technical assessments of the significance
and alternative uses of exports and a diplomatic understanding of
the measures needed to support our own export restraint with
complementary restraint from other suppliers. This has resulted
in the formation of interagency groups -- in the case of missile
technology, the Missile Technology Export Control (MTEC) and the
Missile Trade Analysis Groups (MTAG) -- that meet weekly to review
approximately 1,500 export cases annually.
PAGENO="0023"
19
Occasionally, our domestic actions must go beyond the channels
of export application review to deal with exports conducted illegally.
You are familiar with the case of Mr. Helmy, now serving a prison
sentence for illegal activities in support of the Condor program.
Of course, no domestic enforcement program can stop technology
transfers unless there is corresponding international enforcement.
This brings us to enforcement's third element: The need for interna-
tional and diplomatic support. The establishment of the multilateral
arrangements such as CoCos, the MTCR, the Zangger Committee and
Nuclear Suppliers Groups, and the Australia Group set the general
framework for international restraint, but -- when it comes to
specifics -- much more needs to be done. Our diplomats, customs
officials, and intelligence specialists in the Condor case, *for
example, worked with their counterparts in MTCR partner governments
to ensure that U.S. denials of exports were supported elsewhere and
to identify Condor procurement overseas that needed to be stopped.
Sometimes, the identification of a specific export was enough
to catalyze action by foreign governments. Sometimes, we needed
foreign enforcement action to unravel complex procurement activities
and to prosecute criminal activity overseas. Sometimes, we needed
to go beyond MTCR partners to block the Consen network.
As you can see enforcement and administration of export controls
is highly manpower intensive. In the Condor case we needed the
involvement of hundreds of government officials around the world --
and a high enough priority to focus these officials on the effort.
I think you would agree, however, that our effort was worthwhile.
Finally, you have asked about the effect of COCOM liberalization
on non-proliferation. Here the Adminstration has focused on two
main concerns: first, that items of proliferation concern that may
be dropped from COCOM be effectively controlled either nationally
or in some appropriate multinational fora; and, second, that countries
that benefit from such COCOM revisions, principally Eastern Europe,
control the reexport of these technologies to destinations of
proliferation concern.
For almost one year, the Administration have been working these
matters to assure that our nonproliferation interests are not
adversely affected. We have received assurances from our MTCR
partners that any missile-related items that fall off the COCOM
list will nonetheless be controlled by each MTCR member nation for
non-proliferation purposes. In the nuclear area, we have initiated
an effort with other nuclear supplier countries to control nuclear,
dual-use items multilaterally, including any items that might come
under the COCOM streamlining.
The problem of reexport controls has become a more important
issue and we have begun urging other governments to adopt reexport
and export control standards as strict as our own. In the case of
Eastern Europe, we have begun working directly with the governments
to help them strengthen their export controls. These efforts are
now begining to pay off; some exports are being blocked by these
nations that would have otherwise gone to trouble spots in the
Middle East. More needs to be done.
PAGENO="0024"
20
As for controls on the export of conventional arms and
related silitary and dual use manufacturing technology, the
Adsinstration is now reviewing what additional steps might be
taken.
Before I conclude, Mr. Chairman, I would like to recognize
three Defense people who had the most to do not only with the
Condor, but with the enforcement of export controls in general:
Mr. Steven Bryen, Mr. Michael Maloof at DTSA, and Dr. Richard
Speier. It's the efforts of people like these that make the
difference.
I would be happy to answer any specific questions the
committee say have. This concludes my statement.
PAGENO="0025"
21
Chairman PICKLE. Thank you, Mr. Sokoiski. We thank you for
your positive statement. And your observation and analysis of the
success that you have had with the Condor program.
I observed that you have claimed a great victory in the Condor
program, more claims of victory this morning than you were able
to import to our committee this past week. But your statement, of
course, will be a part of our record and we are glad to have it.
Are you saying to me that in the Doctor Helmy case that you
knew all that was going on in every instance of the Helmy case?
Mr. SOKOLSKI. Absolutely not. Intelligence and enforcement is, by
its very nature, very imperfect, even when we focus. I think what
I'm trying to get across though is that even though things are im-
perfect that if they are focused on, they can produce results. By no
means is the Condor story over. We still are trying to be vigilant
on that case, and in particular, given the military significance of
the program. The point is that-
Chairman PICKLE. But I have a feeling from your testimony that
you are saying that you have known from the very beginning every
step that had been taken in the Condor case, and therefore, it is a
big success and you want to talk about that and not the other
shortcomings?
Mr. S0KOLSKI. No. I have spoken with your staff and asked
whether or not it would make sense to focus on one case, and they
urged me to do so. I thought I would focus on this one, since here,
at least, we have some idea of what the elements are of trying to
make things work and we need to do more of that.
Chairman PICKLE. Well, Mr. Sokolski, I am going to ask other
members if they have any questions at this point, because I also
want to get to the next witness. And we have several panels to
hear from today.
We have your statement and it is a good statement and we are
glad to have it, but I would ask if any other members would want
to ask any particular questions of this witness?
Mr. RANGEL. Thank you, Mr. Chairman.
Mr. Secretary, in your statement, you indicate that you are not a
licensing agency and that when you are concerned with dual-use
items that you are ready and eager to advise either State or Com-
merce.
With that backdrop, has it been your experience that areas that
you would like to comment on, as relates to national security, could
possibly be in conflict with the State Department's opinion?
Mr. S0K0LsKI. Well, as an administration official we all work to-
gether, sir. I think that one of the things that has changed over the
last 2 years, in particular, with the focus on proliferation, is that
the amount of sharing of cases, in particular from Commerce, has
increased dramatically and I think what has happened is that the
character of the problem and the complexity and the need to have
more people working together has become clearer and clearer.
Mr. RANGEL. Let me try and clear up my question.
Has it ever reached a point where, in your opinion, things were
being shipped in violation or threat, rather, to our national securi-
ty and while you were eager to advise the State Department, that
the State Department had taken a position that politically or for-
eign policywise that they would rather not have your advice?
PAGENO="0026"
22
Mr. S0KOLsKI. Sir, I don't believe so.
Mr. RANGEL. OK.
And that would certainly apply, if you could say that generally,
and your belief, that is all we want, as relates to some of the cases
that we will be hearing more information on today. To your knowl-
edge there was no conflict in the direction that DOD wanted to go
as opposed to the direction or lack of it?
Mr. S0K0LSKI. By the very nature of having a variety of agencies
with very different outlooks, there is always-how shall I put it-
tension, discussion, that is the reason we have meetings. However,
in the 20 months that I have been in office, I have not had the
problem that you are asking about.
Mr. RANGEL. OK, because I can say, without fear of contradic-
tion, that as it relates to drug policy where we have an offending
nation, that is violating every international law, that the State De-
partment would say that they are cooperating. And when you ask,
why did you say that, they say, well that is the diplomatic thing to
say, but you are right, they are a bunch of bums and they are not
really doing anything. I just wondered as it related to national se-
curity, whether those with the striped pants took the same attitude
as they would not want to offend our friends and allies, even
though our friends and allies were raping and violating our nation-
al security?
Mr. SoKoLsKI. Well, luckily I suspect that drug enforcement is
not something I can speak to, perhaps.
Mr. RANGEL. No one in the State Department can, so that's not a
problem. And DOD is doing a good job in that area, but you don't
have that type of problem, as it relates to national security?
Mr. SoKoLsKI. I have not. We have disputes there that are han-
dled in-house and they do listen to us.
Mr. RANGEL. Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Schuize?
Mr. SCHULZE. Thank you, Mr. Chairman.
Thank you, Mr. Sokolski. Mr. Sokolski, on page 4 of your testi-
mony, you say that in 1987 we assigned an extraordinarily high
priority to blocking Condor II development. How did you become
aware of Condor II and the potential for a technology transfer from
the United States?
Mr. SoKoLsKI. If I may, I would like to be able to have the person
most involved in this, in my office, be able to speak to this question
if that is OK?
Again, I am a newcomer and I have more competent staff work-
ing for me, thank God.
This is Doctor Speier, an assistant for nonproliferation policy in
my office.
Chairman PICKLE. Will you please identify yourself, sir?
Mr. SPEIER. Yes, sir, I am Richard Speier, of the Office of Non-
Proliferation Policy in the Department of Defense. My last name is
spelled S-P-E-I-E-R.
Mr. SCHULZE. Dr. Speier, perhaps you could answer the question.
How did you first become aware of the Condor II program and the
potential for technology transfer?
Mr. SPEIER. Within the limits of open session, Congressman, let
me describe in general how we become aware of what is happening
PAGENO="0027"
23
in the world. We, of course, have our own intelligence assets. In ad-
dition, we have diplomatic discussions with other governments who
often become aware of matters independently from the Govern-
ment of the United States.
In addition, we review export cases that often tip us off well
ahead of time of the interests of governments in various aerospace
developments. Within these broad categories we learned fairly
early on about the Condor program.
Mr. SCHULZE. I am trying to word this so that I can get an
answer in an open hearing. Can you tell me whether it was from
another foreign national or from one of the intelligence agencies or
just where the information came from?
Mr. SPEIER. We could go into that, Congressman, in closed ses-
sion, or for the record, it is protected testimony. I would rather not
go into the precise-
Mr. SCHULZE. In other words, from one of the countries involved,
or would you rather not answer that, as well?
Mr. SPEIER. It had best stand the way we have described it.
There are broad sources of information available.
Mr. SCHULZE. Right. Mr. Sokolski, on page 5 of your statement
you say, Argentina and Egyptian Governments actually decided to
help slow the program. Can you go into more detail? That's news to
me and I would like to have more detail on that if I may.
Mr. S0K0LsKI. Well, I think, in fact, in the case of the Argentines
it is public that the President has renounced support for this pro-
gram. And I believe that it is also, as you will find later in discuss-
ing this case with others, clear that the Egyptian Government cut
off its support, direct support for this program.
Mr. SCHULZE. Can you tell me when? Was that after we brought
it to light? After we found some of this smuggling going on?
Mr. S0K0L5KI. Yes, yes.
Mr. SCHULZE. It was after it was exposed, not before it was ex-
posed. So as a consequence of embarrassment, because their agents
were in this country smuggling goods through the diplomatic
pouches and so forth.
Mr. SoKoLsKI. The Helmy case was very important.
Mr. SCHULZE. So that it was sort of the catalyst?
Mr. S0K0L5KI. It was certainly in the Egyptian case, yes, and
more-there is no question that-
Mr. SCHULZE. The Egyptians said that they were going to slow it
down or have they actually slowed down?
Mr. S0K0LsKI. I really feel that I am out of my element precisely,
but clearly it was after.
Mr. SCHULZE. If you don't know, you don't have to answer.
Mr. SoKoLsKI. Yes.
Mr. SCHULZE. But in your statement, you said that they did coop-
erate and I am trying to figure out in what way?
Mr. SoKoLsKI. Their support for that program was cut off after
revelations and consultations.
Mr. SCHULZE. After the Helmy case came to fruition, the Egyp-
tians backed out of the Condor II and have had nothing further to
do with it?
Mr. S0K0LsKI. I would not try to make categorical statements but
the support, the overt support for that program died.
PAGENO="0028"
24
Mr. SCHULZE. Your agency is responsible for tracking the threat
to U.S. security from illegal technology acquisition, is that correct?
Mr. S0K0LsKI. My office focuses on what we call technologies of
proliferation concern and the DTSA focuses on other technologies
of military significance. We focus, for example, on weapons of mass
destruction and means of their delivery and we are also focusing
on space technologies now.
Mr. SCHULZE. In your opinion, what end users pose the major
threat for missile technology, for example?
Mr. S0K0LsKI. Well, I think one of the great concerns that I have
now and it is shared throughout the administration is that there
are uses of missile technology for-as I explained in the testimo-
ny-so-called scientific purposes, which produce ICBM-capable mis-
siles that frankly are not economically viable, in my opinion, for
any other purpose but military application.
Now, I understand that others have different views than perhaps
that jaundiced opinion that I have, but that is a major concern.
Overt military programs have a way of flagging themselves a lot
more loudly. The difficulty with sounding rockets, space-launched
vehicles and the like are tougher, because in a sense they are out
in the open.
Mr. SCHULZE. Well, can you be more specific in what end users
might pose a threat today?
Mr. SoKoLsIu. I think, clearly, the Middle East and the Koreas
are key concerned areas right now. And the tragedy about this
field is that the areas can change. The Middle East, unfortunately
persists as the number one problem area.
Mr. SCHULZE. How about for biological or chemical warfare tech-
nology?
Mr. SoKotsKI. Definitely the same would apply.
Mr. SCHULZE. The Middle East, as well?
Mr. S0K0ISKI. The Middle East.
Mr. SCHULZE. How about nuclear technology?
Mr. S0K0LsKI. I would have to say, again, that the Koreas and
the Middle East are very, very high on our concerned list and have
been for some time, and I am afraid to say, unfortunately probably
will for some time to come.
Mr. SCHULZE. How about conventional weaponry technology?
Mr. S0K0L5KI. Well, I would turn to DTSA with regard to that
insofar as that is what they cover. But clearly you know the admin-
istration is concerned about the Middle East, as well.
Mr. SCHULZE. That's the major area?
Mr. S0K0LsKI. Well, and a concern of Congress, judging from the
intercourse we have.
Mr. SCHULZE. Well, I have to agree with you, the concern now. I
didn't see this concern 6 months ago, 9 months ago, a couple of
years ago. The thrust in Congress, in my opinion, has been in the
other direction. The thrust in Congress and the politically popular
position has been, "let's loosen up and let's sell everything to any-
body." That has caused me a great deal of concern, over the years,
and I am happy now to see some balance in this.
Mr. SOKOLSKI. Well, I have a little story to tell. I used to work up
here. I worked for-when I first started-for a little known Senator
from Indiana who is now Vice President. And I can remember
PAGENO="0029"
25
having a letter with, I believe Senator Proxmire's signature, a dis-
tinguished Senator from Wisconsin, saying that we should perhaps
put Iraq on the terrorist list. This was, I think, in 1985.
And then Senator Quayle signed it and I remember that was it.
We could not get any other signatures. So it's a concern; however, I
must say that the people at DTSA and the people working in the
various agencies on proliferation issues have been very clearly con-
cerned about these issues for a very long time.
Mr. SCHULZE. But how much influence have you had throughout
the administration? The word that I get is really not much. That
you have had a great deal of concern and that concern has been
genuine, but you have not always been able to persuade the rest of
those involved to your point of view. Is that a correct characteriza-
tion?
Mr. SoKoLsKI. I think that that is a little unfair and let me ex-
plain why. We now have what is called a PCC, a Policy Coordina-
tion Committee. They called them SIGs. Every administration
changes the names of these interagency groups. We did not have
that before. And we now have an office at the DAS level, the
Deputy Assistant Secretary level, that is my office, focused on the
security dimension of proliferation and that was not the case
before.
I think that it is clearly one of the things that Bush has commit-
ted himself, as one of the seven key areas when he campaigned for
office. I think that is different. I don't remember that being the
case before. I think that, yes, I would probably take some exception
to that.
Mr. SCHULZE. OK. In your opinion, is Iraq still a threat? I mean
when you read off the list of threats in the Middle East, does that
include Iraq? What is your opinion?
Mr. S0K0LsKI. I paraphrase my superior's comments and his su-
perior's comments. As long as Saddam Hussein is there we have to
be extremely vigilant.
Mr. SCHULZE. How do you feel about the adequacy of existing
control programs to control weapon proliferation in the third world
and the Middle East right now?
Mr. S0K0LsKI. I think the amount of authority we have is tre-
mendous. And partly, and I will be candid, as a result of both our
commitment to nonproliferation and the attention, because of the
news, we now have authority we did not have before which is good.
The President spelled that out, and Congress legislated.
I think assets are being moved and we are moving in the right
direction.
Mr. SCHULZE. What improvements need to be made?
Mr. S0K0LsKI. If I dare say so-I think one of the key improve-
ments is happening right here in this room. Part of the problem
has not only been that there have been more important things on
the news, but that we have only now gotten oversight in a very se-
rious fashion in the way that this committee is doing it. I keep tell-
ing people oversight has a tremendous impact on getting our atten-
tion and honing our skills.
Mr. SCHULZE. Are export control civil penalties adequate?
Mr. S0K0LsKI. I believe I would like DTSA to answer that since
they are very heavily involved in the enforcement area, but my
PAGENO="0030"
26
belief is that in the authorities that have been given under EPCI
and under the Congress' missile technology control efforts we have
new potent tools that we did not have before.
Mr. SCHULZE. So you feel you are sort of on the verge of a new
era?
Mr. SoKor~sKI. Let's just say that I am a very busy boy. And
when I first started I was not as busy.
Mr. SCHULZE. I would be happy to have the answer, whether Mr.
Sullivan feels that the civil penalties are sufficient and whether
they comprise an adequate enforcement tool?
Mr. SULLIVAN. The general civil penalties under the EAA are-
well, the EAA has lapsed but at least the legislation before it
lapsed, provided rather modest civil penalties. That is an area
where I think some consideration could be given to upgrading
them, at least indexing them to inflation and commensurate with
some of the significant risks involved.
Mr. SCHULZE. Do you have any further suggestions along that
line where they might be? I would be happy to have those in writ-
ing when you have time. If you want to sit down and send those to
us, I would appreciate having it.
In your opinion, either of you, how effective are Commerce
denial orders?
Mr. S0K0LsKI. I think again I would defer to DTSA for a reason.
The number of dual-use cases we see concerning nuclear and mis-
sile issues is a function of what Commerce chooses to give either
the Department of Energy or directly to the interagency groups. In
the case of missiles we have, I think in the last year had something
less than 100 cases referred so that our load is not very high, our
experiential load. Before, I might add, we had many, many fewer,
virtually zero. We're hoping that that number will increase even
more. But DTSA has much more detailed experience in their field.
Mr. SCHULZE. Mr. Sullivan.
Mr. SULLIVAN. I would simply add that denial orders are merely
one important tool. They have to be considered in the context of
criminal sanctions and civil penalties and the like, as well as multi-
lateral enforcement efforts.
Mr. SCHULZE. Mr. Sullivan, reading between the lines of what
you are saying, I am getting the impression that they are not very
effective.
Mr. SULLIVAN. I would not say that. What I was pointing out is
that you need an array of tools for enforcement and compliance
with the law. They range everything from exporter cooperation to
prosecutions. The export control system like the tax system re-
quires voluntary cooperation as well as enforcement.
Mr. SCHULZE. But denial orders are an essential part of that arse-
nal?
Mr. SULLIVAN. It is an essential part of the arsenal and it is an
important part of the arsenal. But it takes a lot more than simply
denial orders. It takes an effective investigation and enforcement,
criminal prosecutions, the imposition of civil penalties when appro-
priate but also a concerted multilateral effort with multilateral
partners, as well, to ensure that they enforce their national laws.
Mr. SCHULZE. Thank you.
Thank you, Mr. Chairman.
PAGENO="0031"
27
Chairman PICKLE. Thank you, Mr. Schuize.
Now, Mr. Sokoiski, I want to move on to the next panel but I
want to ask you a question separate and apart from Mr. Schuize's
immediate line of questioning.
Under the terms of the United States' cease-fire agreement, Iraq
must disclose by today, April 18, the location of all of its chemical
stockpiles, nuclear materials, and ballistic missiles which are to be
destroyed several months later.
Has Iraq complied with this agreement?
Mr. S0KOLSKI. You know, we were talking about that last night.
And I guess I don't know the answer. We were waiting to get the
definitive answer.
Chairman PICKLE. Does anybody at the table know that?
[No response.]
Chairman PICKLE. You have no idea whether they have complied
or not?
Mr. SOKOLSKI. It was my understanding listening to this morn-
ing's news that they had, but I really need to get back to you on
that. The State Department, I think is the appropriate place that
would get it first. It is like our cases from Commerce, we have to
get them from another agency.
Chairman PICKLE. One other question of a general nature, now
that the hostilities with Iraq are over with and you have examined
the battlefield, have you found any material or weapons that Iraq
used that had been manufactured or supplied by the United States
or its allies? Have any of the materials that the Iraqis used against
us, were they of U.S. production and source?
Mr. S0K0LsKI. We're reviewing. I can tell you that in a general
sense, Western equipment, clearly Western equipment got into
their hands. As far as U.S.-specific, we are reviewing. I, personally,
do not know, DTSA may have more knowledge.
Mr. SULLIVAN. Mr. Chairman, there has been concern through-
out the conflict and before the conflict about what technology may
have come from western sources. There is a collection effort to pick
up things from the battlefield and exploit it and review it. That's
an ongoing process. It is very complex and it needs to be correlated
with the body of intelligence information we have.
Chairman PICKLE. Would you supply, for our committee, the
names and the sources of the Western countries that might have
participated in this, will you?
Mr. RANGEL. Mr. Chairman? I thought we have seen and heard
things on television that identified American manufacturers who
had exported arms to Iraq.
Mr. S0K0LsKI. There's no question, sir, that there were U.S. ex-
ports in support of military systems.
Mr. RANGEL. Well, what was the Chairman's question then?
Mr. S0K0LsKI. I was answering the question with regard to
whether U.S. weapons or munitions had made it into Iraqi hands. I
don't personally know of that, but you are right. As far as technol-
ogy-
Mr. RANGEL. Well, have there been reports on television that
U.S. arms and munitions have been exported to Iraq by American
manufacturers? That has been publicly reported.
PAGENO="0032"
28
Mr. S0K0LsKI. I don't think we exported weapons. What clearly is
the case when you saw Hewlett-Packard machines on television
when they launched one of their missiles, there is no question that
U.S. technology did make its way to programs that had important
military implications.
Chairman PICKLE. Well, if that is so, why would you hedge to
answer my question?
Mr. SOKOLSKI. About weapons. I am sorry, I thought you had
asked me about weapons.
Chairman PICKLE. I asked you did any American equipment. get
used against us?
Mr.. S0K0LsKI. Certainly indirectly, the short answer is, yes.
Chairman PICKLE. I don't want to prolong this line of question-
ing. We have you here, as a witness, to try and get background
about the difficulty. We do not propose to prolong a big debate with
you on this testimony that we were late in receiving. And we do
not want to ask questions that would be uncomfortable for you to
answer or uncomfortable for our Government, but we are trying to
get background on this thing.
Now, the next witness we have here is one of the gentlemen you
have alluded to for appreciation for the success that he has done. A
Dr. Steven Bryen.
Mr. SoKoLsKI. Right.
Chairman PICKLE. I am going to ask that you gentlemen just
move over, if you will, and if Dr. Bryen would come on up here and
summarize his statement.
Dr. Bryen, are you here?
Mr. BRYEN. Yes, sir.
Mr. ANTHONY. Mr. Chairman, would you yield to me, for a
moment, before the next witness?
Chairman PICKLE. Yes, and Dr. Bryen, would you have a seat up
here for just a second?
Mr. ANTHONY. Mr. Chairman, I would like to have the attention
of the two witnesses who just spoke. Before we go to the next wit-
ness, I have been very quiet during this period of time because I
really wanted to get into two specific cases concerning the reconfig-
uration of a commercial helicopter into military use and very so-
phisticated computers that can be used for military application as
well as commercial application.
But you made a statement a while ago based on Mr. Schuize's
question, is Iraq still a threat? I might not have gotten it exactly
correct, hut you said as long as Saddam is in power, we must be
extremely vigilant. Well, that is today, after the war and after the
peace treaty has been signed.
I would think that that same admonition would apply prior to
and while we knew that there was this huge military buildup going
on. The questions that have been asked and the answers that you
have given to Mr. Pickle and Mr. Rangel I find to be extremely
vague, evasive, and totally unresponsive to the situation at hand.
There have been numerous accounts that there are at least 40
specific cases right now, under investigation, by the Customs De-
partment where there were parts and weapons systems that were
specifically being sought by Iraq and that even faxes were being
transmitted on the day that the war occurred. In specific responses
PAGENO="0033"
29
to questions about, have you gone to the battlefield, no, that is
somebody else's responsibility. Have you found the chemical stock-
piles and have they been destroyed? No, I might hear about that at
some later date on the news. I have got a whole list of other ques-
tions that I wanted to go into in that same regard, Mr. Chairman.
I think what I would like to do to make sure that this record is
extremely clear and tight is to submit these to the witnesses in
writing so that you will have proper time to respond. You should
get whatever authority you need from officials above you to sani-
tize your answers, and then submit it to us for the record and
review in case we then need to submit some additional questions.
Mr. S0K0LsKI. We would be glad to do that, sir.
Mr. ANTHONY. I want to say I came into this hearing trying to be
very straightforward in terms of just examining what the record is.
But I am beginning to get extremely disappointed in terms of the
response. It may be that you don't have the authority from the
higher-ups to be any more specific than you are today, but we can
discuss that at another day.
Chairman PICKLE. Thank you, Mr. Anthony.
Now the Chair has invited Dr. Stephen Bryen, president of Delta-
tech in Silver Spring, Md., to make a statement in connection with
this general problem that we are talking about. The primary purpose
is for us to examine three or four cases we have. I don't intend to pro-
long this part of the testimony. But, Dr. Bryen, would you care to
summarize in just a few minutes any statement that you would
want to make that is in addition to what these gentlemen have
made. You were part of the operation, and since now have set up, I
guess, your own operation. Would you proceed to make your state-
ment? I am going to ask you to summarize in 3 or 4 minutes, if you
will?
STATEMENT OF STEPHEN D. BRYEN, PH.D., PRESIDENT, DELTA-
TECH, SILVER SPRING, MD. (FORMERLY DEPUTY UNDER SEC-
RETARY OF DEFENSE FOR TRADE SECURITY POLICY AND DI-
RECTOR, DEFENSE TECHNOLOGY SECURITY ADMINISTRATION)
Mr. BRYEN. Thank you, Mr. Chairman. I will be quite happy to
summarize it and submit the entire statement for the record.
Chairman PICKLE. It will be included.
Mr. BRYEN. You are correct. During the period of 1981 until 1988,
October of 1988, I served as Deputy Under Secretary of Defense for
Trade Security Policy, and also as the Director of the Defense
Technology Security Administration, which I helped found in 1985.
During that period, we made a number of efforts to try and deal
with East-West transfers of technology and what we call now the
proliferation problem.
You have to understand, first of all, Mr. Chairman, that the De-
fense Department has a limited role, even as I speak, a limited role
in its ability to oversee or to be involved in export licenses. There
are two kinds of export licenses.
There are munitions licenses. Munitions deal with actual weap-
ons of war. Those are handled by the State Department, as you
know, and the Defense Department sees all of those. There is no
51-840 0 - 92 - 2
PAGENO="0034"
30
difficulty there. Then there are what are called dual-use licenses
which are administered by the Commerce Department.
In the East-West context, the Defense Department sees most of
those. In third countries, it is extremely limited. Before 1985, the
Defense Department saw nothing in regard to West to West. After
1985, largely because of the diversion problem, technology going to
third countries and then going to the Soviet Union-and a lot of
kicking and screaming, I might add-we were able to extract an
agreement that ~was approved by the President that gave the De-
fense Department a limited number of categories for review to a
limited number of countries. At the time there were 15 countries. I
may be out of date, but I think it is down to about seven now.
It is a bit of an atrocious system. For example, licenses going to
defense ministries in some of the countries of concern-Iraq or
Iran, for example-if they are not in those specific categories that
the Defense Department does see, the Defense Department never
knows about the transactions. So during the 1980s, a very large
amount of what I would call military-type equipment, military-type
trucks, equipment for military aircraft being sold to the Iraqi Air
Force, even equipment to repair rockets that went to the Iraqi Air
Force, was approved without the Defense Department being con-
sulted in any way.
This blindsides our military authorities. No matter what you
think of it, they just don't know what is going on. Not only that,
the information on these licenses is not shared, so far as I know is
still not shared, with the different enforcement agencies like the
U.S. Customs Service. So one of the results is that if they have
been tracking a case and watching some activity that they know is
bad, if there is a license in the system, they will never know about
it.
By the way, most of the diversions that we see-not all of them,
but the largest majority of the diversions of technology that occur,
is smuggled technology. It usually starts out with some kind of li-
cense that is generally falsified in some way or another.
Another extraordinarily serious problem is the fact that quite a
lot of sensitive equipment is never put through the licensing proc-
ess. The Commerce Department has the ability to classify materials
as to what are called "general destination." A big part of the infra-
structure that went to Iraq, the American component of it, got
there because the Commerce Department simply said these things
didn't require licenses.
For example, one that didn't get there that almost did was the
Consarc furnaces, these high-temperature furnaces that were prob-
ably going into the Iraqi nuclear program. And they were classified
by the Commerce Department as general destination. In July of
last year, a huge, refurbished forge that was in Pennsylvania, a
company in Pennsylvania asked "do we need a license?" and they
were told they didn't need a license to sell the forge to Iraq. And
this was the forge that was used to make 16-inch guns for our bat-
tleships. It probably was going to Iraq for the super-gun project.
In my statement, I go through a lot of these examples, but the
point of it all is that the system that we have, in my opinion, is
nonfunctional in respect to the proliferation problem. So I have to
tako, politoly, I hopo, exeoption with my friends from th@ Defense
PAGENO="0035"
31
Department. I don't think the system is functioning for a number
of reasons. One is that it is poorly administered here. The second is
that our European allies have made a god-awful mess by exporting
sensitive technology. And the kind of equipment that they have
been willing to release-the Germans, for example, and their in-
volvement in chemical weapons-is atrocious.
I saw Hans Deitrich Gentscher saying the other day that we
should put Saddam Hussein on trial for war crimes. What about
the German companies that supplied the chemicals? Are they not
equally culpable?
What we need to have is a multinational system of controls that
has political support and that is coordinated among the member
countries. And the only institution that can-
Chairman PICKLE. Do we have any kind of a multinational
system-
Mr. BRYEN. No, sir.
Mr. PICKLE [continuing]. Organization in place today that can
perform that function?
Mr. BRYEN. Well, we have an organization in Paris called
COCOM that could perform the function if it was authorized to do
so, but it has not been authorized to do so. Otherwise, there are
some specific arrangements, let's say on missile technology, but
they are not really institutionalized in the formal sense.
[The prepared statement and attachments follow:]
PAGENO="0036"
32
PARTIAL TEXT OF REMARKS OF DR. STEPHEN D. BRYEN PREPARED FOR
DELIVERY TO THE COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON
OVERSIGHT, APRIL 19,1991
Our ability to prevent the proliferation of weapons of mass destruction to countries is
extremely limited. The reasons for this are (1) the near collapse of our own domestic
export control system and that of our allies to the point where no system in the West
can be relied on to operate effectively to restrain the sale of goods, technology and
know-how to produce weapons of mass destruction; (2) the disintegration of the
COCOM system and, with it, multinational controls on critical technology; (3) the
absence of international cooperation on enforcement where proliferation controls are
involved.
The result is that the proliferation of weapons of mass destruction will continue;
that such weapons will get into the hands of dictators such as Saddam Hussein or fall
into the hands of terrorists. This, I believe, is a growing threat to world peace. We are
approaching a shift of emphasis away from conventional-type weapons toward a new
stage emphasizing unconventional weapons. Unconventional weapons are weapons
of mass destruction which are capable of destroying civilian populations. They are also
weapons that can be used on the battlefield even though some, such as chemical
weapons, are banned by international agreement.
Surely this is an issue that should have the complete attention of the President
and the national security community. One would think it would be a major topic for
NATO, for the European community, for the United Nations. In fact, while some give lip
service to the subject, little is being done and the situation continues to grow worse.
Inept, unskilled, and misled bureaucracies continue to give permission to companies
to export goods that should be restricted, materials that can be used for
manufacturing and developing unconventional weapons continue to go to end users
that are known to be unfriendly and dangerous.
Let me describe a current case that is illustrative. As we speak, a shipment of
eight crates sits under detention in Newark New Jersey. This is a shipment of special
purpose pumps that were going to be used to pump a very thick material called
nitrocellulose lacquer. Nitrocellulose lacquer is treated chemically to form ball powder
which can, in turn, be used to manufacture gun propellants, or when dissolved in
nitroglycerine, becomes a major constituent of double based propellants for rocket
motor applications. It can also be used for making plastic explosives, like the
explosive used to blow up Pan Am 103 over Lockerbie, Scotland.
It is useful to know that most terrorists got plastic explosives from Eastern
Europe. The explosives had been produced in Czechoslovakia by a company called
Semtex. With the end of Communist rule in Czechoslovakia, the Czech government
has taken steps to restrict the sale of Semtex explosives. There is reason to believe
that some countries, and terror groups, may have been looking for a substitute
source of supply.
Written on the seized boxes is the destination: `Sazemane Sanaye Defae
Jomhouri Islarni Iran (Chemical). The translation is: Defense Organization of the
Islamic Republic of Iran (Chemical).
These pumps were approved by the Commerce Department and interdicted by
the Customs Service as they were about to be leave the United States.
Understanding how this happened illustrates quite clearly that the export licensing
system we have does not work.
The company shipping these pumps was well aware of where they were going.
They clearly understood the pumps would handle nitrocellulose lacquer. Moreover,
PAGENO="0037"
33
this was not the first shipment. Two other shipments were made during the 1980s.
The background on these other shipments is murky. I do not know whether there
were export licenses, though suspect there may have been because the company
made an inquiry to the Commerce Department to determine if these pumps were
export controlled. They also told the intermediate consignee that they would have to
provide end use information to the government. In asking the Commerce Department
if a license was needed to ship these goods to Iran the company did not, however,
say who the end user in Iran was or indicate the material that was going to be
handled. Commerce officials asked no questions of the company. They replied to the
company that the pumps were "general destination' which means no license was
needed.
The result was the company went ahead and shipped the goods. Now they are
in detention and the Commerce Department is trying to figure out how to reverse its
previous decision.
This technique is what is called a "commodity classification." In essence what
happens is that companies ask the Commerce Department whether or not they need
a license. If they are told they do not, then the company is free to ship any goods to
any destination. For example the Consarc furnaces were classified by the Commerce
Department as GDEST or general destination. More recently, specially designed
solenoids for rocket separation, bound for Iraq, were classified as GDEST by the
Commerce Department. According to the Los Angeles Times the same official
responsible for the Consarc case is the one who approved the rocket solenoids.
There is little or no oversight in the export control system. I see no evidence of
quality control as a reasonable person would understand it. There are many examples
where sensitive commodities and technology are routinely approved without any
questions being asked. There are other cases, some I have been personally involved
in, where sensitive goods are approved in defiance of warnings by experts that the
products will be used in a manner contrary to our national interest.
A case in 1990 for Iraq is an example. This case was for a special analytical
instrument and some related general purpose computers. The Defense Department,
which only heard about this case because of the computers, objected to this
proposed export on the grounds that it was for an instrument that could be used for
chemical weapons development and testing. There was collateral intelligence backing
up the Defense claim.
The Commerce Department decided to fight the Defense Department's
assessment. Instead of taking up the issue on the merits --could the spectrometer be
used for chemical weapons? -- Commerce instead decided to demonstrate that (a) the
controls on these goods were Foreign Policy controls and therefore outside of the
jurisdiction of the Defense Department and (b) there was nothing in the regulations
relating these spectrometers to proliferation controls. Regulators inside the Commerce
Department were instructed to find a way to override the Defense Department's
objections.
The effort was successful and, despite continued complaints by the Defense
Department, Commerce licensing agents succeeded in their mission. Thanks to
efforts like this one here in the United States, and the actions of many of our
European allies, Iraq became the world's largest producer of chemical weapons and
nerve agents.
Obviously there is something wrong in a system where, despite clear cut
evidence, the agency with supervisory, legal, responsibility to regulate sensitive
exports is, in fact, doing everything it can to promote exports and to neutralize those
in the government who object.
The most corrosive aspect of all of this is that America lost its credibility as a
PAGENO="0038"
34
result of these blunders made by our licensing system. Again the example of the
spectrometer instrument is illustrative. Remarkably it was seized by German customs
on the way to Iraq according to a German television station that reported the seizure.
From the pubflcity, German companies were aware that America was in the business
of supplying state of the art analytical equipment of the type needed for chemical
weapons manufacturing and testing. While they probably did not need any
encouragement --all the evidence is to the contrary-- still this information afforded
these companies considerable political protection as they carried on their effort to
supply Saddam Hussein and his minions. If challenged they could, and they did, direct
their authorities to licensing decisions made in the United States. Ineffective officials in
the German government, not known for preventing German companies from exporting
weapons related technology, took American actions as proof that these exports had
political backing from America. If America was doing it, then it was good business
and good politics.
During this time, and still today, Commerce is classifying millions, if not billions,
of dollars of sensitive goods as general destination -telling American companies that
export licenses were not needed to ship to Iraq, even to clearly identified military users
there. In this way a great deal of the infrastructure Saddam Hussein needed to
support his military buildup came from the United States. None of this will be found
on the `list" of exports supplied to the Congress by the Department of Commerce and
recently released after being `sanitized.' It is my own belief that there is far more
exported under advisory opinions and preemptory declarations of "general destination'
than what was actually licensed.
There were no limits to these advisory findings. For example, a company called
West Homestead in Pennsylvania was preparing to sell a refurbished forge to Iraq as
late as last July and they were advised that no license was needed. This forge is, I
understand, the same forge that was used to manufacture 16 inch gun barrels for our
battleships.
Other examples include huge petrochemical complexes which required no
export licenses. As former Secretary of State George Schul~ told the London
Financial Times, the Commerce Department encouraged his company to go ahead
with the deal. It was the former Secretary, not any regulatory body, who became
disturbed about the multi-million dollar project and its possible use by Iraq for chemical
weapons production. It was his decision to take action to stop the project.
Beyond general destination declarations by the Commerce Department there
was also the concealment of information about military exports to Defense
organizations in Iraq, Iran and to other countries. So far as I am aware, the Defense
Department was never told about direct transfers to the lraqi military. Approvals
included military trucks, including some that could be used for tank transport or for
missile launchers, equipment for Iraqi military training aircraft, helicopters,
communications gear and radars. One of the licenses approved to Iraq's Air Force
was for the repair of jet engines and rocket casings.
It is my belief, based on what I experienced during my tenure in the Defense
Department, and what has come to light since I left government service, that a
deliberate effort was made to keep these license applications out of the hands of the
Defense Department, away from the Customs Service, even from the intelligence
agencies. Information was concealed.
This even occurred in some cases where the Defense Department had reviewed
a license application and made objection. Rather than tell the Defense Department the
objection was being rejected, Commerce went ahead and approved the application,
sometimes months afterwards.
These examples and my own experience convince me that the best course of
PAGENO="0039"
35
action is to take export licensing out of the Commerce Department. The Commerce
Department is a trade promotion agency. Giving it a contradictory mission -- to restrict
sensitive trade--creates confusion and conflicts. For example, Commerce Department
officials are not given incentives for stopping trade deals --they are rewarded for
helping encourage trade deals. Licensing officials who say "no" will not be on the
career enhancement track.
Compared to America, what happened in Europe was even worse. The
European countries cravenly exported an endless array of sensitive goods. I think
there is a general attitude among some Europeans that, if things deteriorate in the
Persian Gulf or in the Middle East, the United States can be counted on to fix the
problem. This dangerous thinking, coupled with cultural, historical and political
attitudes that are sometimes cynical, sometimes reminiscent of some of the behavior
that led to the Holocaust, allowed companies in Europe to sell a range of machinery,
technology and know-how for programs including (1) missile technology; (2) nuclear
technology; (3) and chemical weapons technology, including nerve agents.
Just a few days ago a senior German official declared that consideration should
be given to charging Saddam Hussein with war crimes for the acts he committed
against the his own people, which were described as genocide. What about the
companies that put into the chemicals into Saddam Hussein's hands? Aren't their
acts the acts of war criminals?
The issue of enforcement, of responsibility, and of sanctions against wrong-
doers is of extraordinary importance. Any reform must include strengthening export
enforcement --in particular making the laws and penalties sharper and harder hitting.
I salute the decision by United States District Judge Stanley Sporkin in the case
of Consarc Corporation and Consarc Engineering, Ltd. against the Iraqi Ministry of
Industry and Minerals, Rafidain Bank of Iraq, Pittsburgh National Bank, and the Royal
Bank of Scotland PLC. Judge Sporkin ordered the largest punitive damage award in
United States legal history against a foreign government. Judge Sporkin found that
Iraq had intentionally misrepresented the end use of the Consarc furnaces it was
buying. The Iraqis told the company the furnaces were going to be used to
manufacture medical prostheses when in fact the furnaces were going to be used for
nuclear weapons development.
In his decision Judge Sporkin pointed out an important problem that plagues
the export control system. He said" "I gather there is no compliance mechanism that
is built into the end user certificate, and I don't see why somebody ought not to be
working on that concept. ... (You're) going to have to design some system where the
Government has the right to police this end user certificate and to make sure the
product being used, hasn't been resold, hasn't been altered."
This is a valuable suggestion and needs to be adopted into law. In addition,
sanctions are needed against companies, including foreign companies, that knowingly
export sensitive goods that can be used for the manufacture of weapons of mass
destruction. Procedures need to be established so that legal action can be brought
against them in this country if they operate in the United States, export to the United
States, or own or manage facilities in the United States.
The fact is that sanctions can work. In the Toshiba case the result of sanctions
was a determined action in Japan to clean up their export control system. From what
I have seen, the results are impressive and demonstrate the value of sanctions, or the
threat of sanctions. Instead of sending polite diplomatic messages to our allies, and
urging them to do a better job. sanctions put teeth into the system and force them to
take us seriously.
I would even go further. We need a special office in the Justice Department
PAGENO="0040"
36
that can treat complaints made by American companies who have reason to believe
their competitors are cheating and exporting export controlled goods and technology.
Such an office would be charged with investigating these allegations and, if true, taking
steps to impose sanctions on the foreign companies including import restrictions and
restrictions on their ability to participate in Federal procurement under the Federal
Acquisition Regulations.
Enforcement also has to be multinationalized on a cooperative basis with allied
countries if it is to work. I know from experience that this is a difficult problem. To do
it a consensus is needed which, at present, does not exist. We should take the lead
in creating the consensus.
The center of our efforts should be focused on COCOM. COCOM was created
originally to regulate West to East trade in high technology that could be used for
military purposes. I want to broaden significantly COCOM's mandate. But there is an
imminent risk that COCOM itself is about to disappear.
The threat to COCOM is centered on an extraordinary set of negotiations now
taking place among the COCOM members intended to `streamline' and significantly
"liberalize" the COCOM list. This streamlining effort will make available worldwide a
vast array of technology essential to weapons manufacturing.
COCOM's members are preparing to release from control powerful computers
that can be used in real-time military applications such as ballistic missile control
centers, fire control systems, advanced communications, and weapons design;
semiconductors and semiconductor manufacturing for advanced high speed micro
chips including RISC-type microprocessors, digital signal processing circuits, gate
arrays, and custom chips ideal for military applications; very high precision machine
tools including grinding machines to an accuracy of 2.5 microns and cutting and
turning machines with accuracies of under 5 microns which will provide to any country
in the world machines to manufacture literally any kind of high quality weapons
system. COCOM's members have already agreed to release highly sensitive night
vision equipment and manufacturing know how that will now be available world wide.
The U.S. and the allied countries will immediately lose their ability, taking advantage of
infra red and thermal imaging systems, to operate at night against the enemy. This
advantage will be lost forever.
These COCOM decisions mean weapons proliferation on a world-wide scale.
The United States and the COCOM member countries base their export controls on
the C000M list. Once any good, technology or service is taken off the COCOM list, it
is "GDEST" as the Commerce Department is fond of saying. It can go to Libya, or
Iran, or Iraq, or Syria or North Korea, or China or the Soviet Union without license or
regulatory intervention.
The ostensible reason for decontrolling these vital technologies has been the
desire among the allies to help Gorbachev. Little or no attention has been paid to
what the Soviet Union will do with this technology, or what impact these decisions
have on the rest of the world.
The most important arms exporter in the world is the Soviet Union. It is the
Soviet Union's only significant industrial export. It brings them precious hard currency
just at a time that their other exports, especially oil exports, are falling because of
production problems and oil field depletion. It is hard to understand how it is in our
interest to promote Soviet arms exports by allowing them to improve their weapons
and make them more competitive in international sales. As Dessert Storm showed
clearly, Soviet technology was second best.
The administration's continued support for the ongoing COCOM liberalization is
puzzling. Has the President been told what is going on and the risks for the United
PAGENO="0041"
37
States in this policy? Does the administration understand the imminent weapons
proliferation impact of this policy?
A better and more sensible course of action is to reinforce COCOM at this
critical time and enhance, not diminish, its mission. To do that, the liberalization will
have to be suspended.
COCOM is a vital organization for our national security. The fact is that
COCOM was able to prevent Soviet acquisition of advanced weapons technology and,
thereby, prevented the export of modern weapons that could stand up to those we
bought for our own Armed Forces.
We built our national security on superior technology. We did it because it we
recognized that the way to cope with the massive Soviet arms build up was to field
better and more capable weapons systems. We believed, and we were right, that high
technology weapons save money in the long run and, even more importantly, save
lives. The few casualties on our side in the Gulf Conflict proves this to have been a
good policy.
The Soviet Union understood the importance of technology and they tried, and
still are trying, to steal ours for their military programs. The barrier to their efforts was
a tiny, underfunded, organization in Paris, COCOM, that became the bane of the
Soviet military. On countless occasions Russian leaders complained about COCOM to
Western political leaders, demanding they give up on the COCOM embargo. To us
this was convincing evidence that COCOM was effective in assuring Western security.
COCOM can play a role in regulating goods, products and technology that can
be used for weapons of mass destruction that might go to non-COCOM members.
The basic formula is simple. COCOM would be chartered to identify those
technologies most essential for chemical weapons manufacturing, nuclear weapons
fabrication, missile delivery systems, etc. Some of the work has been done already;
some can be accomplished by carefully studying what Iraq got from the West.
Once the list is formulated and accepted by the COCOM members, exports of
the listed goods to non-COCOM members will be have to be cleared by the COCOM
organization. The country desiring to export the products will have to provide
convincing evidence the transfer is for acceptable civilian purposes. COCOM will
review these transactions and will decide if sufficient information has been provided
and if it is credible and meets accepted standards as to proposed end use. To assure
performance by the recipient of the technology --the end-user in export control
parlance-- COCOM could require inspection or verification. In especially sensitive
cases COCOM itself, or its authorized agents, would carry out the inspection checks.
Such a system has significant advantages. First, it avoids focusing on specific
`bad guy" countries. Many of our allies are sensitive about naming controlled
countries. It complicates normal trade relations and creates political problems. Rather
than focus on countries, COCOM would focus on handling certain technologies and
reviewing where these products and technology are going and for what purpose.
COCOM could, in such an environment, maintain its confidential internal process and
thereby protect each member country's political interests and standing.
Second, the system will be far more effective than any national licensing system
acting independently. The litany of mistakes made can be reduced by
multinationalizing the process. Now, with other friendly and allied countries carrying
out mutual oversight, each member country would have to take steps to make sure
the information it presented was accurate and reliable and the assessment made
balanced. One result will be to contribute to improving each nation's internal licensing
system. It will do this by setting higher standards and by making proliferation control
PAGENO="0042"
38
credible and supportable internally.
Third, the system will have the ability to verify approved exports. This is
somewhat different from current COCOM practice in regard to West to East transfers
where the predisposition was toward denial of sensitive exports. In non-COCOM
member countries --e.g., North-South transfers-- there is more complexity because the
more clear-cut adversarial situation between NATO and the Warsaw Pact will not exist.
Some of the affected countries might be friendly. Some of them may be democratic in
character. A more flexible and responsive approach in this framework is essential if
the system is to retain political support once it is started.
Fourth, the system will provide a mechanism for coordination and assure
consistency in practice among member countries. Right now there is no consistency.
On any single day the United States, just as its allies, is making decisions on
proliferation cases that, at best, can be called erratic. A coordinated system would be
a giant step toward ending this chaos.
Fifth, the system will create the international institutional framework to support
coordinated enforcement. Once there is a broad agreement to internationalize the
effort, there is ground for the enforcement agencies to cooperate openly and share a
common agenda. That is an improvement over current conditions, where enforcement
is the exception rather than the rule and where customs agents in other countries and
courts try to operate in political conditions hostile to their efforts. On too many
occasions customs agents and state prosecutors have been frustrated and repressed
by governments who did not want their companies investigated or prosecutions to
take place.
Sixth, a multinational system will, almost certainly, have the support of industry,
particularly if it can be managed on an efficient basis. The conditions exist today to
create a world-wide system based on networked computers that, rather than inhibit
exports, will expedite legitimate exports by assuring effective licensing practice and
coordinated handling of these transaction from the stage of application all the way
through to the actual shipment of goods. Naturally this will require standardization of
the nomenclature for identifying exports. A goodly amount of work has already been
done by C000M to establish a framework for this and, while much has to be done
and funds will be needed, the idea is realistic, the technology exists, and the benefits
are considerable for all concerned.
In summary, we have one of two choices. Either we can reform the system we
have, or we can take our chances in a world that will rapidly become more dangerous
and threatening. In deciding where we go from here we should keep in mind that the
weapons of mass destruction in the hands of the Iraqis got into their hands because
Western democracies sold Iraq the lethal technology. This happened in spite of
numerous agreements, conventions and undertakings related to proliferation.
Examples include the Geneva conventions, the Nuclear Non Proliferation Treaty, the
Missile Technology Control Regime.
To me this says the system we have is not any system at all. It is non-
functioning. It tells me that these agreements lack the proper institutional framework
and political support to mean very much.
We can change that by a wholesale reform of the system. We have to change
our own export control system and we have to put in place a multinational framework
to assure coordinated and effective controls over weapons of mass destruction.
PAGENO="0043"
FO~(.CT/
IPCILLTY
5~RIA
EJcVPT
LW~A
IR~
PIJUST,8N
.
IRAN
lIDIA
~REJ{FIM
~IAZ1L
11<-
DG A~T
FIPCTGI
8~IR
~tw LAN~
PI~61tO1
RD~SSDG
FM~I111Y
10O~T
ATODC
G~R
El-RI/A
Y
TMWU
8
L1W41L*1
~T#R 1L
EM
L/w~
aN~
20 E(GA
WATT ~4
RICIOR
TAJIAA
FIN*ICLAL
AssIsTNa
- - I
SIHALA
&cNLAL
RfiNT
KALUTA-
EHAIaMIff
PI10TtDf-
FIBWX1SSIN
1/duTY
94*LL lOT
WI
1/duly
~C R~R
706
RA1VMYDOI
K/RAdIAl-
RiJTQAl~M
GAS
aNu~lftUT
FIFWCI/&
ASSIST/HI
- - -
1IJIAI1}%k 1/dullY
osuaaj< R/dTEl~
TPMJZ I -T/MJZ II
S/ID 16
5 1/dILITIES M~
ftlI(WD 10 ~
DfVVL~D
GAS ~DURIflUT
/L4~E WI EST
/1-4MM
c~
OJIITIBA
2
3
GAS
P/R/~4~
D6TH~E
PATMINIA
ATIDIA I
AlW-P~ II
EM~kIS(
/LIXRIA
RA-6
~1EAN
~aOff
810 04
I I -f
PAGENO="0044"
U~LWIK ~&D-O AL-FATM T~41L-I R~S ~M1 MISSILES
MISSILE SS-21 I ~ - ~ ~ - - I ~ *
~ 14k11 I t&~NE21
IMitWA II ~DJTER SS-.30
M-9S _________ MISSlI I V~GAN 1974 _JL.......~._ ~fl~fl ss-1eoe
1131 RNL2~ SVM) 16 1?oss LB/St ~O
fl~ 7 ISR4tJ.. ~iflt &B
114XEC1 396
~I 1t&~*N
aSwl I NC
1964 JNJIR
a~xJ1/2B~~ - (EGMI 1962 196-AL- 1962
~J ZME~
PIRN19~
(11 > SY>
JR 9)1) 8 PIRNIY~ * ` U a - -_
Lu'
I I I
PAGENO="0045"
(}CMICAL acfrN RWIAA 150 ~GN1 1974 a~~ow1 (2020IPG
~)R}G 1906 saaW S#MINIA PAIOilN 00(ICAL
RWI4k 200 R~ awtEx(?)
106 F#LLWØH
9:11) 8 ~LIW1W
M-QMN
SS-21 SAM~ 16
aLI~UW ~J 7M8~
__ - - - - - ~ - I - -
cw oo~'s
BIOLOGICAL
t~06
~6
101 F~S
~
9~
S~'LWi1 PM(
~
BIO10#CT(~I
UILIT~RY
RAXR'16
(I({~5I 4e)
WIXR M~
CGOItR
C130
TNIOR
10n
~IM 787
TfrNZR
BIG GIl
11< & Dl
WAIl ~II6
9PL1E115
aN~
______ - WEST TO ARAB
____ ARAB TO ARAB
PAGENO="0046"
42
Chairman PICKLE. Well, Dr. Bryen, we have listened to the De-
fense Department make their general statements and talk rather
confidently about their successes they have had. Your testimony
though is very strong that while we have had some successes, we
have got some great weaknesses. And let me just read for the com-
mittee for the record to make sure that we understand that you
say our ability to prevent the proliferation of weapons of mass de-
struction is extremely limited. The reason for this is the near col-
lapse of our own domestic export control system and that of our
allies to the point that no system in the West can be relied on to
operate effectively to restrain the sale of goods, technology and
know-how. And, two, the disintegration, as you said just now, of the
COCOM system. And third, the absence of international coopera-
tion of nonenforcement.
And you just point out then that the result here is that the pro-
liferation of weapons of mass destruction will continue and that
some weapons will get into the hands of dictators, such as Saddam,
unless we change our system. And you point out that there is very
little oversight of the export control system.
Now, your testimony is full of examples of goods that are sitting
on docks now, labeled for shipment, that would be items of possible
destruction and damage for the United States. We are not going to
go into those because we did not have this hearing for that purpose
today. I simply wanted to have your views from a person who is a
part of the integral operation of the defense system who is now a
part of the private business who now observes to us in testimony
that we are in poor shape, at this point, as far as controls are con-
cerned.
I will not proceed on this as a committee now, any further except
to say to either to Mr. Sokolski or Mr. Sullivan, either one, what
response do you have to make to this statement that he just made?
Mr. S0K0L5KI. I would like to say two things. First of all, with
regard to the problem of authority, I think one of the key frustra-
tions in the Defense Department throughout the 1980s was that
dual-use items that were not specifically listed as items of prolif-
eration concern for nuclear purposes, there was no authority, we
were told by Commerce, to deny. One of the first things that we did
when we got into office here in the Defense Department was to
push to make darn sure that we had got that authority. One of the
things that has happened is that-
Chairman PICKLE. And Commerce said, no, you could not do this.
And why would they give you the denial?
Mr. SoKoLsKI. What is that?
Chairman PICKLE. Why would the Commerce Department say
that you could not put anything through?
Mr. SOKOLSKI. Because the way in which the regulations and the
laws were written the only thing that you could control for, for
proliferation purposes is nuclear or items on the missile control
annex. And there are an awful lot of things like computers that of
a certain size that are not on those lists. And yet, they could and
they did contribute to both missile and nuclear. The Consarc case
was a classic example as well.
What we have done is to change that, at least as far as authority.
You have to enforce what authority you have. But before we did
PAGENO="0047"
43
not even have the authority. Under the EPCI and by Executive
order though we are now reviewing cases of countries, one of which
clearly now is Iraq, where before we did not have authority. The
frustration that Dr. Bryen talks about was more than just real, it
was damnable. That has changed.
Mr. SCHULZE. Mr. Chairman, if you would yield on that point?
Mr. Sokolski, wasn't that the thrust of the Hyde amendment last
year in the Export Administration Act-where he wanted to give
the President more authority to add things to the list-which was
defeated by Congress?
Mr. S0K0L5KI. Well, luckily there were other bills, and more im-
portant there were other actions by the President that at least is
getting precisely the authority issue-
Mr. SCHULZE. But it was done by Executive order then?
Mr. S0K0L5KI. Yes.
Mr. SCHULZE. Although Congress denied that by voting against
the Hyde amendment, I believe?
Mr. S0K0L5KI. Well, we are operating under Executive order now
to get at the very cases and get referred to things that previously
we had difficulty getting referred to.
Mr. JENKINS. Mr. Chairman, let me pursue that for just a
moment. You say you now have the authority but have not had the
authority in the past?
Mr. S0K0LSKI. The authority to get cases going to projects of pro-
liferation concern, whether they are CBW missile or nuclear, and
cases whether they are on specific proliferation technology lists or
not, yes, those regulations are now being drafted.
Mr. JENKINS. So we simply did not have any regulations in place;
the executive branch had the authority to do that but it has only
now given you regulations that afford a degree of protection?
Mr. S0K0LSKI. That's correct, sir.
Mr. JENKINS. So there is nothing that the Congress needed to do,
the executive branch has had this authority all along?
Mr. S0K0LSKI. Well, certainly the argument is there that seizing
upon the authority already latent in law and in the Constitution is
what we needed to do. The important thing is that I think we are
doing it.
Mr. JENKINS. Well, I think that what the oversight committee
needs to know is whether you need any other law passed to give
you any wider control or authority? Do you need something more
than what you have now?
Mr. S0K0LSKI. I would like to take that for the record. My im-
pression is that the problem is not authority, it has to do with
assets and enforcement and focusing those.
Mr. JENKINS. So you have legal authority to control these sales of
weapons systems or whatever the commodity may be, and the prob-
lem is a matter of enforcement?
Mr. S0K0LsKI. The authority that was lacking with regards to
weapons of mass destruction and the means of delivery that pro-
duced many of the cases that Dr. Bryen rightly is concerned about,
that authority now is being drafted into regulation. We did not
have that before.
Mr. JENKINS. Instead of being drafted-
PAGENO="0048"
44
Mr. SOKOLSKI. Some of those have been announced. The CBW reg
has been announced. In fact, it has made some news.
Mr. JENKINs. Well, I guess the point I'm trying to make, and the
subcommittee hearings obviously point to the existence of some
problems, is whether we need to enact additional laws to give you
the authority to do what needs to be done in this area? Or can you
do it without any additional laws being passed?
Mr. S0K0L5KI. I believe the biggest challenge we face is enforcing
the laws we have. I think our plate is pretty full.
Mr. JENKINS. All right, now, has your Department ever talked to
Commerce about giving them a list of the things not to sell?
Mr. SoKoLsKI. Frequently.
Mr. JENKINS. And they have ignored your recommendations?
Mr. SOKOLSKI. They are listening more and more, sir. In fact, as a
result of that we are finally getting cases that we previously were
not getting.
Mr. JENKINS. But in the past, obviously, they must have ignored
your recommendations, is that right?
Mr. SOKOLSKI. I wouldn't characterize it that way.
Mr. JENKINS. Well, they didn't pursue your recommendations in
stopping the sales, did they?
Mr. S0K0L5KI. I would have to say that there were disagree-
ments, yes, sir.
Mr. JENKINS. Well, Dr. Bryen seems to think, based upon his ex-
perience, that it is quite obvious that there has been a proliferation
of sales made over the past few years that are not in our best inter-
est and that Commerce has simply ignored the Defense Depart-
ment's recommendations, is that not correct?
Mr. S0K0L5KI. Sir, I would say as an administration official we
work together and I believe the results that are beneficial with
regard to getting the authority is a result of working together?
Mr. JENKINS. Dr. Bryen, would you like to respond to that?
Mr. BRYEN. Yes. Well, I would make a couple of suggestions that
might be helpful. First of all, I have to preface this by saying that
in my testimony I say quite clearly that I don't think the Com-
merce Department ought to be in this business.
Mr. JENKINS. I read your testimony. I understand your point.
Mr. BRYEN. I think it is a trade promotion agency and it is at
cross-purposes in the business of trying to regulate national securi-
ty type exports, but putting that aside for a moment, I would do
some other things short of that major change. One is that I would
simply. require that all licenses be shared with all the national se-
curity agencies. It can be done electronically, but let them look at
what is going on, step one. And step two, I think is I would create a
right, a simple right that if any agency, the Energy Department for
nuclear, the Defense Department for military, intelligence if they
think there is something going on, they should have a role. But if
any of these national security agencies say "stop," it stops. And
you create a way for that to be reviewed at a high level. It is a very
simple idea, but it seems to me that it could be put into legislation
and it would make a heck of a difference in this process.
Mr. SCHULZE. Would the gentleman yield on that point?
Mr. JENKINS. Yes, I would be happy to yield.
PAGENO="0049"
45
Mr. SCHULZE. If I am not mistaken, the Export Administration
Act that Congress passed last year gave more authority to Com-
merce and less to DOD.
Mr. BRYEN. That's right.
Mr. SCHULZE. So is this Congress heading in the wrong direction,
in your opinion?
Mr. BRYEN. Well, I didn't like that bill and I think it was in the
wrong direction, but I think it also is a little beside the point, be-
cause the major issue is, "if you don't know about it, it doesn't
matter anyway." And you have an agency-and it is not only the
Defense Department I am talking about-it is the enforcement
people at Customs. I sat in another congressional committee a
month ago and we were talking about Iraq and the list, you know,
this famous list that was provided by the Commerce Department to
the Barnard Government Operations Committee. And they asked
the Customs Service about the list and they never got it. They had
asked four times for it and were refused.
Mr. SCHULZE. This is crazy. I think what we ought to be doing is
making sure that everybody has access to the information that has
a responsibility by law to protect the national security.
Mr. JENKINs. Yes, I appreciate that, and I think DOD is attempt-
ing and is making progress, but I think they have a lot of difficul-
ties thrown in their way, and that maybe we ought to know more
about this.
Let me ask one final question about whether or not we have ade-
quate laws as far as violations, criminal prosecutions and that type
of thing.
I was thinking and maybe we already have this, that in civil for-
feiture cases dealing with drugs or illegal alcohol or fruits of the
crime, we sometimes go up-we almost always go immediately for
the vehicle that is transporting the illegal cargo. We seize it. We go
to the homes or whatever of the people involved where they have
made money and we pursue civil forfeiture cases. If a company
knowingly illegally ships banned materials to a country, can we, in
addition to pursuing criminal presecutions, seize company assets? I
mean that type of authority sort of makes a company think.
Mr. SULLIVAN. I would have to just defer to the Commerce and
Customs witnesses because they know the remedies under the law.
I am really not sure. I think there must be, at least, some seizure
authority under the statues that Customs operates, but I am not
sure that they are quite as broad as you are suggesting. You are
suggesting some kind of RICO-style forfeiture type provisions, and I
am not sure that under the export control laws they are quite that
broad.
Mr. JENKINS. I have prosecuted many cases in which vehicles
used to transport illegal materials were seized. Seizure was rather
effective in those cases. It seems to me that it would be even more
of a problem were a company to knowingly sell, in violation of law,
materials that could be used by one of our enemies. And why
shouldn't you have the authority, or the U.S. Government have the
authority, to seize the assets of the company for doing it?
The point I am making is that it would make one more careful in
who they sell to.
PAGENO="0050"
46
Mr. BRYEN. Mr. Jenkins, that makes great sense. I would just
like to highlight the other side of the problem which is what hap-
pens when our allies do this. I want to take the Condor case as an
example. In the Condor case, major European companies, like Mes-
serschmidt, MBB, were involved in-I think it became in violation
of international agreements, particularly the missile technology
and control agreement. And we did nothing about it really.
But it seems to me that what we really need to have is the abili-
ty to cut these people off if they persist in violating, whether it is
the convention on chemical or biological weapons or the missile
technology regime. There are two things we can do. I mean we can
have import restrictions on them if they do that and they do more
business here usually than anywhere else. And the other thing we
ought to look very keenly at is restricting their ability to partici-
pate in Federal contracts under the Federal acquisition regula-
tions. Half the people that supplied Iraq have got business with the
Defense Department and are making money off the U.S. taxpayer.
It seems as though that is a little bit crazy. We ought to have some
toughening up of the laws in that respect, which would then give
the Government the leverage needed to say, "Look, either cut it
out or we cut you out." /
Mr. JENKINS. Or maybe we could take away their most-favored-
nation treatment?
Mr. BRYEN. That's right.
Chairman PICKLE. I thank you, Mr. Jenkins. The Chair would re-
quest that we move on. We could spend all day on this very same
question and go talk about it over, and over again and not come to
any definite conclusion. The testimony that Mr. Sokolski has given
us has been helpful and it is positive and upbeat in nature, but it is
quite obvious, based on what other witnesses have said and what
testimony has been introduced, that there is very little oversight in
the export control program. That you either did not have the au-
thority cr they did not give the authority, that is to Commerce,
and/or State did not give you the authority through the executive.
Whether Congress is derelict or whether we need to do more, the
main thing is to come together with some kind of accumulation
with an approach that controls our licensing and our operations
program.
This is a subject that is very involved and very complicated. I
don't propose that we go any further in trying to lay these kinds of
questions out. I do propose that we go forward on the cases that we
have in front of us. Unless some member has any questions--
Mr. SCHULZE. Mr. Chairman, we have some questions of Mr.
Bryen, if we may?
Chairman PICKLE. All right, can you-
Mr. SCHULZE. We don't want to take any more time than your
side took.
Chairman PICKLE. That's fair enough, proceed.
Mr. SCHULZE. First of all, Mr. Bryen, I would like your opinion,
from your previous position, just your feeling on the cooperation
and the thrust of Congress in this area? Perhaps, mistakenly, over
the 14 or 16 years that I have been involved with trade, I get the
feeling that the thrust of Congress has been to tell the bureaucracy
to loosen up. I have been against that tide. But I have felt that I
PAGENO="0051"
47
have consistently lost, time after time. How does the bureaucracy
view this? Have you felt that we are saying to you, ease off, or do
you feel that we have been saying, be rigid and follow the letter of
the law?
Mr. BRYEN. Well, I have felt the same way you felt, the first
answer. During the 1980s, largely because of the work of my
agency and my department and our Secretary, we attempted to
toughen up export controls, particularly to the Soviet Union.
And that was a wrenching and painful process internally as
much as externally. And part of it required a lot of discipline.
Mr. SCHULZE. Were you over there during the Toshiba affair?
Mr. BRYEN. I was the one who, along with Mike Maloof, who is
sitting behind me, who discovered the Toshiba case.
Mr. SCHULZE. So when we ended up saying, oh, boys, please don't
do it again, what kind of message did that send over there?
Mr. BRYEN. I don't agree with that. I think the Toshiba case is a
very interesting one because you know there is a Toshiba sanction
that was put on by the Congress and it was-
Mr. SCHULZE. Yes, but we did not say, you are not going to do
any more business in this country.
Mr. BRYEN. Well, it worked. The fact of the matter is that Japan,
and I personally looked into this in great detail, because I was very
skeptical, but Japan did an extraordinary job in terms of disciplin-
ing its own companies. They have more control over their compa-
flies than we do because of the way that their structure is. But
they did an extraordinary job in tightening up their export con-
trols.
Mr. SCHULZE. So you think that even though it was not as tough
as some of us wanted, it really was effective?
Mr. BRYEN. Well, they believed it was. And I think it was.
Mr. SCHULZE. I would like to yield to Mr. Shaw, at this point.
Mr. SHAW. Thank you, for yielding.
Mr. Bryen, later in today's hearing we're going to examine the
Global computer case with the Commerce Department. However,
much has been said in public already about the companies relating
to the Global case. By way of background, can you explain the op-
erations of Chilean arms manufacturer, Carlos Cardoen, and his re-
lationship to Global?
Mr. BRYEN. I am probably the wrong person to ask that question
of. We did not, at least during my tenure, we did not know that
much about Cardoen. That has mostly come to light since I left
office. But I believe there is a grand jury looking into that whole
business now, so that I think we have to wait a little longer.
Cardoen is alleged to have been smuggling, at least that is what I
read in the press, or alleged to be involved in smuggling, U.S. tech-
nology through Chile that went on to Iraq, for the manufacture of
things like cluster bombs. And so it is a very serious business, but I
don't really feel that I am an authority on it, and don't know that
much about it.
Mr. SHAW. Well, isn't it true that he is the largest private arms
manufacturer in Chile?
Mr. BRYEN. In Chile, I think that is quite right, yes.
Mr. SHAW. And isn't it also true that he bought Global to test his
attack helicopter prototype?
PAGENO="0052"
48
Mr. BRYEN. That's what I understand. Again, Mr. Shaw, you are
asking me to comment authoritatively on this, and I am only read-
ing about Cardoen in the press.
Mr. SHAW. What about the Swissco operation, are you familiar
with that?
Mr. BRYEN. The Swiss Government?
Mr. SB[AW. Swissco.
Mr. BRYEN. No, sir, I am not.
Mr. SEAW. It is a development company in Miami.
Mr. BRYEN. No, I know of it, but again, it is largely based on
press accounts, so that I am not an authority on that.
~Mr. SHAW. Thank you, I yield back my time.
Mr. SCHULZE. How did Cardoen obtain his cluster bomb technolo-
gy?
Mr. BRYEN. I am going to again say that the knowledge of this
has developed since I left office. We did not really know about it
and I know there is an investigation ongoing by a grand jury, at
the present time. But I think what we are looking at is an alleged
smuggling operation in defiance of the law. The components are
munitions controlled components.
Mr. SCHULZE. That type of technology transfer is restricted?
Mr. BRYEN. Oh, for sure, and if it is proven, and I say so careful-
ly, but if this is proven that this occurred, and our laws were vio-
lated, he or the company-
Mr. SCHULZE. Well, you are aware of International Signal then
from Lancaster, have they ever been prosecuted?
Mr. BRYEN. I don't know the answer to that, I am sorry. There is
a point I would like to raise about this smuggling, versus export
controls and distinguish for you something. The Helmy case which
you are going to look into is largely a case of smuggling. I read the
sentencing decision with some care last night because I knew you
were taking this up. It is a straightforward violation of our laws,
mislabeling and all of that. It was equipment and goods being
smuggled out on Egyptian military airplanes that were here as a
courtesy.
The difference between smuggling and export controls is impor-
tant, however, in one regard. It is something that we pointed out
very often with respect to the Soviets and it is equally true for the
Iraqis. If you sanction a transfer, legally sanction a transfer, then
all the technical help, all the know-how goes with the license. If it
is smuggled, you are on your own.
The point I would make in this regard is the reason the Condor
program collapsed-it was not voluntarily ended, it collapsed-was
because we were able to persuade by leveraging them, the German
companies and the Italian companies-to get out of the business. It
was a matter of putting the heat on them and saying you are not
going to sell anything to the Defense Department and we are not
going to take this lying down. It was not a question of anything
else.
So when they got out, the Egyptians had to try to make this pro-
gram work somehow and that is where Helmy and the smuggling
comes in.
PAGENO="0053"
49
Mr. SCHULZE. Earlier you said that much of this is done through
licenses which are later falsified in some way. Can you tell me
about that?
Mr. BRYEN. Well, the Helmy case is an example. Where you take
a legitimate piece of paper and you change the destination on it or
you change the end-use on your declaration so that it sounds
benign. This is the kind of thing. In the case I cite, which is the
current one involving Iran which is in my statement, where we
have a company applying for a license, they did not tell the Com-
merce Department what the end-use was, even though they knew
what it was. It was for making material that is used to make
rocket fuel or plastic explosives or gun powder or whatever you
want.
And that is the problem. We need to have some very tough rules
about what should be on these documents and about what happens
if you alter them.
Mr. SCHULZE. Any suggestions that you have along those lines,
again, the subcommittee would be very pleased to have them, if
you have time to sit down and give us the following suggestions on
how to toughen these rules, or how to have uniformity, or how to
have joint enforcement.
Mr. BRYEN. I would like to do that because I think that is the
meat of it and that's where we should be going.
Mr. ScHULZE. Thank you.
Thank you, Mr. Chairman.
Chairman PICKLE. I thank the panel very much for your state-
ments and for your testimony. Obviously we need to look into a lot
of these aspects much more deeply and all the agencies involved,
because a great deal more cooperation must be obtained if we are
going to have any sense of control over these export control pro-
grams.
I thank you, very much, for your testimony.
[The following questions and answers were subsequently re-
ceived:]
PAGENO="0054"
50
Question 1: Which countries pose a major threat to the
United States in terms of proliferation? Which countries are
currently operating major underground purchasing networks to
acquire U.S. technology and goods?
Answer: In terms of proliferation, any country with a
nuclear, ballistic missile, chemical, or biological warfare
(CBW) program should be viewed as a major potential threat to
the United States. These weapons have significant
psychological as well as military effects, which can make
their possession or the pursuit of their possession a
destabilizing factor in regions in which the United States has
vital interests.
Attached is a list of all countries which have
technology acquisition networks in the United States, act as
conduits for U.S. technology, and/or are on the
nuclear/CBW/mjssile watch lists.
Chemical Warfare (CW) Programs
confirmed Suspect~.~
Biological Warfare (BW) Programs
confirmed Suspected
Nuclear Weapons.!
PAGENO="0055"
51
In
contrast, Brazil and Argentina have decided to ii~lement a
three-way nuclear safeguard agreement with the International
Atomic Energy Agency (IAEA). It is anticipated that this
agreement will be activated in the next few months.
PAGENO="0056"
52
26 July 1991
1. Listed below, in alphabetical order, is
information pertaining to foreign technology acquisition
efforts which would be harmful to U.S. national security.
Identified are those countries that have major diversion
networks to acquire U.S. technology (marked NETWORK), those
countries that are currently being used as conduits for
acquiring U.S. technology (marked CONDUIT), and those
countries currently on the missile technology control regime
watch list (marked MTCR).
COUNTRY RATIONALE
PAGENO="0057"
53
Question 2: To what extent are U.S. companies being
used to facilitate the development of nuclear, chemical, and
biological weapons programs in countries other than Iraq?
What countries are developing such programs and what items are
being supplied by U.S. firms?
Answer: DIA does not maintain files on U.S. companies.
DIA is aware of a number of cases involving technology
diversions by U.S. companies to Iraq and the other proliferant
nations; however, this data resides at the U.S. Customs
Service (Strategic Investigations Division) and/or at the
Department of Justice.
OCT 0 1991
PAGENO="0058"
54
Question 3: How was Iraq able to acquire chemical and
biological weapons capability? Who supplied the technology
and materials? How sophisticated was the Iraqi acquisition
~j~etwork? How long did it take Iraq? How close are Iran,
~,`7~pdia, Pakistan, Syria, and Libya4to posing such a threat?
Answer: Iraq acquired its dhemical and biological
weapon capabilities by purchasing the expertise and equipment
it needed from a host of willing suppliers. After the program
was initiated, the Iraqis were able to make some minor
modifications to their processes and weapons to accommodate
changes made necessary by restrictions on exports to Iraq.
Determining the "sophistication" of Iraq's acquisition
network is only a subjective assessment at best. From the
list of companies involved, it can be determined that, in many
cases, U.S. and foreign export licensing authorities would not
have realized that the ultimate consignee for the technology
was Iraq as a large number of the companies listed would have
been considered valid end-users. Iraq did have success in
locating and motivating suppliers who were able to provide
them with the chemicals and munitions parts they needed to
continue the production of chemical ammunition during the
Iran-Iraq war. These suppliers were able to circumvent
international controls on exports, such as the chemical
embargo imposed by the Australia Group and others.
The time required for development of CBW or missile
capabilities will vary greatly among proliferating countries
according to the expertise available in the country, the
country's access to information and markets, the actions of
other nations to control critical technology, security
requirements for the program, and the political will to
develop a capability. Iraq began its chemical program in the
1970s, but did not begin aggressive pursuit of a military
capability to produce chemical weapons until the late 1970s.
The Iraqi BW program probably required less time, as the
technology and equipment is less specific and, therefore,
easier to obtain. In missile development, Iraq received SCUD
missiles from the Soviets and then modified them to increase
their range and decrease their payloads over a relatively
short time.
It is unlikely that Iran
~`ill assemble a CBW or rr~i'~'sile program that will be
iq~ent to what was present in Iraq prior to the start of
the DESERT STORM campaign. countries have different
PAGENO="0059"
55
strategic and tactical objectives in starting these programs,
and their execution of these programs reflects this.
Iran initiated chemical weapon development to attempt to
counter th~ overwhelming Iraqi advantage in this area; at
present~
The IThqi network involved in acquiring CBW technology
consisted of 280 companies spanning 33 nations.
PAGENO="0060"
56
Question 4: The Israeli Government claims that the
North Korean Government recently sold so-called "improved"
SCUD missiles to Syria. Can you confirm this allegation? If
so, have any North Korean missiles or launchers been
transferred? How many? To what extent does Syria have access
to U.S. technology and equipment? To what extent does Syria
have access t.a LS. technology?
Answer 4
Syria either has access or can gain access to virtually
any U.S. technology and equipment, given enough time, funding,
and political effort. Because the U.S.S.R. has been its
primary supplier of military technology and equipment in the
past, assimilation of U.S. or other Western technology could
prove difficult, particularly if Damascus tries to incorporate
subsystems or components, rather than complete systems, into
its weaponry.
UCi
- 0 ~
PAGENO="0061"
57
Question 5: Now that the war with Iraq is over, has the
Defense Department examined the battlefield to determine
exactly what weapons and equipment the Iraqis possessed that
were acquired from the United States or its allies? If your
answer is no, explain why this is not being done.
a. What has the Defense Department found so far?
b. Is the Defense Department sharing this information
with the U.S. export enforcement agencies? Please provide
specific examples of when and with what agency this
information was shared.
c. Does the Department of Defense have any evidence
that U.S. commodities reached Iraq after the August 2, 1991,
embargo? If yes, please tell the Subcommittee what
commodities reached the Iraqis, how the commodities were
acquired, and which U.S. companies were involved.
Answer: Attached is a list of the weapons Iraq is
believed to have imported from foreign sources.
5.a. - Attached are three separate lists of Iraqi
weapons and munitions that are being returned to the United
States for technical exploitation. For the most part, little
or no technical exploitation of Iraqi materiel has taken
place, as the majority of these shipments are still in
transit. It is anticipated that arrival of the first
important shipment will occur within the next few weeks and
that exploitation will begin as soon as is feasibly possible.
5.b. - DIA has been sharing information on the captured
Iraqi equipment with the Defense Technology Security
Administration and the U.S. Customs Service. U.S. Customs
agents were in Riyadh, Saudi Arabia, to seal the containers
before their transshipment to the United States to ensure a
chain of custody for future legal actions. It is planned to
have U.S. Customs agents present when the shipments are
delivered to their respective warehouses and the containers
are reopened for technical exploitation. See attached
document at ion.
5.c. - DIA is aware of at least one U.S. company that
was still involved in technology trade with Iraq after the
imposition of the U.N. embargo. As this case, and most likely
others, involve ongoing investigations and/or judicial
proceedings, the subcommittee must contact the U.S. Customs
Service and/or the Department of Justice for further
information. DIA has been providing technical assistance to
the U.S. Attorney in these matters.
OC1 I 1991 ~
PAGENO="0062"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE5L~
BULGARIA
BULGARIA
BULGARIA
BULGARIA
END OF REPORT
PAGENO="0063"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 54
CZECHOSLOVAKIA -
CZECHOSIOVAK IA
CZECHOSL~VAKIA
END OF REPORT
PAGENO="0064"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 54
FRANCE k
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
PAGENO="0065"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQ!JIPTEXT
1986 1987 1988 1989 1990 1986-90 SINCE 5L&
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
FRANCE
END OF REPORT
PAGENO="0066"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1966 1967 1988 1989 1990 1986-90 S1NCE 54
GERMAN DEI~GRATIC REPUBLIC
GERMAN ~MOCRATIC REPUBLIC
GERMAN DEMOCRATIC REPUBLIC
GERMAN DEMOCRATIC REPUBLIC
END OF REPORT
PAGENO="0067"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 5L4
GERMANY, FEDERAL REPUBLIC OF
GERMANY, FE~fRAL REPUBLIC OF
CA~
GERMANY, F,EflERAI RrPI'Ra (~ 1W
END OF REPORT
PAGENO="0068"
SECRET (NO CONTRACT/WN NTEL/NOFORN)
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQU I P-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 5k
ITALY
ITALY
ITALY
ITALY
ITALY
I TALY
I TALY
I TALY
I TALY
END OF REPORT
PAGENO="0069"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 54
POLAND j.~
POLAND
POLAND
POLAND
CJ1
POLAND
POLAND
POLAND
POLAND
END OF REPORT
PAGENO="0070"
EQUIPMENT DELIVERIES TO IRAQ
EQU P-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 5L~
DONOR
END OF REPORT
PAGENO="0071"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 54
END OF REPORT
PAGENO="0072"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1989 1990 1991 1992 1993 1989-93 SINCE 5Z~
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPLIRI I(~S
UNION OF SOVIET SOCIAl 1ST REPUBLICR
UNION OF 5QVIET SOCIALIST REPUBLICS
UNION OF S~VIET SOCIALIST REPUBLICS
UNION OF QVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPI~LICS
UNION OF SO~IET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
PAGENO="0073"
DONOR
1989 1990 1991 1992
UNION OF SOVIET SOCIALIST REPUBLICS
~
UNION OF SOVIET SOCIALIST REPUBLICS
UN ION OF S~VIFT SOCIALIST REPUBLICS
UNION OF S~QALIET SOCIALIST REPUBLICS
UNION OF ~DVIET SOCIALIST REPUBLICS
UNION OF SQVIFT SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
EQUIPMENT DELIVERIES TO IRAQ
EQUI P-TEXT
1993 1989-93 SINCE 54
PAGENO="0074"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1989 1990 1991 1992 1993 1989-93 SINCE 54
UNION OF SOVIFT SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SQ~IET SOCIALIST REPUBLICS
UNION OF SQ~/IET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SQYIET SOCIALIST REPUBLICS
PAGENO="0075"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1989 1990 1991 1992 1993 1989-93 SINCE 54
UNION OF S~IET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SO%~IET SOCIALIST REPUBLICS
UNION OF SQVIET SOCIALIST REPUBLICS
UNION OFSOVJET SOCIALIST REPUBLICS
UNION OF SOVJET SOCIALIST REPUBLICS
UNION OF.S~yIET SOCIALIST REPUBLICS
UNION OF S~~VIET SOCIALIST REPUBLICS
UNION OF SO~IET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
UNION OF SOVIET SOCIALIST REPUBLICS
PAGENO="0076"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1989 1990 1991 1992 1993 1989-93 SINCE 54
UNION OF.~Q~JET SOCIALIST REPUBLIC~~
END OF REPORT
PAGENO="0077"
EQUIPMENT DELIVERIES TO IRAQ
DONOR EQUIP-TEXT
1986 1987 1988 1989 1990 1986-90 SINCE 54
YUCOSLAV.14.
YUGOSLAVIA
END OF REPORT
PAGENO="0078"
74
!~PR ~i c~:~ ~
PUZES
P.3~
CRINESE,
NEW: 3 lbs
CHINESE,
NEW: 2 lba
CHINESE,
NEW! 1 lbs
CHINESE,
NEW: 2 lbs
CHINESE,
NEW: 1 lbs
CHINESE,
NEW! 1 lbs
CHINESE,
NEW: 3. lbs
CUINEOEI,
NEW: .5 lbs
CHINEST,
NEW; .5 lbs
CHINESE,
NEWt .5 lbs
CtNESN,
NEWt 1 lbs
NEW: 2. lbs
Y000,
NEW: 3. lbs
V.100,
NEW: 2 lbs
Y000,
NEW; 1. Lbs
V.100,
NEW: 1 lbs
Y000,
NEW: .5 lbs
U.S.S.R.
NEW; .5 lbs
U.S,s.~.
NEW! 2 lbs
U.S.S.R.
NEW: 2 lbs
B. APRICAN
NEW: 3 lbs
BTTh0M~IAN
NEW: 1 lbs
BRAZILIAN
NEW: 2 lbs
t~EW: 2 lbs
5. ?tFRXCAI~
NOTE! All fuze~ lietsd b.lcw fail ii~to
category; Detonating Fuss, Clue
PROM MD12A
PROX 2(011
MT MS-i
PD 14-5
PD MP-4
PD NP-lB
TIME MS-3M
I!D
PD 2P-6
PD 311-4
PD
PD 1468P1
P1(0K 1479
PD AU-29
PD M1-1BPI.
PD 1472
PIED OPV-3
NT ATH-1035
IMPACT AVU-ET
PROM 148513A1
PD OPZ-2M
PD 142001
I'ROX CAL-PR14
PROX N02.20
the following ~torag~
A, 160 7, QO Class 1.10
1SEA
30 TA
60 TA
14 TA
21' TA
15 TA
02 U
O~ TA
03 TA
10 TA
21 N~
30EA .;:.
20EA
06 TA
06 TA
03 LA
04 TA
12 LA
10 TA
19 EM
16 TA
1~ TA
12 TA
30 TA
PAGENO="0079"
75
22 `91 01 SS(.
!YIBNCfl UflOX 0W-ill
RET422IbS
WRENCH PROX PP-i 10
NEW: 2 lbs
FRENCH PD .. FU1F4
NEW: 2 lbs
FRENCH PROX DE-1'3
ri~w;2l~s
tJ.JC. PD L2.06A2
NEW: .5 lbs
8.AFRXCAN PD M841A1
NEW: 2 lbs
IRENCX PD P0-20-56
NEW: 2 lbs
CHILEAN TINE CDV, MODEL CHIC
NEW: .5 lbs
UNKNOWN PROX CELl1 5.74-JUPITER
NEW$ 2 lbs
ITAL1*N PD P03-335
NEW: 2 lbs
PD PDI-102
NEW: 2 lbs
FRENCH PROX PU RALEC P2
NEW: 2 lbs
PItOX MD-El
NEW: 3 lbs
IRAQI PD OTt! M70?1
NEW: a tb~
U.S.S.R. TIldE T-SO
NEW: 1 lbs
PRENC~ PROX PFPR14
NEW: .5 lbs
CHINESE PD l42~-7
NEW: .5 lbs
ITALIAN PD
NEW; .5 lbs
UNKNOWN PD I4ODEL UNK. (N557 TYPE)
NEW: .5 lbs
U.S.S.R. PD 00-2
NEW: .5 lbs
U.S.S.R. PRESSURE HVU-62
NEW: .5 lbs
U.S.S.R. IMPACT AV-527
NEW: 1 lbs
U.S.S.R. IMPACT AVU-14
NEW: 11bi
SPANISH IMPACT Nv-vS
NEW: .5 lbs
SPANISH IMPACT KAPPA III
NEW: 1 lbs
EULCARIAN PROX PB-i
NEW: 1 lbs
`(000 PD AtT-20
HEW: 1 lbs
IES
~
4(1 P~
4Q ~A
30 LA
30 LA
V.1 OA
20 LA
15 LA
10.. LA
08 LA
25 LA
32 LA
15 LA
20 £7.
26 BA
08 LA
02 LA
02 BA
02 HA
01 LA
01 EA
02 LA
04 BA
04 LA
02 Zi~
05 LA
16 LA
12 LA
PAGENO="0080"
o o 0 0 0 0 0 0 0 0 ~ 0
~ ~ °t -" ~
t~J (1 Nil II P1 N N N II I'S 1
PAGENO="0081"
77
rFR `~1 O3~_SS:Jj
PROOECTILES
C1~iNESE 85-1414 HEAT MODE!. UNKNOWN 04 HA
~iruno for Cannon with Explosive Project&le, Class A, L80 5, Qfl Class i.iz
NEW~ 20 lbs -.
CHINESE 100-1414 HEAT MODEL UNKNOWN 10 HA
Ammo for Cannon with Explosive Projectile, Class A, LSO 5, QDClaee LiE
NEW: 80 lbs
CHINESE 122-MM ILLUM MODEL TINKNOWN 02 HA
Ammo for Cannon with Illuminating Pro~ectji*, Class A, LEO 5, QD Class 1.2C
NEW: 25 lbs
CHINESE 122-nit NE MODEL UNKNOWN 02 HA
Ancno for Cannon with Explosive Projectile, Class A, LSO 5, QO Class 1.1E
NEW: 25 lbs
CHINESE 130-MM HE MODEL UNKNOWN 01 HA
Arinto f or cannon with Explosive Projectile, Class A, LSC 5, QD Class 1.1.E
NEW: 25 lbs
CHINESE 13O~I4k ZLLT3I4 ERIIE, MODEL UNKNOWN 02 HA
Ammo for Can~~~ with Illwninatjng Projectile, Class A, LEO 5, QO Class 1.20
NEW; 50 lbs
CHINESE 152-1414 HE ERRS, MODEL UNKNOWN 04 HA
Ausno for Cannon with Explosive Projectile, Cliii A. LOG 5, QD Class 1.1E
NEW: 120 lbs
CHINESE . 152-14k RE MODEL UNKNOWN 02 HA
Ammo for Cannon with Explosive Projectile, class A, L5~3 5, QD Class LiE
NEW: 60 lbs
CHINESE 152-~z*c ILLUM ERHE, MODEL UNKNOWN 02 HA
Ammo for Cannon with Illuminating Projectile, Class A, LSQ 5, QD dais 1.20
NEW: 60 lbs
V.100 100-MM HEAT 1469 ~0 HA
Ammo for Cannon with Z*ploeive Projectile, Class A, !.SO. 5, QD Class 1.3.H
NEW: 80 lbs
T000 105-1414 XE Ml 02 HA
Ammo for Cannon with Explosive Projectile, Class A, LSO 5. QD Class i.1E
NEW; 20 lbs
YT300 105-MM HEAT 1467 01 HA
Asses for Cannon with Explosive Projectile, Class A, LEO 5, QD Class 1.1H
NEW: 10 lbs
Y000 105-MM MESH 1167 01 HA
Ammo for Cannon with Explosive Projectile, Class A, LEO 5, QD Class 1.1E
NEW: 13 lbs
CZECH 122-1414 HE 462J 02 HA
Ammo for Canne~ with Explosive Projectile, Class A, L.SC 5, QO Class liE
NEW: 25 lbs
11100 130-MM HE 1479 01 ER
Ammo for Cannon with Explosive Projectile, Class A, LEO 3, QD Clang 1.1!
NEW: 25 lbs
U.S.S.R. 82-1414 HEAT BK-88114 04 HA
Ammo for Cannon with E~plo~ive Projectile, Class A, LEO 5, QO Class 1.1E
NEW: 10 lbs
U.S.S.R. 100-MM APDS-T 514-2 02 HA
Ammo for Cannon with Solid Projectile, Class B. LEO 8, QD Class 1,2C
NEWt 20 lbs
U.S.S.R. 100-14.14 HEAT EK-3 04 V.
~ f,.r ~ ~ ~ ~ ,-i__..
PAGENO="0082"
78
`91 0:c6 SSO F.2'le
U.S.S.R. 122-MM HEAT EK*13 05 LA
Explosive Projectile, Class A, LEG 6, QO Class 1,10
U~W: 50 lbs
U.S.S.R. 122-1*1 HE 01-56 -. 02 LA
Ana,o for Cannon ~iith Explosive Projectile, Class-A. L5G 5, QD Class 1.1E
NEW: 25 lbs
U.Z.S~R. 125-MM x~ 01-19 03. ER
Ammo for Cannon with Explosive Projectile, Class A, LEO 5, Qo Class 1.1E
NEW: 15 -
U.S.S.R. 130-'Z-IM APEE-T BP-4825 01 LA
Memo for Cannon with Explosive Projectile, Class A, LEO 5, QO Class 1.15
NEW: 10 lbs
U.S.S.R. 3.30-MM ILLTJM 5-2 01 EA
Ammo for Ctnnon with Illuminating Projectile, Class A, LEO 5, QD Class 1.30
NEW: 10 lbs
U.S.S.R. 152-MM HEAT 8P-540 ` 01 LA
Ammo for Cannon with Explosive Projectile, Class A, LEG 5, QO Class 1.1!
NEWt 25 lbs
152-MM XL 01-25 01 LA
Ammo for Cannon with Explosive Projectile, Class A, LEO 5, QD Class 1.15
NEW: 30 lbs
EWEDI$X 40-MM XE PFHE 08 ER
Ammo far Cannon with Explosive Projectile, Cleu A, Z~5G 5, QO Class 1.1Z
NEW: 20 lbs
30-MM AP-T MODEL UNKNOWN 03. LA
Ammo for Cannon with Solid Projectile, Class H, LEO 8, QD Class 1,40
NEWt 2 lbs
SWEDISH 54-MM BE NODEI~ UNKNOWN 02 SIt
Ar~no for Cannon with Explosive Projectile, Class A, USC 5, QO Clp~ 1.3.E
NEW: 10 lbs
3E1.GIAN 90-MM HEAT 14517 04 ER
Ammo for Cannon with Explosive Projectile, Class A, LEG 5, QO Class 1.15
NEW: 15 lbs -
3ELGIAN 90-MM HESH NR-503A3 03 LA
Ammo for Cenncn with Explosive Projectile, Class A, L50 5, gO Class 1.1E
NEW: 25 lbs
3ELGZAB 90-MM HE NR-447A3 01 SIt
Ammo for Cannon with Explosive Projectile, Class A, LEG 5, QO Class 1.1E
NEW: 10 lbs
3, AFRICAN 155-MM HE ERHS, M1AI. 01 SIt
Explosive Projectile, Class A, LEO 6, QO Class 1.10
5EWl 20 lbs
3. AFRICAN 155-MM HE ER-RAP, MODEL UNKNOWN 01 SIt
Explosive Projectile, Class A, LEO 6, QO Class 1.10
NEW: 20 lbs
~RENCX 155-MM HE ER, AUFI. 02 ER
Explosive Projectile, Class A, LEG 6, QD Class 1.10
NEW: 20 lbs
155-i-u'. HE F3CN 155 50 02 LA
Explosive Projectjl~, Cloos A, LEO 6, QO Class 1.10
NEW: 20 lbs
3REEK 155-MM HE ERSO, ERNIE 01 ER
Explosive Projeotile, Class ?~, LSG 6, QD Class 1.10
NEW: 20 lbs
PAGENO="0083"
79
2E `91 09:03 350
GREEK 155-MM HZ MASS, ERA-ES 01 EA
,Explosive Projectile, Class A, 5.50 6, QD Class 1.10
NEW: 20 lbs
7000 25 PUR HE )4X1 02 MA
Ammo for Cannon with Explosive Pro~ectjle, Cl~a~ A, LOG 5, QD Clasz 1.1!
NEW: 8 lbs
U.S.S.R. 122-NM ILLUM 8-463 02 MA
Aimno for Cannon with Illurninatinq Pro~actil.e, Class A, 5.50 5, QD Class 1.20
NEW: 25 lbi
U.S.s.R. 125-MM HEAT !K-i.4M 01 MA
Ammo for Cannon with Explosive Pro~ectile, Class A, 1,90 5, QD Class L.1E
NEW: 15 lbs
BRAZILIAN 90-MM AP EC-90 01 MA
Ammo for C&nno~ with Solid Projeotile, Class B, L6G 8, QD Class 1.20
NEW: 5 lbs
U.K. 30-NM APSE L5A2 03 MA
Ammo for Cannon with Solid Projectile, Class 5, 5.50 8, QD Class 1.40
NEW: 3 lbs
U.N. 30-NM PRACTICE L12AI 03 MA
Ammo for Cannon with Empty Projectile, Class B, L80 8, QD Class 1.4c1
NEW: 1 lbs
U.S.S.R. 152-NM HEAT BP-540 02 MA
Ammo for Cannon with Explosive Projectile, Class A, LOG 5, QU Class 1.1E
NEW: 20 lbs
UNKNOWN 40-MM HZ MODZL UNKNOWN 04 U
Ammo tot' Cannon with Explosive Projeotile, Clasp A, LSG 5, QD Class 3..1E
NEW: 2 lbs
U.S.S.R. 100-NM HE QF15 02 MA
Anvno for Cannon with Explosive Projectile, Class A, LOG 5, QD Class 1.1E
NEW: 20 lbs
iRAQI 155-NM HZ MAKE, MODEL TJNKNOWN 02 MA
Explosive Proj.otj1s~ Class A, 5.00 6, QD Class 1.3.0
NEW: 40 lbs
BULGARIAN 100-MM HEAT MXO 02 MA
Ammo for Cannon with Explosive Projectile, Class A, 5.80 5, QO Class i.1E
NEW: 25 lbs
U.S.S.R. 122-MM HZ OF-56-3. 02 MA
Ammo for Cannon with Explosive Projectile, Class A, LOG 5, Q0 Class 1.1E
NEW: 25 lbs
FRENCH 60-NM A? C-i (CANNISfl,R) 01 MA
Ammo for Cannon with Solid Projectile, Class H, 1.50 8, QD Class 1,2c
NEW: 1 lbs
CHINESE 152-MM HE MODEL UNKNOWN (STEEL CAGE) 01 MA
Ammo for Cannon with Explosive Projectile, Class A, LSO 5, QO Class 1.1E
NEW: 25. lbs
7000 122-mm PROP MODEL UNKNOWN 01 HA
Inert Annie
PAGENO="0084"
80
1~PP vi ~: 1D v~c~
MISC. ORDNANCE
CHINESE 75-MM RPO BOUNDING TRAO, TYPE 69 06 HA
Rocket Ammo with Explosive Projectile, Class A, LEG L, QD Class 1.1!
NEW: 15 lbs
73NM PROjECTILE S4b-E 06 ER
Rockot Ammo with Explosivo Projectile, Class A, LSG 3, 00 Class 1.1E
NEW 25 lbs
IRANIAN 85-MM RPG BEAT MADDER 02 HA
Rocket Ammo with Explosive Projectile, Class A~ LEO 5, QD Class l.1Z
NEW: 5 lbs
IRAQI 85-MW RPO HE, MODEL UNK. 02 ER
ft~aket Ammo with Explosive Projectile, Glees A, £~eO 5, QD cles~ l.1E
NEW 5 lbs
CHINESE 122-NM ROCKET NE, MODEL UNK. 02 HA
Rocket Ammo with Explosive Projectile, Class A, LSG 5, QD Class 1,1!
NEW: 50 lbs
U.S.S.R. 57-MM HEAT-flAG, 2-51W 08 LA
Rocicet Ammo with Explosive Projectile, Class A, LSS 5, QO Class 1.I.E
NEW: 20 lbs
EAST GERMAN 116-NM ILLUM, MODEL UNK. 02 HA
Rocket Ammo with Iliwnimating Projectile, Class A, LEO 5, QO Class 1.20
NEW: 38 lbs
9RAZIIjIAN 127-NM ROCKET RE, 82143k 01 HA
Rocket Ammo with Explosive Projectile, Clue A, LEO 5, QO ClaSs 1.1!
NEW: 30 lbs
J.S.B.R. MISSILE, AT-S (9M14x) 01. HA
Rocket Ammo with Explosive Projectile, Cla~~ A, LEG 5, QD Class 1.1H
12 lbs
MISSILE, AT~5 (9113.1.3) - - 03 HA
Rocket Ammo with Explosive Projectile, Class A, LEG 5, 00 Class 1.IH
NEW: 35 lbs -
TRENCH MISSILE, HOT 01 HA
Rocket Ammo with E*plosive Projectile, Class A, LEO 5, QO Claee i.1E
NEW: 20 lbs
GRENADE, HAND flAG, RUG-S 04 HA
Explosive Grenade, Class A, LEG 6, QD Class 1.1F
NEW: 1 lbs
ULGARIAN GRENADE, HAND TRAG, KO0-78 OS HA
Explosive Grenade, Class A, LEO 6, QD Class 1.19'
NEW: 1 lbs
HINESE 1O~-NM ROCKET XE, 1400H5, UIUCNOMN 02 ER
Rocket Ammo with Explosive Projectile, Class A, I~SG.5, QO Class 1.1!
NEW: 20 lbs
1JL~GARIAN 73-1*1 RPG HE, 00-92 06 HA
Rocket Ammo with Explosive Projec~tle, Class.A ZaSG 5, QD Class 1.i.E
NEW: 25 lbs -
ELOUIM MINE ~p, NR-409 150 HA
Explosive Nina, Cl~~a A. L50 ~, on Olsasi L2H
NEW: 15 lbs
HINESE GRENADE, HAND FRAO, MINI 49 HA
Explosive Grenade, Class A, LSG 6, QD Class L1F
NEW: 5 lbs
-. MINE AP, P40
PAGENO="0085"
81
~PR `~ ~ sso
FRENCH PROP CHARGE FOR 155-JIM 01 z~
Propellant Explosive (Solid), Class B, L8O 9, QO Class 1.30
NEW: 15 lbs
UNKNOWN GRENADE, RIFLE, RE, JIODEL UNK. 01 HA
Explosive Grertade, C1~ss A, L80 6, QD Class 1.1F
NEW: llbs
U.S.S.R. GRENADE, HAND PARC, RG-42 03 TA
Explosive Grenade, Class A, LSC 6, QD Class 1.1B'
NEW: 1 lbs
TUGO GRENADE, HAND FRAG, 14-75 04 HA
Explosive Grenade, Class A, L80 6, QO Class 1.1!'
NEW: 3. lbs
cHINES! GRENADE, HAND FRAG, 86P 04 ER
Explosive OF.nads, Class A, L80 6, QD Class 1.3.9
NEW: 1 lbs
U.S.S.R. MISSILE, BA-16 02 ER
Rocket Ammo with Explosive Projectile, Cla~~ A, LdO 5, QO Class 1.1E
NEW: iS lbs
BELGIUM MINE, NR-33.2 30 ER
Explosive Mine, Class A, taSO 6, QD Class 1.2!
NEW: 5 lbs
AUSTRIAN M:NE, 099-ROUT!, ATJ4-6 02 ER
Explosive Mine, Class A, L50 6, QO Class 1.1D
NEW: 20 lbs
CHINESE MINE, AT, TYPE 72 03 ER
Explosive Mine, Glass A, L5O 6, QD Clssc 3..1D
NEW: 20 Lbs
ITALIAN MINE, AP, PARC, VS-So 51 ER
Inert R:wno
AUSTRAIN GREW, HAND, DEF, 0478 0'2 EA
ERplosive Grenade, Class A, LSG 6, QD Class 1.3.9
NEW: 3. lbs
BELGIUM GREW, RIFLE, HE, 01287 05 ER
Explosive Grenade, Class A, t~So 6, QD Class 1.10
NEW: 2 lbs
BELGIUM GREW, RIFt.!, PRAC, 14272 04 ER
Inert Ammo
BELGIUM GREW, RIFLE, HE, 1(262 01 ER
Explosive Grenade, Class A, LSG 6, QD Class 1.10
NEW: 1 lbs
BELGIUM OREN, RIFLE, HE, 14261 05 ER
Explosive Grenade, clae~ A, LS0 6, QU Class 1.10
NEW: 1lbs
ETLGIUM OWEN, RIFLE, MEAT, 1(260 01 TA
Explosive Grenade, Class A, TJSO 6, QU Class 1.10
NEW: 3. lbs
U.S.S.R. MISSILE, AT-4, INERT CUT-AWAY 02 ER
Inert Arr~no
U.S.S.R. MISSILE, AT-!, INERT CUT-AWAY 03 ER
Inert Ammo
U.S.S.R. MISSILE, CA'-7, INERT CUT-AWAY 01 ER
lnert 2~rmo
U.S.S.R. MISSILE, AT-4, 91411104 02 ER
Rocket Ammo With Explosive Pro3.otile, C1*~~ A, L6O I, QU Class 1.1!
PAGENO="0086"
82
P11
-~ -~. .~_#1 r~,1e
OER1~AN ROCKET LAUNCHER, ARH3tJRET 08 El
~Røoket Amino with Explos,tv. Projectile, Clase A, LEG 5, QU Class 1.1!
NEW: 25 lbs
l22~MM ROCKET, 0M28F 02 El
Roaket Amino with Expl~ajv, Pro~e~tj1a, Class 1,-LEG 5, QD Class i.~1E
NEW: 30 lbs
OHILXAN BUEMUNITION, PM-l 30 El
Explosive Grenade, C1ECI A, LEO 6, QO Class .1.1F
NEW: 15 lbs
CANADIAN MINE, A?, C3AA 12 El
Explosive Mine, Class A, LEO 6, QU Class 3.2E
NEwilibi
EZIEMVNTXON, lO-2.5i~T 24 El
Explosive Grenade, Cl*ia A, Lsa 6, QD Cl&si l.2E
HEW: 20 lbs
PAGENO="0087"
83
~ o~: i~ ~
MORTARS
IXINESE 60-MM RE TYPE-60
Ammo for Cannon with Explosive Projectile, Class A, LSG 5,
NEW: 3.0 lbs
~XXNHBE 82-MM HE MODEL UNKNOWN
Ammo for Cannon with Explosive ProjectIle, Class A, LOG 5,
NEW: 6 lbs *
IHINESE * 1OO.~l4M HE MODEL UNKNOWN
Ammo for Cannon with Explosivi Projectile, Class A. LSG 5,
NEW: 15 lbs
~EINESE 100-MM ILLUM MODEL UNKNOWN
Ammo for Cannon with Iliwninating Project~l., Class A, LSO
NEW: 15 lbs
ruoo 82-MM HE M74
Anano for Cannon with Explosiv. Projectile, Class A,
NEW: 10 lbs
T000 120-14W RE 1477
Ammo for Cannon with Explosive Projectile, Class A,
NEW: 30 lbs
WOO 120-14K ILLUM 1467
Ammo Sot Cannon with Illuminating Projectile, Class
NEW: 8 lbs
FRENCH 120-MM x~ PRI4-Mpc
Ammo for Ct~o~ with Explosive Projectil., Class A,
NEW: 20 lbs
~RZNCH 120-MM ME PRY-Fl
Ammo for Cannon with Explosive Projectile, Cla~~ A,
NEW: 20 lbs
FRENCH 120-MM HE-RAP PRPA
Anmto for Cannon with Explosive Projegtile, Class A,
NEW: 10 lbs
SPANISH 120-MM H! 1475-N
Ammo for Cannon with Explosive Projectile, Class A.
NEW: 0 lbs
BELOZAN 51-MM HE MODEL UNKNOWN
Ammo for Cannon with Explosive Projectjl~, Cl*z~ A,
NEW: .1. lbs
CHINESE 120-MM HE MODEL UNKNOWN
Ammo for Cannon with Explosive Projectile, Class A,
NEW: 20 lbs
ROMANIAN 82-1414 LZJUM MODEL UNKNOWN
Ammo for Cann~~ with Illuminating Projectjl~, Class
NEW: 20 lbs
ROMANIAN 82-MM HE NDL-11
Ammo for Cannon with Explosive Projectile, Class A,
NEW: 20 lbs
SPANISH 60-1414 ILLU11 MODEL UNKNOWN
Ammo S or C*~n~a with Zllumin~ti~g Projec~j~e, Cless
NEW: 1 lbs
UNKNOWN 120-14)4 HE MODEL UNKNOWN
Ammo for Cannon With Explogive Projectile, Class A,
NEWt 20 1hz
10 HA
QD CLass 1,2!
03 EA
00 Class 1.2E
04 HA
QO Clans 1.1!
04 HA
5, QO Clan, 1.20
05 HA
LEO 5~ QD Clees 1.2E
03 HA
LSO 5, QD Class 1.1!
01 HA
A, LEG 5, QD Clz~s 1.20
02 HA
LS0 5, QO Clafl 3.1E
02EA
LEO 3, QO Class 1.1E
01 HA
LSG 5, QD CLass 1.1!
01 HA
LEO 5, QD Class 1.1!
01 EA
L5O 5, QO Class 1.2E
02 HA
LEO 5, QD Class 1.1!
10 HA
A, LOG 5, QO Class 1.20
10 Eli
LOG 5, 00 Class 1.2!
01 HA
A, LCQ 5, QO disc 1,20
03 LA
LEG 5, QO Class liE
PAGENO="0088"
84
- `91 (~9:~7 SSO
BELGIUM 81-MN XE NR-52O 03 EA
A~m1o fo~ Cannon with Explosive Projectile, Class A, L5G 5, QD Class 1.23
213W: 5 lbs
AUSTRIAN 81-1*1 HE 110-70 06 ZA
ammo far Cannon.with Explosive Projectile, Class-A, LSG 5, QD Class 1.23
NEW: 10 lbs
U.K. 81-1424 ILLUM )4K-3 06 BA
Arrsrio for Cannon with Illi~minating Projectile, Class A, L80 5, QU Class 1.20
NEW: 3 lbs
BELGIUM 81-1414 ILTJUM NR-240 03 BA
Amino for Cannon with Illwninatinp Projectile, Class A, L80 5, QD Class 1.20
NEW: 6 lbs
BELOIUM 81-NM I73LtJ24 NR-253 03 EA
Ammo for Cannon with IllwnjnatingPro~ectile, Class A, LSG 5, QD Class 1.20
NEW: 3 lbs
AUSTRIAN 81-MM ILLUM 82A1. 01 BA
Arena for Cannon with Illuminating ProjectIle, Class A, L8G 5, QD Class 120
NEW: 1 lbs
BELQIUI4 60-MM XE NR-431A1 01 ZA
Amino for Cannon with Explosive Projectile, Class A, 1,50 5, QO Class 1.2E
NEW: 1 lbs
IRAQI 60-MM WE M73 01 BA
Annna for Cannon with Explosive Projectile, Class A, LS0 5, Q0 Class 1.23
NEW: 1 lbs
UNKNOWN 60-NM XE I403EL UNKNOWN 01 BA
Amino for Cannon with Explosive Projectile, Class A, LEG 5, QO Class 1.23
NEW: 1 Lbs
UNKNOWN 60-1414 NE MODEL, UNKNOWN 01 BA
Amino for Cannon with Explosive Projectile, Class A, LS0 5, QO C?ass 1.23
21EW:~lbs
U~8.S.R. 82-J~i1( HE 0-932-DU (cLIP) 04 BA
Ammo for Cannon wIth Explosive Projectile, Class A, LEG 5, QD Class 1.23
NEW: 8 lbs
YUGO 92-NM ILLtJM 1467 05 BA
Amino for Cannon with Illuminating Projectile, Class A, LEG 5, QD Class 1.20
NEW: 10 lbs
TRENCH 120-NM ILLUX PR 02 El
Ammo for Cannon with Illuminating Projectile, Class A, LS8 5, 00 Cliii 1.20
NEW: 6 lbs
FRENCH 120-MN PRACTICE MODEL 51 02 ER
Ammo for Cannon with Empty Projectile, Class B, !JS0 0, QD Class 1.30
243W: 1 lbs
SAIJDIX ARABIAN 81-MM HE MODEL UNKNOWN 01 El
Ammo for Cannon with Explosive Projectile, Class A, L20 5, QD Class 2.23
NEW: 2 lbs
FINNISH 60-NM ME MODEL UNKNOWN 05 El
Ammo for Cannon with Explosive Projectiie, Class A, LSO 5, QD Class 1.23
NEW: 5 lbs
AUSTRIAN 60-NM XE HE-SO 02 El
Ammo for Cannon with Explosive Projectile, Class A, LSG 5, QD Class 1.23
NEWI 2 lbs
CHINESE 120-MN ILLUM MODEL UNKNOWN 01 LA
Ammo for C~n~cn with Illuminating Projectile, Class A, tIC 5, 00 ClaSs 1.2
NEW: 3 lbs
PAGENO="0089"
85
PAKISTAM 60-MM IL.LUM P3)4i(1 06 EA
Ammo for Cannon with Illuminating Pro~ecti1e, C1a~ A, LSG 5, QD Clase 1.20
w~w: 6 Iba
CHINESE 82'-NM ILLUM MODEL UNKNOWN 02 EA
Ammo for Cannon with !lluminatin~ Projectile1 Class A, LSG 5, QU Class 1.20
NEW: 4 lbs
AUSTRIAN 60-MM HE MODEL UNXNOWN 01 EA
Ammo for Cannon with Explosive Pro~ectL3.., Class A, L50 5~ QU Class 1.2!
NEW: 1 lbs
PAGENO="0090"
86
9 April 1991
PMA TEAM Inventory Report
ORIGIN OUAMTI~X
2
2
2
2
1*
1
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
6
11
10
10
10
20
11
10
10
1
PAGENO="0091"
87
PMA TEAM Inventory Report (cont.)
ORIGIN QUANTITY
10
3
10
18
2
1
1
1
3
5
6
4
10
10
4
10
4
32
3
1
4
10
10
1
10
2
PAGENO="0092"
88
~1ATERIEL COLt ~TED DURING OPER~T1G.. ~ -.
AS OF ~ lAY :1991
MAJOR END ITEMS
1 AIRCRAFT PARTS
A MIG-29 (FULCRUM) AIRCRAFT FARTS
(1) FORWARD COCKPIT FUSELAGE I
(2) 30MM AIRCRAFT GUN 1
(:) 0MM AIRCRAFT GUN ROUND 1
B SU-25 (FROGFOOT) AIRCRAFT FARTS
(1)KLEN PS LASER DESIGNATOR 1
(2) DISS-7 DOPPLER NAV SYSTEM
(3) SPO-15 RWR ANTENNAS 2
(4) GUN SIGHT, CONTROL PANEL I
(5) RSBN CONTROL PANEL 1
(6) RSBN ELECTRONICS BOXES 3
(7) KM-2 RADIO COMPASS 1
(8) WEAPONS CONTROL PANEL
(9) RECORDER 1
(10) MACH METER 1
(11) LATITUDE SET PANEL
(12) ELECTRONICS BOXES 2
C. SU-17 AIRCRAFT PARTS:
(1) KLEN PS LASER DESIGNATOR 1
(2) SRO-2 1FF BOX I
(3) ATTITUDE GYRO 1
(4) R-862 UHF/VHF COM RADIO 1
(5) SPS-141 JAMMER POD 2
(6) 50MM FLARE DISPENCER
(7) AS-9 ELECTRONICS POD 1
D. HIND HELICOPTER:
(1) R-863 UHF/VHF COM RADIO 1
(2) FLARE DISPENSER UNIT 1
E. MIG 23 AIRCRAFT PARTS:
(1) R-834M UHF/VHF COM RADIO 1
(2) SPS 141 JAMMER SYSTEM 2
(3) SPS 141 JAMMER PARTS KIT 6
~ç~L !~L ~
1 tn C-1R.203/DT-5B
PAGENO="0093"
89
F. MISCELLANEOUS PAR..~:
LASER RANGE FINDER 1
(2) SURVEYOR TRANSIENT 1
(3) COBRA MISSILE FINS 1SET
(4) P-68 LAUNCHER 3
2. AIR TO AIR MISSILES:
.A. AA-1O ALAMO 1
.8. AA-8B APHID TRAINING MISSILE 1
.C. AA-8 APHID 6
.D. AA-7D
.E. AA-7C 1
.F. AA-2 3
.G. AA-2 SEEKER * 1
3. AIR TO SURFACE MISSILES:
A. AS-14 KEDGE 1
B. AS-9 KYLE 1
4. AMMUNITION (LESS MISSILES & BOMBS):
A. 7.62MM X 54R BALL 4802
B. 7.62MM X 54R LIGHT BALL 891
C. 7.62MM X 39 BALL 6230
D. 7.62MM X 39 STEEL 1121
E. 7.62MM X 39 TRACER 559
F. 7.62MM X 39 API 261
3. 12.7MM X 108 BALL 124
H. 12.7MM X 108 AP 3
I. 12.7MM X 108 APIT RDS 10
3. 12.7MM X 108 API RDS .~47
K. 14.5MM X 114 APIT RDS 747
L. 14.5MM X 114 TRACER 60
M. 20MM API 27
N. 30MM HE FRAG VOG-17M 87
0. 57MM HEAT 13
P. 60MM RDS MORTAR (CHINA) 13
0. RPG-18, 64MM ROCKET 2
R. 73MM HEAT RDS 17
5. 73MM HE RDS 35
T. ROCKET, 81MM W/PFF WARHEAD 4
U. HE, 82MM MORTOR 2
V. 84MM CTG, HE, C~. GUSTAF 4
W. RPG-7, 85MM HEAT 20
X. RPG-7, HE 13
V. 3RD, ROCKET TYPE 69 (RPG-7) 7
Z. 100MM T-12 AMMO SABOT 4
FO~ UF1~iAL US.~ ~
PAGENO="0094"
90
AA. 1(0MM T-12 ~MM0 AEAT
BB. ~o(:)MM T-12 AMMO HE
CC. 122MM HEAT (251)
DD. ~25MM SABOT BM15 7
EE. 125MM HEAT BM14M 22
FF. 125MM HE 77
GG. 127MM WARHEAD, 6S30
HH. CTG, 155MM HE M1A1 SOUTH AFRICAN
II. 127MM WARHEAD ~ ROCKET, SS-30 64
JJ. FROG-7 ROCKET 5
I(K. SCUD WARHEAD
5. EXPLOSIVES
A. ELECTRIC BLASTING CAPS W/ PACKAGING 9
B. PLASTIC EXPLOSIVES & ASSOC PACKAGING 159 BLOCKS
C. FUZE IGNITER SAFETY FUZE 4
6. GRENADES
A. GRD, RIFLE HE M60 (YUGO) 10
B. GRD, RIFLE ILL M62 (VUGO) 2
C. GRD, SMOKE F/T-72 21
D. GRD, FOl 31
E. GRD, RG-42 13
F. GRD, RG-42 VARIENT 3
G. GRD, HAND FRAG M2 2
H. GRD, RDG-5 17
I. GRD, RGM-5 10
.3. TYPE 73 5
K. M-75 2
7. PROPELLANTS
A. ROCKET/FIN ASSY PG 7PM
B. PROPELLANT CHARGE, 122MM 4
C. PROPELLANT CHARGE, 125MM 116
D. ROCKET MOTOR SS-30 127MM 34
E. PROPELLANT CHARGE, 155MM SOUTH AFRICAN 2
8. BOMBS:
A. PBK-500 1
B. CB DISPENSER 2
C. OFAB 250KG 1
D. IRAQI 250KG 1
E. R 50KG 2
F. PTAB-2.5 2
S. CLUSTER BOMB 250KG 1
FOR OFFiCiAL USE ONLY
PAGENO="0095"
91
9. MINES/MINE WARFf-~ EQUIPMENT ~GROUND):
A. TM-69 MINE W/FUZE
B. VALMARA 69 ANTI-PERS 2
C. M72 AT MINE (CHINA)
D. FZ MVCH-62 F/TM-62M MINE
E. VALSELLA VS-T ILLUM/SIGNAL MINE (ITALY) 2
F. VALSELLA VS-T 1.6 MINE (ITALY)
G. PMN AP 1
10. FUZES:
A. FUZE, AH-1A 40
B. FUZE, TYPE 904 11
C. FUZE, BOOSTERS 4
D. FUZE, VK-5 ROCKET 112
E. FUZE, M20 Cl ROCKET 100
F. FUZE, PD MP lB F/6OMM 10
S. FUZE, 73MM GRD ILLUM (VUGO) 1.
H. FUZE IGNITER SAFETY 4
I. FUZE, GRD F1/RDG-5 9
3. FUZE, M20-C1 50
K. FUZE, GRENADE (BULGARIA) 3
L. FUZE, GRENADE RGM/RGM2 17
M. FUZE, GRENADE FGM 9
N. FUZE, GRENADE UZRG 1
11. CAMOUFLAGE/DECOYS/FLARES
A. CAMOUFLAGE NETTING 2
B. INFRARED DECOY FLARES 155
C. FLARE, SIGNAL 26MM (GREEN) 37
D. FLARE, SIGNAL 26MM (WHITE) 34
E. FLARE, SIGNAL 26MM (YELLOW) 21
F. FLARE, SIGNAL 26MM (RED) e
G. FLARE, SINGLE COLOR UNKNOWN Z
H. FLARE, 50MM 134
I. RADAR/CORNOR REFLECTORS 2
12. ANTI-TANK WEAPONS (INCLUDING MISSILES):
A. HOT 2 ATGM 6
B. HOT 1 ATGM 13
C. MILAN ATGM 12
D. AT-S ATGM 2
E. AT-4 ATGM 3
F. AT-2C SWATTER ATGM 1
G. AT-4 LAUNCHER 3
H. MILAN LAUNCHER 4
I. SPS-9 2
4
FOR OFFICIAL USE O1~LV
PAGENO="0096"
92
.13. ARMOURED VEHICL ~:
A. T-72 MIMi TANK
B. T-72 TANK 2
C. T-55 TANK MODIFIED
D. BMP-1 3
E. BMD 1
F. TYPE 6~ APC 1
6. BTR 60 PA 2
H. BTR 60 PU12 1
I. MTL? R8l SAD STA 1
3. MTLB CC-G0l 1
K. ACRV 1V13 1
L. ACRV 1V14 1
M. SA-9 TEL 2
N. ROLAND 1 1
0. PANHARD VCR/TH 1
P. BRDM-RKH 2
0. YW750 AMBUL 1
14. ARTILLERY/MULTIPLE ROCKET LAUNCHERS/ROCKETS
A. GHN 45 HOW 1
.B. 6-5 HOW 1.
C. 2S3 SP HOW 2
D. TYPE 83 HOW 2
E. D-20/TYPE 66 HOW 2
F. TYPE 59-1 HOW
6. 251 SP HOW
H. D30 HOW 4
I. M56 105MM HOW 1
3. MT-12 AT GUN 3
K. ASTROS MRL
L. ASTROS TRANSLOADER 1
M. BM-21 MRL. 2
N. FROG TEL
0. FROG TRANSLOADER 1
P. GHN 45 HOW FIRING TABLE 1
15. BATTERIES:
A. AUTOMOTIVE IGNITION BATTERIES 12
B. MANPACK RADIO BATTERIES 6
C. STORAGE BATTERY MKII-20-12 2
0. AL-11IOB BATTERY 1
16. CHEMICAL & BIOLGICAL WARFARE EOUIPMENT/VHEICLES
A. DECON KITS 37
B. FILTER, MASK, CF-4 1
C. PROTECTIVE MASK M-59 (YUGC) 1
D. PROTECTIVE MASK DRAGER IMP 1
E. FROTECTIVE MASK TYPE CHICOM
FOR OFFLCI~L USE ~
PAGENO="0097"
93
FILTF:. MASI.. DR. .~ER (GER)
~. 1-74 FROT MAS).. W/CRR (ROM: 5
H. M-59 MASK (YUGO)
I. PROTECTIVE MASF:~ (GER)
3. MASK, INDUSTRIAL FILTER
K. MASK. PANORAMIC W/ TALKING DEVICE 7
L. PROTECTIVE OVERSHOES 4 SETS
M. FROTECTIVES GLOVES 6 SETS
N. PROTECTIVES MITTENS 2 SETS
0. PROTECTIVE SUIT 2 SETS
P. SMOKE POT 6
0. SMOKE DRUM 1
R. M-1 MASK (YUGO) 6
S. SHLEM MASK 1
T. RADIATION DECTECTION DEVICE 1
U. DOSIMATOR KIT 1
17. OBSERVATION SIGHTS:
A. PERISCOPE, ELBOW W/MOUNT
B. PERISCOPE, TK H-3 (SOV) 1
C. SIGHT TELESCOPE P60-9 1
D. LOADERS MARK 4 PERISCOPE 1
E. MODEL 165A VISION BLOCK 1
F. OBSERVERS TELESCOPE 1
G. PERISCOPE (BMD-190) (SOV)
H. PERISCOPE, DRIVERS I/R 2
I. SOVIET NVD, SMALL ARMS
3. DUTCH NOD 5
K. TPN-1 GUNNERS PERISCOPE 1
L. LASER RANGE FINDERS (GROUND) 5
18. RADARS:
A. GUN DISH FIRE CONTROL (ZSU-23-4) 3
B. SPOON REST C/D EARLY WARNING 1
C. RASIT BATFLD SURVELL RADAR 1
D. CYMBLINE, COUNTER MORTAR RADAR
E. PLESSY COUNTER MORTAR RADAR 1
19. RADIOS:
A. RL 430 1
B. TRANSCEIVER BCC-349 9
C. TRC 382 RADIO 1
D. TYPE 889 5
E. R123 4
F. R105 9
G. R108 4
H. R109 8
I. TRC 340 1
3. RACAL SYNCAL 30 22
I::. SWITCH BOARD TC-10 1
L. P31M 1
M. R33 RADIO 1
FÜR OmwAi. USE ~y
51-840 0 - 92 - 4
PAGENO="0098"
94
SURFACE TO AIR MISSILES:
A. ROLAND 1 9
B. SA-6 4
C. SA-7 14
D. SA-8 6
E. SA-9
F. SA-14 2
8. SA-16 18
21. SURFACE TO SURFACE MISSILES
A. AL ABBAS SRBM I
B. STYX SB N 2
C. SILKWORM HY-2 8
D. SILKWORM HY-29 9
22. ELECTRONIC COUNTER MEASURES (SHIPBORNE):
A. DAGAIE CHAFF ROUNDS (FRANCE) 12
B. DAGAIE CHAFF LAUNCHER (FRANCE) I
2~. ELECTRONIC WARFARE EQUIPMENT:
A. RACAL DF SYSTEM 2
B. R~78M COPPER CUP HF JAMMER 1
C. TOW 3AMMER
D. TANK MOUNTED LASER WARNING DEVICE 1
24. SMALL ARMS
A. AK-47 SERIES 100
B. RPK
C. DSHK
D. RPG-7 1~
E. PK SERIES 21
F. ZFV-1 2
G. 60MM MORTAR 6
H. 82MM MORTAR 2
I. 120MM MORTAR 1
J. SVD 13
K. FPK 7
L. PM/TYPE 74 PISTOL 20
M. TARIQ PISTOL 15
N. AGS-17
7
FOR OFFICiAL USE CNL~
PAGENO="0099"
95
MISC
A. ARMOR ADD-ON (T-55) 7 PIECES
B. ADD ON ARMOR FOR BMF'-l 2 PIECES
C. ZIL 131 TRUCK 1
D. EXPLORER 10 TON WRECKER 1
8 ~ OFFtCtP~L USE O~LV
PAGENO="0100"
96
DEFENSE INTELLIGENCE AGENCY
WASHINGTON. O.C. 20340. 6148
U-22246/DT-FMO 1 5 JUL 1991
Mr. Nate Simmons
Group Vice President
Electro-Optical and Data Systems Group
GM Hughes Electronics Corporation
P. 0. Box 902
El Segundo, California 90245
Dear Mr. Simmons:
In reply to your letter to LTG Soyster dated 3 June 1991, we hold no
information to substantiate reports that Hughes equipment may have been among
that captured at Khafji. If such statements were made, they are not
attributable to the technical experts charged with exploiting materiel. None
of the Iraqi night vision devices examined to date were found to contain
Hughes components. .
We will continue to look for U.S. origin components in captured equipment as
exploitations are undertaken. Should any Hughes components of the type
indicated in your letter be discovered, I will ensure that you are notified of
the fact and arrange for follow-on inspection by Hughes technical personnel, if
desired.
Sincerely,
Assistant Deputy Dir3ctor
for Scientific e~d
Technical lntcli~ence
PAGENO="0101"
97
01 172050Z JUL 91 PP UUUU
DIA WASHINGTON DC//DT-FMO//
HQDA WASHINGTON DC//DAMI-~FIT~ST11
(MC WASHINGTON DC/lINT-Eli
INFO USCINCCENT MACDILL AFB FL//CCJ2-CHI/
CDRUSAIA WASHINGTON DC//AlA-FM/I
CDRFSTC CHARLOTTESVILLE VA//AIFIMB//
DIRMSIC REDSTONE ARS AL//AIMISDA//
CDRFFIIB ABERDEEN PROVING GROUND MD
MARCORINTCEN QUANTICO VA//IN//
MCCDC QUANTICO VA//IN/I
U N C 1.. A S S I F I E D EFTO
SUBJ: KTO CAPTURED MATERIEL
REFS: A. PHONCON~ ~8 JUN 91~ BTW N. LEGER~ DIA~ AND MAJ COOPE
HQDA.
B. PHONCON~.].2 JUL 91~ BTW R. TISDEL~ DIA~ AND CAPT
BRUEMMER1MARCORINTCEN~ -.
C. STATE.JEPT LTR DATED 8 JUL 91 (PASEP).
~ AS DISCUSSED.DURING REFS A. AND ~ STATE DEPARTMENT IG HA
FORMALLY REQUESTED DOD ASSISTANCE IN LOCATING AND INSPECTING
CERTAIN FOREIGN EQUIPMENT RECOVERED FROM THE KTO.
DIA/DT_FMO/IG/GcbI_3/DT_2/DT41'DT5
R. TISDEL/3?34693/lS JUL 91
U-~2282/DTFMO/KH
M. R. LA B/CHIEF/DTFMO
Unclassified
PAGENO="0102"
98
LIIICIESSL k~G
02 02 PP UUUU
2. REQUEST YOU TAKE REF C. FOR ACTION AND ARRANGE FOR STATE
DEPARTMENT PERSONNEL TO EXAMINE IRAQI EQUIPMENT CONTROLLED BY YOUR
SERVICE'S ORGANIZATIONS. AT THIS TIME~ WE DO NOT RECOMMEND ANY
OCONUS INSPECTIONS OF KTO MATERIEL FOR THE PURPOSES OUTLINED IN REF
C.
3. DIA/DT-FMO POC IS MR. R. TISDEL, (202) 373-4693, AV 243-4693.
DECL OADR
U nc.1assifie~
PAGENO="0103"
99
United States Department of State
Thi !nipcck~r G~ncra1
Wa.clzzngzon. D.C. 20520
July 8, 1991
Mr. 3ohn Berbrich
Assistant Deputy Director for
Science and Technology (DT)
Defense Intelligence Agency
Dear Mr. Berbrich:
I request the assistance of your Agency in conducting an
examination of certain equipment captured by IJ.~. forces during
Operation Desert Storm. The examinations are intended to
determine if the Iraqi forces possessed U.S. origin or design
equipment and, accordingly, should be conducted by personnel with
sufficient technical expertise to identify whether component
parts are of U.S. origin or are of U.S. design and technology.
Initially, I request that captured tanks of Chinese
manufacture and other tanks which have undergone upgrades or
modifications be examined to determine if command and control
systems, range finders, night vision devices, periscopes, and
other components are similar or identical to U.S. manufactured
items. According to U.S. Army Intelligence Agency officials, a
number of captured tanks are located at Ft. Stewart, GA, and can
be examined there. I also ask that DIA identify the locatipn of
other tanks which have been removed from the Desert Storm'theater
of operations so that inspections can be conducted at those
locations.
As discussed with your staff, the inspection team will
consist of personnel from my office accompanied by experts from
DIA, Army Intelligence, the Defense Technology Security
Administration, and U.S. Customs. If necessary, my staff will
arrange for reimbursement to your agency of any incremental costs
which may be incurred in conducting the inspections.
It may also become necessary to send an inspection teas to
the Desert Storm theater-of-operations to examine captured
equipment currently located there. This travel would be
coordinated with your Agency, the U.S. Army Intelligence Agency,
the Defense Technology Security Administration, and U.S. Customs.
I will discuss this with you further pending the results of the
initial equipment examinations.
PAGENO="0104"
100
If you have any questions regarding this request, please
contact Mr. Carl Spann of ny staff on (202) 663-1950.
Sincerely,
Shersian H. Funk
cc: Mr. Franklyri S. }Iowatt
Inspector General
Defense Intelligence Agency
PAGENO="0105"
101
L ~
~ /~ ~
PAGENO="0106"
102
DEFENSE INTELLIGENCE AGENCY
WASHINGTON. D.C. 20340. 6163
C-18,203/DT-5B 4 June 1991
Mr. Donald DeFago
Senior Special Agent
U.S. Customs Service
Strategic Investigations Division
1301 Constitution Avenue, N.W.
Washington, DC 20229
Dear Mr. DePago,
Per your 10 April 1991 request, we have reviewed all the
materi~1 captured durinci the Iraq war an~.,.have been unable to
locate ~D~ETED)' - ~J Apparently, these
aircrart were never deployed to the combat area. The only Iraqi
helicopters we had access to were Soviet..HIP and HIND variants.
We will continue to attempt to locate thq (D~-~J - ~`ou
referenced, however, at this point in ti~ë~ it is unlikely-.that
U.S. or coalition forces will encounter these aircraft.
Attached please find three lists of captured Iraqi
equipment which our military are shipping back to the United
States:
______ Enclosure 1: The Joint Captured Materiel Exploitation
~i~ter (J~NEC) list represents the largest variety of weapons
systems captured from the Iraqi combatants. This is the
equipment Customs agents reviewed in Dhahran, and again, one
container at
Enclosure 2: This list contains mu.uj.tions.. items
ecovered..~or d.iz~ect exploitation by the LI~~~J;
~The captured munitions on `~iis list were
produced by a nu~Ebr of foreign manufacturers. Customs may
be interested in reviewing these items to determine if U.S.
reexport criteria were violated..
-ence it arrives in the-
United States, ~ personnel should be able to
establish a chain of custody f~nost of the munitions.
) Enclosure 3: The FMA Team Inventory Repozt~provideS
a list of foreign manufactured munitions our
Due to the difficulty the
PAGENO="0107"
103
çere having neutralizing foreign munitions, it was
necessary to ship these items to the United States as fast
as possible. We are uncertain as to the status of these
items, however, a chain of custody should be easy to
establish since tjie items were always under the control of
an, Of particular interest to Customs would
be thd
______ Press reports indicating that our military personnel have
absconded with Iraqi weapons of interest are, for the most part,
untrue. Though there are sure to be instances were a service
person or their individual battalion/company ferreted key items
~or return to the United States, to the best of our knowledqe.
______ To date, we have found nothing unique in these
"souvenirs" ~dch has been further confirmed by port of entry
searches by u.s. Customs agents and military investigators.
We will keep you informed of any new shipments which arrive
in the United States and insure that your personnel are on
location when the shipments are opened. The DIA point of contact
on the attached enclosures and other captured foreign equipment
is Mr. Michael Lamb, Chief, Foreign Materiel Office, 202-373-
4701, or his assistant, Ms. Nancy Leger, 202-373-8687. Should
you have additional questions concerning Iraqi technology and
technology transfer, please feel free to call Peter Raimondi,
202-373-4759.
Sincerely,
8
3 Enclosures J~fLDavid B. Newman
1. Materiel Collected during Chief, Research and
Oper. Desert Storm, 6 May 91, Technologies Division
FOUO, 1 Cy.
2. SSO Picatinny, No. 095/91,
22 Apr 91, UNC, 1 Cy.
3. FMA Team mv. Rpt., 9 Apr 91,
S/NF/WN, 1 Cy.
cc:
DTSA/TSO (M. Maloof)
PAGENO="0108"
104
UNtTED STATES GOVERNMENT
memorandum
eATE: 16 April 1991 C-18,l34/DT-5B
DT-5B
SUSJ~CT: U.S~ Customs Service Equipment Request (U)
re: OSC~-5, DB-5, DAH-l, DC-4
REF: 1. Memo, .C-l8,124/DT-5B, C/NF, 8 April 1991, same subject.
2. Meeting with U.S. Customs Service, DIA/DIAC, 21 March 1991.
Per my previous memorandum, attached please find the
updated list of equipment the U.S. Customs Service would like
retrieved from Iraq. Please insure that our field collection
elements are made aware of this updated Customs Service
requirement. Note, that due to my previous concerns with U.S.
company names being disclosed, I marked the Customs Service
equipment list, "FOR OFFICIAL USE ONLY". If you have any
questions, please call Peter Raitnondi, 202-373-4759, DISTS 981-
2440.
2 Enclosures DAVID B. NEWMAN
1. Customs Ltr.,ENF-l-E:EO: Chief, Research and
INV:ST, 4 Apr 91, Technologies Division
UNC, 1 Cy w/attach.
2. Memo, C-l8,l24/DT-5B,
8 Apr 91, C/NF, 1 Cy.
cc:
GC
DT
DT-FNO
- : {`~`T~IIiIIEEII~I~
PAGENO="0109"
105
DEPARTMENT OF THE TREASURY
U.S. CUSTOMS SERVICE
WASHINGTON. D C
A~ 10 ~
David Newman
Division Chief
Defense Intelligence Agency
D.T. 5
Washington, D.C. 20340-6177
Dear Mr. Newman:
In the futherance of our newly est~ablished liaison
activities with your agency, we are once again desirous of your
assistance.
Our Miami, Florida, office has an active investigation
involving Hughes helicopters which were exported to Iraq.
Sources indicate that the; helicopters initially had no hard
points but were subsequently reconfigured to military
specifications and armed for combat.
This investigation is approaching a completion and a trial
date is currently~ scheduled for July 1, 1991. It would be an
invaluable prosecutional asset if the prosecution could
demonstrate that the helicopters in question were reconfigured.
Therefore, we are requesting that your office provide us with any
available serial numbers from captured or abandoned military
configured Hughes 500 and 300 series helicopters from Iraq and
Kuwait.
It would be of further assistance if your reply were
received as early as possible so as to allow our Miami office
ample time to determine its use.
Senior Special Agent Donald DeFago and Intelligence
Specialist Antonio Hernandez are the designated points of contact
at this office. Please direct your response to the attention of
either of these representatives.
We can also be reached by telephone at (202) 566-5104.
Sincerely,
J hn C. Kelley, Jr
Director
Strategic Investigations Division
PAGENO="0110"
106
UNITED STATES GOVERNMEfff
- memorandum
DATE: 8 April 1991 C-1B,l24/D'r-SB
DT-5B
SUBJECT: U.S. Customs Service Equipment Request (U)
TO: OSC-5, DB5, DAH1, DC4
REF: Meeting with U.S. Customs Service, DIA/DIAC, 21 March 1991.
1. ~ During our meeting with personnel from the Customs
Service, Strateqic Investigations Division, we were provided
with
2. Subsequent to the meeting with the Customs Service,
we have learned that a number of items were recovered from Iraq
and forwarded to the U.S. through unofficial channels. For
example, during an unrelated 4 April technical meeting at the
DeSense Technology Security Administration, representatives from
thç
We are in the process
of correlating this retrieved materielirjth Customs Service and
DIA requirements.
3. In order to satisfy Customs Service requirements,
addressees are requested to consider tasking enclosure 1. to
appropriate field elements under their cognizance. Caution
should be exercised in forwarding the Customs Service list to
the field, and at a minimum, the U.S. manufacturers and/or
vendors should be deleted to insure we do not violate Executive
Order 12036/12333. Copies of enclosure 1, with the U.S. vendors
denoted, should not be disseminated beyond the addressees of
this memorandum.
4. We will keep you informed of any new information we
obtain concerning recovered Iraqi equipment. The DT-5B point of
contact on this effort is Peter Raimondi, 373-4759, DISTS 981-
OPTIONALPO~M HO. to
.US199O2e2OO1I2DO6~
PAGENO="0111"
107
2440. Alternate DT points of contact are Nancy Leger, DT-FMO,
373-8687, DISTS 981-1404 and Al Girard, DT-3, 373-4639, DISTS
981-2415.
1 Enclos *e a/s DAVID B. NE~AN
DIA ~q~fipment List, 21 Mar 91, Chief, Research and
1 Cy. Technologies Division
cc:
GC
DT
DT-FMO
DT-3
PAGENO="0112"
108
Question 6: For months prior to the outbreak of the
ground war, reports by several nameless "high official
sources" and by the Director of the Central Intelligence said
that the Iraqi military had forward deployed possibly
thousands of tons of chemical munitions. On the 28th of
February at the daily Pentagon briefing, General Kelly said
that the U.S. armed forces had "found no chemical weapons to
date in the theater of operations." Previously, it had been
reported that only a few chemical land mines had been found.
a. What is the Pentagon's final.finding?
b. Were any Iraqi chemical weapons deployed in the
theater of combat?
c. What is the possibility that the chemicals
originated in the United States?
d. Were chemicals supplied by Alcolac International of
Baltimore to Iraq used in weapons found in the theater of
combat? Have you found any evidence to link Alcolac chemicals
with Iraq's chemical weapons programs?
Answer: No chemical weapons were deployed by Iraq into
the Kuwait! Theater of Operations (KTO). DIA believes that
Iraqi fear of severe retaliation, which they likely believed
included the forced removal of Saddam Husayn from power, led
to their restraint from using CW or BW.
No U.S. exports of finished chemical agents were made to
Iraq. The origin of chemical precursors in a particular
chemical weapon or weapons cannot be determined, based on the
very poor records the Iraqis kept on their production of
chemical agents and weapons.
To date, no Iraqi chemical weapon has~beem found in the
KTO. Even if such weapons had been found
OCT 0 199j
PAGENO="0113"
109
Question 7: Under the terms of the United Nations Cease
Fire agreement, Iraq purportedly disclosed on April 18th the
location of all of its chemical stockpiles, nuclear materials
and ballistic missiles, which are to be destroyed several
months later.
a. To what extent have the Iraqis complied with the
agreement?
b. How will the destruction of these weapons be carried
out?
`c. Were the huge quantities of the mustard gas
precursor "thiodiglycol" that were exported illegally by
Alcolac International, or any mustard gas derived from that
thiodiglycol, listed as part of Iraq's chemical stockpiles?
Answer~ To date, Iraqi noncompliance falls into two
categories: substantial underdeclarations of facilities and
materials and removal of records to prevent access by
inspectors. The Iraqis have made several revisions to their
original declaration regarding chemical weapons. The most
recent chemical weapon declaration is substantially different
from the original. Regardless, the Iraqis have still not
declared many facilities that DIA assessed were part of their
CW network, and DIA believes that undeclared munitions remain.
The following table compares the Iraqi declarations:
Original Declaration Most Recent Declaration
CWsite 8 12
CW munitions 11,000 filled 46,000 filled (25,000 of
which were destroyed or
buried; 79,000 unfilled)
CW bulk material 1,000 tons 1,000 tons
and precursors
CW agents 2 4
To be in compliance with the agreement, Iraq must still:
- Admit to having ~g~nts not yet declared, but whjch
Iraq is assessed to hav~
- Declare, present, `and destroy in the presence ~
representatives: all CW agent and munitions stockpiles,
research and development facilities, production equipment, and
weaponization equipment.
- Declare `and surrender to U.N. representatives all
category 2 and 3 precursors.
OCT 0
PAGENO="0114"
110
Iraq has failed to comply fully with U.N. Security
Council Resolution (UNSCR) 687. Iraq has continued to
underdeclare the number and scope of its weapons of mass
destruction and ballistic missile capabilities; to
deliberately employ concealment and deception measures to
prevent U.N. inspection teams from locating weapons and
production equipment subject to destruction under UNSCR 687;
and to refuse to allow inspectors full and unrestricted access
to all declared or suspected facilities associated with the
storage, development, or production of weapons of mass
destruction and ballistic missiles. Iraq's incremental
approach to compliance with UNSCR 687 is designed to lower the
international demand for future U.N. inspections, thereby
protecting covert Iraqi military capability.
Iraq has willfully underdeclared the extent of its
nuclear program and begrudgingly and in piecemeal fashion
acknowledged the scope and breadth of its program, and then
only under extreme pressure from the leadership of the United
Nations. Iraq is continuing a pattern of covert "damage
control" operations including the removal, hiding, destruction
of, and covert recovery of nuclear-related equipment. This
activity is clearly intended to foil efforts to determine the
true status of its programs and to shield its nuclear
capability from destruction. Iraq has obstructed the U.N.
inspection efforts and has resorted to force and denial of
medical assistance. Iraq continues to insist on the peaceful
nature of its nuclear program, despite overwhelming evidence
to the contrary.
Iraq has underdeclared the number of ballistic missiles,
critical missile components, and facilities and has made
willful attempts to deceive inspectors during missile
inspections by attempting to conceal critical components from
discovery by inspectors.
The Iraqis are known to have an enormous chemical weapon
program, but they have substantially underdeclared their
facilities, materiel, and munitions and have removed records
to prevent access to proscribed items by U.N. inspection
teams.
The Iraqis have maintained from the outset that they
have no biological weapon program and have noted that they
ratified the Biological Weapons Convention on 8 April 1991.
Despite these remonstrations, the existence of a substantial
Iraqi biological weapon program has been credibly asserted by
numerous sources. Evidence, such as the existence of
PAGENO="0115"
111
unusually large microbial production systems, anomalous
containment capabilities, and antiaircraft installations at
sites alleged to be peaceful microbiological research
activities, makes the Iraqi assertions very hollow.
Chemical Destruction. A satisfactory plan to destroy
the CW weapons and agents has not yet been decided on. The
Iraqis did submit a plan that essentially involved
incineration of the mustard agent at the Samarra CW facility.
For nerve age~it disposal, they proposed a chemical hydrolysis
using a 10-percent sodium hydroxide solution. This process
would yield six to seven times the volume of original agent in
the form of waste, which the Iraqis suggested could be buried
onsite. Both proposals were viewed by inspectors as being
unsafe or environmentally unsound. Currently, a satisfactory
dest,ruction plan is still being considered.
The U.N. Special Commission (SPECOM) is resp~~ible for
destroying, removing, or rendering harmless Iraq's ballistic
missiles and CBW capability. The IAEA is responsible for the
same functions regarding all nuclear warfare materiel. A
long-range monitoring plan was submitted to the U.N. Secretary
General by the SPECOM on 1 August, but, as yet, has not been
approved. The United States had substantial input to this
plan.
Nuclear materials and related equipment have been, in
piecemeal fashion, declared to the IAEA. The fourth
inspection team has finished its tour. Nuclear materiel has
been taken into custody, but not yet destroyed. A parallel
nuclear long-range plan has been also submitted to the U.N.
Secretary General.
Ballistic missile destruction is presently in progress.
U.N. inspection teams have supervised the cutting, crushing,
and exploding of missiles and equipment over the term of three
inspections. CBW facilities are still being surveyed. The
Iraqis have opposed a suggestion that chemical agents and
munitions be destroyed "in situ." Irrespective of Iraqi
PAGENO="0116"
112
wishes, hazardous materiel probably will not be removed from
Iraq for further disposition. It may be consolidated at one
place for destruction onsite. An unresolved issue is the
procedure for emptying filled munitions.
The approval of the SPECOM's long-range monitoring plan
is expected shortly. It will cover 3 to 5 years and beyond.
The United Nations has requested substantial U.S. personnel,
equipment,, monetary assistance, and surveillance assets to
support Iraqi compliance with UNSCR 687.
PAGENO="0117"
113
Question 12: SCUD missiles were reportedly used in the
battle of Khost, Afghanistan, in the past several weeks. Can
you verify this use? How many SCUD missiles have been fired
during the Afghan civil war? Is there any evidence that U.S.-
origin technology or equipment is being used to enhance the
Afghan missiles? Does the Soviet Union continue to transfer
SCUD missiles to the Afghan Government? If so, is this in
violation of their pledge last February to adhere by the MCTR
principles?
Answer;
I The total number of
SCUD missiles fired in the Afghan ci~~'l war since the Soviet
withdrawal in February 1989 is approximately 1,540.
SCUD missile capabilities exceed the thresholds set by MTCR--~
maximum range of 300 km and maximum payload of 500 kg.
* H: * `~1 /
0C7 ~ 199j
PAGENO="0118"
114
Question 15: What is the status of the 1,500-mile-
range CSS-2 "East Wind" missile which China transferred to
Saudi Arabia in early 1988? Are they operational? Has the
United States been granted access to those launch sites, as
was requested and denied at one time? Are the launch
facilities manned by Chinese technicians? Were the missiles
ever considered for operational military use during Operation
DESERT STORM? Do you think that these missiles deterred Iraqi
military ope~a~ions against Saudi Arabia?
Answer:
/
PAGENO="0119"
115
Question 16: What information does the Defense
Department have on the Iraqi organization Badr General
Establ ishmen~~?
Answer
uc7~1.
U
/
PAGENO="0120"
116
[The subcommittee did not receive written responses to questions
8, 9, 10, 11, 13, and 14.]
Chairman PICKLE. Now, the Chair will call up the first panel
which consists of Mr. Steve Davis and Mr. David Burns. I am going
to ask those two gentlemen, representing U.S. Customs Service to
come forward to make a statement and then we will have a third
witness sworn in to be a part of that panel.
Mr. Burns, and Mr. Davis, please take your seat at the witness
table.
The first witness we will have today will be Mr. Steve Davis,
senior special agent from the Sacramento, California office.
Mr. Davis.
STATEMENT OF STEVEN C. DAVIS, SENIOR SPECIAL AGENT, U.S.
CUSTOMS SERVICE, SACRAMENTO, CALIF.
Mr. DAVIS. Thank you, Mr. Chairman.
Today, I would like to outline the investigation that we conduct-
ed of Dr. Helmy, that involved the conspiracy to export missile
technology and components for the Condor II ballistic missile
project.
It began on March 19, 1988, when Customs agents in Sacramento
were advised by their counterparts in Chicago that a Mr. Fouad
Mohamed was en route to Sacramento from Cairo, Egypt, via Chi-
cago. The Chicago agents advised that Mohamed was suspected of
being involved in the illegal diversion of licensable materials. Upon
arrival in Sacramento, Mohamed was placed under surveillance by
Customs agents who observed him being met by a family who
drove him to a hotel.
The vehicle, when the registration was checked was determined
to be registered to Dr. Helmy. It was learned that Mr. Mohamed
registered at the hotel under the name of F. Algamal. On March
20, Dr. Helmy drove Mohamed to a second hotel where Mohamed
registered under the name of Foud Elgmal.
On the 22nd of March, Dr. Helmy met with Mohamed at his
hotel, where Helmy was observed to sign over approximately 10,000
dollars' worth of traveler's checks to Mohamed. It was later deter-
mined that this money was used to facilitate approximately 27,000
pounds of various components of solid rocket fuels.
It was also learned later that Helmy had five K-Karb blocks and
carbon cloth. Mohamed agreed to smuggle them out of the country
on his return to Cairo. Because of their ability to withstand high
temperatures, these K-Karb blocks and the carbon cloth are used
in the production of nozzles for rocket engines, and missile nose
cones.
On the morning of March 23, Customs agents who were conduct-
ing a surveillance of Helmy's home observed him loading two card-
board boxes into one of his cars. At approximately 6 p.m. that
evening Dr. Helmy was observed departing his residence in the car
containing the two cardboard boxes.
He was followed to Mohamed's hotel. Customs agents then fol-
lowed Dr. Helmy and Mohamed to the Sacramento airport where
the two purchased airline tickets to Washington, D.C. The boxes
from Helmy's car were checked as baggage and in the baggage
PAGENO="0121"
117
check area, Customs agents were able to examine the exterior of
the two cartons which were addressed to 23-8 Tracy Place, Wash-
ington, D.C., under the name of Foud Moha.
Customs agents from Reston, Va., were able to determine that the
address on the cartons was that of the Egyptian Military Attache
in Washington, D.C. Upon arrival in Washington, D.C., Dr. Helmy
and Mohamed were observed by Customs agents getting into an
Egyptian diplomatic vehicle which drove to the Vista International
Hotel where Dr. Helmy stayed. Mohamed and the boxes were
driven to a house at 1821 T St., Washington, D.C., and it was later
learned that this building was owned by the Egyptian Embassy.
Mohamed and the boxes went into the house on T Street and the
boxes were never seen again.
On March 25, Dr. Helmy returned to Sacramento and Mohamed
left the United States for Egypt. On March 30, Customs agents in
Sacramento interviewed the head of security for Aerojet General
and determined that Dr. Helmy was a staff scientist working for
the Aerojet Solid Propulsion Co. Dr. Helmy held a secret security
clearance and had access to many classified documents and
projects. The projects underway in Dr. Helmy's area involved mis-
sile propellants and gun projectiles.
It was also learned that Dr. Helmy was a naturalized American
citizen who had been naturalized in October of 1987. The same day
Customs agents retrieved the trash from in front of Dr. Helmy's
house and discovered two pages of handwritten notes describing in
nonscientific terms how to work with carbon-carbon materials.
These handwritten notes were identified by Aerojet as instructions
on how an exhaust nozzle for a rocket would be constructed from
carbon composite material, including a brief instruction on where
to obtain the required materials.
It was determined that carbon composite materials and technolo-
gy are controlled items and require Department of State export li-
censes. It was also verified that neither Dr. Helmy, nor Mohamed
had applied for or received any export licenses from the Depart-
ment of State.
During additional meetings with Aerojet it was learned that Dr.
Helmy was a recognized expert in solid rocket propulsion and had
an extended background in carbon composite technology. The Cus-
toms case agent then began to pick up the trash from in front of
Dr. Helmy's residence on a weekly basis.
These trash runs resulted in the recovery of an envelope from
the Fiberite Corp. which was addressed to Science and Technology
Applications, at Dr. Helmy's address and marked to the attention
of A. Helmy. The Customs agent also determined that Science and
Technology Applications had not received an export license from
the Department of State.
The case agent contacted the head of security for Fiberite Corp.
who stated that the description of the large box, taken into the res-
idence owned by the Egyptian Embassy, was similar to the boxes
used by Fiberite to ship some of their carbon composite materials.
Through trash runs and telephone toll analysis, the case agent
began to collect sufficient probable cause to obtain a court order
for a wire tap of Dr. Helmy's residence and office telephones. The
PAGENO="0122"
118
trash runs revealed a handwritten list of chemical compounds and
other materials; it appeared to be a shopping list.
Shipping documents were also recovered that indicated some ma-
terials had already been shipped to Egypt. Those companies identi-
fied through the trash runs which appeared to be legitimate busi-
nesses were contacted concerning their business dealings with Dr.
Helmy. It was learned that all of the chemical compounds on this
shopping list could be used as components for solid rocket fuel.
It was also learned that not all of these items required export li-
censes from the Departments of State or Commerce for export to
Egypt. During late May 1988, Customs received a court order au-
thorizing a wiretap of Dr. Helmy's residence and office telephones.
One of the first intercepted phone calls was between Dr. Helmy
and James Huffman, who in effect, was Helmy's front man for pur-
chasing the chemicals and other materials. Huffman would make
the purchases in the name of his company, Mesa Associates.
During this conversation, Dr. Helmy and Huffman reviewed the
status of their efforts to purchase the items on the list recovered
during the previous trash run.
Huffman also summarized difficulties he was encountering with
several of the manufacturers. During early June, a conversation
was intercepted between Dr. Helmy and Admiral Elgohary, who
was in charge of the Egyptian procurement office in Washington,
D.C. During the conversation, Dr. Helmy explained how they were
having the manufacturer ship the materials to one location in the
United States, and they would then transship the materials to a
second location where it would be turned over to the Egyptian pro-
curement office for export. The same day a conversation between
Dr. Helmy and Ahmed Khairat, also known as Dr. Yossef was
intercepted in which Dr. Helmy reiterated the purpose of trans-
shiping the materials within the United States, that it was to con-
ceal the fact that they would be exported to Egypt.
Also during late May, Huffman told Dr. Helmy that he had run
into problems attempting to purchase one of the rocket fuel compo-
nents, because it was a restricted item. Huffman stated, "I don't
want to make anybody nervous and make them suspicious so that
they start sending somebody around to investigate * * ~ We have
to be very careful about that."
During another conversation Huffman told Dr. Helmy that he
had directed that seven barrels of rocket fuel components be listed
as seven drums fatty acid of animal oil.
Huffman's telephone conversations with Dr. Helmy repeatedly
referred to conversations with Admiral Elgohary and Sousha. At
the beginning of June, Huffman called Dr. Helmy from Admiral
Elgohary's office. Huffman explained that Elgohary had a problem
with the lack of export licenses for the items that they were deliv-
ering to the Egyptian C-130s and he asked Helmy to deal with El-
gohary.
Dr. Helmy reminded Elgohary that the items he and Huffman
were shipping could not legally be exported. Following this call, Dr.
Helmy contacted Khairat in Austria and explained the problem he
had just encountered with Elgohary. Helmy explained that Admi-
ral Elgohary had tried to insist on providing export documents. He
also told Khairat, "I told him these items are controlled ~.rid
PAGENO="0123"
119
cannot be exported outside the United States. I told him that if
they knew I was buying it to export it, I will be thrown in jail."
Helmy went on to ask Khairat to call Admiral Elgohary and ask
him to behave himself. Dr. Helmy warned that "if Elgohary did not
behave, not only will I be in trouble, but also those who are helping
me." "They also will be in great, great trouble. I have Americans
here who are covering my trails and I do not want the problems to
be caused by you."
Later that same day Khairat called Dr. Helmy and told him that
he had explained to Elgohary the need to give Dr. Helmy as much
assistance as possible. As part of the conspiracy the Customs inves-
tigation had also determined that Dr. Helmy had special ordered
two ceramic nose cones from a company named Greenleaf Technol-
ogies.
We have one of those nose cones here that is very small and
there were two of these types of items. On June 10, 1988, Customs
agents acting in an undercover capacity delivered one of these de-
vices to Dr. Helmy. In addition, Huffman ordered two antennas
that are used on sounding rockets and he had also received a quan-
tity of R-45-HT which is a component of solid rocket fuel. These
three items and carbon composite material all required Depart-
ment of State export licenses.
During the same time period, Huffman ordered 400 pounds of
carbon composite material from the Fiberite Corp. Customs agents,
acting in an undercover capacity, delivered the carbon composite
material to Huffman's freight forwarder in Ohio and this was in
early June. Because the carbon composite material must be stored
at temperatures no greater than 40 degrees, Huffman's freight for-
warder made arrangements to have the material stored at a local
beer dock.
Between June 14 and 22, Helmy and Huffman had several con-
versations about how the carbon composite material would be
smuggled out of the United States, past Customs and their fears
about it being detected.
The four boxes of carbon composite material were put into a
wooden box and then marked "AF Club, attention Sousha". Huff-
man commented to Dr. Helmy, "Well, wish us luck, haven't gone to
jail yet."
On June 25, the carbon composite material and two drums of R-
45-HT were seized at the Baltimore/Washington Airport, as the
carbon composite material was being loaded onto an Egyptian C-
130 aircraft. The manifest did not list these four boxes of carbon
composite material. Colonel Sousha was arrested at that time; how-
ever, he was released a short time later after his diplomatic immu-
nity had been confirmed.
An arrest warrant had also been obtained for Admiral Elgohary;
however, shortly before it was to be served, it was learned that he
had diplomatic immunity and the arrest warrant was not served on
him.
Dr. Helmy and James Huffman were both arrested and approxi-
mately $810,000 that Helmy had received to purchase the materials
and technology was seized and forfeited to the Government. Dr.
Helmy and Huffman both pled guilty and each was sentenced to
approximately 4 years in prison.
PAGENO="0124"
120
In addition, Foud Mohamed and Mr. Khairat were indicted and
at this time there are -arrest warrants outstanding for them.
That concludes my testimony.
[The prepaed statement follows:]
PAGENO="0125"
121
Prepared Statement
Senior Special Agent Steven C. Davis
U.S. Customs Service
The Investigation of Abdelkader Helmy
According to documents obtained in his case, the Ministry
of Defense ("MOD") of the Arab Republic of Egypt entered into
agreements in 1984 with Iraq and Argentina for the joint
development of an intermediate range ballistic missile. Analysis
of these documents by the Defense Intelligence Agency shows that
the missile, generally referred to as the Condor II or Bader
2000, was intended to be equivalent to the American Pershing
missile and to have a range of approximately 1,000 kilometers and
a payload of approximately 1,100 pounds. Defendant Helmy has
acknowledged the accuracy of this analysis.
According to Helmy, the initial plans for the Condor II
called for the production of ten missiles. Five of these were to
be retained by the MOD and five delivered to Iraq. Iraq agreed
to fund the project and Egypt agreed to provide the necessary
technical expertise. The initial construction and testing of
the ten missiles was to be done in Argentina, although the MOD
anticipated that it would later produce additional missiles in
Egypt.
Two primary companies were set up to handle the Condor II
project. IFAT Corp. Ltd., located in Zug, Switzerland, was
responsible for the financial aspects and CONSEN S.A.M., located
in Monaco, was to handle the conracting. A formal contract
between the MOD and IFAT was signed on February 15, 1984. CONSEN
recruited engineers for the Condor II project from several
European companies. Egyptian Colonel Ahmed Hussam El-din Yossef
Khairat was picked to coordinate the development of the Condor II
project with IFAT and CONSEN. Me established an office, shared
by IFAT and CONSEN, in Salzburg, Austria for this purpose. The
Condor II project's chief engineer was Egyptian Colonel Fuad
Algamal.
Defendants Helmy and Huffman first became friends in 1983
when Helmy was working for Teledyne, McCormick, Selph
("Teledyne") in Hollister, California. At that time, Huffman was
a midwest marketing representative for Teledyne and Helmy was
Teledyne's chief scientist on a gun project. Huffman was
planning a trip to Egypt and asked Helmy for introductions to
some of Helmy's friends.
Helmy provided Huffman with the names of several contacts in
Egypt, one of which was Col. Khairat. While Huffman was in
Egypt, he attempted to obtain business with the Egyptian military
for both Teledyne and his own company, Mesa Associates. During
1984, Huffman went to Egypt on official business for Teledyne.
Helmy met Huffman in Egypt and arranged for him to meet several
high ranking Egyptian military officials. During this trip Helmy
discussed the Condor II project with Huffman. Khairat requested
Huffman to obtain strap-down inertial guidance systems for the
Condor II project.
In September of 1987, Helmy went to Cairo on vacation and
met with General Abdel Elgohary, Col. Khairat, and other Egyptian
military officials, all of whom he had known for many years.
According to Helmy, these officials explained that they were
having problems obtaining some of the items that were critically
needed for the Condor II project. While the main problem was
finding carbon-carbon for use in the missile nose cones, there
were also problems in procuring many of the chemicals needed for
the solid propellant first stage motor.
Helmy claims that he explained to them that carbon-carbon in
particular was subject to American export controls and could not
be exported without licenses from the State Department. Helmy
also claims that he suggested that alternative non-controlled
items would give satisfactory results and volunteered to help
obtain these materials. In particular, Helmy supposedly
recommended that a non-spherical aluminum would work almost as
well as the spherical aluminum that Condor II scientists were
requesting and that a two-dimensional type of carbon-carbon
called K-Karb could be used in the nose cone instead of the
three-dimensional varieties used in American missiles. Helmy
says that he was told to coordinate his activities with Khairat
and do whatever was necessary to ensure the project's success.
PAGENO="0126"
122
2
Khairat agreed to provide Helmy with a list of the materials
he needed and later sailed the list to Helmy in California. The
list contained a long series of chemicals needed for the solid
propellant for the first stage of the Condor II missile and the
names of companies from which the materials could be obtained.
Khairat obtained Helmy's bank account number and told him
that the money to pay for the materials would be wired to Helmys
account by IFAT. Khairat also told Helmy that the Egyptian
Assistant Military, Naval, and Air Attache in Washington, Colonel
Abdel Monem Hamza, would help him with shipping the materials.
Helmy's plan for the nose cone envisioned two possible types
of nose cone materials. One was a silicon-based ceramic-ceramic
composite material and the other the carbon-carbon composite K-
Karb. On November 30, 1987, Helmy contacted the Advanced
Composite Materials Corporation and obtained a price quotation
for two rods of the ceramic-ceramic composite. On December 8,
Helmy ordered the rods with the intention of having them tested
to see whether they would be a suitable material for the nose
cones. The rods were shipped to Helmy's El Dorado Hills home on
December 11. At approximately the same time, Helmy also ordered
several K-Karb panels from Kaiser Aerotech. Helmy paid $1,800.00
for rods and $1,966.29 for the K-Karb panels. This money came
from the initial $30,000 wire transfer of IFAT funds that was
made to Helmy on December 15, 1987.
In mid-December, 1987, Algamal and another Egyptian Colonel
came to California to visit Helmy and take the nose cone
materials back to Egypt for testing. Helmy had by this time
also prepared a report for condor II scientists entitled "Testing
and Evaluation of C-C Material for Atmospheric Reentry
Applications.? This report dealt with methods for testing the
K-Karb's ability to be used as a nose cone material. Most of the
information in this report is copied- or taken verbatim from a
document Aerojet scientist has prepared for NASA entitled
"Evaluation of Carbon-Carbon Composites for Space Engine
Nozzles." A copy of this latter document was seized from Helmy's
home in June, 1988. Its cover clearly states:
Subj ect to Export Control Law
This document contains information for manufacturing or
using munitions of war. Export of the information
contained herein, or released to foreign nationals
within the United States, without first obtaining an
export license, is a violation of the International
Traffic in Arms Regulations. Such a violation is
subject to a penalty of up to 2 years imprisonment and
a fine of $100,000 under 22 U.S.C. 2778.
Algamal returned to Egypt with the report as well as the
ceramic composite rods and the K-Karu Helmy had obtained.
Helmy also contacted a friend, Hassan Khatib, owner of the
Integrated Research Corp. in Los Angeles, and asked for help in
producing some of the chemicals needed for the missile's
propellant. Helmy asked Khatib to purchase, among other things,
18,000 pounds of military grade aluminum powder, 255 pounds of an
anti-oxidant called Cyanox, and 11,000 pounds of a synthetic
* rubber compounds called hydroxyl-terminated polybutadience
("HTPB'). Helmy told Khatib that the HTPB would be used for
-making plastic bottles, shoes, and glue.
Neither the aluminum nor the Cyanox needed licenses for
export to Egypt. Khatib ordered these materials in March of 1988
and had them shipped to Egypt in April. Khatib realized that the
HTPB would require an export license, so he prepared license
application forms for both the Commerce Department and the State
Department and sent them to Helmy with instructions to have thec
completed. To preserve the secrecy of the project, however,
Helmy never submitted the license applications and instead
obtained this material later through Huffman.
Tests on the K-Karb and ceramic composite rods showed that
while the K-Karb could be made into workable nose cones, the rods
could not be machined into the proper shape. Helmy therefore
ordered five K-Karb blocks, from Kaiser Aerotech with the
intention of shipping them to Egypt for machining. He also
contacted a company called Greenleaf Technical Ceramics and
arranged to have them cast two nose cones out of the ceramic-
PAGENO="0127"
123
ceramic composite to avoid the problems with machining this
material. Helmy described the items he wanted merely as "cones,
but his own records clearly reflect that they were intended to be
nose cones for a missile.
Khairat had also informed Helmy that he needed an ablative
composite fabric as a heat shield for the Condor II payload
covers. Helmy therefore contacted HITCO and ordered a large
quantity of a rayon-based carbon fabric suitable for heat
shields.
In March of 1988, Helmy went to Washington to meet with
Egyptian officials about the progress of his work, and to deliver
the K-Karb blocks and the HITCO fabric. Helmy also prepared a
report entitled "Procedure for Ablative Carbon-Carbon Fabric
Application" explaining how to apply the HITCO fabric to the
missile. Algamal agreed to come to Sacramento to meet with
Helmy and help him transport the K-Karb blocks and the HITCO
fabric back to Washington.
Algamal flew from Cairo to Sacramento on March 19, 1988 and
was met at the airport by Helmy and his family. Helmy took
Algamal to a local hotel and helped him register. On the next
day, Helmy helped Algamal move to a different hotel and used his
own credit card to secure payment of the room. On March 22,
Helmy met with Algamal at the hotel. The two discussed the
status of the Condor II project and Helmy's export activities.
Helmy also signed over $10,000 worth of traveller's checks to
Algamal to use in expediting the shipment that Khatib had already
made for Helmy. Helmy told Algamal that he had received the K-
Karb blocks and the carbon cloth from HITCO and Algasal agreed to
smuggle them out of the country with him when he returned to
Cairo.
On the following day, Algamal and Helmy flew to Washington
with Helmy's report, the K-Karb, and the HITCO fabric. There
Algamal delivered them to a building owned by the Egyptian
Military Attache. They were later smuggled out of the country
and sent to Egypt.
Helmy says that while he was in Washington, he met with
Egyptian military officials and was told that the procurement
effort was going too slowly and would have to be speeded up.
Helmy suggested using Huffman to help him get the materials out
of the country because of the latter's earlier export activities
on behalf of the Egyptian government. Helmy and Khairat had in
fact already discussed using Huffman's services.
In late April of 1988, Helmy learned that Huffman was in
Hollister and called to invite him to Sacramento. Helmy told
Huffman that he wanted his assistance in obtaining hydraulic
components. Although Helmy did not mention it to Huffman on the
telephone, documents seized from Helmy indicated that the
Egyptians needed these components for an Egyptian project to
upgrade American Sparrow air-to-air missiles. Huffman came to
Helmy's house the same night as the phone call and Helmy
described to him the hydraulic components he wanted. Helmy also
told Huffman that he needed to obtain a number of chemicals and
showed him a list of the chemicals. Huffman recognized the
hydraulics package as similar to those used on the Sparrow and
asked if those parts were in fact for the Sparrow. Helmy
acknowledged that the Egyptians were working with the Sparrow's
power drive, but did not give him any details since the project
was considered secret by the Egyptians.
Helmy told Huffman that the Ministry of Defense had already
given him the money to pay for the materials so there would be no
"red tape." Helmy explained to Huffman that the materials would
be smuggled out of the country on the Egyptian C-l3O that the
Egyptian procurement office used to fly equipment between
Washington and Cairo. Huffman was familiar with this plane from
his earlier dealings with the Egyptians. Huffman then
specifically asked Helmy whether the Egyptian government would
get export licenses for the equipment and Helmy told him that
they needed to export the materials without export licenses and
without shipping documents. Helmy specifically remembers using
the word "smuggle" to describe their activities.
Helmy told Huffman that he would pay all of the expenses and
wold give Huffman 15% of their gross profit on the exports.
PAGENO="0128"
124
4
Huffman in turn was to give Helmy a 5% kickback. The net result
was that Helmy would cover all of the expenses and Huffman would
receive 10% of the gross profit. Huffman agreed to Helmy's terms
and Helmy promised to send Huffman a complete list of the parts
and materials he needed and their specifications. Huffman agreed
to get price quotes for the materials and send them on to Helmy.
Huffman was to be responsible for ordering the materials and
arranging for their transportation to Washington.
Huffman later proposed a method for concealing their
operations. Huffman suggested that he purchase the needed
materials in the name of his business, Mesa Associates, and ship
them to the D&N Packing warehouse in Shelby, Ohio, far from his
home and office in Lexington. There, some of the items would be
repackaged and the identifying markings would be removed from
the rest. Huffman would then have the materials shipped to the
D.F. Young Shipping company in Harmon, Haryland, a freight
consolidator used by the Egyptian Procurement Office (EPO") in
Washington for shipping equipment to Egypt. By using this
shipping method, none of the suppliers or shippers would know
that the materials were intended for export.
Helmy told Huffman to coordinate his activities with colonel
Hamza. Shortly after Huffman and Helmy began their work,
however, Hamza became sick and could no longer help them.
Khairat then told Helmy that he should begin working with Admiral
Abd Elrahin Elgohary of the EPO and colonel Mohamed Abdallah
Hohamed. Hohamed, usually referred to as Shousha, was the
military Attache's representative at D.F. Young and was
responsible for coordinating the bi-weekly C-l3O shipments. When
Helmy told Huffman of this change, Huffman indicated that he knew
both Elgohary and Shousha well from earlier dealings with the
EPO.
The shipping method Helmy and Huffman decided to use was
specifically designed to circumvent United States customs laws.
Helmy later described this method in a telephone conversation on
June 1, 1988 with Admiral Elgohary:
"Sir, we really do not want to bring him
(the shipping agent) into this because we
are carrying on this transaction in three
steps, you know, we bring it (we get it)
from the company in a certain way on the
basis that it will be used here, and then
we transport it into another place and
thirdly it gets to you sir so nobody will
know where it is going."
On the same day, Helmy reiterated the purpose of the
shipping methods in a telephone conversation with Khairat:
"We are able to acquire [these items)
through our own personal ways which
require us to store it in two separate
warehouses en route, so that no one could
tell where it is going."
Huffman returned to Ohio and immediately began carrying out
the plans on which he and Helmy had agreed. Helmy sent Huffman a
list of the chemicals that he would need. By Hay 1, 1988,
Huffman had contacted many of the suppliers they would use,
obtained price quotations, formulated a purchasing plan and had
faxed it to Helmy. Specifically included in the plan were an
ablative carbon phenolic fabric manufactured by Fiberite and the
synthetic rubber HTPB, both of which require State Department
export licenses. Helmy had told Huffman earlier that one of his
needs was for the bladders and hydraulic packages for the Sparrow
project. They later had several telephone conversations about
Huffman's efforts to obtain these parts. Helmy also sent Huffoan
two checks, one for $25,000 and another for $31,000 to cover
Huffman's initial expenses.
One of the rocket program's pressing needs was for large
quantities of the artificial rubber HTPB that Helmy had been
trying to purchase through Khatib. Helmy wanted to export at
least 11,000 pounds of this material and had made inquiries in
February of 1988 with the Chemical Systems Division of United
Technologies ("C.S.D.") about whether the water content of their
HTPB was low enough for his needs. C.S.D. had their quality
PAGENO="0129"
125
5
control department perform an analysis of the material and sent
the results to Helmy in mid-March, 1988.
Huffman contacted C.S.D. on Helmy's behalf in early May.
C.S.D. was concerned about the use to which Huffman was going to
put the material, but Huffman assured C.S.D. that he intended to
use the product locally and agreed to confirm this in writing.
In a May 6, 1988 letter to c.s.o., Huffman stated that the R45M
would "be used in a commercial application in our area." C.S.D.
shipped the HTPB to Shelby, Ohio on May 12, 1988.
Helmy also asked Huffman to buy microwave telemetry antennas
for the Condor II. On May 3, 1988, Huffman contacted Vega
Precision Laboratories and requested product information and
price quotations on two parabolic telemetry antennas. These
antennas are specifically designed for rocket telemetry. On May
17, 1988, Huffman placed an order with Vega for two antennas.
Vega personnel asked Huffman what the intended use of the antenna
was. Huffman said they were for commercial use for local
programs.
On May 4, 1988, Huffman ordered a 500 pound drum of EPON
from the Miller-Stephenson Company and had it shipped to D & N
Packing. Epon is used for gluing composite fabrics to surfaces
in the aerospace industry and Helmy intended to use it for this
purpose on the Condor II.
Helmy had already obtained and shipped 225 pounds of the
antioxidant Cyanox but needed more. On May 9, Huffman ordered an
additional 200 pounds of Cyanox from American Cyanimide in North
Carolina. This chemical was shipped to Mesa Associates in care
of D & N Packing on May 12. Huffman also contacted representa-
tives of the Henkel Corporation in La Grange, Illinois and
ordered a 55 gallon drum of Versamide 125 and another drum of
Versamide 140. These two chemicals are epoxy hardeners that are
used in conjunction with EPON. Henkel shipped these two drums to
Mesa, in care of D & N Packing on May 27.
Sometime in early May, Huffman also contacted the Arsynco
Company in Flushing, New York and inquired about purchasing a
rocket propellant component call MAPO (tris-2-methyl aziridinyl
phophine oxide). The Arsynco representative told Huffman that
since he was a first time buyer of MAPO, he would have to give
Arsynco a letter stating the use to which the chemical would be
put. On May 10, 1988, Huffman sent a letter to Arsynco
responding to their concerns. Almost everything in the letter
was a fabrication. Huffman first implied that MESA Associates
was a manufacturer of wire and cable harnesses that did both
commercial and military production for IBM, the United States
Navy, the United States Army, and Teledyne. Although Huffman
knew that the MAPO would be exported, he further claimed that he
wanted the MAPO for use "as a curing agent for a research project
in the United States." Relying on Huffman's representations,
Arsynco shipped 40 pounds of MAPO to D & N Packing on May 26,
1988.
On May 20, 1988, Huffman called Mobay Chemical and spoke to
one of their sales representatives about purchasing hexamethylene
diisocyanate or MMDI, another of the chemicals on Helmy's list.
HNDI's primary use is as a curing agent for HTPB in solid rocket
fuels. Huffman told the sales representative, however, that he
wanted to use the chemical to paint the floor of a local
gymnasium as a community project. As Huffman's own notes show,
the sales representative told him that hexamethylene diisocyanate
is used primarily in rocket fuels. The sales representative told
Huffman that, while this chemical could be chemically altered to
work as a paint additive, this would not be easy to do and there
were other chemicals that would do a better job. Although
Huffman still wanted to purchase the hexamethylene diisocyanate
the sales representative was suspicious and refused to fill his
order.
On May 25, 1988, Huffman called Nelmy and described his
problems in getting the hexamethylene diisocyanate. Huffman told
Helmy that he had tried to get the chemical from Mobay but had
been refused because Mobay knew ~iat it was a rocket fuel
component and was restricted. Huffman told Nelmy that he would
wait a few days before contacting any other chemical companies
because, "I don't want to make anybody nervous and make them
51-840 0 - 92 - 5
PAGENO="0130"
126
6
suspicious so they start sending somebody around to investigate.
We have to be very careful about that."
Also in May, Helmy asked Huffman to help him purchase large
quantities of maraging steel for the Condor II project. Maraging
steel is a modern type of steel that is both ductile and hard and
is ideal for use in rocketry. The particular grade of maraging
steel Helmy and Huffman were purchasing is "the particular grade
commonly used in rocket motor casings production." Helmy wanted
to purchase both large pieces of sheet steel and smaller forged
steel rings for the Condor II project. The sheets were to be
used for the motor casing of the first stage of the Condor II
rocket, while the forged pieces were intended for making the
connections between the casing segments and the head and nozzle
of the rocket. The total price of the steel was estimated by
Huffman and Helmy to be about $299,000.00. The engineering
specifications for these pieces had been given to Helmy by
Algazial in March.
Early in May, Huffman had contacted Leo DeLong, the
president and owner of the 0 & N Packing company and told him he
wanted him to receive, store, and reship several items for him.
DeLong had no previous contacts with Huffman and did not know
what Huffman intended to do with the materials sent to D.F. young
in Baltimore for "A.F" Club Attn Shousha", an ultimate consignee
was never indicated. Muffman told people at D & N that he wanted
several items consolidated into unmarked boxes and wanted drums
of chemicals painted black to conceal their identifying markings.
He also wanted the shipping containers relabelled AG1, AG2, etc.
Several of DeLong's workers did work on the boxes for
Huffman. The receipt and storage of the materials was done by
the 0 & N foreman, Shannon Freibel, and workers Trent DeLong and
James Swanger. When the D & N workers refused to paint over the
hazardous waste labels on the drums, Huffman's son, Adam,
repainted several of the drums.
By late May, Huffman had accumulated at D & N Packing many
of the chemicals that Helmy required. Huffman then made
arrangements with Elgohary and Shousha to smuggle nine drums of
these chemicals out of the country on June 10, 1988 aboard the
Egyptian military transport that was scheduled to leave
Washington on that day.
On May 22, 1988, Muffman sent a letter to Leo DeLong at D &
N Packing with instructions on how to prepare the drums for
shipping. Huffman told DeLong to mark the nine containers AG1
through 9. DeLong was to "eliminate as much marking as possible
before applying on the A-G." In another memo to DeLong, Huffman
instructed DeLong to "clear marking off containers and ship."
Huffinan also told DeLong to mismark the shipping documents to
disguise the contents of the drums. The original invoices for
the items had clearly stated what they were. Huffman had DeLong
and his workers change the designations on the documents that
would accompany the containers to Maryland. The seven drums of
plasticizer that had been labeled AG-i through AG-7, for
example, were to be listed as "7 drums fatty acid of animal oil."
On May 27, Helmy called Huffman to find out what progress
had been made. Huffman reported that he had just spoken to
Elgohary and would meet with him on June 1 to discuss the
details of the shipment. Huffman also assured Helmy that all of
the markings had been removed from AG1-9, and the contents had
been falsified on the airways bills. According to Huffman, "it's
very, very, you know, very clean as far as the way that is
going."
In coordinating the shipment of these materials, Huffman
worked closely with his contacts in the EPO and the Military
Attache's Office. Huffman's telephone conversations with Helriy
repeatedly refer to conversations with Elgohary and "Shousha."
On May 25, 1988, for example, during the first intercepted
telephone call between Helmy and Huffman, Huffman told Helmy that
he had just shipped out AG1 through 9 and would arrange the next
shipment "as soon as Shousha has room for it in his warehouse."
Huffman went on to say that he had talked to Shousha the day
before to tell him what was coming. Two days later, on May 27,
Huffman sent a followup letter to Admiral Abd Elrahin Elgohary,
the head of the EPO, confirming the shipment of AG1 through AG9
PAGENO="0131"
127
7
to D.F. Young.
On June 1, Huffman went to Elgohary's office to discuss the
upcoming shipments. During the course of this meeting, Elgohary
pointed out the problems he would have in concealing from the
shippers the contents of such large quantities of material and
the lack of export licenses. Huffman then called Helmy,
explained that Elgohary was having a problem with the lack of
export licenses, and asked Helmy to deal with Elgohary. Helmy
then spoke to Elgohary in Arabic and reminded him that the items
he and Huffman were shipping could not legally be exported.
Elgohary agreed that the problem was that he would have to give
invoices to the shipper, D.F. Young, to cover the materials.
Helmy agreed to provide fraudulent invoices to cover the
materials. After this call, Helmy contacted Khairat and
explained the problem he had just encountered with Elgohary.
Helmy explained that Elgohary had tried to insist on export
licenses.
I told him these items are controlled and
cannot be exported outside the USA. I told
him if they knew that I am buying it to
export it, I'll be thrown in jail."
Helmy also explained to Khairat the care he and Huffman had
taken to conceal their exports.
"We were able to acquire [these items] through
our own personal ways which require us to store
it in two separate warehouses en route so that
no one could tell where it is going."
Helmy asked Rhairat to call Elgohary and "ask him to behave
himself." Helmy warned:
"that if Elgohary did not behave, not only
I will be in trouble, but also those who
are helping me, too. They also will be in
great, great trouble . . . . I have
Americans here who are covering my trails
and I do not want the problems to be
caused by you."
Later the same day, Khairat called Helmy and told him that
he had explained to Elgohary the need to give Helmy as much
assistance as possible. Helmy informed Khairat that the
microwave antenna that Huffman had ordered would soon be ready.
Helmy also explained that as soon as the antenna was ready, he
would ship it to Egypt.
"If somebody from your end comes our way,
he can carry it in his suitcase."
On the following day, June 2, Huffman and Helmy spoke again
by phone. Huffman explained that things were getting complicated
because people had been asking him questions about whether the
items were dangerous and what they were being used for. Huffman
told Helmy that
"it's difficult, ah, I haven't told these
people anything. . . and I said, No, no, no,
these are just, ah, simple plastic materials.
[y]ou don't need to know. . . what's in the barrels."
Huffman said Elgohary wanted him to disguise the shipments
by placing the drums in boxes and labeling the boxes "personal
items for the Air Force Club" so they could get the boxes
through. Huffman told Helmy that he would have his warehouse
people build the boxes as requested. Huffman also told Helmy
that Elgohary wanted deliveries to the warehouse to be as late as
possible.
"What he's most concerned about .
is the problem with, ah, export licenses
and Customs and so forth. . He wants to
be able to get it 1 or 2 days before the
plane leaves, put it right on the plane
and have it out of here."
AG1 through 9 had been shipped to D.F. Young on May 27. On
June 10, Customs agents acting under the guise of doing a routine
inspection of the materials to be put on the Egyptian military
plane surreptitiously took samples from the various drums and
inspected the plane's cargo manifest. None of the items AG1
through AG9 were on the manifest. The items were nevertheless
PAGENO="0132"
128
loaded onto the plane and flown to Egypt.
One of the most critical needs for the Condor II project was
a large quantity of a carbon phenolic fabric manufactured by the
Fiberite Corporation called MX-4926. The great virtue of this
fabric is its light weight and its ability to ablate or char
evenly when exposed to great heat. Although other types of
carbon composite materials are used in a wide variety of
contexts, the only practical use of MX-4926 is in the
manufacture of rocket nozzles. Helmy in fact intended to obtain
the Fiberite material for use in manufacturing the flexible
rocket nozzles that the Condor II missile required for
maneuverability.
The initial contacts with Fiberite were made by Helmy
himself. In early April, Helmy called Fiberite and asked the
company to send information on ablative components to his company
`Sciences and Technologies Applications" in El Dorado Hills. The
information was sent to Helmy by Fiberite on April 6, 1988.
After Huffman's April meeting with Helmy, however, Huffman
assumed responsibility for obtaining the phenolic fabric. On Hay
4, 1988, Huffman ordered 436 pounds of MX-4926 from Fiberite. On
May 27, Huffman sent a check for $20,949.80 to Fiberite to cover
the cost of the fabric.
Fiberite shipped the fabric to D & N Packing on June 9,
1988. The bill of lading that accompanied the fabric and the
four cardboard containers in which the fabric had been placed
were all stamped with notices stating that the contents were
subject of export controls. Documents recovered from Huffman's
office clearly show that as early as June 9, 1988, he had
explicit notice from Fiberite that its material was subject to
export controls shipping invoice bearing that date clearly
states:
These commodities are authorized by the U.S.
Government for export only to (country of ultimate
destination). They may not be resold, diverted,
transferred, transshipped, or otherwise be disposed of
in any other country, either in their original
form or after being incorporated through an
intermediate process into other end-items,
without the prior written approval of the U.S.
Department of State.
Between June 14 and June 22, Helmy and Huffman had several
conversations about how the carbon fabric in particular was to be
smuggled past Customs and their fears about its being detected.
On June 15, for example, Huffman had called Helmy and told him
that he had talked to Shousha and been told that the next plane
out could take nine more containers. Huffman had decided to put
all four of the carbon phenolic packages into one wood crate and
mark it "Air Force Club." Shousha had told Huffman that with
that marking "he can get that through Customs easily." Huffman
commented further, "Well, wish us luck. Haven't gone to jail
yet."
Later in the same conversation, Helmy broached the
possibility of future clandestine shipments. Huffman reminded
Helmy of his problems with Mobay when he had been told that HMDI
was a restricted chemical. Huffman told Helmy that he did not
want the Egyptians to think that he and Helmy had "failed them,"
but was worried that if he had pressed the Mobay "issue and had
an investigation, then we'd all be in trouble." In a later
conversation on June 22, Helmy suggested that he and Huffoan
should get their own warehouse for future shipments. Huffman
said that he could get one "for maybe even, oh, 50 or 60,000
dollars." Huffman said he knew a "place out here in the country,
it would be kind of remote and it would suit our purposes just
fine."
Customs agents made the actual delivery of the NX-4976 to D
& N Packing on June 14, 1988. MX-4926 must be kept refrigerated
until it is ready to be used and 0 & N Packing did not have cold
storage facilities. Huffman therefore asked Leo DeLong to locate
a refrigerated storage facility in Shelby. The D & N Packing
foreman arranged with a refrigerated beer dock in Shelby to store
the boxes temporarily. After the five boxes of MX-4926 arrived,
D & N employees James Swanger and Mark Gumbert took the boxes to
PAGENO="0133"
129
9
the beer dock.
Huffman also needed a refrigerated truck to ship the MX-4926
to Maryland. He originally made arrangements to have a trucker
pick the boxes up on June 21, 1988. Recorded conversations
between Helmy and Huffman show the need to ship the MX-4926 as
close to the scheduled June 24, 1988 departure date of the C-l30
so that the presence of this material in the shipment would not
be noticed by Custoss. On June 21, Swanger and Scott Lynbarger,
a D & N warehouseman, went to the beer dock and brought the five
boxes back to D & N to wait for the shipper's scheduled 10:00
a.m. pickup. When the truck did not arrive, Lynbarger and
Gumbert took the boxes back to the beer dock.
Huffman spent most of the 21st arranging for alternate
transportation. Huffman finally got another refrigerated truck
from a different company and made arrangements for June 22
pickup. On the 22nd, Freibel and Robert Burroughs, a friend of
Freibel's, brought the five Fiberite boxes back to D & N from the
beer dock, loaded them into the larger wooden box they had made,
and placed the box in the new refrigerator truck along with two
drums of HTPB, two boxes of Versamide, and some Cyanox. The two
drums of HTPB had been placed in boxes to conceal their contents
from Customs agents.
The carbon phenolic fabric arrived in Maryland on June 23,
1988 and was immediately placed in the D.F. Young warehouse.
On June 25, D.F. Young employees took the boxes containing the
MX-4926 and other materials that had been sent out by Huffman
earlier to a waiting Egyptian C-l30 aircraft for loading.
Customs agents seized the materials and arrested Melmy and
Huffman. Shousha was also arrested, but was released when it was
discovered that he had diplomatic immunity. Investigators had
learned shortly before the arrests began that Elgohary had
diplomatic immunity, so he was not arrested.
PAGENO="0134"
130
Chairman PICKLE. I thank you, Mr. Davis, and I am going to ask
Mr. Burns now if he could proceed to make his statement.
STATEMENT OF DAVID E. BURNS, FORMER SPECIAL AGENT, U.S.
CUSTOMS SERVICE, SACRAMENTO, CALIF.
Mr. BURNS. Thank you, Mr. Chairman.
In the interest of time you have my written statement in front of
you and rather than read the entire thing, I will summarize it. Mr.
Davis essentially outlined the investigation.
The one thing that I would like to bring to your attention, kind
of cut to the chase of this whole thing, I think the reason you guys
are sitting here, some of the problems I encountered in this investi-
gation revealed that even though he was procuring some 20 items,
only 4 or 5 of them were actually controlled at the time. I think
that is the thing this committee is looking at.
Thank you.
[The prepared statement follows:]
PAGENO="0135"
131
STATEMENT OF DAVID E. BURNS
FORMER SPECIAL AGENT
U.S. CUSTOMS SERVICE
My name is David Eugene Burns. I have 11 years of law
enforcement experience including employment as a Deputy sheriff
with Douglas County, Nevada, Sheriff's Office and El Dorado County,
California, Sheriff's Office, assignment to the Drug Enforcement
Administration's South Lake Tahoe Narcotics Task Force, and
employment by US Customs Service as a Special Agent/Criminal
Investigator. I have recently been hired by the Bureau of Land
Management as a Special Agent, and will begin employment with that
agency in May 1991.
Additionally, I have 11 years of military service including
three and one half years on active duty with the US Army where I
served in the 2nd Battalion (RANGER), 75th Infantry, and eight
years in the Reserves and National Guard including assignments to
the 12th Special Forces Group, the 4th Force reconnaissance
Company, 4th Marine Division (Reserve), and various units in the
California National Guard.
I am currently on active duty with the California National
Guard, assigned as a Operations Non-commissioned Officer in the
CounternarcOtics Branch. Prior to going on active duty with the
National Guard, I was employed by US Customs as a Special Agent.
In March 1988, I was employed in this capacity, and assigned to the
Sacramento Resident Office.
On March 19, 1988, I was the agent designated to receive all
duty agent calls. I received a call from the Chicago office of US
Customs about a suspicious person, identified as Fouad Mohamed,
travelling to Sacramento from Cairo, Egypt. Pursuant to this call,
myself and other agents from the Sacramento Office conducted a
surveillance of the individual when he arrived. My investigation
identified the passenger travelling under the name Fouad Mohamed,
as Fuad Algamal. I identified the person that met him at the
Sacramento Metropolitan Airport as Dr. Abdelkader Helmy. the
ensuing investigation into Dr. Helmy's activities included
searching his trash every week, monitoring his movements, obtaining
the toll records of his telephone calls from both his home and
office, and, eventually, a court ordered monitoring of his
telephone calls.
This investigation reveled that Dr. Helmy, James Huffman of
Lexington, Ohio, and several Egyptian nationals were involved in a
conspiracy to illegally export the components and ingredients
necessary to manufacture components of a Medium Range Ballistic
Missile which would have had a range of some 1800 kilometers and be
capable of carrying a payload of 500 kilograms. The construction
of this missile system was being financed by Iraq, and was being
engineered by scientist from West Germany and Italy working in
conjunction with Egyptian and Argentinean military organizations.
During my investigation, I learned that Dr. Nelmy was
attempting to purchase the chemical ingredients, metal appliances,
and insulating materials to construct solid rocket motors, ablative
carbon material for the nose cones and rocket exhaust nozzles, and
radio telemetry antennas. Additionally, I learned that Dr. Helmy
had been involved in attempts by the Egyptian military to purchase
Fuel Air Explosion bombs and technology, guidance systems for the
Stinger missile system, and missile test range facilities.
I learned that Dr. Helmy had obtained the patent information
on the most critical components of the Fuel air Explosion bombs
including the dispenser and the ignition mechanisms. He later
admitted to obtaining those patents under the direction of Colonel
Ahmed Al-Din Khairat, also known as colonel Hussam Yossef, who was
also directing the operation to obtain the missile components.
Documents recovered from Dr. Melmy's trash, and later from his
home, office, and computer revealed that Dr, Helmy was purchasing
or directing the purchase of all of the ingredients for
manufacturing rocket engines. Interestingly, very few of the raw
ingredients, even when purchased with the intent to combine them
with other ingredients to manufacture rocket engines, are
controlled by the US Government. It became evident during my
investigation that Dr. Helmy intended to circumvent what export
PAGENO="0136"
132
STATEMENT OF DAVID EUGENE BURNS
Page 2
controls were in place on the few controlled items by smuggling all
of the materials out of the United States.
My investigation revealed that helmy and Huffman intended to
smuggle the items out of the United States by having the items
shipped to a warehouse, called 0 & N Packing in Shelby, Ohio, that
specialized in transshipment of materials . Once at the warehouse,
the items were either placed in shipping containers built by
huffman, or had all their original markings painted out, and were
then shipped to D.F. Young, the official freight forwarder for the
Egyptian Procurement Office, located in Baltimore, Maryland. to
facilitate the shipping, false manifest of lading were prepared
that concealed the true contents of the crates and drums.
On May 27, 1988, nine items containing materials destine for
the missile project were shipped to D.F. Young this way, customs
agents in Baltimore observed that these items were placed on a
pallet and loaded on an Egyptian military c-13o cargo transport
airplane and shipped out of the country. When they examined the
manifest and export documents for the flight, they found no mention
of the nine items.
I learned during my investigation that the missile project was
called CONDOR II by the Argentinean government, and the Badr-2000
by the Egyptian government. The program utilized engineers from
West Germany and Italy who were familiar with the Pershing II
missile, Egyptian engineers, and Argentinean engineers and missile
test ranges to build this missile system. There was evidence
recovered during this investigation that Colonel Rhairat had asked
Dr. Helmy about rendering fissionable some Uranium 238 the Egyptian
government had purchased. Dr. Helmy later told me that the
warheads for this missile system would have been nuclear, chemical,
or conventional high explosive depending on the ability of Egypt
and her partners to manufacture the various types of warheads.
From my military experience, and from the knowledge I gained
during this investigation, I realized that if this type of missile
was introduced into the Middle East, or South America, it would be
extremely destablizing, and potentially would have to be confronted
by soldiers from the United Nations, undoubtedly including
Americans. I also realized during this investigation that the
various laws enacted to control the export of this type of
technology and material had serious flaws and loopholes.
I urge this committee to examine the strengthening of the
various laws to include: requiring companies to notify the US
Government when materials that have innocent applications as well
as military applications are purchased, much like the procedures
required for the purchase of precursor chemicals for illegal drug
manufacturing; enacting legislation that would punish the attempt
of, or actual illegal exporting of, the component parts or raw
ingredients of military hardware where there is clear intent to
circumvent export laws, or to assemble the parts or ingredients
once outside US jurisdiction; and to strengthen the Nissile
Technology Control Regime.
While this investigation may represent an example of how the
varicus federal agencies investigate the illegal export of
munitions, I believe it more importantly identifies some of the
weaknesses in our laws. Thank you for the opportunity to address
this committee, and I hope some of the lessons I learned may be
used to further the control of illegal exportation of military
hardware and munitions.
PAGENO="0137"
133
Chairman PICKLE. Does that complete your general statement?
Mr. BURNS. Yes, sir.
Chairman PICKLE. All right.
Now, the Chair would ask Mr. Rangel to proceed.
Before we proceed, let me ask the next witness to come and we
will have him before us.
The Chair will now call Mr. Abdelkader Helmy to the witness
stand.
I am going to have to ask you though to be sworn in. Would you
raise your right hand? Do you swear to tell the truth, the whole
truth and nothing but the truth?
Mr. HELMY. Yes, sir.
Chairman PICKLE. The record will show that the gentleman has
answered in the affirmative. Will you have a seat, sir?
Mr. HELMY. Yes, thank you.
Chairman PICKLE. Mr. Rangel.
Mr. RANGEL. Thank you, Mr. Chairman.
First, let me thank Agents Burns and Davis for such good law
enforcement work. You are to be commended and you are a credit
to the Customs, as well as to the Nation.
As a result of your success in this case which led to a conviction,
have you been able to find out what, if anything, the Egyptian Gov-
ernment did in connection with the diplomats that were involved
in this conspiracy?
Mr. DAVIS. No, sir.
Mr. RANGEL. As a result of the plea of Dr. Helmy, were other
Americans involved that were not arrested or convicted that you
know of? Did Dr. Helmy indicate how he was able to get the sub-
stances licensed and unlicensed?
Mr. DAVIS. Everybody that was involved in the conspiracy was
indicted. The method that they used to obtain these items was to
tell the manufacturers that they had a use other than for rocket
fuel, here in the United States. They said it was for research
projects or other things like that.
Mr. RANGEL. Well, one of the Ohio firms repackaged a lot of
these things.
Mr. DAVIS. Yes, sir.
Mr. RANGEL. And relabeled them.
Mr. DAVIS. Yes, sir.
Mr.. RANGEL. Did you or your colleagues have an opportunity to
interrogate these people and find out whether or not they knew ex-
actly what they were doing?
Mr. DAVIS. They were interviewed and as far as my recollection
goes what they stated is that they knew the materials were going
on to Baltimore, Md., and they had no idea that it was going out of
the country.
Mr. RANGEL. And did you believe them?
Mr. DAVIS. We had no other evidence to disprove that.
Mr. RANGEL. Well, in your interrogation of Dr. Helmy, did he
share with you any other American citizens that were working
with him or as he put it in your testimony, covering his trail?
Mr. DAVIS. From the evidence that we had, from the wiretap and
the other documents we were able to recover, it is our belief that
PAGENO="0138"
134
everybody that was in the United States and subject to our law was
indicted and that we had identified all of them.
Mr. RANGEL. Did there come a time that your investigation was
being hampered by the State Department or any other U.S. agency
or department?
Mr. DAvIs. No, sir.
Mr. RANGEL. And any statement that the State Department tried
to derail your investigation to your knowledge, would not be a true
statement?
Mr. DAvIS. To my knowledge, it would not be.
STAT1~MENT OF ABDELKADER HELMY, LOMPOC, CALIF.
Mr. RANGEL. Dr. Helmy, let me thank you for the inconvenience
that this committee has caused you in bringing you to this commit-
tee and thank you for your cooperation.
You are an American citizen.
Mr. HELMY. Thank you.
Mr. RANGEL. You are an American, right?
Mr. HELMY. Yes, sir, I am.
Mr. RANGEL. And your wife is an American?
Mr. HELMY. Yes.
Mr. RANGEL. And your children were born here, in the United
States?
Mr. HELMY. Yes, sir.
Mr. RANGEL. Do you feel any sense of obligation or support for
the United States and its national security?
Mr. HELMY. Yes, sir, as a matter of fact, if you look to my record,
I am a person who contributed to the research and development of
the space shuttle. I did a lot of work on the cruise missiles, the har-
poon program. I did a lot of work on the development of the
120mm gun. And I did a lot of contribution to the defense and the
aerospace industry in this country before I get involved with any of
this problem.
Mr. RANGEL. And you are quite proud of the contribution that
you made to our national defense and security?
Mr. HELMY. Absolutely, sir.
Mr. RANGEL. But when some people encouraged you to share
your talents and information with foreign governments, who were
they that approached you?
Mr. HELMY. It was, as a matter of fact, it started out very slow,
which I did not realize. If I had realized that it would have ended
up to this, I would not have just get involved with this. But it was
the two friends which was my friends back in Egypt which is the
Defense Minister of Egypt which was my friend when he was a
younger person and another person which is-he was the manager
or the director of the special programs for the Egyptian Govern-
ment.
Mr. RANGEL. And, of course, you didn't think that it would get
this involved or that you would end up in jail and bring disgrace to
your family?
Mr. HELMY. Yes, sir.
Mr. RANGEL. But what was it that encouraged you to accept their
offer to get involved in the first place? What was the motivation?
PAGENO="0139"
135
Mr. HELMY. As a matter of fact, sir, what happened exactly the
blocks which they call them the K-Karb blocks, when the Egyptian
people asked me about any carbon-carbon material because those
persons when I was a younger person, they send me to France to
learn a lot about the carbon-carbon and the manufacture and so
forth. So when they approached me about the carbon-carbon I re-
ferred them to the company in France which manufactured this
and I told them to go there. I even give them the name of a person
in the French company.
Mr. RANGEL. OK. Doctor, you and I will be talking about mis-
siles, your expertise, your devotion, your dedication to the United
States, the fact that you knew a lot about missiles, that you helped
build up our defense system and now someone comes and asks you
to share it with them. And, of course, you did not think that you
would get involved, but did they offer you money to do it; was it a
spirit of helping Egypt's national defense, what motivated you do
to this? Were you disappointed as a new American? Is it something
that we did wrong?
Mr. HELMY. No, really, sir, just help to an old friend.
Mr. RANGEL. Millions of dollars were involved in these transac-
tions, were they not, Doctor?
Mr. HELMY. Yes, there was money but I don't believe that it was
the main objective, because I can be content with a small amount
of money. Like I was telling you, sir, it started that I was helping
them with noncontrolled material which was the K-carbon and
then it took step by step and I found myself finally involved.
Mr. RANGEL. Yes, but you knew from the beginning that this was
against the United States laws, even though you may not have
thought it would hurt us. There must have been-you could not
have done all of this as a new citizen and alone. How were you able
to work with other Americans so well? Did you pay them well in
order to cooperate with you?
Mr. HELMY. As a matter of fact, sir, they offered me money to
work with them and I refused it. They offered me to work with
them with $100,000 a year and I refused it because I like my job
and I like my country. I swear to this and this was not really the
case, the money at all.
Mr. RANGEL. But in order for you to help your friends out, you
had to get a lot of American friends to help you out. Isn't that cor-
rect? I mean, you couldn't have done this by yourself, the purchase
of it, the repackaging, the shipment, different countries. It really
looked as though-
Mr. HELMY. As a matter of fact, sir, I had this company in which
the-my own company in which I filed the form in 1982 and 1983,
as I remember, which is called the Science and Technology. And I
was planning in the future to have my own company and to quit
working for another company. And I have my own company in this
country, and I thought this might be-this is a start of a business
which I can do. And as a matter of fact, if you look at the whole
list, the whole list is most of the material really like, for example,
antimony oxide, corundum, asbestos, ethylene oxide-
Mr. RANGEL. No, no, Doctor. You knew when you were getting
these substances and shipping them to Egypt that you were assist-
ing them in building a missile. You knew that. I don't care what it
PAGENO="0140"
136
was, if it was oil and water and all of these good substances. You
knew as a scientist that these things were being used to build a
missile.
Mr. HELMY. Not all of them, sir. Yes, they may be, for this par-
ticular program, maybe two or three materials.
Mr. RANGEL. Whatever the materials were and whatever you
were indicted for, you understanding that it was violating United
States laws and that you were assisting them in doing something
that is against the law for you to have done.
You know, you already pled guilty, so you don't have to answer
that. My question is, as an American citizen and as one who loves
his country, and certainly love your family who are American citi-
zens, are you willing to help us so that other people are not able to
do this against our great Nation? Are you willing to help us today?
Mr. HELMY. You mean help the United States?
Mr. RANGEL. Help the United States of America.
Mr. HELMY. I would like to help the United States of America to
my maximum extent, of course. There is no doubt about my inten-
tion to help this country.
Mr. RANGEL. Well, OK. Then as an American citizen and some-
one who wants to help us, tell us, what would you recommend to
your Nation, to this Congress, that we do to prevent you from
doing the things that you have already done and been convicted of?
What is it that we should have done to make it more difficult for
you to have done this to help your friends?
Mr. HELMY. I think, Your Honor, one thing which is very impor-
tant is to make-for example, for me, I didn't know that there is
two different lists, a State Department material list or a Com-
merce. I learned all these things after I get involved with this and
after I get my problem.
It should be clear for every public person to know that there is a
State Department material which should be distinguished from
Commerce Department, number one.
Number two, which is very important also, the materials which
have been put on the State Department list, they are not clear. For
example, the material which I pleaded guilty for, it is not men-
tioned clearly in the list that this carbon phenolic material is pro-
hibited from being exported. Even it says there-phenolic silica is
clearly there, but it doesn't mention the material by the name. It
just lists it by-
Mr. RANGEL. But, Doctor, Doctor-
Mr. HELMY. It should be clear also.
Mr. RANGEL. Doctor, I agree with you. But I don't care how
harmless the material is. A bright, intelligent person like you, you
are a scientist. It is not so much the material that is the basis of
your conviction. You have violated the trust that America places in
its citizens by turning over things that you know that could build
weapons to a foreign country. Egypt is no longer the country that
you are a citizen of. You assumed the responsibility as an Ameri-
can citizen. And so it is true that we made it easy for you to help
your Egyptian friends. We made it easy for you. But let's not get
involved in the intent. You knew it was against the law, and I am
asking you: How could we have made it difficult for you to have
yioldod to the temptation, whatever it was-old friends, money,
PAGENO="0141"
137
building your own corporation? What is it that we could have done
that you would have told your friends "I want to help you, but I
don't want to go to jail, and I cannot help you because I can't get it
repackaged without going to jail"?
When you went to these American firms, they knew you were
violating the law, didn't they?
Mr. HELMY. Yes.
Mr. RANGEL. They knew. They knew that you were sending this
stuff to Egypt, and they knew it wasn't harmless material. They
knew it was used to build armaments, didn't they?
Mr. HELMY. Yes, sir. I think I would suggest this. I would suggest
the law enforcement agency to get involved in such cases before it
goes far, like if they knew certain things happened like this, they
start to investigate it and to confront the person at the beginning.
In other words, if the law enforcement agency came to me from the
beginning when I started to send the K-Karb and when I started to
sell the K-Karb and they came and investigate me and they tried
to stop me at the early age, this would be better.
Mr. RANGEL. No, I-once they catch you, you bet your life that it
would be better if they stop you. But they really want to find out,
you know, who you were working with. They didn't just want you.
You are just a small person involved in this conspiracy. They used
your good friendship. They used your talent. And you are in jail,
and they are out. And it is these other people that we are con-
cerned about.
Who asked you to buy those nose cones? Who is the person? Was
that your Egyptian friend?
Mr. HELMY. Yes, sir.
Mr. RANGEL. And he knew and you knew it was against the law
to do that, didn't you?
Mr. HELMY. The K-Karb sale is not a controlled material. This is
what I was sending-
Mr. RANGEL. But you knew those nose cones weren't being used
for ice cream. You knew that it was going to be used to manufac-
ture something that you would have violated your new country's
laws in doing it. You knew that.
Mr. HELMY. Not this particular material, sir. Not the nose cone
material.
Mr. RANGEL. But if you take all of these materials and put them
together, you knew that final product would be against the law,
right?
Mr. HELMY. Right.
Mr. RANGEL. How many people were on your payroll that were
involved in your assisting your friends? How many Americans did
you pay?
Mr. HELMY. Just me and Mr. Huffman.
Mr. RANGEL. That is all?
Mr. HELMY. Yes.
Mr. RANGEL. These people in Ohio, how long have you known
those, the ones that repackaged?
Mr. HELMY. I don't know them. This was made by Mr. Huffman.
Mr. RANGEL. Well, what was the total amount of money that you
were able to get from your Egyptian friends for this effort?
Mr. HELMY. It was for me $1,050,000 altogether.
PAGENO="0142"
138
Mr. RANGEL. And how much did the Government recover, the
United States Government recover of that amount?
Mr. HELMY. Everything.
Mr. RANGEL. How can you help the United States to prevent
other American citizens from doing what you did? What would you
recommend that we do besides stop it early before they get in-
volved? What can we do as it relates to the laws?
You were afraid of violating the law-of getting caught, rather.
You were a:fraid of going to jail. At least our agents say that. What
could we have done? What better laws could we have had so that
you would have said "I can't do that, it is too dangerous," or "it is
the wrong thing to do"?
Don't you want to help us?
Mr. HELMY. Yes, I want to, of course. I believe that these laws
should be-.-this is what I am trying to explain to you, sir; that
those laws should be very clear to people because, for me, it was
like a gray area. The black and white wasn't that sharp for every-
thing, so it should be clear for everyone who starts his own compa-
ny, for example, to get these materials about-not the material but
get the law and read it, and it will be clear for everyone so he
wouldn't----
Mr. RANGEL. But it was clear to you that you could go to jail if
you got caught, so you knew it was against the law. I mean, didn't
you act as though you were avoiding the law? You didn't just do all
this stuff openly, did you? You knew you were breaking the law.
Dr. Helmy, I am trying to help you as one American to another,
but you are trying to tell me that you just made a mistake, that
you didn't know what you were doing. And that would mean that
you didn't have any criminal intent, that you were just trying to
help a friend. And if that is what you are saying under oath after
you have sworn to tell us the truth, then you can't help. We had
laws on the book. You knew you were breaking the law. You were
afraid of going to jail. You were paid an outstanding amount of
money to break the law. And whatever your intentions were, to
help a friend or to make some money or to start a new firm, that is
not important.
What is important is that you are an American citizen, and you
did tell me that you wanted to cooperate and help your country so
that other people, Egyptians or whatever, do not get caught in
what you have done. And I just want to ask you as to-you know,
besides Huffman, who else was involved in this in the United
States? Just you and Huffman and the Egyptian friends?
Mr. HELMY. Your Honor, one of the other things also, the scien-
tists in this country are very low paid compared by other worlds if
you are a scientist. And if you are one of the very distinguished
scientists all over the country, all over the world, and they just
give you like $60,000 or $50,000, $40,000 a year. And your needs,
you are looking forward for a better life or so. So if it is possible
also to make the scientists get more money so they can also-
wouldn't be attracted by such-
Mr. RANGEL. Doctor, I am not persuaded. But, you know, we gave
you American citizenship. We gave you an opportunity for a better
way of life for your wife and for your family. And if you are saying
that for a couple extra dollars you would turn all that in and say
PAGENO="0143"
139
that it wasn't worth it just to become a part of our great Nation,
there is very little I can say.
Of course, I don't want to lecture you because you have already
learned your lesson. I had just hoped that we could take advantage
of this opportunity for you to help-and, of course, for us to try to
help you as a result of it. But if you are saying that you weren't
paid enough money and that you didn't think you were doing any-
thing wrong, then, of course, Doctor, you are under oath and you
know better than I do. I can't contradict you.
Mr. HELMY. Your Honor, also one of the other things too, I got
with the Custom people after my case, and I told them about mate-
rials that should be also restricted from exporting outside which
was not on the list; for example, material which is in the early de-
velopment and the outside world is looking at it. It should also he
restricted because many of these countries, they are just hungry
for building these components and these weapons, and they are
looking for this material. Once the material gets started in develop-
ment, it should be immediately put on the list so nobody would try
to export it at the early stages of development. This one other
thing, too.
Mr. RANGEL. Thank you, Doctor.
Mr. HELMY. Thank you.
Mr. SCHULZE. I thank the gentleman from New York.
I would like first to ask Agent Davis a few questions. Mr. Davis,
in your opinion, had this Condor II scheme not been checked, what
damage to our national security could have come about?
Mr. DAvIs. I am not qualified to answer that, sir. I know what
we did in the investigation. I know how to enforce the laws. But
that is way out of my area of expertise.
Mr. SCHULZE. Well, you know, just as a citizen, don't you think it
would have been probably highly unstabilizing and destabilizing in
the Middle East with what happened later on?
Mr. Burns, do you have an opinion on that?
Mr. BURNS. Yes, I do, sir. The events that have transpired in the
gulf recently, the war with Iraq, I think that if this program would
have gone forward, the stages it was in, the soldiers of the United
Nations would have been confronted with a potentially much more
accurate missile than the SCUDS that they were confronted with. I
think it goes without saying, as a citizen, any one of us can under-
stand that the people that were confronting that aggression over
there would be confronted with a much more serious threat.
Mr. SCHULZE. Thank you.
Agent Davis, the crux of Huffman's operation in Ohio was to
have the freight forwarder mislabel and change or repaint these
shipments. Would it be helpful if Customs had some way to better
screen outbound manifests or a computerized manifest? In what
manner could you have been better able to detect through customs
procedures?
Mr. DAVIS. Sir, I believe that is a matter of policy that I think
could be dealt with better when the Commissioner testifies before
your committee.
Mr. SCHULZE. OK. But you don't think that if there were some
uniformity to outbound manifests that you would have an opportu-
nity to compare shipments and that kind of thing as an agent?
PAGENO="0144"
140
Would that not be a valuable tool, or you don't think about those
things?
Mr. DAVIS. We do have the opportunity in our export searches to
look at the documentation that is submitted with the manifest, the
invoices, the special export declarations. In the special export-
Mr. SCHULZE. But don't you physically have to get the papers
and sit down and go through them? There is no way that you can
compare everything that is going out to a destination from a ship-
ping point in a computerized way? It is my understanding that you
do not have that capability, that it all has to be done by paper?
Mr. DAVIS. On exports it is hard copy, and we have to look at the
documents at the port of export.
Mr. SCHULZE. It would not be normal procedure for an agent to
say give me all the shipments from Ohio to Baltimore from D&N
Co. or something? I mean, that is not normal investigative proce-
dure, is it?
Mr. DAVIS. Not exactly that way, sir. We do have teams that
review the documentation. They target certain commodities or cer-
tain ports that it is being exported to and then select items or ship-
ments for examination.
Mr. SCHULZE. So you can't think of any tools that we could give
to you that would facilitate such investigations or have an opportu-
nity to get them earlier?
Mr. DAVIS. Again, sir, that is a policy issue that I think the Com-
missioner will address.
Mr. SCHULZE. See, I don't think it is a policy issue. I am not
asking you to dictate to the Customs Service what they are doing. I
am asking you as an agent that I presume has some experience
how we can facilitate your job. And if you don't want to respond to
that, or if they have told you not to respond to that, that irritates
the hell out of me. But you just do what you want to do.
Agent Burns, when you interviewed Mr. Helmy about Condor II,
did he tell you about the financing of the program by Iraq, Saudi
Arabia, and the roles of Egypt and Argentina and Iraq and West
Germany and Italy?
Mr. BURNS. Yes, he did, sir.
Mr. SCHULZE. He did. Did he tell you about the organization of
the program in Europe, in Egypt, in Argentina and Iraq and the
names of the foreign companies from Egypt and Argentina and
West Germany and Italy involved with the program?
Mr. BURNS. Yes, he did, sir.
Mr. SCHULZE. Did he give you the names of the Egyptians and
Argentineans and West Germans and Italian companies involved
with the Condor program and the names of the individuals in each
company and the leadership roles and the functions and expertise
and the achievements of each company in the program develop-
ment?
Mr. BURNS. Yes, he did, sir.
Mr. SCHULZE. Did he tell you about the Egyptian effort to devel-
op a nuclear warhead, including the Cobalt 60 effort and the pur-
chase of uranium from France?
Mr. BURNS. Yes, he did, sir.
PAGENO="0145"
141
Mr. SCHULZE. Did he discuss with you the outline of the SCUD
missile joint development program between Egypt and North
Korea?
Mr. BURNS. Yes, he did, sir.
Mr. SCHULZE. Did he give you the details of an Iraqi chemical
warhead and its planned utilization?
Mr. BURNS. Yes, he did.
Mr. SCHULZE. Did he give you the details of guidance and control
equipment purchases by Egypt in West Germany?
Mr. BURNS. Yes, he did.
Mr. SCHULZE. Did he give you the names of Italian personnel in-
volved, as well as their activities and functions in the program?
Mr. BURNS. Yes, he did.
Mr. SCHULZE. Did he discuss with you or tell you about his rela-
tionship with Defense Minister Abu Gazalla and President Muba-
rak and discuss the whole situation at that high level?
Mr. BURNS. Yes, he did, sir.
Mr. SCHULZE. That this went to the highest levels of government
in Egypt?
Mr. BURNS. That is correct, sir.
Mr. SCHULZE. And he discussed with you also the knowledge of
President Mubarak of the Condor program and the fact that he ap-
proved it in 1984?
Mr. BURNS. That is correct.
Mr. SCHULZE. And also the modification of the SCUD and the
SS1O missiles as well?
Mr. BURNS. That is correct.
Mr. SCHULZE. Agent Burns, do you want to give me your candid
opinion on this situation and the answer to the question that my
colleague from New York is trying to get to? How do we better set
up structures which will deter such operations in the future?
Mr. BURNS. Yes, I do, sir. I would like to point out that I am not
a Customs employee any longer, and I am not representing Cus-
toms.
Mr. SCHULZE. Former Agent Burns.
Mr. BURNS. Right. So any statements I say shouldn't be con-
strued to be any Customs policy.
Mr. SCHULZE. Right.
Mr. BURNS. I think rather than try and change Customs proce-
dures or attack it when it is leaving the country, sir, I think the
real place to attack it is at the source. Drawing on my experience
in the area of drug investigation, one of the things that we could do
here, I think, that would give law enforcement better tools to
better enforce this type of activity, would be an understanding that
some of the materials do have multiple uses. Besides being used in
rocket fuels, they can be used to make rubber shoes and bottlecaps.
And it wouldn't be right to hurt American commerce by disallow-
ing that stuff to be exported and be used for peaceful means.
On the other hand, I think that if we set up some sort of a watch
list system much like they use for drug precursors, where a compa-
ny wishing to buy one of the materials that might be used in
rocket material would have to be listed on a list, properly identi-
fied, and then that list turned over to the law enforcement agency
PAGENO="0146"
142
responsible for enforcing it. It would give us as agents the tool to
start identifying some of the people.
Obviously, if Goodyear Tire is buying a bunch of the HTPB, the
rubber material that Mr. Helmy was trying to export, it wouldn't
be of a concern to us. On the other hand, where we have a compa-
ny like Mesa Associates or Science and Technologies buying thou-
sands and thousands of pounds of this, it would give us as investi-
gators a tool to begin to look into their activities.
I think attacking it at its source like that would be a much
better investigative tool than trying to add levels of bureaucracy
into our already-
Mr. SCHULZE. How would you disseminate that list? If we re-
quired that list, would you computerize it and have it available to
other law enforcement agencies? How would you disseminate that
information?
Mr. BURNS. Just thinking off the top of my head, sir, I guess my
recommendation would be to do it the way that the Drug Enforce-
ment Administration does a precursor list. The companies are re-
sponsible for maintaining it and for rendering it to the Drug En-
forcement Administration when they need it.
Mr. SCHULZE. Upon request.
Mr. BURNS. And it would be a violation of law not to do that, so
we would have a means, then, of attacking these companies that
provide the material if they are not maintaining that list.
Mr. SCHULZE. So that on a regular basis, an agent could just stop
in and say let me look at the list and let me just see if it is up to
date?
Mr. BURNS. Or make it a monthly requirement, weekly require-
ment that they furnish that to the Customs agents or the Com-
merce agents in the area that they conduct their business in.
Mr. SCHULZE. Mr. Burns, in your opinion, would anyone have
caught on to this operation, Mr. Helmy's operation, if there had
not been some kind of a tip or an informer?
Mr. BURNS. Not for a very long time, sir.
Mr. SCHULZE. You think it could have gone on for quite some
time?
Mr. BURNS. That is correct.
Mr. SCHULZE. I appreciate your testimony very much.
Mr. Helmy, I share some of the gentleman from New York's feel-
ings that you are one of the top rocket scientists in your field and
are known as that. Isn't that true?
Mr. HELMY. Yes, sir.
Mr. SCHULZE. Would you just take a minute and tell us about
your educational background?
Mr. HELMY. Yes. I have a bachelor degree in engineering, and I
have a master of science in rocket propellant, and I have a Ph.D.
also.
Mr. SCHULZE. Where are those degrees from, what university?
Mr. HELMY. University of Cairo, sir.
Mr. SCHULZE. University of Cairo. When did you come to the
United States?
Mr. HELMY. 1979.
Mr. SCHULZE. 1979. And when did you become a citizen?
Mr. HELMY. 1987.
PAGENO="0147"
143
Mr. SCHULZE. 1987. And how old were you when you came to this
country?
Mr. HELMY. I came to this country as an exchange scientist, and
I worked for-I came as an exchange scientist working for one of
the NASA program at the Jet Propulsion Laboratory. It was
called-
Mr. SCHULZE. Did you work for Teledyne? Who was your first
employer?
Mr. HELMY. I came into a program, which is a NASA program,
which is I am employed by JPL, Jet Propulsion Laboratory in Pasa-
dena. This is a National Science Foundation-or called National
Research Council program as an exchange scientist.
Mr. SCHULZE. What other companies in the United States did you
work for?
Mr. HELMY. After I worked with the Jet Propulsion Laboratory
and National Research Council, I worked with Teledyne Co. and
then I worked with Aerojet.
Mr. SCHULZE. And Red Stone Arsenal?
Mr. HELMY. No, sir. I didn't work with Red Stone, but there was
a combined program between Teledyne and Red Stone Arsenal, and
I was a Teledyne representative in the program.
Mr. SCHULZE. I see. OK. Would you explain to the committee
your relationship to officials in Egypt? You said that some of them
were your friends. Can you tell me who they are and what your
relationship is?
Mr. HELMY. It was a family friendship before I come into this
country, when I was back in Egypt.
Mr. SCHULZE. With whom?
Mr. HELMY. With the Defense Minister of Egypt then who was
Mr. Khairat, and with also the chief of the special programs of the
Egyptian Government.
Mr. SCHULZE. And he was the Defense Minister at that time?
Mr. HELMY. The Defense Minister at that time was Mr. Abu Ga-
zalla.
Mr. SCHULZE. Mr. Gazalla.
Mr. HELMY. Yes.
Mr. SCHULZE. And he is an old family friend of yours, or you
knew him when you were .children?
Mr. HELMY. Yes, sir.
Mr. SCHULZE. How about President Mubarak? What is your rela-
tionship with him?
Mr. HELMY. I don't have with him a family, but I know him per-
sonally.
Mr. SCHULZE. You know him? How do you know him?
Mr. HELMY. When I was a young engineer, I used to work in the
Egyptian rocket and research-Egyptian Rocket and Electronic Re-
search Center in Egypt, and I used to develop for them a lot of
things. The Defense Minister and the President of Egypt used to
work as heads of the air force and the artillery, and so I used to
communicate with them.
Mr. SCHULZE. You knew them in that capacity. Did you ever dis-
cuss the Condor II project with either the Defense Minister or with
Mr. Mubarak?
Mr. HELMY. Yes, with the Defense Minister, yes.
PAGENO="0148"
144
Mr. SCHULZE. The Defense Minister but not with Mr. Mubarak?
Mr. HELMY. Not personally with Mr. Mubarak.
Mr. SCHULZE. Not with Mr. Mubarak. Well, how did you get in-
volved with Condor II?
Mr. HELMY. Since the program started in 1984, they used to just
take my opinion about the course of work, which they should and
which they shouldn't, and they seek my advice about decisions
which they should do in order to do the program. So I used to ana-
lyze the program from this.
Mr. ScITuLzE. So you thought you were doing it as a service for
old friends.
Mr. HELMY. Right.
Mr. SCHULZE. You were trying to help old friends. Did you hold
secret security clearance in the United States?
Mr. HELMY. Yes, sir.
Mr. SCHULZE. As these negotiations were going underway, did
you feel some pangs of conscience? You know, there are not many
citizens of the United States who are given secret clearance. Did it
go through your mind that you might be violating that trust?
Mr. HELMY. As a matter of fact, sir, when I was-when they
were consulting with me about this, I saw this as a completely dif-
ferent issue from my work. So I knew that this is a very unsophis-
ticated technology from what I am doing.
Mr. SCHULZE. You thought it was something outside of that
which you were involved in at a lower level, and as a consequence
did not feel that it was a violation of that trust?
Mr. HELMY. Right.
Mr. SCHULZE. In response to Mr. Rangel's question about what
you would do, you said you would have people be more aware of
the law. But I think you had to be aware of the law; otherwise,
why wouM you use the circuitous route of shipping things to Ohio
and then having them repackaged and shipped to Baltimore? That
was obvious that it was either some kind of smuggling or coverup
or there was something wrong, and that is why that had to be
done. Is that correct?
Mr. HELMY. Mr. Huffman was in Ohio, so things had to be in
Ohio in his storage room before it has to be shipped.
Mr. SCHULZE. So you thought Huffman was handling that, and
that you really were not aware of repackaging and so forth?
Mr. HELMY. I was aware.
Mr. SCHULZE. You were aware of it. Do you know why the goods
were not manifested on the C-130 flight? in other words, they were
not listed on the manifest. Did you know that they would not be
listed on the manifest?
Mr. HELMY. I didn't know the procedure of shipping, as a matter
of fact, what the shipper should do and shouldn't do. It is out of my
experience and I don't know the details of it.
Mr. SCHULZE. I, again, heard your answer to Mr. Rangel's ques-
tion about remuneration. But when you paid $1,272 for the nose
cones but you charged the Egyptian Government $23,724, that is an
enormous markup. Can you tell me why you charged them that
much?
PAGENO="0149"
145
Mr. HELMY. This list, sir, is just done by the instruction of the
Egyptian officials. Because I was an old friend of them, they told
me to put this price.
Mr. SCHULZE. They told you how much to charge?
Mr. HELMY. Yes. They told me to put these prices in, and they
wanted me to make a profit on it.
Mr. SCHULZE. You paid $1,820 for the microwave antenna, but
you charged them $32,057. Did they tell you to do that?
Mr. HELMY. Well, what happened, they didn't tell me how. They
sent me the money and they told me how much I should put for
the antenna.
Mr. SCHULZE. How about the R-45-M. You paid $18,000, and
$206,490 charged the government. That is an enormous markup,
enormous profit.
Mr. HELMY. Yes. This number I took from the Egyptian officials.
Mr. SCHULZE. They gave them to you, told you how much.
As you are aware, Customs, as they were going through your
trash, found a note-we have a copy of it, and I am sure you are
very much aware of it-which refers to the SCUD B-100.
Can you tell us what you know about that system?
Mr. HELMY. I think this information was from a book which
called-which I bought it from just a general bookshop in Sacra-
mento. It is called "The Russian Military." And, as a matter of
fact, this is a very public book, available for everyone, and I believe
that the Customs just took it from my home when they arrested
me.
Mr. SCHULZE. So that nobody discussed with you or you were not
involved or talked about a SCUD upgrade at all, or guidance sys-
tems?
Mr. HELMY. I am speaking about this information in the paper.
Mr. SCHULZE. Yes.
Mr. HELMY. But the SCUD B, I knew everything, which they
were doing it from the Egyptian official. Whenever the other rela-
tionship with the Koreans, I knew it.
Mr. SCHULZE. You knew about their upgrade project and it was
going on. Did you participate in any way in that project?
Mr. HELMY. No.
Mr. SCHULZE. Mr. Helmy, I am going to give you another oppor-
tunity. You have heard all of this, some of the recommendations on
how we can keep this from happening in the future. We want sci-
entists to be able to work, and we want commerce to be able to
flow. But we also cannot afford to have-in fact, I think it is very
destabilizing for the world order-to have these types of situations
going on where smaller countries are building their own missile
systems and other things.
With those systems goes a degree of responsibility-with the edu-
cation and background and involvement in these projects.
On reflection, do you have any suggestions for us on how we can
keep people from being motivated, whatever the motivation, to
transfer this type of technology to other nations?
Mr. HELMY. Also, I remember one more thing. That those compa-
nies which have and manufacture those components, I would sug-
gest that they should not sell them to anyone unless they show to
them the license before they sell it.
PAGENO="0150"
146
Mr. SCHULZE. The companies should do more investigation of
their clients and customers or whoever they are doing business
with?
Mr. HELMY. Right. In other words, many companies, anyone who
goes to buy from it, they should not just sell him on the basis that
he has no solid foundation that he should buy.
So it should first be either the responsibility also of obtaining the
license should be defined, either the manufacturer or the exporter
or the importer. It should be defined exactly who should obtain it
before the material get out of the company.
Mr. SCHULZE. Thank you, Mr. Chairman. Thank you, Mr. Helmy.
Mr. RANGEL [presiding]. You know, Doctor, we are trying desper-
ately hard to be of some assistance to you as one American to an-
other, and your testimony would indicate that you just made a mis-
take trying to help a friend.
Now, you heard our Customs agent and former agents indicate
that you had conversations, one with Admiral Elgohary. You know
Admiral Elgohary?
Mr. HELMY. Yes, sir. I don't know him personally, but I know
him through the phone. He introduced himself to me on the phone,
but I don't know him personally.
Mr. RANGEL. You never met him?
Mr. HELMY. No, I never met him.
Mr. RANGEL. But you told him you were afraid of going to jail
because of what you and your buddy was doing. Right?
Mr. HELMY. Right, sir.
Mr. RANGEL. And you knew that you were violating the law in
shipping goods outside of the country. I mean, you knew that.
Mr. HELMY. Yes, sir.
Mr. RANGEL. And you helped your buddy, Huffman, to repackage
these things to get it by Customs, I mean, so that you could-
Mr. HELMY. I didn't help with the packaging. But the packaging
was arranged between Mr. Huffman and between Admiral Elgo-
hary. The packaging and the packaging policy together.
Mr. RANGEL. But you knew that the things that the things that
you were shipping to Egypt or wherever was against the law, and
you and Huffman wanted to get this out of the country and not be
detected and not get caught. Right?
Mr. HELMY. Yes, sir.
Mr. RANGEL. So it really doesn't make any difference what the
law is, you have made up your mind that you were going to break
the law, take the money, and work with Huffman. And I just figure
that if you made a mistake and you did get caught and you were
thrown in jail, you know, why are you so unwilling to help us to
see that this doesn't happen again?
You said in one of those conversations that you had a lot of other
Americans that were helping you to do this.
Mr. HELMY. Believe me, sir, I just said everything to-it must
have been everything I know. I told them everything, absolutely. I
won't hold from them any information positive.
Mr. RANGEL. Well, has the Egyptian Government been in touch
with you since you have been in jail?
Mr. HELMY. When I was in jail, I was in touch with the Egyptian
Government about this procedure, and I knew from them certain
PAGENO="0151"
147
things but not relevant to the material anymore. But I knew from
them they were approached by the American Government to stop
the program, and they stopped the program, according to the
American administration.
And also I knew from them that they had an extradition request
from the American Government with Interpol for Mr. Khairat. I
knew from them that the American Government dropped this re-
quest also.
Mr. RANGEL. They dropped the request for the people that you
were helping in Egypt. Our Government, we got you but we didn't
want the Egyptians. We didn't ask for them.
Mr. HELMY. After the American Government put the request
with Interpol for Mr. Khairat, then the American Government
dropped it. But I knew also this from the Egyptians.
Mr. RANGEL. Agent Burns or Davis, are you familiar with this?
That our Government dropped the request for extradition?
Mr. DAVIS. No, sir. To the best of my knowledge, we still have
outstanding arrest warrants for Mr. Khairat and for-
Mr. RANGEL. OK. But he is saying he has been in touch with the
Egyptian Government and that we have dropped-well, you know
State Department can do these things, which Customs may not
know.
Go ahead, Doctor.
Mr. HELMY. And I knew from them also that this program is not
going to be done anymore because they didn't want to have any
misunderstanding between the two Governments.
Mr. RANGEL. But you are telling me that none of your Egyptian
friends got in any trouble in Egypt-
Mr. HELMY. Right.
Mr. RANGEL [continuing]. And the United States is not anxious
to get any of those Egyptian friends of yours. It is all over now and
you are the only one in jail.
Mr. HELMY. Right, sir.
Mr. RANGEL. Well, have your friends in Egypt, your bigshot
friends, offered to help you and your family at all?
Mr. HELMY. Never, sir. Until this minute, I hired my lawyer on
my own with my own money, and until this minute I support my
family from just my-from donations from different people and
from loans which I get. I have a brother who is working also and
helping me. But the Government of Egypt never helped me at all.
This is for definite.
At the beginning they promised. When I got in touch with them,
they promised that they will help, but they never helped after this.
What happened, I knew from my family this. That after this inci-
dent happened, then the Egyptian Government had sent a person
here who spoke with the American administration and they re-
solved the matter together. And before they sent this ambassador
here, or this particular person here, they promised my family back
in Egypt that I am going to be OK and everything will be taken
care of.
And then after this particular person came here and resolved the
problem with the American Government, then they threatened my
family and they rejected us, and they never allowed us even to
speak to them.
PAGENO="0152"
148
Mr. RANGEL. Speak with whom?
Mr. HELMY. With the Government of Egypt.
Mr. RANGEL. So when last have you heard from anyone repre-
senting the government of Egypt? How long has it been?
Mr. HELMY. I didn't hear from them directly, but I hear from
them through my family back in Egypt. This was in 1988.
Mr. RANGEL. So you were the fall guy. You tried to help your
Egyptian friends and they cut a deal with the United States, and so
they are OK, Egypt is OK, the United States is OK, and you are in
jail.
Mr. HELMY. Right, sir.
Mr. RANGEL. And the Department of Defense Minister in Egypt,
what is he doing? Has he gotten promoted?
Mr. HELMY. No. He was, according-he was removed and re-
placed by another Defense Minister.
Mr. RANGEL. But he never went to jail?
Mr. HELMY. No.
Mr. RANGEL. You didn't receive a letter from the President of
Egy~ th~nking you for help or anything at all?
Mr. HELMY. I have no idea.
Mr. RANGEL. Nothing?
Mr. HELMY. I don't know.
Mr. RANGEL. Well, Mr. Chairman, thank you.
Chairman PICKLE. Mr. Sundquist, I believe, has some questions.
Mr. Sundquist.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
Dr. Helmy, I appreciate your cooperation. Is it fair to say that
when you got into this thing, I think you said in 1984 that it was
started, the first contact, that you got into it gradually and you
didn't realize it was illegal?
Mr. HELMY. I didn't get into it personally in 1984, but I knew
that the prc~ject started in 1984.
Mr. SUNDQUIST. OK.
Mr. HELMY. Because when President Mubarak approved it in
1984, they talked to me about it.
Mr. SUNDQUIST. Oh, the project got started in 1984. The point I
was making, though, is that these things tend to, at the beginning
they tend to look harmless and then gradually you get pulled into
it, and then at some point you feel like maybe I have got some
problems.
Mr. HELMY. Yes, sir.
Mr. SuNrQuIsT. When did you first get involved in it? When
were you first contacted, or when did any of this occur?
Mr. HELMY. For the list of the material or for the whole pro-
gram, sir?
Mr. SUNDQUIST. Anything. Any contact with anybody about it.
Mr. HELMY. I knew about the program since it started. As a
matter of fact, I knew about the program even before I come into
this country.
Mr. SUNDQUIST. Right.
Mr. HELMY. Before I come into this country this was a program
which Egypt wanted to do a long time ago, and they have what you
call the basics of the program.
PAGENO="0153"
149
Mr. SUNDQUIST. So that was before 1979 you knew about the pro-
gram?
Mr. HELMY. Right. They have this program all after 1974, 1973,
in their mind, but they didn't have a chance.
Mr. SUNDQUIST. What was it called then?
Mr. HELMY. It used to be called Badr 2000. But they never start-
ed it until 1984 when the President approved it and they started to
put some money in it.
Mr. SUNDQUIST. And then when were you first contacted?
Mr. HELMY. At the time, I was in Egypt at that particular time,
and when the President approved it they came and told me and ev-
erybody was happy that they are going to do this program. So I
know about it immediately after-as of the day when the President
approved it.
Mr. SUNDQUIST. OK. When were you first contacted about trying
to obtain the materials?
Mr. HELMY. As I remember, sir, it was in 1987. As I remember.
Mr. SUNDQUIST. OK. Approximately when in 1987?
Mr. HELMY. Maybe in September or August or so.
Mr. SUNDQUIST. OK.
Mr. HELMY. But this is not for definite.
Mr. SUNDQUIST. And when did you first take action to acquire
any of the controlled materials?
Mr. HELMY. I believe also in 19-either 1987 or 1988 after I re-
ferred them to go to France and to buy it, and they couldn't get in
touch with the person which is supposed to sell it to them. So I be-
lieve either 1988 or 1987. Late 1988 or early 1987.
Mr. SUNDQUIST. James Huffman was a friend of yours?
Mr. HELMY. Yes, sir.
Mr. SUNDQUIST. A long time?
Mr. HELMY. Yes, sir.
Mr. SUNDQUIST. And you got him involved.
Mr. HELMY. Yes. He also knew about it, I think, in 19-maybe
1984, as I remember, or 1985. Maybe 1984, as I recall.
Mr. SUNDQUIST. So you started taking action in 1987 to obtain
materials?
Mr. HELMY. No. They didn't tell me about the material until
1987. Because at 1984, 1985, 1986, they were working with the
German companies and the Italian companies, and they have ev-
erything. They didn't ask me for nothing, except they just tell me
about what they are doing and they tell me what do you think
about what is right or wrong.
Mr. SUNDQUIST. So, in 1987, really, you started doing something
for them, and at that point did you realize then the nature of what
you were doing?
Mr. HELMY. At the beginning, no.
Mr. SUNDQUIST. Not at the beginning. When Mr. Schulze asked
you the question about the amount of money you were paid, and
Egyptian officials told you what to charge, did you share that with
other people?
Mr. HELMY. Not really. As a matter of fact, the people were my
friends and they wanted me to make money.
Mr. SUNDQUIST. But the Egyptian official didn't say, "Hey, share
this with other people who are your friends"?
PAGENO="0154"
150
Mr. HELMY. No. It was for me.
Mr. SUNDQUIST. Mr. Huffman didn't get any of that money?
Mr. HELMY. I give him a profit for what he is doing. But they did
not tell me to share with Huffman or with anyone.
Mr. SUNDQUIST. But you did share with Mr. Huffman?
Mr. HELMY. I give him a profit-
Mr. SUNDQUIST. Did you share with anybody else?
Mr. HELMY. No, sir.
Mr. SUNDQUIST. Just Mr. Huffman?
Mr. HELMY. Yes.
Mr. SUNDQUIST. At the point that they gave you this and said,
"Dr. Helmy, you are our friend and we want you to make some
money off of this, and here is what you should charge us." At that
point did you realize that you were involved in something with a
foreign government?
Mr. HELMY. At the beginning they sent the money gradually. Be-
cause at the beginning they sent 30,000, then after that they sent
100, I believe.
Mr. SUNDQUIST. A hundred dollars?
Mr. HELMY. $30,000 at the beginning.
Mr. SUNDQUIST. When was that?
Mr. tIELMY. I believe this was in late 1987, if I remember correct-
ly.
Mr. SUNDQUIST. Late what?
Mr. HELMY. 1987.
Mr. SUNDQUIST. Late 1987, that is when they started sending
money.
Mr. HELMY. I hope I am recalling correct.
Mr. SUNDQUIST. Right.
Mr. HELMY. And then after that they sent a little bit more and
more and more, so the money accumulated with time.
Mr. SUNDQUIST. Did they tell you at that point how much they
were going to send you in total?
Mr. HELMY. No. It was, as a matter of fact, at one time they sent
half a million and it was not need, and I told them, I don't need it
now because I have enough money. They said, no. Just keep it.
Mr. SUNDQUIST. Did they send you money in advance of you bill-
ing?
Mr. HELMY. Yes.
Mr. SUNDQUIST. Didn't that tell you something was wrong?
Mr. HELMY. I think that you are not aware of their type of-of
how the business is done in the Middle East. In the Middle East-
here you have everything you need and concrete, and you do
things, billing and so forth. But, in the Middle East they do the
business this way.
Mr. SUNDQUIST. All right. Did you have any idea how much they
were going to end up paying you for this, that they wanted you as
a friend to be taken care of?
Mr. HELMY. Would you, please-
Mr. SUNDQUIST. I mean, did you know how much in total you
were going to be paid for this?
Mr. HELMY. At the beginning, no. But at a certain point when
they are asking me about an invoice and they told me how to make
PAGENO="0155"
151
the invoice, they told me to put this much, this much, this much,
so I-yes.
Mr. SUNDQUIST. You knew that was coming from the Egyptian
Government at that point, did you not?
Mr. HELMY. Yes, sir.
Mr. SUNDQUIST. And knowing that in the early 1970s they
wanted this program, and knowing that you are one of the experts
in rocket science, did it occur to you that it was wrong and you
were involved doing the work for what was then a foreign govern-
ment?
Mr. HELMY. Like I told before, that I thought at the beginning
that this is different from what I am doing. My work is more so-
phisticated and more advanced than these kind of things, and I
thought that this would be a good chance for me to start my own
company.
Mr. SUNDQUIST. What would be your guidelines as to what is dif-
ferent? If it was a bomb, would that be different and something you
weren't working with? I mean, I am trying to figure out how you
can delineate something different and something that would still
be legal.
Mr. HELMY. If they asked me probably at the beginning directly
to give them just direct information from here or things at the be-
ginning, I immediately would realize this. But it came gradually.
Mr. SUNDQUIST. It came gradually. That is the point I was
making earlier. That it seems to me that at some point it was
gradually, you didn't intend to, and then at some point there it
was. What point was that?
Mr. HELMY. Maybe close to the end.
Mr. SUNDQUIST. Close to the end? You said this is the way busi-
ness is done in the Middle East. Is this being done with any other
Egyptian colleagues in this country?
Mr. HELMY. I am not aware of any other things. But this is usu-
ally the way they come. If somebody wants me to buy for him, say
a radio from here or so, or say a TV or so, he just sends me money
and he tells me, OK, when you are coming bring with you a TV or
so, and he never asks about an invoice or so.
Mr. SUNDQUIST. Right. Dr. Helmy, what I am really trying to
find out, though, is are you aware of any other activity where the
Egyptian Government is trying to help friends in this country?
Mr. HELMY. No, I am not.
Mr. SUNDQUIST. Why would they select you and nobody else?
Mr. HELMY. Because I was their friend.
Mr. SUNDQUIST. Well, they obviously must have other friends?
Mr. HELMY. Yes, of course. But I am not aware of.
Mr. SUNDQUIST. You are not aware of any other friends they had
in this country doing this kind of thing, innocently or not?
Mr. HELMY. No, I am not. For definite, I am not.
Mr. SUNDQUIST. Do you have dual citizenship?
Mr. HELMY. Yes, sir.
Mr. SUNDQUIST. You still maintain your Egyptian citizenship?
Mr. HELMY. Yes, sir. But I don't know after this incident if they
are going to let me go there or not.
Mr. SUNDQUIST. You don't know what?
PAGENO="0156"
152
Mr. HELMY. After this incident if they will let me enter there or
not.
Mr. SUNDQUIST. Why would they not let you enter if you were
helping them?
Mr. HELMY. Because of my cooperation with the American Gov-
ernment.
Mr. SUNDQUIST. Because of your cooperation with the American
Government. I see.
And you feel like you have fully cooperated with the American
Government?
Mr. HELMY. Yes, sir.
Mr. SUNDQUIST. But you are saying on the record, and knowing
that you have endangered apparently, by your words, endangered
your dual citizenship with the Egyptian Government, that you
know of no other Egyptians-
Mr. HELMY. Yes, sir. For sure.
Mr. SUNDQUIST. Do you have any other knowledge of the Egyp-
tian Government ever working with former citizens of Egypt in
this country?
Mr. HELMY. No, I have no idea. Except I know that they have a
military procurement office in D.C. Other than that I don't know
anything.
Mr. SUNDQUIST. Were you ever in contact with them?
Mr. HELMY. No. Just only during this program, I would just get
in touch with them in order to arrange for the shipment.
Mr. SUNDQUIST. Did the Egyptian Government help you with
your defense, your attorneys or anything?
Mr. HELMY. No, sir.
Mr. SUNDQUIST. Mr. Burns, do you have knowledge of the Egyp-
tian Government helping Dr. Helmy with his defense in terms of
helping?
Mr. BURNS. I don't have any direct knowledge, sir. During the
early portions of the trial it was mentioned to me that there was
some belief on the part of the U.S. attorney's office that the Egyp-
tian Government might be paying part of his legal expenses.
Mr. SUNDQUIST. Dr. Helmy, you are saying they paid no part of
your legal expenses?
Mr. HELMY. Absolutely. Absolutely. We paid all of it just from
our savings in this country and some part that came from my
brother back in Egypt, which is a very small part.
Mr. SUNDQUIST. And the Egyptian Government, in their contacts
with your family, have they talked about assisting you financially,
or your family, as an old friend financially?
Mr. HELMY. At the beginning, yes. But after, as I told before,
after the envoy or the official came here at the beginning and they
settled this issue between each other, they went back, as a matter
of fact, and they won't have any contacts, they refused any con-
tacts with my family.
Mr. SUNDQUIST. Getting back to what my colleague, Mr. Rangel,
said, aren't you disappointed that here you are-
Mr. HELMY. Yes, I am.
Mr. SUNDQUIST [continuing]. And you are not getting any help
from them?
Mr. HELMY. Yes~ I am~
PAGENO="0157"
153
Mr. SUNDQUIST. Aren't you frustrated by the fact that you are
the fall guy for a lot of people?
Mr. HELMY. Yes, I am.
Mr. SUNDQUIST. One last chance. Are there any other people in-
volved that you ought to mention here that would help us prevent
this sort of thing that you haven't mentioned previously?
Mr. HELMY. No. I said everything.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
Mr. HELMY. Thank you.
Chairman PICKLE. Mr. Rangel.
Mr. RANGEL. Mr. Chairman, it is my understanding that these
hearings are public and that the exhibits, including transcripts of
the wiretaps used as a part of these hearings, are to be made a part
of the hearing record, and will be made available to the public here
in the hearing room today.
It is also my understanding that the subcommittee has sought
and received a legal opinion from the House counsel regarding use
and disclosure of the wiretap transcripts, and that legal opinion
will be made a part of the record.
Chairman PICKLE. Yes, that legal opinion will be made a part of
the record.
[The opinion referred to follows:]
PAGENO="0158"
154
flonnrtb ~. ~nber~lon ~ttbrii ~. ~c~!
Clerk ~trerel Cxid
~1Iitt of fljt ~terk
~ ~ou~c of ~eprt~tntatth~
~a~b~n~ton, ~ 20515-6601
April 17, 1991
MEMORANDUM
To: The Honorable J. J. Pickle
Chairman
Subcommittee on Oversight
Committee on Ways and Means
From: Steven R. Ross
General Counsel to the Clerk
Charles Tiefer C..1~
Deputy General Counsel to the Clerk
Re: Subcommittee Authority for Obtaining and Using Wiretap
Evidence at Hearing
You have asked about the Subcommittee's legal authority to
obtain and use, as evidence at a hearing, transcripts and
recordings of court-ordered wiretaps. For the reasons stated
below, the wiretap statute sets forth clear authority for the
Subcommittee to obtain and to use wiretap material at its hearings.
Specifically, on April 18, 1991, the Subcommittee on Oversight
will hold a hearing on the administration and enforcement of the
United States export laws. One of the instances to be examined at
the hearing concerns Abdelkader Helmy, a research scientist at the
Aerojet Solid Propulsion Company, who provided missile-related
information and materials to foreign countries. On April 9, the
Subcommittee voted to summon Helmy, who is incarcerated for his
violations of the export control laws, to testify at the hearing.
On April 10, this office applied for, and received, a writ of
habeas corpus ad testificandum from the United States District
PAGENO="0159"
155
April 17, 1991
Page 2
Court for the District of Columbia to bring Helmy to testify at the
hearing.
When the Customs Service was investigating the Helmy matter,
it conducted, in 1988, court-ordered wiretaps of Helmy's telephone
conversations. The Subcommittee requested the Customs Service, by
letter, to provide the tapes and transcripts of the intercepted
conversations, and the Customs Service has provided them. As noted
in the Subcommittee's letter, which is attached to this memorandum:
Discussions between [the Customs Service's] General Counsel's
office, and the office of the General Counsel to the Clerk of
the House, Steven R. Ross, have addressed the legal issues
presented by such use [of the wiretap material at hearings].
As the discussions have clarified, the conduct of this hearing
should be entirely consistent with the pertinent provision of
Title III, 18 U.S.C. Section 2517. As specified in the
language of that provision, a Congressional hearing is a
"proceeding held under the authority of the United States,"
at which the testimony pertaining to these materials will be
taken under oath. Additionally, a Customs Service official
testifying at the hearing, by assisting legislative oversight,
uses these materials in a manner "appropriate to the proper
performance of his official duties."
In more detail, Title III of the Omnibus Crime Control Act of
1968, 18 U.S.C. § 2510 et seq., sets forth the law regarding court-
ordered electronic surveillance. It is prohibited in 18 U.S.C. §
2511 to disclose surveillance materials, except as otherwise
provided. However, in 18 U.S.C. § 2517, the various bases for
disclosing surveillance materials are set forth. Section 2517 (3)
applies by its express terms to Congressional hearings:
Any person who has received, by any means authorized by this
chapter, any information concerning a wire, oral, or
electronic communication, or evidence derived therefrom
intercepted in accordance with the provisions of this chapter
may disclose the contents of that communication or such
derivative evidence while giving testimony under oath or
affirmation in any proceeding held under the authority of the
United States or any State or political subdivision thereof.
PAGENO="0160"
156
April 17, 1991
Page 3
A Congressional hearing is, of course, a proceeding held under the
authority of the United States in which testimony is given under
oath. In fact, officers of the United States Customs Service will
themselves testify in the hearings.
In addition, another subsection of the same section, section
2517(2), also applies. This provides that:
Any investigative or law enforcement officer w'no, by any means
authorized by this chapter, has obtained knowledge of the
contents of any wire, oral, or electronic cor~-nunication or
evidence derived therefrom may use such contents to the extent
such use is appropriate to the proper performance of his
* official duties.
Providing evidence in an oversight hearings is eminently
"appropriate to the proper performance of (an officer's) official
duties." See, e.o., Watkins v. United States, 354 U.S. 158 (1957);
Barenblatt v. United States, 360 U.S. 109 (1959).
Congressional committees have often obtained and used
electronic surveillance materials, based on these statutory
provisions. See, e.o., In re Grand Jury Proceedings (Hastincs),
841 F.2d 1048, 1052-1054 (11th Cir. 1988); in re Aoolication of the
Unitad States, etc,, CR Nos. 83-l5l-RFP, et seq. (N.D. Cal. April
21, 1988); United States v, Allen N. Dorfman, et al., No. 81 CR 269
(N.D. Ill. July 1, 1981) (reprinted in House Comm. on the Judiciary,
97th Cong., 2d Sess., Court Proceedinos and Actions of Vital
Interest to the Conaress 407 (Comm. Print 1981)).
Accordingly, the Subcommittee is clearly authorized to obtain
and to use at these hearings the tapes and transcripts relating to
Abdelkader Helmy. The Subcommittee may wish to enter these
materials as exhibits at the hearings.
PAGENO="0161"
157
Mr. RANGEL. And there is no objection to these materials being
entered into the record.
Mr. HELMY. I have a request, sir.
Chairman PICKLE. Your inquiry is whether the exhibits will be
made a part of the record, and the answer would be yes.
Mr. RANGEL. And I will turn them over to the staff.
I think Dr. Helmy is trying to get your attention, Mr. Chairman.
Chairman PICKLE. Dr. Helmy?
Mr. HELMY. Yes. I have a request, sir. It seems that when we
were through this case my lawyer had given to the judge sealed
material, and this sealed material was given a copy to the Govern-
ment and a copy-the sealed material, given a copy to the Govern-
ment and a copy to the judge. And I would appreciate if you make
this sealed material not a part of the public record of this, because
this would endanger me and my family.
Mr. RANGEL. I understand what Dr. Helmy has said, and staff
has assured me that any materials that your lawyer shared with
the judge will not be made public and will be held confidential.
Mr. HELMY. Thank you, sir.
Chairman PICKLE. Now, Mr. Davis or Mr. Burns, do either of you
want to make any additional statement or make comments? I know
Mr. Burns gave a very abbreviated statement, if at all, and before
we go to the next panel I want to ask if you want to say anything
additional in view of the testimony that has been given.
Mr. Burns.
Mr. BURNS. Yes, Mr. Chairman, I do. And again I would just like
to put on the record that I am not an employee of Customs and
anything I say is not a statement from Customs itself.
Mr. Rangel had asked Dr. Helmy and had asked Mr. Davis if the
State Department had had any influence on this case or attempted
to exert any influence on this case. Early in the process when I was
writing my affidavit we mentioned the names of the various Egyp-
tian Government officials that had figured in this case; specifically,
the Minister of Defense, Field Marshal Abou Gazallah, and the Ad-
miral Elgohary here in Washington.
When the affidavit was reviewed by main Justice and by the
State Department, the State Department requested us to remove
the names of any Egyptians that we didn't intend to indict. It
caused some consternation on my part as a case agent. Obviously,
taking out Elgohary and any mentions of the conversations with
him would have weakened the probable cause for our wiretap.
However, we did remove the names of any of the Egyptian Gov-
ernment officials that we didn't intend to indict.
Chairman PICKLE. Before you continue, it was your feeling you
should include those names but you were instructed not to include
their names?
Mr. BURNS. That is correct, Mr. Chairman.
Chairman PICKLE. You were instructed by whom?
Mr. BURNS. It was relayed to m.e by the U.S. attorney that I was
working with in Sacramento on the case and he told me that infor-
mation had come to him via main Justice from the State Depart-
ment.
Chairman PICKLE. From the State Department. All right. Go
ahead.
51-840 0 - 92 - 6
PAGENO="0162"
158
Mr. BURNS. During Dr. Helmy's testimony, he mentioned that
the materials that he was in the process of procuring were not all
for the rocket program. On the contrary, the evidence that I re-
viewed during my investigation revealed that, in fact, they all were
for the rocket program, either for actually constructing the rocket
or for manufacturing or modifying the parts for the Condor II pro-
gram.
He also indicated that he wasn't aware that the various activities
he was involved in were crimes at the time. Yet, when we effected
our search warrant on his residence, we found that he had a copy
of the "International Traffic and Arms Regulations," commonly re-
ferred to as the "ITAR" in his possession.
Mr. Rangel and some of the other members of the committee
have made much about Dr. Helmy not revealing the names of any
other Americans. My investigation revealed that he probably did
not have the knowledge of any other Americans. If you look at this
conspiracy, if you will, he was the bottleneck here in America. He
knew the people in Egypt and, through Mr. Huffman, he was deal-
ing with the American corporations.
Mr. Huffman, I might point out, never cooperated with the Gov-
ernment. He went in, pled guilty and took his sentence, and never
did cooperate with us. So, the knowledge that he had of any other
American conspirators in this was never brought to the Govern-
ment's attention.
Chairman PICKLE. Was Mr. Huffman, just for my own informa-
tion, convicted or did he serve a sentence?
Mr. BURNS. He currently is in custody, Mr. Chairman.
Chairman PICKLE. He is serving now?
Mr. BURNS. Yes, sir.
Chairman PICKLE. And where is he now?
Mr. BURNS. Somewhere in the Federal Bureau of Prisons system,
sir. I have no idea.
Chairman PICKLE. All right. Thank you.
Mr. RANGEL. Mr. Chairman?
Chairman PICKLE. Mr. Rangel.
Mr. RANGEL. On that point, Mr. Burns, what you are saying then
is that those Americans that were involved as vendors and repack-
agers, relabeling and did business with Mr. Helmy and those cocon-
spirators, to your knowledge, did not have criminal intent?
Mr. BURNS. That's correct, Mr. Rangel. The corporate members
that I spoke with during my investigation, quite frankly, cooperat-
ed fully with our investigation. One of the problems in controlling
this type of exportation is that many of these items don't require
any licensing whatsoever to be handled and be possessed here in
America.
Mr. RANGEL. I had a chance to look at some of the materials that
these corporations, these companies that Dr. Helmy was dealing
with, and, hell, they put in their literature that they sell rocket
material. Now, who in the heck do they think the material is going
to? They tell you how effective it is and come and ask questions,
and we'll help you to build a missile, you know, just call the
number.
PAGENO="0163"
159
Now, I cannot see how they believe that this is not going to for-
eign governments, especially when they're asked to disguise the
packaging.
Mr. BURNS. I think, the point, Mr. Rangel, is right now if me and
you had the money, we could go out and buy just about any of this
material ourselves as long as we assured the company that we
weren't taking it out of the country, and that was all they asked
for in this investigation. Mr. Huffman provided several false letters
of the intended use of it and that's really all that's required by the
law. So, as I said, me and you could go out and buy tons of this if
we assured them we were not going to take it out of the country.
Mr. RANGEL. I see. Well, Mr. Chairman, that's very interesting
because it seems like all you have to do is get it to a point of debar-
kation and they are obeying the law, and if you have a foreign dip-
lomatic ship there waiting then you've got it made.
Mr. BURNS. That's a correct observation, Mr. Rangel. The other
thing, as far as the repackaging, when we debriefed the people at
D&N Packing, they told us that it wasn't all that unusual that fre-
quently when you would have entrepreneurs that were receiving
materials from one source and selling them to somebody else legal-
ly that they would conceal the original source of that so they
wouldn't get cut out of the middle of the deal.
However, I would like to point out to the committee's attention
that when the employees of D&N Packing were asked to paint over
the drums that had "EPA Hazardous Waste Material" markings on
it, they refused to do that and at that point Mr. Huffman and his
sons took over the task of building the boxes and painting over the
labeling. It was for that reason that the people from D&N were not
ever prosecuted in this case.
Chairman PICKLE. That means to me that the shipper can make
any label change they wish and they are not subject to any kind of
controlled regulation or even much supervision, if any, at all; is
that basically correct?
Mr. BURNS. I am not an expert on that area, Mr. Chairman. But
I would imagine there is probably some international commerce
commission, some internal regulations within America about trans-
porting materials that are not properly labeled if they are hazard-
ous. Again, this is just an assumption on my part, but I would
assume that if it is a material, same some of the plasticizer that
was actually exported that's not a hazardous material, there isn't
much of a regulation as long as it is not a hazard about having it
properly labeled. Again, that is an assumption on my part and I
am certainly no expert in that area.
Chairman PICKLE. Thank you.
Mr. BURNS. We never did develop any knowledge during the in-
vestigation that the shipping companies here internally in America
were ever aware that once the labeling had been changed that they
were, in fact, transporting something that was mislabeled. It was a
straight commerce deal between the people at D&N Packing and
the freight company that was moving the freight around the coun-
try.
I would like to point out that besides this Condor program when
I interviewed Mr. Helmy, he indicated some of the other programs
that he had been involved in much earlier than this one. In the
PAGENO="0164"
160
written statement I provided the committee early in, I believe, 1985
when he was working, when Dr. Helmy was working with Tele-
dyne, McCormick, Self and Hollister, he had been contacted by the
same principals in this case from the Egyptian side, primarily Colo-
nel Khairat, about obtaining some fuel-air explosive bombs.
As I am sure you gentlemen are aware of in the current conflict
over in the Middle East that became an issue. It turns out that
during the time that Mr. Helmy was working for Teledyne, McCor-
mick, Self, the Egyptian Government, through a person on the east
coast, attempted to purchase some of these and they were informal-
ly denied a license by the State Department for the purchase of
them. They, then, turned to Dr. Helmy in his capacity at Teledyne
and asked him to obtain the patents on the more critical portions
of that system, specifically the dispenser and the ignition units. He
admitted during my debriefings with him that he, in fact, turned
those over to the Egyptian officials.
I also developed information in interviewing some of the other
corporations that he had been in contact with during this investi-
gation that he had approached the Coleman Research Corp., locat-
ed down in Huntsville, about obtaining Stinger guidance systems.
The Stinger missile being one of our primary surface-to-air mis-
siles.
He had, also, early in our wiretap investigation, we overheard
him being asked to check on the remotely piloted vehicle, known as
the SCARUB that was being built by Teledyne Rhein, which is es-
sentially, for lack of a better word, the poor man's cruise missile.
Teledyne Rhein is in the process of building this up particularly as
this RPV for the Egyptian Government. They had asked Dr. Helmy
to check on its status through his back channels. But, I think,
clearly in this case there was some evidence and not that there
were other Egyptians involved, but there was more than one pro-
gram that the Egyptian Government was interested in Dr. Helmy
following up on.
As Mr. Sundquist had asked during his questioning about the
moneys involved in this, there was some evidence at the end of our
wiretap that Dr. Helmy and Mr. Huffman were intent on establish-
ing this as a full-time smuggling venture, if you will. They talked
about buying their own warehouse. They talked about using the
money that-Dr. Helmy made the comment to Mr. Huffman that
"In the future rather than buying one or two of these various types
of items, we're going to be buying large quantities of one chemical,
then large quantities of another, and shipping them in the same
way." So, this wasn't a one-time effort on the part of the Egyptian
Government or on Mr. Helmy to try and smuggle something for
one particular time.
Chairman PICKLE. If you will suspend just a minute, Mr. Burns,
Mr. Sundquist, I believe, wants to ask a question on that point.
Mr. SUNDQUIST. Mr. Burns, thank you for that comment. I would
like to go to Dr. Helmy. Is this the new business that you were
talking about?
Mr. HELMY. No, I would like to clear this because a lot of this is
not accurate, sir. First, with respect to the Coleman Industry, this
is not a Stinger. This was the Pershing. What happens, the Egyp-
tian Government sent a representative here to Coleman Industry
PAGENO="0165"
161
and Coleman Industry is the company which manufacture software
for the Pershing missile. They came through officially and asked
him to prepare a proposal. They prepared the proposal. He was,
also, looking to obtain a license. It is not any illegal things, number
one.
Number two, with respect to the RPV, this was already a pro-
gram between the United States of America and the Egyptian Gov-
ernment. It was paid through even the Government, not through
me and it was manufactured by Teledyne Brown for the Egyptian
Government. There was a big Egyptian delegation from the Egyp-
tian Air Force working with Teledyne, not Teledyne Brown, I am
sorry, it is Teledyne Aerospace in San Diego.
There was a big Egyptian delegation which was working with the
Teledyne Aerospace in San Diego in this program and at one time
they have a flight test which failed. So, I was contacted by the
Egyptian Government to know why this was failed and what I
think. But nothing was illegal about this because this was the pro-
gram.
With respect to the Egyptian-
Mr. SUNDQUIST. What year were you contacted by the Govern-
ment to ask what you thought?
Mr. HELMY. What happened-
Mr. SUNDQUIST. What year?
Mr. HELMY. I don't recall. I think it was 1987, I believe, 1987.
Mr. SUNDQUIST. Did they call you often to find out what you
thought about defense systems?
Mr. HELMY. No, they called me-OK. The program which we
have with Teledyne Brown, we have a flight test and the flight test
was failed. What do you think? Do you think we should cut this
program with Teledyne Brown?
Mr. SUNDQUIST. Dr. Helmy, my question, I want to get back and
let Mr. Burns respond to what you said, but my question was this.
Earlier I had asked you about moneys and who got moneys, and
what it was going to be used for, and maybe I didn't ask the ques-
tion exactly right. But apparently there has been some evidence on
wiretap that the money was going to be used for other kinds of
things like this in the future with Mr. Huffman. You didn't say
that on the wiretap?
Mr. HELMY. For sure, this was only list which I have and this is
it.
Mr. SUNDQUIST. You are saying that the wiretap did not occur
and you didn't say that?
Mr. HELMY. For more program and future program more than
the list which I have, as I recall, this was the only program
which-
Mr. SUNDQUIST. You weren't going to use this money to buy a
warehouse? What did you say to Mr. Huffman about what you are
going to use the money for? Do you recall?
Mr. HELMY. The money which I had received?
Mr. SUNDQUIST. Yes.
Mr. HELMY. Huffman didn't know how much money I received.
Mr. SUNDQUIST. No. But did you talk to Mr. Huffman about
doing more of this kind of thing?
Mr. HELMY. No.
PAGENO="0166"
162
Mr. SUNDQUIST. Did you talk to Mr. Huffman about what you
were going to do with the money?
Mr. HELMY. The only thing which I ask Ruffman to do is just to
procure me the material which is on the list and if I don't give him
the whole material at once, maybe I give him something at the be-
ginning, then-
Mr. SUNDQUIST. Could you hold up just a second and then we can
get Mr. Burns to respond? Is that possible?
Mr. BURNS. Yes, sir. I am referring here to the Government Sen-
tencing Memorandum that I believe is a part of the record of this
filed in the Eastern District of California, United States of America,
Plaintiff v. Abdul Khadar, et al., Defendants. Page 26, lines, basi-
cally, 4 through 7 when Mr. Flynn, the assistant U.S. attorney that
prepared this, is quoting some of our wiretaps.
I will read, it says, starting at line 4,
Later conversation on June 22nd, Helmy suggested that he and Huffman should
get their own warehouse for future shipments. Attachment 57, page 7, which was
the original attachment to this document. Huffman said that he could get one for
maybe even, oh, 50 or $60,000. Huffman said he knew a place out here in the coun-
try that would be kind of remote and would suit our purposes just fine.
Now, that is a direct quote off of the transcripts of that wiretap,
sir.
Mr. SUNDQUIST. Mr. Helmy, does that refresh your memory?
Mr. HELMY. Yes. But I know for definite, for sure, 100 percent,
that there is no more than the list which I received from the Egyp-
tian Government.
Mr. SUNDQUIST. Are you denying under oath to us that you said
that?
Mr. HELMY. Maybe I said that, but I know for sure that there
was more than the-there was nothing more than the list which I
have, that could be more shipment from the same list because I
haven't given him the list at once. I give it him-
Mr. SUNDQUIST. Well, let me go back. You are saying that you
may have said that or you did say that?
Mr. HELMY. I say I might have said that on the wiretap, but the
intention is that with no more than the list itself.
Mr. SUNDQUIST. Well, I mean, this is a fairly major thing for you
to remember. I mean, what you are going to do with the money
and where the money was going to go and would you invest with
Mr. Huffman. You don't remember that discussion with Mr. Huff-
man at all?
Mr. HELMY. I don't remember it at all. But the thing which I re-
member clear for my mind is that there was nothing except this
list. If there is, I would tell it to them because I told them some-
thing which is more important than this. So, if it was more activi-
ty, I would tell it to them. I have no reason to hide it from them.
Mr. SUNDQUIST. Well, Dr. Helmy, I am disappointed. I have not
been so far because I thought you came in here as an American
citizen, as Mr. Rangel said, with some remorse over what happened
and some concern about your country, your new country, and that
you were going to be cooperative. But something this major when
you said, no, you didn't say it and we read it and you say I may
have said it. I mean, that really disappoints me. Can we believe the
other things that you are saying to ug?
PAGENO="0167"
163
Mr. HELMY. Yes. I tell you something, sir. You know, this is now
like 3 years before this happened. But the thing which I remember
because the wiretaps first when they were translated, they weren't
translated correct. There was even-my lawyer contested that
there was a lot of not accurate translation. But for the reality, one
thing for real, I am telling you everything the truth. This is no
problem with all of this.
The second thing which I am very clear about is that there was
nothing more than this list. This is the list. It might, I was giving
it to Huffman piece by piece and not telling him everything at*
once. It could be this is the way, but not for more shipment or no
more activity than this.
Mr. SUNDQUIST. And you don't remember discussing with Mr.
Huffman $60,000, if that was the number, for a warehouse that
might be suitable? You don't recall that? For the record, you are
saying this?
Mr. HELMY. What happens for the warehouse, he used it to
handle the warehouse problem. Whenever he has a problem he
comes to me.
Mr. SUNDQUIST. You are saying you don't remember saying that
or you are denying saying that?
Mr. HELMY. I say I am not remembering.
Mr. SUNDQUIST. Thank you.
Mr. Burns.
Mr. BURNS. Yes, sir. I would just like to address one other point
that Dr. Helmy just said. I am referring in this matter to Customs
report of investigation number 17 for the Abdul Khadar Helmy
case that I believe, also, is a part of the record. This particular
report documented my traveling to Huntsville, Ala., and interview-
ing officials at the Coleman Research Corp.
Just to read, the paragraph that I am reading is off of page 3 of
that particular report. It says:
Transtechno, which was one of the companies that was affiliated with Consen, one
of the engineering companies over in Europe, was inquiring about two distinct sys-
tems. One, the infrared seeker system for the Stinger missile and one relating to
tactical ballistic missiles. The current president of CRC, Mr. James Morrison, who
was vice-president and general manager of Huntsville office of CRC, handled the
project for the Huntsville office.
The report goes on to say that besides looking at those two items
that I just mentioned there, they also had been approached by
Consen and Dr. Khairat about providing missile test range facili-
ties and software for optimizing trajectory of warheads. The compa-
ny, which is a legitimate up front company, provided the proposal
to Transtechno and to Consen and in that proposal they told them
that in order to export this we are going to need license. Then, at
that point, the Egyptian Government lost their interest in it. Short-
ly, thereafter, they began the whole process of acquiring it by the
illegal means.
Mr. SUNDQUIST. Thank you for allowing me to interrupt, Mr.
Chairman.
Chairman PICKLE. Mr. Davis, do you want to add anything else
at all?
Mr. DAvIs. No, thank you, sir.
PAGENO="0168"
164
Chairman PICKLE. The Chair wishes to move on to the next
panel. We have many questions that we wish to submit to the pan-
elists for further answers. It is not the Chair's position today to at-
tempt to draw conclusions about much of the testimony that has
been presented. I appreciate the fact that Mr. Davis has given a
very factual, chronological development of this particular case. Mr.
Davis, Mr. Burns has not only confirmed that, but also has related
some of the background to it. We are glad to have the testimony
that Dr. Helmy has presented here as an addition to all this.
It is hard, I would think, for the average person to believe that
Dr. Helmy was not an agent for the nation of Egypt, an outright
agent developing materials for the use of that nation aided and
abetted by, one, finances from Iraq, the engineering from West
Germany, and the cooperation of Argentina. It would seem to me
that this case is an obvious example that it was relatively easy to
buy almost any kind of goods, put them together and ship them out
of the country contrary to our laws, particularly if you had the co-
operation of one of the nations involved. That is the conclusion
that one may or may not come to.
The committee now will attempt to sort out all this testimony.
Our concern is in what way can we, the United States, establish
better control of our exports, both purchase and shipments, in
order to ensure the safety of our country. I don't know that we
know the answer. But we know it is relatively easy to do it, at least
from the testimony that has been introduced this morning. I think
that it should be a clear bell ringing to our Commerce Department
and the State Department that we are woefully weak in this
regard. But we will try to address those specific Customs questions
at a later point.
I do want to thank each of the panelists for their participation
today. Thank you very much.
Now, our next panel will be Dennis Bass, who is a Senior Special
Agent from Baltimore, and Leslie Hinkleman, former export man-
ager of Alcolac International in Baltimore. I am going to ask both
Mr. Bass, if he would take his seat at the table, I am also going to
ask Leslie Hinkleman if she will take her seat. We will give the
oath to her at one time and we will proceed as a panel then.
Then I will yield to Mr. Jenkins and to Mr. Bunning for any
comments or questions. We have asked some of our special wit-
nesses to take the oath for the testimony being presented. Ms.
Hinkleman, will you raise your right hand?
[Witness sworn.]
Chairman PICKLE. The record will show that Ms. Hinkleman has
answered in the affirmative.
All right. The Chair recognizes Dennis Bass who is Senior Spe-
cial Agent of Customs Service in Baltimore. Mr. Bass. And then the
Chair will yield to Mr. Jennings and Mr. Bunning.
STATEMENT OF DENNIS J. BASS, SENIOR SPECIAL AGENT, U.S.
CUSTOMS SERVICE, BALTIMORE, MD.
Mr. BASS. Thank you, Mr. Chairman. This investigation began in
1988 when information was developed which indicated that Alcolac
International, a chemical manufacturer in Baltimore, was arrang-
PAGENO="0169"
165
ing for shipment of a larger quantity of a chemical called thiodigly-
col to Iran. Thiodiglycol is a precursor chemical in the manufactur-
ing of mustard gas.
The Office of the Special Agent in Charge in Baltimore had pre-
viously investigated allegations that Alcolac had shipped thiodigly-
col to Iran.
Mr. JENKINS. Mr. Chairman, there may be some question; I
assume that the reason that Mr. Bass is not being identified is that
he is involved in ongoing investigations, other investigations, and is
being shielded from the TV camera. Is that the reason for that?
Chairman PICKLE. Yes, sir.
Mr. JENKINS. That is correct. All right. I just wanted to make
that comment.
Mr. BASS. The Office of the Special Agent in Charge in Balti-
more, had previously investigated allegations that Alcolac had
shipped thiodiglycol to Iran. However, the allegations were never
substantiated.
Special agents from the Baltimore office, Strategic Investigations
Group, began surveillance of the Alcolac plant and developed fur-
ther information relating to a shipment of seven containers of thio-
diglycol going from Alcolac to Singapore. The shipment was con-
signed to Hallet Enterprises in Singapore. The U.S. Customs atta-
che, Bangkok, quickly ascertained that Hallet Enterprises was
merely an office in Singapore and not a likely recipient of a ship-
ment of chemicals.
Baltimore Customs inspectors were informed of this information
and began a search for the shipment. The inspectors located the
shipment and determined that it was being loaded on a barge in
Baltimore and would shortly depart for Norfolk, Va., to be laden
on a freighter enroute to Singapore.
The documentation indicated that the shipment was incorrectly
being exported as "G-Dest, that is, general destination goods not re-
quiring an export license, instead of with the required Commerce
Department license. Since a validated Commerce license was
needed to export thiodiglycol to Singapore the shipment was sub-
ject to seizure. A fast decision had to be made either to seize the
shipment in Norfolk and overtly continue the investigation or to
allow the chemicals to depart Baltimore without alerting the sus-
pects so that we could try to ascertain the final destination of the
shipment.
Compounding the problem was the fact that the shipment would
be in Norfolk little more than 24 hours making any substitution
almost impossible. We decided to confer with our Virginia Beach
office which coordinated with the Customs District Director in Nor-
folk. The Regional Commissioner's staff in the Northeast Region,
which covers Baltimore, also conferred with the staff of the South-
east Regional Commissioner, who covers Norfolk. Concurrently, the
Strategic Investigations Division at headquarters obtained approval
from the Department of Commerce allowing a substitute shipment
to leave the country.
While all this coordination was occurring, Customs inspectors in
Norfolk unearthed 430 drums identical to those used to ship the
thiodiglycol. Working through the night they removed the original
drums from the shipping containers and with the help of a local
PAGENO="0170"
166
fire department filled the new drums with water and then reloaded
them into the original containers. The inspectors went so far as to
remove the labels from the original drums and put them on the
drums in the rear of the container so that if someone opened the
doors they would see genuine Alcolac labels.
Arrangements had been made to track the movement of the
goods once it reached Singapore. However, there was concern that
the vessel might divert from its scheduled itinerary and unload the
containers at another port. The Strategic Investigations Division at
headquarters had lessened that concern by arranging to have the
vessel tracked by satellite. Using a high tech series of electronic de-
tective devices, the ship was located within hours.
As the shipment proceeded to its destination, Baltimore special
agents pursued various leads. Several suspicious details were un-
covered. For example, the paperwork indicated that a company in
West Germany should be notified upon the arrival of the shipment
in Singapore. The U.S. Customs Attache, Bonn, Germany, ascer-
tained that the German company was a pharmaceutical company.
Also, 5 days after arriving in Singapore, the shipment was loaded
on a vessel destined for Karachi, Pakistan. This alarmed us for two
reasons. First, the shipment could be trucked from Karachi to Iran,
making tracking difficult, if not impossible. Second, there was no
U.S. representation in Pakistan.
Through the efforts of the U.S. Customs representative in Hong
Kong, arrangements were made with the Drug Enforcement Ad-
ministration representative in Karachi to assist in tracking the
shipment. Twenty-four days after the shipment arrived in Karachi,
I received a telex advising that the shipment was, in fact, enroute
to Iran having been loaded aboard the Iranian ship, Iran-Ekram.
Search warrants were then immediately executed at Alcolac's
three locations in Maryland. Incriminating documents were discov-
ered that indicated that officials of Alcolac should have been aware
the chemicals were not really destined for Singapore. Also, it was
learned that Leslie Hinkleman, the export manager at Alcolac, fal-
sified documents to establish the company's innocence. The docu-
ments and further evidence revealed the German citizen, Peter
Walaschek, was deeply involved in the illegal shipment, as well as
three previous shipments that were also diverted to Iran. Attached
to my statement is a shipping document where Alcolac indicated
transshipping is allowed and a doctored telex, which was done by
Leslie Hirikleman.
Officials at Alcolac began cooperating with Customs after the in-
vestigation substantiated the corporation's involvement in the ille-
gal shipment. I requested officials of Alcolac to send Walaschek a
telex inviting him to Baltimore for a meeting. Walaschek was
stunned when he was greeted by Customs special agents instead of
Alcolac officials and arrested upon his arrival at Baltimore-Wash-
ington International Airport.
Walaschek pled guilty to violating the Export Administration
Act and admitted to arranging three previous shipments to Iran,
all totaling 210 tons of thiodiglycol valued at more than $350,000.
Before Walaschek could be sentenced, he fled the country, and is
currently a fugitive.
PAGENO="0171"
167
The investigation also uncovered four shipments of thiodiglycol
previously made by Alcolac on behalf of Nukraft Mercantile Corp.
located in Brooklyn, N.Y. Search warrants executed by Customs
special agents at Nukraft revealed that Nukraft officials Harold
Greenberg and Nicolas De Fino, as well as a Dutch national, Franz
Van Anraat, and Japanese national, Charles Tanaka, were respon-
sible for making the purchases and exports of thiodiglycol on
behalf of the Iraqi Government.
Documents seized by the Swiss Government on behalf of the U.S.
Government at the residence and business location of Van Anraat
further substantiated the violations. Both Harold Greenberg and
Nicholas De Fino pled guilty to violations of the Export Adminis-
tration Act.
With the assistance of Greenberg, Charles Tanaka was invited to
the United States where he was arrested in Baltimore, Md. Tanaka
subsequently pled guilty in U.S. district court to one count of
money laundering and is currently incarcerated in the United
States.
Franz Van Anraat was arrested in Milan, Italy, at the request of
the U.S. Government, in January 1989, pending extradition to the
United States. However, after 7 months of incarceration, a Milan
court refused to extradite Van Anraat and he was set free. An Ital-
ian appeals court overruled the lower court and ordered Van
Anraat extradited; however, by that time he had fled Italy. He is
believed to be residing in the Netherlands at this time and is cur-
rently a fugitive.
Van Anraat successfully caused 538 tons of thiodiglycol to be ex-
ported by Alcolac International and illegally diverted to Iraq.
The Alcolac Corp. pleaded guilty to one count of violating the
Export Administration Act and was fined $437,594. Leslie Hinkle-
man, the export manager at Alcolac, pleaded guilty to one count of
making a false statement, and Peter Walaschek also pled guilty,
but, as I have stated, later fled to West Germany and is currently a
fugitive.
Harold Greenberg and Nicholas De Fino both pleaded guilty to
violating the Export Administration Act. Greenberg was sentenced
to two years' probation and a $27,000 fine. De Fino received a 2-
year sentence, with all but 6 months' home detention suspended,
and a $15,000 fine.
All Sobani, an Iranian Government official, and Franz Van
Anraat both remain fugitives.
Attached to my statement are two schematic drawings detailing
the four Iranian and four Iraqi shipments.
That is my statement.
[The prepared statement and attachments follow:]
PAGENO="0172"
168
WRITTEN STATEMENT
SENIOR SPECIAL AGENT DENNIS 1. BASS
U.S. CUSTOMS SERVICE
THE INVESTIGATION OF ALCOLAC INTERNATIONAL
ALTHOUGH THE UNITED STATES HAS STRONG EXPORT LAWS
CONTROLLING CERTAIN CHEMICAL PRECURSORS, THE U.S. CHEMICAL
INDUSTRY IS STILL TARGETED BECAUSE OF ITS QUALITY PRODUCTION AND
COMPETITIVE PRICING.
ONE SUCH U.S. FIRM WAS ALCOLAC INTERNATIONAL, LOCATED IN
BALTIMORE, MARYLAND. DURING 1987 AND 1988, ALCOLAC BECAME
INVOLVED IN A SERIES OF TRANSACTIONS INVOLVING THE SALE OF
THIODIGLYCOL, A PRECURSOR FOR MUSTARD GAS, TO TWO DIFFERENT
PURCHASERS FOR EXPORT. THE FIRST SERIES OF TRANSACTIONS INVOLVED
SALES TO A GERMAN NATIONAL DOING BUSINESS AS COLIMEX GMBH AND
COMPANY KG. THE SECOND SERIES INVOLVED SALES TO NU~AFT
MERCANTILE CORPORATION, A BROOKLYN, NEW YORK, COMPANY WHICH WAS
ACTING ON THE BEHALF OF A DUTCH NATIONAL. THE INVESTIGATION,
WHICH WAS CONDUCTED BY THE SPECIAL AGENT IN CHARGE, BALTIMORE
(SAC, BALTIMORE), REVEALED THAT THE GERMAN NATIONAL WAS ACTUALLY
A BROKER FoR AN IRANIAN DIPLOMAT FROM THE IRANIAN EMBASSY IN WEST
GERMANY AND THAT THE DUTCH NATIONAL WAS A PROCURING AGENT FOR THE
IRAQI GOVERNMENT. BOTH WERE RESPONSIBLE FOR SHIPMENTS BEING
ILLEGALLY' DIVERTED TO THE PERSIAN GULF.
PAGENO="0173"
169
-2-
THE COLIMEX TRANSACTIONS BEGAN IN JANUARY, 1987, WHEN
ALCOLAC WAS CONTACTED BY THE GERMAN NATIONAL. HE INQUIRED
CONCERNING THE PURCHASE OF 15 TONS OF THIODIGLYCOL FOR DELIVERY
TO CY SAVAS OIKONOMIDIS E . E., A GREEK COMPANY. THE QUANTITY OF
THE ORDER WAS LATER INCREASED TO 30 TONS. DURING FEBRUARY AND
MARCH, 1987, ALCOLAC SHIPPED A TOTAL OF 66,000 POUNDS TO THE
GREEK COMPANY, FOR WHICH IT RECEIVED $54,000. WITHOUT ALCOLAC'S
KNOWLEDGE, THE GREEK COMPANY, WORKING TOGETHER WITH THE GERMAN
NATIONAL AND AN IRANIAN DIPLOMAT IN GERMANY, TRANSSHIPPED THE
THIODIGLYCOL FROM GREECE TO IRAN.
IN LATE JUNE, 1987, THE GERMAN NATIONAL CONTACTED ALCOLAC
AND ORDERED AN ADDITIONAL 60 TONS OF THIODIGLYCOL, THIS TIME FOR
SHIPMENT TO A SINGAPORE COMPANY NAMED MALLET ENTERPRISES. AFTER
SEVERAL MONTHS OF NEGOTIATIONS, THE TRANSACTIONS WERE
CONSUMMATED; AND, ON SEPTEMBER 4, 1987, 128,700 POUNDS OF
THIODIGLYCOL WAS SHIPPED TO MALLET IN SINGAPORE. ALCOLAC WAS
PAID $105,960 FOR THIS SHIPMENT. ALTHOUGH THE COMMERCE
DEPARTMENT REGULATIONS, REVISED A MONTH EARLIER, REQUIRED THAT A
VALIDATED LICENSE BE OBTAINED FOR SHIPMENT, ALCOLAC WAS UNAWARE
OF THE NEW REGULATIONS AND DID NOT APPLY FOR A LICENSE. THE
SHIPMENT WAS TRANSSHIPPED FROM SINGAPORE THROUGH HONG KONG TO
PAKISTAN AND, FINALLY, TO IRAN. AGAIN, ALCOLAC HAD NO KNOWLEDGE
OF THE TRANSSHIPMENT.
PAGENO="0174"
170
-3...
ON FEBRUARY 8, 1988, THE GERMAN NATIONAL TELEPHONED
ALCOLAC'S EXPORT MANAGER AND INQUIRED ABOUT AN ADDITIONAL 60 TONS
OF THIODIGLYCOL FOR DELIVERY TO SINGAPORE AND PAKISTAN. ON THE
SAME DATE, THE EXPORT MANAGER RESPONDED BY TELEX THAT AN EXPORT
LICENSE WAS REQUIRED FOR BOTH SINGAPORE AND PAKISTAN, AND THAT
ALCOLAC WOULD APPLY FOR AN EXPORT LICENSE. IN RESPONSE TO THIS
TELEX, THE EXPORT MANAGER WAS ADVISED THAT THE ENTIRE SHIPMENT
WOULD BE SENT TO SINGAPORE. (SEVERAL MONTHS LATER, AFTER A
SEARCH WARRANT WAS EXECUTED AT ALCOLAC'S OFFICES, THE EXPORT
MANAGER DESTROYED THE FEBRUARY 8, TELEX REFERRING TO PAKISTAN AND
FURNISHED CVSTOMS AGENTS WITH AN ALTERED TELEX THAT REFERRED ONLY
TO SINGAPORE.)
ON FEBRUARY 9, 1988, ALCOLAC SUBMITTED TO THE DEPARTMENT OF
COMMERCE AN APPLICATION FOR AN EXPORT LICENSE FOR THE SHIPMENT
TO SINGAPORE. THE APPLICATION DESCRIBED THE CHEMICAL AS
"THIODIETHYLEN GLYCOL" [SIC) AND HAD ATTACHED LITERATURE
DESCRIBING THE CHEMICAL (BUT ERRONEOUSLY LISTED THE CONHODITY
CONTROL LIST NUMBER AS 5799C RATHER THAN 4798B). THE APPLICATION
WAS SIGNED BY THE DIRECTOR OF INTERNATIONAL MARKETING AND THE
EXPORT MANAGER. BECAUSE OF THE ERRONEOUS COMMODITY CONTROL LIST
NUMBER IDENTIFIED A CHEMICAL WHICH WAS PERMITTED TO BE SHIPPED TO
SINGAPORE WITHOUT AN EXPORT LICENSE, THE DEPARTMENT OF COMMERCE
RESPONDED TO ALCOLAC, ON FEBRUARY 22, 1988, THAT A VALIDATED
PAGENO="0175"
171
-4-
LICENSE WAS NOT REQUIRED FOR THE SINGAPORE SHIPMENT. ALCOLAC
ADVISED THE GERMAN NATIONAL ACCORDINGLY.
IN LATE FEBRUARY AND EARLY MARCH, 1988, THE GERMAN NATIONAL
INCREASED THE ORDER TO 120 TONS, AN EXTREMELY LARGE ORDER FOR
THE CHEMICAL. IN ADDITION, HE ASKED THE EXPORT MANAGER TO
ARRANGE TO PURCHASE SEVEN 20-FOOT CONTAINERS IN WHICH ALCOLAC
WOULD PLACE THE DRUMS OF THIODIGLYCOL TO BE SHIPPED TO SINGAPORE.
THE EXPORT MANAGER AGREED, AND SUBSEQUENTLY MADE ARRANGEMENTS TO
PURCHASE SHIPPING CONTAINERS AND PASS ON THE COST TO COLIMEX.
THE SHIPPING ARRANGEMENTS REQUESTED BY THE GERMAN NATIONAL, AND
AGREED TO BY ALCOLAC, ALLOWED THE SHIPMENT TO REMAIN INSIDE THE
ORIGINAL CONTAINERS UNTIL THE PRODUCT WAS DELIVERED TO THE FINAL
DESTINATION. THESE SHIPPING ARRANGEMENTS TEDS FACILITATED THE
SURREPTITIOUS TRANSSHIPMENT OF THE CHEMICAL BY ALLOWING IT TO BE
TRANSSHIPPED WITHOUT BEING UNPACKED IN SINGAPORE.
ON APPROXIMATELY MARCH 28, 1988, THE GERMAN NATIONAL SPOKE
TO THE EXPORT MANAGER AND REQUESTED THAT ALCOLAC MODIFY THE
SHIPPING DOCUMENTS USED IN THE PRIOR SHIPMENTS. HE ASKED THAT
THE LANGUAGE "TRANSHIPPING IS ALLOWED" BE ADDED TO THE BILL OF
LADING AND COMMERCIAL INVOICE.
THE EXPORT ADMINISTRATION REGULATIONS REQUIRE A "DIVERSION
CLAUSE" TO BE FEATURED ON ALL BILLS OF LADING AND COMMERCIAL
INVOICES THAT STATES:
PAGENO="0176"
172
-5-
THESE COMMODITIES LICENSED BY UNITED STATES FOR ULTIMATE
DESTINATION [NAME OF COUNTRY]. DIVERSION CONTRARY TO UNITED
STATES LAW PROHIBITED.
THE ULTIMATE DESTINATION IS REQUIRED TO BE IDENTIFIED BY
COUNTRY NAME. IN THE PRIOR SINGAPORE SHIPMENT, SINGAPORE HAD
BEEN LISTED AS THE ULTIMATE DESTINATION. THE GERMAN NATIONAL
ASKED THAT THE DESTINATION FOR THIS SHIPMENT BE LISTED AS FAR
EAST RATHER THAN SINGAPORE.
THE EXPORT MANAGER AGREED TO COMPLY WITH THESE REQUESTS.
THE GERMAN NATIONAL CONFIRMED THE REQUEST WITH A TELEX ON THE
SAME DAY WHICH STATED:
ACCORDING TO OUR PHONE CONVERSATION FROM TODAY, PLEASE DO
SOME NECESSARY THINGS FOR THE CUSTOMER AS DISCUSSED: 1) ON
THE SHIPPING DOCUMENTS INSERT "TRANSSHIPPING IS ALLOWED" 2)
PLEASE DO NOT WRITE ON THE BILL OF LADING "THESE COMMODITIES
LICENSED BY UNITED STATES FOR ULTIMATE DESTINATION
SINGAPORE. DIVERSION CONTRARY TO UNITED STATES LAW
PROHIBITED." PLEASE YOU MAY WRITE INSTEAD OF SINGAPORE,
"FAR EAST."
PAGENO="0177"
173
-6-
THE EXPORT MANAGER RESPONDED IN A TELEX DATED MARCH 21,
1988: "HAVE NOTED DETAILS AND WILL COMPLY ON THE B/L AND
INVOICES." THE GERMAN NATIONAL'S REQUEST THAT THE SHIPPING
DOCUMENTS PERMIT TRANSSHIPMENT AND LIST THE FAR EAST RATHER THAN
SINGAPORE AS THE ULTIMATE DESTINATION, COMBINED WITH THE EARLIER
REQUEST BY HIM TO SHIP THE THIODIGLYCOL TO SINGAPORE AND
PAKISTAN, MADE IT CLEAR THAT THE SHIPMENT WAS GOING TO BE
TRANSSHIPPED OUT OF SINGAPORE (POSSIBLY TO PAKISTAN, WHICH IS
CONTIGUOUS TO IRAN). THE EXPORT MANAGER'S LATER CREATION OF AN
ALTERED TELEX ESTABLISHED ALCOLAC'S RECOGNITION THAT THE CHEMICAL
WOULD BE TRANSHIPPED.
ON APRIL 19, 1988, ALCOLAC SENT ITS FREIGHT FORWARDING
AGENT, PATRON SERVICES, INC., (PATRON) A "SHIPPER'S LETTER OF
INSTRUCTIONS" INSTRUCTING PATRON TO PREPARE THE BILL OF LADING
FOR THE SHIPMENT TO SINGAPORE. AS THE GERMAN NATIONAL HAD
REQUESTED, ALCOLAC INSTRUCTED PATRON TO INSERT ON THE BILL OF
LADING "TRANSHIPPING IS ALLOWED," AND TO LIST THE DESTINATION AS
THE FAR EAST RATHER THAN SINGAPORE. AN EMPLOYEE OF PATRON, AFTER
REVIEWING ALCOLAC'S REQUEST, CALLED THE EXPORT MANAGER THAT
STATED THAT THE EXPORT ADMINISTRATION REGULATIONS DID NOT PERMIT
THE BILL OF LADING TO STATE THAT TRANSSHIPPING WAS ALLOWED AND
REQUIRED THAT THE NAME OF THE COUNTRY BE INCLUDED IN THE
DIVERSION CLAUSE, AND THAT PATRON THEREFORE COULD NOT COMPLY WITH
THE REQUEST.
PAGENO="0178"
174
-7-
ON APRIL 28, 1988, THE PATRON EMPLOYEE SENT THE EXPORT
MANAGER A COPY OF THE APPLICABLE REGULATIONS. PATRON PREPARED
THE BILL OF LADING INDICATING THAT THE ULTIMATE DESTINATION WAS
SINGAPORE AND MADE NO REFERENCE TO TRANSSHIPPING BEING PERMITTED.
THE BILL OF LADING, PREPARED BY PATRON, WAS FURNISHED TO ORIENT
OVERSEAS CONTAINER LINE, THE SHIPPING LINE FOR THE THIODIGLYCOL,
AND WAS FILED WITH THE CUSTOMS SERVICE. PATRON ALSO PREPARED AND
FILED, PURSUANT TO THE INSTRUCTIONS OF ALCOLAC, A SHIPPER'S
EXPORT DECLARATION DATED APRIL 18, 1988. IN ACCORDANCE WITH THE
EXPORT MANAGER'S INSTRUCTIONS, THE COUNTRY OF ULTIMATE
DESTINATION FOR THE SHIPMENT WAS INDICATED AS SINGAPORE.
ALCOLAC ASKED THAT PATRON PROVIDE IT WITH DUPLICATE
ORIGINALS OF THE BILL OF LADING TO BE FORWARDED TO COLIMEX. AN
ALCOLAC EMPLOYEE ALTERED THE BILL OF LADING RECEIVED FROM PATRON
BY TYPING "TRANSSHIPPING IS ALLOWED" ON THE DOCUMENT,
NOTWITHSTANDING THE INSTRUCTIONS RECEIVED FROM PATRON THAT IT WAS
UNLAWFUL TO INDICATE ON THE BILL OF LADING THAT "TRANSSHIPPING IS
ALLOWED."
PAGENO="0179"
175
-8-
IN ADDITION, ALCOLAC PREPARED AN INVOICE DATED APRIL 18,
1988, TO COLIMEX. ALTHOUGH THE REGULATIONS PROVIDED BY THE
FREIGHT FORWARDER CLEARLY REQUIRED THAT THE INVOICE, LIKE THE
BILL OF LADING, INCLUDE A DIVERSION CLAUSE SPECIFYING THE NAME OF
THE COUNTRY OF ULTIMATE DESTINATION, ALCOLAC PREPARED THE INVOICE
TO INDICATE THAT THE ULTIMATE DESTINATION WAS THE FAR EAST AND
THAT TRANSSHIPMENT WAS ALLOWED. THE INVOICE, IN THE AMOUNT OF
$198,660 PLUS $9,100 FOR THE SHIPPING CONTAINERS, WAS SENT TO
COLIMEX TOGETHER WITH THE ALTERED BILL OF LADING.
ON APPROXIMATELY APRIL 20, 1988, 430 55-GALLON DRUMS
(CONTAINING A TOTAL OF 236,500 POUNDS OF THIODIGLYCOL STORED IN
THE SEVEN CONTAINERS PURCHASED BY ALCOLAC FOR COLIMEX) WERE
SHIPPED BY BARGE FROM THE PORT OF BALTIMORE TO THE PORT OF
NORFOLK, VIRGINIA. ON APRIL 21, 1988, UNITED STATES CUSTOMS
INSPECTORS AND SPECIAL AGENTS FROM NORFOLK, WORKING IN
COOPERATION WITH SPECIAL AGENTS OF THE SAC/BALTIMORE OFFICE,
SUBSTITUTED WATER FOR THE THIODIGLYCOL, WITHOUT ALCOLAC'S
KNOWLEDGE. FOUR HUNDRED AND THIRTY DRUMS OF WATER WERE RELOADED
ONTO THE VESSEL ORIENTAL FRIENDSHIP, WHICH DEPARTED THE PORT OF
NORFOLK FOR SINGAPORE ON APRIL 22, 1988.
PAGENO="0180"
176
-9-
IN MAY, 1988, HALLET ENTERPRISES, THE SINGAPORE CONSIGNEE
FOR THE THIODIGLYCOL, NOTIFIED THE SHIPPING COMPANY IN SINGAPORE
HANDLING THE ARRIVAL OF THE ORIENTAL FRIENDSHIP THAT THE SHIPMENT
WOULD BE TRANSSHIPPED TO KARACHI, PAKISTAN, ABOARD THE VESSEL
OCEAN SINCERITY. WHEN THE SHIPMENT ARRIVED IN SINGAPORE, IN
ORDER TO EFFECT THE TRANSSHIPMENT, MALLET FILED WITH SINGAPORE
AUTHORITIES A COPY OF THE ALTERED BILL OF LADING FURNISHED BY
ALCOLAC TO COLIMEX AND BY COLIMEX TO MALLET. THE STATEMENT ON
THE BILL OF LADING THAT TRANSSHIPPING WAS ALLOWED ASSISTED MALLET
IN AVOIDING DIFFICULTIES THAT HAD OCCURRED WITH THE PRIOR
SHIPMENT TO SINGAPORE.
THE OCEAN SINCERITY LEFT SINGAPORE ON APPROXIMATELY MAY 24,
1988, CARRYING THE DRUMS OF WATER. IT ARRIVED IN KARACHI ON JUNE
4, 1988. THE SHIPMENT WAS PLACED ON THE VESSEL IRAN EKRAM,
WHICH LEFT KARACHI ON JUNE 4, 1988, AND TRAVELED TO BANDAR ABBAS,
IRAN. SHIPPING DOCUMENTS INDICATED THAT THE SHIPMENT WAS
DELIVERED TO A TEHRAN COMPANY NAMED M/S RAY TEXTILE INDUSTRIES.
ALCOLAC WAS LATER PAID THE FULL AMOUNT OF ITS INVOICE TO COLIMEX.
PAGENO="0181"
177
- 10 -
AT THE SANE TIME THE COLIMEX TRANSACTIONS WERE TAKING PLACE,
ALCOLAC BEGAN SELLING EXTREMELY LARGE QUANTITIES OF THIODIGLYCOL
FOR EXPORT TO A GROUP DOING BUSINESS AS NUKRAFT MERCANTILE
CORPORATION, BROOKLYN, NEW YORK. IN OCTOBER, 1987, NURRAFT
CONTACTED THE EXPORT MANAGER AND EXPRESSED AN INTEREST IN
ESTABLISHING A LONG-TERN SUPPLY RELATIONSHIP FOR THIODIGLYCOL
WITH ALCOLAC, STATING THAT THE THIODIGLYCOL WAS BEING PURCHASED
FOR USE IN THE TEXTILE INDUSTRY BY NUKRAFT'S EUROPEAN CUSTOMER, A
DUTCH NATIONAL IN SWITZERLAND. NUKRAFT WAS INTERESTED IN AN
INITIAL SHIPMENT OF 130 METRIC TONS OF THIODIGLYCOL.
ALCOLAC INVOICED NUKRAFT FOR THE SHIPMENTS. THE INVOICE,
DATED OCTOBER 21, 1987, AND SIGNED BY THE EXPORT MANAGER,
INDICATED THAT ALCOLAC SOLD NUKRAFT 277,200 POUNDS OF
THIODIGLYCOL AT 57 CENTS PER POUND AND CONSIGNED THE ORDER TO
COMPANIES, INC., IN SWITZERLAND. THE TOTAL PRICE WAS $158, 004,
PLUS $9,800 OCEAN FREIGHT. THE SPACE FOR THE COUNTRY OF
DESTINATION IN THE DIVERSION CLAUSE WAS LEFT BLANK, IN VIOLATION
OF 15 C.F.R. SECTION 386.6.
PAGENO="0182"
178
- -11-
PATRON SERVICES, AT ALCOLAC'S REQUEST, PREPARED THE BILL OF
LADING FOR THE SHIPMENT. THE BILL OF LADING INDICATED THAT THE
"TEXTILE ADDITIVES," NOWHERE IDENTIFIED BY NAME, WERE SHIPPED VIA
THE VESSEL EUROPEAN SENATOR ON OCTOBER 22, 1987. THE PORT OF
DISCHARGE WAS LISTED AS ANTWERP, BELGIUM. THE DIVERSION CLAUSE
ON THE BILL OF LADING STATED THAT THE ULTIMATE DESTINATION WAS
SWITZERLAND.
A COPY OF A TELEX DATED OCTOBER 29, 1987, FROM INDUSTRIAL
PROJECT FORWARDING, LTD., THE FORWARDING AGENTS FOR THE DUTCH
NATIONAL, TO NUERAFT, WAS FOUND IN ALCOLAC'S FILES. THE TELEX
STATED:
ACCORDING TO THE INFORMATION WE HAVE RECEIVED ALL
TRANSSHIPMENT COSTS IN ANTWERP HAVE TO BE SENATOR ACCOUNT.
ON THE FOLLOWING DAY, NTJKRAFT INSTRUCTED ALCOLAC TO REVISE
THE BILL OF LADING TO INDICATE "GOODS IN TRANSIT." ALCOLAC
COMPLIED WITH THESE INSTRUCTIONS. aT ALCOLAC'S REQUEST, PATRON
PREPARED A SECOND BILL OF LADING INDICATING IN THE ROUTING AND
INSTRUCTION SECTION:
GOODS IN TRANSIT. SENATOR LINIE [SIC] RESPONSIBILITY
TERNINATES AT ANTWERP.
PAGENO="0183"
179
- 12 -
THE SHIPMENT OF THIODIGLYCOL NEVER REACHED SWITZERLAND.
AFTER ITS ARRIVAL IN BELGIUM, IN NOVEMBER, 1987, THE THIODIGLYCOL
WAS TRANSSHIPPED BY VESSEL TO THE PORT OF AQABA, JORDAN, WITH ITS
FINAL DESTINATION BEING IRAQ. AFTER THE COMPLETION OF THE FIRST
SHIPMENT, NUKRAFT'S PRINCIPALS ARRANGED FOR A MEETING AT
ALCOLAC'S OFFICES ON NOVEMBER 19, 1987, IN ORDER TO DISCUSS
NUKRAFT'S FUTURE NEEDS. THE VICE PRESIDENT, THE DUTCH NATIONAL
AND A JAPANESE NATIONAL ATTENDED ON BEHALF OF NUKRAFT. ALCOLAC
SENIOR EXECUTIVES ATTENDED THE MEETING, AS WELL AS THE DIRECTOR
FOR INTERNATIONAL MARKETING AND THE EXPORT MANAGER.
AT THE MEETING, THE VICE PRESIDENT EXPLAINED THAT NUKRAFT
WAS AN AFFILIATE OF A BROOKLYN, NEW YORK, COMPANY NAMED UNITED
STEEL AND STRIP CORPORATION, AND WAS OWNED BY THE PRESIDENT OF
UNITED STEEL AND STRIP. THE DUTCH NATIONAL WAS INTRODUCED AS THE
EUROPEAN AGENT AND CUSTOMER NUKRAFT. HE STATED THAT HE SOLD
THIODIGLYCOL TO WESTERN EUROPEAN DISTRIBUTORS, WHO THEN DILUTED
AND REPACKAGED THE CHEMICAL FOR SALE TO END-USERS IN THE TEXTILE
INDUSTRY, PRIMARILY IN ITALY. THE GROUP DISCUSSED THE SUPPLY BY
ALCOLAC TO NTJKRAFT OF ITS TOTAL REQUIREMENTS FOR THIODIGLYCOL,
WHICH NUKRAFT ESTIMATED TO BE 3,000,000 TO 6,000,000 POUNDS PER
YEAR. THAT QUANTITY WAS GREATER THAN ALCOLAC'S TOTAL DOMESTIC
AND INTERNATIONAL SALES OF THE CHEMICAL IN 1987, APPROXIMATELY
1.8 MILLION POUNDS.
PAGENO="0184"
180
- -13-
ALCOLAC HAD NO INFORMATION TO SUGGEST THAT THERE WAS
SUFFICIENT DEMAND FOR THIODIGLYCOL FOR LEGITIMATE USES TO ACCOUNT
FOR THE VOLUME NUKRAFT INTENDED TO BUY, AND HAD NEVER BEFORE
HEARD OF NUKRAFT OR ANY OF ITS PRINCIPALS OR AFFILIATES.
MOREOVER, ALCOLAC WAS TOLD THAT NIJI~AFT WAS A SHELL COMPANY
FORMED FOR THE PURPOSE OF THESE TRANSACTIONS, WITH NO MEANINGFUL
ASSETS. COMPANY EXECUTIVES ASKED WHETHER NUKRAFT WAS AWARE THAT
THE CHEMICAL COULD BE USED TO PRODUCE MUSTARD GAS. THE VICE
PRESIDENT AND THE DUTCH NATIONAL RESPONDED THAT THEY WERE AWARE
OF THIS RESTRICTED USE, AND THAT THE CHEMICAL WOULD BE USED FOR
TEX~1~ APPLICATIONS RATHER THAN MUSTARD GAS PRODUCTION. ALCOLAC
ACCEPTED THESE ASSURANCES AND AGREED TO SUPPLY NUKRAFT' S TOTAL
REQUIREMENTS AT A PRICE OF 56 CENTS PER POUND. BASED ON AN
ESTIMATED COST TO PRODUCE THIODIGLYCOL AT 35 CENTS PER POUND,
ALCOLAC EXPECTED TO EARN $630,000 TO $1,260,000 IN PROFITS PER
YEAR FROM THE NUKRAFT RELATIONSHIP.
AFTER THE NOVEMBER MEETING, ALCOLAC CONTINUED TO SUPPLY
THIODIGLYCOL TO NUKRAFT. THE NEXT SHIPMENT OCCURRED IN JANUARY,
1988. PRIOR TO THAT SHIPMENT, THE VICE PRESIDENT ASKED THE
EXPORT MANAGER TO LIST THE CONSIGNEE ON THE SHIPPING DOCUMENTS AS
U.O. COMPANIES IN MONROVIA, LIBERIA, AND TO INDICATE THE
PURCHASER AS INDUSTRIAL PROCUREMENT CORPORATION AT THE SANE
BROOKLYN ADDRESS AS NUKRAFT. A VALIDATED LICENSE IS REQUIRED FOR
EXPORT OF THIODIGLYCOL TO AFRICA.
PAGENO="0185"
181
- 14 -
ALCOLAC INITIALLY PREPARED A DRAFT INVOICE REFLECTING THE
INFORMATION SUPPLIED BY NIJKRAFT; HOWEVER, BY TELEFAX DATED
JANUARY 8, 1988, THE EXPORT MANAGER ADVISED THE VICE PRESIDENT:
" PLEASE NOTE THAT WE CANNOT SHIP PRODUCT TO OR SHOW MONROVIA ON
ANY OF OUR DOCUMENTS. MATERIAL WILL BE CONSIGNED TO INDUSTRIAL
PROCUREMENT I ANTWERP, BELGIUM." ALTHOUGH IT WAS EVEN MORE
CLEAR THAN IN THE FIRST TRANSACTION THAT BELGIUM WAS NOT THE
DESTINATION, ALCOLAC AGREED TO PROCEED WITH THE SHIPMENT AND
INDICATE ON THE SHIPPING DOCUMENTS THAT THE CONSIGNEE WAS A
CORPORATION LOCATED IN BELGIUM, THE EXISTENCE OF WHICH HAD NEVER
BEEN CONFIRMED.
IN ADDITION, THE DUTCH NATIONAL REQUESTED THAT A "LONG
DIVERSION CLAUSE" BE USED ON THE INVOICE AND THE BILL OF LADING.
tHE LONG DIVERSION CLAUSE STATED:
THESE COMMODITIES LICENSED BY THE UNITED STATES FOR ULTIMATE
DESTINATION WESTERN EUROPE FOR DISTRIBUTION OR RESALE IN ANY
DESTINATION EXCEPT SOVIET BLOC, LAOS, LIBYA, NORTH KOREA,
VIETNAM, CAMBODIA, OR CUBA UNLESS OTHERWISE AUTHORIZED BY
THE UNITES STATES.
THAT DIVERSION CLAUSE, ALTHOUGH SIMILAR TO ONE PERMITTED BY
15 C.F.R. SECTION 386.6 FOR CERTAIN SHIPMENTS, WAS MISLEADING
WHEN USED IN CONNECTION WITH THE THIODIGLYCOL SHIPMENT. IT
PAGENO="0186"
182
- 15 -
SUGGESTED THAT RESALE IN ANY COUNTRY NOT LISTED WAS PERMITTED BY
UNITED STATES LAW, WHEN IN FACT THAT RESALE TO IRAN, IRAQ AND
SYRIA WERE CLEARLY NOT PERMITTED. MOREOVER, THE DESIGNATION OF
WESTERN EUROPE RATHER THAN A SPECIFIC COUNTRY VIOLATED 15 C.F.R.
SECTION 386.6. THE EXPORT MANAGER CONFIRMED THAT ALCOLAC WOULD
COMPLY WITH THE REQUEST IN A TELEFAX DATED JANUARY 13, 1988,
ADDRESSED TO THE DUTCH NATIONAL, WITH A COPY TO NUKRAFT'S VICE
PRESIDENT. ALCOLAC PASSED THE REQUEST TO ANCHOR INTERNATIONAL,
THE FREIGHT FORWARDING AGENT WHO WAS PREPARING THE BILL OF LADING
FOR THE SHIPMENT. THE FREIGHT FORWARDER ADVISED THE EXPORT
MANGER THAT THE USE OF THE MISLEADING DIVERSION CLAUSE WAS NOT
PERMITTED. ALCOLAC RESPONDED THAT THEIR CUSTOMER HAD ASKED THAT
THIS DIVERSION CLAUSE BE USED, AND THEY THEREFORE INSISTED ON ITS
USE. ANCHOR INTERNATIONAL PREPARED THE BILL OF LADING WITH THE
INCORRECT DIVERSION CLAUSE.
AS IN THE FIRST SHIPMENT, NUKRAFT ASKED THAT ALCOLAC ARRANGE
FOR THE BILL OF LADING TO STATE THE SHIPMENT WAS IN TRANSIT, AND
ALCOLAC COMPLIED. IN ADDITION, NUKEAFT ASKED ALCOLAC TO PURCHASE
THE CONTA[NERS IN WHICH THE THIODIGLYCOL WAS TO BE SHIPPED.
ALCOLAC MADE THE NECESSARY ARRANGEMENTS AND PURCHASED THE
CONTAINERS. THE BILL OF LADING AGAIN DESCRIBED THE CONTENTS OF
THE SHIPMENT ONLY AS "TEXTILE ADDITIVE."
PAGENO="0187"
183
- 16 -
AT NUKRAFT'S REQUEST, ALCOLAC ISSUED ITS INVOICE TO
INDUSTRIAL PROCUREMENT CORPORATION, 1000 ESSEX STREET, BROOKLYN,
NEW YORK. THE INVOICE WAS DATED JANUARY 7, 1988, AND THE
DIVERSION CLAUSE INDICATED That THE DESTINATION WAS WESTERN
EUROPE. THE INVOICE SPECIFIED THE QUANTITY AS 277,200 POUNDS AND
THE TOTAL PRICE AS $158,004 PLUS $9,800 OCEAN FREIGHT AND $5,950
FOR THE CONTAINERS.
THE SECOND SHIPMENT WAS SHIPPED ON THE VESSEL DART ATLANTIC
ON JANUARY 12, 1988. ALTHOUGH THE BILL OF LADING LISTED THE PORT
OF DISCHARGE AS ANTWERP, DOCUMENTS OBTAINED IN ROTTERDAM, THE
NETHERLANDS, INDICATED THAT THE SHIPMENT WAS DISCHARGED THERE AND
NEVER ACTUALLY REACHED ANTWERP.
ALCOLAC'S PREPARATION OF THE SHIPPING DOCUMENTS WITHOUT
REFERENCE TO MONROVIA, LIBERIA, ITS USE OF THE IMPROPER DIVERSION
CLAUSE, ITS DESIGNATION OF WESTERN EUROPE AS THE DESTINATION,
ITS AGREEMENT TO INDICATE ON THE BILL OF LADING THAT THE
SHIPMENT WAS IN TRANSIT, AND ITS ASSISTANCE IN PURCHASING THE
SHIPPING CONTAINERS RATHER THAN USING THE SHIPPING LINE
CONTAINERS ALL ASSISTED NUKRAFT IN TRANSSHIPPING THE SHIPMENT TO
IRAQ.
PAGENO="0188"
184
- 17 -
A THIRD SHIPMENT WAS SENT IN EARLY FEBRUARY. THE SHIPPING
DOCUMENTS WERE SIMILAR TO THOSE FOR THE SECOND SHIPMENT. THE
COMMERCIAL INVOICE, DATED JANUARY 29, 1988, FROM ALCOLAC
INDICATED THAT THE PURCHASER WAS INDUSTRIAL PROCUREMENT CORP.,
AND THE CONSIGNEE WAS COMPANIES, INC., THE DUTCH NATIONAL. THE
TOTAL QUANTITY OF THIODIGLYCOL WAS 263,450 POUNDS, AND THE TOTAL
COST WAS $150,166.50 PLUS $9,800 OCEAN FREIGHT AND A $6,650
CONTAINER CHARGE. THE DESTINATION LISTED IN THE INVOICE'S
DIVERSION CLAUSE WAS WESTERN EUROPE. THE INVOICE STATE, "GOODS
IN TRANSIT."
THE BILL OF LADING, PREPARED BY ANCHOR INTERNATIONAL
ACCORDING TO ALCOLAC'S INSTRUCTIONS, USED THE SANE MISLEADING
LONG DIVERSION CLAUSE AS IN THE SECOND SHIPMENT, AND INDICATED
THAT THE ULTIMATE DESTINATION WAS WESTERN EUROPE. THE BILL OF
LANDING DESCRIBED THE SHIPMENT AS "TEXTILE ADDITIVE" WHICH WAS"
IN TRANSIT." ON FEBRUARY 5, 1988, A SHIPPER'S EXPORT
DECLARATION FOR THE SHIPMENT WAS FILED BY ANCHOR INTERNATIONAL
WITH THE U.S. CUSTOMS SERVICE AT ALCOLAC'S INSTRUCTION. IN
COMPLIANCE WITH THE REQUESTS RECEIVED BY ALCOLAC FROM NtJKRAFT,
THE COUNTRY OF ULTIMATE DESTINATION WAS LISTED AS WESTERN EUROPE
RATHER THAN A SPECIFIC COUNTRY. THE SHIPMENT ARRIVED IN BELGIUM
AND WAS TRANSSHIPPED TO THE PORT OF AQABA, JORDAN, IN MARCH,
1988, ITS FINAL DESTINATION BEING IRAQ.
PAGENO="0189"
185
- 18 -
ALCOLAC SHIPPED A FOURTH AND FINAL NUKRAFT SHIPMENT LATER
THAT MONTH. AGAIN, ALCOLAC COMPLIED WITH ALL OF NUKRAFT'S
REQUESTS. THE INVOICE INDICATED THAT THE PURCHASER WAS
INDUSTRIAL PROCUREMENT CORP., AND ThE CONSIGNEE WAS COMPANIES,
INC., BELONGING TO THE DUTCH NATIONAL, IN SWITZERLAND. THE
DIVERSION CLAUSE LISTED "WESTERN EUROPE" RATHER THAN A SPECIFIC
COUNTRY AS THE DESTINATION. THE INVOICE STATED, "GOODS IN
TRANSIT." THE QUANTITY LISTED ON THE INVOICE WAS 261,800 POUNDS,
AND THE PRICE WAS $149,226, PLUS $9,934.05 OCEAN FREIGHT AND A
$7000 CONTAINER CHARGE.
THE BILL OF LADING AGAIN USED THE MISLEADING LONG DIVERSION
CLAUSE, WHICH INDICATED THAT WESTERN EUROPE WAS THE DESTINATION,
AND DESCRIBED THE SHIPMENT ONLY AS "TEXTILE ADDITIVES." ALCOLAC
AGAIN ASSISTED NUKRAFT IN PURCHASING SHIPPING CONTAINERS. ON
FEBRUARY 22, 1988, A SHIPPER'S EXPORT DECLARATION WAS PREPARED BY
ANCHOR INTERNATIONAL ON BEHALF OF ALCOLAC. THE SHIPPER'S EXPORT
DECLARATION INDICATED THAT THE COUNTRY OF ULTIMATE DESTINATION
WAS "WEST EUROPE." THIS FINAL SHIPMENT WAS SHIPPED ABOARD THE
STUTGART EXPRESS WHICH SAILED ON FEBRUARY 21, 1988. IN MARCH,
1988, THE SHIPMENT ARRIVED IN ANTWERP, BELGIUM. THE SAME MONTH
IT WAS TRANSSHIPPED TO THE PORT OF AQABA, JORDAN. ITS FINAL
DESTINATION AGAIN WAS IRAQ.
PAGENO="0190"
186
- -19-
ALCOLAC'S WILLING COMPLIANCE WITH ALL OF NUXPAFT'S REQUESTS,
IN ALL FOUR OF THE SHIPMENTS, BY PREPARING DOCUMENTS INCONSISTENT
WITH FEDERAL REGULATIONS, FACILITATED THE ILLEGAL RE-EXPORT OF
EACH SHIPMENT BY NUKRAFT TO IRAQ.
IN LATE MARCH, 1988, ALCOLAC'S VICE PRESIDENT FOR FINANCE,
SAW A TELEVISION NEWS REPORT CONCERNING THE USE OF CHEMICAL
WEAPONS BY IRAQ INDICATING THAT THE CHEMICALS USED TO MAKE THE
CHEMICALS WEAPONS WERE BELIEVED TO BE REACHING IRAQ THROUGH WEST
GERMANY, BELGIUM OR TURKEY. ALCOLAC SENIOR EXECUTIVES DECIDED TO
DISCONTINUE SHIPMENTS TO NTJKRAFT UNTIL SUFFICIENT ASSURANCES WERE
OBTAINED THAT THE THIODIGLYCOL WAS, IN FACT, BEING USED IN THE
TEXTILE INDUSTRY. THE DECISION WAS COMMUNICATED TO THE EXPORT
MANAGER AND THE PENDING SHIPMENT TO NUKRAFT WAS SUSPENDED. NO
STEPS WERE TAKEN, HOWEVER BY ALCOLAC EXECUTIVES TO MONITOR THE
MANNER IN WHICH THE EXPORT MANAGER OBTAINED INFORMATION
CONCERNING THE DESTINATION OF THE THIODIGLYCOL OR ITS USE. IN
ADDITION, NO ATTEMPT WAS MAKE TO NOTIFY ANY GOVERNMENT AGENCY OF
THE NUKRAFT TRANSACTIONS.
DURING THE NEXT SEVERAL MONTHS, THE EXPORT MANAGER REQUESTED
THAT NUKPAFT AND THE DUTCH NATIONAL PROVIDE DOCUMENTATION
VERIFYING THE DESTINATION OF THE THIODIGLYCOL. ON APRIL 20,
1988, NUKRAFT TELEFAXED DOCUMENTS TO THE EXPORT MANAGER SAID TO
PAGENO="0191"
187
- 20 -
HAVE BEEN OBTAINED FROM THE DUTCH NATIONAL. THE DOCUMENTS WERE
INVOICES FROM COMPANIES, INC., IN SWITZERLAND TO UNITED OVERSEAS
COMPANY, INC., MONROVIA, LIBERIA, CORRESPONDING TO THE FOUR PRIOR
SHIPMENTS OF THIODIGLYCOL. A HANDWRITTEN NOTE ON ONE OF THE
INVOICES INDICATED THAT UNITED OVERSEAS COMPANY WAS THE END-USER.
EVEN AFTER RECEIVING THESE INVOICES, ALCOLAC DID NOT SEVER
ITS TIES WITH NUKRAFT. IT REPEATEDLY REQUESTED THAT NURRAFT
SUPPLY IT WITH COMPLETED UNITED STATES DEPARTMENT OF COMMERCE
END-USER FORMS IDENTIFYING THE END-USER OF THE THIODIGLYCOL.
FINALLY ON MAY 11, 1988, THE EXPORT MANAGER RECEIVED A TELEFAX
FROM NUKRAFT WITH A FORM THAT NUKRAFT SAID WAS COMPLETED BY THE
DUTCH NATIONAL. THE FORM INDICATED THAT UNITED OVERSEAS COMPANY,
INC., IN MONROVIA, LIBERIA, WAS THE ULTIMATE CONSIGNEE. ON MAY
24, 1988, THE EXPORT MANAGER STATED IN A TELEFAXED MESSAGE TO
NUKRAFT THAT ADDITIONAL SHIPMENTS WOULD BE MADE ONLY AFTER
PROPERLY COMPLETED FORMS WERE RECEIVED. NUKRAFT NEVER PROVIDED
SUCH FORMS, AND NO FURTHER SHIPMENTS WERE MADE.
THE THIODIGLYCOL SALES TO NUKRAFT AND COLIMEX WERE EXTREMELY
PROFITABLE FOR ALCOLAC. ITS FULL MANUFACTURING COST FOR THE
THIODIGLYCOL SHIPPED TO NUKRAFT RANGED FROM 34 TO 35 CENTS PER
POUND, AND THE SELLING PRICE WAS 57 CENTS PER POUND. THE
PAGENO="0192"
188
-21-
MANUFACTURING COST FOR THE THIODIGLYCOL SOLD TO COLINEX IN THE
FINAL SHIPMENT WAS 37 CENTS PER POUND, AND THE SELLING PRICE WAS
84 CENTS. ACCORDINGLY, ALCOLAC'S GROSS PROFIT MARGIN FROM THE
FOUR SHIPMENTS TO NUKRAFT AND THE LAST SHIPMENT TO COLIMEX
TOTALED APPROXIMATELY $352,000.
CONCLUSION
THIS CASE RESULTED IN THE ARREST OF THREE FOREIGN NATIONALS,
THREE U.S. CITIZENS, THE IMPOSITION OF A FINE OF JUST UNDER ONE
MILLION DOLLARS ON ALCOLAC, AND THE ISSUANCE OF A U.S. ARREST
WARRANT FOR THE IRANIAN DIPLOMAT.
AS IN THE MAJORITY OF THESE TYPES OF INVESTIGATIONS THE
COOPERATIVE EFFORT BETWEEN CUSTOMS' ENTITIES PLAYED AN INTRICATE
PART IN FORMULATING THE CASE. FROM INSPECTION AND CONTROL, TO
THE CUSTOMS ATTACHE OFFICES, TO INTELLIGENCE, TO THE HEADQUARTERS
DESK OFFICER THE CUSTOMS SPECIAL GENT HAS A VARIETY OF
SPECIALIZED EXPERTISE AT HIS DISPOSAL TO DRAW UPON WHICH WILL
ENHANCE HIS INVESTIGATIVE ABILITIES AND PROVIDE ACCESS TO
SPECIFIC SUPPORT RESOURCES.
PAGENO="0193"
RLL OF LADING
IN~t N~ooEAbTD Ijifioss C~s~g~d To O~do~)
189
O1~ENTOVEggAS ewgiazse,t i~NE
I - I I I I I I
ALCOLAC INTERNATIONAL, INC. -
3440 FAIRFIELD ROAD
- - BA 021930
-
BALTIMORE, MARYLAND 21226 USA
P$-7355 (2969) - -~ - -
-~ I J I F
BALLET ENTERPRISES PIE LTD
25-01 SHENTON HOUSE
SINGAPORE
PATRON SERVICES INC1 I 1 81 I -L1
31 S CALVERT STREET
BALTIMORE, MD 212(12 USA
~
SAMEAND-ALSO: COLIMEX CMB&- - I
- MOZARISTRASSE 7 - - -
5000 KOELN 1
W. GERMANY
.
- - - -- - -
-
- - -
ON BOARD
APR221988 ~`
-~ OCL'(USA)Lnc.
-
°°
ORIENTAL FRIENDSHIP -V7
BALTIMORE
LOT 503 D.M.T. - - - -
SIN(~AP0RE -
- - -
- - - I -
- -- -
(C000i ~EMWM* P HAZARDOUS MATERIAL) PARTICULARSPURN) D BY SHIPPER
ONTO. .S~WdJ~L.))~S. ~ H - -_-DESCUIPRON OF PACKAGES AGO GOODS- - GROSS WEIGHT MEASUREMENT
BALLET ENT - FREIGHT PREPAID ON BOARD
SINGAPORE - SI-UPPER LOAD STOW AND COUNT - - - - -- --
KRO2{FAX -- 7 - 20' SHIPPER-OWNED.CONTAINERS SAID -TO - -25413O# -- 4730 CFP.
MADE IN EISA CONTAIN TOTAL 430 x 55-GALLON STEEL
NC) 1 IJP/430 DRUMS TEXTILE ADDITIVE-SURFACTANTS (115273 KGS) -(133 941 Mi
KITMIR (NON-HAZARDOUS MATERIALS NOT RESTRICT
- - - SEAL - NO LABELS REQUIRED) .:~ ~-~-~` - -
C0NTA~LEL,~OS ** TRANSSHIPPING IS ALLOWED~
~ ~ - -THESE COMMODITIES LICENSED FOR-ULTIMA1~ -: -
TNYttr -~OC~"Z~% 1 8~ 1 DESTINRFION -SINGAPORE. DIVERSION CONTRL Y - -
~ / - TO U.S. -LAW PROHIBITED. - - I - - I -
~ I) - -CONTAINERS SEALED BY - - . - -
128917 ~. SHIPPER ~--. TI.
%`SM%~:
TLUT80562k--128992--~-- -~
TUJ 7803650 02821 -
t.COLAC - 28988 - - - -- - -
d~~sd C.,VOVAGM$ - . If M*,oh~,ot ,~t,p, *o~IUS CDO-Ei.?sIIIRitStjOD of lisbility sh,itootspi ~odtb,AdR.~..RP*ARNEUIbSEhAPgOd
TUUTIUUEI
UTEEOOGIS;T*AUO~DT
- JSSOEER
~od A~loood A WOO p~od.d -
TU.UUDESKIIATUAT.U.OA,.Udd.IDTOW500UIO
GE TARIFF lEG
~
FREIGTTEU AS
=
--
- -
RATE -
US S PREPAIO
- --
---~~
- US N COU.ECT
.
LOCAl. CUOREOCT
- - -
5USd DOd N RU CUS~~ .soAEAS. GAO -
UoIO,s.o5,O,U&..l......OoNU&b4lGOII~dd9hNO
-~
51-840 0 - 92 - 7
PAGENO="0194"
190
,~
4 -i~ *~~-
/BATCH - - -
`NTF - - - -
IWLJW ~.~88B5366:LB+ - - S - - -
8 FEB. 1988 - - - - -
ATN -MR. .P~ WALASCHEK - - -. - - - - - - -:
RE-PHt~JE CALL. TODAY - ~-- - - -
PLEASE- NOTE THAi- WE HAVE CHECF~ED -~ND :EINb THAT -SINGAPORE DOES NEED
~ EXPORT LICENSE FOR SHIPMENT ~ -KRONFA~ FOR CLOTHING AND TEXTILE -
4PPL~tATIONS.~- WE WILL APPLY: FOR -EXPORT LICENSE TODAY.
~RICE-WILL BE USBLO.85/LB. CIF sn~GAF-ORE:
IATERIAL-WIL-LNEED A 2WEEK LEAD TIME -ARRIVAL TIME ~O DAYS AFTEF~
ECEIPT OF OFDEF -
N ORDER TO GET EXPORT LICENSE, WE NEED ~ro KNOt-I THE ULTIMATE-
~UBTOMER NAME -AND ADDRESS.. - - - - -- -
*E CAN SHIP KROMFAX- ONLV INTO THE FOLLOWING COUNTRIES WITHOUT -
ICENSE - - - - - - -- - - S -
USTRALIA, BELGIUM. CANADA. BENMA~K~ FED.REP.W.GERMAN~, FRArIC
REECE. -IF~ELAND. IThLY, JAPAN, LUXEMB~URG. THE NETHERLAND5~ NEW
LAND, NORWAY, -PORTUGAL, SPAIN. SWI TZERLAND- AND THE UNI TE0
INGDOM. - - - - -
-EASE AD~2ISE IF WE CAN_BE OF ANY F'JF:THEF: ASSr~-TAHcE~: tIE WILL -
~PLY FOR EYPOF~ LICENSE ~ -ft' `-~EEP YOU ADVISED. - HE HOPE TO PE
LE T0 FILL YOL - ~:DER - - .Ji~THAN~: YOU FOR ~OUF: COOF-ERAT IC-N. - -
:S AND BST F:GDS - - - -
PAGENO="0195"
191
EXPECTED A/i: NOT 5~ECIFIEO
SPECIAL FLA3S: N~F ACT
DEP~P-Tf'ENT: ~ - - - -
~.)DRE~E FL.AC~: ~ - - --
INPUT ADDEESS: I"JTF
- i~u~ -~41~t~:L~ * - - - - -
CALL PLACED: - FEERL~RY 9, iEEE AT 19:03:O1.91 -. -r -- - - -
ANSw&~EKC<: FEEP-UARY 9, i9~E AT 1 9:03 :31 .91 GOT- "&885366 CDL 9" -
TEXT STARTE~: FEDRUERYE, 199-9 AT iS:O3:31.~1
rEXT FINIIHED: FEDAU~Y E- i~S~E. AT 19:04:06.35- - -~ -
CALL END.D ft 13 L `V i9~ AT 1D o 1 76 COT 8&.8~~66 -CDL D
OuTPUT LJNC TI4X (3) USING ~XA-tL6 XIT ii -
~***.** *******,~**** ******~ **** *****-k****~*
M 5~ ~ `~ 1 O~7_~ FR~W C~ `~V A_C LAC
***** STAAT OF ADORESS *************~*************
/NTF
/AUw_E4i6~3~6L:~ -
~ END CF_AD)PESS- ~
-~ - - -- - -- -
ATN ~R. P. LECWEK - -
R~ PV~ONE CALL TODAY -- = -
PLEASE_NOTE THAT WE HAVE CHEG~ED C~IND THAT SNGAPORE EN) -
PAKIST~N BOTH -NEED fiN EX'O°T LICENSE FOY SHIPMENT CR- KRCMFAX ~R -. -
CLOTHING ANC TE~TIL9. .~LiCATIC~S. bcE ~ILL ~LY -FOil -EX'ORT LIEENSE
- - - -- -- ~_ - - -
C Lt. J ~L IL-' C F K~EEC I I E~RE
MTEPIAL_WILL NEYD-A 0 ~F KLEAI T1"E- A ~VAE TIME 40 D-1YS AFTER -
- ~EC&EI~~ OF CALEP. - - - -
IN a~DEF~ TO GET EY'cFT LICENSE EY -NEED TC Y-NC,, T-85 ULTIMATE -
C~STCMER NAVE ~ND~DD~.ESS. -- - -- - - - -
~E. ~AN SHIP KR3Mf~X ONLY INTO THE FCLLOINE COUNTRIES IwITMOUT - - -
LICENE- - - - -- -
AUSTPALIA,EELS1~M, CANADA, DENMERK, F5DREP.W.GER~ANY, FRAN~E'
GYEECEf IRELAND' ITAlY, JA~AN,__LUXE~URG~ THE NETHERLANDS-, ~NEW -
ZEALAND~ NORWAY, P3~TU3AL, I~AIN~ S~IT2ERLPND AND- THE UNITEV
KIN~D3P. - - -
PLEASE ADVISE IF wE CA.N ES CF ANY FLETHER ASSISTANCE. WE WILL -
APPLY PC' E)PQPT LICENS A-NE WILL KEEP YOU ADVISED. -
WE HO'E TO ES AILE TO FILL YOUR OEDEP AND ThANK YOU FOR YOUR
- COOPERATION. - - -
TKS AND I ST FOES -
- LESLE -~ -
LLLL -
~**** _END CF YESSAGE ~
tYESSA~E N~EER: - 1 59~0273E FRCM EIESr35296 ALCOLAC" - -
HEADER DkTAI 23 BYTES,-2 LINES, 1 ADD'ESSES AND NC SECONDS. -
TEXT DATA: - c42 EYTES' 25 LINES i0 oO.74 SECCN~DS. - -_ -
CALL RECEIVED: FE5P~ARY ~, 19359T 17:595U.02 - - - - -
START Cf HEAlER: - FEERJARY ~, ISE AT 17:59 53.62 - - -
END CF TEXT: FEEP.UA'Y ~, lESS AT 15:0C:50.76 -
CALL CC~PLET.ED: FEYRUARY 9,1988 PT 19:01:49.01
INPUT LINE INFO: ODD 1 ii,200) USING SXW12.AEDIC5 - - -
PAGENO="0196"
1st Shipment
2nd ShIpment
3rd Shipment
Belgium
Liberia
Possible
phony end-user
of Thiodiglycol
(ultimately nixed)
CASE Al THIODIGLYCOL
10/21/87; 604 66-gallon drums
To Belgium
I/~~; :xts t~'in~ (66 (Jal. dnirn~)
~fH~n~irtIad In flott~rdarn
2/4/88; to Rotterdam, `Western
Europe' cited as end-user
2/20/88; 476 drums, `Western
Europe' cited as end-user
U'S'
10/87 3/88
Correspondence from
Nu Kraft Mercantile
to Alcolac requesting
Thiodiglycol shipments
destination of
Jordan
Actual
destination of
all 4 shipments
- 4th ShIpment
PAGENO="0197"
CASE A2 - THIODIGLYCOL
U.S.
Alcolac
30 tons
Thiodiglycol
1st ShIpment OK
(2/87) 30T;$3
2nd ShIpment
(8/87) SOT;$105K
~ 3rd ShIpment
(4/88) 120T (intercept.
Provision of Funds
M/S Ray
Textile
Industries
(Teheran)
PAGENO="0198"
194
Chairman PICKLE. Ms. Hinkleman, any statement at this time?
STATEMENT OF LESLIE HINKLEMAN, FORMER EXPORT
MANAGER, ALCOLAC INTERNATIONAL, INC., BALTIMORE, MD.
Ms. HINKLEMAN. No, but I will be happy to answer any questions
that you have.
Chairman PICKLE. All right. Mr. Jenkins.
Mr. JENKINS. Thank you, Mr. Chairman.
First of all, let me ask Mr. Bass a few questions. Then I will have
a few questions for Ms. Hinkleman.
Mr. Bass, the only employee or officer of the domestic company
that was indicted was simply an employee, is that correct? None of
the principals of the company were indicted?
Mr. BASS, Yes, sir, that is correct.
Mr. JENKINS. You did not make a case against any of the major
owners or the people who really control the company other than
Ms. Hinkleman?
Mr. BASS. We attempted to, but we were unable to obtain any
evidence that would show that they were directly involved.
Mr. JENKINS. The other cases that you made were against people
not directly connected with the company, but were associated with
the purchasers of the material, is that right?
Mr. BASS. That is correct.
Mr. JENKINS. I will come back to that in a moment. But, if this
material was sold it could be used for purposes other than mustard
gas, of course.
Mr. BASS. Yes.
Mr. JENKINS. And there is a legitimate market for it and it is
sold everyday, I assume, in this country as well as to foreign coun-
tries, is it not?
Mr. BASS. Yes, sir, it is.
Mr. JENKINS. For legitimate purposes.
Does your agency make any concerted effort to locate recipients
of this particular material?
Mr. BASS. To locate the recipients?
Mr. JENKINS. How do you determine when an investigation is
called for?
Mr. BASS. Generally, what we try and do is go to the source of
these type commodities through Project Gemini which the Customs
Service has in place where we go out to manufacturers and export-
ers of commodities that are either dual use or solely licensable and
make them aware of the laws and at the same time educate them
to what countries and people might be looking for these commod-
ities, and advise them to notify us of any suspicious inquiries, out
of the ordinary inquiries, and that type thing.
On the other side of the coin, when we are not notified but we do
determine a shipment has gone out of a nature that we feel is sus-
picious that may be used for a purpose other than the law allows
for we then, if it is already overseas, get up with our attaches that
cover that area and they attempt to verify the end use of the com-
modity.
Mr. JENKINS. Well, for over 2 years this company, Alcolac,
shipped literally hundreds of tons of this particular chemical to
PAGENO="0199"
195
overseas customers. Why didn't the Customs Service detect these
huge shipments earlier than they did?
Mr. BASS. Basically, the examinations are a hands-on type exami-
nation, and with the allocation of manpower, there are certain
shipments that are checked, certain types of shipments that are
checked, and certain types that there just aren't enough people to
get around to.
The paperwork for the shipments was misleading in the sense
that even if an inspector had, or an agent had viewed the paper-
work, he might not be clear what the commodity actually was. Al-
colac in these eight shipments almost always used either the words
"textile additives" or "Kromfax," which was their brandname as
opposed to the chemical name. So anyone that looked at the docu-
ments still very well might not know what was in the 55-gallon
drums.
Mr. JENKINS. All right. I understand the difficulties in getting in-
dictments, but it does concern me a bit that the only defendant
happens to be an employee at a lower level than the owners of this
company. She didn't make a decision to mislead on the invoice of
her own volition, did she?
Mr. BASS. I believe she did. Yes, sir.
Mr. JENKINS. She did?
Mr. BASS. Yes, sir.
Mr. JENKINS. So you were convinced that she was the major
person involved from the standpoint of the domestic company?
Mr. BASS. I was convinced that she was the only person involved
enough that I had evidence to charge.
Mr. JENKINS. Did you question her superiors and take statements
from them?
Mr. BASS. Yes, sir.
Mr. JENKINS. And you were convinced then that they didn't
know, have any knowledge that this was going on?
Mr. BASS. I can't say that I was convinced, but I had no evidence
to the contrary to prove otherwise.
Mr. JENKINS. Did Ms. Hinkleman receive any financial rewards
for this endeavor? Other than her normal salary as an employee?
Mr. BASS. She may have received a bonus. I am not clear on that.
Mr. JENKINS. From whom?
Mr. BASS. From her company.
Mr. JENKINS. Someone gave her a bonus for participating in this
thing.
Mr. BASS. Well, I believe, and I am not totally familiar with Alco-
lac's salary and benefits program, but I believe that certain em-
ployees received bonuses if sales were up and that type thing. Obvi-
ously, by the number of shipments, the quantities, a fair amount of
money was made, and I believe she may have received some type of
bonus for that.
Mr. JENKINS. Well, I am going to question her in a few moments.
But I guess what I am really trying to ascertain is how difficult it
is to make cases, whether or not you have the necessary tools to go
after the principals involved, and what could be done to enable the
Customs Service to detect such shipments earlier than we did in
this case.
PAGENO="0200"
196
Mr. BASS. Well, I think the major tool that I personally could
think of would be some type of automated computer system for ex-
ports. We have something similar for that for imports, and we are
now faced with a large enforcement effort for illegal exports and I
think a computer system which would compile manifests and that
type thing would make us instantly able to check in and see if
there have been many shipments like this before, is this one un-
usually large, the dates, things like that. I think it would be a very
helpful tool.
Mr. JENKINS. Ms. Hinkleman, I want to ask you a few questions.
I know you do not have an attorney present but I have been ad-
vised by counsel for the committee that you have the same rights
as you would before a court in that you cannot be sued, there is no
lawsuit or anything that could be filed against you for any state-
ment that you make so long as you tell the truth. So I wanted to
assure you of that. And I want to ask you a few questions.
How long had you been employed by Alcolac?
Ms. HINKLEMAN. Fifteen years.
Mr. JENKINS. Fifteen years? And you were employed first in
what capacity?
Ms. HINKLEMAN. Clerk-typist.
Mr. JENKINS. As a clerk-typist?
Ms. HINKLEMAN. Yes.
Mr. JENKINS. And you worked as a clerk-typist for several years,
did you?
Ms. HINKLEMAN. Right. I don't remember how many years. Two
or three years, I believe.
Mr. JENKINS. Ultimately, you were assigned to what division at
Alcolac?
Ms. HINKLEMAN. Well, I originally was hired to work in the
export department as a clerk-typist.
Mr. JENKINS. As a clerk-typist in the export department?
Ms. HINKLEMAN. Right.
Mr. JENKINS. So you worked your way up in the department?
Ms. HINKLEMAN. Right.
Mr. JENKINS. Over a number of years?
Ms. HINKLEMAN. Right.
Mr. JENKINS. And how long did you serve as the manager of that
department?
Ms. HINKLEMAN. About 6 years.
Mr. JENKINS. Six years?
Ms. HINKLEMAN. Or 5-maybe 5 years.
Mr. JENKINS. Prior to serving as an export manager had you also
been involved, in addition to being the clerk-typist, in other capac-
ities?
Ms. HINKLEMAN. In the export department, yes. It was a very
small department. Basically, extremely small.
Mr. JENKINS. How many people were there?
Ms. HINKLEMAN. Just one.
Mr. JENKINS. Just you?
Ms. HINKLEMAN. There was myself, the lady that I worked for
and myself. And then when she retired I was given, just basically
was told to do what she did. And then I guess after a period of 3 or
4 years, then they got an assistant secretary for me to help me out.
PAGENO="0201"
197
Mr. JENKINS. All right. Did you receive any training by the com-
pany as such for the position of export manager?
Ms. HINKLEMAN. On hands training and that type of thing. I did
go to some seminars, and that was about it.
Mr. JENKINS. Where did you learn about the requirements for
export licensing?
Ms. HINKLEMAN. I really had no education on that subject.
Mr. JENKINS. No training in that regard whatsoever.
How large a company is Alcolac?
Ms. HINKLEMAN. At the time that I was working with them I
think they had about 200 employees.
Mr. JENKINS. And was it a privately owned company?
Ms. HINKLEMAN. It was at one time. It had been bought out two
or three times by larger companies. So for the past, I guess 5 years,
they were owned by Rio Tinto Zinc out of the United Kingdom, and
I think they have been recently bought out again by somebody else.
Mr. JENKINS. And you were not an officer of the company at any
time, is that right?
Ms. HINKLEMAN. No, I was never an officer.
Mr. JENKINS. Who did you report to at Alcolac?
Ms. HINKLEMAN. I reported to-well, they changed the reporting
plan. I reported to Lee Terhune, who was the-I guess he was the
sales manager for export, and then I also reported to Paul Jones,
who was vice president of sales.
Mr. JENKINS. So you had a lot of people, managers and so forth,
ahead of you in the company; is that correct?
Ms. HINKLEMAN. I would think so; yes.
Mr. JENKINS. Now, if you will briefly describe your duties as
export manager?
Ms. HINKLEMAN. We-let me see. I was to take orders from the
faxes or the telex or by phone or by mail, however the orders
would come in, and then we would process them through the com-
pany. Sometimes we had to check for credit. Sometimes we would
have to have letters of credits opened. Then we would just process
it through the regular system.
We had to book freight. You know, for it to go overseas. And do
the banking and do the documentation.
Mr. JENKINS. All right. Who would you contact as to what to do
with the documentation?
Ms. HINKLEMAN. Normally over the years we did-we had
freight forwarders who did most of the documentation. We did the
actual documentation to the piers, invoicing to the customers,
packing lists, things like that.
Mr. JENKINS. Were you very-what is the chemical name?
Ms. HINKLEMAN. Thiodiglycol.
Mr. JENKINS. And what is that?
Ms. HINKLEMAN. Chemically, I don't know. .1 am not a chemist.
Mr. JENKINS. What is it used for?
Ms. HINKLEMAN. To me, it was used for textile additives and to
make ink flow in pens. That is what I was told.
Mr. JENKINS. That is what you were told by company executives
and people ahead of you in-
Ms. HINKLEMAN. There was technical literature drawn up on it.
We did have technical literature and it did say it was used as a
PAGENO="0202"
198
textile additive. It was used by the ball-for ballpoint inks to make
the ink flow. But there is nothing in the technical literature that
ever said it was used by mustard gas. So-
Mr. JENKINS. You did not know that?
Ms. HINKLEMAN. No, I-well, I, eventually, of course, I did know
it. But I was never sat down and said, "Oh, this product is definite-
ly used for mustard gas".
Mr. JENKINS. When did you learn that?
Ms. HINKLEMAN. The year, I mean, I really don't remember.
Mr. JENKINS. Under what circumstances did you learn that it
could be used for mustard gas?
Ms. HINKLEMAN. Actually, the first time I learned it was from
someone in the shipping department who made a joke about it, and
it was probably back in 1985 or 1986, I guess. He said something
about, "You know that could be used for mustard gas?" And I said,
"No." I said, "Does anybody else know it?" Because I honestly
thought lie was kidding. Then I come to find out it was. They said
it could be. But it was never put on any brochures. Never.
Mr. JENKINS. Sure. During your employment was this chemical
commonly exported?
Ms. HINKLEMAN. It wasn't one of our largest exported products,
no. But it was exported from several different companies.
Mr. JENKINS. What was the-normally, what was the average
size of an export sale of this chemical?
Ms. HINKLEMAN. Probably an average size would be about 5 to 10
drums.
Mr. JENKINS. About how many?
Ms. HINKLEMAN. About 5 to 10 drums.
Mr. JENKINS. Were the orders involved in this particular case,
ranging from 30 to several tons, unusually large?
Ms. HINKLEMAN. Now when I look back on it, of course, they
were unusually large. At the time it was considered a great sale,
you know.
Mr. JENKINS. Who was making the sale?
Ms. HINKLEMAN. Well, I think they would like to think I made
the sale. I mean, I don't know-nobody physically made the sale.
They contacted us and we processed the orders. People knew about
the sale from the president down to the shipping clerk. Everyone
knew they had the orders in-house.
Mr. JENKINS. So everyone superior to you were well aware of the
fact that this was a great series of orders?
Ms. HINKLEMAN. Yes, they were very much aware of it.
Mr. JENKINS. And making the company a great deal of money?
Ms. HINKLEMAN. I think so.
Mr. JENKINS. Isn't that correct?
Ms. HINKLEMAN. Yes, sir, I think so.
Mr. JENKINS. Did you participate in the profits from any of this
in any way?
Ms. HINKLEMAN. Nothing other than my paycheck. I did not
even get a raise.
Mr. JENKINS. You received no bonuses or anything for making
these sales?
PAGENO="0203"
199
Ms. HINKLEMAN. No. They were going to put me on the bonus
program in 1989, and I got fired in January 1989. So, I really re-
ceived no bonus for that at all.
Mr. JENKINS. OK. Were you not suspicious of the huge volumes
of this chemical being sold?
Ms. HINKLEMAN. At the beginning I was not suspicious of the
products. I just thought it was a great sale, and it was supposed to
go to the textile industry in Singapore, the one for-the German
shipment. And, you raise the question is it strange, and they said
no, there is a huge textile industry in Singapore. It is not unusual
to ship this product there.
And I was told to make sure that I had the necessary documents.
Mr. JENKINS. You were told that by whom?
Ms. HINKLEMAN. By Paul Jones.
Mr. JENKINS. He was?
Ms. HINKLEMAN. He was the vice president.
Mr. JENKINS. The vice president.
Ms. HINKLEMAN. So we did file. We did file with the Department
of Commerce for an export license.
Mr. JENKINS. And Mr. Jones or any other superior did not ever
caution you about not selling this to any foreign country or give
you any indication that there might be a problem with these sales?
Ms. HINKLEMAN. They told me to make sure that I had the neces-
sary documents to ship it. That was basically it. They didn't say-I
think towards the end when they felt that the Government was
suspicious of it they were more cautious of it and they were more-
you know, bring you in and talk to you more about it. But in the
beginning they were not.
Mr. JENKINS. Well, no senior officials of the company were ever
prosecuted, except you as an employee, is that right?
Ms. HINKLEMAN. Yes, sir. And that was for making a false state-
ment.
Mr. JENKINS. For making a false statement?
Ms. HINKLEMAN. For making a false statement.
Mr. JENKINS. To the Customs agents?
Ms. HINKLEMAN. Yes.
Mr. JENKINS. In what way? Explain that.
Ms. HINKLEMAN. There was a telex that we had received in from
Mr. Walaschek and I-we had received the telex early, a few
months before, and it had, "Please quote prices CIF Singapore CIF
Pakistan for Kromfax." I can't remember the tonnage right now,
but it was for a certain amount of tonnage, and I quoted him prices
on both Pakistan and Singapore.
And when Customs came in and they were going through the
documents and all, I did not find this telex. This was buried some-
where in the file. So when they left I was going through the file
trying to find all the documents I could find on this to give to them
and I found this, and I was afraid because Customs said, "You
knew it was going to Pakistan" or "Did you think it was going to
Pakistan," and I said, "No, I did not." And so then I saw this telex
that I had sent saying you quoted Pakistan, so, obviously, it looks
like I knew that it was going to Pakistan. So I got rid of the telex.
So then when they asked if I did, because when they received the
documents back from Germany they had a copy of it, so they knew
PAGENO="0204"
200
that I had done that. And, you know, they asked me if I had done
that and I said no. So, actually I made a false statement.
Mr. JENKINS. Made a false statement to the agent?
Ms. HINKLEMAN. Right.
Mr. JENKINS. Were you trying to protect your job? Is that basical-
ly what you were doing?
Ms. HINKLEMAN. Yes, I was.
Mr. JENKINS. I know this doesn't have a great deal to do, maybe,
with what we are attempting. The committee is attempting to as-
certain how we can prevent shipments such as this from being
made. But it concerns me that you are the only person-are you
convinced that you are the only one that knew anything about
what was going on?
Ms. HINKLEMAN. No, I am not convinced.
Mr. JENKINS. You are not convinced of that?
Ms. HINKLEMAN. No, I am not.
Mr. JENKINS. As a matter of fact, everybody above you knew,
were well aware of it, were they not?
Ms. HINKLEMAN. Excuse me?
Mr. JENKINS. Everyone, all of your superiors were well aware
that these sales were being made.
Ms. HINKLEMAN. They all were in the meetings with the same
people I were in the meetings with.
Mr. JENKINS. Did they ever tell you to or make any statement at
any time that "We need to be cautious about making these sales"
or "Should we be cautious about revealing anything about who is
buying this material"?
Ms. HINKLEMAN. Yes. I think they were cautious. In fact, we
tried to find out who the actual end user was, and we kept asking,
you know, the customer, Who is the end user? What are they using
it for? And they would never come back and tell us.
I would think that they should know that before you ship a prod-
uct. Especially if they knew that that product could be used
wrongly, they should have checked out who was actually going to
use it and what they were going to do with it. I mean anybody can
tell you anything. You can say, "I'm going to use this to clean my
floor with," but that doesn't mean that is what you are going to
use it for.
And I would think they would know, or somebody in a company
should know what the product is actually being used for. I mean,
that is-I don't get to travel. I didn't visit the customers. I don't
know what they did with it. I never got to see their plants.
Mr. JENKINS. Did you have any suspicion at all during this time
that this particular chemical was going to end up in Iran? Did you
have any indication of that from anyone?
Ms. HINKLEMAN. No, I really did not.
Mr. JENKINS. You didn't have any suspicions about that?
Ms. HINKLEMAN. No.
Mr. JENKINS. Anyone in your company, any superior ever indi-
cate that it might end up in the Middle East?
Ms. HINKLEMAN. I think they were a little suspicious of it, but of
course nobody would admit that to me. I mean I wasn't privy to
their meetings or whatever.
PAGENO="0205"
201
It is hard for me to say what they knew or what they thought. I
really don't know.
Mr. JENKINS. You don't feel, I would imagine, too good about
being a fall guy for the company?
Ms. HINKLEMAN. No, I don't feel good about it at all actually.
Mr. JENKINS. Do you feel that you were?
Ms. HINKLEMAN. Excuse me?
Mr. JENKINS. Do you feel that you were somewhat the recipient
of-
Ms. HINKLEMAN. Yes, I do.
Mr. JENKINS. Did they later keep you in the employ of the com-
pany?
Ms. HINKLEMAN. Well, no, they actually-in December, they
promised that they would not fire me, that I was doing a great job
and everything was going very well. January is when they fired
me. So, I mean, I really-other than the fact that my lawyer told
me I was probably going to be fired, I didn't really even think up
until the end that I would be fired.
Mr. JENKINS. The company fired you? The company fired you in
January?
Ms. HINKLEMAN. Yes.
Mr. JENKINS. Because of this incident?
Ms. HINKLEMAN. Yes. I asked why I was being fired actually and
they said, "You know why you are being fired." And I said, "No, I
don't. Why don't you tell me why I am being fired?" They would
never come out and tell me why I was being fired. They wrote me a
little letter and just said I was terminated and that was it.
Mr. JENKINS. Did you destroy any other documents other than
this telex?
Ms. HINKLEMAN. Not that I can remember. No, I don't think so.
Mr. JENKINS. Had this ever-this situation ever come up before
where you had been checked by Customs as to the sale or shipment
of this chemical or any other chemical?
Ms. HINKLEMAN. I personally was not; no. I think the Depart-
ment of Commerce contacted Alcolac in 1985 or something. I mean,
that is what I remember. I don't know. They didn't contact me, but
I do remember somebody coming to the office and talking to Paul
Jones.
Mr. JENKINS. I would imagine when Customs ultimately interro-
gated you, you were scared.
Ms. HINKLEMAN. Yes, I was.
Mr. JENKINS. Were you cooperative or did you go to the company
officials and talk with them?
Ms. HINKLEMAN. I think I was honest with Customs. I was as
honest as I could be and I was honest with the company. I told the
company what I told Customs. I didn't hide anything from any-
body.
Mr. JENKINS. I am going to let Mr. Bunning, he has some ques-
tions.
Chairman PICKLE. Mr. Bunning.
Mr. BUNNING. Thank you, Mr. Chairman. I want to go back to
Agent Bass. Your agency was sent to Alcolac in 1984, I believe.
Mr. BASS. That is correct. We received information in 1984.
PAGENO="0206"
202
Mr. BUNNING. You didn't continue to monitor the company even
though at that time you found nothing wrong?
Mr. BASS. There was some monitoring done, but just routine be-
cause the allegations were unsubstantiated.
Mr. BUNNING. Was it a tip from a fellow or can you relate to this
committee where the tip came from that you ought to check on
them?
Mr. BASS. In 1984?
Mr. BUNNING. Yes.
Mr. BAgs. The Dutch Embassy.
Mr. BUNNING. The Dutch Embassy.
Mr. BASS. Yes, sir.
Mr. BUNNING. If it hadn't been for the tip in 1988, do you think
this scheme would have come to the attention of Customs?
Mr. BASS. Well, it may have come to our attention, but I believe
it may have been some time later after the fact.
Mr. BUNNING. Can you reveal to the committee where the tip
came from in 1988?
Mr. BASS. No, I can't.
Mr. BUNNING. Why wasn't this kind of a scheme caught in the
normal process, that is what this committee is trying to find out, of
screening what was shipped and what wasn't shipped? Why wasn't
it caught?
Mr. BASS. My best answer would be that paperwork is often in-
correctly filled out. Sometimes illegible in spots and that an inspec-
tor or a Customs officer on a pier or on the docks has to go by what
is in front of him. Re obviously can't timewise search through 430
55-gallon drums. But even to look at one of them without being a
chemist, it is difficult.
The ~other side of the coin is that the way this paperwork was, it
appeared to be correct. It said it was going to Singapore, for exam-
ple, the last shipment. To find out whether or not it needed a vali-
dated Commerce license takes time. It is not something that, again,
an inspector on the pier can often find out immediately. So, these
are problems that we run into.
The other problem was just the way that the manifest was to say
"Kromfax." I mean, the average Customs employee, the average
person would have no idea what is in those 55-gallon drums.
Mr. BUNNING. Shouldn't they?
Mr. BAss. I believe they absolutely should.
Mr. BUNNING. Well, why don't they then?
Mr. BASS. I don't know the answer to that.
Mr. BUNNING. In other words, if there are two names or three
names or four names for a given chemical, why shouldn't the Cus-
toms official know that?
Mr. BASS. Well, the names that were on this paperwork were not
a chemical name, it was a brandname.
Mr. BUNNING. OK.
Mr. BAss. Which made it even more difficult.
Mr. BUNNING. You are not answering my question. The question
is if there is a given name for this, you called it Kromfax or this is
called in the chemical sense a different name, why shouldn't those
that are approving the shipment know exactly what is in the bottle
or in the drum.
PAGENO="0207"
203
Mr. BASS. That is done on a random basis to actually verify that
what is on the paperwork is inside the drum or inside the contain-
er.
Mr. BUNNING. In other words, if somebody would ship water in
those drums, on the manifest it says water, they wouldn't do any-
thing about it?
Mr. BASS. Possibly not. Possibly by looking at the paperwork who
the shipper was, who the consignee was, what country it was going
to, the fact that a lot of money was being spent to just ship water
might pique an inspector's interest and he would make an effort to
go out there and examine the drums.
Mr. BUNNING. You mentioned the fact that an automated export
manifest system might help?
Mr. BASS. I think so; yes.
Mr. BUNNING. All right. Even though Ms. Hinkleman put some
misleading information on her Commerce license application to
Singapore, should Commerce have caught the mistake and revoked
the export license?
Mr. BASS. With all due respect, you would have to ask Commerce
that. I don't know what their procedures are. I really don't feel like
I am qualified to answer that.
Mr. BUNNING. All right. Describe the cooperation you received in
your investigation by the DEA and from the authorities in Paki-
stan.
Mr. BASS. It was excellent. Our senior Customs representative in
Hong Kong requested DEA to get with the Pakistani authorities in
Karachi, told them about the shipment and told them it was our
desire to know if there was any movement or activity on it whatso-
ever. The minute that there was word that it was going to be
shipped out, they provided us with the shipping documents and all
the pertinent information right away.
Mr. BUNNING. What about the Italian, Swiss, and German au-
thorities in tracking down the gentleman who fled, Van Anraat?
Mr. BASS. Well, in tracking him down, we really haven't gotten
any assistance. However, from those three Governments we got a
great deal of assistance throughout the investigation. The Germans
executed three search warrants at our request. The Swiss executed
two search warrants at our request. The Italians executed an
arrest warrant and a search warrant of Franz Van Anraat, and
then detained him pending extradition.
Mr. BUNNING. Why haven't you had the cooperation after the
fact?
Mr. BASS. As far as tracking them down? Well, we know where
these people are. Peter Walaschek is in Germany. The Germans
don't extradite Germans, so there is nothing that we can do or that
the Germans can do.
Mr. BUNNING. Well, then, why was Van Anraat released to Ital-
ian authorities pending extradition?
Mr. BASS. Why was he released? The judicial system there decid-
ed, a lower court decided, that it wasn't an extraditable offense and
by the time we got word of that and it was appealed, it was too
late. Even though the appeal was in our favor, Mr. Van Anraat
was long gone.
PAGENO="0208"
204
Mr. BUNNING. Tell us about Walaschek's escape from the United
States.
Mr. BASS. Walaschek was placed in a halfway house in Washing-
ton, D.C., and remained there for, I believe, approximately 2, 2½
months, and subsequently fled and got back to Germany.
Mr. BUNNING. How did he get a passport to get out?
Mr. BASS. I don't know. I don't know that he had a passport to
get out. But if he got one, I don't know how-
Mr. BUNNING. Why won't the Germans extradite him?
Mr. BASS. Because they won't extradite German citizens.
Mr. BUNNING. We don't have any kind of an agreement with
Germany on that?
Mr. BASS. That is my understanding from-
Mr. BUNNING. Or is the violation not sufficient?
Mr. BASS. From what the Office of International Affairs at main
Justice told me that the-I don't think it is the violation, it is the
fact that Germans will not extradite German citizens.
Mr. BUNNING. I understand that Mr. Tanaka purchased virtually
all the thiodiglycol in Japan before coming to the United States to
purchase it from Alcolac?
Mr. BASS. That's correct.
Mr. BUNNING. Who did he purchase from in Japan? Do you have
any idea?
Mr. BASS. The names of the companies you mean?
Mr. BUNNING. Yes, sir.
Mr. BASS. I don't know them offhand. But, I mean, I had some
records that named Japanese chemical companies.
Mr. BUNNING. Could you furnish those to the committee?
Mr. BASS. I could, sure.
Mr. BUNNING. OK. I would like for you to.
Mr. BASS. I don't know that I have them with me.
Mr. BUNNING. No. I mean-
Mr. BASS. Oh, OK. Sure.
Mr. BUNNING [continuing]. Make sure that they are furnished.
In your report, you indicated that the Alcolac executives knew or
certainly should have known what was going on?
Mr. BASS. Yes.
Mr. BUNNING. But you said you didn't have enough evidence to
prosecute them?
Mr. BASS. That's correct.
Mr. BUNNING. Isn't it highly unusual to purchase up to 3,000
tons of thiodiglycol for use in the textile industry?
Mr. BASS. If you're asking me, I would say, yes, it is.
Mr. BUNNING. In other words, Customs doesn't care how much is
being shipped if they don't know what is in the bottle or in the
drum?
Mr. BASS. No. I don't think that is a fair statement. We do care.
However, there are hundreds of chemical companies everywhere
and it is difficult to monitor all of them.
Mr. BUNNING. How many can be made into mustard gas?
Mr. BASS. How many chemicals?
Mr. BUNNING. Yes, how many are able to be made into mustard
gas? This arid hydrochloric acid and you have mustard gas?
Mr. BASS. That is correct.
PAGENO="0209"
205
Mr. BUNNING. How many other chemicals can you do that with?
Mr. BASS. I don't know. There are other chemicals that through
different processes can be converted into mustard gas.
Mr. BUNNING. How many as easily as thiodiglycol?
Mr. BASS. I am not a chemist, but my guess is thiodiglycol is
probably one of the easiest.
Mr. BUNNING. OK. Did Alcolac's executives meet with Van
Anraat and Tanaka, and express their concern about mustard gas?
Mr. BASS. Yes.
Mr. BUNNING. It is amazing to me that you weren't able to find
enough evidence. Did Alcolac stand to make $1.3 million in profits
on the deal with the German alone?
Mr. BASS. I believe that is right. Actually based on the figures
that we developed through the potential sales to Nukraft, this
would have been to Franz Van Anraat, Alcolac expected to earn
between $630,000 and $1,260,000.
Mr. BUNNING. In profits?
Mr. BASS. Yes.
Mr. BUNNING. That includes all expenses being paid and every-
thing?
Mr. BASS. Yes.
Mr. BUNNING. OK. Do you think the penalties and sentences in
this case were sufficient for the crime?
Mr. BASS. No.
Mr. BUNNING. Do you think this committee should recommend
additional and much more restrictive and stiffer penalties?
Mr. BASS. I don't think that is a recommendation I should make.
I might say I wouldn't mind seeing that happen, but I don't think I
should be the one to recommend that. Maybe the policy-
Mr. BUNNING. You just said they weren't sufficient. Now, either
they were sufficient or they weren't. Do you think they should be
tougher or do you think they are sufficient? What is the answer?
Mr. BASS. I think they should be tougher. But I am not prepared
to recommend to the committee.
Mr. BUNNING. What they should be.
Mr. BASS. Yes.
Mr. BUNNING. We don't want you to recommend that.
Mr. BASS. OK.
Mr. BUNNING. We will try to determine that ourselves.
Mr. BASS. OK.
Mr. BUNNING. Should the chemical company in Baltimore have
been put out of business because of this violation?
Mr. BASS. Well, the law doesn't provide that a company be put
out of business. They can be debarred and prohibited from making
exports and things like that. But they voluntarily agreed to no
longer export thiodiglycol.
Mr. BUNNING. That is the only agreement that they made in the
judgment?
Mr. BASS. Well, they also paid a fine.
Mr. BUNNING. Did, in fact, the executives of Alcolac know that
the corporation that they were doing business with was a shell
company?
Mr. BASS. Yes.
Mr. BUNNING. They did know that?
PAGENO="0210"
206
Mr. BASS. Yes, they did.
Mr. BUNNING. OK. Thank you. I am going to switch over. I would
like to ask Ms. Hinkleman a few questions. I understand that you
weren't particularly happy about testifying today and I can under-
stand that. We are not here to do you any harm, believe me. We
would just like to know how companies are beating the system and
that is why we are here, to try to find that out.
You have told Mr. Jenkins your work experience with Alcolac.
Can you give me a little background on your education before you
went to work for the chemical company?
Ms. HINKLEMAN. I just have a high school education.
Mr. BUNNING. Were there any job descriptions at Alcolac when
you took your job or moved up to the job of export manager?
Ms. HINKLEMAN. No.
Mr. BUNNING. There were not any job descriptions in the compa-
ny itself?
Ms. HINKLEMAN. At that time there were no job descriptions. I
think they have job descriptions now, but they did not.
Mr. BUNNING. When they made you export manager, did you get
a raise?
Ms. HINKLEMAN. Yes, I did.
Mr. BUNNING. A good one?
Ms. HINKLEMAN. It was about $5,000.
Mr. BUNNING. OK.
Ms. HINKLEMAN. No, it wasn't. It was about $3,000.
Mr. BUNNING. What part of Alcolac's business were exports?
Ms. HINKLEMAN. I think it was about 10 percent. It might have
been 7 to 10 percent. It was a very small percentage.
Mr. BUNNING. 10 percent?
Ms. HINKLEMAN. Yes.
Mr. BUNNING. Then when they started to do all this exporting,
would you say that it became a much larger percentage of their
business?
Ms. HINKLEMAN. I don't know if it became a much larger per-
centage or not.
Mr. BUNNING. Did you have any idea of the amount of business
that the company was doing?
Ms. HINKLEMAN. Domestically?
Mr. BUNNING. Yes.
Ms. HINKLEMAN. I remember going to a meeting in 1988. They
wanted to do $88 million in 1988. That sticks in my head, but I
don't know. They wanted 10 percent of that to be international. So
they would expect $8 million that year from international.
Mr. BUNNING. You told Mr. Jenkins about your altering the one
document?
Ms. HINKLEMAN. Right.
Mr. BUNNING. What were the circumstances? Did somebody tell
you to alter it?
Ms. HINKLEMAN. No, no one told me.
Mr. BUNNING. You did that on your own?
Ms. HINKLEMAN. Yes, I did that on my own.
Mr. BUNNING. OK. Why did you put thiodiethylene glycol instead
of thiodiglycol on it?
PAGENO="0211"
207
Ms. HINKLEMAN. Because we had technical brochures and some
said thiodiethylene glycol and some said thiodiglycol. I mean, to
me, they were both the same product. I don't think it was any-I
mean, it wasn't done on purpose to confuse anybody.
Mr. BUNNING. Wasn't there a perception that thiodiethylene
glycol was legitimate and the other one wasn't?
Ms. HINKLEMAN. No.
Mr. BUNNING. OK. Why did you put Kromfax on the application?
Ms. HINKLEMAN. That was a trade name. It was a trade name of
the-you mean on the application to the-
Mr. BUNNING. Yes, the application for shipment. The Commerce
application.
Ms. HINKLEMAN. It was just a trade name. We put all our trade
names on the documents and invoices so the customers would know
that is the product they got.
Mr. BUNNING. How did you get the wrong commodity control
number?
Ms. HINKLEMAN. That was all-I don't know exactly what hap-
pened with that. I asked the library for the number. She gave me
the number. We got the number. Apparently that's the number
that we used, but they had changed the number the month before
and we used the old number. Now, when I did submit the forms, I
did attach copies of the technical literature to it. So they had the
full chemical description.
Mr. BUNNING. In other words, Commerce had all of this?
Ms. HINKLEMAN. Yes, they did.
Mr. BUNNING. OK. Would you tell me about the role of the li-
brarian, Mary Reed Blut?
Ms. HINKLEMAN. Her role? I think her role in this was just to-
she was just the librarian and we-if we needed numbers, any kind
of particular, like schedule B numbers or commodity codes, or
chemical descriptions or chemical compositions, I would get them
from her because I was not a chemist.
Mr. BUNNING. Did she ever catch on? Did she catch on with what
was happening?
Ms. HINKLEMAN. I think she had-I think she grew a little suspi-
cious of it. Yes. I think she did.
Mr. BUNNING. Why did you change shipping documents to read
"Trans-shipping allowed" and then change the destination to "Far
East or Western Europe" when you knew where they were really
going?
Ms. HINKLEMAN. No. Because the customer asked me to do that
and he said, "Could you change the documents to show now instead
of going here, it's going there? Could you change it?" I said, "Yes."
Mr. BUNNING. Did you become suspicious when they did that?
Ms. HINKLEMAN. No, not-at the very beginning, I did not, not
until more people got involved in it. Then, of course, I became
more suspicious of it. I honestly felt they were customers.
Mr. BUNNING. If this was OK, why did your freight forwarder
refuse to make these changes for you?
Ms. HINKLEMAN. I don't know why he refused because I assume
it was not right. I didn't know and don't know.
Mr. BUNNING. Didn't that redflag or didn't that alert you, also?
Ms. HINKLEMAN. Yes, it did. I am sure it did. Yes.
PAGENO="0212"
208
Mr. BUNNING. What other employees knew what was going on?
Ms. HINKLEMAN. I mean, I don't know what-who knew what.
You know, it is hard to say they knew because I don't know that
they knew, I would suspect that the meeting that we had with the
people from New York, there were several people from that meet-
ing and they were all product managers. They knew the product.
They knew what it could be used for. To me, if they wanted to sell
the product, then they should have made sure of where it was
going to and what it was going to be used for.
Mr. BUNNING. Did your vice president of sales, Mr. Jones, know?
Was he in charge of all sales completely?
Ms. HINKLEMAN. I would think so. Yes.
Mr. BUNNING. Did the vice presidents and officers of the corpora-
tion receive bonuses for the business that they did?
Ms. HINKLEMAN. Yes, they did.
Mr. BUNNING. On sales?
Ms. HINKLEMAN. Yes. On net profits.
Mr. BUNNING. In other words, those people like Mr. Jones, those
people in that level all received bonuses for the amount of sales?
Ms. HINKLEMAN. Yes.
Mr. BUNNING. Did you tell them about the Walaschek sales
through Pakistan?
Ms. HINKLEMAN. I am sure-I don't really remember. I think
that I told Paul Jones about it and I know I told Lee Terhune
about it.
Mr. BUNNING. Where do they work now?
Ms. HINKLEMAN. Excuse me?
Mr. BUNNING. Where do some of those people work now?
Ms. HINKLEMAN. I honestly don't know.
Mr. BUNNING. You don't?
Ms. HINKLEMAN. I know that they don't work for Alcolac. I think
Paul Jones, I had heard, went to work for a company called CPS. It
is a chemical company. I don't know where they are located.
Mr. BUNNING. Why did you alter the telex from Walaschek that
Customs used against you?
Ms. HINKLEMAN. I honestly don't know. I was frightened and I
was afraid it was going to show that I knew more than probably
what I really knew.
Mr. BUNNING. Mr. Chairman, I would like to enter into the
record three exhibits at this time. These are the documents that
have been changed or altered and they are public record, so I
would like to offer them.
Chairman PICKLE. Without objection, they will be made a part of
the record.
Mr. BUNNING. Thank you very much.
[See appendix "Additional Background Material," item 3, Alcolac
case.]
Chairman PICKLE. Mr. Jenkins.
Mr. JENKINS. I will try to be as fast as I can. Mr. Bass, in re-
sponse to a question by Mr. Bunning about what could be done
with the company that was not done, did the Customs Service refer
Alcolac to Commerce Department for civil sanctions?
Mr. BASS. Commerce Department was familiar with the case. I
believe, I am not 100 percent certain that part of the plea agree-
PAGENO="0213"
209
ment was that there would be no civil sanctions other than what-
ever fines the court found against them.
Mr. JENKINS. You mean Customs acquiesced in the agreement to
accept a plea from an employee and you accepted the company's
agreement to pay a fine, but you agreed not to pursue a civil action
against the company or refer the case to the Commerce Depart-
ment for that purpose?
Mr. BASS. Sir, plea agreements are drawn up between the De-
partment of Justice and a defendant. That was their decisions,
however they were made.
Mr. JENKINS. Well, I know the assistant U.S. attorney and the
defendant's attorney entered into a plea agreement, but they asked
Customs about your recommendations and whether or not you
would agree with the recommendations; did they not?
Mr. BASS. They may have, and I am not sure that I agreed with
that in particular. There were a couple of things that we didn't
agree on.
Mr. JENKINS. Well, you know, if we want to prevent a company
that has engaged in this activity in the past, it would appear to me
that we would want to at least tell Commerce that you ought to
seek some civil sanctions against this company. You would agree to
that, wouldn't you?
Mr. BASS. I would think if there is some-
Mr. JENKINS. Were you overruled by someone?
Mr. BASS. Pardon me?
Mr. JENKINS. Were you overruled in your recommendation by
someone?
Mr. BASS. If that is the way it went down, obviously so. Again, I
am not 100 percent, I don't have 100 percent recollection of that
plea agreement, but I know that that matter was brought up.
Mr. JENKINS. Was it brought up with you by the assistant U.S.
attorney or was it brought up by your superior?
Mr. BASS. No, not by my superior. I believe it was brought up by
one of the attorneys for Alcolac.
Mr. JENKINS. I know they would want to avoid any civil sanc-
tions. But the question I am really trying to pursue is why it was
not referred to the Commerce Department for civil sanctions?
Mr. BASS. At this time I couldn't give you a definite answer on
that. I could check, though, and get back to you.
Mr. JENKINS. Well, I wish you would respond. I simply do not
know why we didn't curtail future shipments or why we did not
take some civil action from the standpoint of Commerce after this
was revealed. I simply do not know and I wish you would look into
that, Mr. Bass.
Mr. BASS. Yes, sir, I will.
Mr. JENKINS. Ms. Hinkleman, let me ask you a couple of ques-
tions. I am obviously somewhat concerned that you were the only
defendant and that no action was taken against the company. At
some point you must have-I recognize that when you were imme-
diately questioned, I guess the natural reaction would have been to
sort of stonewall because you were working for a company and you
didn't want to jeopardize your job, and that sort of thing. I guess
that was your first reaction, was it not?
Ms. HINKLEMAN. Yes, it was.
PAGENO="0214"
210
Mr. JENKINS. And you didn't want to get any superior in trouble,
I assume?
Ms. HINKLEMAN. No. And I honestly didn't know. When you
don't know, you don't accuse or make statements that aren't
really-you don't know. I don't-I really honestly did not want to
get fired, no, because I had been with the company for a very long
time and thought I was going to be there forever to be quite honest
with you.
Mr. JENKINS. Well, at some point didn't you talk with Mr. Jones
or some superior and say, look at all of these things Tanaka and all
these people are trying to purchase?
Ms. HINKLEMAN. Yes.
Mr. JENKINS. Did you?
Ms. HINKLEMAN. Yes, I did.
Mr. JENKINS. And those list of chemicals were on the danger list,
were they not?
Ms. HINKLEMAN. Yes, they were.
Mr. JENKINS. What did Mr. Jones say to you?
Ms. HINKLEMAN. That he never saw it and that I-
Mr. JENKINS. That what?
Ms. HINKLEMAN. That he never saw it and that I should get rid
of it. I did. I think I took it back and just threw it in the trash can.
I don't know what the chemicals were. I know that he didn't like
the sound of them or the look of them. But I don't know what they
were.
Mr. JENKINS. So what he was saying to you is I didn't see that
list; is that right?
Ms. HINKLEMAN. Right.
Mr. JENKINS. Don't tell me what is on that list or what this com-
pany wants to buy because I don't want to know anything about it?
Ms. HINKLEMAN. Right.
Mr. JENKINS. Is that what he was saying to you?
Ms. HINKLEMAN. Basically, yes. That's how I took it.
Mr. JENKINS. Did you ever tell Mr. Bass or Customs about that?
Ms. HINKLEMAN. No, I did not. I was very careful honestly in
what I said and I tried not to incriminate people from Alcolac be-
cause I did not know what they knew and so I wasn't going to say,
yeah, they knew, yeah, they should have known, yeah, they knew
everything, and I did not do that. So, I basically said what I knew
and how I dealt with it, but I really didn't drag other people into it.
Mr. JENKINS. Ms. Hinkleman, if you had had any idea that this
chemical was going to be used for mustard gas somewhere in Iran,
would you have participated in the sale of such a commodity?
Ms. HINKLEMAN. No, I most certainly would not have. If they
had told-the company didn't even tell all the employees. So, I
mean, every employee in the company did not know what this
product could be used for. I think that if companies know that it
can be misused or can be used for mustard gas, they should tell ev-
erybody. Why not tell the whole company? Tell everybody in ship-
ping, everybody in receiving, everybody in purchasing.
I mean, that way those people will know if they see an order
come through for this for 3,000 tons or something they're going to
suspect it. They might say, well, this looks pretty strange, you
know. But when the company doesnt bother to tell the employees
PAGENO="0215"
211
what is going on, then how are the employees supposed to know or
how are they supposed to flag it?
Mr. JENKINS. So the company gave no information to its employ-
ees?
Ms. HINKLEMAN. No, they did not. Of course, toward the end
when they were having so many problems they, of course, did. But
there are a lot of people that work for a chemical company who are
not chemists and they don't know. I am sure that the chemists
knew. I am sure that the people in the chemical department knew.
Mr. JENKINS. But they didn't say anything to the people down on
the-
Ms. HINKLEMAN. They didn't tell the secretaries.
Mr. JENKINS [continuing]. Export? They didn't tell the export
manager?
Ms. HINKLEMAN. Not until it was a little bit too late, I think.
Mr. JENKINS. Not until after the fact?
Ms. HINKLEMAN. Well, I did-they did tell me before because in
1985, I think, when they were first contacted by the Department of
Commerce, then they did bring it to our attention. They did men-
tion it. I mean, there was never any big memo go out, but they did
say the product can be used in mustard gas and we should be care-
ful.
Mr. JENKINS. What basically did they say, look, this could be
used for mustard gas and might be-we may have customers from
the Middle East trying to buy this from us, be careful and don't
sell this to potential customers from the Middle East?
Ms. HINKLEMAN. Basically. Yes, basically, they did say something
like that.
Mr. JENKINS. After they said that, did you sell any? Did any of
these transactions occur after that?
Ms. HINKLEMAN. Yes. Of course, they did. I mean, I don't know if
all of them were legitimate or not legitimate. I don't know.
Mr. JENKINS. After all, you were making all these sales and the
company made a million dollars or so from these sales apparently
from what I heard. Did anyone tell you that you were doing a great
job?
Ms. HINKLEMAN. Yes.
Mr. JENKINS. Did they?
Ms. HINKLEMAN. Yes, they did.
Mr. JENKINS. Who was telling you that?
Ms. HINKLEMAN. Paul Jones.
Mr. JENKINS. Mr. Jones.
Ms. HINKLEMAN. And David Phillips. He was the president. I
mean, I was told I did a very good job. They were very pleased.
Mr. JENKINS. You didn't go out and solicit any orders, you just
received them; is that right?
Ms. HINKLEMAN. Right. No, I did not solicit.
Mr. JENKINS. Did anyone have any supervisory duties to look
over the orders that you were receiving?
Ms. HINKLEMAN. Yes, I think that the director of finance looked
over every order that I put through.
Mr. JENKINS. Who was that?
Ms. HINKLEMAN. Roger Nielson.
Mr. JENKINS. Roger Nielson.
PAGENO="0216"
212
Ms. HINKLEMAN. Yes.
Mr. JENKINS. Did he ever raise any question about any of this?
Ms. HINKLEMAN. Only once that I can remember. It was one of
the shipments going to Germany. It was net 60 days or some kind
of thing where he thought he wasn't going to get his money and he
was quite upset that I had done it that way. He wanted a letter of
credit for all future orders after that.
Mr. JENKINS. It appears to me, and my conclusion may be wrong,
that you feel that all of your superiors had more knowledge of this
than you did.
Ms. HINKLEMAN. I believe so.
Mr. JENKINS. You believe so.
Ms. HINKLEMAN. I can honestly say they did not know about the
telex that I had destroyed, but they did basically know just about
everything else, I would think.
Mr. JENKINS. if your superiors are telling you, "Don't show me
that, I don't want to look at it," does that raise a red flag to you?
Ms. HINKLEMAN. Yes, kind of.
Mr. JENKINS. So, basically, your statement is that companies are
dealing in this type of commodities, if we want to know what is
going on, then they ought to be required to at least inform their
employees that this can be used for mustard gas or whatever?
Ms. HINKLEMAN. I should think so, yes, and I think that on the
forms going to the Department of Commerce, they should also put
that on there, and I think it should be in the literature that they
send out to the customers. I mean it does not make sense, if it can
be used for that, why do they not put it on there.
Mr. JENKINS. Mr. Bunning wanted to-
Mr. BUNNING. I just have got a couple of other questions.
Does Customs continue monitoring companies that violate this
law that you prosecuted under? In other words, are you presently
or have you in the past continued to monitor those companies?
Mr. BASS. Yes, sir. In fact, chemicals are very big priority.
Mr. BUNNING. I am talking specifics now. I am talking about
those who have violated the law.
Mr. BASS. Yes.
Mr. BUNNING. Do you have any knowledge or does anyone at
your desk there have any knowledge about the IRS being involved
in checking on the amount of profit and those profits that this cor-
poration made in direct relationship to these illegal shipments?
Mr. BASS. I do not know of any IRS knowledge or investigation
into this, no.
Mr. BUNNING. I asked you about the list of all the chemicals that
can be made into mustard gas, and I have it before me. I would
like to ask Ms. Hinkleman, did the corporation that you worked for
ever publish a list like this-there may be 20 names on it-or put
it on your bulletin board or notify you that these are the chemicals
that could be used for illegal gases or whatever they might be?
Ms. HINKLEMAN. No, not that I recall.
Mr. BUNNING. They did not?
Ms. HINKLEMAN. No.
Mr. BUNNING. That is all the questions I have, Mr. Chairman.
Chairman PICKLE. The Chair would like to proceed now to the
next panel, but the Chair makes the observation that the Custôni~
PAGENO="0217"
213
laws are not being carried out or they are being circumvented,
when an employee of the company can change the labeling on the
product, in this particular case thiodiglycol, and just automatically
call it Kromfax, that is questionable, if not a violation of the law,
when an employee can just simply order special kinds of contain-
ers, that ought to be questionable, particularly when a shipment of
this kind of a good is used for mustard gas.
When an employee of the company can actually put on that
chemical the label on it, they leave blank the country of ultimate
destination, not even show it, that should raise a flag, and that is a
weakness of our law. And certainly if an employee of a company
can actually put on the outside of the document that transship-
ment is allowed, no ultimate company, but just send it on, thus it
would not be inspected at any one port.
If those kinds of things can be carried out and is being carried
out and was carried out in this case, then it is obvious to me that
our Customs laws and export laws are embarrassingly loose, and in
this particular case dangerous.
On the other hand, if a company can be set up to make these
purchases and transshipment of a product that is obviously danger-
ous to the world, and there is no control by that company as to
where the goods go or they are not being sent, then it seems to me
obvious that the company officials knew what was going on. The
company officials have not been indicted in this case in any regard,
simply because Customs says they cannot make a case.
This committee does not want to prejudge it, but this committee
is going to ask the House Counsel to see if suit can still be brought
against company officials, by name and by individuals. And when
they appear before our committee, that is, the Commerce and State
Department later, we will ask that question, why that cannot be
done, and perhaps they will either deny or confirm that a suit can
still be brought.
There are obvious weaknesses in the carrying out of our Customs
laws. Changes must be made, particularly when these kinds of
products are so dangerous to the world and came that close to caus-
ing great damage to our people. And when we now find that we are
going to fine the company, but we want to also get a guilty plea
from one employee, who may or may not have known a lot more
than she has indicated, we have to say that justice has not been
carried out.
So, therefore, I am asking the House Counsel to confer with our
Justice Department and we will see if suit can still be brought. It
seems to me like there is a weakness there.
Now, the Chair will have other questions, but we must go on to
the other panels. I appreciate your testimony very much.
Do any other members have any other questions at this point?
Mr. Moody, do you have any questions about this suit?
Mr. MOODY. No, Mr. Chairman.
Chairman PICKLE. All right.
Thank you.
The next panel will be Frank Deliberti, National Director for the
Office of Export Enforcement, Bureau of Export Administration,
accompanied by Leonard Patak, Special Agent in Charge, Office of
Export Enforcement, out of Dallas.
PAGENO="0218"
214
Mr. Deliberti, are you in Washington?
Mr. DELIBERTI. Now I am, sir.
Chairman PICKLE. Where were you?
Mr. DELIBERTI. Prior to that, from 1985 to about February of this
year, I was the Special Agent in Charge of the San Jose field office,
which covered the nine Northwestern States of the country.
Chairman PICKLE. Now, do you have a statement, or does Mr.
Patak have a statement, also?
Mr. DELIBERTI. I have a statement and Mr. Patak will answer
some of the questions that you may have with me.
Chairman PICKLE. Will you proceed, sir.
STATEMENT OF FRANK W. DELIBERTI, DIRECTOR, OFFICE OF
EXPORT ENFORCEMENT, BUREAU OF EXPORT ADMINISTRA-
TION, U.S. DEPARTMENT OF COMMERCE, ACCOMPANIED BY
LEONARD S. PATAK, SPECIAL AGENT IN CHARGE, OFFICE OF
EXPORT ENFORCEMENT, DALLAS, TEX.
Mr. DELIBERTI. Mr. Chairman and members of the subcommittee,
I am pleased to appear before your subcommittee today to discuss
export enforcement. I will summarize and ask that my entire writ-
ten statement be submitted for the record.
Chairman PICKLE. Without objection, it is so ordered.
Mr. DEL]:BERTI. As you have requested, I will now discuss the
Global Helicopter case. Let me begin by saying that there are limi-
tations on the testimony I can give. Consequently, I will be able to
discuss only our initial investigation and Commerce's action on re-
voking a general license. I understand from your staff that this is
acceptable to the subcommittee.
On July 24, 1990, we learned that, in early 1988, Global Helicop-
ter Technology, Inc., of Hurst, Texas, was contacted by Cardoen In-
dustries of Santiago, Chile. According to the information, Cardoen
had modified a Bell Long Ranger Helicopter, changing the two-
person crew station to a single-crew station. Cardoen returned the
helicopter to the United States, telling Global that it wanted to
market it in the United States, and that Global should obtain the
necessary FAA certification. We also learned that the helicopter
might be a prototype for the manufacture of attack helicopters by
Cardoen fo:r resale to Iraq.
We immediately checked our licensing data base, which revealed
no export identification number for Global, but listed Cardoen. We
determined, that Cardoen was a large company in Chile that manu-
factured a variety of goods, ranging from agricultural products to
armaments.
According to our information, Cardoen was the largest arms
manufacturer in Chile, and the majority of its armament sales
were to Iraq. Our special agents immediately contacted the FAA in
Fort Worth, Texas, in order to obtain the serial number of the heli-
copter.
The FAA gave us the serial number and referred us to an article
in the London Sunday Times about a Cardoen modified helicopter.
The British journalist asserted that the Cardoen helicopter was
being marketed as an attack aircraft, and that Iraq had placed an
order with Cardoen for 50 of them.
PAGENO="0219"
215
We also obtained a copy of a Cardoen brochure used to market
the modified aircraft as an attack helicopter. In this brochure, Car-
doen claimed the single-crew station was designed to minimize the
exposure of the front part of the helicopter to enemy gunfire.
Immediately thereafter, we contacted Bell Helicopter to trace the
registered ownership of the aircraft. Using the serial number ob-
tained from the FAA, we found that Swissco Management Group,
of Miami Lakes, Fla., owned the helicopter. Bell officials also indi-
cated that Bell had undertaken a feasibility study in 1986 for Car-
doen regarding the modification of the Long Ranger as an attack
helicopter. Bell withdrew from the proposed project with Cardoen,
because of concerns that Iraq was one of the proposed end-users for
the helicopter. On the same date, we determined that Swissco
owned 51 percent of Global.
On July 30, 1990, we received a response to our request for a li-
censing determination from the Bureau of Export Administration's
Office of Technology and Policy Analysis. This determination indi-
cated that, under Commerce dual-use controls, the Long Ranger
helicopters could be exported to Chile or Iraq under a general li-
cense. This meant no application and no individual validated li-
cense was required. The licensing determination further stated
that the aircraft may be subject to licensing by the Department of
State as a munitions item, if it had been modified as an attack heli-
copter.
On August 2, 1990, the President issued an Executive order im-
posing an embargo on Iraq. On August 6, 1990, we interviewed
Clem Bailey, president of Global. Bailey disclaimed any knowledge
that the helicopter was a prototype for an attack helicopter. Bailey
claimed that the helicopter was to be used in the United States for
agricultural spraying.
Also, on August 6, 1990, we subpoenaed the documents from
Global. Among the documents obtained under that subpoena was a
contract between Global and Cardoen, in which Global agreed to
obtain FAA certification for the modified helicopter. That same
day, based on information obtained during the investigation, we de-
tained the helicopter, pending a license determination by the De-
partment of State.
Later in August, following a request from Commerce Enforce-
ment, BXA's Office of Export Licensing sent letters to Global and
Swissco, revoking their authority to export this helicopter to Car-
doen under a general license. In addition, the letter advised them
that a license may be required from the Department of State, if it
is determined that the modified helicopter falls under State's juris-
diction.
In conclusion, Mr. Chairman, the export enforcement system is
working. This case demonstrates that the Bureau of Export Admin-
istration's Office of Export Enforcement works hand-in-hand with
its licensing counterparts. It also shows the effectiveness of our ef-
forts to prevent illegal exports.
Moreover, Commerce is working closely with other agencies to
insure that we bring the full complement of available resources
toward the effective enforcement of export controls. We think that
the Global Helicopter case illustrates that Commerce is fulfilling
its mandate to enforce the Export Administration Act.
PAGENO="0220"
216
Mr. Chairman, I am prepared to respond to any questions that
you may have.
[The prepared statement follows:]
PAGENO="0221"
217
Statement of Frank W. Deliberti
Director, Office of Export Enforcement
Bureau of Export Administration
U.S. Department of Commerce
Before the Subcommittee on Oversight
House Committee on Ways and Means
April 18, 1991
I am pleased to appear before the House Ways and Means Subcommittee on Oversight
to discuss export enforcement.
I am Frank Deliberti, Director of the Office of Export Enforcement (OEE) in the
Department of Commerce. Prior to coming to the Commerce Department I served six
years with the U.S. Customs Service. Since 1976 I have been an employee of
Commerce's export enforcement program. During this time I have served as a special
agent, a team leader, the Special Agent in Charge of the San Jose Field Office, and was
recently selected as the Director of OEE.
The Bureau of Export Administration (BXA) is the regulatory agency within the Federal
Government that is responsible for licensing the export of `dual use" commodities for
national security, foreign policy and short supply reasons. Within BXA, Export
Enforcement has two major responsibilities. The first is the prevention of illegal exports.
This includes (a) reviewing pending licenses and recommending their denial or return
without action if there is an enforcement concern; (b) requiring, where necessary, that
pre-license checks be conducted to ensure that the end users are bona fide and
appropriate; (c) directing that post-shipment verifications be conducted to ensure that the
commodities were received by the designated end user; and (d) outreach to the business
community to inform them about the Export Administration Act (EAA) and the Export
Administration Regulations (EAR) and to enlist their support for compliance with U.S.
export laws.
The second responsibility is the investigation of possible violations of the EAA and EAR
and assisting in the prosecution of those cases where violations have occurred.
Commerce Export Enforcement accomplishes this latter responsibility through both
criminal and administrative processes. I might add that, in addition to criminal
prosecutions, one of the most powerful tools we have is the ability to deny export
privileges, both as a sanction for EAA and EAR violations and, for limited periods, as
a preventative measure. This authority, which stems from our statutory mandate to
license dual use exports, has been especially useful in cases where the violator is a
foreign national who is unlikely to submit to U.S. jurisdiction for purposes of criminal
prosecution.
As you have requested, I will now discuss the Global Helicopter case.
THE ENFORCEMENT - LICENSING CONNECTION
ThE GLOBAL HELICOPTER CASE
Mr. Chairman, let me start my discussion of this case by saying there are limitations on
the testimony I can give concerning this case. I will be able to discuss only our initial
investigation and Commerce's action on revoking a general license. I understand from
your staff that this is acceptable to the Subcommittee.
PAGENO="0222"
218
-2-
On July 24, 1990, we received
information indicating that, in early
1988, Global Helicopter Technology
Inc., of Hurst, Texas, was contacted
by Cardoen Industries (Cardoen) of
Santiago, Chile. According to the
information, Cardoen had modified
a Bell 206L-III Long Ranger
Helicopter, changing the two-person
crew station to a single-crew station.
Cardoen returned the modified helicopter to the U.S., telling that Global that it wanted
to market the modified helicopter in the United States, and asking Global to obtain the
necessary FAA certification. We also learned that the helicopter might be a prototype
for the manufacture of attack helicopters by Cardoen for resale to Iraq.
~HRONOLOGY OF THE INVESTIGATION:
As soon as we received the information, we checked BXA's Export Control Automated
Support System (ECASS). That check revealed no exporter identification number for
Global. Cardoen was listed as a consignee in ECASS. A check of our files indicated
that Cardoen was a large company in Chile that manufactured a variety of goods ranging
from agricultural products to armaments. According to our information, Cardoen was
the largest arms manufacturer in Chile, and the majority of its armaments sales were to
Iraq. Our special agents immediately contacted the FAA in Fort Worth, Texas, in order
to obtain the serial number of the helicopter.
In responding to our inquiry, the FAA gave us the serial number and also advised us that
on June 1, 1990, a reporter for the London Sunday Times 1 had contacted the FAA to
inquire about the FAA's role in the matter of the Cardoen-modified helicopter. The
journalist asserted that the Cardoen helicopter was being marketed as an attack helicopter
and that Iraq had placed an order with Cardoen for 50 of the aircraft. Additionally, the
FAA advised us that, on July 20, 1990, NBC News had contacted them to inquire about
the matter and subsequently faxed a copy of a brochure from Cardoen used to market the
modified aircraft as an attack helicopter. In this brochure, Cardoen indicated that the
single-crew station was designed to reduce the silhouette of the aircraft to minimize the
exposure of the front part to enemy gunfire.
Immediately thereafter, we contacted Bell Helicopter to trace registered ownership of the
helicopter through the serial number obtained from the FAA. It was determined that the
owner of the helicopter was Swissco Management Group (SMG) of Miami Lakes,
Florida. Bell Helicopter officials also indicated that Bell had undertaken a feasibility
study in 1986 for Cardoen regarding the modification of the 206L-ffl Long Ranger as an
attack helicopter. Bell withdrew from the proposed project with Cardoen because of
concerns that Iraq was one of the proposed end users for the helicopters. On the same
day, we were able to determine that SMG owned 51% of Global Helicopter Technology,
Inc.
On July 30, 1990, we received a response to our request for a licensing determination
from BXA's Office of Technology and Policy Analysis. The determination stated that
that, under Commerce Department controls, Bell Long Ranger helicopters could be
exported to Chile or Iraq under a `general license," meaning that no application and no
individual validated license was required. The licensing determination further stated that
that type of aircraft may be subject to licensing by the Department of State if it had been
modified as an attack helicopter.
The text of an article that appeared in the London Sunday Times related to the helicopter is attached to this
statement as an appendix.
PAGENO="0223"
219
On August 6, 1990, we interviewed Clem Bailey, President of Global. Bailey disclaimed
any knowledge that the helicopter was a prototype for an attack helicopter. Bailey
claimed that the helicopter was to be used in the United States for agricultural spraying.
DETENTION OF THE HELICOPTER
AND REVOCATION OF THE GENERAL DESTINATION LICENSE
Also on August 6, 1990, we subpoenaed documents from Global. Among the documents
obtained under that subpoena was a contract between Global and Cardoen in which Global
agreed to obtain FAA certification for the
modified helicopter.
With the imposition of the embargo on Iraq
by Presidential Executive Order of August
2, 1990, and based on information obtained
during the investigation, Commerce agents,
on August 6, 1990, detained the helicopter
at Global pending a licensing determination
by the Department of State.
Later in August, following a request from
OEE, BXA's Office of Export Licensing
revoked the authority of Global and SMG to
export this helicopter to Cardoen under a
"general license." In addition, the letter
advised them that a license may be required
from the Department of State if it is
determined that the modified helicopter falls
under State's jurisdiction.
CONCLUSION:
The export enforcement system is working. This case demonstrates that BXA's Office
of Export Enforcement works hand-in-hand with its licensing counterparts. It also shows
the effectiveness of our efforts to prevent illegal exports.
Moreover, Commerce is working closely with other agencies to ensure that we bring the
full complement of available resources to the effective enforcement of export controls.
We think that the Global Helicopter case illustrates that Commerce is fulfilling its
mandate to enforce the Export Administration Act.
Mr. Chairman, I am prepared to respond to any questions you may have.
PAGENO="0224"
220
PAGE 41
1ST STORY of Level I orinted in FULL format.
Copyright (c) 1990 Times Newspapars Limited
The Sunday Times
June 3, 1990, Sunday
SECTION: Home news
LENGTH: 695 words
LTIADLINE: Chile judges say British journalist was murdered
BYLINE: Lv Riohard Casehy
SODY:
JUDGES investigating the mysterious death of a British defence journalist
found hanged in his hotel room in Chile are convinced that he was murdered.
Tests will be carried out on the sedatives found in the body of Jonathan
:`lovle, the editor of Defence Helicopter World, to determine whether he was
drugged by his killers before being suspended with one of his shirts in a
wardrobe.
Staff at the Hotel Carrera in Santiago will be interviewed by the elite
investigation unit S0-7. The unit was called in after a preliminary police
inquiry, which concluded that Moyle had committed suicide, was discredited.
A senior official in the Chilean justice department said yesterday: ` It is
impossible to commit suicide in much a small closet. The tests next week are
crucial.''
The Chiieanm have also dismissed claims circulated by British embassy and
Chilean officials in Santiago that Moyle amphyxiated himself while trying to
obtain sexual pleasure.
Movie, 28, was found naked and hanging by the neck from a clothes rail in a
cramped wardrobe Bin shorter than his body. The door was shut from the outside.
His head was covered by a pillow case, his hips were bound with plastic and
padding and his legs showed signs of having been bound. There was blood at the
foot of the bed and two files and a briefcase were missing.
The death has left his parents, Tony and Diana Moyle, convinced that he was
murdered to suppress a scoop. The smear campaign has intensified their sense of
loss. ` `This calculated attempt to soil my son's name is hateful. I want the
name of the man who started this,'' Tony Moyle said.
He had spnken to his son by telephone less than half an hour before his
estimated time of death. ` `We have always said Jonathan was murdered. He was
fearless to the point of recklessness, but suicide was not in his character.''
Moyle, a former RAF helicopter pilot, arrived in Santiago on March 24, a week
before.hi6 death, to cover an international aerospace fair. He~was-investigating
reports that Cardoen, Chile's largest arms manufacturer, had agreed to supply 50
attack helicopters to Iraq. The helicopter, a conversion of the Bell 2060-111,
is undergoing certification tests in Texas, and is expected to be armed with
Chinese missiles. Cardoen denies that the design is for military use.
PAGENO="0225"
221
PAGE 42
Ic) 1990 Tises Newspapers Limited June 3, 1990
However, Western intelligence sources are increasingly worried about reports
of a more threatening trade. Cardoen, which supplied Iraq with thousands of
cluster bombs, is suspected of trans-shipping sophisticated oscilloscopes from
Europe to Iraq for testing nuclear detonators. Cardoen denies it has any part in
such shipments.
What `lovie discovered say never he known. He is said to have interviewed
Canoe Cardoen, 47, head it the arms company, and on the night before his death
met Raol `lontesin':', the Cardoen press officer, in the hotel bar. Both Cardoen
men deny the meetings took place.
Tn le.'se yb'' knew his, lyle was a brill tant and i'nini''na ted defsncs
specialist . He turned down a place at Oyf':'rd to read interns ti''nal politics and
strategic studies at Abervetwvth Iniversity on an RAE bursary. While still a
student he was recruited by Special Branch and is reported to have helped break
a university drugs ring.
Last week the Ministry of Defence denied that Moyle was an intelligence
agent. A spokesman said: ``He left the RAE and became a private citizen. That is
the end of it
A Foreign Office spokesman refused to comment on the smear against Moyle.
Movle gained a first-class degree and wrote an 9IA thesis on Air Attack on
Britain, which is now a classified document. His tutor, Professor John Garnett,
said: ``He was an escellent scholar and delivered the goods. He was confident to
the point of being slightly brash. Any notion that he `:ommitted suicide is
ludicrous.
Moyle graduated from the RAE Cranwell and trained on Jet Provosts and Gazelle
helicopters. However, he left in 1988 to become a journalist.
Moyle had planned to marry Dr Annette Kissenheck, a German paediatrician, on
June 16, and they had booked a castle near Bonn for a wedding ball. She said:
``Jonathan was at the happiest point in his life. We both were.
TERMS:
Jonathan MovIe
51-840 0 - 92 - 8
PAGENO="0226"
222
Mr. ANTHONY [presiding]. Thank you, Mr. Deliberti.
I think part of the problem the committee would like to look at
is the fact that you have dual use. I have some questions kind of
leading into some final conclusions, so if you would bear with me
on the preliminaries.
Was there anything illegal about Carlos Cardoen purchasing the
used Bell helicopter in 1988?
Mr. DELIBERTI. That particular question really relates to the li-
censing of the helicopter rather than an enforcement issue.
Mr. ANTHONY. Well, it was licensed.
They got a license for export. Is there a presumption, then, that
it was a legal transaction?
Mr. DELIBERTI. Right, at the time when the helicopter was known
to be a civilian helicopter, a general license of G-Dest would have
been appropriate for that helicopter.
Mr. ANTHONY. And that is what he got, did he not?
Mr. DEL:[BERTI. That was before the attempted modification.
Mr. ANTHONY. The question was in 1988.
Mr. DELIBERTI. In 1988, the general license-
Mr. ANTHONY. I clearly do not see anything difficult about the
question. I think all you have to do is say no, it was not illegal. We
can stand here for an hour and hammer it all out, but I think I
know the answer to the question I just asked.
Mr. DELItBERTI. You are correct, sir, a general license applied.
Mr. ANTHONY. Unless you can tell me that it was illegal. If you
are going to tell me it was illegal, then you have just shot holes in
the licensing procedure and you have just shot a hole in your
whole testimony.
Mr. DELItBERTI. In 1988, it was not illegal.
Mr. ANTHONY. Thank you. Would it be illegal for him to do that
today, under the same set of circumstances, general use for avia-
tion, a used helicopter, getting a general license? Has anything
changed since 1988 that would make that illegal today?
Mr. PATAK. Obviously, with the embargo on Iraq, if the helicop-
ter was in the same commercial configuration as it was in 1988-
Mr. ANTHONY. Going to Chile.
Mr. PATAK [continuing]. It could go to Chile under a general li-
cense. That is my understanding.
Mr. ANTHONY. Just a good, straightforward, simple question. The
answer is it would not be illegal?
Mr. PATAK. That is correct, sir.
Mr. ANTHONY. I am not trying to throw any trick questions at
you here. They come later.
Mr. DEL1EBERTI. You are absolutely right. A lot of this depends on
whether the end-use/end-user are appropriate, and we have to con-
sider that, that is why I say it is partly a licensing determination
issue.
Mr. ANTHONY. So, it was not illegal to purchase it, it was not ille-
gal to export it to Chile, as long as under general license for export
it was used for civilian purpose?
Mr. DELIEBERTI. Exactly.
Mr. ANTHONY. And that would not be illegal to do that today,
either, would it?
PAGENO="0227"
223
Mr. DELIBERTI. Again, it depends on the end-use and end-user.
Today, I think there is enough public information about Mr. Car-
doen that we may not have a question now as to whether or not he
can receive these helicopters.
Mr. ANTHONY. All right. Question 3, was there anything illegal
about Global Helicopter contracting with Carlos Cardoen to assist
in the FAA certification of the modified Bell helicopter?
Mr. PATAK. No, sir, there was not.
Mr. ANTHONY. All right. Setting aside for the moment the issue
of the value of the helicopter when it was reimported to Fort
Worth, was there anything illegal about that reimportation?
Mr. PATAK. I am sorry, sir, that is a pending matter and I cannot
comment on that importation.
Mr. ANTHONY. And what is the reason that you cannot comment
on the reimportation?
Mr. PATAK. That is a pending matter before Customs issue, sir.
Mr. ANTHONY. If it is determined that the modified helicopter is
still a civil aircraft, would it be illegal for Cardoen to reexport it to
Chile?
Mr. DELIBERTI. Again, it goes back to the end-use and end-user,
and it would depend on that.
Mr. ANTHONY. And I assume that what made you think that the
modified helicopter in this case was not for civil use was the fact
that the company that was going to do the modification was asked
to actually put gun turrets on it and also to put some steel up un-
derneath where the pilot was going to be, and that-here is a little
photograph of it.
You know, down home, we have some boll weevils in cotton,
maybe he was going to go down there and shoot those little weevils
out of the cotton, since it was for agricultural spraying, spraying
with bullets, rather than herbicides. Is that what made you change
your mind? It was really the company itself that notified you, and
then your investigation after that?
Mr. DELIBERTI. Right.
Mr. ANTHONY. If the modified helicopter is a military aircraft,
then it would require State Department license, am I correct in
that?
Mr. DELIBERTI. If it were determined to be a munitions item, that
is correct. We are waiting for the State Department to make that
determination as to whether or not they control the export of that
helicopter.
Mr. ANTHONY. You just jumped to my next question, and that
was whether or not they had made a determination. You are
saying you are waiting on them to make a determination?
Mr. DELIBERTI. That is correct. They are still looking into it.
Mr. ANTHONY. How long have they been looking at it?
Mr. PATAK. As far as we know, the U.S. Customs Service has not
received a determination from the Department of State. We de-
tained the helicopter on August 6, pending their determination,
and I am not sure what the timeframe is now. I do not know if Cus-
toms has received that determination.
Mr. ANTHONY. Well, this is the middle of April. You seized it in
the first part of August-
Mr. PATAK. We actually detained it-
PAGENO="0228"
224
Mr. ANTHONY. Sir?
Mr. PATAK. We actually detained the helicopter, not seized it.
Mr. ANTHONY. You did what?
Mr. PATAK. We detained it. In other words, we prevented it from
going anywhere.
Mr. ANTHONY. If it had been mine, I would have said you seized
it. You still have hold of it, right? Well, you have got it stored some
place in protective custody?
Mr. PATAK. At that time, yes, sir.
Mr. ANTHONY. Well, we can quibble over words.
The bottom line of what I am trying to get to is that the State
Department still has not rendered a determination as of this date,
and I am trying to find out why. Have you asked them? Have you
prodded them? Do you think we are going to know tomorrow? Are
we going to know next August?
Mr. PATAK. In August we requested a determination. We have
conferred with the U.S. Customs Service, who now has the helicop-
ter, and to our knowledge they have not received a determination
yet. I do not know why.
Mr. ANTHONY. Well, we will ask them and maybe we can find
out from them.
If you have the authority to answer this question: If Cardoen
were successful in developing the Cardoen 206L-3 Light Attack
Helicopter, in your opinion, who do you think would be interested
in purchasing them?
Mr. PATAK. Based on the information that we obtained in the in-
vestigation, I think he would like to have marketed the helicopter
obviously to Iraq, and perhaps to other countries-Jordan, Egypt,
Ecuador, and Brazil in South America.
Mr. ANTHONY. But still he would have to wait on the State De-
partment to give him that specific license to be able to do that?
Mr. DELIBERTI. If the State Department controls it.
Mr. ANTHONY. The State Department controls it, after we now
determine that there is something suspicious, then the dual-use
now has gone from civilian to military. What if this were a legiti-
mate business case, where they were going to sell to our friends
and our allies to protect their countries? What takes so long for the
State Department to make a determination on dual use?
Mr. DELIBERTI. I do not know.
Mr. ANTHONY. You do not know. We will have to ask the State
Department that.
I understand that your inquiries into the ownership of this heli-
copter generated another investigation involving other Cardoen
companies in Miami. Is that assumption correct?
Mr. DELIBERTI. I cannot comment on that.
Mr. ANTHONY. You cannot comment on whether or not that was
a correct assumption?
Mr. DELIBERTI. I cannot at this time.
Mr. ANTHONY. You cannot even state as to whether or not there
is an investigation going on?
Mr. DELIBERTI. I cannot.
Mr. ANTHONY. Can you not comment because the Department of
Justice has told you not to discuss this case with the subcommittee,
PAGENO="0229"
225
either publicly or privately, or is it because of your own personal
policy, internal policy?
Mr. DELIBERTI. No, it is-
Mr. ANTHONY. Let me strike the words "Department of Justice."
Has any other agency instructed you not to discuss it?
Mr. DELIBERTI. That would be correct.
Mr. ANTHONY. I am going to yield to Mr. Shaw.
Mr. DELIBERTI. Excuse me, Mr. Anthony, one moment, please.
Mr. ANTHONY. Do you have an elaboration, or a final comment?
Mr. DELIBERTI. Just one moment, please.
[Pause.]
Mr. ANTHONY. In game shows, they give you a time limit. Do you
need additional time for consultation, or do you have a statement
that you would like to correct or modify for the record?
Mr. DELIBERTI. No, Mr. Anthony, we are just trying to satisfy you
as best we can, and we are probably better off doing it at a later
time.
Mr. ANTHONY. Well, you will satisfy me a lot better by giving me
a much fuller disclosure in openness of my question. If we can do
that at a later time, that is how you will satisfy me.
Mr. DELIBERTI. Fine.
Mr. ANTHONY. The only reason I am getting into this line of
questioning is the difficulty that you have with dual-use, and when
you do have some modifications and there are other agencies that
get involved in it. Your testimony was fairly braggadocios about
how good the system works, but the next panel is going to be able
to be as braggadocios because some of the equipment in that case is
actually missing and it looks like it got to the end-user for military
purposes.
So, there are no trick questions here, I am just trying to get a
feel for what is going on and how easy it is or how difficult it is to
take a civilian piece of equipment and convert it, and bypass any of
the safeguards that we have. So, if you find anything in the record
that you need to modify or correct, feel free to do it by additional
written comment.
[The following was subsequently received:]
PAGENO="0230"
226
EXECUTIVE OFFICE OF ThE PRESIDENT
OFFiCE OF MANAGEMENT AND BUDGET
WASHINGTON. D.C. 20503
June 26, 1991
Ms. Beth Vance
Staff Director
Subcommittee on Oversight
Ways and Heans Committee
1135 LHOB
Washington, D. C. 20515
Dear Ms. Vance:
In response to your communication with Janet Hale, I am
pleased to enclose an 0MB staff response to Congressman Anthony's
questions on Global Helicopters.
As noted in the response, please do not hesitate to contact
Legislative Affairs or Ms. Hale's office directly, if you need
information in the future.
~
David F. Taylor
Special Assistant to the Director
Enclosure
QUESTIONS FROM THE WAYS AND MEANS COMMITTEE
SUBCOMMITTEE ON OVERSIGHT
MS. BETH VANCE, STAFF DIRECTOR
EXPORT CONTROLS
Question #1: What is the status of the Global helicopter case,
and why has the government not been able to make a definitive
decision on the matter?
Response: The Global helicopter is currently secured by Customs
in Dallas, Texas, after being seized on March 27, 1991, as part
of an investigation into import/export violations. The case is
under a sealed affidavit. As explained by Customs in testimony
before the House Ways and Means Committee, details of ongoing
investigations cannot be discussed. (Customs gave the Committee
a letter from the Justice Department outlining this requirement.)
Prior to the seizure of the helicopter by Customs, the Commerce
Department had notified Global that the helicopter should not be
moved until a licensing decision had been made. Since the
helicopte:was potentially a munitions item, the review is being
performed by the State Department. It is likely that the
helicopter will be considered a munitions controlled item and
therefore will require a State Department license for export.
We regret that we are unable to supply you with additional
information at this time. If you are interested, we would
willingly supply you with ~n~crit~t~.cn ~ ~.t cQ~n~ ~
PAGENO="0231"
227
Mr. DELIBERTI. Thank you.
Mr. ANTHONY. Mr. Shaw.
Mr. SHAW. Let me review where we are for the moment here. As
I understand it, in 1988, Cardoen began a project to develop a low-
cost attack project for a lucrative Third World arms market. He
contacted Bell to design an armed version of the Long Ranger com-
mercial helicopter. Now, I understand Bell did this, and this is the
design study which was developed either in-well, it said in 1988,
however, there are some dates in this design study which would in-
dicate that this study was in existence as early as May of 1977.
Is this design itself a violation of any laws, if its technology is
then given outside of this country or to people from outside of this
country? In other words, has Bell violated any laws by having
made this design study available?
This is the design study for the modification of a commercial to a
military-type of vehicle, and I think that Mr. Anthony has re-
viewed some of the design and some of the pictures with the gun
placements and everything else, to indicate that this is no longer a
commercial type or civilian type of helicopter.
Mr. DELIBERTI. Actually, I think we have a licensing question
here, as to whether or not there are controls and what the controls
are. We have submitted the study to our licensing people and re-
quested a licensing determination. We should have the results
shortly and will provide that information to you.
Mr. SHAW. Let me then ask another question that I would like,
and I assume you are going to supply that for the record, the
answer to that question. I understand that Bell did ask the State
Department to license it to Spain and Panama. Another question,
was a request ever made to license it to Chile?
Mr. DELIBERTI. Regarding the Commerce Department or the
State Department?
Mr. SHAW. This would be the licensing agency, which would be
the State Department.
Mr. DELIBERTI. Mr. Shaw, we are not in a position to answer for
State.
Mr. SHAW. Now, when Bell declined to sell Cardoen any of the
choppers directly, he had Swissco purchase one on the used market
and ship it legally to Chile in 1988 for modifications. In March
1988, Cardoen contacted with Global to obtain a desirable FAA
safety certification. Global later assured the State Department that
the modified helicopter was only for civil commercial use. In 1990,
Swissco shipped the chopper back to Global to begin this certifica-
tion.
Now, the modifications that have been talked about, narrowing
the cockpit down to one man, putting all the armaments on it, put-
ting all of the gun attachments on it, these have all been made and
then it came back. In June of 1990, a British reporter was mur-
dered, after reporting Cardoen's plans to sell 50 of the attack heli-
copters to Iraq. When the press contacted the FAA about its in-
volvement with Cardoen's project, they immediately informed Com-
merce. Commerce determined that the helicopter could be legally
exported to Chile or Iraq, without any Commerce validated license,
but might be controlled by the State Department as a defense item,
and they were informed, but to this date no final determination
PAGENO="0232"
228
has been made. I believe that pretty much coincides with the testi-
mony that you gave.
Now how did the fact that this helicopter might very well be ille-
gal, how did this come to the attention of FAA? Was it not NBC
News?
Mr. DELIBERTI. Yes, through NBC News and the Sunday London
Times.
Mr. SHAW. Have any of you seen this brochure put out by Car-
doen on this particular helicopter? I can tell you where I got it. I
got it from our staff that got it from NBC who got it at the Bagh-
dad air show. This sets forth all of the information, and clearly,
"Attack Helicopter" written on the front.
I would also ask you about a publication called Flight Interna-
tional dated 13 February 1988 in which it refers to the helicopter
built in Chile with components coming from Bell's Canada factory
and Cardoen's new factory in Spain. It goes on to say that the heli-
copter is a new venture for Cardoen Industries, which is better
known for its Chilean-developed cluster bombs. The aircraft is
based on the Bell Jet Ranger and is aimed at Third World coun-
tries unable to afford sophisticated attack helicopters.
All this information was out there. All of the news reports. And
it is, quite frankly, somewhat embarrassing to get some of this in-
formation and start accumulating some of this information from
news media. I am really totally confused at this point of the ques-
tion as to why the FAA had to be tipped off on this thing when it
was supposed to be going through a certification process. Do you
have any knowledge of any of that as to why in the world all of the
red flags did not go up immediately when this thing came in, this
armed aircraft came in?
Mr. DELIBERTI. No, I do not believe we have an answer for that. I
mean, I can tell you why the FAA came to us, but I do not have an
answer as to why they went to the FAA.
Mr. SHAW. Why don't you tell me why they came to you?
Mr. DELIBERTr. One part of the export enforcement mission here
at Commerce is the outreach program, which is our campaign to
educate not only the business community but also the Government
community as to what to look for in everyday transactions regard-
ing exports. The FAA had known about export enforcement and
when they saw something that appeared to be suspicious in nature,
such as this helicopter, they sent that information to our intelli-
gence division based in Washington, D.C. From there it was sent to
the Dallas field office for investigation.
Mr. SHAW. When did you first learn of Cardoen's involvement
with these companies that we have been discussing today? That is
the Global Helicopter case, involving Swissco in Miami?
Mr. PATAK. Basically, sir, in July of 1990 we first received the
information. Because the FAA was completing the certification
process and we were all under time constraints we were obviously
in a quandary. Then, with the imposition of the embargo on
August 2, we learned within that week-and-a-half period of time of
the involvement of Swissco and Global and their relationship.
Mr. SHAW. Mr. Anthony.
Mr. ANTHONY. Let me see if I used the proper word. You used
the word detain. Is that the proper terminology?
PAGENO="0233"
229
Mr. DELIBERTI. That is correct.
Mr. ANTHONY. The prototype is being detained by you.
Mr. DELIBERTI. It was detained by Commerce.
Mr. ANTHONY. By Commerce. Under what legal authority are
you detaining it? It is a civilian airplane that has been reimported
back into the United States for modification. There has been no de-
termination by the Department of State as to whether or not it
contains munitions. So therefore, at the moment, it is legally a ci-
vilian airplane, I believe. You do not have the authority to make
that determination on your own. The law allows State to make
that determination. State has not made that determination. So
what gives you the legal authority to hold that plane? Will you not
give the plane back? It is a prototype.
Mr. DELIBERTI. First, the helicopter is no longer under our con-
trol, but under the general authority of the act and the regulations,
we have the authority to detain, pending licensing review to deter-
mine if a license is required.
Mr. ANTHONY. All dual-use property?
Mr. DELIBERTI. Exactly.
Mr. ANTHONY. If you have a suspicion that it can be configured
for another use that would be illegal.
Mr. DELIBERTI. Right. And the purpose for the detention-to de-
termine if it required a license.
Mr. ANTHONY. How often do you do that?
Mr. DELIBERTI. As often as is required. We detain for purposes at
times to determine whether or not a license is required for the
export of anything going to any destination.
Mr. ANTHONY. How many times have you done it this year?
Mr. DELIBERTI. I would have to get back to you with an exact
number.
Mr. ANTHONY. Would you do that? And also, how many times
you have done it over the last couple of years?
Mr. DELIBERTI. Detentions? Again, I would have to get back to
you with that information.
[The following was subsequently received:]
PAGENO="0234"
230
Mr. ANTHONY. I want to tell you what bothers me. You said that
the law was very clear. It appears to me that there are a lot of am-
biguities sitting out there on dual use property. We keep asking
you a question, you keep saying, I have got to get back with you.
You keep saying, that is in the State Department.
It appears to me that maybe we are at least probing enough, and
as Mr. Shaw very clearly demonstrated, that this information was
out in the public arena all the way from Baghdad to a weekly or a
monthly aviation publication. Yet since the presidential declara-
tion of the embargo and this seizure of the prototype, State has
still failed to make a determination.
I guess I am scratching my head, and I may sound like I am
more of an attorney representing the defendant in this case than I
am a member of this subcommittee, but I must tell you, I was a
prosecutor for 10 years. It makes me wonder exactly under what
clear-cut authority you are doing some of the things that you are
saying that you are doing when State has not come forward with
any clear licensing answer. I guess maybe we will have to get them
in here and ask those direct questions to them.
Mr. SHAW. Would you yield on that line of questioning?
Mr. ANTHONY. Be happy to yield.
Mr. SHAW. What investigative powers does Commerce have? The
reason is, I am somewhat concerned here that with regard to
Swissco, they interviewed Swissco's freight forwarder in Hialeah
and then they turned the case over, I understand, to Customs. At
Detentions vs. Seizures
Commerce Export Enforcement
[On a Fiscal Year Basis]
Detentions Seizures
PAGENO="0235"
231
what point does your authority cease and you have to turn it over
to another agency?
It does sound then-I think that Beryl Anthony is making a very
good point-like we have got too many cooks in this whole thing
and it just does not make a whole lot of sense at this point. It does
not seem to be well organized-we are having trouble finding the
lead agency.
[The Department of Commerce supplied the following:]
Mr. Shaw, in cases where the violation appears to be solely against the Arms
Export Control Act, that is clearly in the jurisdiction of the Department of State,
and the U.S. Customs Service enforces that act. In cases where there is a violation
of the Export Administration Act, Commerce has the licensing authority, the exper-
tise, and the criminal and administrative enforcement authority and powers to in-
vestigate and prosecute allegations of violations. In some cases we work EAA cases
jointly with the Customs Service. That agency has the authority to investigate EAA
violations for criminal prosecution only.
Mr. DELIBERTI. In enforcing the EAA, Commerce agents have the
authority to execute warrants, to make seizures by warrant, to
make arrests, to conduct criminal investigations, and to conduct
administrative investigations. And during the time since the
Export Administration Act expired, on September 30 of last year,
there was a question about our enforcement authorities. Because of
that we went to the Department of Justice to get deputization as
U.S. marshals to retain these law enforcement authorities.
Mr. SHAW. You mean you have got the policing responsibility
without the policemen. Is that basically what you are saying?
Mr. DELIBERTI. Yes, that is what happened for the period of time
between the expiration of the Export Administration Act on Sep-
tember 30, 1990, and our deputization as U.S. marshals beginning
in late January 1991.
Mr. SHAW. So that is why you turned the investigation over to
another agency?
Mr. DELIBERTI. I cannot comment on the case that you men-
tioned, but we have the authority to conduct investigations of EAA
violations on our own or jointly with customs.
Mr. PATAK. Sir, if I might be able to clarify something. As far as
the detention, we felt at that time it was a very prudent move to
do that. As soon as the detention was made we notified the U.S.
Customs Service and we conducted a joint investigation which re-
sulted in the seizure of the helicopter by the U.S. Customs Service
in March of this year.
Mr. SHAW. It sounds like you are in a little bit of a frustrating
position waiting for other people to make determinations over
things that you are responsible for and left holding onto the bag. I
think this is a whole area that we ought to look at and try to place
responsibility in some logical chain or responsibility without flip-
ping back and forth from one agency to another.
It has got to be a tough working situation for you, and it has got
to be frustrating. It has got to be very slow and most inefficient
and most costly. At least that is the way it looks to us. Perhaps you
could give use some guidance as to how we might be able to im-
prove the situation so that we can more effectively enforce the law.
[The Department of Commerce supplied the following:]
PAGENO="0236"
232
To those who are unfamiliar with the export laws and regulations the jurisdic-
tions may seem blurred at times. The Export Administration regulations (EAR)
have been likened to the IRS regulations and the Tax Code. It takes a long time to
thoroughly undertand them and that is why it is important to note that the enforce-
ment of this Act is all we do. Our special agents are experts in their field and fre-
quently are called upon to testify as such in trials and before grand juries. We need
the support of your committee and the Congress to keep in business. We are a small
corps of highly trained people, dedicated to a mission we view as essential. Without
the continued support of the administration and the Congress this important exper-
tise and asset could be lost.
Mr. DELIBERTI. There is no doubt that we have an excellent
export control program right in Commerce. The marriage of licens-
ing and enforcement works. OEE has the responsibility for screen-
ing licenses to ensure that Commerce denies or returns license ap-
plications which pose a diversion risk. We also work with the busi-
ness community and are able to get a tremendous amount of infor-
mation from them based on our efforts to raise their level of aware-
ness as to suspected illegal transactions. We also get information
from the intelligence community. As I mentioned we also have a
license application screen available that no one else has and are
able to screen licenses to determine whether or not there are bona
fide end users involved in these transactions.
Just one statistic that comes to mind-in fiscal year 1990 we
were able to recommend the rejection or return of applications for
exports for almost 1.5 billion dollars' worth of goods that were
going to unsuitable consignees. So we do have a very effective
export control program: an across-the-board program involving
criminal investigations, administrative investigations, and preven-
tive enforcement measures which include intelligence gathering,
law enforcement cooperation on the domestic, and more important-
ly now, on the international front, and the outreach program
which is our campaign to educate the business community.
Mr. SHAW. That is not quite responsive to what I had said be-
cause I asked if there was anything we could do to improve it so
that whoever has the responsibility also has the tools at hand to
make decisions and to go forward.
One of the earlier witnesses we had here today made an observa-
tion which certainly caught my attention. He said that he felt-I
think it was Mr. Bryen-that he felt that for the agency that had
the responsibility of promoting trade, to give it the responsibility
for restraining trade he felt was somewhat of a paradox. Mr. Bryen
seems to make a lot of sense.
And the fact that you are still waiting around for the State De-
partment to make a determination as to the export of a helicopter
which is clearly a defensive or offensive weapon rather than a com-
mercial vehicle I would think would be somewhat discouraging and
disheartening to your agents who are trying to enforce the law. To
be waiting since 1990 for this determination, particularly with the
Iraqi involvement, I think is somewhat absurd.
[The Department of Commerce supplied the following:]
Let me respond first to Mr. Bryen's comments. There is absolutely no conflict be-
tween the export promotion programs of the Department of Commerce and our reg-
ulatory and enforcement responsibilities. In 1985, the Congress expressed this con-
cern because, at the time, we were housed within the International Trade Adminis-
tration (ITA)-the export promotion wing of Commerce. In the 1985 amendments to
the EAA, we were split off as an equal agency to ITA, headed by our own under
PAGENO="0237"
233
secretary. ITA has no authority over us and indeed we often approach trade issues
from a different perspective. Our job as a national security agency within the Com-
merce Department is to protect the national security and foreign policy interests of
the United States, balancing this against the economic interest of the country. We
do not take this mandate lightly. Now, let me address the rest of your question.
Mr. DELIBERTI. Any enforcement agency involved in export con-
trol would have to wait for that same determination from the De-
partment of State. It is not because we are in the Commerce De-
partment we have to wait. The same is true for Customs.
Mr. SHAW. Why is that in the State Department instead of the
Defense Department anyway?
Mr. DELIBERTI. Can you repeat that, please?
Mr. SHAW. Do you know logic of why the State Department has
that rather than the Defense Department?
Mr. DELIBERTI. I do not know.
Mr. SHAW. I have no further questions.
Mr. ANTHONY. We thank you for your testimony.
Mr. MOODY. Mr. Chairman.
Mr. ANTHONY. I am sorry, Mr. Moody. Let me just finish my
comment and then I am going to yield to Mr. Moody. Do not forget
that we have requested some additional information. I will assume
that somebody with you has jotted it down. We will leave the
record open a sufficient amount of time for you to do that. Mr.
Moody.
Mr. MOODY. Thank you. Let me just ask a few basic procedural
questions. Does Commerce routinely inform Customs about any and
all licenses that have been requested for export that could conceiv-
ably be in the munitions or dual use area?
Mr. DELIBERTI. To my knowledge, we do not.
[The Department of Commerce supplied the following:]
As I mentioned earlier, we do not have munitions information. That is at the De-
partment of State. In addition, general licensing information is not very helpful in
enforcement.
Mr. MOODY. I ask that because I have been talking to some Cus-
toms people and they say they rely more on tips from patriotic
American businesspeople than information from Commerce about
sensitive items. Some of these sensitive items they have been able
to stop have not come from tips from the Commerce Department
but rather from American businessmen.
Mr. DELIBERTI. Mr. Moody, if an item is controlled by the State
Department we certainly would give it to the Customs Service to
investigate because they have the authority to do that. But on dual
use items, the authority to investigate alleged or actual violations
of that act lies with the Commerce Department.
Mr. MOODY. Right. But why would you not want to let Customs
know so that if anything of that nature were leaving the country
Customs, which is sort of the cop on the beat so to speak, could
make sure that those items were what exporters say they are and
are headed for the stated consignee, and so forth?
[The Department of Commerce supplied the following:]
As I mentioned earlier, general information on approved licenses, for example, is
not really useful in the enforcement context. The key information usually comes
from tips and then the information in the licensing data base helps us to make the
case. This information is readily available to Customs through the liaison person
who is located in BXA. They have had a liaison person in our operation since Janu-
PAGENO="0238"
234
ary of 1982 and we have regularly and routinely shared information with them
since that time.
Mr. DELIBERTI. There is a liaison person designated by Customs
who-
Mr. MOODY. I recognize that, but I am talking about pieces of
paper with vital information on it. On an absolute, universal basis
why would you not send that to Customs?
Mr. DELIBERTI. We do exchange information on a regular basis.
Mr. MOODY. But that is not my question. My question is, why do
you not send everything of that nature to Customs? I am telling
you that the Customs people tell me that they nail more things at
airports based on tips from businessmen than help from the Com-
merce Department. I know there are periodic exchanges of infor-
mation. Why is that not complete information?
[The Department of Commerce supplied the following:]
In this business, most cases are made on tips, not from the constant review of li-
censing data. This is true for us and it is true for Customs.
Mr. DELIBERTI. We do pretty much the same thing. We get a tre-
mendous amount of information from the business community and
we act on it accordingly.
Mr. MOODY. I am asking why you do not share that invariably
with Customs. That is my only question.
Mr. DELIBERTI. When we conduct joint investigations we do just
the same.
Mr. MOODY. We do not have a Customs person at the table but I
have talked to some Customs people who say that some of this is
classified, I guess, at Commerce. This is all classified-some of this
is classified, is it not?
Mr. DELIBERTI. It could be.
Mr. MOODY. And if it is classified it does not get over to Customs?
Mr. DELIBERTI. If it is classified, for the most part they would
have the same access to that information as we do.
Mr. MOODY. How would they get that access?
Mr. DELIBERTI. There is internal mechanisms where there is a
sharing of classified information.
Mr. Moory. But you just indicated, I think, a moment ago, that
they do not get a universal list of what has been approved for
export.
Mr. DELIBERTI. Approved for export?
Mr. MOODY. Dual use.
Mr. DELIBERTI. They do have access to that. That is correct, Mr.
Moody, because earlier there was a comment made that they did
not have access to that. But they do have access to it. There is a
person that is designated to give them that information. There has
also been a terminal at Customs headquarters in Washington since
May of 1986 to help them get licensing information, and they do
have access to it.
Mr. MOODY. So every single dual use case that you approve, Cus-
toms gets a copy of what you have approved and what is supposed
to be in those crates and who it is for?
Mr. DELIBERTI. You are talking about licensing cases here, I be-
lieve, right?
Mr. Moory. Yes.
PAGENO="0239"
235
Mr. DELIBERTI. I am sorry, I thought you were talking about in-
vestigative cases. I am misunderstanding you here. As best I know
there is a terminal available for Customs to have access to the li-
censing information.
Mr. MOODY. Access, but you do not send it to them. They sort of
have to know what to ask for right now, do they not?
Mr. DELIBERTI. Can you repeat that, please?
Mr. MOODY. You do not send it to them, you say it is available to
them. You mean, if they know what they are looking for they can
punch it up and get it. I guess that is what you are saying.
Mr. DELIBERTI. Right, it is a computerized system and there is an
individual dedicated to pulling the information up for them at
their request.
Mr. MOODY. At their request. But unless they know what to re-
quest they do not routinely get it. I do not know how I can make
myself any plainer. I am almost about to give up because I do not
think I am getting through to you. I am asking you if they get a
universal list of what is dual-use technology that is being exported
or do they have to wait to ask for it? If they do not know what to
ask for, they are not going to get it.
[The Department of Commerce supplied the following:]
As I said earlier, lists of approved licenses are not really helpful in investigations
of violations. Our people in export enforcement don't get this information, nor do we
really seek it. What we need is information that relates to specific investigations or
cases and that we seek and get from the Office of Export Licensing in BXA.
Mr. DELIBERTI. Customs also has to make a request for it and
then they would get it.
Mr. MOODY. That is my point. That is all I am asking. That is
consistent with what Customs has told me, that they often do not
know-they find out more by tips from patriotic businessmen than
they do from Commerce which has that information. They say, if
we know what to ask for, somehow out of the blue, then we can go
to Commerce and you can say yes or no or punch it up. But they
are sitting there, the policeman on the beat, not knowing what to
look for in many cases. That is what I have been told by Customs.
That is all I am trying to determine.
Mr. PATAK. Mr. Moody, just to clarify a point there. They work
basically the same as we do in export enforcement. Now we are
talking about enforcement versus licensing.
Mr. MOODY. That is not my question.
Mr. PATAK. I understand that, sir.
Mr. MOODY. I am just trying to make one narrow point. That is,
that Customs does not routinely appear, apparently from what you
say-is not automatically copied or given info on what you have li-
censed in the dual area.
Mr. PATAK. Nor are we, sir.
Mr. MOODY. No, what you have licensed, what Commerce has li-
censed.
Mr. PATAK. But also we are not normally given that information.
We can get it through the data base just as Customs can, sir.
Mr. MOODY. Who makes the determination if something should
be licensed? I am just talking dual use now.
Mr. PATAK. The Office of Export Licensing.
Mr. MOODY. And that is a different office than you are, right?
PAGENO="0240"
236
Mr. PATAK. Yes, sir.
Mr. MooDy. So you do not get it totally either and neither does
Customs.
Mr. PATAK. That is correct, and it's not generally that useful in
investigations and criminal prosecutions.
Mr. MooDy. Would there be an investigatory or an enforcement
purpose in your getting that or are you happy the way it is now?
Mr. PATAK. Sir, it is basically a proactive program. You would
want to check on certain commodity control numbers whether they
are for proliferation purposes or other sensitive type technology.
Then you would punch in that particular number to indicate what
has been exported and to whom.
Mr. MOODY. Right, if you knew what you were looking for. But
you do not get-you as the investigatory side or the enforcement
side-a full blanket coverage of what has been licensed for export.
Mr. PATAK. No, sir.
Mr. MOODY. All right, that is all I am trying to find out. I am not
being critical of you, I am just trying to find out the answer to that
question.
Do you believe there is possibly any conflict of interest between
Commerce's role as a promoter of exports and your role within
Commerce in the enforcement area?
[Pause.]
Mr. MOODY. Take all the time you need.
Mr. DELIBERTI. As I mentioned earlier, there is absolutely no con-
flict.
Mr. MOODY. Is that your considered opinion? [Laughter.]
There is absolutely no conflict between Commerce's role as a pro-
moter of exports and your role as a stopper of exports in certain
cases?
Mr. DELIBERTI. Right. Mr. Moody, let me just elaborate a little bit
here. I am on the law enforcement side of the house. I have been
involved in export control law enforcement for 22 years and I can
tell you that this marriage of licensing and enforcement works.
[The Department of Commerce supplied the following:]
The trade promotion people in ITA don't tell me or my people how to do our job.
We enforce the law!
Mr. MOODY. I am just thinking about the case of the ovens where
we had somebody in the Commerce Department who was pushing,
pushing, pushing for these high tech, or high whatever they were,
ovens that could be used to make missile nose cones. The Iraqi gov-
ernment told Commerce they were for prostheses construction and
Commerce--well-documented-was the biggest advocate of letting
that stuff go. Finally, because it came in the glare of publicity the
White House stopped and the Commerce Department backed off, or
someone stopped it.
But there was a clear case apparently of the Commerce Depart-
ment pushing, pushing, pushing and trying to override the objec-
tions from within the other branch of the Government. So I am
asking, is this not an inherent conflict?
Mr. DELIBERTI. It is not.
[The Department of Commerce supplied the following:]
I would like to insert here a copy of a chronology on the Consarc case which
might help clarify this issue for you.
PAGENO="0241"
237
/ `l~-.~' \
UNITED STATES DEPARTMENT OF COMMERCE
Bureau of Export Administration
~ Washington. D.C. 20230
CONSARC CHRONOLOGY
The following chronology sets forth the Commerce involvement in
the CONSARC attempt to export furnaces to Iraq. It should be
noted that it was not until July 1990 that information was
obtained concerning the possibility of this equipment being used
in connection with sensitive nuclear activities in Iraq. When
such evidence was presented, Commerce moved immediately to ensure
that no export of the furnaces would take place.
*****
On March 16, 1989, CONSARC wrote to the Department of Commerce
requesting an advisory opinion on items it proposed to ship to the
Ministry of Industry and Minerals in Iraq to be used for materials
research and development and to make "titanium castings to be used
for medical prosthesis." CONSARC's proposed sale included general
purpose induction furnaces used to melt metals at high
temperature.
CONSARC did not mention in its letter any possible nuclear
application. In conversations with Commerce officials, CONSARC
did mention that certain metals that could be used in nuclear
applications could be melted in the furnaces, even though the
equipment was not large enough to be a production furnace. But
CONSARC, stated that there was no indication that the furnaces
would be used for nuclear applications, and Commerce had no
information indicating such use.
On May 6, 1989, Commerce informed CONSARC that two of the furnaces
would need individual validated export licenses and that, under
existing regulations, the export of the other two furnaces would
not require prior government approval. All exports remained
subject to regulations prohibiting exports where the exporter has
reason to know that the item would be used for sensitive nuclear
purposes.
On May 10, 1989, CONSARC supplied Commerce with additional
technical information on the two furnaces that Commerce had stated
would require licenses. This information supported CONSARC's
position that no licenses were required. Again, there was no
indication that the furnaces would be used in sensitive nuclear
applications.
PAGENO="0242"
238
-2-
On June 19, 1989, based on the additional technical information
provided b~' CONSARC, Commerce determined that none of the furnaces
was included on the control lists for national security, foreign
policy, missile proliferation, or nuclear proliferation reasor;~.
Commerce notified CONSARC that this determination was subject to
prohibitions against exports where the exporter has reason to know
the item will be used for sensitive nuclear purposes. The
Commerce Department has not approved and would not approve a
license for sensitive nuclear uses in Iraq.
On July 14, 1989, CONSARC provided Commerce with documentation
from the Iraqi end user and the Iraqi Government stating that the
equipment was to be used for work in material science technology.
The letter from the Iraqi Ministry of Industry and Minerals
states, in part, that the furnaces would not be used for nuclear
applications.
On June 27, 1990, the Customs Service detained the CO~SARC
furnaces before they could be shipped to Iraq.
As indicated above, the CONSARC furnaces were not subject to U.S.
controls. In addition, the Administration (based upon the
assessment of the Department of Defense and Joint Chiefs of Staff)
and its COCOM allies eliminated effective as of July 1, 1990
- controls on all industrial furnaces, including furnaces that are
* more sophisticated than the CONSARC equipment.
On July 13, 1990, a Commerce engineer and special agent visited
CONS~RC to examine the equipment. As a result of this visit, it
was reconfirmed that the furnaces did not fall within the scope of
existing USG export controls. The Commerce engineer mentioned
that the only reason for control would be if the items were
destined for a sensitive nuclear use. CONSARC again stated that
the end use was materials research and the production of medical
prostheses.
During the week of July 16, 1990, interagency meetings were held
to review the proposed sale of the furnaces. The State Department
confirmed that the furnaces were not controlled as munitions
items. Commerce pointed out that the furnaces were not controlled
by Commerce regulations unless they were intended for sensitive
nuclear uses. Commerce requested additional information on
possible sensitive nuclear uses of the equipment in Iraq.
PAGENO="0243"
239
On July-19., 1990, the Administration obtained additional
information indicating that the furnaces might be used in
sensitive ~uciear activities by Iraq. Commerce immediately
directed that the company apply for an individual validated export
license and informed the company that it could not ship the
furnaces without such a license. Commerce informed Customs of
this decision and asked that the furnaces not be released for
export.
On July 31, 1990, CONSARC representatives met with commerce
officials to discuss their intention to submit the necessary
license application. At this meeting, CONSARC repeated its
contention that the intended end use of the furnaces was not
related to sensitive nuclear activities.
On August 2, 1990, CONSARC informed Commerce that in light of the
President's sanctions against Iraq it would not proceed at that
time with the license application.
With respect to the broader issue of Commerce's licensing
practices toward Iraq, consistent with Administration policy,
Commerce refers two-thirds of all applications for review by
Defense and State and has not approved any applications to Iraq
-contrary to U.S. missile and nuclear non-proliferation controls.
* This was recently verified by the General Accounting Office of the
Congress following a review of more than four years of licensing
data, the GAO noted in its conclusion that it:
did not find that any MTCR (Missile Technology Control
Regime] restricted items had been approved for the export to
Iraq since the effective date of the MTCR.
Because of its concern with the proliferation of nuclear capable
ballistic missiles and based on its belief that the export
- controls in place since 1987 needed updating, the Commerce
Department, in the fall of 1989, instituted a technical review by
Bureau of Export Administration engineers of the control lists.
The State Department is currently discussing the list revisions
with our Allies to ensure that its modernization will be carried
out in a multilateral fashion.
On April 3, 1990, all export licenses to Iraq were made subject to
more stringent reviews.
On August 2, 1990, all export licenses to Iraq were suspended.
Dated: September 7, 1990 -
PAGENO="0244"
240
- CONSARC
o on Jul~ 19, 1990, the USG successfully stopped the shipment of
CONSARC furnaces going to Iraq that night; have been used in
sensitive nuclear applications.
o Contrary to reports in the press, the handling of the CONSARC
furnaces case clearly demonstrates that existing interagency
mechanisms and relationships work.
o Commerce rules provide that nothing may be exportod if it is
to be used in sensitive nuclear activities. Accordingly, when
allegations were made in mid-June 1990 about the possible
diversion of the CONSARC furnaces to sensitive nuclear uses in
Iraq, the Customs Service detained the shipment until a proper
investigation could be completed.
o The Commerce Department working with State, Defense, the NSC,
and other agencies managed to obtain additional information
indicating that the furnaces might be used by Iraq in
sensitive nuclear activities.
o Based on this information, the Commerce Department halted the
export on July 19, 1990.
o The furnaces were not shipped and remain in the United States.
PAGENO="0245"
241
STATISTICS ON U.S. LICENSING FOR IRAQ
1985-1990
Each of these licenses was processed in accordance with the prevailing export policies
and interagency procedures described in the BXA Facts - Iraq Export Licensing Fact Sheet.
Licensing Action
Approved RWA#
License Disposition 771° (68%) 39 (3%) 323 (29%) 1133
Total Dollar Value $1.5 B** $27M $442M $1.969B
Interagency Review
Total
Approved*** 8e.jccic.4 Reviewed
fense Position 487 (69%) 20 (3%) 198 (28%) 704
lergy Position 177 (60%) 28 ( 9%) 91 (31%) 296
State Position 62 (78%) 5 (6%) 13 (16%) 80
SNEC## Position 24 (36%) 12 (18%) 30 (46%) 66
* This figure includes four licenses that were subsequently suspended.
This figure included $1 billion worth of cargo trucks that were nal shipped to Iraq.
000 Included in these approval statistics are those cases in which State asserted that no foreign
policy controls applied and returned the license without review; cases in which Defense stated
that it had no statutory role in reviewing the license; or in which any agency voiced objections but
did not continue to escalate them.
S Returned Without Action
#5 SNEC is the Sub-Group on Nuclear Export Coordination. This is a State Department-chaired
committee with representatives of Defense, Commerce, Energy, the Arms Control and Disarmament
Agency and the intelligence community.
PAGENO="0246"
242
I would also like to insert a chart in the record at this point to give the Subcom-
mittee an idea of the enforcement activities which the Administration has taken to
apprehend and sanction EAA violators. These are based on the Export Administra-
tion Annual Report for FY 1990 and show that 46 individuals were criminally con-
victed in FY 1990 and 70 individuals and firms were administratively sanctioned for
violating the EAA or its regulations. In the first six months of FY 1991, Commerce
has already surpassed the total number of criminal convictions which it obtained m
FY 1990.
EXPORT ADMINISTRATiON ACT
ENFORCEMENT STATISTICS FOR FY 1990
In FY 90 there were 374 special agents enforcing the EAA,-- 74 from
Commerce & 300 from Customs. On aper agent basis both agenmes
produced approximately the same number of criminal convictions for
a total of 46 convictions. In addition, Commerce adrn!nistra:fvey
sanctioned 70 individuals and firms.
Acministrative (DCC) 60%
Crimina (DCC) 7%
C~imirral (icin:~ 3%
SOURCE: Crimina (030S) 30%
(See Tables 7-1 & 7-2 from the
Export Administration Annual Report FY 1990]
Mr. MOODY. Thank you, Mr. Chairman.
Mr. ANTHONY. All right, Mr. Moody. We are ready to go to panel
four and I think, Mr. Deliberti, you are still on that panel. We need
Randall Sike, Special Agent in Charge, and Jerry M. Hobbs, Spe-
cial Agent, Office of Export Enforcement, San Jose, Calif.; and
Portia Moore, former assistant U.S. attorney, San Francisco, Calif.
If those witnesses could come forward.
Mr. Deliberti, are you ready? We will take your testimony, and
then Mr. Sike and then we will take Ms. Moore. You are recog-
nized at this time.
STATEMENT OF FRANK W. DELIBERTI, DIRECTOR, OFFICE OF
EXPORT ENFORCEMENT, BUREAU OF EXPORT ADMINISTRA-
TION, U.S. DEPARTMENT OF COMMERCE, ACCOMPANIED BY
RANDALL SJ[KE, SPECIAL AGENT IN CHARGE; AND JERIY M.
HOBBS, SPECIAL AGENT, OFFICE OF EXPORT ENFORCEMENT,
SAN JOSE, CALIF.
Mr. DELIBERTI. Mr. Chairman, I will now turn to the C-TEK
case. In outlining this case for you I would like to discuss how we
received the initial information, our investigation, the partieg to
the case, and our sting operation.
PAGENO="0247"
243
In February 1989, we learned that a Minnesota company had
become suspicious about a purchase order for two micro VAX II
computers. The company became suspicious about the sale when a
firm in Iowa first indicated the computers were to be exported, but
later said they would be sold to C-TEK Computers of Kirkland,
Wash.
Because Kirkland is in the jurisdiction of the San Jose field
office, they handled the investigation. They arranged with a Seat-
tle freight forwarder to make a controlled delivery of computers to
C-TEK. Posing as a representative of the freight forwarder, our
agents delivered the computers to C-TEK, looked over its facilities
and later called C-TEK to determine the identity of any other
freight forwarders they had been using.
We contacted the other C-TEK freight forwarder, examined doc-
uments showing the shipping history of C-TEK exports and asked
to be notified of any future shipments. Within weeks we were in-
formed by the Seattle freight forwarder that C-TEK was making
shipments of computer parts to Computer Focus and W.K. Agen-
cies-companies located in Singapore.
As shown in the photos that Special Agent Hobbs has just put on
the easel, our special agents accompanied by Customs examined
the shipments and took photographs of the equipment. Because we
did not have a reasonable basis to believe an unlawful export was
about to occur, we allowed the shipment to go.
We immediately sent the information and photographs to the
Digital Equipment Corp., the manufacturer of the VAX computers.
DEC identified the components as a VAX 8700 superminicomputer
and told us that identifying information such as logo and serial
numbers had been removed, as Mr. Hobbs is pointing out. We im-
mediately contacted U.S. Customs and asked them to work with
the Singapore authorities to stop delivery of the shipment and
return it to the United States. U.S. Customs made the necessary
arrangements.
At the same time, we were working with the U.S. Attorneys
Office in Seattle to obtain search warrants for C-TEK's office and
warehouse. Two additional warrants authorized seizure of bank
funds C-TEK intended to use to purchase the computer equipment
which we believe would have been illegally exported. We seized ap-
proximately $851,000.
During our searches we found incriminating evidence which Spe-
cial Agent Hobbs has just put on the easel. This included a fax co-
versheet and a December 23, 1988, Seattle Times article. Both dem-
onstrated that Casperson, C-TEK's president, knew that a Com-
merce export license was required to export the VAX 8700. With
the assistance of the assistant U.S. attorney we were able to con-
vince Casperson to cooperate.
Let me take a moment to identify the parties to the diversion
network. Mr. Chairman, you may wish to refer to the map at my
right as I do this.
Shiv Mohan was the architect of the diversion network and di-
rected its operations. He gave the instructions to purchase of U.S.
origin, high technology equipment and fronted the funds necessary
for the transactions.
PAGENO="0248"
244
Perfect Technologies located in London and Moscow is a compa-
ny run as a partnership between Mohan and an Indian national,
Sidhartha Bose. Commerce export license applications indicate that
since 1986 Perfect has attempted to obtain U.S. origin equipment
for the Soviet Union.
John Townsend, a former partner in Capricorn Computing Serv-
ices of Sydney, Australia-a company which we do not believe was
part of the diversion network-was responsible for establishing
contacts in the United States. He was formerly employed as a field
representative in Australia for a U.S. computer firm. He was the
technical expert for the diversion network using his ability to dis-
assemble and reassemble sophisticated computer equipment.
Robert Casperson is a U.S. computer broker who was Mohan's
U.S. contact.
David Whyte, a computer broker employed by Computech in To-
ronto, Canada, assisted Casperson in diverting U.S. origin, high
technology equipment to Mohan. Whyte suggested the network
could move U.S. goods through Canada without detection.
W.K. Agencies and Computer Focus in Singapore. These compa-
nies were fronts used by Mohan in the diversion of U.S.-origin com-
modities. W.K. Agencies address turned out to be a residential
apartment unit in Singapore as shown in the photograph at my
right. These companies were identified on shipping documents as
the intended end users for the DEC VAX 8700 shipments.
Virtual Computers of Bombay had previous business dealings
with Mohan. Mohan asked Virtual for blank copies of its stationery
and then used it to make false end use statements to both the
United States and Canadian authorities.
A company we worked with during the investigation was Tek-
tronix of Beaverton, Oreg. This firm is a manufacturer of highly
sought after graphic terminals. The workstations were controlled
by the Department of Commerce for national security, nuclear non-
proliferation and missile technology reasons. Let me underscore,
there is no indication that this firm had any part in the diversion
scheme. They cooperated with us in the investigation.
As the investigation progressed, we advised an investigative plan
to get the violators into the United States and arrest them. The
chart at my right illustrates our plan. We knew from Casperson
that Mohan was eager to purchase 50 Tektronix graphics worksta-
tions for export to India through Canada, using a Canadian export
permit obtained under false pretenses. Although U.S.-origin com-
modities may normally be exported to Canada for use there with-
out obtaining a U.S. export license, it is unlawful to make such an
export when the exporter knows the goods are not intended to stay
in Canada.
The diversion network believed workstations were shipped from
Beaverton, Oreg., to a warehouse in Buffalo, N.Y., because we had
established the bona fides of the transaction through letters and in-
voices on Tektronix letterhead that Tektronix provided. A meeting
of the conspirators was arranged in Buffalo to inspect the worksta-
tions and to discuss the final arrangements. Casperson, Mohan,
Whyte, and Townsend all attended the meeting. During the meet-
ing, which was videotaped, they discussed the illegal diversion
scheme. At the end of the meeting, they were arrested and subse-
PAGENO="0249"
245
quently charged with violating the Export Administration Act, the
regulations, and other Federal statutes.
In my prepared statement, you will find the transcript of three
consensually recorded phone conversations. The first is a conversa-
tion between Casperson and Whyte in which Whyte tells Casperson
that he has obtained a Canadian license to export the 50 worksta-
tions. In the second they discuss having C-TEK appear to be the
purchaser of the workstations instead of Computech in Canada so
that questions about end users would be avoided. In the last record-
ing, they again discuss having a U.S. company appear as the pur-
chaser of the workstations and indicate that they might be willing
to buy a U.S. company, if necessary. They also discuss telling Tek-
tronix that the workstations are being bought for the U.S. military.
We have provided the subcommittee with a full set of transcripts
and an audio copy of the phone calls contained in my formal state-
ment.
One of the interesting aspects of the C-TEK case is the seeming-
ly unlimited availability of money to purchase U.S.-origin high
technology goods. If you look at the chart to my right, you will see
the extent of money transfers to fund the diversion network. When
a purchase was to be made, funds appeared in C-TEK's bank ac-
count. Casperson told us that in many cases he had no advance
knowledge of when the funds were being transferred or the
amounts involved. Working from C-TEK's bank accounts, we
traced the sources of the funds to London, New York, and Dubai.
Because the money was intended to be used in the United States to
promote an unlawful activity, the transfer of funds to Casperson
violated U.S. money-laundering statutes. All told, over $1.6 million
was made available to Casperson to purchase computers and other
U.S. high technology goods.
Whyte, Townsend, Casperson, and Mohan pled guilty to viola-
tions of the Export Administration Act and money-laundering stat-
utes. Malhotra, who assisted in the transfer of funds from Mohan
to Casperson through his New York bank account, pled guilty to a
misdemeanor count of violating U.S. tax law. The following sen-
tences were imposed:
Whyte received a 1-year imprisonment and 2 years' probation
and forfeiture of seized controlled commodities.
Townsend received 2 years' imprisonment, 2 years' probation.
Casperson received 4 months in a work-release program and 2
years' probation.
Malhotra receive 1 year probation.
Mohan received 2 years 9 months imprisonment and $1.5 million
fine.
In conclusion, you should know the expert enforcement system
works. Export control cases are very complex, multinational, multi-
defendant in nature, requiring considerable time to investigate and
to prosecute. Once the initial information is uncovered, there is a
dedicated core of professional law enforcement people ready to do
whatever is necessary to investigate, pursue, and prosecute both
criminally and administratively.
I want to thank the subcommittee again for the opportunity to
make a presentation on export enforcement. We believe that the
cases we have discussed today demonstrate that Commerce is ful-
PAGENO="0250"
246
filling its statutory mandate to enforce the Export Administration
Act.
[The prepared statement follows:]
PAGENO="0251"
247
Statement of Frank W. Deliberti
Director, Office of Export Enforcement
Bureau of Export Administration
U.S. Department of Commerce
Before the Subcommittee on Oversight
House Committee on Ways and Means
April 18, 1991
I am pleased to make a second appearance today before your subcommittee to discuss
export enforcement. I testified earlier today on the Global Helicopter case. I will now
turn to the C-TEK case.
THE DIVERSION OF U.S. HIGH TECHNOLOGY
BY C-TEK COMPUTERS
In outlining this case for you I would like to discuss how the we received the initial
information, our investigation, the parties to the case, and our sting operation.
THE INITIAL INFORMATION:
In February 1989, we received information that a Minnesota company had become
suspicious about a purchase order for two Micro VAX II computers. We had visited this
company as part of our ongoing outreach program to encourage compliance with the'
Export Administration Act (EAA). The company became suspicious about the sale when
a firm in Iowa first indicated the computers were to be exported, but later said they
would be sold to C-TEK Computers of Kirkland, Washington.
THE INITIAL INVESTIGATION - VAX 8700:
Because Kirkland, Washington, is in the jurisdiction of the San Jose Field Office, that
office was asked to investigate. Commerce special agents arranged with a Seattle freight
forwarder to make a `controlled delivery' of the computers to C-TEK. Posing as
representatives of the freight forwarder, OEE agents delivered the computers to C-TEK
and looked over its facilities. In order to determine the identity of the other freight*
forwarders C-TEK had been using, one of our special agents, still posing as a
representative of the freight forwarder, contacted C-TEK by phone. C-TEK was asked
if it was happy with its present freight forwarder and if it would like a sales presentation.
During the conversation we were able to determine the name of another freight forwarder
used by C-TEK. We contacted the other freight forwarder, examined documents showing
the shipping history of C-TEK exports, and asked to be notified of any future shipments.
Within weeks, our San Jose field office was contacted by both Seattle freight forwarders,
notifying us that C-TEK was making shipments of `computer parts' to Computer Focus I
and W.K. Agencies, companies located in Singapore. Accompanied by U.S. Customs,
our special agents examined the shipments and took photographs of the equipment.
Because we had no reason to believe an unlawful export was taking place, the shipment
was allowed to be exported.
PAGENO="0252"
248
2
We immediately sent the
information and photographs
to the Digital Equipment
Corporation (DEC), the
manufacturer of VAX
computers. DEC identified
the components as a VAX
8700 minisupercomputer.
OEE immediately contacted
U.S. Customs and asked that
its attache in Singapore work
with the Singapore
authorities to stop delivery of
the shipment and return it to
the United States. U.S.
Customs responded quickly
and made the necessary
arragnements.
THE INITIAL SEARCHES:
At the same time, we were working with the U.S. Attorney's office in Seattle, obtaining
search warrants for C-TEK's office and warehouse. Two additional warrants were
obtained authorizing seizure of bank funds held by C-TEK. These funds were to be used
to purchase other computer equipment that we believe would have been illegally exported.
Commerce special agents were successful in seizing $851,283.34.
During our searches, we discovered several pieces of incriminating evidence, including
a FAX cover sheet and a December 23, 1988, Seattle Times article. Both demonstrated
that Robert Casperson, the President of C-TEK Computers, had knowledge that a
Commerce export license was required to export the VAX 8700. With the assistance of
the Assistant U.S. Attorney (Portia Moore), we were able to convince Casperson to
cooperate with us, to describe the entire diversion network, and to obtain the necessary
evidence to prosecute all those who were implicated.
TA:
FOX A:
CUTE: s,su,s TATE:
A copy of the FAX cover sheet sent to John Townsend in
Australia by Robert Casperson of C-TEK stating they will
need to be careful, given the U.S. efforts to stop the
diversion of U.s-origin high technology as reported in the
~~~gjimus article ohown on page two.
CUR FAT A, 205-821-OUT"
1,. or poses: a Tu:c. is:,
PAGENO="0253"
249
3
PAR'IlES, RELATIONSHIPS, AND THE DiVERSION NETWORK;
Let me take a moment to identify the parties to the diversion network.
Shiv Mohan (doing business as Kohinoor Impex Pvt Ltd): Mohan was the architect
of the diversion network and directed its operations. He gave the instructions for the
purchase of U.S. high technology equipment and provided the funds necessary for the
transactions.
Perfect Technologies: Perfect Technologies, located in both London and Moscow, is a
company run a partnership between Shiv Mohan and an Indian national, Sidhartha Bose.
Commerce export license data indicates that, since 1986, the company has been named
as a consignee on applications for shipments to the Soviet Union.
John Townsend: John Townsend, a former partner in Capricorn Computing Services
of Sydney, Australia, a company that we do not believe was part of the diversion
network, was an associate of Shiv Mohan and was responsible for establishing contacts
in the United States. He was formerly employed as a field representative in Australia for
a U.S. computer firm. He was the technical expert for the diversion network. Townsend
assisted Mohan in circumventing U.S. export control laws through his ability to
disassemble and reassemble sophisticated computer equipment.
iwuert ~..aspersun ~ .~ as ~...-Ir~rt computers, Inc.): Robert Casperson of
Kirkland, Washington, is a computer broker who was the United States contact for the
diversion network. Upon being discovered by Commerce special agents, he agreed to
cooperate with the Government in uncovering the diversion network.
jo~R
Computer-smuggling ring reportedly broken
~
PAGENO="0254"
250
4
d Whyte; David Whyte, a computer broker employed by Computech in Toronto,
Canada, assisted Casperson in diverting U.S.-origin high technology equipment to
Mohan. Whyte suggested the network could move U.S. goods through Canada without
detection.
sy,~:. Agcucies and Computer Focus: These Singapore firms were front companies
used by Shiv Mohan to facilitate the diversion of U.S.-origin commodities through
Singapore. W.K. Agencies turned out to be a residential apartment unit located in the
- Eastern Mansion District of
Singapore. These companies were
identified on shipping documents as
the intended end users for the DEC
VAX 8700 shipments.
Virtual Computers: Virtual
Computers of Bombay, India, is a
company that had had previous
business dealings with Shiv Mohan.
This firm was asked by Mohan for
blank copies of its stationery and
subsequently provided those copies
to Mohan. We believe the
stationery was eventually used by
Mohan to make false end use
statements to U.S. and Canadian
authorities about the intended
consignees, including forged
signatures.
)PERATING COMPANY:
jpjij~ç~ Tektronix of Beaverton, Oregon, is a manufacturer of highly sought-after
graphics terminals (workstations). These workstations were controlled by the Department
of Commerce for national security, nuclear non-proliferation, and missile technology
reasons. There is no indication that this firm had any part in the diversion scheme. It
cooperated with us in the investigation.
Tifil PLAN - A TEKrRONX~flNGI
As the investigation progressed, we devised an investigative plan that would get as many
of the violators as possible into U.S. jurisdiction so that we could arrest them. We knew
from Robert Casperson that they were eager to purchase 50 Tektronix graphics
workstations. The conspirators intended to export the workstations to India through
Canada using a Canadian export permit obtained under false pretenses. I would note that
although U.S.-origin
commodities may
normally be exported
to Canada for use
there without a U.S.
export license, it is
unlawful to make
such an export when
the exporter knows
the goods are not
intended to stay in
Canada.
VIRTUAL
~
Proposed Shipment Route for Tektronix 4225
Graphics Terminals (Work-Stations)
PAGENO="0255"
251
5
The diversion network believed the shipment of workstations was being sent from
Beaverton, Oregon, to a warehouse in Buffalo, New York, because we had established
the bonafides of the transaction through letters and invoices on Tektronix letterhead that
had been provided by Tektronix. A meeting of the conspirators was arranged in Buffalo
to inspect the workstations at the warehouse and to discuss the financial arrangements for
the purchase. Casperson, Mohan, Whyte, and Townsend all attended the meeting.
During the meeting, which was videotaped, they discussed the illegal diversion scheme.
At the end of the meeting they were arrested and subsequently charged with violating the
EAA, the EAR, and other federal statutes.
I'd like to play some consensually recorded phone conversations at this point.' The first
conversation illustrates the reaction of Whyte and Casperson to getting an export permit
from the Canadian authorities within two weeks.
WHYTE: And -- oh, I left the message with your secretary that the approval
did come through.
CASPERSON: Oh, on the Tektronix. Yeah, I got that.
WHYTE: On the Tektronix. I must have been dreaming that I got it.
(Laughter). I phoned them up and I sald, I don't know of -- you
couldn't have. I just okayed it today. (Laughing).
CASPERSON: Oh. (Laughing).
WHYTE: (inaudible).
CASPERSON: Can we get that fax copied on --
WHYTE: Yeah. He's going to be getting that out to me probably Tuesday so
I'll probably have it by Friday and that's great.
CASPERSON: Okay. Well, they may just go and take fifty all at once.
WHYTE: Yeah.
CASPERSON: And now we have that.
WHYTE: Okay. Well, as soon as ah -- they should have that paper work over
to me by today.
CASPERSON: Oh, okay.
WHYTE: They're (Tektronix) kind of a nervous company. Well, you got to
know where it's going. And I'm saying listen, it's staying in the
states, it's not even coming to Canada.
CASPERSON: Yeah.
WHYTE: I want it FOB Buffalo.
CASPERSON: Oh, okay.
WHYTE: And they may come along and say well, you got to tell us the user,
so we may have to say well, okay it's going to the company C-TEK,
who did the sale.
CASPERSON: Oh, okay.
WHYTE: Or something like that.
CASPERSON: Okay.
1 OEE special agents do consensual monitoring of telephone calls under the authority of section 12(a) of the
EAA and in accordance with guidelines established by the Attorney General. As the term indicates, in a
consensual monitoring one party to the conversation has consented to the recording.
PAGENO="0256"
They're just covering their ass.
Yeah.
252
6
WHYTE: We'll have to get around that. We'll tell them it may come up to
Canada because we're doing some modifications.
CASPERSON: Okay.
WHYTE: And we're putting it - we're a value added reseller. We're adding
it to a computer here software and the whole bit.
CASPERSON: Okay.
WHYTE: They know we're lying but that's fine.
CASPERSON: (Laughter).
WHYTE:
CASPERSON:
WHYTE: But apparently the thing in Canada is they try to add 10 percent to
the price.
CASPERSON: Is that right?
WHYTE: Yeah. Just like they do for all the international shipments.
The diversion network was concerned that Tektronix might get suspicious about the
intended end user for the 50 graphic workstations and so the conspirators discussed ways
to fool the manufacturer. The following conversation outlines how Whyte and Casperson
planned to make C-TEK the purchaser to get around this concern.
WHYTE: Okay. So the worst thing we could do is to say, oh, you're (C-
TEK) the customer.
CASPERSON: Uh-huh.
WHYTE: You know, if-- if we need to produce this. Because they're uptight
about us exporting them into Canada.
CASPERSON: Oh, are they?
WHYTE: Because they want to charge us 10 percent more.
CASPERSON: Oh, I see.
WHYTE: So we're going to sign a waiver saying they're never going to be
used in Canada and the whole bit, you know.
CASPERSON: Oh, okay.
WHYTE: So we'll say, well, here's our customer and, you know, we're selling
him a computer and everything and he's a consultant or whatever.
CASPERSON: Uh-huh.
WHYTE: And then of course they might even want them shipped over there
to prove it and all that, then we'll just get them up here.
CASPERSON: Oh, okay.
WHYTE: Okay. So there's -- there's no major problems there.
CASPERSON: Okay.
WHYTE: So, umm, that's just a little bit of paperwork and, you know, they're
afraid of their shadow.
CASPERSON: (Laughing) so I guess I can understand that.
WHYTE: Yeah. Well, I said the worst thing they'll do is not sell to us.
CASPERSON: Yeah.
PAGENO="0257"
253
7
WHYTE: You know, and (laughing) -- it's the only time we'll ever do a
Tektronix deal.
CASPERSON: Yeah (laughing).
The conspirators also considered buying a U.S. company, naming it as the end user, and
claiming that it was doing work for the U.S. military. The following conversation
between Whyte and Casperson outlines this alternative plan.
WHYTE: But we have to give them a name of a person where they're going.
CASPERSON: Uh-huh.
WHYTE: So we got -- we worked with this company down in Buffalo and they
think they're going down there.
CASPERSON: Yeah. That's what I -- well, I asked you. I got to come up with
that name too.
WHYTE: Yeah. So I--
CASPERSON: With a ship to address, too, for ours.
WHYTE: So I'll get you the name, like -- when you need it, I know a lot of
people.
CASPERSON: Oh, okay.
WHYTE: And even if we have to go buy a business down there we'll --
(laughing).
CASPERSON: (laughing).
WHYTE: -- we'll have one.
CASPERSON: I don't know if we want to go that far (laughing).
WHYTE: Well, the ones in Buffalo don't sell that high. (laughing).
CASPERSON: Oh, (laughing). Real estate prices are still real low there, huh?
WHYTE: That's the problem. Now, what we can do -- I'll tell you what you
do. You say I've got all these ones in the military.
CASPERSON: Uh-huh.
WHYTE: Who are installing graphic systems. If we give them like ones in the
Navy or something like that --
CASPERSON: Uh-huh.
WHYTE: -- they'll never be able to trace it.
CASPERSON: Well, that's true.
WHYTE: Because they say like it's going here, it's going -- I mean, but see,
I don't know enough about these terminals to say what they are
going to do with them.
CASPERSON: Yeah. (laughing) I know.
WHYTE: (laughing). You know, like well, what do they do with this stuff?
CASPERSON: They draw pretty pictures (laughing) --
WHYTE: Yeah.
CASPERSON: -- on the screen.
WHYTE: Yeah.
CASPERSON: Three dimensional picture.
51-840 0 - 92 - 9
PAGENO="0258"
254
8
WHYTE: Urn-hum. Oh, well.
CASPERSON: Or two dimensional, I'm not sure which they are.
(WHYTE: Urn-hum.
CASPERSON: Some kind of dimensional picture.
W}IYTE: Yeah. Well, I guess ah, they had a reason for it. If they were
design - they've got to be designing something.
CASPERSON: Yeah.
WI-IYTE: Like what would the Navy design battleships - they get someone
else to do that, wouldn't they?
CASPERSON: Um, the military has been buying lots of the stuff.
WFIYTE: Yeah, because I see there was a tender there where they were putting
graphic equipment -
CASPERSON: Oh, the military uses the stuff for air defense command, too.
WFIYTE: Okay.
CASPERSON: For putting up all their pictures for - off their radar screens. All
their - a lot of their radar now is three dimensional too.
WHYTE: Just a moment. This is what we got to do. Right in this little book
it tells me everybody who is buying anything in the world.
CASPERSON: Uh-huh.
FUNDING THE DIVERSION NETWORK:
One of the interesting aspects of the C-TEK case is the seemingly unlimited availability
of money to purchase U.S. high technology goods. When a purchase was to be made,
funds `appeared' in Robert Casperson's C-TEK account. Casperson told us that in many
cases he had no advance knowledge of when the funds were being transferred or the
amounts involved. Working from C-TEK's bank records, we traced the sources of the
funds to London, New York, and Dubai. Because the money was intended to be used
in the United States to promote an unlawful activity, the transfer of funds to Casperson
violated U.S. money laundering statutes. All told, over $1.6 million was made available
to Casperson to purchase computers and other U.S. high technology goods.
Transfers of Money to Robert Casperson 12-14-88 to 3-21-89
5489,885 (12-14-88)
-
5200000 s~~y 1'
I
5300,000 (3-16-89)..........
i L 5200000,(3-21-89)
SHAM
MALHOTRA
PAGENO="0259"
255
9
SENT1~N~I?$JMPOSEP
Whyte, Townsend, Casperson and Mohan pleaded guilty to violations of the Export
Administration Act and money laundering statutes. Malhotra, who assisted in the transfer
of funds from Mohan to Casperson through his New York bank account, pleaded guilty
to a misdemeanor count of violating U.S. tax law. The following sentences were
imposed:
David Whyte -- 1 year in jail and 2 years' probation, and forfeiture of seized controlled
commodities
John Townsend -- 2 years in jail, 2 years' probation
Robert Casperson -- 4 months in a work release program, 2 years' probation
Sham Lal Malhotra -- 1 year probation
Shiv Mohan Mukkar -- 2 years and 9 months in jail, $1.5 million fine
cQNcLUSION~
The export enforcement system works. Export control cases are very complicated and
require considerable time to investigate and to prosecute. Once the initial information is
uncovered, there is a dedicated corps of professional law enforcement people ready to do
whatever is necessary to prosecute the case, criminally, administratively, or both.
I thank the subcommittee again, for the opportunity to make a presentation on export
enforcement. We believe that the cases we have discussed today demonstrate that
Commerce is fulfilling its statutory mandate to enforce the EAA.
PAGENO="0260"
4~
z
=
0
(I)
LU
LU
I-
z
256
p
PAGENO="0261"
Proposed Shipment Route for Tektronix 4225
Graphics Terminals (Work-Stations)
BOMBAY
~~CAPRICORN
COMPUTING
SERVICES
SIDNEY
Beaverton, OR
Buffalo, NY
Toronto, Canada
Beaverton, OR
Buffalo, NY
Toronto, Canada
Bombay, India
Bombay, India
DIFFERENCE:
S 5,236.36
S 8,798.18
KOHINOOR
IMPEX
PVT LTD
NEW DELHI
VIRTUAL
COMPUTERS
Freight Rates for 25 units at 120 lb ea 3,000 bs to a
TEKTRONIX
Right~O-Way1
(Freight Forwarder~
S 1,800~00
1,530.00
PAGENO="0262"
C)1
Transferlof Money to Robert Casp~rson 12-14.88 to 3-21-89
$489,985 (12-14-88)
~~-~$9985 (12-28-8'
$29,985 (2-9-89)
$20Q000 (3-13-89)
(1-18-89)
(3-16-89L~
(3-21-89)
CHOWDUR1
BCCI
PAGENO="0263"
259
Mr. ANTHONY. Thank YOU very much.
Mr. Sike, you do not have a statement, do You, or Mr. Hobbs?
Mr. SIKE. No, sir.
Mr. ANTHONY. Ms. Moore, you are recognized.
STATEMENT OF PORTIA R. MOORE, ATTORNEY, SAN FRANCISCO,
CALIF. (FORMER ASSISTANT U.S. ATTORNEY FOR THE WEST-
ERN DISTRICT OF WASHINGTON STATE)
Ms. M9ORE. Thank you. I am Portia Moore, an attorney in pri-
vate practice with the law firm of Morrison & Foerster in San
Francisco. Prior to becoming a partner with Morrison & Foerster, I
worked for 4 years as a criminal assistant U.S. attorney for the
Western District of Washington in Seattle, Wash. I was the pros-
ecutor who was assigned the primary responsibility for the C-TEK
investigation. I was involved in the investigation from the very
early stages, from drafting the first search warrant in the case for-
ward.
I have listened with great interest today to your questions to the
various witnesses here as to what Congress can do to strengthen
the export enforcement laws. As someone who is responsible for
prosecuting a fairly significant export violation case, I was often
frustrated and discouraged by the ease in which people could divert
technology from the United States and by the lack of teeth in our
export enforcement laws. I have identified five areas where I be-
lieve improvements are warranted, and I would like to very basi-
cally and briefly share those areas with you now.
First and foremost as a prosecutor, I was stunned and perhaps
appalled at what I considered inadequate sentencing provisions by
the Export Enforcement Act. Although in the Mohan case the
charge was, and I believe that we would have successfully proved
that the equipment at issue destined for Russia, the EAA afforded
a maximum sentence of only 10 years imprisonment for this crime.
When compared to sentences for other Federal crimes, 10 years is
extremely light, indeed. Bank robbery, passing forged money,
making false statements to a banking institution all carry higher
penalties than the penalty for violating national security concerns.
Significantly, other crimes which impact on national security
carry much greater prison terms. For example, 18 U.S.C. section
794(a), which makes it a crime to deliver information related to our
national defense to aid a foreign government carries a penalty of
death, imprisonment for any term of years, or imprisonment for
life.
There are a number of practical reasons why I believe Congress
should consider increasing the penalties. The first and foremost
reason why the penalties should be increased, the criminal penal-
ties should be increased, is to convey a strong message to the crimi-
nals involved in these crimes, but, more importantly, to the judges
who are hearing them, that we consider this very serious and that
we consider these crimes very dangerous.
In the Mohan case, I was repeatedly confronted with the atti-
tude, from both the judicial officer in Buffalo where we had an ini-
tial detention hearing and the judges in Seattle, that this was just
not a crime of that serious a nature. And I was confronted with
PAGENO="0264"
260
that attitude even after I had Department of Defense witnesses tes-
tify as to the national security risk that was involved in these
crimes.
The second reason why you should consider increasing the penal-
ty for EAA crimes relates to pretrial detention. In this case, pre-
trial detention of these defendants was very hard fought. I attend-
ed two different detention hearings that spanned approximately 6
days. The order of pretrial detention was twice appealed by the de-
fendants. And the Court of Appeal for the Ninth Circuit ordered
the defendants detained in this case on the basis of risk of flight.
And one of the major factors they pointed to was the fact that the
penalties the defendants were facing in this case were so severe.
Now, those penalties were not severe because of the Export En-
forcement Act. They were severe because I had charged the defend-
ants with money laundering, and as a result of that, I was able to
bump the penalties that they were looking toward upon conviction
up to 20 years. So that is the first area of concern.
The second area of concern involved the difficulty in obtaining
forfeiture in this case. As you have heard, prior to conviction the
Government seized over $850,000 in this case, and we seized that
money not under the forfeiture provisions of the EAA but, rather,
under the forfeiture provisions provided by the money-laundering
statute.
The EAA forfeiture provision, although one does exist, provides
for forfeiture only after conviction, where I think any experienced
prosecutor will tell you that the funds are almost guaranteed to be
gone at that time. The forfeiture provisions under the EAA do not
provide for substitution of assets, and they do not provide for a pre-
sumption in favor of forfeiture.
All of these were present in the money-laundering statute, which
is why we used the money-laundering statute. But one thing the
money-laundering statute did not allow us to get was money that
had been transferred wholly inside the United States. So where
you have two crooks involved in a technology diversion scheme and
they are transferring money inside the United States, the Govern-
ment is going to be hard pressed to seize that money unless they
can prove that money represents-that money itself represents pro-
ceeds of a crime. And that is very difficult to do.
So the second area that I would like to see Congress improve is
the forfeiture provisions of the EAA. I would specifically like to see
a presumption in favor of the legality of forfeiture as we have in
the drug statutes and money-laundering law. I would also like to
see a provision for pre-conviction seizure. And I would like to see a
provision that allows the Government to get money that has been
transferred within the United States.
The third problem area that I found was pretrial detention. As
Congress knows, under the Bail Reform Act, a prosecutor has two
grounds for detaining somebody pretrial. One is danger to the com-
munity; the other is risk of flight. In the Mohan case, the Govern-
ment moved to detain these defendants prior to trial on both
grounds. I could not get any judicial officer to agree with me that
these crimes represented a danger to the community.
The courts were impressed by the fact that these defendants
were businessmen who had no prior record and who appeared to be
PAGENO="0265"
261
legitimate. And on that basis, they refused to find that the defend-
ants represented a danger to the community. The defendants were
ultimately detained under the ground of risk of flight. But as a
result of this case, an appeal in this case, the Ninth Circuit came
down with a decision that although it upheld the pretrial detention
of the defendants in our case, it ruled that a defendant who can
show that he has ties to the United States in general, not just the
community where the charges are brought, but a defendant who
can show that he has ties to the United States may, in fact, be able
to show that he is not a risk of flight.
In this case, two of the three defendants did not have any ties to
the United States, but our most culpable defendant, Mr. Mohan,
did. Now, his defense attorneys did not press that, did not press
those ties. I fear that had they done so, Mr. Mohan would not have
been detained prior to trial and would not be here today.
The fourth area that I feel needs improvement is the area of edu-
cation of both the public and law enforcement personnel. The
crooks involved in the Mohan case made comments to the investi-
gators that they had no idea that they could go to jail for such a
long period of time for these violations. I think that Congress needs
to get the message, much as they have with the drug issue, that we
consider these to be serious violations and that they would not be
tolerated.
I also believe that it would be a good idea to require U.S. manu-
facturers of controlled items to provide purchasers of those items
with a document explaining export controls.
The fifth and final area, and the conclusion of my comments, in-
volves the need for national and international cooperation. In this
case, we had evidence scattered around the world, and we had a
very difficult time getting much of that evidence from many differ-
ent governments. We also had some reluctance on the part of the
law enforcement agencies involved, not Commerce but particularly
Customs, to cooperate with the investigation that was going on. So
I would conclude by saying we need to emphasize that, for the good
of our country, we must have cooperation both among the agencies
working on these cases and from the international governments.
Thank you.
[The prepared statement follows:]
PAGENO="0266"
262
WRITTEN TESTIMONY OF FORMER ASSISTANT UNITED STATES
ATTORNEY, PORTIA R. MOORE, BEFORE THE SUBCOMMITTEE ON
OVERSIGHT OF THE COMMITTEE ON WAYS AND MEANS OF THE UNITED
STATES HOUSE OF REPRESENTATIVES, PERTAINING TO THE
ADMINISTRATION AND ENFORCEMENT OF U.S. EXPORT CONTROLS.
April 18, 1991
Mr. Chairman and Members of the Subcommittee:
I am Portia R. Moore, an attorney in private
pract:Lce with the San Francisco law firm of Morrison &
Foerster. Prior to becoming a partner with Morrison &
Foersl:er I spent four years working as an Assistant United
States Attorney' for the Western District of Washington, in
SeattLe, Washington. I appear today at the request of the
Chairman of this Subcommittee to generally describe my
experience as the lead federal prosecutor responsible for
the successful prosecution of a large technology smuggling
case known as United States of America v. Mohan, etal.,
CR 89-247WD (W.D. of Washington).
I. THE INVESTIGATION AND PROSECUTION.
The initial investigation of this case began in February
1989, when special agents with the United States Department of
Commerce (hereinafter, "DOC") began looking into the activities
of a company known as C-TEE COMPUTERS, located in a suburb of
Seattle, Washington, for suspected violations of the federal law
that no "commodity or technical data subject to the Export
Administration Regulations may be exported to any destination
without a validated export license issued by the Office of Export
Enforcement" (15 C.F.R. Section 772.1(b)). The investigation was
precipitated after Midwest Systems, Inc., a computer sales
company located in Minnesota, advised DOC officials of a
suspicious order for the purchase of two Digital Equipment
Corporation (hereinafter, "DEC") MICROVAX computers. These
particular computers were subject to the Export Administration
Regulations because they are capable of being used for military
applications and, for that reason, could not be exported outside
the United States without a validated export license issued by
the DOC. DOC agents subsequently determined that C-TEE
COMPUTERS, the company purportedly purchasing the Nicrovax
computers at issue, was engaged in the business of finding,
purchasing, selling and sometimes exporting, computers and
computer equipment. DOC agents also determined that an
individual named ROBERT CASPERSON owned and operated C-TEE
COMPUTERS.
During the initial phase of the investigation, DOC
Special Agent Jerry Hobbs, acting in an undercover capacity,
spoke with one of C-TEE's employees who informed Mr. Hobbs that
C-TEE used a number of different freight forwarding companies to
ship its merchandise overseas.
DOC agents contacted the freight forwarding companies
identified by the C-TEE employee and asked those companies for
their cooperation. Specifically, the agents asked the various
freight forwarding companies to notify them the next time
CASPERSON or C-TEK COMPUTERS attempted to export any commodities
overseas. Two of the freight forwarding companies used by C-TEE
COMPUTERS agreed to cooperate and, in March of 1989, informed DOC
agents that they had been hired by C-TEE to pick up and ship
eleven different containers of computer parts which were to be
exported by C-TEE to different companies located in Singapore.
PAGENO="0267"
263
Accordingly, DOC agents, acting in conjunction with special
agents with the United States Customs Service, detained, opened,
and photographed the contents of a number of the eleven different
boxes being shipped by C-TEE COMPUTERS to Singapore. The
contents of the various eleven boxes were described by C-TEK
COMPUTERS as miscellaneous computer parts, including a computer
cabinet. Each of the eleven invoices filled out by C-TEK
COMPUTERS identified the total value of the goods being shipped
as under $5,000. After the shipments were photographed by
government agents, they were released for export.
In late March 1989, photographs of the various suspect
shipments were developed and submitted to a DEC employee in
Washington, D.C. On March 22, 1989, DOC Agent Hobbs was informed
that a DEC engineer had evaluated the photographs and determined
that the shipment identified as a "computer cabinet" was, in
reality, a DEC VAX 8700 computer -- in other words, a mainframe
computer, with a value of between $400,000.00 and $652,000.00.
Special Agent Hobbs was further informed by DEC employees that
the 8700 computer was capable of being used for any number of
scientific applications, including military applications.
Special Agent Hobbs requested a licensing determination
from DOC licensing officers in Washington, D.C. Three different
DOC licensing officers determined that all models of the DEC VAX
8700 computer required a license -- specifically, an "individual
validated export license" -- for export to all countries,
including the country of Singapore. The licensing officers also
advised Agent Hobbs that a presumption of denial existed for an
export license for the DEC VAX 8700 to the U.S.S.R. or to any
Eastern Bloc country. Neither CASPERSON, nor anyone else
associated with C-TEE COMPUTERS, had applied for or received a
license to export a DEC VAX 8700 computer to any country.
On March 24, 1989, Special Agent Hobbs was advised that
the United States Customs Attache office in Singapore had
determined that the company in Singapore to which the 8700
computer was being shipped was nonexistent. Specifically, the
Customs Attache in Singapore had made a physical check of the
purported address in Singapore and found a 20-year old apartment
building with the exact room number giyen on the shipping
invoices belonging to an Asian family. There was no telephone
listing in the Singapore phone directory for the company in
Singapore to which the 8700 Computer was allegedly being shipped.
Based on the foregoing evidence, a search warrant was
prepared for the business known as C-TEK COMPUTERS. The search
warrant was executed on March 29, 1989. During the course of the
search, DOC agents seized a large volume of documents. Those
documents revealed that CASPERSON, as president of C-TEE
COMPUTERS, had exported, or was in the process of attempting to
export, highly sophisticated computers and computer goods to
various companies located in India, Singapore, and Australia.
None of the shipments had a validated export license as required
by statute.
After the search of his business was concluded,
CASPERSON met with the United States Attorney's Office and agreed
to cooperate with the government by allowing consensual
1 A DEC VAX 8700, when assembled, weighs 2,000 lbs. and is
three feet deep, six feet tall, and six to eight feet long.
It is highly unlikely, therefore, that the computer could be
used in an apartment.
PAGENO="0268"
264
monitoring of telephone conversations between himself and others
involved in a then ongoing scheme to illegally export computer
goods from the United States. Between the time of the search
warrant (March 29, 1989), and the date that all defendants were
arrested in Buffalo, New York (July 21, 1989), CASPERSON
participated in approximately 180 tape-recorded telephone
conversations.
Those tape-recorded conversations, coupled with
documents seized from CASPERSON'S place of business during the
execution of the March 29, 1989 search warrant, revealed the
following: (1) that beginning as early as August 1988, an Indian
citizen named SHIV MOHAN, working with a British citizen residing
in Australia named JOHN TOWNSEND, actually purchased or attempted
to purchase various highly sophisticated computers and computer
products which were capable of being used for military purposes,
and then exported or attempted to export those goods either to
nonexistent companies in Singapore or to companies associated
with MOHAN in India; (2) the computers and computer products
which WOMAN and TOWNSEND actually purchased or attempted to
purchase for export included, among other things, the super
mini-computer known as the DEC VAX 8700, various MICROVAX II
computers, and a type of computer called a Tecktronics 4225
Workstation -- all of which are capable of, and in fact have been
used for, military purposes; (3) MOHAN had close ties with the
Soviet tlnion and, in fact, was the managing director of a company
located in New Delhi, India, known as KOHINOOR IMPEX PRIVATE
LIMITED (hereinafter, referred to as "KIP"), which operated as a
trading house exporting goods and equipment to Russia and
elsewhere; (4) in February of 1989, KIP entered into a joint
venture agreement with a company in London, England, named
PERFECT TECHNOLOGIES LIMITED, and an agency in Russia called
"GLAVKOSMOS RESEARCH" for the stated purpose of developing and
producing computers, computer systems and software for Russia;
(5) MOHAN and TOWNSEND paid CASPERSON, and DAVID WHYTE, a
Canadian citizen residing in Toronto, to act as brokers; that is,
they paid large commissions to CASPERSON and WHYTE to locate and
arrange for the purchase and subsequent export from the United
States and Canada of highly sophisticated computer equipment
which was capable of being used for military purposes; (6) WHYTE,
in filling the orders for sophisticated computer equipment placed
by MOHAN and TOWNSEND, knowingly violated various Export
Administration Regulations of the United States by, among other
things, attempting to purchase large numbers of the
Tecktronics 4225 Workstations and falsely identifying the
end-user of the product as being a United States company located
in Buffalo, New York; and by failing to acquire a validated
license or authorization from the DOC to re-export the same; and
(7) that the funds used to acquire both the DEC VAX 8700 computer
and the Tecktronics 4225 Workstations were provided to CASPERSOM
and WHYTE by the English company known as PERFECT TECHNOLOGIES
LIMITED. Documents seized during the course of various search
warrants issued in this case revealed that between December 14,
1988, and March 23, 1989, wire transfers totalling approximately
$1.6 million were transferred to CASPERSON's C-TEK COMPUTERS
business account. CASPERSON admitted to Special Agent Hobbs that
the $1.6 million was transferred to C-TEK on behalf of, or at the
direction of MOHAN, and was to be used for the purpose of
purchasing and then exporting to India and other places unknovn,
various highly sophisticated computers and computer-related
parts.
Five months after the search warrant was first executed
at C-TEK, MOHAN, TOWNSEND, and WHYTE were lured into the United
States by CASPERSON. Acting on instructions from DOC special
PAGENO="0269"
265
agents, CASPERSON sent a telegram to TOWNSEND requesting a
seeting between the parties. CASPERSON told TOWNSEND that the
purpose of the meeting was to discuss outstanding orders for
cosputer goods that MOHAN had placed with both himself
(CASPERSON) and WHYTE, and to specifically discuss the delivery
to MOHAN of the Tecktronics 4225 Workstations. Both TOWNSEND and
MOHAN agreed to meet with CASPERSON in Buffalo, New York.
Presumably, the only reason they agreed to do so was because
CASPERSON still held a large portion of the $1.6 million that had
been transferred to his account by PERFECT TECHNOLOGIES LIMITED.
On July 21, 1989, TOWNSEND, MOHAN, WHYTE, and CASPERSON met at a
hotel in Buffalo, New York, to discuss the outstanding orders for
computer equipment. Defendants MOHAN, TOWNSEND, and WHYTE, were
placed under arrest at that time.
After their arrest, defendants MOHAN, an Indian national
residing in New Delhi, India; TOWNSEND, a British national
residing in Australia; WHYTE, a Canadian citizen; CASPERSON, a
United States citizen residing in Kirkland, Washington; and
numerous other individual and corporate defendants not present in
the United States were charged in a 25-count Second Superseding
Indictment filed in the Western District of Washington with
various criminal violations relating to the export of highly
sophisticated computer equipment from the United States, in
violation of the United States export laws. In addition,
defendants MOHAN, TOWNSEND, and others, were charged with the
crimes of attempting to export highly sophisticated computer
equipment from the United States to the Soviet Union. The
charges contained in the indictment constituted violations of the
Export Administration Act of 1979, (50 U.S.C. Appendix,
Sections 2410, et ~ which restricts exports of U.S. origin
technology where necessary for, among other things, national
security reasons, and prohibits the exportation of any ~tem on
the Commodity Control List without a validated license. The
indictment also charged the various defendants, including
defendants MOHAN and TOWNSEND, with false statements and money
laundering, all arising in connection with the alleged export
violations.
Defendants M0H~N, TOWNSEND and WHYTE were ordered
detained pending trial. The case was ultimately resolved when
2 The Commodity Control List ("CCL") is an official,
public document which is prepared by the Secretary of
Commerce and contained in the Export Administration Act
("EAA") regulations. The CCL identifies, by level of
performance, those commodities (in this case, computers)
which are controlled for purposes of national security --
that is, which require a validated license prior to export
from the United States. The inclusion of an item on the CCL
does not mean that it can never be exported. Rather,
inclusion on the CCL only triggers individualized
consideration by the Departments of Commerce, Defense, and
possibly other Government agencies, of the validity and
appropriateness of the proposed exportation.
3 Initially, the defendants were ordered, over Government
objection, released on bail pending trial. The Government
successfully appealed the order of release, which was issued
by a magistrate in Buffalo, New York, to a district court
judge in the Western District of Washington. After vigorous
opposition from the defendants, the Ninth Circuit affirmed
the trial court's order of detention. See United States v.
Townsend, et al., 897 F.2d 989 (9th Cir. 1990).
PAGENO="0270"
266
all four defendants entered pleas of guilty to various charges
contained in the indictment. The sentences they received are as
follows:
1. Shiv Nohan: Guilty Plea 7/17/90
(Indian Citizen) Sentenced 11/7/90
33 months imprisonment
2 years probation
Fined $1,500,000
2. John Townsend: Guilty Plea 6/7/90
(British Citizen Sentenced 8/3/90
Australian Resident) 24 months imprisonment
2 years probation
3. David ~ Guilty Plea 5/29/90
(Canadian Citizen) Sentenced 8/3/90
1 year and 1 day
imprisonment
2 years probation
4. Robert Casperson: Guilty Plea 3/5/90
(American Citizen, Sentenced 8/10/90
cooperating defendant) 4 months work release
2 years probation
* * * * * *
II. CIRCUMVENTION OF U.S. EXPORT CONTROLS.
During the approximate 15-month period of May 1988
through August 1989, defendant MOHAN and others, acting through
defendant TOWNSEND, purchased and successfully
exported or attempted to export three particular types of
sophisticated computers and computer-related equipment in
violation of the United States export laws: (1) 5 NICROVAX II
computers with an approximate value of $350,000.00; (2) a super
minicomputer known as the DEC VAX 8700, with an approximate value
of $550,000.00; and (3) 50 Tecktronics Workstations with an
approximate value of $900,000.00. Defendants ImYTE and
CASPERSON, acting as brokers for MOHAN and TOWNSEND, purchased
the equipment ordered, and then arranged for the export of that
equipment, to MOHAN's associates in Singapore and India.
Documents obtained from the various search warrants
ismued in this case, as well as from formal discovery requests to
various foreign countries, conclusively established that the
equipment was not for use in either India or Singapore and was to
be ultimately exported to the U.S.S.R.
A. The Five MICROVAX II~çg~pg~g~:
At MOHAN's request, TOWNSEND acquired five MICROVAX II
computers from the United States and had them shipped to
Australia. Once the computers arrived in
Australia, TOWNSEND attempted to re-export the same to ROMAN in
India, via Singapore, without first acquiring a valid U.S.
re-export license. Upon learning that the computers had been
shipped to Singapore without a valid re-export license, DOC
licensing officials ordered the computers returned to the United
States. TOWNSEND subsequently sent DOC licensing officials a
letter stating that he had unknowingly violated U.S. export laws
in sending the computers to Singapore, and assuring DOC officials
5
PAGENO="0271"
267
that the computers would be returned to the United States and
would not be re-exported. The computers were then sent to
CASPERSON at C-TEE COMPUTERS. Once the computers arrived,
CASPERSON sent a letter to DOC licensing officials assuring them
that he was purchasing the five MICROVAX II computers from
TOWNSEND. In his letter, CASPERSON stated that the computers
would not be re-exported to any country. Immediately upon
receiving the five MICROVAX II computers, however, CASPERSON sent
them to WHYTE in Canada. WHYTE then proceeded to acquire a
Canadian export license for the computers and subsequently
shipped the computers directly to MOHAN's associates in
Singapore.
These computers were, in fact, exported and have never
been recovered. We do know, however, that MOHAN never applied
for or received any import authority for these computers from the
Singapore Government.
B. The 50 Tecktronics 4225 Workstations:
In January 1989, MOHAN and TOWNSEND placed orders via
CASPERSON and WHYTE, for the purchase of 50 pieces of
sophisticated computer equipment known as Tecktronics 4225
Workstations. The estimated cost of this equipment was in excess
of $900,000.00. WHYTE agreed to, and in fact did, apply for and
receive export licenses from the Canadian government to export
the equipment directly to MOHAN's company, KIP, and/or MOHAN's
associates, in India. In order to evade United States export
requirements, WHYTE told Tecktronics, Inc. -- the United States
manufacturer of the equipment -- that this equipment was destined
for end-use in the United States. In keeping with that story,
WHYTE instructed CASPERSON to direct Tecktronics to ship the
equipment to a company in Buffalo, New York. The plan was that
once the 4225s arrived in Buffalo, WHYTE would move the equipment
into Canada and then export it directly to MOHAN's company and/or
associates in India. WHYTE knew from the inception of the order
that the purchaser of these goods was MOHAN and that the
purported final destination was India and not the United States.
DOC licensing officers have determined that this method of export
of the 4225s to India constituted "transshipment" and, as such,
was a violation of Export Administration regulations. In
recorded conversations between the two, WHYTE admitted to
CASPERSON that he knew that the plan to ship the 4225s in this
manner constituted a violation of United States export laws.
This scheme was aborted when the defendants were
arrested in Buffalo, New York. No computers were shipped. We
have confirmed that MOHAN never applied for or received any
authorization to import these computers to India, as required by
Indian law.
C. The DEC VAX 8700:
In December 1988, CASPERSON and TOWNSEND, at MOHAN's
request, purchased a DEC VAX 8700 computer from a company in
Chicago and then disassembled the computer in a
warehouse in a suburb of Seattle, Washington. The computer, in
its disassembled state, was packed for shipment to Singapore in
eleven different containers in order to hide the true nature of
what was being exported. CASPERSON and TOWNSEND removed all
identifying marks from the computer, including the computer's
serial number. The eleven containers were sent to two different
nonexistent companies in Singapore. The description of the goods
being shipped, as described in the eleven shipping invoices, were
falsified to reflect miscellaneous computer parts, all with a
PAGENO="0272"
268
value under $5,000.00. CASPERSON and TOWNSEND planned to travel
to Singapore to reassemble the computer.
During the course of his cooperation with the
Government, CASPERSON admitted that TOWNSEND told him that it
would be useless to apply for a DOC-validated export license
because the computer was so sophisticated and because of where it
was ultimately going. In connection with his guilty plea,
TOWNSEND admitted to Government prosecutors that NOHAN had
informed him that the 8700 computer was destined for either
Romania or Bulgaria.
The computer was, in its disassembled state, shipped to
Singapore. The shipment was stopped in Singapore and returned to
the United States where it was seized by U.S. Customs officials.
* * * * * *
III. SUGGESTED IMPROVEMENTS TO THE SYSTEM.
As a prosecutor trying to enforce the EAA, I encountered
a variety of problems. I believe that the Act can be
strengthened in several ways to achieve greater levels of
effectiveness and, ultimately, deterrence.
A. Inadequate Sentencing Provisions:
Perhaps the major deficiency of the EAA, from both the
prosecutor's and society's perspective, is the comparative
lightness of its sentencing provisions. When
considering a just punishment for an export violation, the goal
of the EAA must be kept in sharp focus. The Act exists primarily
to protect the safety of our country and our people from wanton
dissemination of advanced technology with military applications.
For example, the computers MOHAN and his cohorts conspired to
illegally export had recognized applications to missile guidance
systems and aircraft radar. The EAA itself, however, affords a
maximum sentence of only ten years' imprisonment.
When compared to sentences for other federal crimes, ten
years is a light sentence, indeed. For example, passing or
altering counterfeit notes carries a maximum penalty of 15 years'
imprisonment (see 18 U.S.C. § 471); false statements made to
federal banking institutions carry a maximum penalty of 20 years
(see 18 U.S.C. §5 1005, 1006, 1007 and 1341); bank robbery of a
federally insured institution also carries a maximum 20-year
penalty (see 18 U.S.C. 5 2113(a)). Significantly, other crimes
which detrimentally affect our national security carry extremely
stiff penalties. Thus, gathering or delivering information
related to our national defense to aid a foreign government
carries a penalty of death, imprisonment for any terms of years,
or imprisonment for life. See 18 U.S.C. 5 794(a).
B. The Difficulty in Obtaining Forfeiture:
Forfeiture laws are among the most potent weapons in the
prosecutor's arsenal. Under the civil forfeiture provisions of
the Controlled Substances Act,
(21 U.S.C. Sections 801, et pg~.), for example, the Government
may properly request and obtain a warrant for seizure of all
property, including money, connected to illegal drug activity.
The importance of this statute is that it authorizes seizure of
property before a conviction is obtained, where a subject is
suspected of or charged with illegal drug activity. See
PAGENO="0273"
269
21 U.S.C. § 853(f). Moreover, under the criminal forfeiture
provisions of the controlled substances Act, forfeiture upon
conviction for a drug crime is accompanied by the rebuttable
presumption that the forfeiture is appropriate, and the court may
order substitution of assets. Id. at § 853(d) and 853(p).
The EAA does not provide for either of these
extraordinarily useful enforcement mechanisms -- specifically,
preconviction seizure of property including money, a presumption
in favor of forfeiture or substitution of assets. Instead, under
the EAA, forfeiture can occur only after conviction for an export
violation. 5ee 50 U.S.C. § 2410(g). By the time conviction has
occurred, however, forfeiture is likely to be beside the point as
the defendant will have squandered or hidden most of his or her
assets before then. Furthermore, the EAA provides no procedural
guidelines to govern forfeiture, thus, provisions like the
presumption in favor of forfeiture and substitution of assets do
not exist in the Act.
The pre-conviction forfeiture tool is simply too
important an enforcement mechanism to be left out of the EAA.
congress should, therefore, consider substantially strengthening
the EAA by giving prosecutors the authority to obtain seizure of
ill-gotten gains prior to conviction and by creating a rebuttable
presumption that forfeiture is appropriate in export violation
cases.
In the Mohan case, we used the money laundering statute
(18 U.S.C. § 1956) as a means of seizing, preconviction, the
funds transferred by MOHAN and his associates to cAspERsoN's
c-TEE account. By its terms § l956(a)(2) makes it a crime for
anyone to transport, transmit or transfer monetary instruments or
funds from outside to the inside, or from inside to outside of,
the United 5tates "with the intent to promote the carrying on of
a specified unlawful activity." Export violations are one of the
"specified unlawful activities" covered by the [money laundering]
statute.
Even the forfeiture provisions under the money
laundering statute are not perfect when dealing with EAA
violations, however. Export law violators typically are business
people, managers, and technology specialists who have ready
access to large sums of money. In the case I prosecuted, for
example, the defendants freely trafficked in computer hardware
costing hundreds of thousands, indeed millions, of dollars.
Under the money laundering provisions of the criminal code
mentioned above (18 U.S.C. § 1956), the transfer of funds into or
out of the United States for illegal purposes is a crime. The
movement of money within the United 5tates for illegal aims,
however, may not be a crime unless the prosecutor can prove that
4 The criminal forfeiture statute, as set forth in
18 U.S.C. § 982, is directly applicable to convictions for
violations of the money laundering statute. significantly,
the criminal forfeiture statute incorporates by reference
the procedural guidelines for seizure of assets set forth in
21 U.S.C. § 853, including the guidelines authorizing
preconviction seizure and establishing a rebuttable
presumption in favor of forfeiture.
In the Mohan case preconviction seizure warrants
allowed the government to seize in excess of $850,000.00.
This money was to be used by CASPEBSON and WHYTE to buy the
computer equipment ordered by MOHAN and TOWNSEND.
8
PAGENO="0274"
270
that pgj~gy itself represents the proceeds of illegal activity --
something which is very difficult to do. Given that export
violations will almost always involve the movement of money
within the United States (and did in the Mohan case), the EAA
forfeiture provisions should be strengthened to clearly prohibit
and criminalize such transactions.
C. Pre-trial Detention:
In the Mohan case it was extremely difficult to acquire
an order of pre-trial detention. As the lead prosecutor in the
case, I spent six court days and two
hearings devoted to this issue alone. The order of pretrial
detention was twice appealed by the defendants to the Ninth
circuit.
A presumption in favor of pre-trial detention in export
violations which implicate national security concerns should be
considered. There is, of course, authority for such a
presumption as demonstrated by the strict detention rules for
cases involving violations of our drug laws. Thus, under the
Bail Reform Act, a person suspected of illegal drug activity
carrying a sentence of ten years or more in prison is rebuttably
presumed to pose a danger to the community, and carries the
burden of proving why he or she should not be kept in jail
pending trial. 18 U.S.C. § 3142(e).
Violators of export control laws who endanger our
national security should also be treated as threats to our
community. We should presume, as we do for the drug dealer, the
appropriateness of pre-trial detention for export violators.
Such a presumption would be particularly helpful because in the
Mohan case, for example, two different court officers -- the
magistrate in Buffalo and the judge in Seattle -- both squarely
rejected the Government's position that the defendants' serious
crimes rendered them a danger to the community. In both
instances the Court was impressed by the fact that none of the
defendants had any prior criminal records or had any history of
drug abuse. In addition, all of the defendants were "successful"
and allegedly reputable, businessmen. As a result, the only
basis on which the Government was able to secure pretrial
detention was that of risk-of-flight.
Yet, a defendant charged with serious export violations
who has any ties to either the United States in general, or the
specific community where the charges are brought (such as family
or close friends) will probably be able to establish that he is
not a flight risk and so should not be detained on this basis.
See United States v. Motamedi, 767 F.2d 1403 (9th Cir. 1985); and
United States v. Townsend, et ml., 897 F.2d 989, 995, 996
(9th Cir. 1990).
D. Educating the Public and Law Enforcement
Personnel:
The lightness of the EAA's sentencing provisions and the
lack of a pre-trial detention presumption underscore another
deficiency in the statute, namely its diluted
message to the public and criminal justice personnel. The EAA
simply speaks too softly about the dangers of export violations.
When I was prosecuting the Mohan case, for example, I encountered
the disturbing sentiment that export violations were not
substantial crimes. One judge made clear to me that he could not
quite see why the attempt to illegally export some computers
merited much attention.
9
PAGENO="0275"
271
Congress must take on the role of educating the public
and public officials about the very real dangers posed to our
society by illegal export of sensitive technology. Congress can
achieve this goal in a number of ways. First, by substantially
increasing the sentencing levels under the Act, Congress can make
clear that it takes export crimes seriously, and that judicial
and law enforcement actors should do the same. Second, Congress
can insert a policy statement into the EAA that highlights the
potential for harm to our society from illegal exports.
Finally, Congress can ensure that appropriate resources
are devoted to the enforcement of the EAA. My involvement with
the Mohan case made it abundantly clear that the prosecution of
illegal exporters is difficult, time-consuming, and
resource-intensive. The defendants generally have the money to
afford skilled and expensive defense attorneys. The evidence
trail frequently runs across the country and around the globe,
requiring extensive investigations. The EAA itself is a
complicated maze of regulations and requirements.
Many smaller U.S. Attorney's offices simply do not have
the resources or experience to pursue these cases effectively.
would suggest therefore, that Congress create a national task
force to coordinate the prosecution of export violations. This
task force should consist of members from the relevant Government
agencies like the Departments of Commerce and Defense, and
federal prosecutors. Only with such a centralized and properly
funded authority can export violations be effectively pursued.
E. The Need for National and International
Cooperation:
My final remarks on improving the EAA concern the notion
of cooperation on both a national and international scale.
Internationally, we must work to secure agreements with other
countries concerning the production of evidence from abroad and
investigations within their borders. Here, at home, we need to
emphasize inter-agency cooperation.
10
E95889 . BU9
PAGENO="0276"
272
Mr. ANTHONY. Thank you, Ms. Moore, for your testimony.
Could you explain precisely for the record what charges the de-
fendants were found guilty of, what counts they were found guilty
of? You had multicount indictments.
Ms. MOORE. That is correct, and the defendants entered pleas of
guilty to the charges of 50 U.S.C. section 2410(a), which is the
lesser of the two export enforcement violations that makes it a
crime to knowingly export goods in violation of the export enforce-
ment laws. The defendants did not enter pleas to the greater crime
of exporting a good to a controlled country-in this case, Russia.
Mr. ANTHONY. Now, in your earlier testimony, you indicated that
you, as the prosecutor, felt you had sufficient evidence, if you went
to a jury trial, to convict the defendant of that count.
Ms. Moo1~E. That is correct.
Mr. ANTHONY. Could you just explain a little bit about how the
plea bargain came to take place and why this particular sentenc-
ing? The reason I am curious about it is that one of your recom-
mendations to this panel is that the sentencing guidelines be stiff-
ened and the penalty itself be stiffened. The current law that the
judge could have imposed was 10 years, yet he only did 33 months.
There is a lot of slippage between 33 months and even the 10 years.
I personally looked over your more complete submitted testimo-
ny and I looked over each individual count, with the maximum
that was obtainable plus the penalties. I think I added up-if the
judge were to run them consecutive and not concurrent, it would
be in his third or fourth generation before he would be allowed to
be out of prison. I am talking maybe a total of 400 or 500 years on
all of the counts.
So I am a little curious, as a former prosecutor, how the plea bar-
gain occurred and why the particular arrangement was made.
Ms. MooRE. Mr. Anthony, let me say two things. First of all, I
was not present during plea negotiations. I had left the U.S. attor-
ney's office at that time. I could not tell you why the prosecutors
who took over the case allowed the defendants to plea to the lesser
charges. I can tell you that personally I would not have done so,
given the evidence that I knew existed.
I can also tell you, however, that the reason for the low sentence,
at least one of the reasons that I am aware of, is because these par-
ticular computers were subsequently decontrolled. So although at
the time they were charged it was an offense to export these to
Russia, they were not-if you may recall, that was right around
the height of the warm relationships between the Soviet Union and
the United States. And the computers were subsequently decon-
trolled, and the judge stated that that was one of his reasons for
giving such a low sentence.
Mr. ANTHONY. A change of circumstance in terms of the market-
place?
Ms. MOORE. That is correct.
Mr. ANTHONY. And you stated that you had left the U.S. attor-
ney's office, and your case was picked up by someone else?
Ms. MOORE. That is correct.
Mr. ANTHONY. I have a feeling that the person who picked up
your case wa~ a bit 1e~ enthu~ia~tic than you and was just trying
to work it off the caseload and move it forward.
PAGENO="0277"
273
Ms. MOORE. I think that may be true, Mr. Anthony, and it was
also a case that I worked on for a full year and knew the evidence
pretty much in and out. I think it was fairly difficult for new pros-
ecutors to come on.
Mr. ANTHONY. I have two questions. One is about jury appeal, in
terms of what would make you feel that that case had jury appeal
and were you still there, would you have taken it to trial, versus
your predecessor and whether or not they thought it had jury
appeal and would be willing to take it to trial. Also this following
question would go to both of you, in terms of the manpower, the
amount of money spent, the resources that are needed and neces-
sary, and the cooperation between Customs, Commerce, and the
Justice Department in this case. The other map has been taken
down, but you very graphically showed to us and to anybody
watching that this is a very sophisticated, very complicated, multi-
national, multicorporation, multiindividual type scheme that takes
an awful lot of evidence and persistence and, therefore, manpower
to bring it to trial.
If you could, just give me your thoughts in terms of how much
personnel, the amount of money, the cooperation that went on be-
tween Customs and Commerce, and if any problems occurred. Then
after she finishes, Mr. Deliberti, if you would give us some indica-
tion of how much time and how many people were involved and
the cost.
Ms. Moore?
Ms. MOORE. Mr. Anthony, with respect to your first question,
that of jury appeal, I can tell that you are an ex-prosecutor because
that was the thing that I was most worried about as a prosecutor.
And the jury appeal came from the Department of Defense in that
I was going to-prior to the time that the computers were decon-
trolled, I was going to put on a Department of Defense witness to
explain why this represented such a grave threat to our national
security. It didn't convince the judges in terms of detaining the de-
fendants or finding the defendants a danger. But I did think that
for a lay person, for a jury person, that that would be pretty strik-
ing. And the Department of Defense was kind enough to lend us
their assistance in that matter.
With respect to Government resources in dealing with this case,
from the prosecutor's standpoint they were substantial. I worked
on this case-and the Seattle office at that time was a very small
office, 15 criminal prosecutors in the actual trial section. I worked
on this case full-time for one year investigating it, up to and after
the defendants' arrest. It was more than a full-time job.
After the defendants got arrested, they hired very high-powered
and expensive defense attorneys who filed mammoth amounts of
paper which diverted me as a prosecutor away from preparing the
case. At the same time, I was trying to get an indictment out be-
cause I only had 30 days. At the same time, I was trying to get a
very complicated indictment out, I had to respond to motions, ap-
pealing bail, and that was just an example of it, motions for all
sorts of information under the Freedom of Information Act.
So the manpower was substantial, and after I left, two additional
prosecutors took on the case and devoted virtually their full-time to
the case. All the-
PAGENO="0278"
274
Mr. ANTHONY. Would you yield at that point? Within the Depart-
ment of Justice, is there any such thing as a special strike force,
where people stay there year after year after year and handle
those cases and they become the expert, leave, and then somebody
else has to come in? You are aware of no special task force?
Ms. MOORE. There is not one, or one did not exist at the time
that I was working on the case.
Mr. ANTHONY. Could we benefit from some structure like that?
Ms. MOORE. It would be an extreme benefit. I don't think you
should take it away from the U.S. attorney's offices. It was quite
fun and challenging. But it certainly would help to have that level
of expertise. And you do have some of that already in place. The
Office of International Affairs was very helpful, and there is a core
of assistants around the country, maybe three or four, who have
worked on the cases.
The other thing that you should be aware of is that all the wit-
nesses in this case, if this case had gone to trial, there were going
to be 50 witnesses, 49 of which were either from outside the State
of Washington, where the case was being tried, and in most in-
stances were from outside of the United States. So in terms of re-
sources from the U.S. attorney's office, that was substantial.
Mr. ANTHONY. Tell me if there were any problems within the
Commerce Department and the Customs Service. And I am speak-
ing specifically of the VAX 8700 computer.
Ms. MOORE. I have nothing but highest praise for the Commerce
agents that I worked with. They literally moved up to Seattle and
worked around the clock for a full year.
The Customs agents that I worked with who I personally knew
as a prosecutor-well, let me just say that there seemed to be some
of the classic tension between investigative agencies. That seemed
to surface in this case, where Customs seemed to feel that they
should be investigating the case and not Commerce, and so did
some things that caused problems for me as a prosecutor.
Mr. ANTHONY. Did Customs want to actually seize the computer?
Ms. MOORE. Customs did seize the computer, and that turned out
to be a problem because they-we had no problem with them seiz-
ing it, but their timing of the seizure was such that they had to
give notice to the interested parties. And we had to dance around
that and do some things to make sure that that did not blow the
undercover investigation.
Mr. ANTHONY. You were trying to work a sting operation
through--
Ms. MOORE. That is correct. Through Commerce.
Mr. ANTHONY. Through Commerce.
Ms. MOORE. And Customs had seized the computer, in my opin-
ion prematurely.
Mr. ANTHONY. Back to what Mr. Shaw said earlier about having
maybe some better coordination, if his idea were in place, that par-
ticular situation at least maybe could be prohibited in the future.
Do you think it would be workable if we talked in terms of some-
thing like that?
Ms. MOORE. I am not sure what you are referring to.
Mr. ANTHONY. I guess he was talking about having some level at
which all of these decisions would be sent-would have the author-
PAGENO="0279"
275
ity to say to Commerce or to Customs this is the way it is going to
be done.
Ms. MOORE. I think that would be extremely helpful.
Mr. ANTHONY. From your standpoint of going into court, if you
had a single-source decisionmaker, it would obviously help you. Is
that what you are saying?
Ms. MOORE. That is true, although I have to say in this case Com-
merce came through time and time again. We got a quick licensing
determination. They did what I told them they needed to do for the
good of the case. I do think it would help for the infighting maybe
to have a level removed that is going to make determinative deci-
sions, such as you will not seize the computer.
When we went over to Singapore to interview witnesses, Customs
initially told me that I would not be allowed to interview witnesses,
that that was their jurisdiction. Customs knew nothing about the
case. So to have one body that could deal with problems like that, I
think would be helpful.
Mr. ANTHONY. Well, I thank you for your testimony, and I would
like to congratulate you. Every piece of evidence that I have read
or material I have read indicates that you did a very thorough job
and did have good cooperation and good competent people working
with you. Here was a case where the system eventually did work.
I must tell you that I have been in the situation where either the
law was changed or something occurred that took a very strong
case and then suddenly made it somewhat weaker. But that doesn't
stop the original intent of what you were attempting to do. So to
that extent, I congratulate you.
What about the costs from Commerce's standpoint?
Mr. DELIBERTI. Mr. Anthony, we had the same question about six
months ago, and we do have some figures available for you. The
two main case agents on this case are senior special agent Jerry
Hobbs who is to my right, and the new special agent in charge of
the San Jose field office, Mr. Randall Sike. But, quite honestly, de-
pending on the investigative activity of the day, we used anywhere
from two investigators to as many as 32, in the event we had an
arrest going down or if we were executing warrants, or even re-
viewing the abundance of documentation that was seized during
the course of this investigation. It went as high as 32 agents.
The cost is approximately $500,000, of which we estimate about
$150,000 to be for travel purposes.
Mr. ANTHONY. Was the cost and the complexity of this case
taken into consideration in the plea bargain and by the trial judge
in meting out the punishment, both jail days and fines, to your
knowledge?
Mr. DELIBERTI. To my knowledge, I do not know that.
Mr. ANTHONY. Do you know whether or not the fine has been col-
lected?
Mr. DELIBERTI. I don't know that either, but maybe someone else
could answer that.
Mr. ANTHONY. We are going to have the defendant testify after
you. I guess we can ask him if he has paid it.
Let me just ask some basic questions starting right at the very
beginning of the transaction. Why wasn't Commerce able to pre-
vent the C-TEK shipment of the VAX 8700 from the United States
PAGENO="0280"
276
after being warned by a Minnesota firm that C-TEK may possibly
export the equipment without a license?
Mr. DELIBERTI. Why we did not-
Mr. ANTHONY. Why were you not able to prevent the shipment to
begin with after you were notified?
Mr. DELIBERTI. Originally, when Commerce and Customs inspect-
ed the shipment we were told we would be looking at a different
kind of computer than was involved with C-TEK. And we had re-
ceived information that all it was was an expansion cabinet. This
was early information. Then when we inspected the piece of equip-
ment, it was camouflaged by not having any kind of logos on it,
any kind of markings on it, and it fit the description of an expan-
sion cabinet.
Later on when we went to the equipments' manufacturer, Digital
Equipment Corp., we found out that, in fact, it was part of the
super minicomputer, and we then contacted Customs and they ar-
ranged to get it back.
Mr. ANTHONY. I understand you got excellent cooperation out of
the employees from Digital also. Is that correct?
Mr. SIK~. That is correct.
Mr. ANTHONY. You are not saying that you were monitoring C-
TEK prior to this tip, are you?
Mr. SIKE. No, sir.
Mr. ANTHONY. So what you are really saying is that when Mr.
Moody said that most of the cases, in his opinion, come because of
a tip, you are saying that this particular case came because of a
tip.
Mr. SlicE. Yes, sir.
Mr. ANTHONY. And after the tip, then you began to monitor, but
even with early monitoring, you couldn't make a determination
that the first shipment contained an item that should have re-
quired, what, a license?
I guess my basic question on that response is what if you hadn't
gotten the tip? What if the Minnesota firm had not been suspi-
cious? Would we still be seeing this money chased all around the
world and this equipment being traced all around the world, not on
your chart in front of a committee?
Mr. DELIBERTI. Perhaps. However there are other mechanisms
that are in place here. Let's start with the business community in
general. We certainly are raising the level of awareness of the busi-
ness community, and especially in the Seattle area now. Not only
that, we have freight forwarders now that have a higher level of
awareness of export controls. And we also have the Customs Serv-
ice at the ports and borders. So there are three other mechanisms
that may have kicked in.
Mr. ANTHONY. Now, you know Mr. Casperson is going to testify
that had he had a little bit better knowledge, Ms. Moore, of even
the penalties as they apply today, that he might have thought
twice about it. So any education that you have done must have
been going on after that point. Are there special programs that are
ongoing into the business community?
Mr. DELIBERTI. There are special prograths going on that are edu-
cational in nature, and I could tell you how it is expanding. In the
northwestern region that I had managed for the last 6 years, in
PAGENO="0281"
277
1985 we had a total of about four or five tips or leads come into the
office, and at the close of 1990 it was up to 400. So we certainly see
an increase in the level of awareness and reporting of information
to the Commerce Department based on this campaign to educate
the public.
Mr. ANTHONY. Let me go back to this computer, this VAX 8700.
There is a possibility that that computer, having been shipped,
could have been shipped from Singapore before Commerce discov-
ered it was a VAX 8700.
Mr. DELIBERTI. That is correct.
Mr. ANTHONY. And after you got into your investigation, you
found out that Mohan had very close serious ties with the Soviet
Union? It is a supercomputer on the export list, and before the cold
war began to resolve, they were perceived and the President had
made some very serious statements about what an enemy they
were. So that could have actually ended up-
Mr. DELIBERTI. Could have.
Mr. SIKE. We believe so.
Mr. ANTHONY. Could any of the equipment that has now present-
ly not been accounted for be in Russia?
Mr. SIKE. Yes, sir.
Mr. ANTHONY. Is it your strong belief that is where it is?
Mr. SIKE. It is my belief, sir.
Mr. ANTHONY. Based on convincing evidence, documented tran-
scriptions of recorded testimony?
Mr. SIKE. Based on evidence ~that we have obtained through
banking documents.
Mr. ANTHONY. That particular piece of equipment that you sus-
pect to be in Russia at the moment, which means that the system
failed even with a tip, has that been declassified? I am not sure if
that is the proper terminology, but has it been reduced to a non-
threatening use category?
Mr. SIKE. Yes, sir.
Mr. ANTHONY. Then I must tell you that that does make me feel
a bit better.
Mr. SIKE. Us, too.
Mr. ANTHONY. At least they are not over there using this sophis-
ticated computer planning missile-well, they could be. I mean,
just the fact that we have declassified it doesn't mean that it can't
be used. That equipment did have military application use, did it
not? So it still would have military application use.
Mr. SIKE. Yes, sir.
Mr. ANTHONY. It is just that the threat has been reduced.
Let me tell you what a future witness is going to testify to, and I
would like to get your response to this. A future witness has told
our staff that looking back, first, Ms. Moore, he wouldn't have done
it because now he knows that he could be punished for it. Not that
it was morally wrong, but that he could have been sent to jail for
it. But when asked if he were to do it, even in the face of the law
saying he shouldn't and knowing the severe punishment, he said
what he would do is spread the shipments out and route them
through Canada to avoid detection.
My basic question is based on-and if you have any response to
this, Ms. Moore, feel free to jump in. Since we do have this free
PAGENO="0282"
278
trade treaty with Canada and we are in the process of determining
whether or not to give fast track authority to the administration to
determine whether or not we want a free trade treaty with Mexico,
how easy is it for enemies of the United States to illegally export
U.S.-origin high technology?
Ms. MOORE. I think in this case it was extremely easy, and that
was one of the most frustrating aspects for me in this case, because
that was the diversion route used here; where equipment. U.S.-
manufactuTed equipment, was purchased in the United States,
transshipped to Canada without a license, and then a license was
received to ship the equipment to Mohan's companies in India, and
we did not receive substantial cooperation from the Canadian Gov-
ernment. And it was difficult to establish or to explain to a jury
why that was wrong.
Mr. ANTHONY. Thank you. I apologize for turning my head for a
moment.
Do you have any response to this? Does Commerce have any re-
sponse to that new scheme that would come up? In other words, he
breaks the parts down. He sends it into Canada with which we
have got a free trade border, active-active trade. From reading the
material, it appears that if they are willing to issue false declara-
tions to the Canadian Government, they almost routinely give a re-
export license to the parts and/or the product in total. It appears
to me that this is a major, major loophole. I just wonder how in the
world Customs or Commerce is stopping it or plans to stop it. Or
are you even worried about it?
Mr. SIKE. Well, it is my understanding that the licensing require-
ments to Canada, there are none because of the government rela-
tionships, so that free trade issues and licensing issues are separate
issues.
Mr. ANTHONY. Explain that to me.
Mr. SIKE. Well, the-
Mr. ANTHONY. In other words, I am sitting over there in India. I
have got a pocketful of money, and I have got an enemy that wants
to buy the most sophisticated high technology that Americans
make. The American is going to sell it because it is going into
Canada, and there is no reason for them to think that there is any-
thing wrong with it. But I have obtained a broker in Canada that is
going to go do whatever it takes illegally to get it to me in Singa-
pore, to that false front office building that is just a fake name.
How are we going to stop it?
Mr. SIKE. Well, Canada has similar export controls to ours. If we
export a commodity to Canada or the exporter exports a commodi-
ty to Canada, under our regulations if he knows that the commodi-
ty is not for consumption in Canada, then it would require a De-
partment of Commerce license if it is a controlled commodity. If
the commodity goes to Canada and it is a controlled commodity
and the individual sometime afterward then wants to export out of
Canada, then he would be required to get-my belief is he would be
required to get a Canadian permit.
Mr. ANTHONY. Well, I think I agree with what Ms. Moore said.
There seems to me to be a glaring loophole, and I must tell you
that while we are debating to do something with Mexico, it looks
like we are going to open up the south end of our border as well as
PAGENO="0283"
279
having the north end of our border opened up. I think this is an
area that we really need to give some serious thought to. Inasmuch
as the Canadian Government has asked to be brought into it and
call it a North American trade agreement discussion, maybe this is
the time to open that back up to see if there is any recommenda-
tions that we could make.
So if I am off on the wrong foot and running up a blind alley, I
hope you will help me with it. But if you think I am at least
moving in the right direction, I wish you could give me some addi-
tional guidelines from Commerce in that regard.
Mr. Sundquist, do you have some questions, or Mr. Schulze?
Mr. SCHULZE. I would yield to the gentleman from Tennessee.
Mr. ANTHONY. The gentleman from Tennessee, Mr. Sundquist.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
Ms. Moore, I want to compliment you also for your excellent
work.
Ms. MOORE. Thank you.
Mr. SUNDQUIST. While I am happy that you are in the private
sector doing well, I am sorry you are not still with the Govern-
ment.
Mr. ANTHONY. Mr. Sundquist, would you yield a minute?
Mr. SUNDQUIST. I would.
Mr. ANTHONY. I think what I am going to do at this point is ask
our other two witnesses to come forward. I would like to swear
them in and put them under oath. I think maybe we can have
some questions batted back and forth inasmuch as I keep mention-
ing them.
So, Mr. Casperson, and I understand that Mr. Sastra is an attor-
ney representing Mr. Mohan, if you all could take your places at
the table. Mr. Mukkar and Mr. Casperson, if you would just raise
your right hands, I am going to read an oath. Raise your right
hands.
[Witnesses sworn.]
Mr. ANTHONY. I want the record to reflect that there were af-
firmative responses from both witnesses.
I yield to Mr. Sundquist.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
Ms. Moore, I want to get back to the question. I think Deliberti
said it cost about a half million dollars. What do you think it cost
the Justice Department for this case? Any guess?
Ms. MOORE. I really can't venture any guess. I believe that it was
more than that, given the travel involved, but I can't give you a
dollar number.
Mr. SUNDQUIST. How much was Mr. Mohan fined for his viola-
tions?
Ms. MOORE. $1.5 million.
Mr. SUNDQUIST. Ms. Moore, did you have a feeling or do you have
a feeling that we were able to get to the bottom of this whole oper-
ation?
Ms. MOORE. Absolutely not.
Mr. SUNDQUIST. Do you think we just barely touched it?
Ms. MOORE. Yes, I do. Very strongly.
Mr. SUNDQUIST. And on the basis that we didn't really get to the
bottom of it but we got a portion of it, how easy was it or is it for
PAGENO="0284"
280
the remaining people that we didn't touch to just continue with
their operation?
Ms. MOORE. It was my opinion and the opinion of the agents-
and I don't think that the ~committee members are going to like to
hear this-but that it was very easy. And particularly the Canadi-
an route is a very big problem, and I am convinced that Mr.
Mohan has not told us even a sliver of what he knows. I am con-
vinced that there is a network of people out there, Mr. Mohan's
former cohorts, who are continuing to do the same thing.
Mr. SUNDQUIST. Again, maybe this question has been asked in a
little different way, but obviously you had to have given some
thought to how we could improve the law, given the Canadian situ-
ation. Other than stiffer penalties and maybe more information
that is out to other businesses to encourage tips, maximum penal-
ties, perhaps more minimum penalties, those kinds of things, what
other suggestions based on your long and dedicated involvement in
this case would you make to this committee?
Ms. MOORE. I think that internationally something does need to
be done, and one of the things that I was worried about as a pros-
ecutor is that, on the one hand, I was going to be telling the jury
that these were very serious crimes, but on the other hand it
seemed to me that it was fairly easy to commit the crimes.
I was disappointed that other governments did not seem to be in-
terested in our problem even though it involved their countries.
And I am particularly talking about Canada, although they subse-
quently changed, and Singapore. And so I don't know what you can
do, and I understand that it is sticky. But it seems to me that
something needs to be done to guarantee cooperation with coun-
tries who say that they are friendly to us.
Mr. SUNDQUIST. What did Canada do to change to be more coop-
erative? What brought that on?
Ms. MOORE. After numerous meetings where the agents met with
Canadian authorities and were finally able to convince the Canadi-
an authorities that they were, one, not withholding information
from them gratuitously, Canada took in what my opinion was an
offensive attack and said if you would just let us know about your
investigation early on, we could have stopped all this. That was
wrong because Canada had already granted export licenses for
large amounts of equipment that I, as a newcomer to these crimes,
understood had to have raised flags. When somebody is trying to
get an export license for 50 Tektronix 4225's to go to the same end
user, that has to raise a flag.
Canada was upset that we hadn't shared with them, that we
were doing this investigation, and initially took the position that
because we hadn't informed them of that, we were essentially re-
sponsible for them granting export licenses. After we pointed out to
them that the export licenses had already been granted at the time
we got involved-but it took a lot of meetings to get them con-
vinced of that-then Canada seemed to back down a little bit. Al-
though they never did any of the search warrants that we request-
ed, and we had a hard time getting documents from them.
Mr. SuNDQuI5T. Did you have any problems with our State De-
partment? Did they help or hinder or just nothing?
PAGENO="0285"
281
Ms. MOORE. I really didn't have any contact with the State De-
partment except to go overseas to do an investigation.
Mr. SUNDQUIST. Who did you deal with? At what level did you
deal with officials in Canada?
Ms. MOORE. I forget now. Maybe the agents can speak to that.
Mr. SUNDQUIST. What government officials, what level? Would it
be the equivalent of our Justice Department?
Ms. MOORE. No, no. We met with the equivalent of their Com-
merce.
Mr. SUNDQUIST. Their Commerce. I see.
Ms. MOORE. Yes. External Affairs.
Mr. SUNDQUIST. Thank you, Ms. Moore.
I want to also compliment Commerce on their good work and the
dedication of the two agents. You really gave a lot of yourselves in
this thing in time and energy. I know you have to be frustrated as
well when you spend all this time and you get the goods on people,
and then they get off with relatively light sentences.
What is the impact? You all are aware of the dangers and the
impact on our security if we don't stop this kind of thing. That has
to be one of your major concerns, isn't it?
Mr. HOBBS. It is personally a concern, and we continue and do
our job as thoroughly as we can. Beyond that, we can't really ad-
dress that.
Mr. SUNDQUIST. Do you think that we got all the people involved
in this?
Mr. HOBBS. My personal thought is that we did not.
Mr. SUNDQUIST. If we had stronger sentencing, stronger punish-
ment, do you think that might help in having the cooperation of
witnesses and maybe we would be able to get more?
Mr. HOBBS. I believe that it would assist us, yes.
Mr. SUNDQUIST. Could you just briefly review the undercover op-
eration that you developed initially to track C-TEK's shipments?
Mr. HOBBS. The undercover operation was more an undercover
type operation where we enlisted the assistance of Mr. Casperson
to consensually monitor telephone conversations and observe what
transpired between Mr. Casperson and any of the other codefen-
dants.
Mr. SUNDQUIST. Was it fairly easy for Mr. Casperson to use the
false descriptions and the freight forwarders and the multiple des-
tinations as you observed it?
Mr. HOBBS. It was my observation that it was quite simple for
him to do that. He simply had to misrepresent it.
Mr. SUNDQUIST. And have you given any thought as to what we
can do in terms of changing our laws to prevent that?
Mr. DELIBERTI. Let me address that here. You should know that
we are working with COCOM to establish standardized enforce-
ment procedures where we are all going to be enforcing export con-
trol laws in the same way. And we are working with the Australia
Group to also harmonize these enforcement-
Mr. SUNDQUIST. How about Canada?
Mr. DELIBERTI. Canada is included in that. While we bring
Canada up, I think it is important to at least bring something to
the floor here. That is, to receive these special privileges, such as
that sort of license-free zone to Canada, countries have got to adopt
PAGENO="0286"
282
some sort of an effective export control program. And the arrange-
ment that is currently there with Canada, includes this type of pro-
gram, and Canada is a COCOM member. So no proposal for license-
free exporting can go forward without adequate safeguards.
Mr. SUNDQUIST. Is there a list published on which countries are
embargoed-so that on the form it was stated that people will sign
under penalty of law that this particular shipment or these goods
do not have the ultimate destination of Country X-Libya, Iraq,
Iran, Soviet Union, whatever?
Mr. DELIBERTI. Not to that extent. I believe they have to sign a
shipper's export declaration, which is a census form, stating that
they understand what they are doing and they have to comply with
the regulations. And I believe incorporated in the regulations there
is a list of countries that don't get favorable treatment as com-
pared to those that do.
Mr. SUNDQUIST. Is that accessible? Regulations are one thing. But
to the people who are doing the shipping, there is something else.
Mr. DELIBERTI. Well, freight forwarders do shipping, and they get
paid substantial fees for providing a service, and they are supposed
to know. And people that are in the exporting business for the
most part are supposed to know.
Mr. SUNDQUIST. There is a difference between supposed to know
and warned. Don't you think that a warning there is needed-we
heard some testimony earlier today from a young lady who is sup-
posed to know, but her bosses really were supposed to know, and
they got off and she was left holding the bag.
Ms. Moore, do you have any comment on that?
Ms. MOORE. I think that would be a good idea, and it would help
from a prosecution standpoint to show the guilty knowledge.
Mr. SUNDQUIST. It would show the knowledge of guilt.
Now, we have controlled goods, right? I mean, that is part of
what we are talking about. So why not controlled countries receiv-
ing controlled goods and make it visible?
Mr. DEUBERTI. That is really a policy-
Mr. SUNDQUIST. I know it is a policy decision, but we are trying
to figure out what we can do to help to make your job easier.
Let me go and talk about the link between Mr. Mohan and the
Soviet Union. Could you comment on the contract that was trans-
lated? It was a Soviet Union contract. Could you comment on that,
describe it and how it fits in?
Mr. SlicE. Yes, sir. We sent letters rogatory through to the U.K.
for banking documents from bank accounts that were identified
during the investigation as belonging to Perfect Technologies and
Sidhartha Bose and Shiv Mohan. When we received those docu-
ments back, amongst them was a document, a contract basically,
for extension of a line of credit. What the document consisted of
was a Russian contract for a computer.
The document which was used to extend a letter of credit de-
scribed specifically what the letter of credit was going to be used
for. And I will just read you the first paragraph because that
pretty well describes what it is. It is a document from Perfect Tech-
nologies, Ltd. to BCCI in London. It says,
Perfect Technologies, Ltd. have requested us to sffect a t~1egraphic trnn~fer of
$490,000 favoring C-TEK Computers, Inc. being advanced payment for equipment
PAGENO="0287"
283
being purchased under their contract with Russia for U.S. $562,000 obtained during
a recent exhibition.
It just so happens that that $490,000 was exactly the payment
that was made for the DEC VAX 8700 by C-TEK Computers.
Mr. SUNDQUIST. That is an amazing document.
Mr. SIKE. Yes, it is.
Mr. SUNDQUIST. How did you happen to get that?
Mr. SIKE. Well, through the legal process, through the U.S. attor-
ney's office going through letters rogatory and through the United
Kingdom judicial system, we were able to get the actual bank that
handled the transfer to provide the documents for us as soon as we
got the legal situations cleared up. So, yes, we were lucky.
Mr. SUNDQUIST. Ms. Moore, that would have been very valuable
in a jury trial, wouldn't it?
Ms. MOORE. I liked that piece of evidence, yes.
Mr. SUNDQUIST. I will bet you did.
Ms. MOORE. That was going to be blown up.
Mr. SUNDQUIST. I meant to ask earlier, is it easier for somebody
to ship from Canada to India than it was from Canada to some
other countries? Is there some special arrangement because it is
part of Great Britain?
Mr. SIKE. I don't know the answer to that, sir.
Mr. SUNDQUIST. I wish everybody here could see and hear the
tape recordings that you all made. One part that you have included
in the transcript here, obviously you can't hear the smirking or the
laughing between Mr. Townsend and Mr. Whyte. But would you
describe that particular conversation and what they were laughing
about and why they were? It involved how easy it was to smuggle
computers.
[Pause.]
Mr. SIKE. Would you like me to characterize it?
Mr. SUNDQUIST. Yes, characterize it, just to give us the ease that
they talked about this happening.
Mr. SIKE. Well, Mr. Casperson had talked to Mr. Whyte. There
was a telephone conversation, and they were talking about trying
to get the license to export the Tektronix equipment from Canada.
Whyte was very, very happy and basically said he must be dream-
ing that he got it, and he laughed. Then he faxed a copy. They
were talking about faxing a copy to Mr. Casperson. The conversa-
tion basically ended up that they would-excuse me a second.
They were talking about how easy it was to get a Canadian
export license, a Canadian license. At least, David Whyte was talk-
ing about how easy it was.
Mr. SUNDQUIST. Mr. Casperson, it looked pretty easy at the time,
I guess.
STATEMENT OF ROBERT J. CASPERSON, PRESIDENT, C-TEK
COMPUTERS, INC., KIRKLAND, WASH.
Mr. CASPERSON. It looked a lot easier after I had learned more
about the export laws. Today I see it as a lot easier than it was
then. Then I didn't know. We stumbled into it at that time.
Mr. SUNDQUIST. You think it is easier than what you thought it
was even?
PAGENO="0288"
284
Mr. CASPERSON. Yes, much easier.
Mr. SUNDQUIST. How did you get involved in this with Townsend
in 1988?
Mr. CASPERSON. I had been dealing with Capricorn Computers for
about 1½ to 2 years prior to that, selling Datapoint equipment to
Australia, to a travel agency in Australia. At some point in time,
John Townsend became a partner or an associate of Capricorn, and
Capricorn Computer would ask me about some DEC equipment,
some disk drives, various other components. And at that point I
was introduced to John Townsend who was handling the DEC
equipment.
Mr. SUNDQUIST. What was your motivation to get involved in
this? Money?
Mr. CASPERSON. It was just a broker business at that time. We
were just brokering equipment.
Mr. SUNDQUIST. What about step two or step three or four as you
proceeded?
Mr. CASPERSON. Step two was probably we were becoming more
involved in larger pieces of DEC equipment. They were still just
asking for quotes, and the ability to get licenses. Step two I think
was when we first fell into a way of going through Canada. That
was pure accident.
I happened to get in contact with a broker in Canada, and I
started dealing with him because he had the best price. That was
the only reason, and it was by accident that he offered to get a Ca-
nadian export license and export to Singapore directly, instead of
us doing it.
Mr. SUNDQUIST. When did you find out that the computers were
really going to the Soviets? At what point?
Mr. CASPERSON. It was long after the investigation, the undercov-
er investigation.
Mr. SUNDQUIST. You didn't know that before?
Mr. CASPERSON. No, I did not know.
Mr. SUNDQUIST. You didn't know that-
Mr. CASPERSON. I had an idea.
Mr. SUNDQUIST. When they raided you, you didn't know it was
going to the Soviets at that point?
Mr. CASPERSON. No, I did not. I had an idea that they were going
some place other than Singapore-well, I knew they were going
some place other than Singapore when we shipped it to Singapore.
I thought it was going to India at that time. When we got involved
with Tektronix equipment in large quantities, I had a strong-I'm
trying to think of the word-idea that it was not going to a compa-
ny in India because of the quantities. It would take a company the
size of General Motors to need that kind of quantity of Tektronix
equipment. So it was at that point in time that I had a feeling it
was going some place else.
Mr. SUNDQUIST. How much money did you receive over the
course of the diversion operation from Mr. Mohan?
Mr. CASPERSON. Probably somewhere between $1.3 and $1.4 mu-
lion.
Mr. SUNDQUIST. What happened to that money?
Mr. CASPERSON. The Government has almost all of it.
Mr. SuNnQuIsT. They seized it?
PAGENO="0289"
285
Mr. CASPERSON. Yes.
Mr. SUNDQUIST. Almost all of it?
Mr. CASPERSON. What they don't have in cash they have in the
equipment.
Mr. SUNDQUIST. I see. Where did you think that money came
from?
Mr. CASPERSON. I thought it all originated from Mr. Mohan. I
knew it was coming through banks in London and in New York.
Mr. SUNDQUIST. Tell us about when the Commerce agents came
to see you and showed you the smoking gun memo.
Mr. CASPERSON. Which memo?
Mr. SUNDQUIST. The memo that you had sent describing that you
were going to have to be careful. Didn't Commerce show that to
you when they came and in fact raided your company?
Mr. CASPERSON. They obtained that during the search warrant.
They obtained that from my office.
Mr. SUNDQUIST. So they didn't have that when they-
Mr. CASPERSON. No.
Mr. SUNDQUIST. What was your reaction when they confronted
you with that?
Mr. CASPERSON. I knew they had it.
Mr. SUNDQUIST. You knew they had it.
Mr. CASPERSON. Oh, sure.
Mr. SUNDQUIST. Were you worried about them finding it?
Mr. CASPERSON. At that point, I knew I was in trouble.
Mr. SUNDQUIST. You knew you were in trouble.
Mr. CASPERSON. Worried-I was scared to death already. At that
point it didn't make a big difference.
Mr. SUNDQUIST. At that point had you already agreed to cooper-
ate? At that point had you already agreed to cooperate when they
found that?
Mr. CASPERSON. Yes.
Mr. SUNDQUIST. What should we do to change our export laws,
Mr. Casperson? What should we do to keep these things from hap-
pening? What should we do to put people like Mr. Mohan and
others out of business? What should we do to keep equipment from
going to the Soviet Union or countries that want to use it for other
reasons?
Mr. CASPERSON. You have got a real paradox in that you have
the Commerce Department on one side trying to control and regu-
late, and then you have other agencies on the other side wanting to
open up free trade. Things are real difficult. I think, as I said in
my statement, one of the major areas is to educate the business
community in areas of what the penalties are. Put it right on the
documents that falsifying these documents could result in a $50,000
fine and five years in prison.
It is a short statement. It would be easy to put on documents, put
it on all the documents.
Mr. SUNDQUIST. You think that would have made a difference
with you?
Mr. CASPERSON. Absolutely. I had no idea I could spend 5 years
in jail. I knew it was wrong, but I didn't realize I could spend 5
years in jail for it.
[The prepared statement follows:]
51-840 0 - 92 - 10
PAGENO="0290"
286
STTVIEMEr1T OR ROBERT J CASPERSOK
PRESiDENT of C-fEE COMPUTERS INC.
APRIL 18,1991
Mr. Chairman, and members of the Subcommittee.
My name i Robert Caspirson soil I sin the president ot C-Tek
Computers, Inc. of Kirkland, Washinciton. We buy and sell
compute rs and a 1 so d) consul Ii ng work with corpora t ions regarding
exportinq. I would like to share with iou my experiences and
observations n~ the U.S l)epartment of Commerce otfice ot Export
Enforcement regarding the transshipment of goods through Canada.
As you know C-TEE Computers was involved in a case regarding
the shipment of computers to Singapore without the proper export
1 i cense or sh 1 pp jog documents. After icy i og been served with a
search warrant by agents of the Office of Export Enforcement of
the U.S. Department of Commerce, I agreed to take part in an
undercover operation that resulted in the arrests of three
foreign nationals and one lJ.S. citizen who were involved in the
case. There are also indictments outstanding for several other
foreign. nationals and foreign companies that were involved in
this transaction and other transactions that occurred during the
undercover operation.
One of the questions the agents asked no after the
conclusion of this case was if we had it to do over again how
would we do it. My response was first of all T would not do it
again. Even though I stood to make in excess of $600,00D in a 6-3
month period, no amount of money is worth the impact that this
has had on me or especially my family both emotionally and
financially. It I were to do it again and had the knowledge that
I have today as a result of my experiences in the undercover
operation, I have found that it is very easy to ship and divert
goods out of the U.S. to virtually any destination that you would
choose. A lot ot what T am going to share with you I just
stumbled upon. Anyone who wanted to make a career of this and
took the time to study the export regulations of both the U.S.-
and Canada could do this very easily with very little chance of
being caught or if caught very little chance 01 being
successfully prosecu ted.
First of all we would find a nice small to medium sized
broker located in Canada that sells the type of equipment that we
would want to divert. I would tell them what I wanted to ship and
to what (lest i nat ion and preferably I would let the Canadian
broker purchase the equipment either in Canada or in the US.
Actually it would not matter where he bought the equipment. If he
could buy it in Canada that would sake it even harder to detect.
The Canadian Broker would then apply for a Canadian Export
1 i cense or as they are called in Canada an Export Permit, and
fill out the application truthfully. Oo the application form
there is a block asking for the origin ot the items to he
exported. The Canadian broker would put in this block that the
origin would be the U.S. In our particular case the Canadian
broker involved applied for more than seven different export
permits, all of which showed that the origin of the computers was
the U.S. There was no question that all of the computers that
would be exported to either Singapore or India would be
transhipped from the U.S. through Canada on to either India or
Singapore. The Canadians did not ask if a U.S. re export license
had been applied for in regards to any of the applications.
Except for one application for graphics terminals that were to be
shipped to Tndie, all of the applications were approved in under
PAGENO="0291"
287
two weeks. At this caste time it was taking two to three months to
get a U.S. export license approved. The application to India took
about 3 1/2 months for approval , hut only because they requested
letters from two companies in India regarding the application and
Mr. Mohan, who was the purchaser of this equipment, was very slow
in sending these. Had he responded faster the applications would
have been approved a lot faster.
By shipping the goods in the fashion T have described there
is very little chance of it coming to Lbs attention of the US
Commerce Department office of Export. Enforcement. Just tsr
argutsents sake lets say that Commerce Department lid happen to
stumble upon one of these transactions. The Caned ian broker would
just say that he purchases equipment all the Lime in the U.S. and
with free trade between the two countries it is his understanding
that he did not need a U.S. export license to ship eguipment to
Canada and as a Canadian citizen he is not familiar with the tJ.S.
Export Regulations. He is though very famitiar with Canadian
Export Regulations and has complied with all of their
requirements and he told them that the origin of the equipment
was the U.S. and they never informed him that he would need a re
export license from the U.S. Department of Commerce. Tn this
particular scenario there is nothing to f ie the tJ . S. cit i zen
involved, to the transaction. I am not a attorney, hut I would
fbi nk i t WOil id be very Ii f i Co 1 t ti pr cecil Ii inyone in t ft i
case.
It is my observaf ion that this type of transaction is going
to become easier to do in the coming years with the advent of
free trade with the Common Market and the possibility of free
trade with Mexico.
The question then is how do you stop this type of
transaction. I do not think the Commerce Department can get the
type of budget that would be required to hire the number of
agents that would be needed to check every shipment that would be
leaving the U.S. Even If they had the help of Customs it would he
an impossible task to check the final destination of every
shipment going out of this country.
As I see it there are only a few things that can be done to
slow it down. Dne is to educate the business community that there
is an Dff ice of Export Enforcement that is checking on goods that
are being shipped out of the U.S. I did not realize that the
Department of Commerce had an office of Export Enforcement until
after they served their search warrant. Tn fact I thought that
they were customs agents urit i 1 the (lay after they did a search of
my office. I would also educate the business community in regards
to what the penalties would he if they were to be caught making
illegal shipments. In my case I had no idea that I could spend up
to five years in jail for this type of activity. I have to admit
I did not go out and ask anyone either, t)ut the point is there
needs to he a campaign to notify bus mess peoplit what the
penalties would be. It) my case this would certainty have made me
think twice about what I was about ta do. Right now you need to
he very familiar with the export regulations to know this.
I also think that the retulatmoos as they pertain to
shipments to Cartada need to l)e rev ised and made easier to
understand. Purl 0] the unde rc toe r operation the agents gave me
sect ions of the regu Tat ions to read that wore highlighted in the
areas that perta med to Canada. The agents i oterpretat ion was
different from my interpretation and aftr I gave a copy to my
attorney to read, he had a third interpretation of the same
regulations. What I am trying to say is, that the way they are
written is very confusing.
The U.S. Department of Commerce is also going to have to
find ways to m~m5t better cooperation will) their counterparts in
Canada, the Common Market ~of in the fitter probably Mexico.
PAGENO="0292"
288
They need to get the help o1 the exporting agencies in these
countries to make their citizens aware of what the re export
requirements are with regard to goods that originate in the
United States.
One thing that I found dealing with other computer brokers
during the undercover operation, who do extensive exporting was
that it is common practice to avoid the licensing proces:; it
possible. They would do this not to divert goods to somewhere it
should not go, but to avoid having to deal with the Commerce
Department and expedite their shipments. One example was a
computer broker in Minneapolis who had a cusl:o:ner in England who
wanted to buy a large DEC VAX computer. The broker found one for
sale in Australia. Rather than go through the hassle of dealinn
with the Washington office of the Commerce Department and waiting
the 1-2 months it would take for approval of a re export license,
he found an Australian computer broker who already had a license
to ship tim i a type of equipment to one of h is cus loner'; in London.
So the US broker had the Australian broker pick up the equipment
and ship it to his customer in London on his lustralian re export
license. When the equipment arrived in London the U.S. broker had
the equipment picked up and shipped to his customer elsewhere in
England.
I think the department of commerce has made great strides in
the last two years with regards to the handling of license
applications and answering questions that exporters might have.
You now have a pretty good idea within two weeks of where your
application is in the approval proceso. The hoot thing they did
was open offices in Newport Beach, California and Portland,
Oregon. The employees in these oft ices uni ike the Washington D.C.
office are friendly, knowledgeable and very responsive. if they
do not know the answer to a question and cannot direct you to
someone who can, they say they will find out and call you l)ack.
The best part is they actually do call back.
Over the eighteen month period that the undercover
operation, and the following investigation look place, I worked
very closely with the agents of the office of Export Enforcement
from San Jose, California. I can honestly say that the agents
that I worked with always acted in a very professional and
courteous manner. There were tines that they were insensitive as
to how the undercover operation was effecting my family and as a
result were effecting ny performance, though I believe that as a
result of this investigation that they have learned a great deal
about how they should handle cooperating defendants in the
future.
Tn the beginning ot this operation the agents did have
difficulty in understanding how our industry worked aol the
mechanics involved in this very complex case. By the end ot the
investigation, I would have to say they are probably the mnost
knowledgeable agents in the country with regards to the exporting
of any sophisticated high tech equipment. T think we all learned
a great deal about how goods could and are being diverted out of
this country.
I think that the Department of Commerce has a very valuable
resource here, and one way that they could capitalize on this
knowledge would he to give semi oars for all of their field
agents. The content of those seminars should focus not only on
the techniques usod to divert goods, hut also on what to look for
as signs that individuals or companies are taking part in this
sort of activity. If these seminars were to he responsible for
stopping just one shipment, it would he worth the cost of doing.
Once again I would like to thank you for the opportunity to
address you, and I hope that my remsarks will be of some value to
you.
PAGENO="0293"
289
STATEMENT OF SHIV MOHAN MUKKAR, RAYBROOK, N.Y.
Mr. SUNDQUIST. Mr. Do you prefer being called Mr. Mukkar?
Mr. MUKKAR. Mukkar or Mohan, same thing. Mukkar.
Mr. SUNDQUIST. Mukkar, Mr. Mukkar.
Mr. MUKKAR. That is my family name, sir.
Mr. SUNDQUIST. Mr. Mukkar, where is your home?
Mr. MUKKAR. New Delhi, India, sir.
Mr. SUNDQUIST. New Delhi.
Mr. MUKKAR. Yes.
Mr. SUNDQUIST. When did you leave New Delhi last?
Mr. MUKKAR. The 17th of July 1989.
Mr. SUNDQUIST. For what purpose?
Mr. MUKKAR. I was coming to basically see my son in London
who was at that time, and then also meet Mr. Townsend here and
Casperson because I placed large orders and the equipment was not
coming in.
Mr. SUNDQUIST. You came over here for the meeting in Buffalo?
Mr. MUKKAR. Yes, to settle the accounts.
Mr. SUNDQUIST. Are you the owner of Perfect Technologies?
Mr. MUKKAR. I am one of the directors, sir.
Mr. SUNDQUIST. Who were the other owners?
Mr. MUKKAR. There are two of them. One is, of course, my wife
and there is one guy Sadewa.
Mr. SUNDQUIST. Pardon me?
Mr. MUKKAR. Mr. Sadewa. He was. He is no longer. After I was
arrested, the company's almost closed, and he-you know, he left
the company. He was a director at the time I left India.
Mr. SUNDQUIST. Where did you have offices at that time?
Mr. MUKKAR. At the time of my arrest, I had office in Bombay
and Delhi.
Mr. SUNDQUIST. London?
Mr. MUKKAR. London is my agent where there is always-he is
my partner in-not Perfect Technologies. He is my partner in
other activities. I was trying to make an amusement park in India.
Mr. SUNDQUIST. But he was your partner, and you had an office
there?
Mr. MUKKAR. No. He is my partner in India, in another venture.
Perfect Technologies, he is the director and he owns the company
100 percent.
Mr. SUNDQUIST. Excuse me one second, Mr. Mukkar.
Ms. Moore, if you disagree, would you speak up at this point, or
any point?
Ms. MOORE. Yes. I would just-I think that Mr. Mohan forgot to
mention Sidhartha Bose as an officer of Perfect Technologies and
also forgot to mention that Perfect Technologies maintains an
office in Russia.
Mr. SUNDQUIST. I was just getting to that. What is Mr. Bose's
role-was he not an officer?
Mr. MUKKAR. No, sir. He owned the company and all those docu-
ments are in-was given to me even in the discovery material that
Sidhartha Bose owned the company.
Mr. SUNDQUIST. Owned what company?
Mr. MUKKAR. Perfect Technologies, Ltd.
PAGENO="0294"
290
Mr. SUNDQUIST. So he was an owner of the company?
Mr. MUKKAR. He is the owner of the company of Perfect Technol-
ogies. They are my agents duly approved by Reserve Bank of India.
Mr. SUNDQUIST. Mr. Mukkar, I do want to remind you that you
are under oath.
Mr. MUKKAR. I am under oath, sir. I know.
Mr. SUNDQUIST. And you swore to tell us the truth.
Mr. MUKKAR. Right, sir.
Mr. SUNDQUIST. And when I ask you the question of who the offi-
cers were, you failed to mention-or who the owners were, owners
or officers-you failed to mention Mr. Bose.
Mr. MUKKAR. Dr. Bose is the owner of Perfect Technologies.
Mr. SUNDQUIST. So you would like to correct what you said previ-
ously, right?
Mr. MUKKAR. Oh, I see. It is a limited company. I will put it this
way. Then if it is the technical language to be used, Dr. Bose owns
majority shares of the company.
Mr. SUNDQUIST. Where is Mr. Bose now?
Mr. MUKKAR. I do not know. Last he was in India because it was
his daughter's birthday. My agent for exports, he was from 19-Dr.
Bose actually was working for an American company in 1983.
Mr. SUNDQUIST. Did he not benefit from the income of Perfect
Technologies that you owned or were officer in?
Mr. MUKKAR. I am not an officer in Perfect Technologies, sir.
Mr. SUNDQUIST. You are not a part owner of-
Mr. MUKKAR. No, sir.
Mr. SUNDQUIST. You didn't own any part of Perfect Technologies?
Mr. MUKKAR. No, sir. I did not own any part of Perfect Technol-
ogies.
Mr. SUNDQUIST. You did not benefit from sales made by Perfect
Technologies?
Mr. MUKKAR. Yes, I benefit because they are my agents and that
approval is given to me by the Government of India.
Mr. SUNDQLTIST. What?
Mr. MUKKAR. They are my agents. Agents. They sell my equip-
ment. They are my agents in England, and they have an office in
the Soviet Union also.
Mr. SUNDQUTST. So they sold for you?
Mr. MUKKAR. Not essentially me. They were agents for a lot of
other companies like Technicom.
Mr. SUNDQUIST. Did they sell for you in addition to other compa-
nies?
Mr. MUKEAR. Yes, I was one of their principals. They had many
other principals also.
Mr. SUNDQUIST. Is it true that there is a warrant out for~ Mr.
Bose? Do you know if Mr. Bose has a warrant out for his arrest?
Mr. MUKKAR. I do not know, sir.
Mr. SUNDQUIST. You don't know that?
Mr. MUKKAR. No.
Mr. SUNDQUIST. Ms. Moore, do you know?
Ms. MooRE. Yes, there is a warrant out for his arrest.
Mr. SUNDQUIST. For what reason?
Ms. MOORE. He is charged in the indictment, the same indict-
ment that Mr. Mohan pled guilty to.
PAGENO="0295"
291
Mr. SUNDQUJST. But, Mr. Mukkar, you didn't know that he was
charged in the same indictment?
Mr. MUKKAR. He was charged in the same indictment, but
whether there was a warrant out or not, I did not know, sir.
Mr. SUNDQUIST. And Perfect Technologies had an office or has an
office in Moscow?
Mr. MUKKAR. Yes, sir, they have an office-
Mr. SUNDQUIST. Have you ever been to Moscow? Did you ever go
to that office?~
Mr. MUKKAR. Yes, sir, I have been to Moscow a couple of times.
Mr. SUNDQUIST. These are the minutes from a meeting on June
30, 1988.
Mr. MUKKAR. Right, sir.
Mr. SUNDQUIST. It is the minutes of a meeting discussing the
export orders from the U.S.S.R.
Mr. MUKKAR. Right.
Mr. SUNDQUIST. You are familiar with that?
Mr. MUKKAR. Yes, right, sir.
Mr. SUNDQUIST. And you were present during that meeting?
Mr. MUKKAR. June of-I do not know what document it is, sir.
Mr. SUNDQUIST. This is where terms of business with PTL were
discussed, the cover charge, the commissions-
Mr. MUKKAR. Right, sir. Right.
Mr. SUNDQUIST. You were present then?
Mr. MUKKAR. Right, sir.
Mr. SUNDQUIST. Ms. Moore, would you walk us through this just
generally?
Ms. MOORE. Yes. I gave you my only copy of the document.
Mr. SUNDQUIST. I will give it back.
Ms. MOORE. This document, which bears the Bates number 7120,
is a document that was seized pursuant to a search warrant from
another individual who was charged in the indictment named Mr.
Malhotra, who is located in New York. Mr. Malhotra subsequently
pleaded guilty to a misdemeanor.
This document reflects the minutes of a meeting on June 30,
1988, between Shiv Mohan, Sidhartha Bose, and an individual
named Mr. Beliga, where they appear to be setting up the terms,
the commissions that the parties would get for export orders to the
U.S.S.R.
This was the first documented proof that we had of an agree-
ment between PTL, Perfect Technologies, Ltd., and Kohinoor
Impex. When I give you back the document, you will see Kohinoor
is listed in here, and Kohinoor, of course, is the company owned by
Mr. Mohan.
This date coincides with the date that Mr. Mohan was contacting
John Townsend and Mr. Casperson for large orders of Tektronix
4225's and Micro VAX 2 computers. This document also seems to
contradict Mr. Mohan's attorney's statement to the court in Buffa-
lo, New York, wherein he stated that Mr. Mohan was just a small-
time businessman who, if he sold anything at all to Russia, it was
simply personal computers.
Mr. SuNDQuI5T. Thank you, Ms. Moore.
Mr. Mohan, could you tell us about this-is it Kohinoor, the busi-
ness?
PAGENO="0296"
292
Mr. MUKKAR. Yes, sir. I will explain to you, sir. Actually, this
document if anybody will see he will get confused.
Dr. Bose's company, Perfect Technologies, is my agent for any
export order they get from any place in Soviet Union-the coun-
tries that are defined in the agreement.
Now, Indian Government allows that if you import components
and assemble those components and have some added value in that
manufacture, you could export it to Soviet Union. Otherwise, the
export is not allowed to Soviet Union. If. you buy in dollars, you
cannot sell in rupees. You have under the bilateral agreement, it is
so. So the indian Government, you have to go to the Indian Gov-
ernment and say that I need components for 500, 1 will export for
1,000, the Government gives you a license for 500, and then you
export for 1,000.
Now, besides Dr. Bose was my agent for sales, sometimes it hap-
pened that he had to buy some components for me also. Just about
that this was written, it coincided with the time when I was talk-
ing to Townsend, but also it coincided with the time when I was
negotiating 1,000 pieces of personal computer components from
Taiwan. So I told them that I cannot pay you 5 percent on both
sides, when I buy and I sell, so I give you only 2 percent on those
components which you buy, and then 5 percent on the normal com-
mission, because if you are giving me the components, same compo-
nents I am assembling, and I am selling it to the Soviet Union, you
are my agent as per Reserve Bank of India, so you start getting-
and this, for this 2 percent also, we got the approval additional 2
percent. We got the approval from the Reserve Bank of India.
Mr. SUNDQUIST. This is the contract that resulted in your sen-
tencing, I assume. This is the sale of the equipment.
Mr. MUKKAR. No, sir. This is a general contract. Actually this
was-there was a big-
Mr. SUNDQUIST. This is not the basis, Ms. Moore?
Ms. MOORE. This is one of the pieces of evidence that establishes
the diversion to the Soviet Union. The contract for the 8700 is a
different document.
Mr. SUNDQUIST. I understand that.
Ms. MOORE. I think Mr. Mohan, perhaps he could tell us what
equipment it was that is referred to in this document that he
was-
Mr. MUKKAR. I have documents attested by the American Em-
bassy which I wanted to give at the trial.
Mr. SUNDQUIST. If you could briefly describe it, and then if we
could have those for the record-
Mr. MUKKAR. Starting from videocassettes, radio tape recorders,
silver plates, pencil sharpeners, and practically 15 other products I
was exporting to Soviet Union, plus personal computers starting
from 1987.
Mr. SUNDQUIST. So you have supplied computers to the Soviet
Union?
Mr. MUKKAR. Only personal computers.
Mr. SUNDQUIST. Only personal computers.
Mr. MUKEAR. Only personal computers.
Mr. SUNDQUIST. And you had no part in the computer shipment
that was discussed and the meeting in Buffalo was arranged for?
PAGENO="0297"
293
Mr. MUKKAR. That Buffalo-I mean, sorry, sir. Are you talking
about Tektronix?
Mr. SUNDQUIST. Yes, Tektronix.
Mr. MUKKAR. Yes. Tektronix, a license was obtained. I was told
by Mr. Casperson that the license was-now through Mr. Town-
send. The first time I met Mr. Casperson at the meeting in Buffalo.
I had not met him ever before.
Mr. SUNDQUIST. What kind of equipment were you ordering?
Mr. MUKKAR. 4225 for shipment to India.
Ms. MOORE. Perhaps Mr. Mohan could then explain for us, if this
equipment was to go to India, why he did not have an Indian
export license for the 4225's as required by Indian law.
Mr. MUKKAR. Export license or-
Ms. MOORE. Import license.
Mr. SUNDQUIST. Import license.
Mr. MUKKAR. I had the import license. I can give you that also.
Maybe it will be with me. Actually, terminals at that time-I have
to correct myself. Terminals at that time were OGL, but I will still
check up and I will give you the detailed reply. It was an open gen-
eral license, one item, whether it was terminals or-this was not a
workstation because every time-it was termed in the indictment
also as a workstation. Whereas, 4225 was a terminal. And an
export license from Canada was obtained in the name of Kohinoor
Impex for that.
Ms. MOORE. But no import certificate or license was obtaining
from the Government of India. Isn't that correct?
Mr. MUKKAR. Import certificate applicability started from April
of 1989.
Mr. SUNDQUIST. Mr. Mohan, if what you are saying is true, why
did you plead guilty to conspiracy for making false statements and
money laundering?
Mr. MUKKAR. Sir, money laundering is an automatic offense.
Mr. SUNDQUIST. What about the false statements?
Mr. MUKKAR. No false statements. I have pleaded guilty to
knowledge of the offense-
Mr. SUNDQUIST. What about conspiracy?
Mr. MUKKAR. I am not pleading guilty for that, sir.
Mr. SUNDQUIST. Ms. Moore?
Ms. MOORE. No, he has not, is my understanding.
Mr. SUNDQUIST. What did you plead guilty to?
Ms. MOORE. To knowingly violating U.S. export laws pursuant to
2410(a), which does not specify going to a controlled country.
Mr. MOODY. Would the gentleman yield for a minute?
Mr. SUNDQUIST. I would yield.
Mr. MOODY. Mr. Mohan, this document right here, numbered
7120-
Mr. MUKKAR. Right, sir.
Mr. MOODY. Where were these items to go? What was your un-
derstanding of where they would finally go?
Mr. MUKKAR. 4225, originally when we decided when I was im-
porting the material-there were three items, sir: Micro VAX's,
4225's, and 8700. They are the only three items totally described in
the indictment and various papers, whichever has come to us.
PAGENO="0298"
294
Micro VAX, first the order was placed in May of 1988. The reason
the order was placed, because DEC was coming into-
Mr. MOODY. Just try to answer the question I asked you without
giving me other information.
Mr. MUKKAR. Right.
Mr. MOODY. What equipment does this cover? This is the minutes
of the meeting on 30/6/88, June 30, 1988.
Mr. MUKKAR. There is a big list of equipment which was going,
and it is gone already.
Mr. MOODY. Did you know this would go to the Soviet Union?
Mr. MUKKAR. Which one?
Mr. MOODY. Did you know that these would end up in the Soviet
Union?
Mr. MUKKAR. Which one? The-
Mr. MOODY. The ones referred to in this-covered by the minutes
of this meeting.
Mr. MUKKAR. No, sir, I don't understand what you are saying.
These computers in the indictment were not going to Soviet Union
at all.
Mr. MOODY. Where were they going?
Mr. MUKKAR. They were going to India.
Mr. MOODY. But as Ms. Moore pointed out, you had no license to
take them to India, no Indian license.
Mr. MUKKAR. Not required, sir, until that time. The license re-
quirement came in April of 1989.
Mr. MOODY. Did you participate in anything going to the Soviet
Union? Do you have any knowledge of anything going to the Soviet
Union?
Mr. MUKKAR. Not at all, sir.
Mr. MOODY. You didn't have knowledge of anything going to the
Soviet Union?
Mr. MUKKAR. I had no knowledge at all of anything going to the
Soviet Union other than what I was manufacturing.
Mr. SUNDQUIST. Mr. Mukkar, I want to remind you you are
under oath.
Mr. MUKKAR. I know, sir.
Mr. SUNDQUIST. It is very serious.
Mr. MUKKAR. Anything is if I am then referring to the equip-
ment you are talking about.
Mr. SUNDQUIST. Now, the-
Mr. MOODY. Don, let me just finish this point. You say you had
no knowledge of anything going to the Soviet Union, correct?
Mr. MUKKAR. No, no, sir. Anything means anything-I mean, I
was exporting a lot of things to Soviet Union.
Mr. MooDY. But nothing of the-none of this controlled technolo-
gy?
Mr. MUKKAR. I do not know, sir. I was exporting-whatever I
was exporting from India, I was exporting with a new export li-
cense from-issued to me by the Government of India.
Mr. MOODY. Ms. Moore, maybe you can help me. Am I not asking
the right question?
Ms. MOORE. Perhaps, Mr. Mohan, you admit, Mr. Mohan, that
you were involved or placed an order for an 8700 computer. Is that
correct, sir?
PAGENO="0299"
295
Mr. MUKKAR. Right.
Ms. MOORE. And could you explain to the Congressman why that
computer, which is approximately 8 feet tall, weighs 2,000 pounds,
was going to a private apartment in Singapore?
Mr. MUKKAR. A private-we, I had to start my own business in
Singapore, which I started in June of-before I got arrested. June
of 1988 I started a company with Dr. Bose.
Mr. MOODY. Are you telling us that that computer that Ms.
Moore just described was going to a personal private apartment?
Mr. MUKKAR. No, sir. It was going to be used by me.
Mr. MOODY. To do what?
Mr. MUKKAR. To make-to start software project.
Mr. MOODY. In Singapore?
Mr. MUKKAR. In Singapore, sir.
Mr. MOODY. You lived in Singapore?
Mr. MUKKAR. I had bought a house, and I was to shift to Singa-
pore thereafter.
Mr. MOODY. Ms. Moore, we are missing something?
Mr. Mukkar, can you tell us why you didn't get an import certifi-
cate from Singapore for that equipment, sir?
Mr. MUKKAR. I asked these people, which is on the recording.
They never asked me that an import certificate required. They had
been getting the license-
Mr. MOODY. Who is "they" in this case?
Mr. MUKKAR. They means Mr. Casperson and Mr. Townsend.
Mr. MOODY. But is Ms. Moore correct? If you thought you were
taking it to Singapore, why didn't you have an import license for
Singapore?
Mr. MUKKAR. Because there always they were exporting from
Canada and there was no requirement of import certificate from
Canada.
Ms. MOORE. Mr. Mohan, you knew that the 8700 was not coming
from Canada. You got documents from John Townsend telling you
it was being shipped from Seattle.
Mr. MUKKAR. But did they ask me-
Ms. MOORE. You got a fax-
Mr. MUKKAR. Did they ask me for import certificate then?
Mr. MOODY. But you knew it wasn't coming from Canada, so why
do you bring Canada into the 8700 discussion?
Mr. MUKKAR. Originally, in September, October, they told me
that the machine is available from Canada through David Whyte.
In November they told me that they are shipping the material
from-what you call-the United States. Mr. Casperson confirmed
to my man, Mr. Beliga, that everything what we were doing was
legal. It's on the tape in the conversation. It is one of the docu-
ments that I have submitted.
Mr. MOODY. Ms. Moore, comment?
Mr. MUKKAR. And, sir, one small thing. 8700 document, the Rus-
sian document which has been the contract which has been al-
ready-$560,000 and the bank document which has been said. The
total contract value of this contract-
Mr. MOODY. Say that again?
Mr. MUKKAR. The total contract value of the contract submitted
to the bank is $562,000.
PAGENO="0300"
296
Mr. MOODY. Right.
Mr. MUKKAR. The cost price of 8700 from Mr. CASperson was
$650,000. Either I must be a crazy man buying a machine for
$650,000 and selling for $562,000? This was a different contract.
Mr. MOODY. You mean the Soviet contract that you have there
was for a different piece of equipment?
Mr. MUKKAR. Different piece of equipment.
Mr. MooDY. Where did the 8700 finally end up?
Mr. MUKKAR. 8700 went to Singapore. They was select-I am
sorry with my English.
Mr. MOODY. Just take your time.
Mr. MUKKAR. The first 8700 I gave a letter of credit for a com-
plete machine from another company owned by the same group of
people. These are the people chart accountants like any compa-
ny-
Mr. MOODY. Just answer my question. Where did the 8700 finally
end up?
Mr. MURKAR. Original intention-original destination Singapore.
Mr. MOODY. And that is where it is now?
Mr. MUKKAR. No. Then later on, when the machine went, Mr.
Casperson and Mr. Townsend both travel to Singapore to assemble
the machine.
Mr. Moo:DY. Is that true, Mr. Casperson?
Mr. CASPERSON. Yes, it is, sir.
Mr. MOODY. When you assembled it, where did you think it was
going, Mr. Casperson?
Mr. CASPERSON. I thought it was going on to India at that time.
Mr. MOODY. Sorry?
Mr. CASPERSON. I thought it was going to India.
Mr. MooDY. You thought it was going to India. Who told you
that?
Mr. CASPERSON. John Townsend.
Mr. MOODY. Where did you think it was going, Mr. Mukkar?
Mr. MUEKAR. Sir, it is just unthinkable to imagine that I-the
way I have been projected as a con man, that I will ask to break
the machine, take it to Singapore, come there, assemble it again,
and then I break it again and send it somewhere else.
Ms. MOORE. Mr. Mohan, are you aware that John Townsend, pur-
suant to his plea agreement, your partner John Townsend has told
prosecutors that you told him that the 8700 was destined for either
Bulgaria or Romania?
Mr. MOODY. Did you say that, Mr. Mukkar?
Mr. MUKKAR. No, sir.
Mr. SuN]QuIsT. If I could reclaim my time.
Mr. SASTRA. You should not cross-examine him in this proceed-
ing.
Mr. SUNDQUIST. Pardon me?
Mr. SASTRA. She should not cross-examine him in this proceed-
ing.
Mr. SUNDQUIST. I have invited her to, so it is no problem. I have
asked her to speak up because-
Mr. MOODY. We are just trying to get the facts.
Mr. SUNDQUIST. That is what we are trying to do.
PAGENO="0301"
297
Mr. ANTHONY. Would the gentleman yield? Let me advise Mr.
Sastra that under the rules of the committee, you are not permit-
ted to speak other than to your client. If you would like to talk to
him in private, that is the purpose of your being allowed to appear,
only directly to him off the record. Do you need a minute to talk to
him?
Mr. SASTRA. Just one second. I don't want Ms. Moore to-
Mr. ANTHONY. You are not supposed to say it to us. We will
attend to that.
Mr. SUNDQUIST. Mr. Chairman, if I could just-
Mr. ANTHONY. Ms. Moore, if you have a question, we certainly
don't mind your helping us inasmuch as you-
Ms. MOORE. Thank you, Mr. Anthony.
Mr. ANTHONY. You prepared for a trial in this case. If you have
some suggested lines of questions, just direct it directly to me, and
we will see to it that the question is asked. That will satisfy the
concerns there.
Mr. SUNDQUIST. Mr. Mohan, what I am trying to figure out is the
contract with the Soviet Union.
Mr. MUKKAR. Right, sir.
Mr. SUNDQUIST. The letter of credit specifically. The letter of
credit from the Soviet Union was for the same amount, as I under-
stand it, as the VAX purchased from Perfect Technologies, same
amount of money. Now, that is just not a coincidence, is it?
Mr. MUKKAR. No, no, sir. They asked for $490,000. They sent
$490,000.
Mr. SUNDQUIST. From the Soviet Union?
Mr. MUKKAR. Not from the Soviet Union. This was sent from
London, sir. This money was sent from London.
Mr. SUNDQUIST. Why is it printed in Russian?
Mr. MUKKAR. The contract given, as I said, it is very-if you
have two houses, if you want to buy a house and you have a house
already, you don't have the mortgage on that. You take the mort-
gage on the first house and buy the second house. So this was a
contract which we had on which-I mean not we, which the agent
had. And he sent this document to the bank. This is what was ex-
plained to me, and then I was going-
Mr. SUNDQUIST. In Russian?
Mr. MUKKAR. No, no. This is a contract-
Mr. SUNDQUIST. Do you speak Russian?
Mr. MUKKAR. No, sir, I don't. My agent-that is the reason I
need an agent.
Mr. SUNDQUIST. So it was for the purchase of these machines?
Mr. MUKKAR. No, sir. This particular contract, which was given
to the bank, was a contract for the supply of certain equipment,
part of which equipment went from America, from a company
called Technicom, which I check, later on. Because when I saw this
document I was also equally shaken.
Mr. SUNDQUIST. Mr. Casperson, could you shed some light on this
in terms of that contract?
Mr. CASPERSON. The contract from London I was not aware of
until July of this past year.
Mr. SUNDQUIST. You have no knowledge of it then?
Mr. CASPERSON. No, I did not, sir.
PAGENO="0302"
298
Mr. SUN1JIQUIST. Ms. Moore?
Ms. MOORE. The amount of money that is in the document at-
tached to the contract is the same amount of money that was used
to purchase the 8700.
Mr. SUNDQUIST. Ms. Moore, you don't think that is just a coinci-
dence that it would be the precise amount of money?
Ms. MOORE. No, I do not, sir.
Mr. SUNDQUIST. You feel that we are fairly safe in assuming that
that was for the VAX machine?
Ms. MOORE. That, coupled with other evidence in the case, yes.
Mr. SUNDQUIST. What is the other evidence?
Ms. MOORE. The fact that it went to an apartment building, the
fact that it was broken down, the fact of the Soviet connection, yes,
sir.
Mr. SUNDQUIST. My last question, Mr. Mohan. Where did the
money come from, the million dollars that was put up for your bail
in Buffalo?
Mr. MUKKAR. From a friend of mine whom I met immediately
after my marriage. He also had got married at the same time. It is
a matter of coincidence. He had one son; I had one son. And we
became-
Mr. SUNDQUIST. What was his name?
Mr. MUKKAR. Mr. Bernard Lang.
Mr. SUNDQUIST. Where is he from?
Mr. MUKKAR. He is from Geneva. His sister is married to the
family of his family, and his father is a leather manufacturer in
Brussels, Belgium. So on the bail money, the magistrate, magis-
trate put up a bail for a million dollar cash only. He put the re-
striction, million dollar cash only. I have a lot of friends and rela-
tions in this country, but since it was cash only, I don't have such
friends who have a million dollars. I have to look for a rich friend.
Mr. SUNDQ,UIST. Do you have a fax machine in prison?
Mr. MUKKAR. In where, sir?
Mr. SUNDQUIST. Did you have a fax machine in your prison?
Mr. MUKKAR. No, sir.
Mr. SUNDQUIST. You don't?
Mr. MUKKAR. No, sir. I don't have-there is a fax machine with
the case manager.
Mr. SUNDQUIST. It is not yours?
Mr. MUKKAR. No, it is not mine.
Mr. SUNDQUIST. Do you have access to it?
Mr. MUKKAR. Pardon me?
Mr. SUNDQtJIST. Do you have access to it?
Mr. MUKKAR. No, sir. The fax which I sent to Mr. Onner, I am
sure you are referring to that, was sent by my son.
Mr. SUNDQUIST. You have sent no faxes from prison or you have
no fax machine-
Mr. MUKKAR. No, I have no-
Mr. SUNDQUJST. You have no access to a fax machine.
Mr. MUKKAR. No, I said, and they don't-they only gave me the
fax which was sent by the Congress to the prison. I have got no
access to any fax machine.
Mr. SUNDQUIST. Are you still conducting business with Mr. Bose?
PAGENO="0303"
299
Mr. MUKKAR. Sir, I am in prison. How can I-I work for Unicor
now.
Mr. SUNDQUIST. Thank you. Thank you, Mr. Chairman.
Mr. ANTHONY. Ms. Moore, you are familiar with the final plea,
the plea bargain, and what was actually entered of record?
Ms. MOORE. Just briefly, Mr. Anthony, not the specifics. But I
can try.
Mr. ANTHONY. I was curious as to whether or not there was a
plea of record of more than just money laundering? Was there a
plea of a specific count that concerns the Export Administration
Act?
Ms. MOORE. It is my understanding that there was a plea to a
2410(a) violation. Which specific count it involved, whether it was
the 8700 or the micro VAX's. I cannot tell you, but I am sure that
there was a plea to 2410(a).
Mr. ANTHONY. Is that your recollection, Mr. Mukkar?
Mr. MUKKAR. Yes, sir. It is 2410(a).
Mr. ANTHONY. But it is your recollection that you knowingly pled
guilty in a court of law to more than just a money laundering of-
fense?
Mr. MUKKAR. Yes, sir, because they said it is money laundering
and that goes side by side. Sorry, sir. My English knowledge is not
very good.
Yes, sir, I pleaded knowledge to this violation, to this count, both
the counts. I pleaded guilty to both the counts. It is an export viola-
tion.
Mr. ANTHONY. So to rephrase my question, or repeat my ques-
tion, you knowingly pled guilty in court to more than just money
laundering? So you have acknowledged, for the public record, that
you are guilty of some violation of the United States statutes deal-
ing with shipments that would require export licensing?
Mr. MUKKAR. I have pleaded guilty that I had the knowledge of
that violation, that it makes me guilty.
Mr. ANTHONY. And you had the knowledge it made you guilty?
Mr. MUKKAR. Yes.
Mr. ANTHONY. When that was advised to you in court, you re-
tained your attorneys. Based, I assume, on a multitude of options,
you chose to accept the plea bargain arrangement rather than go
to a trial?
Mr. MUKKAR. Right, because it was told in the court that it is
better that we settle the case outside the-you know.
Mr. ANTHONY. In other words, you felt that it was better to plead
to 33 months in prison and a $1.5 million fine rather than fight for
your full innocence before a jury, although you say that you are
innocent?
Mr. MUKKAR. The guidelines was 16 years. I would have been 60
years old by the time I would have got out.
Mr. ANTHONY. But had the jury believed you, you would have
been set free.
Mr. MUKKAR. But juries are not predictable. It was a very big
chance for my life.
Mr. ANTHONY. So you chose to-
Mr. MUKKAR. I chose to plead guilty, sir.
PAGENO="0304"
300
Mr. ANTHONY. So you chose to plead guilty. Has the fine been
paid?
Mr. MUKKAR. Yes, but my plea agreement, some fine has to be
paid in Indian rupees-I mean, not in Indian rupees, with the per-
mission of my government, because otherwise it becomes a viola-
tion by me. So it has been applied for, or not applied for, I do not
know. I think I was advised that it has been applied for. I can find
out.
Mr. ANTHONY. Were you familiar with all of the requests for the
shipment of the various computers? Do you have sufficient recall
that if I ask you about some of the computer shipments, you will be
familiar with them?
Mr. MUKKAR. I will try to answer your questions.
Mr. ANTHONY. Did you have sufficient contact with each one of
the shipments that you think you would be familiar-
Mr. MUKKAR. No, sir, except for one shipment, the second ship-
ment when it went, 8700. One portion of material, I was coming to
the same thing. Mr. Townsend and Mr. Casperson were in Singa-
pore. They cleared one shipment and then they left the place. Mr.
Casperson came to America.
Then we found some problem, advised by the Singapore Govern-
ment, that the computer has been shipped illegally, without a li-
cense. The person who was there, he sent the computer not only
which was the Singapore Government advised us, that even the
material which was cleared because Department of Commerce was
only investigating W.K. Agency. The computer was shipped to two
companies.
One company's material was cleared already by the customs. One
company, they stopped the material. The second company my man
was advised that it has been shipped without license. So he not
only did the ship and paid the money for the freight also, even that
material which was lying here in the customs.
Mr. ANTHONY. Let me ask you about the five microVAX-Il com-
puters. Do you know what happened to them?
Mr. MUKKAR. I had known they went to Singapore. But immedi-
ately went to Singapore, originally those computers were to go to
India. Then a Canadian license, they were unable to obtain a li-
cense for India. I did not want the computers because my basic ob-
jective was gone. My basic objective was to sell those computers by
the time DEC India comes into.
DEC India started manufacture of equipment in 1989, February.
Now I had to compete directly with DEC. It was difficult for me to
sell.
I told Townsend that if he could sell the material here, he could
not. Then I asked people in Singapore, they said we will buy it, so a
license was obtained for Singapore and sent to Singapore. Thereaf-
ter, I am run either for money, from thereafter-
Mr. ANTHONY. Do you know where those computers are?
Mr. MUKKAR. I really do not know, after it went to Singapore.
Mr. ANTHONY. Let us talk about the 50 model 4225-II-D Tek-
tronix graphics workstations. I understand they are valued at
about $17,000 each?
Mr. MUKKAR. The sale price to me was $22,000.
Mr. ANTHONY. How much?
PAGENO="0305"
301
Mr. MUKKAR. $24,000.
Mr. ANTHONY. What did you intend to do with the 50 Tektronix
workstations?
Mr. MUKKAR. Sir, DEC India had started manufacturing comput-
ers in India, the same micro VAX-IT, which-
Mr. ANTHONY. Did you have a purchaser for them in India?
Mr. MUKKAR. We had few purchasers, but all my life I have been
a success selling material from stock.
Mr. ANTHONY. You were going to take them and put them in
your inventory?
Mr. MUKKAR. In my inventory. Sir, I have been buying 10,000
Honda engines at one time. I was the biggest buyer from Hawkins
Sidley, biggest buyer from Cummins Engine Co. And my success
has been because of keeping the stock and selling from stock.
Mr. ANTHONY. Did you have a warehouse where you would keep
this inventory stock?
Mr. MUKKAR. 60,000 square foot of warehouse.
Mr. ANTHONY. Mr. Sike, Mr. Hobbs, did you all ever find this
warehouse, and did you find the 50 Tektronix workstations stored
there for future sale? Ms. Moore?
Ms. MOORE. The Tektronix were not exported. That was part of
the sting operation, but you may want to ask-
Mr. ANTHONY. They were actually stopped after the arrest in
Buffalo?
Ms. MOORE. That is correct, but you may want to ask Mr. Mohan,
who testified or who caused to have testimony presented at his
original detention trial, that Multi-Rubber was going to be a cus-
tomer for one of these pieces of equipment, the Tektronix. We con-
tacted Multi-Rubber in India, who had no knowledge of Mr. Mohan
and denied ever having placed any purchase order.
Mr. ANTHONY. Do you have any proof or did you submit any
proof that you had a-rather than going into it, let me just say
this. Through your attorney, if you have some proof that you actu-
ally had a customer that was never presented to the court-
Mr. MUKKAR. That is what I was submitting, sir.
Mr. ANTHONY. If you had that, we would allow you to submit
that for the record.
Mr. MUKKAR. It is already submitted to the court.
Mr. ANTHONY. If it is already submitted as part of the court
record, we have all of those transcripts and we have that informa-
tion.
Mr. MUKKAR. Immediately I got arrested-
Mr. ANTHONY. Let me ask you this question. You stated that in
your opinion you were going to buy them and put them in invento-
ry, although you did not have sufficient customers to sell them im-
mediately?
Mr. MUKKAR. Right, sir.
Mr. ANTHONY. There is a dispute between the witnesses at the
table and what the investigative file shows. Where this one person
that you said was going to purchase it, we have a statement in the
file that says that is not correct. So at least that is there. You have
got your statement and they have got their statement.
But knowing that you are telling this subcommittee that the in-
tended use was a legitimate use, why was there an attempt to cir-
PAGENO="0306"
302
cumvent the U.S. export control laws by shipping through Canada?
Why did it just not go direct from the United States?
Mr. MUKKAR. Because I was told that Canadian law-Mr. Casper-
son told me, even up to do the day I think before his arrest, I was
told that Canadian law was-even the discovery material says that
Canadian licenses are as good as United States licenses.
Mr. ANTHONY. Mr. Casperson, what is your response?
Mr. CASPERSON. That was all during the undercover operation
and that was part of-
Mr. ANTHONY. That was part of the sting?
Mr. CASPERSON. Yes. One thing, earlier you had said in my state-
ment that I would break down equipment and send it to Canada. It
is easier than that.
Mr. ANTHONY. Tell me how you would do it? I want Mr. Hobbs
and Mr. Sike to listen to this.
Mr. CASPERSON. I would not break down anything. I would not lie
to the Canadian Government, at this point. I would tell them exact-
ly what we were doing.
Mr. ANTHONY. You would ship it in whole, and you would tell
the truth?
Mr. CASPERSON. We have a broker in Canada buy the equipment.
Where he bought it, we really would not care. He would go and get
his Canadian export license and put it on his permit application
that the origin of the goods was the United States.
In every case, in over seven of the permits that the Canadian
broker applied for, in every case he put on the document that the
origin of the goods was the United States. And the Canadian Gov-
ernment never asked him whether or not he had a reexport license
from the United States.
Mr. ANTHONY. Mr. Casperson, if you decided to be a recidivist
and understood that there was a lot of money out there and under-
stood that there were a lot of clients available out there, with the
exception of. the fear of a tip going to Commerce and Customs,
what would be your overall fear of being detected on making these
illegal shipments?
Mr. CASPERSON. I think I misunderstood you.
Mr. ANTHONY. I am just saying if you got back into the business,
and taking out the fact that somebody would get suspicious, a tip-
ster-and what we have determined up here is that a tipster is
really a competitor.
Mr. CASPERSON. Right.
Mr. ANTHONY. Somebody that is mad at somebody else for
making a sale when they would not make the sale. So somebody
said that it was the patriotism of the businessman. Some of us
think that it may be the greed of the businessman not to lose a
sale.
But anyway, what would be your fear of being caught, knowing
what you know? You are a much better expert at the laws now, in
terms of--you stumbled into them.
Mr. CASPERSON. Knowing what I know now, I would have very
little fear.
Mr. ANTHONY. You would have every fear of getting caught?
Mr. CASPERSON. Very little fear of being caught.
PAGENO="0307"
303
Mr. ANTHONY. You have heard all these witnesses testify about
what a great job they are doing and the licensing and the investi-
gatory being hand-in-glove and what a great job they are doing. I
do not understand. Here is the criminal who is saying that he has
already been caught and punished, but if he went out and did it
again he would have absolutely no fear of getting caught, or little
fear of getting caught.
We have the other side bragging about how easy it is to detect
you and shut you down. Tell me what you would do?
Mr. CASPERSON. There would be very little chance of connecting
a U.S. citizen to that type of a transaction, in the way I described
it.
Mr. ANTHONY. So that is what you would do? You would just ship
it all up to Canada, find a legal broker up there?
Mr. CASPERSON. A legal broker in Canada would be taking care
of everything.
Mr. ANTHONY. That would take care of everything? You would
just ship it up there. Do you have a response to that, Mr. Hobbs,
Sike, Deliberti? What would Commerce do if he was back out on
the street under another name, selling illegal high technology
goods from the United States and just transshipping it through
Canada and using truth on the forms, et cetera, just like he said?
What in our system would catch that?
Mr. DELIBERTI. It may happen where he may beat the system.
There is no doubt about that. He may beat the system. But then
again, he may not. There are many people out there who are aware
of export controls. He is going to have to get financing. He is going
to have to go to a manufacturer. He is going to have to go to a
packer. He is going to have to go to a freight forwarder. He is going
to have to go to an airline. He is going to have contact with quite a
few people.
And he may beat the system. But then again he may have a
sharp exporter, a sharp traffic manager, a sharp salesman who
looks at these red flag indicators that we give them and he may be
able to be picked up again.
Mr. ANTHONY. I guess I agree with you in theory. The only thing
that disturbs me is that he might make ten sales before that
occurs. And then I am worried about what happens with the end
use of those ten that go. I guess I am trying to find out if there is a
way that we can cooperate with you and your agencies and find
tighter controls.
I am telling you, it disturbs me. It has got to make Ms. Moore
just fume to hear a criminal that she had investigated and pros-
ecuted come right back and tell me, Mr. Prosecutor, "If I want to
go back out on the streets, I can do it again. I have absolutely little
fear of getting caught." I would almost feel like I had not done my
part of the job, Ms. Moore. It is very disheartening to hear that
kind of conversation.
Mr. Mukkar, it is a little bit more difficult to do business with
you because you say you are innocent but you pled guilty, and you
are serving time in prison and you have to pay a big fine. So it is
more difficult to deal with your situation, but I will say this, from
what Ms. Moore, Mr. Casperson, Mr. Sike, Mr. Hobbs have laid out
on the table for this committee to read in terms of documentation
PAGENO="0308"
304
in tracing you and your connections with certain organizations and
certain countries, I think I know why you did not take it to a jury
trial.
I have a feeling that if a jury read what I read or heard, and
took it in the jury room and deliberated on it for long, Ms. Moore
would have gotten her wish. It sounds to me it would have been
perfect jury appeal.
With the arrogant attitude that you are displaying right now, if I
had you in a courtroom and under cross-examination for about a
day-and-a-half and let the jury get a good taste of you and how
much money you have made out of this and what you have done,
assuming that the law had not been changed in terms of decertify-
ing a piece of equipment, I would relish my closing argument.
T would love to have Mr. Sastra come in behind me and cover up
and explain how you are this innocent businessman who has set up
these false fronts and ordered all this equipment and shipped it
through so many different places. I must tell you, you have not im-
pressed me one whit.
There may be some other people on this committee that think
that you are an innocent businessman out there buying computers
and you have been duped by all of these other people. Mr. Sastra
may be an excellent attorney and, in the final analysis, he may
have earned his fee by advising you to plead guilty. I think he may
have understood more about the American judicial system than his
client did.
I got you under a bind because I can make a statement and I will
not allow you, for the record, to comment. I think, though, having
you here has proven a useful purpose for us in terms of under-
standing the mental attitude of the operations and the difficulty
with which Mr. Sike and Mr. Hobbs have to investigate these cases.
And also with the policymakers over at Commerce, in terms of
trying to establish what is going to be our exact policy in terms of
dealing with these multinational business people who some of us
think, and the law has already proven, have skirted and gone to
the illegal side.
I want to close-just let me get Mr. Casperson's final comment
for the record. Tell me, from your viewpoint, are there any sugges-
tions that you could make to this subcommittee now that you have
cooperated. And I would like to compliment you for cooperating. It
was obviously the very best thing to do and you were rewarded.
You were rewarded for your cooperation. You may be destitute in
terms of finances, but you have got your freedom.
Mr. CASPERSON. Absolutely.
Mr. ANTHONY. So you have been rewarded through the system.
You got the least punishment of all, yet you were the most cooper-
ative. Do you have any suggestions for us in terms of how can we
stop it 5C) that we do not have to depend upon a patriotic casual
tip?
Mr. CASPERSON. Yes, I think education of the business communi-
ty is the primary thing. Notifying the business community of what
the penalties would be if they are caught, letting them know that
the Commerce Department does have an enforcement division out
there checking along with Customs. Whether they have the man-
power or not, I think it would be impossible to ha~~ ~n~gh people
PAGENO="0309"
305
to check every shipment going out of this country as to what the
ultimate destination is.
But knowing that there are people out there checking raises that
risk considerably of being caught, at least in the perception.
Whether in truth it raises it or not, the perception is that they are
checking. And if they are checking, your chances of being caught
are quite good.
Mr. ANTHONY. Ms. Moore, you wanted to make a statement?
Ms. MOORE. I just wanted to correct for the record, with respect
to the Tektronix 4225 deal, Mr. Mohan was never told that he did
not need a U.S. license. In fact, if you check the tape recordings at
the time of the defendants' arrest, you will hear conversations be-
tween Mr. Mohan and Mr. Whyte wherein Mr. Whyte is explaining
the lies that he told to the U.S. manufacturers to get around the
U.S. export regulations. I just did not want that to be in the record
that he was told he did not need a U.S. license. That is not true.
Mr. ANTHONY. I thank you for the correction and compliment
you for either going over and getting re-prepared for your testimony
or having a good keen memory from the case.
Mr. Sundquist, you have some additional questions?
Mr. SUNDQUIST. Thank you, Mr. Chairman. I have one short
series of questions, Mr. Mohan, I did not ask earlier. What was
your association with Virtual Computers?
Mr. MUKKAR. Sir, he was-I place an order in the month of May.
I was not registered-I was not having an office in Bombay and all
my end users were all Bombay, Maharashtra based companies.
There is interstate sales tax and taxation. So since I required an
importer in Maharashtra I took-he was-we never-all the time
Government has been saying that Virtual Computer is the end
user, Virtual Computer is the end user. Virtual Computer was
never an end user.
Mr. SUNDQUIST. I agree with that. Virtual Computers has stated
that it never ordered any equipment from you, nor provided any
end use statements. The president of Virtual told U.S. authorities
that the signatures on the documents purportedly from Virtual are
forgeries. Now who prepared the documents on Virtual Computer
letterhead?
Mr. MUKKAR. Virtual Computer themselves place the document
and I have an affidavit from Virtual Computer.
Mr. SUNDQUIST. Just tell me the answer, who prepared the docu-
ments on Virtual Computer letterhead?
Mr. MUKKAR. V.R. Nik himself.
Mr. SUNDQUIST. Mr. Nik said that is not true, he did not order
anything. He said he gave your associate, Mr. Balega the blank sta-
tionery because you provided Mr. Nik with a line of credit. Is that
true?
Mr. MUKKAR. Sir, he has given affidavit contradicting every
statement of this. He said the statement was taken under duress
from him.
Mr. SUNDQUIST. Mr. Nik said he gave your associate Mr. Balega
blank stationery because you provided Mr. Nik with a line of
credit. Is that true or false?
Mr. MUKKAR. I have no idea whether Balega took the paper or
not. I have this affidavit of Mr. Nik which says that this statement
PAGENO="0310"
306
was taken under duress from him. It is duly attested by the Ameri-
can Embassy in India.
Mr. SUNDQUIST. How can you claim to be an innocent importer
when apparently you went to such lengths to secure bogus shipping
documents to be used to circumvent U.S. export laws?
Mr. MUKKAR. Sir, there was no-if I read out to you the Canadi-
an-the Canadian law which I was told was-
Mr. Sur~rnQuIsT. You are getting off the subject. You are not even
addressing my questions. Answer the questions, if you would, sir.
Mr. MUKKAR. Right. What are the question, sir? I have not fol-
lowed you.
Mr. SUNDQUIST. Did you or did you not prepare the Virtual Com-
puter documents, sign them and use blank stationery?
Mr. MUKKAR. No, sir.
Mr. SUNDQUIST. You did not. Did you or did you not receive
blank stationery from Mr. Balega, or did Mr. Balega fill this out or
did you?
Mr. MUKKAR. I do not know.
Mr. SUNDQUIST. Did you have a line of credit that you furnished
to Virtual Computers?
Mr. MUKKAR. I had no personal line of credit to Virtual Comput-
er. Any of my companies maybe having, I do not know.
Mr. SUNDQUIST. Ms. Moore, do you have any comments on this?
Ms. MOORE. I do not know about that aspect.
Mr. SuNDQuI5T. Mr. Chairman, I know that Mr. Moody, our col-
league, is going to ask some questions. But I think this has been
very helpful to have the hearings. My hat goes off to the folks from
Commerce for the job they did. We now know the challenge that
they face, as you say.
Mr. ANTHONY. Would you yield for one moment, Mr. Sundquist?
Mr. SUNDQUIST. I will.
Mr. ANTHONY. Based on your exchange with the witness, Mr.
Mukkar--he is under oath and there is a quorum present for the
subcommittee. I just want to advise that there is a possibility, upon
close examination of all of the documents and evidence, that perju-
ry could or could~ not have occurred here. I just want the record to
know that, and I want the attorney to be knowledgeable about
that. We will obviously refer that to the proper authorities.
Go ahead, Mr. Sundquist.
Mr. MUKKAR. I want to rectify. You know, in one case you said
Multi-Rubber. I was about to explain but then the subject was-
Multi-Rubber, when I was asked by the agent on my arrest I did
not remember the name. I said Multi-Rubber. It was Multi-Periph-
erals. I did not remember the right name. Then Multi-Peripherals,
the confirmation was given to the prosecution or the judge or the
court for that purpose.
Mr. SUNDQUIST. Are there any other corrections you would like
to make before I finish?
Mr. MUKKAR. No, sir. Thank you very much.
Mr. SUNDQUIST. I think we see the challenge that Commerce
faces, arid I think we see the challenge that the Justice Depart-
ment faces. Ms. Moore, I wish we had many more of you. Mr. Cas-
person, i[ feel bad for you. I think you got caught in the wrong
place. I think you were used and I think it is unfortunate that you
PAGENO="0311"
307
got involved. I am sorry you did and I think you understand the
mistakes that you made.
But I have to tell you, Mr. Mukkar, if I am judge of people, I
would say you have got some real problems with perjury. The pos-
sibility does exist. I find many inconsistencies in what you have
said. It just shows me how tough it is for this country to try to pro-
tect things in commerce.
Thank you, Mr. Chairman.
Mr. ANTHONY. Thank you, Mr. Sundquist. I would like for the
record to reflect my own personal positive feelings about Commerce
and Ms. Moore. I think, based on the documentation that I saw, I
read, and having had some previous experience in the past of work-
ing on complicated cases-this certainly goes beyond the scope of
anything I was forced to work on or oversee in terms of the juris-
diction that I had.
I think Mr. Sundquist is correct, it does show the difficulty with
which you have an assignment. But I think it is also the reason
why we are taking a look at it to see if we can find ways to give
you additional tools so that not only can you be diligent and expert
and professional in the way you do it currently, but maybe we can
even add some additional fodder for your files and your investiga-
tive techniques. And then, Ms. Moore, obviously take into consider-
ation the recommendations that you have made to see if there are
additional circumstances there that can help.
The one that I think really impresses me the most is the need for
more international cooperation. I must tell you that I have never
been one to feel like you had to raise the penalty to where it was.
Whether it was 10 years or 15 years, I do not think Mr. Casperson
would have blinked an eye. Usually it is money at that level that
gets you seduced into something. Ten years, if the judge is tough
enough and wants to give the full 10 years, I think that is it.
Maybe it is more changing the attitude inside the judiciary as well
as educating the public businessperson. A dual need there could ac-
complish your goals.
But something that has been made very clear by your charts, by
your testimony and by your tracking of the evidence is the fact
that this is multinational, multicountry involved. Without ques-
tion, we have got to find a way to get more international coopera-
tion so that you can do it even faster and more efficiently. I think
then you would probably start addressing one of my key concerns
and that was the overall cost of these.
Mr. Casperson, it is my understanding that you are back in the
business of legally selling computers?
Mr. CASPERSON. Yes, sir.
Mr. ANTHONY. That was your original business and I assume
that you were a success at it.
Mr. CASPERSON. Yes, sir.
Mr. ANTHONY. For whatever failure occurred that got you into
the illegal side of it. The record is very clear that you are one of
the most cooperative witnesses that I have seen. When you partici-
pate in 180 consensual telephone conversations and you actually
lure fugitives from around the world into the United States for
them to be arrested, so that Ms. Moore can even practice her pro-
fession, I think you should be complimented for that.
PAGENO="0312"
308
Mr. CASPERSON. It was a very difficult time.
Mr. ANTHONY. I know it was a difficult time. Anyway, you made
the right choice. Let me just tell you that, you made the right
choice. I hope that you continue to be a successful businessman. I
hope that you also become somewhat evangelical about telling
other businesspeople not to get in there and try to make a buck
because if they do, they may be in a very large, uncomfortable situ-
ation in room 1100.
Then you can also look to your left and just be thankful. The two
guys standing back behind you are getting prepared to take this
gentleman back to his residence. He is not going to see a lot of sun-
light, and he is going to have a lot of bars and his freedom taken
away from him.
I do not have very much to say to Mr. Sastra and his witness
because as soon as I say something I will be listening to a 15-
minute response. It is 10 after 5:00. It is real pretty outside and we
have had a long day. I think the record has been made clear from
all of the investigation. I just want to thank everybody for cooper-
ating with us. This is only the first of what will be a series of hear-
ings ~th that I close and yield to Mr. Moody.
~ MOODY. Thank you, Mr. Chairman, I will not take long. Ms.
Moore, I have just a brief question. Clearly, proving knowledge is
very tough and that is what the criminal standard requires, knowl-
edge of an illegal transfer of technology and equipment. You have
discussed raising the penalties for doing so, but the burden of prov-
ing knowledge is still very, very tough on the prosecution.
What about joining up the criminal side with civil penalties
where you would not have to prove knowledge if the computers, as
in this case, ended up in illegal use? For example, the U.S. broker
or the person who made the critical decision to sell the equipment
and have it shipped overseas, that person would face a monetary
fine of some sort. As a result, that person would feel under an obli-
gation to make sure that controlled technology did not get to the
wrong place and to follow up on exports.
What do you think about a civil forfeiture as something to
strengthen the hand or strengthen the inducements against this
sort of activity?
Ms. MOORE. I think that is a good idea. I do not think that would
have worked in this case because in this case, particularly with
Tektronix, the Tektronix people were doing their job, were asking
the questions, and they lied to them. So what do you do when you
have people like Mr. Mohan and others who simply lie despite the
company's best efforts? So I would need to give that more thought.
I like the idea.
Mr. MOODY. Yes, Tektronix was lied to, but if they had any in-
kling they might be lied to-in their position as being lied to, they
would assign someone to follow this thing all the way through to
the end. They would institute controls of their own in case they
might be lied to
Ms. MOORE. I think that is a good idea if you could do it constitu-
tionally; some type of reasonable person standard that the compa-
ny should have known. I do think, Mr. Anthony, with all due re-
spect that the way that you are going to stop these exports the
most is through the private ~e~toi' and r@quiring thorn to do ~orne~
PAGENO="0313"
309
thing. That is what happened in this case in every instance. With-
out the private sector we could not have proved the knowledge, be-
cause it was the lies they made to the private sector that really
was the backbone of our case; that they knew what they were
doing.
Mr. MOODY. Thank you.
Mr. ANTHONY. Again, this subcommittee's members are thankful
for your cooperation and your testimony. The subcommittee will
stand in adjpurnment subject to the call of the chair.
[Whereupon, at 5:14 p.m., the hearing was adjourned, to recon-
vene at 9:30 a.m. on Wednesday, May 1, 1991.]
PAGENO="0314"
PAGENO="0315"
ADMINISTRATION AND ENFORCEMENT OF U.S.
EXPORT CONTROL PROGRAMS
WEDNESDAY, MAY 1, 1991
HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON OVERSIGHT,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:35 a.m., in room
1100, Longworth House Office Building, Hon. J.J. Pickle (chairman
of the subcommittee) presiding.
Chairman PICKLE. The committee will come to order, and we will
ask our guests to please take their seats.
The subcommittee's first day of hearings on enforcement of U.S.
export control laws, held on April 18, 1991, clearly illustrated that
we do have questionable export control policies and enforcement
programs-a problem that, if not quickly addressed, will lead to an-
other dictator threatening his neighbors with weapons of mass de-
struction and jeopardizing our national security. The military
might of this Nation is no substitute for effective export controls.
Despite its great success, the cost of Desert Storm far exceeded the
price of developing and implementing an effective export control
policy.
This country needs a rational and enforceable export control
system, one that preserves international trade but stems the prolif-
eration of weapons of mass destruction. That is not an easy task,
but the consequences of delay could be catastrophic, particularly
when considering the number of nations now trying to procure nu-
clear weapons with ballistic missile delivery systems.
The ability of potential adversaries to acquire sensitive U.S. tech-
nology, equipment, and materials is largely beyond the current
control mechanisms established by the United States. Dr. Stephen
Bryen, former Director of the Defense Technology Security Admin-
istration, of this country, testified on April 18 that,
Our ability to prevent the proliferation of weapons of mass destruction to coun-
tries is extremely limited. The reasons for this are: one, the near collapse of our
own domestic export control system and that of our allies to the point where no
system in the West can be relied upon to operate effectively to restrain the sale of
goods, technology and know-how; two, the disintegration of multinational controls
on critical technology; and, three, the absence of international cooperation on en-
forcement where proliferation controls are involved.
Our investigation of this issue supports Dr. Bryen's conclusion. He
was one of our top defense officials.
Today is the subcommittee's second day of hearings on the ad-
ministration and enforcement of U.S. export control laws. At the
(311)
PAGENO="0316"
312
first hearing, we examined four export control cases which illus-
trated how the game is played, who the players are, the role of
Customs and other Federal agencies, and the methods or diversion
schemes used to circumvent our export laws. We were able to trace
those cases from beginning to end, identifying a long list of defi-
ciencies in our export control system. Today, the subcommittee's
goal is to sort through the issues raised by these cases and identify
overall the problems the Federal Government faces in administer-
ing the law. Most importantly, we need to look carefully at the
agency's evaluation of the situation and consider their specific pro-
posals to improve our enforcement effort. As evidenced in our April
18 hearing, the problems are clear and the solutions complex.
It seems that our export control programs depend heavily on in-
formant sources and intelligence information, and very little on
systematic agency program operations. Also, someone who wishes
to export sensitive commodities illegally without detection can do
so with relative ease. Finally, it doesn't seem as though all the Fed-
eral Government's efforts have much of a deterrent effect in stop-
ping illegal exports. I don't think the Federal Government is even
close to knowing whether we get 10 percent or 90 percent of the
commodities prohibited from export.
For example, in three out of the four cases we considered, we
were not able to "catch the crooks" until substantial quantities of
the goods had already left the United States. Many of the criminals
are living grand lifestyles, right out in the open, and we don't seem
to be able to touch them. Even those that we did catch only got a
few years in prison or were just put on probation. In one case, 630
tons of chemicals used to make mustard gas was sold to Iraq and
Iran before Customs "got a tip." Further, no one who worked for
the exporter went to jail, and the company only was fined
$438,000--less than the profit that the company made on the ille-
gal sales. In another case, only two members of a smuggling ring
which relied heavily on Egyptian Government diplomatic officials
went to jail, and they only got a little over a 3-year sentence each.
In the final case reviewed, high-tech equipment was smuggled out
of the United States without detection, using our Canadian neigh-
bor as the diversion point. The international ringleader involved
here continues to deny complicity, after pleading guilty to violation
of the U.S. export laws, and he will be out of prison soon and be
able to conduct business as usual. Government witnesses reported
that the criminal hasn't told the U.S. Government a "sliver" of
what he knows. That is his quote.
In concluding, I want to say for the record that this subcommit-
tee has never had more difficulty investigating the effectiveness of
a set of laws, and the administration's performance and enforce-
ment efforts. The purpose of today's hearing is to complete the
hearing record of April 18 and to get answers to some basic ques-
tions. Some of the witnesses at the earlier hearing, I believe, were
less than candid when asked direct questions, or suggested that
today's witnesses could better address such matters. We intend to
go through these unanswered questions of April 18 and address
overall policy and enforcement issues. We have a very distin-
guished li6t of witn~~s here today7 and I hope we will dispel any
PAGENO="0317"
313
suspicion that the administration or the individual agencies have
anything to hide.
I am pleased that our first two witnesses today are members of
the committee-that is, this committee-and they have expressed
longstanding interest in the subject of U.S. export controls. I wel-
come them both: Congressman Pete Stark and Congressman Jim
Moody. Following their testimony, we will hear from the Depart-
ment of the Treasury Office of Foreign Assets Control, commonly
referred to as OFAC, with regard to its role in formulating, admin-
istering, and enforcing financial and trade sanctions. Then the sub-
committee will proceed with the statements and questioning of the
U.S. Customs Service Commissioner, Carol Hallett; the Department
of Commerce Deputy Assistant Secretary for Export Enforcement,
Kenneth A. Cutshaw; and the Department of State Deputy for De-
fense Trade, Bureau of Politico-Military Affairs, Charles Duelfer.
Now, our first witness will be Mr. Pete Stark, but before I yield
to him, I will ask Mr. Schuize if he has any opening statement.
Mr. SCHULZE. Thank you, Mr. Chairman. I am pleased to join you
in this second day of hearings on the enforcement of U.S. export
controls.
At our hearing on April 18, the subcommittee learned what I
have known for a long time, and that is that our export controls
are weak and we are being beaten at every turn. We heard credible
testimony from export enforcement officials that diversions contin-
ue to this day and that it is extremely easy to get away with illegal
export schemes.
A major reason we find ourselves in this dilemma, Mr. Chair-
man, is that Congress pushed our export administrators in the
wrong direction time and time again over the last decade. For ex-
ample, in the 1985 Export Act, so-called foreign availability re-
quirements added to a steady erosion in export enforcement. Under
this twisted logic, if another country sells a controlled commodity
to one of our enemies, then we should, too, because to do otherwise
just hurts business. In the omnibus trade bill of 1988 and again in
the Export Act amendments of 1990, Congress prevailed in essen-
tially removing the Defense Department from export control deci-
sions-a serious mistake, in retrospect. Before we in Congress start
pointing the finger elsewhere, many of us should check our own
voting records rather than spread the blame. It is time for Con-
gress to "get religion" and change the law to prevent the next Iraq
from happening.
Mr. Chairman, the subcommittee's investigation found weakness
at every point in the export control system. Smugglers most often
bypass the elaborate and confusing licensing system altogether,
and many dangerous commodities aren't even controlled. In both
licensing and enforcement, it appears that there may be just "too
many cooks in the kitchen." The constant back and forth between
agencies may ci-' more to confuse things than to enhance them.
I was disturbed to find how easy it is to buy controlled goods on
the U.S. market. In fact, you and I could go out right now, Mr.
Chairman, and buy dangerous amounts of these sensitive con-
trolled commodities as long as we promised that they were only for
domestic use. We could then easily change the markings on our
high-tech package and send it on its way to Singapore and on to
PAGENO="0318"
314
God knows where from there. Yet many U.S. companies go on sell-
ing without knowing to whom they are selling, and by looking the
other way, our so-called friends in Europe and the Orient have pro-
vided an open conduit to our foes in the Middle East and else-
where.
To be fair, when our agents in the field have been alerted to an
illegal export operation, they do a very good job of shutting it off.
However, the big problem is that most often these schemes go on
for years before we catch on, if at all. We discover the problem usu-
ally based on a tip that comes after the "horse is already out of the
barn." Sc) we just sit back and wait for the next big tip.
It is clear that the law needs to be changed and toughened to
take the profit out of illegal exports and prevent those who are
caught from walking away scot-free. I hope that today's witnesses
don't come in here and try to "pull the wool over our eyes," but
rather, offer constructive suggestions on how to improve export
control enforcement.
Mr. Chairman, I thank you for having this series of hearings. I
think they are informative and interesting, and I look forward to
receiving the testimony from today's witnesses.
Chairman PICKLE. Thank you, Mr. Schuize.
Mr. Anthony, do you have an opening statement?
Mr. ANTHONY. I have no statement, Mr. Chairman.
Chairman PICKLE. The first witness will be the Honorable Fort-
ney Pete Stark who has been interested in this subject for some
time.
Mr. Stark, we are pleased to have you this morning.
STATEMENT OF HON. FORTNEY PETE STARK, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. STARK. Thank you very much, Mr. Chairman.
I could make your job much shorter by just bringing to you and
asking you to put in the record testimony that I heard as a
member of the Joint Economic Committee last week, which in the
words of the distinguished Chair was "a bag of horsefeathers."
You are going to hear from Commerce and the State Department
that, yes, there may have been some problems but they have their
act together. If you look at the charts of how they think they have
their act together, I would assume that this committee would find,
as the Joint Economic Committee found, that they don't. They are
representing sellers-which they should do-and there is a conflict
of interest.
But I am here on a particular issue; and I am going to deal with
one country, although there are several, and I am going to deal
with one type of export-nuclear paraphernalia, equipment, the
means with which other countries could build nuclear weapons.
Particularly, seeing as Germans like Mr. Schulze and myself like
weapons, we can talk about the land of our forefathers and say
that they are really not obeying the law. Even if this committee
were able to bring pressure on our own Government, how do we
stop Seimans, a Germany company, from selling to Iraq or Paid-
stan the equipment to build a nuclear weapon? And the answer is
we can't. They don't obey our laws. They obey German laws.
PAGENO="0319"
315
Weak export controls have led to Pakistan acquiring nuclear
dual-use items from Germany to build a centrifuge plant to enrich
uranium, which they will tell you is there to generate electricity.
But the CIA and our own State Department was telling us as long
as 16 years ago when I was there that Pakistan is building the ca-
pability for nuclear weapons. Iraq was building a centrifuge plant
with help from German, British, and other firms. Now Iran wants
to build nuclear weapons with a German firm's products-Seimans.
They want to resume construction of two large nuclear reactors.
We might be powerless to do anything. Quiet diplomacy has been
tried by the State Department with absolutely dismal results. The
Germans have admitted they paid absolutely no attention to our
warnings.
In the war in the gulf, we have the attention of Germany and
other countries, and now we should let them know that we will not
tolerate their subverting nuclear proliferation agreements. Exports
are much more important to Germany and make up a third of
their GNP, half of Holland's GNP, where it is less than 10 percent
of ours. However, we cannot tolerate our punishing our own manu-
facturers, as Mr. Schuize just indicated, and stand idly by while
our allies are arming Iraq and Pakistan.
Just for example, Daimler-Benz-you are all familiar with the
Mercedes Benz, oh, so popular in this country. They are also mar-
keting equipment to others, Iraq and particularly in Pakistan, that
would allow them to get into the nuclear weapons business. I have
a very simple proposal. If they sell in contravention to our policy
nuclear weapons to a third country, they don't have to export any-
thing to the United States. Mercedes can make mushroom clouds
in Iraq, or they can sell Mercedes Benz in America, but not both.
Last fall, we passed legislation similar to this to punish foreign
countries if they sold missile, chemical, or biological weapons tech-
nology. The President vetoed the chemical and biological weapons
sanction, thus allowing Iraq to get more biological weapons equip-
ment than they might otherwise have had.
This is the same bill, the same language, the same waivers, the
same exceptions. It just addresses nuclear proliferation instead of
missile proliferation.
I urge this committee, as they take testimony and continue their
investigation, to consider putting tough sanctions on companies,
not countries, who don't pay any attention to our roles and whose
own countries don't have rules to prevent them from circumvent-
ing or increasing nuclear proliferation for fear one of these days we
will be staring at our own weapons coming back at us from poten-
tial enemies in the future.
I thank the Chair for allowing me to testify this morning. Thank
you.
[The prepared statement and attachments follow:]
PAGENO="0320"
316
STATEMENT OF CONGRESSMAN PETE STARK
OVERSIGHT SUBCOMMI1TEE
COMMITFEE ON WAYS AND MEANS
MAY 1, 1991
Thank you, Mr. Chairman, for holding these hearings and for the
opportunity to testify before your subcommittee on this matter of vital
importance to our national security.
We have heard a great deal about the flaws in and limitations of United
States export controls--the smuggling operations and the turf battles between
the State, Commerce, and Customs. For example, we know that the
Commerce Department licensed more than $1.5 billion worth of sensitive
dual-use technology to Iraq between 1985-1990. These hearings are an
important step towards bringing more attention to these problems and
helping bring about more effective licensing and enforcement procedures.
But even if U.S. export controls were perfect, our efforts at preventing
proliferation would be weakened by the limitations of export laws and
enforcement in foreign countries, including some of our closest European
allies. My remarks today will specifically address the problem of foreign
companies which sell nuclear weapons technology to countries of
proliferation concern.
With the events of recent years--the easing of East-West tensions, the
liberation of Eastern Europe, and the Soviet Union's slow, uneven, but
definite progress towards democracy and capitalism-nuclear proliferation is
now the leading threat to U.S. national security.
Currently, nine nations are considered to have the bomb: The United States,
the Soviet Union, the United Kingdom, France, China, Israel, India, South
Africa, and Pakistan. A host of others, including Iraq, Iran, Brazil, Argentina,
North Korea, and Algeria, have nuclear weapons programs at various stages
of development. If we don't take steps today to better control the spread of
nuclear equipment, material, and technology, we could wake up a decade
from now and find ourselves in a world with every terrorist nation
brandishing the ultimate weapon.
Making a nuclear weapon is, of course, no simple matter. But the only real
barrier out there is the difficultly of obtaining fissile material, such as
separated plutonium or highly enriched uranium. One way to enrich
uranium is through a high-speed centrifuge facility. It takes a great deal of
time, expertise, and high technology to build such a facility, but it can be done,
even by a developing country. It took Pakistan more than a decade, but today
Islamabad has the indigenous capability to er.~kh uranium and can start
assembling a nuclear arsenal.
Before the war in the Persian Gulf, Iraq was closely following Pakistani
model, and was building its own centrifuge facility. According to various
estimates by non-proliferation experts, Iraq was somewhere between 5 and 15
years away from completing the facility and having a nuclear weapons
capability. In the history of the world, 5 to 15 years is not a lot of time. We
may have dealt Baghdad a setback, just as Israel did in 1981 when it bombed
PAGENO="0321"
317
the Osiraq nuclear reactor, but Iraq could once again resume its work and
Libya, Iran, and Syria could follow its model.
The key to both Iraq and Pakistan's efforts was the assistance furnished by
Western firms, especially from Germany. These companies took advantage
of lax export controls, poor enforcement, and weak penalties for violators, to
supply critical components for Iraq and Pakistan's nuclear weapons program.
Some of the firms involved were simply front companies set up by Iraq's
extensive overseas smuggling network. But also involved were some major
multi-national corporations, including Messerschmitt-BoelkoW-Blohm
GmbH (MBB). MBB is Germany's largest aerospace firm and a subsidiary of
Daimler-Benz.
As an addendum to my testimony, I have included a set of two dozen case
studies of foreign firms which have assisted the nuclear weapons programs in
Iraq, Pakistan, India, South Africa, and other countries. You will find quite a
few multi-national firms implicated there. Currently, a subsidiary of the
German conglomerate Siemans is informally applying for an export permit to
build two large nuclear reactors in Iran. Next week, German foreign minister
Hans Dietrich Genscher is going to Iran where he will discuss the prospects of
resumed nuclear cooperation. I find this development very troubling indeed,
in light of Iran's record on supporting international terrorism and its use of
chemical weapons in the Iran-Iraq war.
For years, the United States tried to use quiet diplomacy to get our allies to
tighten their export controls and take the threat of nuclear proliferation more
seriously. The State Department will argue that they achieved some success
in this area. It is possible that the record could have been worse, but according
to the available evidence, our warnings had essentially zero impact on, for
example, Germany's export control policy. The following quote appeared last
fall in the German newsweekly Der Spiegel:
"Far more than a thousand times the Americans have briefed the German
services and high-ranking Bonn ministry officials about sensitive arms deals
with the Middle East, the Far East, and South America over the past six
years...Not much has been done as a consequence. Many of the written
warnings, which have been declared so-called nonpapers in Bonn,
immediately ended up in the trash can."
Since that time the Germans and others have talked much of new and better
enforced export regulations. And yet, as late as last fall dozens of German
firms were violating the Iraq embargo. Again, despite our quiet protestations,
Bonn stood by while the sanctions were critically weakened and war became a
more likely possibility. It was only when allegations against German
companies surfaced in the media that the German government started to take
action against the embargo cheaters. But I am less concerned about seeing
export violators punished than in having the violations prevented in the
first place.
Furthermore, even as they moved to tighten controls on arms exports last
fall, Bonn liberalized its controls over many nuclear items, including
centrifuge technology. This may have been an oversight, but it certainly is
not a good sign.
In the past Germany has pledged to crack down on its exports of sensitive
technologies, only to return to business as usual when the heat was off. In
1984, under pressure from the United States, Germany changed its laws to
prevent the company Karl Koib from building the Samarra poison gas
production facility in Iraq. Less than a year later, the changes were watered
down and work on the plant continued.
51-840 0 - 92 - 11
PAGENO="0322"
318
I don't mean to exclusively bash the Germans--my immigrant grandparents
wouldn't like it. The Germans certainly haven't been the only contributors
to proliferation, just one of the worst. One of the basic problems 1 see is that
many of our European allies rely far more on exports for economic growth.
Exports make up over a third of Germany's GNP, more than half of
Holland's, but less than a tenth of the United States'. Europe has always
fought us on export controls-they fought us on COCOM and they will fight
us here. In the aftermath of the war in the Gulf, we may temporarily have
their attention on this issue, but I am not optimistic for the long run.
Having tried the soft, diplomatic approach for some time, I would suggest we
now make some use of the "stick." I recently introduced the Nuclear Non-
Proliferation Enforcement Act (HR 830). This legislation would impose
import sanctions on foreign firms furthering the spread of nuclear weapons.
Any foreign company that sells-without the proper safeguards- nuclear
equipment, materials, or technology will have its goods barred from entering
the United States.
This legislation will help send a strong consistent message to our allies that if
they cannot or will not control their exporters, then the United States will
step in and do the job for them. HR 830 is the product of months of work
after consultation with leading experts in the nuclear non-proliferation field
as well as scholars in international law. This is a workable approach which, I
strongly believe, will create strong incentives for both foreign companies and
foreign governments to get their acts together. Governments will wish to
avoid the embarrassment of having their companies publicly and visibly
named as assisting nuclear proliferation. Firms, especially large multi-
national conglomerates such as Daimler-Benz, will have strong incentives to
more closely monitor the dealing of their many subsidiaries when confronted
with the prospect of losing access to the world's richest single market.
This approach is not really extraterritorial. If the country concerned has
effective measures to prevent proliferation and has imposed the appropriate
penalties on the company concerned, then sanctions would not be imposed.
Our allies have made an internationally binding commitment to prevent
nuclear proliferation. It's only when they fail to carry through on this
commitment that the sanctions would occur. No export controls will be
perfectly leak-proof: we just expect our allies to make a good-faith effort.
Further, the companies named as violators will have an opportunity to
present their case, as they may appeal the President's decision to the United
States Court of International Trade.
Nor would this legislation violate U.S. obligations under the General
Agreement on Tariffs and Trade (GAiT). Article 21 of GAiT contains a very
dear exception for cases of this kind. The article reads in part
"Nothing in this agreement shall be construed...
`(b) to prevent any contracting party from taking any action which it
considers necessary for the protection of its essential security interests
(i) relating to fissionable materials or the materials from which they are
derived;
(ii) relating to the traffic in arms, ammunition and implements of war
and to such traffic in other goods and materials as is carried on directly
or indirectly for the purpose of supplying a military establishment."
The violations that would trigger the sanctions are also very specifically
defined in the bill. A company commits a violation if it (A) sells nuclear
PAGENO="0323"
319
items without getting the equivalent safeguard guarantees mandated in U.S.
law, (B) retransfers nuclear items exported from the United States without
U.S. permission, (C) sells nuclear items to countries which do not have
international safeguards on all of their nudear facilities, such as India and
Pakistan, or (D) sells certain nuclear dual-use technology to a controlled
country. A controlled country is one which is not party to the Nuclear Non-
Proliferation Treaty, has violated an agreement made with the International
Atomic Energy Agency, has made efforts to build nuclear weapons
clandestinely, or has repeatedly provided support for international terrorism.
If these guidelines are carefully adhered to by the major international nuclear
suppliers, we can significantly slow the spread of nuclear weapons. If not,
further nuclear proliferation is only a matter of time.
This legislation, while strict and specific on what triggers the sanctions,
provides maximum flexibility for the President to administer them. The
Administration will determine when violations have taken place and how
long the import ban should occur, though it must be imposed for at least two
years. The President may waive the sanction altogether, if he deems such a
step essential for U.S. national security, but he must notify Congress twenty
days in advance and provide the rationale for doing so.
On the other hand, the legislation would not bar the importation of defense
articles, spare parts, maintenance services, or component parts, in cases in
which no reasonable alternative is available. We don't wish to put our own
economic or national security at risk.
Finally, the legislation includes a "privatization" clause to take advantage of
the many fine people working in the nuclear non-proliferation field outside
of government. Any person may petition the government to investigate a
foreign company for its involvement in nuclear proliferation. They would
have to show significant probable cause and it would then be up to the
Administration to decide whether to pursue the case. This section is modeled
closely on similar petition-clauses in several United States Trade laws.
This legislation is specific, flexible, just, and effective. And, it has ample
precedent. HR 830 very closely parallels--almost word for word at points-the
missile technology sanctions passed in the Defense Authorization Act last
fall. If the President could sign that legislation, he should fmd this bill
acceptable as well. The only losers in this legislation are the "proliferation
profiteers" and their weak-kneed governments which refuse to stand up to
them.
I am not arguing that this is the only approach for addressing this problem. I
just think it would be one more useful policy tool. The State Department
understandably hates to lean too heavily on other countries for specific
concessions. They can continue to play the "good cop" while Congress can
play the tough cop, threatening sanctions if results are not delivered.
In the long run, what we need is an institutional multilateral system of
export controls on all sensitive technologies, with a common sanctions
regime on offenders. I believe that this legislation is a small, but useful step
in this direction. The alternative is Waking up a decade from now and
finding Syria armed with the bomb and the means to deliver it.
PAGENO="0324"
320
FOREIGN FiRMS REPORTED 70 HAVE ENGAGED IN ILLICIT NUCLEAR TPADE
(19s0-zm)
FOREIGN SELECTED IMPORTERS OF NUCLEAR WEAPONS-RELATED iTEMS
SUPPLIERS ARG~TTNA IL4ZZL L'4D(A IRAQ LUYA PA~TA~( S. ATZICA
U.S-TRADE
RELATIONS
A1fred~~94l
x
x
x
~TS
BsLgocucle~ire
9_
X
X
.
Aeronau&s Co.
X
x
~=°~
X
X
yoS
EopoU~~~
X
?
X
H&llMetoYorno
X
?
InduntriaaCardoooi
X
bIer-Nudest
sno~.~o
X
`
LId
X
X
X
?
x
x
?
Matrix~Cburbifl
X
Messerscbniill.Boeb;ow-
X
X
Neue-Technoio~ien
X
X
X
YES
X
X
X
X
X
X
?
X
0cc
X
?
X
?
X
?
X
X
YES; n.e 59% 40os. nub.
X
SO(5CE$; ArOd.., pc~ enponto .nd 5.4k. bdd by lb. ddnk.s, nod Lbcuey .0th. Fnurin~ N,ok.e SupplIer. & Nnop t.r~(n~ Pr.j.d, il~utnr.y Tusle.
odiRde.. Penp.r.dby CA. RcbI.y. YorR6beb!onuot,o~ en, hnulenonulk...e.ctE6SPCT.b (40I)647.3$ISn~T. (401)641-4199.
PAGENO="0325"
0
z
C,,
~ ~ n
z
0 : d a 0
~ 0
B
4~i~ ~q >~
-~
8
0
z
PAGENO="0326"
I
PAGENO="0327"
I
I
o 0
z
~1I~
PAGENO="0328"
324
Emerging Nuclear Suppliers & Nonproliferation Project
TWELVE FOREiGN FIRMS REPORTEDLY ENGAGED 1N
INTERNATiONAL NUCLEAR WEAPONS-RELATED TRADE'
(Part 1)
Firm 1: Belgonucleaire SA (Belgium)
The Belgian firm Belgonucleaire SA is a leader in plutonium waste treatment and
technology, including the manufacture of mixed plutonium fuels for advanced nuclear reactors.
Belgonucleaire offers its products as well as nuclear engineering and consulting services on a
worldwide basis. In 1987, it was implicated in a major corruption scandal involving several
German firms, most importantly Nukem GmbH and its subsidiary Transnuklear GmbH, who for
years illegally transferred or disposed of toxic radioactive waste through fraudulent contracts with
the Nuclear Research Center at Mol, Belgium. The Mol center held a 50 percent share in
Belgonucleaire, which together with Nukem and Transnuklear held all shares in the Belgian firm
Transnuble NV. Transnubel is the Belgian enterprise responsible for the transport of radioactive
materials. Because of the scandal between Transnuklear and Mol, which revolved around
deliberate mislabeling of nuclear waste containers, Germany's Der Spiegel, accused Belgonucleaire
of participation in the clandestine transfer of nuclear weapons materials onto the international black
market, perhaps even to Pakistan or Libya. Although such claims have not been verified,
Belgonucleaire had on numerous past occasions solicited orders from Pakistan, Libya, Egypt,
Taiwan, and Korea -- all states of proliferation concern.
Historically, Belgonucleaire has provided a considerable degree of technical assistance to
both Libya and Pakistan. Belgonucleaire has also provided training services for employees of
Pakistan's Atomic Energy Agency (PAEA) that involved individuals known to have been
associated with Pakistan's nuclear weapons program. The president of the PAEA, Munir Khan,
once recognized Belgonucleaire for its services in the construction of a small nuclear "pilot
facility," built during the seventies, which gave Pakistan the "capability to produce the necessary
plutonium for a bomb."
Sources: Bruo.seln Domestic Servwx, 1/17/88; Bulletin of th.e Atomic Scientists, 4/89. pp. 21-27 by Dan Charles;
Nuclear News Buyers Guide. 3/89, p. 4; ~ 1/29/88, p. 4 by Guy Duplat; Der Spiced, 1/18/88, pp. 18-30,
9/17/88, pp. 22-26, 9/30/89, pp. 59-61; I.e VIfIL `Express (Brassel.c). 4/24/87, pp. 10-19 by Michael B. Balzhasa,s;
Nucleonices Week, 2/18/88, pp. 1, 8-9 by Mark Hibbs & Ann MacLachlan.
t~ftme abstracts were compiled by Cameron Binkley from articles held in the Emerging Nuclear Suppliers
& Nonproliferation Project database. The validity of information contained within an abstract is based solely upon
the original sources.
Monterey Institute of International Studies
PAGENO="0329"
325
Emerging Nuclear Supplieri & Nonproliferation Pmjms 2
Firms 2 & 3: Neue Technologien GmbH & Physikallsch Technische BeratungjGermany)
Neue Technologien GmbH (NTG) is a German nuclear engineering firm of approximately
100 employees, active in many areas including nuclear materials handling, decontamination,
metallurgy, and vacuum technology. It was known until 1986 as NTG-Nukleartechnik GmbH und
Partner. Physikalisch Technische Beratung (PTB) was a subsidiary of NTG established by Rudolph
Maximilian Ortmayer to protect NTG's anonymity and to serve as an intermediary in
transshipments to Pakistan. After Ortmayer was fired in mid-1988 as NTG's Technical Director,
investigations of both firms were begun for illegally exporting nuclear components and materials
from Germany to Pakistan, India, and South Africa between 1982 and 1988. The illegal exports
to Pakistan reportedly included both tritium and tritium processing equipment, components of an
installation to make nuclear fuel, and transport and storage containers for uranium hexafluoride
(used to enrich uranium). Tntium exports are especially sensitive because tritium is an essential
link in the process of constructing a hydrogen bomb. The total value of the deliveries was
estimated at DM 20 million. NTG is also believed to have sold India "reflector material" and
equipment used to control atomic reactions in nuclear plants. In addition, a device used to make
nuclear fuel was illegally exported to South Africa. The director of PTB, Peter Finke,
acknowledged that zircalloy cladding (used to make nuclear fuel) assemblies was sent to Pakistan
for its Kanupp heavy water reactor. The German firms supplied the U.S-origin zircalloy after
Canada had refused the sale due to proliferation concerns.
In 1986, NTG re-exported from Germany to Pakistan two high-powered lasers, which were
made in the United States and used for nuclear fuel fabrication. The U.S. suppliers to NTG were
Coherent General and General Electric Corporation, both of which thought that the lasers were
going to stay in the FRG. Instead, the lasers were sent to Margalla Enterprises of Pakistan
(allegedly a procurement agency for the Pakistan Atomic Energy Commission). A PTB director
said that Pakistan repeatedly pressured him to acquire an entire range of nuclear technology,
including technology to produce a thermonuclear weapon. In 1987, the U.S. firm Imperial Clevite
Corporation (a subsidiary of the U.S. finn Gould Inc.), sold components for a reactor refueling
machine to an NTG agent in the United States. The components eventually were illegally
re-exported to India. Through its subsidiary, Scientific International, NTG also participated in the
bidding process for the laboratory construction projects of several prominent U.S. companies and
research centers. By means of bidding documents, it acquired sensitive nuclear-related blueprints
from the United States, which German officials believe were passed on by NTG to its clients in
Pakistan. NTG has supplied technology to numerous international customers, including the United
States' Oak Ridge and Los Almos National Laboratories.
Sources: DPA (Hamburg). 1/26/89, New York Times, 12/22/88 by Michael R. Gordon. Nuclear Fuel, 12/26/88, pp.
1. 9-11, 1/9/89, p. 2. 4/3/89, pp. 6-7, 5/1/89, pp. 12-13, 8/21/89, pp. 4-5 by Mark Hibbs; Nuclear Encineerinc
!nternatio~y~j, 4/89, p. 3; Nucleonics Week, 1/5/89, pp. 3-5, 8/24/89, PP. 8-9 by Mark Hibbs; Polizis-le-Cizoyen
(Paris), 2/22-28/9-), pp. 5().55 by `,4y& Schneider; Der Spiced, 11/6/89, pp. 125-13!. Die Tageszeisunc (Berlin),
9-16-89, p. 4 Isv Thomas Scheuler; Welt am Sonatag, 12/25/88, pp. 1-2, by Heinz Vielan.
Monterey Institute of International Studies
PAGENO="0330"
326
Emerging Nuclear Suppliera & Nonproliferation Project
Firm 4~Nukem GmbH (Germany)
Nukem GmbH, with many major facilities centered around Hanau, is one of Germany's
largest nuclear enterprises involved in numerous areas of the nuclear power and the sensitive
nuclear fuel cycle industries. Nukem's operations in the nuclear sector are global and include
major transactions in the nuclear fuels of uranium (at various stages of enrichment) and plutonium.
Some of Nukem's exports have caused concern. For instance, in 1987 Nukem received the German
government's "rubber stamp" to export three electronic testing devices to South Africa potentially
useable in a nuclear weapons program. A second permit was issued in May 1988. On other
occasions, Nukem has been accused of bypassing international agreements on the transfer of
uranium as when it delivered U.S.-embargoed uranium to the United States from South Africa by
changing certificates of origin while en route. Of course, Nukem's legitimate trade relations with
the United States have been considerable. Over the years, the firm has received under U.S. license
large quantities of enriched uranium and has conducted business with major U.S. public service
utilities, such as Rochester Gas & Electric Corporation and American Electric Power Corporation.
Nukem holds 100 percent share in its U.S. subsidiary Nukem Inc. and through 1988 these two
companies together dominated the greater percent of world trade in critical nuclear materials.
In addition to several European companies, Nukem holds major shares in important German
nuclear industrial firms such as Alkem GmbH, Reakior-Brennelement Union GmbH, and Uranit
GmbH. Until early 1988, Nukem also held a two-thirds share of the nuclear materials transport
firm Transnuklear GmbH. At that time the company experienced a major corporate shakeup with
its management being taken over by the Nukem parent firm Degussa AG. This reorganization took
place after Nukem was caught up in the major nuclear industry scandal that engulfed its
Transnuldear subsidiary late in 1987. Several top executives of Nukem and Transnuklear were
charged with illegal waste handling and corruption, and were investigated for suspicions of having
transferred nuclear weapons-related materials to Pakistan, Libya, or Sudan. Although the later
allegations were never proven, Nukem was forced to dispose of all nuclear fuel handling divisions
while spending millions to promote the image of a "New Nukem" to a public and nuclear industry
whose confidence in the organization had plunged precipitously.
Sources: Bulletin of the Atomic Scienticts,,4/89, pp. 21-27by Dan Charles; Nuclear Fuel, I125/&f,pp. I. 71"y Mark
Hlbbs; Nuçlegr Fuel, 3/21/88, p.9; Nuclear Fuel, 4/4/88, pp. 3-4, 10/3/88 by Eric Lindeman; Nuclear News, 3188,
pp. 88-92, 8/89, p. 154; Nucleonic.s Week, 9/21/89, p. 3 by Mark Hibbs; Nucleonics Week, 2/18188, 1, 10-11 by
Mark Hi.bbs & Ann MacLachlan; Der Spiegel. 1/18188, pp. 18-30, 6/12/88, pp. 70-86, 11/29189, pp. 33-35; Die
~ (Hamburg), 3/14/88, pp. 32-39 by Horn Bieber, ci a!.
Monterey Institute of International Studies
PAGENO="0331"
327
Emcrging Nuclear Suppliers & Nonproliferation Project
FirmS: Transnuklear GmbH (Germany)
Until 1988, Transnuklear GmbH was Germany's foremost nuclear waste and nuclear
materials handling firm, two-thirds owned by the German firm Nukem GmbH and one-third owned
by the French firm Transnucleaire SA. Transnuklear maintained several overseas offices, including
in the United States where the company held a 50 percent share of the U.S. firm Transnuclear Inc.
Twenty percent of the U.S. subsidiary's export trade was conducted with its European parent
firms. Transnuklear was the source of a major German nuclear industry scandal that surfaced late
in 1987 and centered around the firm's fraudulent business practices involving international nuclear
materials transport and disposal. These practices allegedly included deliberate mislabeling of
radioactive substances, bribery, and embezzlement. Furthermore, through its association with the
Belgian Nuclear Research Center at Mol, Transnuldear reportedly shipped weapons-grade
materials, possibly through Luebeck, Germany, to Pakistan, Libya, or possibly Sudan. Charges
were also made that the firm paid the Belgian subcontracting firm Smet-Jet DM 16 million to
illegally dispose of German nuclear waste in the North Sea. These charges were never
substantiated. Transnuklear had its license suspended and was dissolved in 1988 following the
corporate reorganization of its parent company, Nukem, in the wake of the scandal. One of the
company's chief executives committed suicide after being fired. At one point no less than 13
different commissions were investigating Transnuklear and its relationship to the research center
at Mol.
Sources: DPA (Hamburg), 1/15/88; Bulletin of the Atomic $cjemfjyts 4/89, PP. 21-27 by Dan Charles; fjgJ~gjk
flpjg~., 2/7/88,p. 11 by Serge Schntemann; Nuclear Encineerin~ Interratknoi, 8/88, pp. 57-58, 60-61; Nuclear FueL
1/25/88, pp. 1, 7 by Mark Hibbs, 3/7/88, p. 11 by Eric Lindeman, 9/31/88, p. 4, 10/31/88, 4-5 by Mark Hibbs;
NuclgorNcws 4/88, pp. 73-74; Nucleonics Week. 2fl8/88, pp. 1, 8-9 by Mark Hibbs & Ann MacLachlan; Qgg
~j~g.gl 1/18/88, pp. 18-30, 9/30/89, pp. 59-61; Qjg~iet (Hamburg), 1/22/88, pp. 11-14 by Horst Bieber, ci at
Monterey Institute of International Studies
PAGENO="0332"
328
Emerging Nuclear Suppliers & Nonproliferation Project
TWELVE FOREIGN FIRMS REPORTEDLY ENGAGED IN
INTERNATIONAL NUCLEAR WFAPONS-RELATED TRADE*
(PwY 2)
Firm 6: Alfred Hempel GmbH (Germany~
Alfred Hempel GmbH was the chief concern, until his death in 1989, of
former Nazi officer Alfred Hempel. Through his company, and a network of
subsidiaries, namely Rohstoff Einfuhr GmbH of Germany and Orda AG of
Switzerland, Hemple conducted a lucrative import/export trade in nuclear materials.
According to numerous sources, the firm often operated at or beyond the fringe of
legality. Other Hempel German subsidiaries included Fundus GmbH, Inter-Nuclear
Service Society for Waste Disposal (implicated in the Nukem-Transnuklear scandal),
Isotron, IRE Diagnostic, GB Chemicals, and Kapp Chemicals. Hempel's foreign
subsidiaries also included Pomera AG and Inter-Nuclear Service AG (both of
Switzerland) as well as two overseas mining firms in Namibia. Outside Germany and
Switzerland, Hempel maintained offices in Argentina, the People's Republic of
China, the Soviet Union, and the United States.
Hempel activities included the purchase of heavy water from countries such as
Norway, the PRC, and the Soviet Union for export to countries such as Argentina,
India, and Pakistan. Heavy water is used as a coolant in some nuclear reactors that
produce plutonium as a byproduct -- one of two possible nuclear weapons core
ingredients. In one case, Hempel allegedly arranged the transfer of 100 tons of heavy
water from the PRC to India. The company is also believed to have brokered the S90
million sale and shipment of between four and six tons of Chinese enriched uranium
to South Africa for use in its nuclear facilities while Western suppliers were
boycotting the country. U.S. officials protested Hempel's transactions to the German
government on several occasions, as did Norway and Switzerland, but to no avail.
Sources: Christian Science Monigf, 7/8/88, pp. 1, 14 by E. A. Wayne; Nuclear Fuel, 7/25/88, pp. 7-8 by Mark
Hibbs; Der Spiegel, 1/18/88, pp. 18-30, 10/17/88, pp. 22-26; Die Tageszeizung, 10/7/89, pp. 14-15 by Thomas
Scheuer; Wall Street Journal, 1/3/88, pp. 1. 6, 6/21/88, p. 34 by John I. FiaLka; QJg,~gis 10/21/88 by Wo~fgang
Hoffinann.
*These case studtes were compiled by Cameron Binkley from articles held in the Emerging Nuclear Suppliers
& Nonproltferation Project database. The validity of information contained within each case study is based solely upon its
original sources.
Monterey Institute of International Studies
PAGENO="0333"
329
Ernergmg Nuclear Suppliers & Nonproliferation Project
Firm 7: Degussa GmbH (Germany)
Degussa GmbH is a major German metal and chemical company that maintains
considerable trade relations with the United States. Until July 1990, it was attempting
to purchase the worldwide gold and silver businesses of the U.S. firm Engelhard
Corporation. Degussa has numerous subsidiaries, several of whom, like Leybold-
Heraeus GmbH have been implicated in illicit nuclear trade deals. In 1988,
executives of Degussa replaced the top executives of Nukem GmbH, which was
plagued by one of Germany's worst nuclear industry scandals. Degussa once held a
35 percent share in the firm, but divested most of its interest to Rheinisch-
Westfaelisches Elektrizitaetwerk AG in 1990.
In January 1989, information surfaced that Degussa had shipped 95 kilograms
of beryllium to India in 1984. Beryllium is used to decrease the amount of plutonium
needed to manufacture a nuclear bomb. The amount sold by Degussa roughly
represented enough useable material for 20 such devices. In violation of U.S. export
laws and regulations, Degussa obtained the beryllium from the United States and
transferred it to India without acquiring U.S. consent. In March 1990, Degussa
agreed to pay $800,000 in fines to the U.S. Commerce Department for the
company's illegal export activity.
Sources: DPA Hwnburgl, 1/28/89; New York Tjrng~, 2/1/89, p. A2 by Stephen Er.gelberg; Nuclear FueL 4/2/90,
p. 1; Nuclearligygs. 3/88, pp. 88-92; Der Soiree!, 1130/89, pp. 22-23; Wall Street Journal, 1/19/88, p. 24, 2/1/89,
p. 411 by Thomas F. O'Boyle, $122190, p. AS, 1/4/91, p. A4; Washington j~jjj~ 2fl/89, p. A19 by Don Oberdotfer.
Monterey Institute of ls,tensutional Studies
PAGENO="0334"
330
Emerging Nuclear Suppliers & Nonproliferation Project 3
Firm 8: Inter-Nuclear Service AG (SwitzerIan~
Inter-Nuclear Service AGof Zug, Switzerland is a small nuclear industry firm
involved in the import and export of nuclear materials. The company is a subsidiary
of Germany's Nukem GmbH, but was also associated with the group of firms
connected to Alfred Hempel GmbH of Duesseldorf. The Hempel group was
implicated in the illegal export on numerous occasions of heavy water, a sensitive
nuclear weapons-related material, from Norway, the People's Republic of China, and
the Soviet Union to Argentina, India, Israel and Pakistan from at least 1977 through
1987. Der Spiegel claimed in January 1988 that Inter-Nuclear Service, with
supervision from its Nukem management, supported Pakistan's nuclear weapons
research by secretly supplying that country with heavy water and acting as a Swiss
go-between for the firm's German parents.
Sources: Nuclear Fuel, 9/19/88, p. 4 by Mark J-libbs; Der Spiced, 1/18/88, pp. 18-30; ~jg~ie! 10-21-88 by
Wo~fgang Hoffinann.
Firm 9: OrdaAG (Switzerland)
Orda AG of Switzerland is a small nuclear materials trading firm established
by Alfred Hempel GmbH of Germany in 1980 with an investment of $34,000 that
grew into a multimillion dollar enterprise in just five years. According to British
intelligence sources, the firm's location in the nuncontrol1ed~ Swiss tax haven of Zug
enabled it to act as a transshipper for sensitive nuclear materials -- most importantly
heavy water useful in the production of plutonium for nuclear weapons -- without
regard to German export laws and regulations. The Hempel group apparently
channelled all deliveries of such heavy water to India through the Swiss subsidiary.
Orda is also believed to have shipped between four and six tons of enriched uranium
from the People's Republic of China to South Africa as well as several tons of
uranium ore from the PRC to Argentina.
Sources: Nuclear Fuel, 7/25/88, pp. 7-8, 9/19/88, p. 4 Icc Mark /libbs; Die Taeeszgjp~gg, 10/7/89, pp. 14-15 ~.
Thomas Scheuer; Wall Street Journal, 6/21/88, p. 34, 1/3/89, pp. 1, 6 Icc John J. Fia&a; ~ 1021/88 Icc
Wolfgang Hoffinann.
Monterey Institute of International Studies
PAGENO="0335"
331
Emerging Nuclear Suppliera & Nonproliferation Project 4
Firm 10: Pechiney SA (France~
Pechiney SA is one of France's major state-owned firms employing over
71 ,000 workers in the primary and fabricated metal products industries. Pechiney's
annual revenues are in the $7 billion range. The firm has extensive trade and
business relations with the United States, completing in 1989 the $1.26 billion
acquisition of Triangle Industries Inc. Pechiney also maintains ownership, partial
ownership, or joint-venture activity in several other U.S. enterprises such as
American National Can Company, Howmet Corporation, Reynolds Metal Company,
and the U.S. nuclear fuel service activities of Babcock & Wilcox, Inc.
Pechiney controls two subsidiaries, who, according to Politis-Le Citoyen, were
allegedly engaged by Rudolph Ortmayer's Neue Technologien GmbH (NTG) to
participate in the enterprise of evading German export controls on the sale of nuclear
technology. The first of the two French subsidiaries, Compagnie Europeenne Du
Zirconium Cezus (wholly owned by Pechiney), produces special metals and alloys,
pipes and tubing, and zirconium. The second subsidiary, Zircotube (51 percent-
owned by Pechiney and 49 percent-owned by France's huge nuclear engineering
firm, Framatome), manufactures zircalloy tubing. These materials are used in the
construction of nuclear reactors that can produce plutonium for a nuclear bomb.
NTG procured these sensitive items from Pechiney's subsidiaries following meetings
between representatives of the two companies in Germany. NTG allegedly altered
the labels and destination of the shipments in Frankfurt and is believed to have
subsequently routed up to 30 tons of the material from France to Pakistan.
Sources. Nesc Yorkiisoes., 11/22/88, p. Dl by Steven Greenhouse; New York Thnes. 11125188, p. D3 by Deborah
Wise; Nuclea~N~pg.y, 1/88, p. 53. Politis-Le Citçy~.j~ (Paris), 2/22-28190, pp. 50-55 by Mycle Schnezder;Der Sri egel
11/6/89, pp. 125-131; Wall Streetjp9~upl 4/29/87, p. 49, 4/27/88, p. 22, 12/5/88, p. B5, 1/27/89, p. A12; World
Nuclear Jndustr9 ~ 1990, pp. 188, 193, 191.
Monterey Institute of International Studies
PAGENO="0336"
332
Emerging Nuclear Suppliers & Nonproliferation Project
Firm 11: Prometron Technics Corporation (Japan)
Japan's Prometron Technics Corporation, which was founded in 1973, is a
small industrial machinery manufacturing and trading firm with branch offices in
Berlin, Chicago, and Singapore. In May 1889, the firm was investigated for small
but illegal shipments of hafnium wire to East Germany. Hafnium is a metal used in
the construction of nuclear reactors that, according to Japanese sources, have mainly
military applications. Japanese authorities suspect that the material was originally
acquired in the United States. In July 1989, Prometron's president, Hirokuni
Matsuda, was arrested on charges stemming from the case, and was later released
after a Tokyo court fined him for illegally exporting the material. Japanese
authorities alleged, but never proved, that Prometron had shipped other items
restricted by regulations of the Coordinating Committee for Multilateral Exports
Controls (COCOM) of which Japan is a participant.
Sources: ~ 5/24/89; New Yor*,Tiews 5/26/89, p. Dl. 5 by David E. Sanger; Nuclear Fuel, 5/29/89, p. 9;
Wall Street Journal, 5/24/89, p. Al. 5/25/89, p. Al4 by Jeremy Mark & Masa'yoshi Kanabayashi; Wall Street
Lgjctagj, 7/7/89, p. B4, 11/29/89, p. All.
Firm 12: Radium-Chemie AG (Switzerland)
Radium-Chemie AG is a Swiss firm involved in the manufacture and trade of
tritium-based products such as luminescent paints. It has acquired some of its tritium
imports from the U.S. Department of Energy. Tritium is a sensitive element used to
produce hydrogen bombs and to boost the efficiency of other nuclear weapons.
Radium-Chemie allegedly procured 8000 curies of tritium, some of it military-grade,
and illegally exported the material to Pakistan through an intermediary, Gutekunst
Leuchtfarben of Germany, to avoid dealing with Pakistan directly. Gutekunst sent
the tritium that it had obtained from Radium-Chemie to Pakistan in containers falsely
declared to be empty (in violation of Germany's Military Weapons Control Law).
The United Nations International Atomic Energy Agency does not regulate tritium
exports, and because Switzerland is not a member of the European Community or
Euratom (the European nuclear regulatory organization) no international controls
applied to the tntium transfers of the Swiss firm.
Sources: Nuclear Fuel, 6/27/88, p. 13, 4/3/89, pp. 6-7lry Mark Hibbs, 7/10/19, pp. 6-7; Polizis-Le Cucrven (Paris.),
2/22-28/%, pp. 50-55 by Mycle Schneider; Q PM,gJJ. 11/6/89, pp. 125-131.
Monterey Institute of Interentiona! Studies
PAGENO="0337"
333
Summary of HR 830, the Nuclear Non-Proliferation
Enforcement Act
This legislation would impose import sanctions on foreign firms which
contribute to the proliferation of nuclear weapons. Much of this bill,
especially the language on waivers and exceptions, was taken directly from
the Missile Technology sanction legislation which passed last fall.
Specifically, the firms would have their goods banned from entering the
customs territory of the United States if they engaged in any of the following
activities:
1. Selling nuclear items (that is, nuclear equipment, materials, or technology)
without requiring safeguard measures equivalent to those mandated in the
U.S. by the Atomic Energy Act.
2. Retransferring nuclear items exported from the U.S. without the
permission of the United States.
3. Selling nuclear items to countries, such as India and Pakistan, which do
not have international safeguards on all of their nuclear facilities.
4. Selling dual-use nuclear items (controlled under the Nuclear Non-
Proliferation Act of 1978) to controlled countries. A controlled country being
one which is not party to the Nuclear Non-Proliferation Treaty, has violated a
safeguards agreement with the International Atomic Energy Agency, has
made efforts to build nuclear weapons clandestinely, or has repeatedly
supplied support for international terrorism.
The President will determine if violations have taken place. He must impose
the sanction for at least two years. He may waive the penalty altogether if he
deems such a step essential for U.S. national security, but he must notify the
Congress twenty days in advance and provide the rational for doing so.
The sanctions may not be imposed on U.S. imports of products such as spare
parts, maintenance services, component parts, and defense articles, for which
no reliable alternative exists.
The sanctions will also not be imposed in cases in which the countries do
have adequate measures to prevent the above kind of nuclear transfers from
occurring and are invoking the appropriate punishments on the company
concerned.
Companies named will have the opportunity to appeal the sanctions to the
United States Court of International Trade.
Finally, HR 830 contains a "privatization" clause to take advantage of the
many fine people working in the non-proliferation field in the private sector.
Any person may petition the Admini~Lration to initiate an investigation on a
company suspected of contributing to proliferation. They must, of course,
present substantial evidence of their case and it is then up to the
Administration to choose whether to pursue the investigation.
PAGENO="0338"
334
102D CONGRESS
1s~ SESSION
To provide for the imposition of economic sanctions on any foreign person that
engages in the trade of nuclear equipment and technology under certain
circumstances that are prohibited under United States law.
IN TIlE HOUSE OF IREPRESENTATIVES
FEBRUARY 5, 1991
Mr. STARK (for himself and Mr. PENNY) introduced the following bill; which was
referred to the Committee on Ways and Means
A BILL
To provide for the imposition of economic sanctions on any
foreign person that engages in the trade of nuclear equip-
ment and technology under certain circumstances that are
prohibited under United States law.
1 Be it enacted b7,i the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. SHORT TITLE.
4 This Act may be cited as the "Nuclear Non-
5 Proliferation Enforcement Act of 1991".
6 SEC. 2. IMPOSITION OF SANCTION.
7 (a) BAsIS FOR S~oTIoN.-The President shall impose
8 the sanction set forth in subsection (c) on a foreign person if
PAGENO="0339"
335
2
1 the President determines that such foreign person know-
2 ingly-
3 (1)(A) exports, transfers, or is otherwise engaged.
4 in the trade of any nuclear materials and equipment or
5 nuclear technology-
6 (i) which violates paragraph (4) of section
7 127 of the Atomic Energy Act of 1954 (42
8 U.S.C. 2156(4));
9 (ii) which fails to meet all the criteria set
10 forth in section 127 of the Atomic Energy Act of
11 1954, except that for purposes of this clause ref-
12 erences in paragraphs (4) and (5) of such section
13 to the United States shall be deemed to refer to
14 the exporting country; or
15 (iii) to any non-nuclear-weapon state that
16 does not meet' the requirements of non-nuclear-
17 weapon states that are set forth in section 104(d)
18 of the Nuclear Non-Proliferation Act of 1978 (22
19 U.S.C. 3223(d)); or
20 (B) has knowingly or materially contributed-
21 (i) through the export, transfer, or other en-
22 gagement in the trade of any goods or technology
23 that are subject to the jurisdiction of the United
24 States and controlled under the Export Adminis-
25 tration Act of 1979 pursuant to section 309(c) of
*HR 830 III
PAGENO="0340"
336
3
1 the Nuclear Non-Proliferation Act of 1978, be-
2 cause of their significance for nuclear explosive
3 purposes, or
4 (ii) through the export, transfer, or other en-
5 gagement in the trade of any goods or technology
6 that would be, if they were subject to the jurisdic-
7 tion of the United *States, controlled under the
8 Export Administration Act of 1979 pursuant to
9 section 309(c) of the Nuclear Non-Proliferation
10 Act of 1978, because of their significance for nu-
.11 clear explosive purposes,
12 to the efforts by any foreign country described in sub-
13 section (b) to use, develop, produce, stockpile, or other-
14 wise acquire nuclear weapons; or
15 (2) conspires or attempts to engage in or know-
16 ingly assists in an export, or in a transfer or trade, de-
17 scribed in paragraph (1).
18 (b) Coin~TRIEs RECEIVING ASSISTANCE.-The coun-
19 tries referred to in subsection (a)(1)(B) are-
20 (1) any non-nuclear-weapon state that the Presi-
21 dent determines has, at any time after January 1,
22 1980-
23 (A) used a nuclear weapon;
24 (B) tested a- nuclear weapon;
25 (0) produced a nuclear weapon; or
*HR 830 IH
PAGENO="0341"
337
4
1 (D) made substantial preparations to engage
2 in any activity described in subparagraph (A), (B),
3 or (C);
4 (2) any foreign country which has not ratified the
5 Treaty on the Non-Proliferation of Nuclear Weapons
6 and concluded an agreement with the International
7 Atomic Energy Agency for the application of Interna-
8 tional Atomic Energy Agency safeguards on all the
9 country's nuclear facilities;
10 (3) any f~reign country which has violated such
11 an agreement with the International Atomic Energy
12 Agency relating to safeguards; and
13 (4) any foreign country whose government is de-
14 termined for purposes of section 6(j) of the Export Ad-
15 ministration Act of 1979 to be a government that has
16 repeatedly provided support for international terrorism.
17 (c) SANCTION.-The sanction which applies to a foreign
18 person under subsection (a) is that the President shall pro-
19 hibit, for a period of at least 2 years, the entry into the cus-
20 toms territory of the United States of any article that is the
21 growth, product, or manufacture of that foreign person.
22 (d) EXPANSION OF SANCTION TO OTHER ENTITIES.-
23 The President shall impose the sanction imposed on a foreign
24 person under this section on any other entity that controls, is
eHR 830 III
PAGENO="0342"
338
5
1 controlled by, or is under common control with, that foreign
2 person.
3 SEC. 3. ANNUAL DETERMINATIONS BY THE PRESIDENT;
4 APPEAL OF DETERMINATIONS.
5 (a) DETERMJNATIONS.-The President shall, at least
6 once each year, determine which, if any, foreign persons have
7 carried out acts described in paragraphs (1) and (2) of section
8 2(a). The President shall publish all such determinations in
9 the Federal Register. The President shall impose the sanc-
10 tion required by section 2 upon making such determination.
11 (b) APPEALs.-Any person who the President deter-
12 mines has carried out any act described in paragraph (1) or
13 (2) of section 2(a), may obtain review of the determination by
14 filing an appeal, within 60 days after the determination is
15 published in the Federal Register, in the United States Court
16 of International Trade, which shall have jurisdiction to
17 review such determination.
18 SEC. 4. EFFECT OF ENFORCEMENT ACTIONS BY OTHER
19 COUNTRIES.
20 The sanction set forth in section 2 may not be imposed
21 under such section on a foreign person with respect to acts
22 described in paragraph (1) or (2) of section 2(a), and any such
23 sanction that is in effect against a foreign person on account
24 of such acts shall be terminated, if-'
*HR 830 IH
PAGENO="0343"
339
6
1 (1) the country from which the export, transfer, or
2 other act originates has in effect laws restricting the
3 export, transfer, or other activity in a manner substan-
4 tially similar to the restrictions imposed by United
5 States laws or regulations on such exports, transfers,
6 or other acts,
7 (2) the foreign person is subject to those laws, and
8 (3) the country has imposed on that foreign person
9 the appropriate penalties pursuant to those laws.
10 SEC. 5. ADVISORY OPINIONS.
11 The President may, upon the request of any person,
12 issue an advisory opinion to that person of whether a pro-
13 posed activity by that person would subject that person to the
14 sanction under section 2. Any person who relies in good faith
15 on such advisory opinion which states that the proposed ac-
16 tivity would not subject a person to such sanction, and any
17 person who thereafter engages in such activity, may not be
18 made subject to such sanction on account of such activity.
19 SEC. 6. WAIVER AND REPORT TO CONGRESS.
20 (a) WAIVER.-In any case other than one in which an
21 advisory opinion has been issued under section 5 stating that
22 a proposed activity would not subject a person to the sanction
23 under section 2, the President may waive the application of
24 section 2 to a foreign person if the President determines that
*HR 830 IH
PAGENO="0344"
340
7
1 such waiver is essential to the national security of the United
2 States.
3 (b) REPORT TO CONGRESS.-In the event that the
4 President decides to apply the waiver described in subsection
5 (a), the President shall so notify the Congress not less than
6 20 working days before issuing the waiver. Such notification
7 shall include a report fully articulating the rationale and cir-
8 cumstances which led the President to apply the waiver.
9 SEC. 7. ADDITIONAL WAIVER.
10 The President may waive the imposition of the sanction
11 under section 2 on a person with respect to a product or
12 service if the President certifies to the Congress that-
13 (1) the product or service is essential to the na-
14 tional security of the United States; and
15 (2) such person is a sole source supplier of the
16 product or service, the product or service is not avail-
17 able from any alternative reliable supplier, and the
18 need for the product or service cannot be met in a
19 timely manner by improved manufacturing processes or
20 technological developments.
21 SEC. 8. EXCEPTIONS.
22 The President shall not apply the sanction under see-
23 tion 2-
24 (1) in the case of procurement of defense articles
25 or defense services-
*HR 830 IH
PAGENO="0345"
341
8
1 (A) under existing contracts or subcontracts,
2 including the exercise of options for production
3 quantities to satisfy requirements essential to the
4 national security of the United States;
5 (B) if the President determines that the
6 person to which the sanction would be applied is
7 a sole source supplier of the defense articles and
8 services, that the defense articles or services are
9 essential to the national security of the United
10 States, and that alternative sources are not read-
11 ily or reasonably available; or
12 (C) if the President determines that such ar-
13 tides or services are essential to the national se-
14 curity of the United States under defense copro-
15 duction agreements or NATO Programs of
16 Cooperation;
17 (2) to products or services provided under con-
18 tracts entered into before the date on which the Presi-
19 dent publishes his intention to impose the sanction; or
20 (3) to-
21 (A) spare parts,
22 (B) component parts, but not finished prod-
23 ucts, essential to United States products or
24 production,
*HR 830 IH
PAGENO="0346"
342
9
1 (0) routine services and maintenance of prod-
2 ucts, to the extent that alternative sources are not
3 readily or reasonably available, or
4 (B) information and technology essential to
5 United States products or production.
6 SEC. 9. PETITIONS BY INTERESTED PERSONS.
7 (a) FILING OF PETITIONS.-Any United States person
8 may file a petition, in accordance with regulations issued by
9 the President, requesting that an investigation be conducted
10 to determine whether sanctions are warranted under sec-
11 tion2.
12 (b) ACTIONS ON PETITIONS.-The President shall con-
13 duct an investigation pursuant to a petition filed under sub-
14 section (a) if, on the basis of facts set forth in the petition, the
15 President determines that there is a reasonable basis to be-
16 lieve that a foreign person has engaged in any act described
17 in paragraph (1) or (2), of section 2(a).
18 (c) PETITION DETERMINATIONS:-The President shall,
19 within 20 days after receiving a petition under subsection (a),
20 determine whether to conduct an investigation pursuant to
21 the petition, notify the petitioner of the determination, and
22 publish the determination in the Federal Register, together
23 with the reasons for the determination.
24 (d) APPEALS.-A person filing a petition under subsec-
25 tion (a) may appeal a determination of the President on the
*HR 830 III
PAGENO="0347"
343
10
1 petition by bringing an action for review of the determination
2 in an appropriate United States district court. The court shall
3 review the determination in accordance with section 706 of
4 title 5, United States Code.
5 SEC. 10. DEFINITIONS.
6 As used in this Act-
7 (1) the term "non-nuclear-weapon state" means a
8 non-nuclear-weapon state within the meaning of the
9 Treaty on the Non-Proliferation of Nuclear Weapons,
10 done at Washington, D.C., London, and Moscow on
11 July 1, 1968;
12 (2) the term "nuclear materials and equipment"
13 has the meaning given that term in section 4(4) of the
14 Nuclear Non-Proliferation Act of 1978 (22 U.S.C.
15 3203(4));
16 (3) the term "nuclear technology" means sensitive
17 nuclear technology (as that term is defined in section
18 4(6) of the Nuclear Non-Proliferation Act of 1978 (22
19 U.S.C. 3203(6)) and Restricted Data (as that term is
20 defined in section 11 y. of the Atomic Energy Act of
21 1954 (42 U.S.C. 2014(y));
22 (4) the term "foreign person" means any person
23 other than a United States person;
*HR 830 III
PAGENO="0348"
344
11
1 (5) the term "United States person" has the
2 meaning given that term in section 16(2) of the Export
3 Administration Act of 1979 (50 U.S.C. App. 2415(2));
4 (6) the term "person" means a natural person as
5 well as a corporation, business association, partnership,
6 society, trust, any other nongovernmental entity, orga-
7 nization, or group, and any governmenta.1 entity, and
8 any successor of any such entity; and
9 (7) the terms "otherwise engaged in the trade of"
10 and "other engagement in the trade of" mean, with re-
11 spect to a particular export or transfer, to be a freight
12 forwarder or designated exporting agent, or a con-
13 signee or end user of the item to be exported or trans-
14 ferred.
15 SEC. 11. REGULATORy AUTHORITy.
16 The President may issue such regulations and orders as
17 are necessary to carry out this Act.
*HR 830 IH
PAGENO="0349"
345
Chairman PICKLE. Mr. Stark, we certainly thank you for your
testimony and for your interest and leadership in this matter. I
think your bill, H.R. 830, will be closely followed and watched by
this committee and by the administration. I am glad that you have
appeared in other committees to express this viewpoint. We cer-
tainly appreciate your entire statement.
I said earlier that your entire statement, which is very well docu-
mented and extremely well prepared, will be made part of this
hearing. So we thank you very much for your testimony.
Mr. STARK. Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Schulze.
Mr. SCHULZE. I just want to thank our colleague for his presenta-
tion. Pete, given the threat of chemical and biological and missile
technology and proliferation in the Third World, why have you
homed in on nuclear technology rather than broadened it?
Mr. STARK. Well, there was some attempt to add all of these. The
President vetoed chemical and biological weapons, and I think
those should be included. We have done a relatively better job in
controlling nuclear type exports from our country, and my theory
is I will take any help I can get. I am more scared about nuclear
weapons than I am about missile- or biological- or chemical-weapon
technology. But once that nuclear genie gets out of the bottle, there
is almost no stopping him. The gentleman from Pennsylvania can
well imagine what we would have been faced with if the SCUDS
had any kind of nuclear warheads on them. We would have been
facing a much different situation.
That to me seems the most horrendous, the easiest one to zero in
on, and the easiest one to bring sanctions against individual compa-
nies. But I would-
Mr. SCHULZE. Does this affect any of our allies?
Mr. STARK. Of course it does. It affects companies that are resi-
dent. Germany is our ally. And I have no quarrel with Daimler-
Benz. I think they make wonderful cars and trucks. And I am per-
fectly willing to even buy them in spite of the UAW's opposition to
my perhaps doing that. But I see no reason then that we have to
allow them to export to this country if they are at the same time
shipping the means for nuclear weapons to a country like Pakistan
or Iraq or Iran.
Mr. SCHULZE. I thank you. Thank you, Mr. Chairman.
Chairman PICKLE. The Chair has observed that no other mem-
bers of the committee have any questions.
Mr. Stark, we thank you very much for your testimony.
Our next witness will be our colleague, the Honorable Jim
Moody.
Mr. Moody, will you take your place at the stand?
STATEMENT OF HON. JIM MOODY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Mr. MooDy. Thank you, Mr. Chairman and colleagues.
I commend the subcommittee for its efforts to pursue this
matter. I will not read my statement in its entirety and would re-
quest it be put in the record.
PAGENO="0350"
346
Chairman PICKLE. Your entire statement will be made part of
the record.
Go ahead, Mr. Moody.
Mr. MOODY. Thank you, Mr. Chairman.
I will focus primarily on the Customs Service. It can and should
do more to stop inappropriate and illegal export of military-related
items. But Customs is essentially a "cop on the beat," not the pol-
icymaker. It has the authority to look in any crate, carton or con-
tainer leaving the country. But since there are literally millions of
those, Customs badly needs help to know where to look and what
to look for. I will elaborate on that in a moment.
I have talked with businessmen, legitimate and not so legitimate
arms brokers, journalists, officials in Customs, State, Commerce,
and DOD. As a result, my misgivings about the direction of U.S.
policy and the way it is being implemented has grown ever strong-
er. Recent revelations have described the unwitting and sometimes
witting role of America and other NATO countries in arming un-
democratic countries like Iraq in volatile regions like the Middle
East. Only yesterday we hear that Algeria is now moving to devel-
op nuclear technology as well. I want to identify briefly seven spe-
cific problem areas which seem to me need addressing.
Number one, conflict of interest within lead U.S. agencies. The
Commerce Department has final discretion over licensing of dual-
use technology. Other agencies have advisory roles. But Com-
merce's primary overseas function, after all, is to promote and fa-
cilitate U.S. exports, not to curtail them. Emphasizing today's sale
while ignoring tomorrow's consequences can be directly harmful to
U.S. interests. I believe this is a built-in conflict of interest which
needs to he addressed and should make the Commerce Department
not necessarily the sole gatekeeper of dual-use technology.
Similarly, the State Department, which has sole discretion over
munitions sales abroad, also has a conflict of interest. It is in
State's interest to maximize U.S. influence with other countries,
develop favorable relations. It does not like to say no.
We know that State pursued closer ties with Iraq right up to the
invasion of Kuwait. Frequently the main force of leverage the
United States has through State with undemocratic countries is
the sale of arms. As we know, these governments can often be
more interested in building regional power or suppressing internal
dissent than in legitimate self-defense.
I lived and worked for a year in Iran, and the arms we poured
into Iran were primarily used not for defending Iran against out-
side countries, Mr. Chairman, but by enforcing internal control
inside the country of Iran. And when that country flipped political-
ly, of course, all those arms were simply passed into the hands of
the Ayatollah.
The Departments of Commerce and State are committed to agen-
das that in their eyes may loom larger than controlling the export
of arms technology. These institutional blinders continue to under-
mine our ability as a Nation to protect our country's long-term in-
terest in this area.
Now, the DOD for its part has both strengths and weaknesses.
The DOD can, of course, bring critical knowledge and the national
security dimension to this issue. It now has an advisory role to
PAGENO="0351"
347
Commerce, but it is often ignore'd. Commerce will approve licenses
over the strong objections of DOD. Unfortunately, DOD's credibil-
ity with Commerce and State has apparently been undermined by
its continuous opposition to even relatively unthreatening technolo-
gy transfers to the Soviet bloc over a number of years. It has been
focused on Soviet bloc exports, of course. We understand why that
made sense. Perhaps, however, DOD has not been so careful with
respect to the Middle East.
Curiously, DOD has been relatively willing to support arms sales
to the Middle East. Of the 771 export licenses approved for sales
between 1985 and 1990 to Iraq alone, 487 were referred to DOD for
their recommendation. It concurred in every single one except 9 of
those 487 requests. DOD approved 478 requests, while turning
down only 9-including numerous sales to the Iraqi Defense Minis-
try.
Number two, relying on the world of the seller or purchaser. In
approving licenses for the export of dual-use technology, it is criti-
cal to determine the actual end use of the item. Yet Commerce is
not obliged to do more than simply ask the seller and the purchas-
er what their intentions are. Ironically, at Commerce, the word of
an applicant-even the Government of Iraq-has sometimes car-
ried more weight than objections of our own DOD.
In 1988, Iraq attempted to purchase high performance ovens
which it said was used for constructing prosthesis devices. Later it
was accidentally determined that the real intention was to produce
ballistic missile nose cones. Commerce continued to push hard on
this sale right up until the very moment when it was revealed in
public press, and the matter was stopped only after newspaper ac-
counts.
There is another case now in court in England of nuclear trig-
gers. They were labeled as high speed electrical switching devices,
and they were told they were for electronic gear, high performance
electronic gear. Actually, their real purpose is nuclear triggers. An
American company was simply exporting these. They were told
they were allowed to say on their application that these were for
electronic purposes, when, in fact, due to a sting operation-and
due to a tip from inside the company-it was discovered these were
actually nuclear trigger devices. And yet the simple statement of
the purchaser was to the contrary, and that was accepted under
our system.
Another brief point. Today, criminal penalties apply to U.S. com-
panies only if they willfully and knowingly misrepresent the end
use of an exported product. The U.S. Government must, therefore,
prove that the firm had prior knowledge, which is no easy task.
There is, therefore, a clear incentive under the present structure
for U.S. firms not to ask too many questions, much less follow up
on the end use to verify what that end use would be.
I would say that powerful incentives are needed for U.S. firms, in
fact, to ask those very questions, and if necessary do on-site follow-
up. To this end, I suggest the law be amended to impose civil penal-
ties on U.S. firms that export dual-use technologies that are later
found to have been used for military applications, contrary to the
stated purpose on the license. This would be a lower threshold of
proof, but for the first time would establish the correct incentives
PAGENO="0352"
348
for U.S. export firms to be themselves part of the enforcement net-
work.
Unbelievably, there is now only random and occasional foilowup
by U.S. Government agencies to determine the actual end use of
dual-use items. The Customs Service would be the logical agency to
determine if exports were, in fact, being used for military purposes.
But Customs has a very limited authority to operate overseas.
Sources inside Customs tell me of an undercover attempt to investi-
gate sales to Iraq that were stymied by the refusal of the State De-
partment to grant a passport to a Customs agent because it did not
want to allow him to travel under an assumed name. Therefore,
that investigation was stopped before it ever got started.
Item number three, the so-called general destination loophole.
American companies are free to ship items to any destination if
Commerce classifies the commodity as "general destination,"
meaning it can go anywhere and does not require an export li-
cense.
This committee heard the case of the Warren pumps where Dr.
Steven Bryen testified on April 19. His company requested to ship
general purpose pumps to Iran and received a general destination
classification. Customs seized the shipment on the dock in New
Jersey only because the shipping label stated, "Defense Organiza-
tion of the Islamic Republic of Iran (Chemical)." If it had not been
labeled that way, it probably would not have been seized, and those
pumps-which, in fact, are not for pumping chocolate or peanut
butter but are able to make high powered explosives-would have
arrived in Iraq, their intended destination.
The Warren pumps company told us that it did not provide more
information because U.S. law did not require them to do so. U.S.
law should require them to do so. Somehow we need to find a way
to factor end users into the licensing process even for products that
may seem on the surface to be innocuous.
Number four, the Canada loophole. Most high-technology prod-
ucts can travel to Canada without any license requirements simply
by declaring that Canada is the final destination. Then firms
within Canada, either Canadian or foreign, can then reexport these
products to third nations without even informing any U.S. agency,
much less receiving permission. We saw a clear example of this in
the C-TEK computer case discussed by this committee, again, on
April 18. This committee heard testimony from Robert Casperson
that this was a common and "reliable" export route for weapons
technology. This loophole, Mr. Chairman, must be closed.
Number five, lack of cooperation between intelligence and en-
forcement. The information gathered by the CIA regarding the ac-
tivities of other countries trying to develop nuclear and other mili-
tary capabilities, chiefly by imported technology, is routinely
passed up the CIA chain of command. Fine. But this vital informa-
tion is normally not shared with Customs. The CIA is under no
policy obligation at this time to inform Customs or any other
agency about the expected use of exported U.S. arms technologies.
Usually it is the CIA that comes to Customs for information, not
the other way around.
Number six, lack of cooperation between licensing and enforce-
ment agencies. Incredibly, the Customs Service is not currently in-
PAGENO="0353"
349
formed in any systematic way of new licenses for dual-use high-
tech items. If Customs receives a specific prior tip from an outside
or private source, it can request information on a specific export
license issued by Commerce. Otherwise, it knows very little about
the export licensing universe. Customs would have a significant leg
up in enforcement if Commerce reported, one, all licenses that had
been denied and the reasons for those denials; and, two, even more
importantly, all licenses that had been approved having military
potential, particularly those going to countries now or previously
on the terrorist list. In this way, Customs would have some idea of
what to look for, and this would greatly enhance and simplify their
task.
Finally, Mr. Chairman, number seven, Customs resources concen-
trated on imports rather than exports. Customs resources are so
overwhelmingly directed at this time toward stopping contraband
such as drugs from coming into the country that it has few re-
sources to control goods going out of the country. According to Cus-
toms agents I have talked with, it catches only the smallest tip of
the iceberg. Even with a full-court press on screening incoming
goods, it is now estimated that only about 10 percent of drugs
smuggled into the United States are actually stopped. To say that
Customs stops even 5 percent of illegally exported arms-related
items is probably an exaggeration.
Let me just make a point and then close, and that is that process
reform is no substitute for policy reform. The recommendations I
have made here all relate to process. The main reason current
processes failed to prevent export of many high-tech products to
Iraq and other countries is, in fact, political. The implementation
of policy cannot be better than the policy itself. Up until Iraq's in-
vasion of Kuwait, the Reagan and Bush administrations actively
pursued closer political and commercial ties with Iraq. President
Reagan made the political decision to take Iraq off the terrorist
list. The administration shared intelligence with Iraq and permit-
ted its access to certain controlled technologies.
In our efforts to improve the process, we must not lose sight that
the underlying policy can be flawed. To this end, the Commerce
and State Departments and other agencies will not be more dili-
gent than the administration directs them to be.
U.S. arms exports must be guided by coherent, centrally focused
foreign policy and national security concerns. We need to ask,
What future Husseins are we now arming? Who are we exporting
technology to today that will be tomorrow's adversary?
In conclusion, Mr. Chairman, the United States is now essential-
ly a sieve-leaking high-technology and dual-use products to
friends and foes alike throughout the world.
We cannot continue to undermine our ability to protect our
country's long-term interest in the area of arms and dual-use sales.
We cannot wait until future Iraq or Syria or Algeria or some other
country has acquired high-tech military capacity in order to then
recognize too late the importance of implementing comprehensive
export arms control policies.
Thank you very much for the opportunity to testify.
[The prepared statement follows:]
51-840 0 - 92 - 12
PAGENO="0354"
350
* JIM MOODY 1019 Loaswosm 8UTWING
WISCONSIN WASHINGTON. DC 20515
~ong~ve~ of t~jc ~initeb ~`tatc~
~ou~c of ~epre~cntatibe~ (414) 29711331
~a~jington, ~ 20515
STAT~IENT OF THE HON. JIM MOODY (D-WIS.)
BEFORE THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON OVERSIGHT
WEDNESDAY, MAY 1, 1991
I commend this Subcommittee for its effort to shed light on
inappropriate and often illegal exports of U.S. military
technology. As I have learned sore about this subject, I have
become increasingly concerned about U.S. policy -- or lack of
policy -- on the exports of U.S. high technology and sensitive
military items. Policy on "dual use" products -- items that have
both military and civilian applications -- are in special need of
overhaul.
My comments here will focus on the customs Service. It can
and should do more to stop inappropriate and illegal export of
military-related items. But Customs is essentially the "cop on the
beat"--at airports, ports, and borders--not the policy maker. It
has the authority to look at any crate, carton, or box that as it
deems fit. Since there are literally millions of different boxes,
cartons and containers leaving the country, Customs badly needs
help to know where to look and what to look for. More on this in a
minute.
I have talked with businessmen, legitimate and not so
legitimate arms brokers, journalists, and officials in Customs,
State, Commerce, and the Defense departments. As a result, my
misgivings about the direction of U.S. policy and the way in which
it has been implemented have grown ever stronger. Recent
revelations have described the unwitting and sometimes witting role
of American and other NATO government agencies and businesses, in
arming undemocratic countries like Iraq in volitile regions like
the Middle East.
Today I want to identify what I see as seven problems with the
current system. I do not claim to have magic solutions, but I do
seek to identify some key issues that must be addressed.
1. Conflicts of Interest within Lead U.S. Agencies
The Commerce Department has final discretion over the
licensing of dual use technologies. Other agencies having only
advisory roles. But Commerce's primarily oversees functon is to
promote and facilitate U.S. exports, not to curtail them.
Emphasizing today's sale while ignoring tomorrow's consequences can
be harmful to U.S. national interests, as was the case in Iraq. I
believe that the Commerce Department's built-in conflict of
interest renders it inherently un-suited to be the sole gatekeeper
on dual use exports.
similarly, the State Department has an inherent interest
conflict. It has the final say in the licensing of munitions. But
one of State's main goals is to maximize U.S. influence and
maintain favorable relations with other governments. It does not
like to say "no" to friends or potential friends.
PAGENO="0355"
351
For example, it pursued closer ties with Iraq up to the day of
the invasion of Kuwait. In general, State wants countries to vote
with us in the U.N. to support our diplomatic initiatives, to work
closely with us, etc. Frequently the main form of leverage the
U.S. has with undemocratic governments is the sale of arms. These
governments can be more interested in building regional power or
suppressing internal dissent than in legitimate self defense. Thus
State, like Commerce, is institutionaly inclined to accomodate--not
block--countries seeking U.S. arms, and is inherently unsuited as
sole gatekeeper over munitions exports.
The Departments of Commerce and State are commited to agendas
that, in their eyes, loom larger than controlling the export of
dual use technology. And these institutional blinders continue to
undermine our ability to protect our country's longterm interest in
the area of arms and dual use sales.
The Defense Department, for its part, has both strengths and
weaknesses. DOD can bring critical knowledge and the national
security dimension to decision making in arms export policy. It
now has an advisory role but the Commerce Department has, in some
key instances, approved export licenses over the strong objections
of DOD. Unfortunately, DOD's credibility with Commerce and State
has been undermined by its continuous opposition to even relatively
unthreatening technology transfers to the Soviet Bloc over a number
of years, and to this day. (DOD currently even opposes the export
of fiber optics technology to improve communications in Eastern
European countries.) As a result, DOD's legitimate concerns about
technology transfer to third world countries have not received the
credence they deserve.
Curiously, DOD has been relatively willing to support arms
technology exports to the Middle East. Of the 771 exports licenses
approved for sales between 1985-1990 to Iraq alone, 487 were
referred to DOD for their recommendation. It concurred in all but
9 of them -- including numerous sales to the Iraqi Defense
Ministry.
2. Relying on the Word of the Seller or Purchaser
In approving licenses for the export of dual use technology it
is critical to determine the real end use of the item. Yet the
Commerce Department is not obligated to do more than simply ask the
seller and the purchaser what their intentions are. ironicaI!~, at
Commerce the word of an applicant -- even the Governments of Iraq,
Iran, or Syria --has sometimes carried more weight than the
objections of our own Department of Defense.
In 1988, Iraq attempted to purchase high performance ovena
which it said was for constructing prosthesis devices. Later it
was determined that the real intention was to produce ballistic
missile nose cones. Commerce continued to work hard to promote the
sale despite DOD warnings. (They were stopped at the last
minute--but only after extensive publicity).
The fact is that almost all significant illegal exports that
haye been stopped were stopped only as a result of tips from
private U.S. businesses -- not from activity by government agencies
to discover the real end use. Given the institutional weaknesses
cited above, getting the business community more involved in export
control is one important way of improving enforcei~ent.
Another point: Today, criminal penalties apply to U.S.
companies only if they will~ully and knowingly misrepresent the end
use of exported products. But the U.S. Government must prove that
the firm had prior knowledge -- no easy task. There is therefore a
clear incentive for U.S. firms not to ask too many questions, much
less to follow up purchases to verify end use. Powerful
incentives are needed for U.S. firms to ask those questions and to
do on-site follow up. To this end, I suggest the law be amended to
impose civil penalties for U.S. firms that export dual use products
that are later found to have been placed in military use contrary
to the stated purpose. This lower threshhold of proof Would
establish the correct incentives would the U.S. export firms.
PAGENO="0356"
352
Unbelievably, there is now only random and occasional
follow-up by any U.S. Government agency to determine the actual
application of dual use items. The Customs Service would be a
logical agency to ascertain if the exporter allowed military-use
items to leave the country under false representations. But
Customs has very limited authority to operate overseas. Sources
inside Customs tell me of undercover attempts to investigate sales
to Iraq that were stymied by the refusal of the State Department
to issue a passport to a Customs agent under an assumed name.
In any event, U.S. policy can no longer rely solely on the
word of the purchaser.
3.The General Destination Loophole
American Companies are free to ship items to any destination
if Commerce classifies the commodity as "general destination",
meaning that it can go to any destination and does not require an
export license.
Dr. Steven Bryen testified before this Committee on April 19
and he discussed the Warren Pumps case. This company requested to
ship general purpose pumps to Iran and received a "general
destination" classification from Commerce. Customs seized the
shipment on a dock in Newark, New Jersey because, fortunately, the
shipping labels stated: "Defense Organization of the Islamic
Republic of Iran (Chemical)." The types of pumps Warren was
shipping can be used to pump chocolate and peanut butter. But,
according to Dr. Bryen, Iran intended to use the Warren pumps to
manufacture explosives. In its original letter to Commerce, the
Warren Pumps Company stated that the pumps were going simply "to
Iran" not that they were going to the Chemical section of the
Iranian Defense Minist~ybecause, the U.S. company said, U.S. law
didn't require them to so state.
U.S. law should so requre and Commerce should ask who the
actual end user is. Somehow we need to find a way to factor
end-users into the licensing process, even for products that may
seem innocuous.
4. The Canada Loophole
Most high technology products can travel to Canada without any
license requirement simply by declaring that Canada is their final
destination. Firms within Canada --either Canadian or foreign--can
then re-export these products to third nations without even
informing any U.S. agency, much less receiving its permission. We
saw a clear example of this in the C-TEK computer case discussed by
this Subcommittee in its hearings on April 18. This Subcosmittee
heard testimony from Robert Casperson that this was a common and
"reliable" export route for weapons technology. This loophole must
be closed.
5.Lack of Cooperation between Intelligence and Enforcement
The information gathered by the Central Intelligence Agency
regarding the activities of other countries trying to develop
nuclear and other military capabilities--chiefly by imported
technology--is routinely passed up the CIA chain of command. But
this vital information is normally not shared with the Customs
Service. The CIA is under no policy obligation to inform Customs
or other agencies about expected use of exported U.S. Arms
technologies. Usually it is the CIA that comes to Customs for
information -- not the other way around.
PAGENO="0357"
353
6. Lack of cooperation between licensing and enforcement agencies.
Incredibly, the Customs Service is not currently informed in
any systematic or selected way of new licenses for dual use high
tech items. If Customs receives a specific prior tip from an
outside or private source it can request information on a specific
export license issued by Cosserce. Otherwise, it knows little
about the export licensing universe. Customs would have a
significant "leg up" in enforcement if Commerce reported (1) all
licenses that had been denied, and the reasons for denial, and (2)
all licenses that had been approved having military
potential--particularly those going to countries now or previously
on the terrorist list. In this way, Customs could have some idea
of what to look for and this would greatly enhance and simplify
their task.
7. Customs Resources Concentrated on Imports Rather than Exports
Customs resources are so overwhelmingly directed toward
stopping contraband such as drugs from coming into the country that
it has few resources to control goods going outAccording to
Customs agents I've talked with, it catches only the smallest tip
of the iceberg. Even with a full court press on screening incoming
goods, it is estimated that only 10% of drugs smuggled into the
country are actually stopped. To say that Customs stops even 5% of
illegal arms-related items leaving the country would probably be an
exageration.
Process Reform No Substitute for Policy Reform
The recommendations I have made here all relate to process.
The main reason current processes failed to prevent export of many
high tech products to Iraq and other countries is political. The
implementation of policy cannot be better than the policy itself.
Up until Iraq's invasion of Kuwait, the Reagan and Bush
Administrations actively pursued closer political and commercial
ties with Iraq. President Reagan made the political decision to
take Iraq of f the terrorist list. President Bush shared
intelligence with Iraq and permitted its access to controlled
technologies.
In our efforts to improve the process, we must not lose cite
that the underlying policy was flawed. In the end, The Commerce
Department the State Department and other agenr~ies will not be more
diligent than the Administration directs them to be.
U.S. arms exports must be guided by coherent, centrally
focused foreign policy and national security concerns. We need to
ask, what future Husseins are we now arming? Who are we exporting
technology to today that may be tomorrow's adversary?
In conclusion, the United States is essentially a
sieve--leaking high technology and dual use products to friends and
foes throughout the world.
We cannot continue to undermine our ability to protect our
country's long term interest in the area of arms and dual use
sales. We cannot wait until future Iraq or Syria has acquired a
high tech military capability to recognize the importance of
implementing comprehensive export arms controls.
Thank you very for giving me the opportunity to testify before
you today.
PAGENO="0358"
354
Chairman PICKLE. Mr. Moody, we thank you very much for your
statement, and this entire statement will be made a part of our
record.
I especially want to compliment you on making these seven very
important points, which we will not only consider in this commit-
tee, but pass on to the committee of jurisdiction. I am particularly
impressed on your number six where you point out the lack of co-
operation between the licensing and enforcement agencies, particu-
larly between Commerce and Customs. There must be some defi-
nite improvements, and that lies specifically in our jurisdiction.
We are glad to have this statement. It is a very complete and
substantial statement, and we thank you for it.
Mr. MOODY. Thank you.
Chairman PICKLE. Mr. Anthony.
Mr. ANTHONY. Thank you, Mr. Chairman.
Jim, I was real interested in your comment about the State De-
partment and the conflict with DOD. I don't know if I wrote the
numbers down correctly, but I wrote down that Commerce had ap-
proved 487 sales of munitions to Iraq that required some review by
DOD and that 9 had been turned down. I just wondered if you
could expand on that part of your testimony.
Mr. Moo]Y. My staff has been in touch with those agencies and
has provided those numbers. I can get backup to you in detail for
you. I would be happy to do that.
Mr. ANTHONY. At what point in time were these sales being
made to Iraq?
Mr. MooDy. This is between 1985 and 1990. Right up to 1990.
Mr. ANTHONY. Right up until 1990.
Mr. MOODY. It doesn't cover 1991. It goes through calendar 1990,
long after the Iran-Iraq war ended. There was a certain policy ra-
tionale which the administration had. You could agree or disagree,
but there was a rationale provided that during the Iran-Iraq war
we did not want to see Iran overwhelmingly win; therefore, there
was a tilt towards Iraq in a number of areas-the sharing of intelli-
gence, taking them off the terrorist list, et cetera.
But the war ended in 1988. For 2 more years that we know of,
and probably 2½ if we had the final information, the DOD contin-
ued to approve overwhelmingly the numbers of items that request-
ed their comments on from Commerce in order to sell arms-related
items to Iraq. Long after the Iran-Iraq war ended, any policy that
might have existed for tilting towards Iraq had long since ended.
Mr. ANTHONY. Any additional information that you have on that
particular part of your testimony I think could be beneficial. I
think that part shows a strong conflict between DOD and the State
Department in terms of what policy is and in terms of diplomatic
relationships and what other worldly goals we are pursuing at the
same time. Commerce is just trying to assist local manufacturers of
particular items.
Mr. MooDy. Right.
Mr. ANTHONY. So any additional evidence or testimony or facts
that you could add to that, I would appreciate it.
Mr. MOODY. I would be happy to get more detail for you.
Mr. ANTHONY. Thank you.
PAGENO="0359"
355
Mr. MOODY. I think it goes to the basic point that without many
recriminations, there is an inherent conflict between the role of
Commerce and our export arms control policies-namely, Com-
merce's job is to push exports, promote them, facilitate them, and
encourage them, and that is their role for balance of payments of
purposes. They have the final say-so. Then we shouldn't be sur-
prised if they go overboard.
Mr. Schulze made a good point in his introductory comments
that the DOD has been in some sense removed from having the
veto role. On the other hand, I would point out that even DOD's
recommendations, except in nine cases, were to go ahead and let
the stuff go. It appears that DOD has been much more careful, and
appropriately so, looking backward in the past, over exports going
to the Soviet bloc than they were to other areas of the world which
might be volatile.
Mr. ANTHONY. What you are saying is when Iran and Iraq got
into their conflict, President Reagan in 1982, if I am not mistaken,
took them off the list of being a terrorist country.
Mr. MOODY. I don't know what year, but he did do that.
Mr. ANTHONY. I think it was 1982, then I think in 1984 he re-
stored full diplomatic relations with Iraq, which meant then that
all of these goods obviously could be sold. So your time frame for
your sales that you have outlined started from that point through
1990.
Mr. MOODY. Right, 1985 through 1990.
Mr. ANTHONY. 1985 through 1990, and I think President Reagan
in 1984 established full diplomatic relations with the country of
Iraq. Well, obviously I will talk to you in private, but any addition-
al evidence that you have on those specific sales, especially those
nine that were turned down, I would be real curious to see what
was so bad about those nine.
Mr. MOODY. All right.
Mr. ANTHONY. And what was so good about the 487.
Mr. MOODY. Right. We will do so. We will get some more infor-
mation to you.
Mr. ANTHONY. See where some of those inherent conflicts arise. I
thank you.
*Chairman PICKLE. Thank you, Mr. Anthony.
Mr. Schulze, do you have any questions?
Mr. SCHULZE. Just briefly. I thank the gentleman for his testimo-
ny. I don't have with me all of the votes of all the Members, but it
just seems to me that Congress does share a large part of the
blame in this. There has been a great push from Congress to all of
the bureaus involved to sell goods overseas. In fact, the message
has been to DOD and others to stop holding up these sales. And I
think we have got to start sending a clear message. I opposed most
of that legislation, and I think it is about time that we send a clear
message that we would rather sacrifice some sales than have a pro-
liferation of some of these weapons. So I cannot blame administra-
tions and bureaus for some of Congress' schizophrenia. I think that
perhaps now we can speak with one tongue and tighten up some of
these rules and regulations so they know where they stand.
PAGENO="0360"
356
I can understand the gentleman's concern, but I hope that his
record will bear out that concern so that we can send clear signals
to the bureaucracy.
Mr. MOODY. I agree. I don't disagree with that at all, Mr.
Schulze. I am simply saying that DOD's role with respect to the
Soviet bloc is one thing. They have been very, very cautious, and I
would not fault them for it at all. DOD's role with respect to the
Middle East and perhaps other volatile areas has not apparently
quite so tough-minded. Maybe that is something we should look at.
Mr. SCHULZE. I think that they received the message from Con-
gress in that direction. And the only thing that they were told to
do was watch Communist countries, and anybody who could buy
anything anywhere else, they were to open the floodgates. That
message-I have in my office the statements made on the floor by
the export caucus and others over the last decade, and the message
was very, very clear, and the votes were very, very clear to the bu-
reaucracy. That is, open the gates and start selling stuff. Anything
that can be bought anywhere else, sell it.
Now, if we are going to change that-and I didn't think we
should have done it in the first place-then we should send that
clear message. We have got to give these people some direction. I
am just as happy to point the finger of blame, but we have got to
understand that we right here in this body are largely responsible
for any of these sales and that we have the oversight, the author-
ity, even through the intelligence community, at any point to stop
any of them. So I enjoy the luxury of blaming others, but we have
got to be introspective once in a while and say that we do share
responsibility in this and we are going to change the law and here
is the way we want it.
Mr. MOODY. Well, the thrust of my testimony is not a blame
thrust at all. It is pointing out seven areas I think we need to ad-
dress, and that is what I would like to leave with the committee.
Chairman PICKLE. Mr. Moody, again, I want to thank you. Your
testimony is very thorough and important to us. We will be looking
at this whole problem, and we will be calling you again. We also
want to invite you to be a part of any of our continuation of testi-
mony and hearings today.
Mr. MOODY. Thank you very much.
Chairman PICKLE. Thank you very much, Mr. Moody.
We will next hear from the United States Department of the
Treasury. We will hear from Richard Newcomb, who is the Direc-
tor of the Office of Foreign Assets Control, or OFAC.
Mr. Newcomb, will you please take your position at the witness
table and identify any of the gentlemen that you might have with
you.
STATEMENT OF R. RICHARD NEWCOMB, DIRECTOR, OFFICE OF
FOREIGN ASSETS CONTROL, OFFICE OF ENFORCEMENT, U.S.
DEPARTMENT OF THE TREASURY
Mr. NEWCOMB. Thank you, Mr. Chairman, members of the sub-
committee. I am here today to discuss Foreign Assets Control role
in formulating, administering and enforcing economic sanctions
programs imposed against Iraq, Kuwait, and Libya. OFAC ha~ pri-
PAGENO="0361"
357
mary responsibility within the executive branch for implementing
the financial and trade sanctions currently in effect with respect to
a number of countries.
In addition to Iraq, Kuwait, and Libya sanctions, we administer
comprehensive sanctions against Cuba, Vietnam, North Korea, and
Cambodia. We also administer the import embargo currently in
effect against Iran, and the import and new investment prohibi-
tions against South Africa, under the Comprehensive Anti-Apart-
heid Act. In recent years, we administered the economic sanctions
programs against the Sandinista regime in Nicaragua, and the
Noriega regime in Panama.
In view of your interest in the programs affecting Middle East-
ern countries, my comments today will be directed to the Iraq,
Kuwait, and Libya programs, our assessment of the programs and
specific strategies we have employed in fulfilling our mission, in-
cluding our specially designated nationals program.
As you know, Iraq's invasion of Kuwait on August 2 resulted in
the immediate declaration of a national emergency by the Presi-
dent under the International Emergency Economic Powers Act, an
issuance of two Executive orders freezing all Iraq and Kuwait Gov-
ernment assets in the United States, or under the control of U.S.
persons, and imposing a comprehensive trade embargo against
Iraq, similar in scope to the one imposed under IEEPA against
Libya in 1986.
Following the August 6 resolution of the United Nations Security
Council calling on U.N. member States to impose sweeping econom-
ic sanctions against Iraq and occupied Kuwait, the President, on
August 9, issued another Executive order broadening the sanctions
previously imposed against Iraq, and a fourth Executive order ex-
tending the same comprehensive sanctions to Kuwait, then under
Iraq control.
Since the liberation of Kuwait by allied military forces and Oper-
ation Desert Storm, the prohibitions of August 9 on most trade and
financial transactions with respect to Kuwait have been removed
by the issuance of general licenses authorizing such transactions.
Except for seven Kuwait banks, the U.S. property of the Govern-
ment of Kuwait has been effectively unblocked by general license.
The seven banks, while remaining blocked, have been issued specif-
ic licenses to use their assets to settle pre-August 2 obligations.
Also these seven banks have now been licensed to engage in letter
of credit and foreign exchange transactions.
We anticipate that the banks will be unblocked and fully able to
operate in the United States by the end of this month.
A comprehensive economic sanctions program, similar to that
against Iraq, was imposed by the President against Libya in Janu-
ary of 1986. The Libya sanctions blocked the U.S. property of the
Government of Libya; and prohibited imports to and exports from
Libya; prohibited financial transactions and travel transactions.
The objectives of the August 2, and August 9 Executive orders
were to deprive Iraq of any economic or financial benefit as a
result of its illegal invasion and occupation of Kuwait, and to pre-
serve and protect the substantial U.S. assets of the Government of
Kuwait for the benefit of their rightful owner. Through the swift
and coordinated actions of the President, the National Security
PAGENO="0362"
358
Council, and the Treasury and State Departments on the night of
the Iraqi invasion, the legal authority to implement sanctions was
in place and operational responsibility assigned before U.S. finan-
cial markets opened the following morning on August 2.
Much of the initial success in implementing the sanctions after
the decisive steps taken by the President can be attributed to the
quick application of restrictions to the complex commercial and fi-
nancial relationship that existed between the United States and
Kuwait and Iraq. In many cases, these actions set the pace or
became the model for the sanctions program administered by other
countries. The most immediate and pressing problems we faced in
the aftermath of the Executive orders was identifying which insti-
tutions were actually owned or controlled by the Governments of
Kuwait and Iraq, winding down financial and commercial transac-
tions entered into prior to the sanctions, and structuring a regula-
tory program that provided a reasonable degree of investment
flexibility for the billions of dollars of blocked Kuwait property,
while assuring that the property remained fully protected.
The President's orders immediately and effectively immobilized
tens of billions of dollars of Kuwait and Iraq Government-owned
assets in the United States. These orders interfered with or halted
altogether billions of dollars of capital flows. These included for-
eign exchange contracts, oil payments, repurchase agreements, cur-
rency swaps, payments to international banking syndicates, and a
wide variety of overnight investment arrangements involving cap-
ital markets in different political jurisdictions.
Resolving the problems resulting from the blocking orders was a
complicated and difficult task, especially in today's sophisticated
capital markets, with their international scope and highly devel-
oped dependence on the execution of interlocking contractual obli-
gations. We've had considerable experience over the years in freez-
ing assets of adversarial countries, but not since World War II have
we been tasked with imposing and administering such a large-scale
protective asset freeze involving a country with such complex and
extensive multinational investment holdings as Kuwait. In addi-
tion, most past freezes had not occurred suddenly, but after a
period of escalating international tensions. This freeze was imposed
literally overnight.
Almost immediately our blocking program developed into a two-
track approach. First, we had to identify and make known to the
financial and export communities, the Kuwaiti banks, and other in-
stitutions frozen by the Executive orders, and how preexisting fi-
nancial and other contractual arrangements could be completed,
wound down, or continued without violating the freeze order.
Second, we had to identify, license, and develop operational
guidelines for the Kuwait Government-owned institutions deter-
mined to be under the control of the legitimate authorities so that
they could continue to function within the international frame-
work established by the U.N. sanctions program. The day after the
freeze, on August 3, we issued guidance to U.S. persons concerning
the completion of existing contracts involving pre-invasion oil ship-
ments en route to the United States, securities transactions, for-
eign exchange contracts, and letter of credit payments to U.S. ex-
PAGENO="0363"
359
porters for goods and services exported to Iraq or Kuwait prior to
the effective date.
That day we also began what became an extensive and ongoing
cooperative consulting process with the Kuwait authorities, as well
as with many other companies and financial institutions affected
by the freeze, to ascertain, for example, which of the blocked
Kuwait Government institutions had sufficient senior officials and
management personnel outside of Kuwait to resume limited oper-
ations. We met with CEOs and other senior officials of Kuwait-con-
trolled institutions to tailor specific licenses designed to permit
U.S. persons, including holders of blocked property belonging to the
institutions, to engage in specified types of transactions inyolving
the institutions.
This licensing scheme was followed to ensure that transactions
permitted by the license remained subject to U.S. jurisdiction and
control, while allowing the institution sufficient flexibility to
resume operations.
We consulted regularly with the Federal Reserve Bank of New
York and various U.S. Government agencies, including the Depart-
ment of State, Commerce, and Defense, the U.S. Customs Service,
the FBI, the NSC, and members of the intelligence and law enforce-
ment communities.
We also established an ongoing program with foreign govern-
ments to meet regularly with their embassies to coordinate actions
and ensure uniform application of all U.N. resolutions, and partici-
pated in coordination meetings with our allies in such forums as
the Bank of International Settlements, the Organization of Eco-
nomic Cooperation and Development, the European Economic Com-
munity Commission, and the United Nations.
On the domestic side, we believe the longer term effectiveness of
the sanctions can be attributed to the intensive efforts of many
U.S. Government agencies affected, and the high level of coopera-
tion exhibited by the Federal Reserve System, and other bank su-
pervisory and regulatory agencies, and the financial and export
communities.
The U.S. Customs Service was in a position to assist us by moni-
toring all imports and exports and did so, completely and effective-
ly. Many exports to Iraq or Kuwait, already on the high seas, were
returned to the United States. Others were diverted to other desti-
nations, either voluntarily or by direction of the Naval forces par-
ticipating in the quickly assembled multinational blockade.
Internationally, the unprecedented level of cooperation and una-
nimity of purpose exhibited by the U.N. member states participat-
ing in the sanctions program has been remarkably successful in
preventing inadvertent leaks in any particular political jurisdiction
from turning into a serious hemorrhaging of the embargo.
On February 8, we issued regulations requiring that all U.S. per-
sons holding blocked Iraqi property and all U.S. nationals with
claims against Iraq file reports of such assets or claims. Since the
reporting deadline of March 15, we have been reviewing, tabulat-
ing, and evaluating these reports. They reveal the value of blocked
Iraqi property in the United States exceeds $1.2 billion. This prop-
erty consists principally of bank deposits, frozen on August 2;
amounts subsequently paid into blocked accounts by purchasers of
PAGENO="0364"
360
Iraqi oil en route to the United States on August 2; and a miscella-
neous variety of Iraqi Government-owned tangible properties and
credits.
Approximately $420 million additional was reported as blocked
in the offshore branches of U.S. banks, particularly in the United
Kingdom. Almost 1,100 individuals, corporations, banks, and U.S.
Government agencies have reported billions of dollars in claims
against Iraq. These range from claims asserted by individuals for
personal property looted in Kuwait, to losses of future business and
concession rights. Inasmuch as these claims have not been submit-
ted to a formal claims resolution body, much less adjudicated, it
would be inappropriate to speculate as to their actual aggregate
value. The process by which these claims will be adjudicated and
settlements funded will be determined once the details of the UN
reparations plan are worked out.
The Iraq and Libya sanctions regulations provide the Secretary of
the Treasury with the authority to include, within the definition of
the target country Government, those individuals and entities which
have been determined to be acting on behalf of, or controlled by, the
foreign target Government. This authority greatly enhances the
effectiveness of the sanctions programs by forestalling a potential
avenue of sanctions evasion by specially designated nationals, that
is, agents or front companies of Iraq or Libya.
The effect of being designated as specially designated national is
significant. The SDN is exposed internationally as a target Govern-
ment agency instrumentality, or controlled entity acting either
overtly or covertly as a front, and all of the SDN's property within
the jurisdiction of the United States, including financial assets in
U.S. bank branches overseas, is blocked. U.S. persons are prohibit-
ed from engaging in any transaction involving property in which
the SDN has an interest, which includes all financial and trade
transactions, and all holders of this property must report their
holdings.
Through information obtained from a combination of investiga-
tive sources, including other U.S. agencies, we have undertaken a
major initiative to identify front companies and agents used to ac-
quire technology, equipment and other resources for Iraq. On
August 1, we formally identified 52 businesses and 37 individuals
as Iraqi S1)Ns and 160 merchant ships as Iraqi owned or controlled,
thus prohibiting their use by U.S. businesses and individuals.
This action was the culmination of many months of domestic and
international investigative effort coordinated with domestic and
foreign intelligence resources. In practice, an Iraqi SDN is an Iraqi
Government body, representative, intermediary, or front, whether
overt or covert that is located outside Iraq and functions as an ex-
tension of the Government. It may be a firm created by the Iraqi
Government, or a third party company that otherwise becomes
owned or controlled by the Iraqi Government, or that operates on
its behalf.
No criminal linkage is necessary for being placed on this list.
Ownership or control by the Iraq Government, or acting on its
behalf, would suffice to qualify a person for designation. For U.S.
persons, dealing with an SDN is equivalent to doing business with
PAGENO="0365"
361
the government of the target country, an activity which is prohibit-
ed and subject to penalty.
Yesterday, we named 48 entities, all located outside the United
States, as Libyan specially designated nationals. Libya's policies
and actions, including its continued refusal to disavow terrorism as
a tool of international policy, makes such a listing particularly
useful at this time in redirecting public attention to the compre-
hensive sanctions program in place against Libya.
Neither the Libyan or Iraq SDN list is intended as a static docu-
ment, but will be continuously augmented as additional front com-
panies and agents are identified.
It was a pleasure, Mr. Chairman, appearing before this commit-
tee this morning. I will be pleased to respond to any questions that
you or the members might have.
[The prepared statement follows:]
PAGENO="0366"
362
PREPARED STATEMENT OF R. RICHARD NEWCOMB
DIRECTOR, OFFICE OF FOREIGN ASSETS CONTROL
DEPARTMENT OF THE TREASURY
before the
SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
May 1, 1991
Chairman Pickle and members of the subcommittee:
Good morning. I am R. Richard Newcomb, the Director of the
Office of Foreign Assets Control (FAC) at the United States
Department of Treasury. I appear before the subcommittee today
to discuss FAC's role in formulating, administering, and
enforcing the economic sanctions programs imposed against Iraq,
Kuwait, and Libya.
FAC has primary responsibility within the Executive Branch
for implementing the financial and trade sanctions currently in
effect with respect to a number of countries. In addition to the
Iraq, Kuwait, and Libyan sanctions, we administer comprehensive
sanctions against Cuba, Vietnam, North Korea, and Cambodia. FAC
also administers the import embargo currently in effect against
Iran. We currently administer and interpret the import and new
investment prohibitions imposed against South Africa by the
Comprehensive Anti-Apartheid Act of 1986, and continue to
exercise residual World War Il-origin assets controls affecting
the Baltic Republics. In recent years, we administered
successful economic sanctions programs against the Sandinista
regime in Nicaragua and the Noriega regime in Panama.
In view of your expressed interest in the programs affecting
the Middle Eastern countries, my comments today will be directed
to the Iraq, Kuwait, and Libyan programs, our assessment of the
effectiveness of those programs, and specific strategies we have
employed in fulfilling our mission, including a vigorous
Specially Designated Nationals program.
PAGENO="0367"
363
-2-
Description and Regulatory Evolution
of the Iraq, Kuwait, and Libyan Sanctions PrograiTi~
As you know, Iraq's invasion of Kuwait on August 2 resulted
in the immediate declaration of a national emergency by the
President under the International Emergency Economic Powers Act
("IEEPA") and the issuance of Executive Orders No. 12722 and
No. 12723, freezing all Iraq and Kuwait government assets in the
United States, or under the control of U.S. persons, and imposing
a comprehensive trade embargo against Iraq similar in scope to
the one imposed under IEEPA against Libya in 1986.
Following the ~August 6 resolution of the United Nations
Security Council calling on U.N. member states to impose sweeping
economic sanctions against Iraq and occupied Kuwait, the
President on August 9 issued Executive Order No. 12724 broadening
the sanctions previously imposed against Iraq and Executive Order
No. 12725 extending the same comprehensive sanctions program to
Kuwait, then under Iraqi control. With respect to Iraq, the
August 9 Executive order prohibited the following transactions,
most of which had been prohibited under the August 2 order:
(1) imports and exports between the United States and
Iraq, including activity promoting such transactions;
(2) dealing in property of Iraqi origin exported from
Iraq after August 6;
(3) transactions related to travel to Iraq (with
limited exceptions);
(4) transactions related to transportation to or from
Iraq, including the use of Iraqi-registered vessels or
aircraft;
(5) the performance of contracts in support of
projects in Iraq; and
(6) the commitment or transfer of funds or other
financial or economic resources to the Government of
Iraq.
The August 9 order also continued in effect the blocking of Iraqi
government property.
Since the liberation of Kuwait by the Allied Military Forces
in Operation Desert Storm, the prohibitions of August 9 on most
trade and financial transactions with respect to Kuwait have been
removed by the issuance of general licenses authorizing such
transactions. Except for seven Kuwaiti banks, the U.S. property
of the Government of Kuwait has now been effectively unblocked by
general license. The seven banks, while remaining blocked, have
PAGENO="0368"
&64
-3-
been issued specific licenses to use their assets to settle pre-
August 2 obligations. Also the seven banks have been licensed to
engage in letter of credit and foreign exchange transactions. We
anticipate that the banks will be unblocked and fully able to
operate in the United States by the end of this month.
A comprehensive econonic sanctions program similar to that
against Iraq was imposed by the President against Libya in
January 1986. Although these sanctions were also imposed under
the authority of IEEPA, they were a deliberate response to
Libya's longstanding support of international terrorism
(including hostage-takings and bombings), rather than an
immediate response to a particular act of aggression. As in the
case of the Iraq and Kuwait sanctions, the Libyan sanctions were
developed by Treasury with the assistance of the Departments of
State and Justice, the White House staff, and the National
Security Council.
The Libyan sanctions block the U.S. property of the Govern-
ment of Libya, prohibit imports to and exports from Libya,
prohibit financial transactions with Libya (including extensions
of credit), and prohibit travel transactions. As I will discuss
in greater detail shortly, the Libyan Sanctions Regulations
("LSR") 31 C.F.R. Part 550, promulgated by FAC to implement the
Libyan sanctions, include within the definition of the
"Government of Libya" any organization or person designated by
the Secretary of the Treasury as having been determined to be
owned or controlled by, or acting on behalf of, the Government of
Libya. The Iraqi Sanctions Regulations (`ISR"), 31 C.F.R. Part
575, provide the Director of FAC with similar authority in
defining the "Government of Iraq."
Effectiveness of Implementation of
~ragi Sanctions and Kuwaiti Asset Protections
The objectives of the August 2 and 9 Executive orders were
to deprive Iraq of any economic or financial benefit as a result
of its illegal invasion and occupation of Kuwait, and to preserve
and protect the substantial U.S. assets of the Government of
Kuwait for the benefit of their rightful owner. Due to the swift
and coordinated actions of the President, the National Security
Council, and the Treasury and State Departments on the night of
the Iraqi invasion, the legal authority to implement the
sanctions was in place and the operational responsibility
assigned before U.S. financial markets opened on August 2.
We believe much of the initial success in implementing the
sanctions after the decisive steps taken by the President can be
attributed to the quick and rational application of the
restrictions by the Treasury administrative apparatus to the
complex commercial and financial relationship that existed
PAGENO="0369"
365
-4-
between the United States, Kuwait, and Iraq. In many cases,
these actions set the pace or became the model for the sanctions
programs administered by other countries.
The most immediate and pressing problems we faced in the
aftermath of the Executive orders were identifying which
institutions were actually owned or controlled by the Governments
of Kuwait and Iraq, winding down financial and commercial
transactions entered into prior to the sanctions, and structuring
a regulatory program that provided a reasonable degree of
investment flexibility for the billions of dollars of blocked
Kuwaiti property while ensuring that the property remained fully
protected.
The President's orders immediately and effectively
immobilized tens of billions of dollars of Kuwaiti and Iraqi
government-owned assets in the United States. These orders
interfered with or halted altogether billions of dollars of
capital flows. These included foreign exchange contracts, oil
payments, repurchase agreements and currency swaps, payments to
international banking syndicates, and a wide variety of overnight
investment arrangements involving capital markets in different
political jurisdictions.
Resolving the problems resulting from the blocking orders
was a complicated and difficult task, especially in today's
sophisticated capital markets with their international scope and
highly developed dependence on the execution of interlocking
contractual obligations. We have had considerable experience
over the years in freezing the assets of adversarial countries,
but not since World War II have we been tasked with imposing and
administering such a large scale protective asset freeze
involving a country with such complex and extensive multinational
investment holdings as Kuwait. In addition, most past asset
freezes had not occurred suddenly, but after a period of
escalating international tensions; this freeze was imposed
literally overnight.
Almost immediately, our blocking program developed into a
two track approach. First, we had to identify and make known to
the financial and export communities the Kuwaiti banks and other
institutions frozen by the Executive orders and how pre-existing
financial and other contractual arrangements could be completed,
wound down, or continued without violating the freeze order.
Second, we had to identify, license, and develop operational
guidelines for the Kuwaiti government-owned institutions
determined to be under the control of legitimate authorities so
they could continue to function within the international
framework established by the U.N. sanctions program.
The day after the freeze, Friday, August 3, we issued
guidance to U.S. persons concerning the completion of existing
PAGENO="0370"
366
-5-
contracts involving pre-invasion oil shipments en route to the
U.S., securities transactions, foreign exchange contracts, and
letter of credit payments to U.S. exporters for goods and
services exported to Iraq or Kuwait prior to the effective date.
That day we also began what became an extensive and ongoing
cooperative consulting process with the Kuwaiti authorities, as
well as with many of the companies and financial institutions
affected by the freeze. Over the weekend of August 5, we
developed and transmitted to the Federal Reserve Bank of New York
("FRBNY") the first in a series of determinations concerning the
blocked status of certain prominent Middle Eastern, Pan-Arab, and
Kuwaiti banks and financial institutions. We also met with U.S.
and Kuwaiti representatives of various compnmies affected by the
freeze order.
Over the next couple of months we met daily with a wide
variety of parties affected by the freeze. We issued numerous
interpretative rulings involving a wide variety of transactions
and additional blocking status determinations concerning various
institutions. These complicated and fact-intensive
determinations, especially those involving banks in which other
countries had interests, had to be made under severe time
constraints. These constraints arose because delays of just a
day or two in determining the status of a bank could cause severe
runs by concerned depositors who feared their funds might
incidentally be caught in the freeze if the bank were determined
to be owned or controlled by the Governments of Kuwait or Iraq.
It also became apparent to us over this period that many other
countries were taking blocking actions with respect to the
individual institutions based upon our determinations.
We also worked extensively with the Government of Kuwait
during this period to ascertain which of the blocked Kuwaiti
governmental institutions had sufficient senior officials and
management personnel outside of Kuwait `to resume limited
operations. We met with CEO's and other senior officials of the
Kuwait controlled institutions to tailor specific FAC licenses
`designed `to permit U.S. persons, including holders of blocked
property belonging to the institutions, to engage in specified
types of transactions involving the institutions. This licensing
scheme was followed to ensure that transactions permitted by the
licenses remained subject to U.S. jurisdiction and control while
allowing `the institutions sufficient flexibility to resume
operations. Most of these institutions were owned or controlled
by the Kuwait Investment Office or the Kuwait Investment
Authority.
In addition to the regular meetings with the Kuwaitis and
other affected parties since August 2, we have consulted
regularly with the Federal Reserve Bank of New York and various
U.S. Government'agencies, including the Departments of State,
Commerce, and Defense, the Customs Service, the FBI, the NSC, and
PAGENO="0371"
367
-6-
members of the intelligence and law enforcement communities. We
also established an ongoing program with foreign governments to
meet regularly with their embassies to coordinate actions and
ensure uniform application of all U.N. resolutions and partici-
pated in coordination meetings with our allies in such forums as
the Bank for International Settlements, the Organization for
Economic Cooperation and Development, the European Economic
Community Commission, and the United Nations.
On the domestic side, we believe the longer term
effectiveness of the sanctions can be attributed to the intensive
efforts of the many U.S. Government agencies affected and the
high level of cooperation exhibited by the Federal ~eserve
System, the other bank supervisory and regulatory agencies, and
the financial and export communities. The Customs Service was
in a position to assist us by monitoring all imports and exports
and did so completely and effectively. Many exports to Iraq or
Kuwait already on the high seas were returned to the United
States; others were diverted to other destinations, either
voluntarily or by direction of the naval forces participating in
the quickly-assembled multinational blockade. Internationally,
the unprecedented level of cooperation and unanimity of purpose
exhibited by the U.N. member states participating in the
sanctions program has been remarkably successful in preventing
inadvertent leaks in any particular political jurisdiction from
turning into a serious hemorrhaging of the embargo.
The same level of cooperation and unanimity of purpose was
exhibited domestically as well. FAC's Enforcement Division
conducts and coordinates investigations of substantive violations
of the embargo and accordingly maintains daily operational
liaison with the U.S. Customs Service and the Federal Bureau of
Investigation. Similarly, FAC routinely coordinates its
activities with the Departments of State, Defense, Commerce, and
Justice, and the intelligence community.
Census of Blocked Iraqi Assets and Claims Against Iraq
On February 8, we issued regulations requiring that all
United States persons holding blocked Iraqi property, and all
United States nationals with claims against Iraq, file reports of
such assets or claims with FAC. Since the reporting deadline of
March 15, we have been reviewing, tabulating, and evaluating the
reports filed.
The reports filed reveal that the value of blocked Iraqi
property in the United States exceeds $1.2 billion. This
property consists principally of bank deposits frozen on
August 2, amounts subsequently paid into blocked accounts by
purchasers of Iraqi oil en route to the United States on
PAGENO="0372"
368
-7-
August 2, and a miscellaneous variety of Iraqi government-owned
tangible properties and credits. Approximately $420 million
additional was reported as blocked in the offshore branches of
U.S. banks, primarily in the United Kingdom.
Almost 1,100 individuals, corporations, banks, and U.S.
Government agencies have reported billions of dollars in claims
against Iraq. These range from claims asserted by individuals
for personal property looted in Kuwait to losses of future
business and concession rights. Inasmuch as these claims have
not been submitted to a formal claims resolution body, much less
adjudicated, it would be inappropriate to speculate as to their
actual aggregate value. The process by which the claims will be
adjudicated and settlements funded will be determined once the
details of the U.N. reparations plan are worked out.
- We have already held several meetings with the larger
claimants who have raised issues we believe require examination
in order to obtain a clearer and more complete picture of their
losses. These meetings enable us to more effectively evaluate
the various settlement options or scenarios likely to be put
forth.
Specially Designated Nationals
As noted earlier, the ISR and LSR provide the Secretary of
theTreasury with authority to include within the definition of
the target country government those individuals and entities
which have been determined to be acting on behalf of, or
controlled by, the target government. This authority greatly
enhances the effectiveness of these sanctions programs by
forestalling a potential avenue of sanctions evasion by
Specially Designated Nationals--agents and front companies of
Iraq and Libya.
The effect of being designated a Specially Designated
National, or SDN, is significant. The 5DM is exposed inter-
nationally as a target government agency, instrumentality, or
controlled entity acting either overtly or covertly as a front,
and all of the SDN's property within the jurisdiction of the
United States (including financial assets in U.S. bank branches
overseas) is blocked. U.S. persons are prohibited from engaging
in any transaction involving property in which the SDN has an
interest, which includes all financial and trade transactions,
and all holders of SDN property must report those holdings to
FAC. In the case of Iraq, which is subject to multinational
sanctions, being identified as an Iraqi SDN by the United States
provides a basis for other governments to take similar steps to
include the specifically identified individuals and entities
within their sanctions programs.
PAGENO="0373"
369
-8-
Through information obtained by FAC from a combination of
investigative sources, including other U.S. agencies, we have
undertaken a major initiative to identify front companies and
agents used to acquire technology, equipment, and other resources
for Iraq. On April 1, Treasury formally identified 52 businesses
and 37 individuals as Iraqi SDN5 and 160 merchant ships as Iraqi-
owned or controlled, thus prohibiting their use by U.S.
businesses and individuals. This action was the culmination of
many months of domestic and international investigative effort
coordinated by Treasury with domestic and foreign investigative
resources. Approximately half of the designated Iraqi SDN5 are
part of the Iraqi military-industrial network.
In practice, an Iraqi SDN is an Iraqi government body,
representative, intermediary, or front (whether overt or covert)
that is located outside Iraq and functions as an extension of the
Government of Iraq. It may be a firm created by the Iraqi
Government, or it may be a third-party company that otherwise
becomes owned or controlled by the Iraqi government or that
operates on behalf of the Government of Iraq. No criminal
linkage is necessary for being placed on the SDN list. Ownership
or control by the Iraqi government or acting on its behalf would
suffice to qualify a person for designation.
For U.S. persons, dealing with an SDN is equivalent to doing
business with the government of the target country, an activity
which is prohibited and subject to severe penalties. For
example, under the Iraq Sanctions Act, civil penalties of up to
$250,000 may be imposed administratively. Criminal fines of up
to $1 million per violation may be imposed on both individuals
and corporate entities, and prison sentences of up to 12 years
are authorized for individuals, including officers, directors, or
agents of a corporation who are knowingly involved in a corporate
violation of the sanctions.
U.S. persons may be designated as SDN5 and, as such, would
have their assets blocked by FAC, effectively putting them out of
business. It should also be noted that a U.S. firm in which Iraq
holds a controlling interest was immediately blocked under terms
of the August 2 Executive order.
Among the entities identified as SDN5 were the Matrix-
Churchill Corporation of Solon, Ohio, and Bay Industries, Inc.,
of Santa Monica, California, two U.S. corporations on which FAC
had previously served blocking notices. Matrix-Churchill's role
in Iraq's international arms and technology acquisition network,
performed under cover of a seemingly innocuous machine tool sales
and service business, has received widespread publicity in recent
months.
Yesterday, we named 48 entities, all located outside the
United States, as Libyan SDN5. Libya's policies and actions,
PAGENO="0374"
370
-9-
including its continued refusal to disavow terrorism as a tool of
international policy, make such a listing particularly useful at
this time in redirecting public attention to the comprehensive
sanctions program in place against Libya.
Neither the Libyan nor the Iraqi SND list is intended as a
static document, but will be continuously augmented as additional
front companies and agents are identified.
It was a pleasure appearing before this subcommittee this
morning. I will be pleased to respond to any questions.
#####
PAGENO="0375"
371
Chairman PICKLE. Mr. Newcomb, we thank you. I particularly
appreciate the full reporting of the actions taken by our Govern-
ment, particularly since the beginning of the invasion of the
Kuwait nation.
Mr. NEWCOMB. Thank you.
Chairman PICKLE. And the steps that Treasury took to safeguard
the properties, both in Kuwait, and the investment that our people
had. This is a thorough recitation of the steps that Treasury has
taken and it is good to have this on the record, and I appreciate
that.
I think our committee members have a lot of questions that
we're going to ask you to respond to. These questions are of a gen-
eral nature and they are not intended to be critical of either you or
anyone in the Department, but we're trying to get some facts and
to have a better understanding of where we are on some of these
questions.
I am going to go through a few of the questions and then yield to
my other committee members for questions that they want to ask
you.
First, with respect to the reported wealth of Saddam Hussein.
Can you tell me how rich Hussein actually is?
Mr. NEWCOMB. No, Mr. Chairman, I cannot. I can tell you that I
have seen many of the news reports and many of the TV documen-
taries on this issue. I can state that the figures that have been sug-
gested are theoretical figures, based on the belief that Saddam
Hussein was engaged in an activity to skim oil revenues from oil
purchases from Iraq. So these figures are based on the assumption
that Saddam Hussein was skimming on every purchase, and the
figure was what it would have amounted to had that been, in fact,
the case.
Chairman PICKLE. Are you telling me that you do not know
whether Saddam Hussein is worth $10 billion, more or less?
Mr. NEWCOMB. I certainly cannot give a net worth prediction.
Chairman PICKLE. Can you tell me in what countries he has
made his investment or transferred his wealth?
Mr. NEWCOMB. Mr. Chairman, these are questions where we are
currently working actively to investigate. We have a number of
leads, but I think it would be unfair of me, at this time, to make
suggestions based on mere allegations. However, we have worked
cooperatively with the Government of Kuwait and with other gov-
ernments to bilaterally and multilaterally to attempt to identify
these assets.
Chairman PICKLE. Can you tell me, to what extent has Jordan
played a role in sheltering Saddam's wealth? Is it true that after
the invasion Jordan's banks and businesses protected and facilitat-
ed Iraq's transfer of money and other assets to safe haven? Can
you comment on that?
Mr. NEWCOMB. I think with regard to Jordan, I would have to
ask you the time period. I know there has been considerable news
reporting on transfers that might have taken place on August 3
and 4. Granted that was after the invasion, but it was prior to the
imposition of the U.N. sanctions. So as a technical matter, any such
transfers during that period of time were not violations.
PAGENO="0376"
372
But there may be others. I can only stress to you, in the strong-
est possible way, that these are very serious concerns that every al-
legation of such activity has been, or is under investigation, is
being looked into. I have met on many occasions with the senior
banking officials and political representatives from Jordan to go
into those questions.
Chairman PICKLE. Mr. Newcomb, I asked you if you could tell me
to what extent has Jordan played a role in sheltering Saddam's
wealth? Can- you respond to that?
Mr. NEWCOMB. I can't give you a definitive answer on that, Mr.
Chairman.
Chairman PICKLE. All right, now you have just published the list
of specially designated nationals. And you are saying that that puts
the world on notice that if any of these companies are doing busi-
ness in Iraq, it is against the law. You have just published today
the same kind of list with respect to Libya.
[The Iraqi sanctions regulations follows:]
PAGENO="0377"
373
13584 Federal Register I Vol 56, No. 64 / Wednesday April 3. 1991 I Rules and Regulations
Office of Foreign Assets Control
31 CFR Part 575
Iraqi Sanctions Regulations
AGENCY: Office of Foreign Assets
Control, Department of the Treasury.
SC'flOH: Final rule; List of specially
designated nationals of the Gover.'tment
of Iraq; List of vessels registered, owned
or controlled by the Government of Iraq.
SUMMARY: The Iraqi Sanctions
Regulations (the `Regulations") are
being amended to add a new appendix
A and a new appendix B to the end
thereof. Appendix A contains the list of
Individuals and Organizations
Determined to be Within the Term
`Government of Iraq" (Specially
Designated Nationals of Iraq). The list at
Appendix A contains the names of
companies and individuals which the
Director of the Office of Foreign Assets
Control has determined are acting or
purporting to act directly or indirectly
on behalf of the Government of Iraq.
Appendix B contains the names of
merchant vessels registered, owned, or
controlled by the Government of iraq.
These lists may be expanded or
amended at any time.
EFFECTIVE DATE April 3, 1991.
ADDRESSES: Copies of these lists are
available upon request at the following
location: Office of Foreign Aoaets
Control. U.S. Department of the
Treasury. Annex, 1500 Pennsylvania
Avenue NW., Washington, DC 20220.
PAGENO="0378"
374
Federal Register I Vol. 56. No. -84 / Wednesday. April 3. 1991 / Roles and Regulations 13585
FOR FURThER INFORMATION CONTAC'r. per500s. or In properly.in whichthcy.
Richard). Hollas. Chief, Enforcement have an interest, are prohibited.
Section. Office of Foreign Assets The list of.speciallydeaigoated
Control. Tel.: (202) 560-5021. nationals is a partial one. sioceFAC
SUPPLEMENTARY tNFORMATiON:The Iraqi may notbe aware of alt the persons
Sanctions Regulations. 31 CFR part 575 located outside Iraq that might be
(56 FR 2112, Jan. 16, 1961, the owned or controlled by the Government
`Regulations") were Issued by the of Iraq or acting as agents orlrnnt
Treasury Deportment to implement organizations for'lraq. and which thus
Ertecutive Orders No. 12722 and 12724 of qualify as specially designated nationals
August 2 and Aogust 9, 1990. in which of the Government of Iraq. Therefore. -
the President declared a national persons engaging in transactions may
emergency with respect to Iraq, invoking not rely on the fact that any particular
the authority. inter a/ic, of the person is not on the specially designotod
International Emergency Economic nationals list as evidence that it is not
Powers Act (50 USC. 1701 ci seq.) and owned orcontrolled by. or acting or
the United Nations ParticipalionAct (22 purporting'to act directly orindireotly
U.S.C. 2a7c). and ordered specific on behalf of. the Government of Iraq.
measures against the Government of The Trcasu.ryDepartment regards it as
Iraq. incumbent upon all U.S. persons to take
Section 575.2.06 of the Regulations reasonable steps to ascertain for
defines the term "Goveritroent of Iraq" themselves whether persons they enter
to include: into transactions with are owned or
al The state and the Government of contrcUed byihe Government-of Iraq or
Iraq. as well as any political are acting or purporting to act on its
subdivision, agency. Cr instrumentality behalf, or on behalf of other countries *
thereof, including the Central Bank of subject to blocking lot presertt.
Iraq: . Cambodia. Cuba, Libya. North Korea,
(bl Any partnership, association, and Vietnam).
corporation, or other organization This rule also ad&s.appendi.xBbo part
oabstantially-owrted-or controlled by the 575 to'provide public.notice-of a listef
foregoin; merchant vessels which the Director of
(c)Any person to the extent that ouch the Office of Foreign Assets Control has
person is, or has been, or to the extent determined lobe registered, owned, or~
that There is reasonable-cause 10 believe controlled by the Government of Iraq or
that such person is, or has been, since by'persons acting or purporting to act
the effective date, actingorpurporting to directly or indirectly on behalf of the
act directly orindirectly on behalf of Government of Iraq, pursuant to
any of theioregoing and §575.306 of the Regulations. The
(dl Any other person or organization merchant vessels included in appendix
determined by the Director of the Office B constitute blocked property in which
of Foreign Assets Control lobe included the Government of Iraq has en interest.
within thin section. end are subject to all the'prohibitiona
Determinations Shot persons fall applicable to the Government of Iraq.
~ this definition are effective upon No U.S. person may engage in any
the date of determination by the unlicensed transaction involving these
Director. Office of'ForeignAssets vessels.
Control l"FAC"l. Public notice is The list of Govcn',tuent oflrag'
effective upon the date of publication or flagged, owned, or controlled vessels iv
cpon actual notice, whichever is sooner. a partial one. since FAC may not be
This rule adds appendix A to part 575 aware of all merchant ships registered.
to provide public notice of a list of. owned. or cont.ro~ed by the Government
persons. known as "specially designated of Iraq or by persons located outside
nationals" of the Government of Iraq. Iraq that may be acting as agents or
The list consisis of companies and front organizations for Iraq who fell
isdtviduala whom-the Director of the within the definition of~Governmenl of
Office of Foreign Assets Control has Iraq." Thereforo,persons engagin~in -
determined to be owned orcontrolled transactions-rosy not rely on thefact
by or to be acting or purporting to ad that any particular vessel is not on the
directly or indirectly on behalf of the list as evidence that it is not owned or
Government of Iraq. and thus fall within controlled by the Government of Iraq.
the definition of the "Government-of The Treasury Department regards it as
iraq" contained in § 575.306 of the incumbent upon all I,t.S. persons to Sake
Regulations. The persons included in reasonable steps to ascertain for
appendtx A ate subtect to alt themselves whether ouch vessels are
prohibitions applicable to other registered. owned. or controlled by Iraq
components of the Government of Iraq. or by other cottnn'ies subject to blocking
All unlicensed transactions with ouch or o-ansportation.related restrictions lat
present. Cambodia,Cuba, Libya, North
Korea, and Vietnam). -
Section 586E offhelraqSanctions Act
sf1990, contained in the Foreign
Operations Authorization and
Appropriations Act of 1960. dated
November 5, 1990, 104 StaL 1979,
provides for civil penalties not to exceed
S050.000Ior violations of the Regulations
end fines of up toSi,000.000 and
imprisonment for upio 12 years for
wiflitil violations of the Regulatior.s. In
addition, section 5(b)of the United
Nations Participation Act of 19-15 102
USC. 287c(b)) provides for the -
forfeiture of any property involved in a
violation of the Regulations.
List of Subjects in 31 CFR Part 573
Banks, Banking, Exports. Imports.
Iraq. Kuwait. Loans, Penalties, Reporting
and recordkeeping requirements.
1. The authority citation for part 573
continues to read as follows:
Asthsrrity: 50 USC. 1701 cc sect aOl3S.C.
1601 et seq~ 02 U.9C,7,87~ PubticLawtOl-
013.104 StoLOO't7-13 lNov.5, 1990)'. 3 USC.
301: E.D.10222, 53 FR 31523 lAez3,1990)'.
E.012724, 55FE:33001fAsg. 13,1990~
2. Appendices A sndB to part 575 are
added-to read as follows:
Appendix A-Individuals and
Organizations Determined To Be
Specially Designated Nationals ci the
Government of Iraq -
Please note that ad dreaso.s sf companies
and persons may aheege.The addresses
listed below are the last ones koawo Is the
0111cc ofForeigoAssots Control. Where an
address is rrstlistaf or someone wisheato
check fortatest address information, the
Office of Fareigo Assets Control will assist
with aoysipbsted information in its
Possessiots-
Ccutnrmeo
0. Ad,'smstheek limited. I 0d Burlington
Street, London. Ecg:st'.d, United Xingds.'n
2, Ads-ocred Eteotranica Des'etapmect.Ltd.. 3
Manidevitte Place. London, EagIaed, United
IUn~dons
3. Al'Arabi Trading Campan~' Limited, Lace
11, Hal Babit Baghdad Dist.'iot 529. Iraq
4. Al.Ralidaln Shipping Cotrrpesy. Bombay,
India
5. The ArstrPen-otenmEngloeering Coerpsnn-'
LId,. Amman. Jordan
a Arab Projects Coropsn;'S.A.Lt&P.O.Box
131o.Amrsan.lordao
P.D.Box7939,Beirut,Lebanso
PD. Baa 19rc. Riyadh. Saudi Arabia
7. ArabTeacaTrada Ca.S.A.Z.. 30. Kei',
AbdruStreet.Rouubdy, Atexacd.'ia 460
ass. Egypt
0. Avchi Ceet,-elC.L Lio'ited, 3 l.tssdeville
Place, London, Engtaed, ticitad Kingdom
0. Arsh:onntaul: Limited, 125 Bsckingbantr
Place. London 0. England. United Kingdom
PAGENO="0379"
375
13586 Federal Register I Vol. 56, No. 64 / Wednesday. April 3. 1991 I Rules and Regulations
10. Associated Engineers. England, United 28. Iraqi Allied Services Limited. England. P.O. Box 44. Alexandria. Egypt
Kingdom United Kingdom 32. Whale Shipping Ltd.. do Government of
I~. ATE. International Ltd.. f/k/a RWR 29. Iraqi Freight Services Limited, England. Iraq. State Organization of Ports, Maqal,
Internattonal Commodittes. 3 Mandeville United Kingdom Basrah. Iraq
Place. London. England. Untied Kingdom 30. iraqi Reinsonance Company. 31-30 Individuals
12. Atlas Air Condinoning Company Limited, Fenchurch Street. London EC3M 3D. United Abb Abd I H I
55 Roebuck House. Palace Street, London, Kingdom 2 Abbas Kassim lIt
England. Untied Kingdom 31. ~ State Enterprise for Foodstuffs 3 Ab t' T ` F. I d U
13RAt~ kH ~ mti~ ~ ~ ~ ~in~ P0 B 1308 C I mb 3 5 )(~ gd g I
England. United Kingdom p.s. Box 2839, Calcutta 700.001. India 4. Ahmad. Rosem. P.O. Box. 1318. Amman.
14. A.W.A. Eog:neertng Limited. 3 lulandeville . . . Jordan
Place. London. England. United Kingdom . qi late terptuse or aritime 5. Ahmad. Watlid Issa. Iraq
55 Bonco Brasileirn.Iroquiann S.A.. Praca ~ Transport, Bnemen. Germany 6. Ai.Amiri. Adnan Talib Hassim, 43 Palace
B;acit (Head oflice and city branch) ~ IraqiTnadeCenter. Dabai. United Arab Manvons.Hammersmith. London, England.
Is. Bay Industries. inc.. 10100 Santa Monica t'ates 7. Al.Anawi, Dour, Iraq
U d Stt I M vu C if rn 34~ ~l LIt1~ d n.Engl d, Unit d 8 ~3 1 L~e I N S P0 B 1318.
17. Dominion International. England. United Kingdom , g. Al.Dojaoi. Nadim S.. P.O. Box 1318.
Kingdom 35. Matrix Churchill Corporation. 5903 Harper Am I rd
leE Ii Cop `.1 EngI d 36R54 dd~ I d, ~ ~ ~lh~t ~ 10 Al 0 S d PD B 318 Am. is.
19. Eurornoc. Ltd.. 4 Bishops Avenue. Place. London. England. Untied Kingdom 11AH b b' ~ I H I 40
Northunood. Middlesex. England. United 37. Pandora Shipping Co.. S.A., Honduras ~` i~ n.
Kingdom 38. Pes'u Naniga'ion 8 international Trading roey ou . aace a e. ensiogto...
20. Eunomac Earopean Manufacturer Center Co. Ltd.. White Star Building.. P.O. Box fan . so e in~ om
SRL Via Ampere 5.20052 htonza, Italy 8382. Amman. Jordan 1... A i. A Muta i . E~ernnan~
II. Earomac Transporti International SRL Armoush Bldg., P.O. Box 485. Aqaba. Jordan 13. A er. Peter Francis. Grey
Via Ampere 5.20052 Monza. Italy 18 Hoda Sharawi Street. Cairo. E63.pt Sioughlon Lane. Stooghton. Leiceslershirn.
22. Falcon Systems. England. United Kingdom Hai Al Wahda Mahalat ~, cc~ Zulak 50. England. United Kingdom
23. Geodesigns. England. United Kingdom House 14. Baghdad Iraq 14. Al.Ogsily. Abram H.. Pat 2., SLRonons
24. Investacast Precision Castings. Ltd.. 112 39. PMK/QUDOS (Lis'erpool Polytechnic). Court. 63 Putney Hill. London. England.
City Road, London. England. United England United Kin dom United Kingdom
Kingdom 45 Rafidain Bank. New Banks' Street. P0 15. Amaro. Joaquim Ferreira, Pzaca Pio X, 54-
25. I.P.C. International Limited. England. Box 11360. Messaril. Baghdad. Iraq )~7 10' Andar. CEP 20091. Rio de Janeiro.
Lotted Kingdom branches in Iraq) Brazil
20. I.P.C. Marketing Lioxited. England. United p.o. Box 607, Manama, Bahrain 2 branches 15. Aroioush, Ahmad. "Ahite Star Bldg., P.O.
Kinguom jt~ Bahr in Box 8362, Amman. Jordan
27. Iraqi Airways. Saddam International 114 Tatto'cur Sir. Eldukki, P.O. Box 239, Omran 17. Artuoush. Ali. White Star Bld&.. P.O. Box
Airport. Baghdad. Iraq Gica. Cairo. Egypt 6282. Amman. Jordan
Opernning 6. 1010 `i en. Vienna. Austria P.O. Box 1194 Cinema al.Hussein Street 18. Aria. Foxad Hamza. Pracia Pio X. 54-10'
General Service Agent. Bangiadeshi.oovned A `d ` Andur, CEP 20091. Rio de Janeiro, Brazil
Travel Agency, Dhaka. Eaogladesh P0 Box 685. Aqaba. Jordan 19. Daghir. Ali Ashour. 2 Western Road.
Rio dv )aneino, Brazil P0. Box 815401, Jubal Amman. Jordan stem Gs'eer., Thames Dillon. Surrey,
.arrgunmeno.ai Diplomatic Housing ?.tafraq. Jordan England. United Kingdom
Apm 1480 g p pl 8 hi f 2 d Ft SdtT is POB 1691 B rut 20o~'m~ hJ t~ Abd 1 P0 B 1318
PTA P ` C h Sheikh Khalila Street. P.O. Box 2227. Abu 21. Hand, Michael Brian. England, United
N k3~ usuxakia Dhabi.UniiedArabEmk'ates Kingdom
C h 0 gue~. ccc os no a ia Itafidain Bank Building. 7-10 Leadenhull 22. Henderson. Paul. 4 Copt Oak Close, Tile
`it E 6 P ,~j S I L d EC3\ INI.. U I d Ku. gd m 9.5 11 C tro Vi rs k Engi
p POE 100..S ArbR b U dK "o
Rn-re l'a}v 41. Rajhrook Limited. England. United 23. Jon, Hana Paul. 19 Tudor House. Windsor
Tokyo. a~un Kingdom Way. Brook Green, London, England.
Casablanca. Morocco 42. Reynolds and Wilson. England. United United Kingdom
The Netnenlonds Kingdom 24. Jume'an. George. P.O. Box 1318, Amman,
27, Utica Crojecka. Central Warsaw, Poland 43. S.M.I. Sewing Machines Italy SPA.. Italy Jordan
Tunis. Tunisia 44. Soltatek. England, United K:ndgnm 25. Kadhum. Dr. Fadel Juwad. do Alvaney
Ankzra. Torkes' 45. Technology and Denelopment Grnup Ltd.. Court. 250 Fsschley Road. London. England.
t.tnscuux, U.S.S.R. Centric House 390/391, Strand. London. United Kingdom
Abs Dhabi. United Arab Emirates England. United Kingdom 26. Khoshaba, Robert Kambar, 15 Harelleld
4 Lacier Regent Street, London SWIY 4p, 46. T.E.G. Limited. 3 Mandeo'ille Place, Road. Maidenhead. Berkshire, England.
United Kingdom London. England. United Kingdom United Kingdnm
5805 W. Sunset Blvd. n21B Los Angeles. 47. T.M.G. Engineering Limited. Castle Row, 27. Mohamed. Abdul Kader Ibrahim.
California 90020. United States Horticultural Place. Chisna'ick, London. Jianguomenwai Diplomatic Houstng
23040 Snuthfieid Road. Sou:hfield. icLohigan England. United Kingdom Compound, Building 7-1, 5th Floor,
48805. United States 40. TN K Fabrics Limited. England. United Apartment 4, Beijing. People's Republic nf
Building 60. J.F.K. International Airport. Kingdom China
Jamaica. Neso York 11430. United States 49. Trading & Maritime Investments. San 20. Omran. Karim Dhaidas. Iraq
1211 Avenue of the Americas. New York. Lonerizo, Honduras 29. Ranuf, K'halid Mohammed. Praca Thu X.
New York 10036, United Stairs 50. UI. internationaL England. United 54-10 Andar, CEP 20091, Rio de Janeirn,
Sanaa. `lenten Kingdom Brazil
Belgrade. Yugoslavia 51. L'NIMAS Shipping. 130 El Geish Road, 30. Ricks. Roy. 87 St. Mary's Price. BenflecL
PAGENO="0380"
a
I
C
z
£1
a Ca~
a ~
~tj
PAGENO="0381"
-q
I
U
I
929
PAGENO="0382"
E >
~ ~
0 ~
~
*3 1
7'
ftLftLLwJILLaJ_ -
I
~~ii~- `~.
2~9~
PAGENO="0383"
379
Received In the Office
ed~1 B~$~'
IN ADVANCE OF PRINTED COPY
DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 C.F.R. Part 550
Libyan Sanctions Regulations
AGENCY: Office of Foreign Assets Control, Department of the
Treasury.
ACTION: Final rule; List of specially designated nationals of
Libya.
SUMMARY: The Libyan Sanctions Regulations are being amended to
add a new Appendix A, Organizations Determined To Be Within the
Term "Government of Libya" (Specially Designated Nationals of
Libya), to the end thereof. Part I of Appendix A contains the
names of companies, banks, and other entities located outside of
Libya which the Director of the Office of Foreign Assets Control
has determined to be owned or controlled by, or acting or
purporting to act directly or indirectly for, the Government of
Libya. Part II of Appendix A (to be published at a later date)
will contain the names of organizations located within Libya
which the Director of the Office of Foreign Assets Control has
determined to be Specially Designated Nationals of Libya. This
list may be expanded or amended at any time.
PAGENO="0384"
380
-2-
EFFECTIVE DATE: [date of publication]
ADDRESS: Copies of this list are available upon request at the
following location: Office of Foreign Assets Control, U.S.
Department of the Treasury, Annex, 1500 Pennsylvania Avenue,
N.W., Washington, D.C. 20220.
FOR FURTHER INFORMATION CONTACT: Richard J. Hollas, Chief,
Enforcement Section, Office of Foreign Assets Control, Tel.:
(202) 566-5021.
SUPPLEMENTARY INFORMATION: The Libyan Sanctions Regulations, 31
C.F.R. Part 550 (the "Regulations'), were issued by the Treasury
Department to implement Executive Orders No. 12543 (51 FR 875,
Jan. 9, 1986) and 12544 (51 FR 1235, Jan. 10, 1986), in which the
President declared a national emergency with respect to Libya,
invoking the authority, inter alia, of the International
Emergency Economic Powers Act (SD U.S.C. 1701 et ~g.), and
ordering specific measures against the Government of Libya. The
Regulations were amended by a final rule published in the Federal
Register (53 FR 5571, Feb. 25, 1988), which clarified the term
"Government of Libya."
Section 550.304 of the Regulations, as amended, defines the
term "Government of Libya" as follows:
(a) The "Government of Libya" includes:
(1) The state and the Government of Libya, as well as any
political subdivision, agency, or instrumentality thereof,
PAGENO="0385"
381
-3-
including the Central Bank of Libya;
(2) Any partnership, association, corporation, or other
organization substantially owned or controlled by the
foregoing;
(3) Any person to the extent that such person is, or has
been, or to the extent that there is reasonable cause to
believe that such person is, or has been, since the
effective date, acting or purporting to act directly or
indirectly on behalf of any of the foregoing;
(4) Any other person or organization determined by the
Secretary of the Treasury to be included within paragraph
(a) of this section.
(b) A person specified in paragraph (a) (2) of this
section shall not be deemed to fall within the definition of
Government of Libya solely by reason of being located in,
organized under the laws of, or having its principal place
of business in, Libya.
Section 550.805 of the Regulations states that:
Any action which the Secretary of the Treasury is authorized
to take pursuant to Executive Order 12543 may be taken by
the Director of the Office of Foreign Assets Control, or by
any other person to whom the Secretary of the Treasury has
delegated authority to so act.
Determinations that persons fall within the definition of
the "Government of Libya" are effective upon the date of
determination by the Director, Office of Foreign Assets Control
51-840 0 - 92 - 13
PAGENO="0386"
382
-4-
("FAC"). Public notice is effective upon the date of publication
or upon actual notice, whichever is sooner.
This rule adds Appendix A to Part 550 to provide public
notice of a list of persons, known as `specially designated
nationals" of the Government of Libya. Part I of Appendix A
consists of organizations located outside of Libya which the
Director of the Office of Foreign Assets Control has determined
are owned or controlled by or are acting or purporting to act
directly or indirectly on behalf of the Government of Libya, and
which thus fall within the definition of the "Government of
Libya" contained in section 550.304(a) of the Regulations. The
persons included in Appendix A are subject to all prohibitions
applicable to other components of the Government of Libya. All
unlicensed transactions with such persons, or in property in
which they have an interest, are prohibited.
The list of specially designated nationals is a partial one,
since FAC: may not be aware of all the agencies and officers of
the Government of Libya or of all the persons located outside of
Libya that might be owned or controlled by the Government of
Libya or acting as agents or front organizations for Libya, and
which thus qualify as specially designated nationals of the
Government of Libya. Therefore, persons engaging in transactions
may not rely on the fact that any particular person is not on the
specially designated nationals list as evidence that it is not
owned or controlled by, or acting or purporting to act directly
or indirectly for, the Government of Libya. The Treasury
PAGENO="0387"
383
-5-
Department regards it as incumbent upon all U.S. persons to take
reasonable steps to ascertain for themselves whether persons they
enter into transactions with are owned or controlled by the
Government of Libya or are acting or purporting to act on its
behalf, or on behalf of other countries subject to blocking or
transportation-related restrictions (at present, Cambodia, Cuba,
Iraq, North Korea, and Vietnam).
Section 206 of the International Emergency Economic Powers
Act, 50 U.S.C. 1705, as amended by the Uniform Sentencing Act, 18
U.S.C. sections 3571 and 3581, provides for civil penalties not
to exceed $10,000 per count for violations of the Regulations,
fines of up to $250,000 and imprisonment for up to 12 years for
willful violations of the Regulations by individuals, and fines
of up to $500,000 for organizations.
Because the Regulations involve a foreign affairs function,
Executive Order 12291 and the provisions of the Administrative
Procedure Act, 5 U.S.C. 553, requiring notice of proposed
rulemaking, opportunity for public participation, and delay in
effetive date, are inapplicable. Because no notice of proposed
rulemaking is required for this rule, the Regulatory Flexibility
Act, 5 U.S.C. 601 et ~g., does not apply.
PAGENO="0388"
384
-6-
PART 550 -- LIBYAN SANCTIONS REGULATIONS
For the reasons set forth in the preamble, 31 C.F.R. Part
550 is amended as set forth below:
1. The authority citation for Part 550 is amended to read
as follows:
Authority: 50 U.S.C. 1701 et ~.; 22 U.S.C. 2349aa-8 & -9;
49 U.S.C. 1514; E.O. 12543, 51 FR 875 (Jan. 9, 1986); E.O. 12544,
51 FR 1235 (Jan. 10, 1986).
2. Appendix A to Part 550 is added to read as follows:
PAGENO="0389"
385
-7-
APPENDIX A
ORGANIZATIONS DETERMINED TO BE WITHIN THE TERM
`GOVERNMENT OF LIBYA"
(SPECIALLY DESIGNATED NATIONALS OF LIBYA)
Part I: Located Outside Libya
1. AL HAMBRA HOLDING COMPANY
Madrid
Spain
2. ARAB LIBYAN SYRIAN INDUSTRIAL & AGRICULTURAL INVESTMENT
COMPANY
Damascus
Syria
3. ARAB REAL ESTATE COMPANY ("ARESCO")
Beirut
Lebanon
4. ARABIAN GULF OIL COMPANY ("AGOCO")
Windsor House, 42-50 Victoria Street, London SW1H ONW
United Kingdom
5. ASTERIS S.A. INDUSTRIAL & COMMERCIAL CORPORATION
Athens
Greece
6. BANQUE ARABE LIBYENNE BURKINABE POUR LE COMMERCE
EXTERIEUR ET LE DEVELOPPEMENT
1336 Avenue Nelson Mandela, Ouagadougou
Burkina Faso
7. BANQUE ARABE LIBYENNE MALIENNE POUR LE COMMERCE
EXTERIEUR ET LE DEVELOPPEMENT ("BALIMA")
P.O. Box 2372, Bainako
Mali
8. BANQUE ARABE LIBYENNE MAURITANIENNE POUR LE COMMERCE
EXTERIEUR ET LE DEVELOPPEMENT ("BALM")
Jamal Abdulnasser Street, P.O. Box 262, Nouakchott
Mauritania
9. BANQUE ARABE LIBYENNE NIGERIENNE POUR LE COMMERCE
EXTERIEUR ET LE DEVELOPPEMENT
P.O. Box 11363, Niamey
Niger
PAGENO="0390"
386
-8-
10~. BANQUE ARABE LIBYENNE TOGOLAISE DU CO~2~ERCE EXTERIEUR
("BALTEX')
P.O. Box 4874, Lone
Togo
11. BANQUE ARABE TUNISO-LIBYENNE DE DEVELOPPEMENT ET DE
COMNERCE EXTERIEUR ("B.T.L.")
25 Avenue Kheireddine Pacha, P.O. Box 102
1002 Le Belvedere, Tunis
Tunisia
12. BANQUE INTERCONTINENTALE ARABE
67, Avenue Franklin Roosevelt, 75008 Paris
France
13. BANQUE TCHADO ARABE LIBYENNE
P.O. Box 104, N'Djaxnena
Chad
14. COMPAGNIE ALGERO-LIBYENNE DE TRANSPORT MARITIME
("CALTRAM")
21 Rue des Freres Bouadou, Birrnandreis, Algiers
Algeria
15. GENERAL EST. FOR PUBLICATION DISTRIBUTION & ADVERTISING
P.O. Box 113, Beirut
Lebanon
16. INTERNATIONAL HOLDING COMPANY
Luxembourg
17. THE JOINT TURKISH LIBYAN AGRICULTURAL LIVESTOCK COMPANY
Ankara
Turkey
18. KAEBLE & GMEINDER COMPANY
Packnang
Germany
19. LIBERIAN LIBYAN HOLDING COMPANY
Monrovia
Liberia
20. LIBYAN ARAB AIRLINES
(Numerous branch offices and facilities abroad)
PAGENO="0391"
387
-9-
21. LIBYAN ARAB FOREIGN INVESTMENT COMPANY (`LAFICO")
Athens
Greece
Rome
Italy
Malta
22. THE LIBYAN ARAB MALTESE HOLDING CO. LTD. (`LAMHCO")
St. Mark House, Cappuchan Street, Floriana
Malta
23. THE LIBYAN ARAB UGANDA BANK FOR FOREIGN TRADE AND
DEVELOPMENT
P.O. Box 9485, Kampala
Uganda
24. THE LIBYAN ARAB UGANDA HOLDING CO. LTD.
(also known as UGANDA LIBYAN HOLDING CO. LTD.)
Kampala
Uganda
25. THE LIBYAN-GREEK INVESTMENT COMPANY
Athens
Greece
26. MEDISAN LIMITED
Ri 6A, Qasam Industrial, Limiti tai Ricasch, Kalkara
Malta
27. MEDITERRANEAN AVIATION COMPANY, LTD.
Malta
28. MEDITERRANEAN SEA OIL SERVICES GxnbH (`MEDOIL')
Dusseldorf
Germany
29. HENIL ENSTALT COMPANY
Vaduz
Liechtenstein
30. METROVIA
Switzerland
31. NATIONAL PETROCHEMICALS COMPANY (LIBYAN)
Germany
PAGENO="0392"
388
-10-
32. NORTH AFRICA COMNERCIAL BANK S.A.L.
(formerly known as ARAB LIBYAN TUNISIAN BANK S.A.L.)
P.O. Box 9575/11, 1st Floor, Piccadily Centre
Hanra Street, Beirut
Lebanon
33. PAK-LIBYAN HOLDING COMPANY LTD.
Karachi
Pakistan
34. SOCIETE AGRICOLE TOGOLAISE ARABE LIBYENNE
Lone
Togo
35. SOCIETE ARABE LIBYENNE-CENTRAFRICAINE D'IMPORT-EXPORT
Bangui
Central African Republic
36. SOCIETE ARABE LIBYENNE MALIENNE POUR L'AGRICULTURE ET
L'ELEVAGE ("SOLIMA")
Bainako
Mali -
37. SOCIETE ARABE LIBYENNE MAURITANIENNE DES RESSOURCES
MARITIMES ("SALIMAUREM")
Nouadhibou
Mauritania
38. SOCIETE ARABE LIBYO-GUINEENNE POUR LE DEVELOPPEMENT
AGRICOLE ET AGRO-INDUSTRIEL ("SALGUIDIA")
Conakry
Guinea
39. SOCIETE ARABE LIBYO-NIGERE POUR LE DEVELOPPEMENT ET LA
COMNERCIALISATION DES PRODUITS AGRICOLES
Niamey
Niger
40. SOCIETE ARABE LIBYO-TUNISIENNE DE TRANSPORT MARITIME
Tunis
Tunisia
41. SOCIETE D'ECONOMIE MIXTE CENTRE AFRICAINE LIBYENNE DES
PRODUITS AGRICOLES
Bangui
Central African Republic
42. SOCIETE LIBYENNE CENTRE AFRICAINE DES MINES
Bangui
Central African Republic
PAGENO="0393"
389
- 11 -
43. SOCIETE MIXTE RWANDO-ARABE LIBYENNE DE PROMOTION
HOTELIERE ET TOURISTIQUE AU RWANDA
Kigali
Rwanda
44. SOCIETE MIXTE RWANDO ARABE LIBYENNE POUR LE
DEVELOPPEMENT ET LA COMMERCIALISATION DES PRODUITS
AGRICOLES ET D'ELEVAGE
Kigali
Rwanda
45. SOCIETE TOGOLAISE ARABE LIBYENNE DE PECHE
Lome
Togo
46. TAMOIL ITALIANA SpA
Piazzetta Bossi 3, 1-20121 Milan
Italy
Cremona Refinery
Italy
47. TURKISH-LIBYAN JOINT MARITIME TRANSPORT STOCK COMPANY
("TURLIB")
Kemeralti Caddesi 99, 80020 Karakoy, Istanbul
Turkey
48. UMN AL-JAWABY OIL SERVICE COMPANY, LTD.
33 Cavendish Square, London W1M 9HF
United Kingdom
Dated: April 3~5, 1991
R. Richard Newcomb
Director
Office of Foreign Assets Control
Approved: April 1991
Peter K. Nunez
Assistant Secretary
(Enforcement)
Filed: April 30, 1991
Publication date: TBP~
PAGENO="0394"
390
Chairman PICKLE. Now, you listed some 89 different firms in
your original publication of the Iraqi SDNs, and now I don't know
how many are on the Libya countries, but I want to ask you what
cooperation are you getting now from other countries, other na-
tions with respect to this list that you have just published?
Mr. NEWCOMB. Let me clarify for the record one statement. The
companies or individuals on this list are not alleged or believed to
have violated the embargo, per se. The standard for being on the
list is that they are acting for, or on behalf of, or owned, or con-
trolled by, directly or indirectly, Iraq as an agent, either openly or
covertly. So they may or may not have engaged in violations. There
may be another whole category of individuals or companies that
might have violated the embargo that would not go on this list, be-
cause they are involved in criminal violations that would be pros-
ecuted under local law in the respective jurisdiction. But to get
more directly to the question that you have asked, we have re-
ceived cooperation from foreign governments. We have received
leads from foreign governments. We have taken them into account
in developing this list. We have discussed our program in many
forums, including the OECD, the European Community Commis-
sion and the BIS.
We anticipate having further sessions of these meetings and
gaining further cooperation. It is our view that perhaps half of the
names on the Iraq list are involved in the arms purchase and pro-
curement network. We anticipate this list to grow. We're working
on it, as we speak, and we will have more names in the future.
Chairman PICKLE. Well, Mr. Newcomb, I want to repeat my un-
derstanding. You have published your list, the SDN. And that is
clear notice to me that any American business who does business
with those companies specifically is in violation of the law?
Mr. NEWCOMB. That is correct.
Chairman PICKLE. Now, the list is not to say they are guilty of
criminality, but they are an agent or a front of Iraq and therefore,
you should not, you must not do business with them.
Now, you published your list on April 1 with respect to Iraq and
I am asking you, do other nations honor this listing? Are they
giving us full authority? Specifically, is Great Britain and Germany
giving us that authority?
Mr. NEWCOMB. The authority with which our programs have
been implemented can, in a case-by-case analysis, be different from
other countries' cooperation. So they may not be as able to cooper-
ate as easily as we would like, but as to your question, have the
United Kingdom and Germany cooperated? Just last week, a dele-
gation of senior officials from the United Kingdom Government
and the British Embassy and the Bank of England came to talk to
us about this list and the cooperation we might have.
So to answer your question, yes, we are working closely with that
government. We have other meetings planned. Through the entire
embargo program we met in our offices in Washington with embas-
sies of approximately 90 countries, as well as with the OECD coun-
tries and the EC countries, what have you. We have briefed them.
We have worked with them. They know about our program. A
major elemeni of our program now is to go out and sell it to other
PAGENO="0395"
391
countries so that these individuals listed are identified. We will
seek their cooperation.
Chairman PICKLE. I'm sure that you will seek their cooperation
but our subcommittee has given us considerable evidence that trad-
ing is going on between many of these companies in both Great
Britain, and Germany and other countries, other nations. And that
this list doesn't mean anything unless those countries cooperate
with us in these kind of imposed sanctions.
And you are saying that they are cooperating. We are going to
submit to you evidence that these sales are going on as usual. I
think that you must respond to us, and I hope that you will do
that.
Mr. NEWCOMB. I would be delighted to receive such information
and if appropriate, in those instances, we will certainly follow up
with those respective governments.
Chairman PICKLE. Can you tell me how much assets Iraq has in
the United States?
Mr. NEWCOMB. Yes. Approximately $1.26 billion were blocked in
the United States.
Chairman PICKLE. What does that represent in banks or in
stocks, or companies or what?
Mr. NEWCOMB. Well, it is the full breadth of what you've just
identified. However, let me say, most of these assets are in the
money center banks. Approximately 40 to 50 percent represent de-
posits at U.S. financial institutions for trade financing and other
commercial transactions. The balance represents payments for oil
shipments that were on the high seas, en route to the United
States from Iraq. We allowed those oil shipments into the United
States, provided payment from the U.S. company to Iraq was made
into a blocked account. That represents approximately the addi-
tional 50 percent.
Chairman PICKLE. Well, I thank you, Mr. Newcomb. The Chair
will yield to Mr. Anthony for any questions.
Mr. ANTHONY. Thank you, Mr. Chairman.
Just to follow, very quickly, Mr. Newcomb, on what Mr. Pickle
was asking about-our foreign allies cooperating with us once the
list of companies and individuals who are controlled, owned, et
cetera, by these other countries have been identified, thereby
making it, for a domestic company or individual, a penalty for
doing business.
When you ask the question, does Germany prohibit their compa-
nies from trading with Iraq off of the list that has been provided by
the United States, is the proper answer no? They do not prohibit
them?
Mr. NEWCOMB. The answer to that is, no. To my knowledge, at
this point, I can tell you I do not know what the German Govern-
ment is doing. I can tell you I will get that information for you.
[The following was subsequently received:]
PAGENO="0396"
392
DEPARTMENT OF THE TREASURY
WASHINGTON
July 9, 1991
The Honorable Beryl Anthony, Jr.
House of Representatives
Washington, D.C. 20515
Dear Mr. Anthony:
At recent hearings of the Oversight Subcommittee of the
House Ways and Means Committee, on the administration of U.S.
export control programs, you asked for a list of items illegally
shipped to Iraq since the embargo was imposed for which companies
and individuals have been prosecuted.
Iraq sanctions were imposed by the President August 2
and broadened August 9. Since that time, as a direct result of
sanctions imposition, investigations have been initiated which
have resulted in the prosecution of several individuals for
attempts to broker Iraqi crude oil.
Additional investigations are currently underway for
export violations of the Iraqi sanctions regulations, but these
cases have not reached the courts for prosecution. Since these
and other cases are still under investigation we are constrained
from discussing them, or the extent of our investigation and
enforcement activity on other cases such as these.
As you know, the investigation of Iraqi sanctions
violations and the careful and complete preparation of a
successful case requires much time and effort. We expect that in
the near future many of these cases will be successfully
prosecuted, and at that time the extent of sanctions violations
will be indicated.
We appreciate your support in this effort. If we can
provide additional information please contact us.
Sincerely,
~./ /1
R. Richard Newcomb
Director
Office of Foreign Assets Control
PAGENO="0397"
393
Mr. ANTHONY. To the best of our knowledge right now, there is
no specific prohibition by Germany or other countries to operate
off of the list that has been provided by us to them?
Mr. NEWCOMB. Not to my knowledge, and the distinction is that
we are operating-and the authority for this list comes from a do-
mestic statute-under the International Economic Emergency
Powers Act. It would depend on a country-by-country basis, their
authorizing, their underlying authority to take such actions,
whether or not they could, indeed, follow suit.
I can tell you we've been approached by many governments in-
terested in the particular companies. Whether they have a blanket
prohibition is very different from whether they are looking into it,
as many of them are. Part of our program is going to foreign gov-
ernments, telling them about our list, and asking them to take
similar action.
Mr. ANTHONY. Well, I agree with the practice and the theory. I
congratulate you for identifying them. I encourage you to keep
moving forward. And especially the fact that you said it is not a
static list. That it is a list that can be changed. In that regard the
subcommittee took some testimony at our previous hearing con-
cerning Carlos Cardeon. Are you familiar with that name?
Mr. NEWCOMB. Yes.
Mr. ANTHONY. What can you tell us about Carlos Cardeon?
Mr. NEWCOMB. I don't believe I can comment in any way, other
than acknowledging that I know the name.
Mr. ANTHONY. Can you confirm whether or not Cardeon has pro-
vided Iraq with military weapons and technology?
Mr. NEWCOMB. I don't believe I should comment on that, either,
Mr. Anthony.
Mr. ANTHONY. And your reluctance-
Mr. NEWCOMB. My reluctance is because I believe that's a matter
under investigation and I can't comment on such matters.
Mr. ANTHONY. Can you comment on why he is not on your
OFACISDN list?
Mr. NEWCOMB. Well, first let me say, as you have pointed out, it
is not a static list. There are many matters under investigation.
That is not to say whether or not he is or not, I am not comment-
ing on that in any way.
We believe that people-
Mr. ANTHONY. He is not on your list, is that correct?
Mr. NEWCOMB. That is correct.
Mr. ANTHONY. And he has not been placed on your list since the
list was placed in the Federal Register?
Mr. NEWCOMB. That is correct.
Mr. ANTHONY. But you say there is an ongoing investigation? Or
you are not saying there is an ongoing investigation?
Mr. NEWCOMB. I am saying there is an ongoing investigation and
I do not believe I should comment any further on that matter.
Mr. ANTHONY. How many other investigations, similar to this
one, if, in fact, there is one going on here, is your agency looking
into?
Mr. NEWCOMB. As far as specially designated nationals, I would
say we are looking at in excess of 100 additional entities that might
be involved in activities. I don't have an exact number, but I would
PAGENO="0398"
394
additionally say that we coordinate closely on criminal violations
which is a different question with other Federal agencies-the Cus-
toms Service, the FBI, the Commerce Department and others. So
there are a variety of investigations. The number 100 is merely
what we are looking into as potential candidates for this list.
Mr. ANTHONY. For the additional list. In the testimony that was
taken last week, there were some transshipments of helicopters be-
tween the United States and Chile and back for some modifica-
tions. Commerce had not intervened. DOD had not intervened, but
Customs, well, I use the word confiscate, but they used another
word and I forget what it is. It is a more gentle word, I think, in
their terminology.
Mr. NEWCOMB. Seized?
Mr. ANTHONY. They impounded, anyway they seized it. They
took control of another person's piece of property, waiting on it to
be adjudicated. Are you familiar with the conflict between those
agencies over that particular piece of equipment?
Mr. NEWCOMB. Not in any manner that I can respond to the com-
mittee. I can say that Customs, in moving forward, and assisting us
in enforcing and working within the Federal Government in en-
forcing this embargo, has not left a stone unturned, has moved
very swiftly to enforce potential violations, and has provided a
great deal of assistance. Likewise, the Commerce Department has
worked with us cooperatively, both in terms of their licensing func-
tion and in their enforcement office.
But as to a question between those two agencies, I think you
should ask them.
Mr. ANTHONY. Well, I did ask them. And I got about the same
answer from them as I got from you.
I guess the bottom line is since you are taking a look at it, it ap-
pears to me that here is one case where there is an enormous
amount of public testimony, concrete evidence of transactions back
and forth. There was a stated conflict of opinion, or at least deci-
sionmaking, within our own Government. That has been brought to
their attention and they still have not resolved that, as I am aware
today.
Here is an individual that at first blush appears to be a major
arms dealer with the end purchaser being Iraq. And I guess I am
curious as to why this person didn't make the first draft. In order
to determine that, we would have to go down case-by-case, and
item-by-item, to examine why somebody got on there, and why
somebody didn't.
My bottom line to you is simply this: the committee heard an
awful lot of powerful testimony in that regard, and our staff dug
up an awful lot of information. I am pretty sure that you have all
of it. Any of it that you don't have, we will be happy to give to you,
but I wish you would take a close look at this particular individual
and any companies that he may own or control in the United
States that could also be listed.
I specifically mentioned a Texas firm, Global Helicopter and a
number of Swissco companies in the Miami area. I don't know
whether or not it is true that he owns or controls them, but there
is evidence out there for you to go and investigate. Since you are
the proper agency to do it, I ask you to do it. When you can report
PAGENO="0399"
395
back to us on your findings, I wish you would so that we could
make it a part of this record.
Mr. Chairman, I am going to yield to other members of the com-
mittee at this point.
Chairman PICKLE. Mr. Bunning.
Mr. BUNNING. Thank you, Mr. Chairman.
Let me follow up on some things that Mr. Anthony was trying to
get at. We had testimony here last week specifically on a case in
Baltimore, Md., the Alcolac case, and there were two people in-
volved in purchasing chemicals for the Iraqi Government. And
Franz Van Anraat and Charles Tanaka acted as principals for the
Iraqi Government in this case.
Why are they not on the SDN list?
Mr. NEWCOMB. Congressman, there may be individuals that are
under investigation on this list of individuals that I mentioned that
were actively being looked at. They may well be. I cannot com-
ment-
Mr. BUNNING. They have been convicted in a court in the United
States. Why are they not on the list if they have been convicted of
a crime and they are on the run? Why wouldn't they be on the list
that is supposed to list those people that have acted for a foreign
government in direct violation of this control act?
Mr. NEWCOMB. Well, let me say, the list that we put out April 1
was the first step in what we anticipate being a multistep process
in identifying names. We may, indeed, have those names under in-
vestigation right now. I can't tell you for certain. What I can tell
you is if they do qualify, following this-
Mr. BUNNING. Mr. Newcomb, these people have been convicted.
They have been proven guilty under this Control Act, and you are
telling me that they are under investigation. There is no need to be
under investigation. We already convicted them.
Mr. NEWCOMB. I'm told that the details of this particular case
have not yet been provided to our office. We will certainly look at
that question and proceed.
Chairman PICKLE. Will the gentleman yield?
Mr. BUNNING. Certainly, Mr. Chairman.
Chairman PICKLE. I'm not satisfied with that response at all.
Here's a case that has already had some confessions and some in-
dictments. Two of these principals involved are fugitives, back in
some other country. Our Department has made no steps to extra-
dite them. This case has been before the public and has been
openly admitted and they have confessed, and yet, they are not on
this list. Now, why wouldn't you, if they qualify, put them on the
list? This has been going on for months and months. Why would
you now hesitate to say to Mr. Bunning, well, we will investigate
and we will look into that further.
That disturbs me, the obvious dodging of the question.
Mr. NEWCOMB. Well, Mr. Chairman, I certainly don't intend to
dodge any question, but let me say this is an ongoing investigation
that we have in many quarters. We are investigating activities of
an entire Government. I can assure you that if these individuals
qualify they will be on the list. But I will repeat, a mere violation
may not necessarily qualify them to go on the list. They would
need to be acting in an agency capacity for the Government of
PAGENO="0400"
396
Iraq, either directly or indirectly. Now, if, indeed they meet the
qualifications-
Mr. BUNNING. Mr. Newcomb, they have been convicted of that.
Mr. NEWCOMB [continuing]. They will be.
Mr. BUNNING. They have been convicted in a U.S. court of doing
just what you said. That is a fact. That isn't a doubt. Agencies of
the U.S. Government have prosecuted these people and they are
convicted. Now, why wouldn't they be on your list?
Mr. NEWCOMB. Congressman, as I indicated, this is an ongoing
process. We are looking at what we believe to be those individuals
acting abroad. We targeted it in specific areas. This is an ongoing
exercise and we will certainly look at that, and if they qualify, they
will be on the list.
You have my absolute assurance of that.
Mr. BUNNING. There's a movie called "Cool Hand Luke," and
somehow there is an appropriate line in that movie, It said, "What
we have here is a failure to communicate." And it looks to me like
the agencies of the Federal Government are failing to communicate
one to the other. Treasury ought to talk to Immigration, and Immi-
gration ought to talk to Commerce, and we ought to get a full list
that includes everybody that has either been prosecuted or is on
the suspect list that you say.
Mr. NEWCOMB. Let me say that I certainly agree the list should
be completed. But as far as cooperation, I can tell you that in my
experience, I don't know of a program that has been more fully co-
ordinated, and where there has been greater cooperation than this
particular program.
I can tell you that there were daily meetings in my office, at the
State Department, policy level and at the enforcement level. And
the cooperation and the coordination are there.
Mr. BUNNING. I'm not questioning that. All I am saying is that
that's great and you have good cooperation. Those two people's
names ought to be on your list because they have been convicted by
the Federal Government of a crime. Now, they have fled the coun-
try and we can't get at them. And if they are trying to do business
on behalf of the Iraqis from another country they ought to be on
the list.
Mr. NEWCOMB. Well, let me just respond by saying there are
probably many others that should be on the list. We are actively
working on that, and we are pursuing every lead as well. The co-
ordination is there. We have anticipated more lists coming out as
early as next week. Beyond that-
Mr. BUNNING. Would you do me a favor? Mr. Newcomb, would
you do me this favor? Just talk to Commerce, and talk to the Immi-
gration people and maybe we can update your list for you.
Mr. NEWCOMB. I would be delighted to do that.
Thank you.
Mr. BUNNING. Thank you, Mr. Chairman.
Chairman PICKLE. Well, Mr. Newcomb, I want to add, before I
yield to Mr. Jenkins, that we are glad to see your SDN list pub-
lished for both Iraq and Libya. We hope that you will insist on co-
operation from other nations, and we doubt that they are giving
the full cooperation that we intend and expect them to. We hope
they will give that.
PAGENO="0401"
397
We are disturbed though in this particular instance, not that we
are just trying to single out one particular company, but we are
disturbed that here's a company that sold Iraq and Iran 630 tons of
the single ingredient for mustard gas, and when mixed with hydro-
chloric acid, probably represents 700 to 800 tons. Now, that is
enough poison gas to kill half of America.
It would have been used, and might have been used, could have
been used against our soldiers, and we have proven that these ship-
ments were made. Now, I don't know what it would take to qualify
to get on your list, but I would ask you, sir, to give our committee
the information that you have, if it is something that you can't say
publicly. But that company ought to be on the list on the face of
the evidence. I am disturbed about that, and I think the same
would probably be true about the Cardoen case. We insist that you
give us further information about it.
Mr. Jenkins.
Mr. JENKINS. Thank you, Mr. Chairman.
Mr. Newcomb, I'm not sure that I fully understand the nuts and
bolts of how you obtain your information. You have a pipeline into
all of the various agencies that might come upon information, for
instance, about supplies going to a nation where we have an em-
bargo. Or how do you obtain your information?
Mr. NEWCOMB. Well, we use a variety of sources, both within the
Government and without, open source information, querying data
bases, querying information that might be within the public
domain, as well as utilization of the resources, when appropriate, of
the intelligence community and the investigative community.
Mr. JENKINS. Are all the other Federal agencies required to
supply you with information?
Mr. NEWCOMB. The other Federal agencies are working closely
with us. They know about the program. I cannot tell you that they
are mandated to supply us with the information, but I can tell you
that this is an issue discussed quite a bit. And that I believe we are
getting very good and active cooperation from the entire Federal
community.
Mr. JENKINS. From all the investigative agencies, including CIA?
Mr. NEWCOMB. Yes.
Mr. JENKINS. All right. Once you get the information and you
make your list, then how do you disseminate this information to
the general public?
Mr. NEwCOMB. Let me back up and say, to the extent that that
coordination can occur within operational priorities, but as a gener-
al policy matter, that cooperation, those links of communication
were there and I anticipate they will be improving and growing
over a period of time, as this becomes more public, and that tool
becomes more effective. This is a multilateral embargo as opposed
to a unilateral, United States only embargo. So we have great ex-
pectations that this will continue.
As far as dissemination to the public, we use a variety of meth-
ods. First, we publish our notice in the Federal Register. We usual-
ly accompany it with a press release. We also, so that the financial
community especially is on specific, written notice, utilize the Fed-
eral Reserve System that sends it to all member banks. So we write
PAGENO="0402"
398
the presidents of the respective Federal Reserve banks within the
United States and they send it to all member banks.
We disseminate it to the financial regulatory and bank supervi-
sory committee. We send it to Customs. We send it to the Com-
merce Department. We send it to the bureaus. We send it to the
intelligence community, and of course, the State Department,
which disseminates it to the embassies worldwide.
Mr. JENKINS. We had a witness last week, Ms. Hinkleman, I
think was h~er name. How would she have known not to sell the
chemicals that were involved?
Mr. NEWCOMB. Well, we certainly attempt to disseminate this in-
formation in the best method possible. There is no way that you
can actually establish actual knowledge, but every avenue that we
can utilize, we do. As a point of fact, our most recent list was pub-
lished in its entirety in the Journal of Commerce, in the New York
Times, in the Washington Times, and other national publications. I
think it was publicized in some local papers, as well. If there is any
individual that should ever inquire or inquired, or if we had ever
any reason to try to put someone on specific written notice about
any particular company, we have a very active program of dissemi-
nating the program requirements.
Mr. JENKINS. You have 89 businesses listed here. Specifically
what does that mean? That it is illegal to do business with these
people.
Mr. NEWCOMB. In its most simple fashion, we have identified in-
dividuals on our SDN list. Let me say with all of our programs we
have perhaps 600 or 700 names worldwide-in our Cuba program,
our Vietnam program, Libya program and so forth, Iraq. And to be
on this list, it means that doing business with that entity is the
same as doing business with that Government. You don't need to
go, say, to the Island of Cuba, or the country of Vietnam, or to
Libya or to Iraq to do it. But these people have been determined to
be acting in an agent capacity or either overtly or covertly or
acting for or on behalf of that government, so that they qualify to
go on to this list.
Mr. JENKINS. Have you seized the assets of these 89 businesses in
the United States?
Mr. NEWCOMB. We have notified through the Federal Reserve
System, which notified member banks that all persons on this list
are to be considered blocked. We found that to be a very effective
system.
Mr. JENKINS. Have you, in effect, seized their bank accounts,
these 89?
Mr. NEWCOMB. If they exist. I believe they do not.
Mr. JENKINS. Do they exit?
Mr. NEWCOMB. I think in some instances they do, but most of
those, as you can see, are offshore. Where they are in the United
States we provide specific, written notice to the parties, as well as
to their known financial institutions that deposits in those institu-
tions are blocked.
Mr. JENKINS. To the parties, you mean the people listed here?
Mr. NEWCOMB. If they are located in the United States.
Mr. JENKINS. You tell them that if they deposit some money, you
are going to seize it?
PAGENO="0403"
399
Mr. NEWCOMB. No, but we are providing them specific written
notice that we consider them to be a specially designated national,
if, indeed, they are in the United States. But usually persons quali-
fying on this list are located outside of the United States.
Mr. JENKINS. In effect, have you seized any money at all from
these 89 people?
Mr. NEWCOMB. Yes.
Mr. JENKINS. How much?
Mr. NEWCOMB. I can't give you an accurate figure on it right
now, because we haven't done a census on it.
Mr. JENKINS. I mean very much or.-.--
Mr. NEWCOMB. I beg your pardon?
Mr. JENKINS. Is it $10 million or in the $100 million range.
Mr. NEWCOMB. It would be inappropriate for me to speculate, be-
cause right now, I just don't know.
Let me go back and say that we have blocked in our program
tens of millions of dollars following this same programmatic meth-
odology, and the assets, because of the cooperation we have from
the financial community, remain blocked. Also, if these were goods
at the ports, the Customs Service is on notice. They would take
very swift action, I am sure, if we knew of property within the
United States. As we did in the case of Matrix-Churchill in Solon,
Ohio, we would go out and physically block the premises.
Mr. JENKINS. So you have in that case seized assets in Ohio?
Mr. NEWcOMB. Yes, and in other places, but that is correct.
Mr. JENKINS. The ships that are named, have you seized them?
Mr. NEWCOMB. If the ships were to land in the United States or
become subject to jurisdiction, those would be blocked as well. The
best example I can give you of such an activity was several years
ago a Cuban ship landed in the United States, and it was seized.
Mr. JENKINS. Have any of these ships named been seized?
Mr. NEWCOMB. Not to my knowledge, no.
Mr. JENKINS. Why are they on the list? Just in case they ever
come?
Mr. NEWCOMB. In case they ever come, to provide notice to the
allies and to the cooperating governments in the U.N. that this is
property of Iraq. Iraq during the embargo did not have many
places to go. So most of its fleet was laid up.
Mr. JENKINS. My time, I guess, is up.
Mr. NEWCOMB. Thank you.
Chairman PICKLE. Any more questions, Mr. Bunning?
Mr. BUNNING. No.
Chairman PICKLE. Mr. Moody.
Mr. MOODY. Yes, thank you, Mr. Chairman.
How did you come by the knowledge on Matrix-Churchill? How
did you get their name to go on the list? What tipped you off about
them? How did that come up?
Mr. NEWCOMB. I believe that was brought to our attention
through our routine coordination and consultation with other Fed-
eral investigative agencies.
Mr. MOODY. You don't know which one?
Mr. NEWCOMB. It was either the Customs Service or the FBI or a
combination of both.
Mr. MOODY. Our information is it was Customs.
PAGENO="0404"
400
Mr. NEWCOMB. That may very well be.
Mr. MOODY. How many Customs-generated cases are on this list?
Can you tell us?
Mr. NEWCOMB. There are a number that are cases that are under
or have been under some stage of the Federal process. I can't give
you an exact number.
Mr. MOODY. All right. You don't know, then.
Mr. NEWCOMB. There is a good number.
Mr. MOODY. We understand there are four very hard cases-that
is, very substantial and significant cases from Customs, but there
are many others that may not be so significant. But you don't have
those numbers in your head at this time?
Mr. NEWCOMB. I don't have the exact number. I can certainly
give them to you.
Mr. MOODY. Thank you. Why would something like SMI Sewing
Machine Co. from Italy be on this list? What would put them on
the list?
Mr. NEWCOMB. We had reason to believe that that entity or that
company was engaged in activities that qualified it to be acting for
and on behalf of Iraq. I don't know the facts of every one of the
companies.
Mr. MOODY. All right. Now, a company doesn't have to be in-
volved in arms shipment to be on this list. I mean, they could be-
just as long as they are owned by or controlled by or are an agent
for Iraq, is that correct?
Mr. NEWCOMB. That is correct. There are banks on our list.
There are private individuals on our list.
Mr. MOODY. The sewing company just might be simply garments.
It might be nothing more or less than what it looks like. But the
fact that it is owned or controlled by Iraq puts it on the list.
Mr. NEWCOMB. Owned or controlled or acting for or on behalf of.
Mr. MOODY. How does a company or a person get on the list?
What kind of evidentiary standard do you require?
Mr. NEWCOMB. In each instance, we produce evidentiaries indi-
cating sufficient reason to believe that the named individuals, or
potentially named individuals, meet the standards of the programs.
Mr. MOODY. Do they have a right of appeal? Can they offer coun-
terevidence to show that this is not so?
Mr. NEWCOMB. Oh, absolutely.
Mr. MOODY. Then you have a process for adjudicating that?
Mr. NEWCOMB. That is absolutely correct.
Mr. MOODY. And that has happened in some of these instances?
Mr. NEWCOMB. Yes.
Mr. MOODY. Do they get put on the list pending the adjudication
of their rebuttal, or do you just put them on and then wait for
them to rebut it?
Mr. NEWCOMB. In developing this list, we have reason to believe
that every name that goes on the list qualifies. If they come back
and later tell us that they do not qualify, we would then coordinate
with the government involved to make a determination.
Mr. MOODY. They go on the list, and they can try to get off the
list, but you do not give them a chance to appeal before they
appear en the list.
Mr. NEWCOMB. We do not do a prior notification, no.
PAGENO="0405"
401
Mr. MOODY. OK. They suddenly appear on the list. Now, once
they appear on the list, they are subject to seizure if they have
assets on U.S. territory, correct?
Mr. NEWCOMB. Blocking of property.
Mr. MOODY. Do they have anyone raise any due process, that
they had no way of knowing they were going to get on the list or
had any right to get off the list or not get on the list? I am just
concerned about process for a moment here. It is not my main
question, but I want to just quickly clear that up. I mean, under
our Constitution, you can't seize property without some kind of
process. I am wondering what their process is.
Mr. NEWCOMB. Let me say that we are not seizing this property.
Mr. MOODY. You are blocking it.
Mr. NEWCOMB. We are blocking the property.
Mr. MOODY. OK, blocking it. Considerable economic damage
could occur, and I am just concerned. I just want to take a moment
of your time to ask you, when they get on the list, they don't even
know they are going to be on the list. Suddenly they are on the list.
Their checks would bounce. All sorts of things would happen. I am
just asking what is their process for avoiding getting on the list if,
in fact, there is, let's say, a bureaucratic or informational error?
Mr. NEWCOMB. Let's say that that is certainly possible. We do
have coordination with foreign governments prior to putting indi-
viduals on the list. In these instances if there has been an error, if
there is reason to believe that a company no longer qualifies based
on information that they present to us, we will move with all due
speed to remedy the problem and take steps to remove them from
the list.
Mr. MOODY. Then all parties would be notified so that they
wouldn't be suffering consequences.
Mr. NEWCOMB. That is right. We would follow the same process.
Mr. MOODY. I just want to get that in the record, that there is a
process, and they have some-I mean, it isn't totally arbitrary, and
they can have a way of providing counterevidence if there is such?
Mr. NEWCOMB. Absolutely.
Mr. MOODY. OK. Most of your testimony today has to do with
control of foreign assets, in this case mostly Iraqi assets. Most of
the focus of what we have been looking at, in a prior meeting and I
think hereafter, will be arms sales. I don't know if you had a
chance to listen to any of the points made by Congressman Stark
and myself. We focused entirely on arms sales.
Do you have any comments on the points we made about lack of
coordination between intelligence and enforcement, lack of coordi-
nation between licensing and enforcement, the fact that we simply
rely on the word-right now of export licensing often has no more
than the word of the seller or the purchaser as to the final end use,
and the fact that there is some inherent conflicts of interest within
lead agencies? Do you have any comments on any of those points?
Mr. NEWCOMB. No, I really don't. Let me say, in terms of Iraq,
the questions you are asking really relate to the licensing and en-
forcement of the Export Administration Act. We administer an en-
tirely different statute.
Mr. MOODY. Right.
PAGENO="0406"
402
Mr. NEWCOMB. We did not get involved in this program until the
night of August 1. I can tell you our experience with the Commerce
Department, their licensing office, and the Customs Services has
been nothing but very great cooperation. I believe that both agen-
cies are working with us very effectively in moving the embargo
program forward. I believe we have done that.
Also, let me say in terms of international enforcement, whenever
there was an allegation of a potential violation that may have oc-
curred, we worked with the State Department, which went through
a process of demarching embassies worldwide to approach foreign
governments. So literally every lead was followed up, both domesti-
cally and internationally.
Mr. MOODY. I have no question about that. That is not the focus.
If you have any comments later on my testimony, that would be
fine. I don't want to take the time now because our time is up.
Mr. NEWCOMB. I don't really. That is not in my province.
Mr. MOODY. Thank you. Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Anthony, any other questions?
Mr. ANTHONY. Mr. Newcomb, in light of what Mr. Moody~ asked
you about the process, and knowing that there is a sewing machine
company from some foreign country that made the list, why would
someone like Carlos Cardeon, the person that I mentioned a while
ago, where there is so much evidence-he is being sued for $30 mil-
lion in unpaid commissions on $467 million worth of weapons that
were sold to Iraq. He has got a helicopter that he has been working
on a prototype. Customs has the helicopter. We had our hearing
over 2 weeks ago. I guess two questions come to mind.
Why did you not put him on your list and let him come in and
rebut off, like you just said to Mr. Moody others have? What is
taking the Government so precious long to resolve this particular
case? Either give the man's helicopter back to him or seize and get
rid of the helicopter and put him on somebody's list because he is
selling arms to Iraq. For me, I don't understand, and I must tell
you it frustrates me when your only response is, well, it is being
investigated. Investigated by whom? For what? When? How? And
how long?
I can tell you what it makes me think. It makes me think that
somebody in the White House, at 0MB, and higher up in Treasury
has called you and said to stonewall the committee. I am just not
very happy with it.
Mr. NEWCOMB. Well, first, let me comment on the last fear that
you have expressed. I can tell you categorically that is not the case.
Mr. ANTHONY. No one has told you not to come in here and talk
about the case?
Mr. NEWCOMB. Absolutely not.
Mr. ANTHONY. You are not talking about the case on your own?
Mr. NEWCOMB. I don't believe it would be proper at this time for
me to comment on a case that is under investigation in cooperation
between our agency-
Mr. ANTHONY. Well, what is being investigated?
Mr. NEWCOMB [continuing]. And another agency.
Mr. ANTHONY. Well, what is being investigated? What is the man
suspected of if he is being investigated? What is he being investi-
gated for? What is the nature of the investigation?
PAGENO="0407"
403
Mr. NEWCOMB. The nature of the investigation is a matter, I be-
lieve, that the Customs Service has an active case on. We are co-,
ordinating with the Customs Service on that matter. Whatever we
do-
Mr. ANTHONY. Is the helicopter-
Mr. NEWCOMB. Whatever we do, we will do jointly. Beyond that,
respectfully I must decline to comment any further. If we go back
and review the file and consult with other Federal agencies, I can
assure you I am not-
Mr. ANTHONY. Just specifically tell me what the Federal Govern-
ment is investigating. I assume it is the helicopter. I mean, I know
the helicopter has been seized, so I assume that much of it is being
investigated.
Mr. NEWCOMB. I think that is certainly part of what is being in-
vestigated, but I-
Mr. ANTHONY. Logic stands that here is a man who has not been
proven right or wrong, but the Government holds a piece of his
property. Now, that property is either a civil aircraft or it is a mili-
tary aircraft. And somebody in our Government won't make that
decision. I think it is military; he thinks it is civilian. But when are
you going to decide? Are another 2 weeks going to drag by before
somebody can make that decision?
Well, just let the record note that I think somebody is dragging
their feet, and I think one of Mr. Moody's seven points about the
differences between the licensing bureau and the investigation
bureau is being proven out 100 percent by this particular case. So
for all of the good positive things that you have done-and you
have done a lot, and I would like to brag about those-there is one
here that is very, very disturbing. I am sure Mr. Bunning would
like to go into his case. In his case, the people were actually con-
victed, and they are fugitives some place. And those people don't
even make the list.
It is a new list, as I understand it. This is the first year that that
list is in operation?
Mr. NEWCOMB. Well, the authority to issue such a list was not
conferred until the President invoked the International Emergency
Economics Powers Act, so we are about 7 months into the program.
Mr. ANTHONY. Seven months into it. So I guess-
Mr. NEWCOMB. Let me just reiterate that there are many other
potential individuals or companies that might qualify for this list.
We have many under investigation. We have many programs that
we administer. We are moving quickly on it. I will certainly take
Mr. Bunning's suggestion and review the facts of those particular
individuals and see if they qualify. And if they do, indeed, we will
take action.
But on the question that you were raising, let me say I can only
comment that I think proper investigative authorities within the
respective agencies, including my own agency, are working on
whatever is involved in the particular case you raised. And I don't
think it would be appropriate for me to comment any further on it.
Mr. ANTHONY. I am not pressing you to comment, and I want you
to know that at no time during my questioning have I tried to get
you to answer any of those questions. I mean, I keep asking a dif-
PAGENO="0408"
404
ferent question, but I am not trying to force you to answer a ques-
tion you don't feel like you should answer.
But now that you have mentioned investigations, on January 27,
1991, the Washington Post reported that U.S. Customs Service was
investigating 40 cases of arms smuggling to Iraq. We are talking
about artillery from Austria, armored cars from Brazil, aircraft
from France, helicopters from Chile and Italy. Are you working
with Customs on any of those cases?
Mr. NEWCOMB. Yes. I think perhaps Mrs. Hallett, the Commis-
sioner of Customs, would comment more fully on that press release.
But let me say it is my knowledge that perhaps one-fourth or one-
third of those cases are cases relating to Iraq post-August 2, where
a violation of the statute that we administer might become in-
volved.
Mr. ANTHONY. A third of them?
Mr. NEWCOMB. Maybe a fourth, maybe 10, I don't know. But I
think one point I would like to make is what those cases tell me-I
believe that Customs has taken the approach where they are not
leaving a stone unturned. They are investigating all potential vio-
lations. When it relates to a particular violation that we adminis-
ter, we coordinate actively. Our people, our investigators, accompa-
ny the Customs investigators where appropriate, where we are able
to do so. And, yes, the answer to your question is that we are work-
ing together on those cases.
I cannot right now give you the exact number, and the reason is
that it is a number that changes. They get opened and they get
closed. And so on a day-to-day basis it could conceivably change.
But it is a very active program and one that we are working to-
gether.
Mr. ANTHONY. But a third to a fourth was the number that you
mentioned, and some of these have occurred since the August 2,
1990, embargo. And you are saying that some of these involve sub-
stantial violations.
Mr. NEWCOMB. My estimate is that perhaps 10 to 15 of the 40
would be post-August 2 cases. I can't tell you how substantial they
are. I can't comment on the quality of the alleged violation.
What I can say is that it represents a substantial Federal effort
to investigate any potential violation that may have occurred post-
August 2.
Mr. ANTHONY. So you are satisfied with your working relation-
ship with Customs?
Mr. NEWCOMB. Yes. And we are satisfied with how the Federal
enforcement community and the administrative community have
worked during this embargo to coordinate with us, at a policy level,
administration level, enforcement level, and intelligence level.
Mr. ANTHONY. I just have one final question, Mr. Chairman. I
wish you would submit this to me in writing. Would you send me a
list of items that the Government has prosecuted companies or in-
dividuals for illegally sending goods into Iraq since the embargo
was imposed?
Mr. NEWCOMB. Yes.
Mr. ANTHONY. Just those cases that you have successfully com-
pleted, up to date.
Mr. NEWCOMB. Yes.
PAGENO="0409"
405
[The information requested follows:]
Iraq sanctions were imposed by the President August 2 and broadened August 9.
Since that time, as a direct result of sanctions imposition, investigations have been
initiated which have resulted in the prosecution of several individuials for attempts
to broker Iraqi crude oil
Additional investigations are currently underway for export violations of the Iraqi
sanctions regulations, but these cases have not reached the courts for prosecution.
Since these and other cases are still under investigation we are constrained from
discussing them, or the extent of our investigation and enforcement activity on the
other cases such as these.
As you know, the investigation of Iraqi sanctions violations and the careful and
complete preparation of a successful case requires much time and effort. We expect
that in the near future many of these cases will be successfully prosecuted, and at
that time the extent of sanctions violations will be indicated.
Chairman PICKLE. Mr. Sundquist.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
I agree with the substance of our concern, but I think it is unfor-
tunate that my colleague has given us a tinge of politics to this. I
said to my good friend I think it is unfortunate there is a tinge of
politics to this. It doesn't do our ongoing investigation any good,
and I don't think you meant to make it a political issue. But I want
to ask the question you posed so we have it on the record. There is
no indication that 0MB has told you in any way or the administra-
tion in any way not to proceed on anything for any political pur-
poses?
Mr. NEWCOMB. Absolutely not.
Mr. SUNDQUIST. I just want to make sure that the record is clear
on that, unless my colleague has something else he would like to
enter on that.
Mr. ANTHONY. Would the gentleman yield?
Mr. SUNDQUIST. I would.
Mr. ANTHONY. It was especially a question on my behalf Mr.
Newcomb answered in the negative. I took it at that, and I dropped
it.
Mr. SUNDQUIST. I appreciate that because I want to make it
clear.
Mr. ANTHONY. That doesn't mean that this one individual doesn't
have strong suspicions that maybe some other pressures were ap-
plied, maybe not directly on Mr. Newcomb. I obviously have no
proof of it, so I dropped it at that.
Mr. SUNDQUIST. Thank you. Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Bunning, do you have questions?
Mr. BUNNING. I just want to follow up on one thing.
The Iraqi sanctions act has civil penalties of $250,000 and crimi-
nal penalties of up to $1 million and imprisonment up to 12 years
for willful violations of trading with Iraq after the sanctions.
Is that a large enough penalty? I would like to get an opinion out
of you on the penalties. And should we try to make them more or
should we not? In other words, I don't know if we are deterring
people by the penalties involved.
Mr. NEWCOMB. Clearly we are proud of the very strong enforce-
ment posture that we have always taken. So I would not want to in
any way indicate that we aren't as aggressively interested in penal-
izing knowing violators as we possibly can.
PAGENO="0410"
406
Let me say the amounts provided for in the Iraq sanctions act
were substantially larger than the amounts in our other statutes
that we administer. When we received that penalty authority, we
were quite pleased and quite satisfied.
I am not aware of any particular case where that has proved in-
adequate. But if that should, I would certainly want to propose
that we enhance those. So the answer to your question is: It doesn't
appear to be now, but certainly over time it may.
Mr. BUNNING. One followup. Have any penalties been assessed
under this law?
Mr. NEWCOMB. Let me say, normally, unless something clearly
qualifies merely for a civil penalty, we would allow the criminal
side of the case to go forward first. So since we are working for-
ward on the criminal side of the case, the actual civil money penal-
ties might not come into play until some time later. But I can just
assure you as a matter of principle, we are an aggressive enforce-
ment office, and we will issue penalties to the maximum reasona-
ble and allowable under the laws.
Mr. BUNNING. In other words, none have been assessed yet.
Mr. NEWCOMB. We have a number of penalty cases in process
where--
Mr. BUNNING. But none have been assessed yet.
Mr. NEWCOMB [continuing]. We have issued prepenalty notices
which certain proposed assessments. But we have a procedure set
up under the Administrative Procedures Act for processing penalty
cases. We are processing for some of those.
Mr. BUNNING. None of them have come to a final disposition?
Mr. NEWC0MB. We haven't gotten paid yet, no.
Mr. BUNNING. All right. Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Jenkins.
Mr. JENKINS. Mr. Newcomb, I think maybe the tone of some of
the questions might appear to be somewhat unfair because our
policy was to encourage and favor trade with Iraq up until the
middle of last year, was it not?
Mr. NEWCOMB. That is correct. We had active trade relationships
with Iraq until 5 a.m. on August 2.
Mr. JENKINS. So until the middle of last year, you were not moni-
toring any sales to Iraq because our policy up until that time was
to encourage sales to Iraq; isn't that correct?
Mr. NEWCOMB. That is correct, Congressman. We were not in-
volved in the Iraq program in any way until the night of August 1.
Mr. JENKINS. Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Moody. The Chair wants to move on, but
Mr. Moody has one more question.
Mr. MooDy. Just briefly. The people on this list are people who
have done something since August 2, 1990, or people who-
Mr. NEWCOMB. No, Congressman. In fact, I think it probably
might work the other way more in that persons are on this list,
where there is a reason to believe that these persons are acting for
or on behalf of or are owned or controlled by Iraq. So if over the
period of time there is information available to us that preceding
August 1 they had an agency relationship or a particularly unique
relationship with Iraq, then they would qualify. It is not post-
August 2 that qualifies them.
PAGENO="0411"
407
Mr. MOODY. All right. Thank you.
Chairman PICKLE. Mr. Newcomb, let me ask you one other ques-
tion. You have given us a list of special designated nationals for
Iraq and for Libya. Do you anticipate publishing other lists for
other countries, such as Syria?
Mr. NEWCOMB. Syria is not a country currently embargoed under
an act that we enforce, so we do not anticipate under Syria. I can
say for Cuba-
Chairman PICKLE. Do you anticipate publishing a list for any
other nation?
Mr. NEWCOMB. We currently have such lists for Cuba, Vietnam,
North Korea, and Cambodia.
Chairman PICKLE. But beyond those lists, you have no intention
of publishing further ones at this point?
Mr. NEWCOMB. Those are the only countries where we have spe-
cific authority in the statute and the implementing regulations
where we can take such steps.
Chairman PICKLE. All right. Mr. Newcomb, you have indicated
that Customs has given you excellent cooperation, and you have
said they left no stone unturned. I assume by that you are satisfied
with Customs performance and their authority. Should Customs be
given additional authority in these kinds of cases?
Mr. NEWCOMB. Well, under the International Emergency Eco-
nomic Powers Act, the authority to administer, enforce, investi-
gate, and implement the International Emergency Act is delegated
to Foreign Assets Control. We have a cooperative, mutual assist-
ance kind of program with the Customs Service where we work to-
gether on cases of joint interest. They clearly have the resources
available to them nationwide and throughout the world to assist us
when we need investigative assistance. When we are aware of cases
that we cannot handle ourselves-we have a small battery of our
own investigators, but when we cannot do it ourselves, which is
very often the case, especially relating to imports and exports, we
have a very active referral program. We routinely meet with the
Customs Service. We coordinate with them. The Customs has a liai-
son with our office. We send people over there routinely.
As far as their authority on the EAA, that is not within my prov-
ince, so I am not the proper person to comment on that.
Chairman PICKLE. Mr. Newcomb, I am not asking about your re-
lations with Customs. We accept that as being a fact. I am trying to
find out, does Customs need additional authority in these kinds of
cases we are looking at. I am advised that Customs feels that they
can do a better job in certain instances, and in these particular
cases, a lot of the tips and information that resulted in indictments
came through Customs. And I think Customs feels that they can do
additional jobs or additional performance. Do you approve of that?
Has Customs ever asked you for any improvements or additional
authority?
Mr. NEWCOMB. Not on the statutes that we administer. It is my
belief that those statutes provide the adequate authority for inves-
tigative responsibility. There may be other statutes that we are not
involved in that they may be-
PAGENO="0412"
408
Chairman PICKLE. Has Customs ever recommended to you that
you endorse their automated manifest process, computer processing
proposal? Are you familiar with that?
Mr. NEWCOMB. I am familiar with it, but it would not be within
my province to be commenting on their administrative operations.
Chairman PICKLE. Whose province would that be in?
Mr. NEWCOMB. That would be other people within the Treasury
Department or the Customs Commissioner.
Chairman PICKLE. You mean you are saying that you don't
intend to comment about any proposal-
Mr. NEWCOMB. I am not really in a position to comment on an
automated manifest system. I know that Customs is constantly up-
grading their ability to do their job.
Chairman PICKLE. We will ask some of these other agencies.
I want to say in conclusion that you have cooperated with the
subcommittee, and we appreciate that. Some of the questions today
have been questions of perplexity and frustration about why cer-
tain lists have been added to and the process. I think it just further
accentuates the fact that there is a lack of coordination between
the various agencies. We are trying to pinpoint some of it. Our par-
ticular jurisdiction is with respect to Customs. I am disappointed,
in a way, that you cannot say that you and Customs are trying to
work out additional processing, but as we go along, I hope we can
concentrate on that. We are going to be hearing from the Commis-
sioner of Customs now.
In the meantime, I thank you very much for your testimony.
Mr. NEWCOMB. Thank you, Mr. Chairman.
[Additional questions for the record to Treasury and their re-
sponses follow:]
PAGENO="0413"
409
DEPARTMENT OF THE TREASURY
WASHINGTON
July 9, 1991
The Honorable J. J. Pickle
Chairman
Subcommittee on Oversight
Committee on Ways and Means
House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
This responds to the questions in your May 9, 1991,
letter following Oversight Subcommittee hearings on
administration and enforcement of U.S. export controls.
1. Q: What evidence does the Office of Foreign Assets Control
(OFAC) have with regard to Saddam's hidden wealth? Can you
confirm the $10 billion estimate? Where is this money? What
steps is the United States taking to locate the funds? When the
money is located, what does OFAC intend to do with it?
A: OFAC has both anecdotal and documentary evidence about the
hidden wealth of Saddam Hussein and his associates. Although we
are not able to confirm the $10 billion estimate, we understand
that it is a hypothetical computation based upon source
information that Hussein has "skimmed" a fixed percentage of the
income from all Iraqi oil sales. We understand that the $10
billion amount was arrived at by calculating five percent of the
total Iraqi oil sales over a ten-year period. As you may know,
other persons formerly associated with the Iraqi regime have
placed the amount of Saddam's hidden assets as high as $33
billion.
OFAC does not yet have a comprehensive picture of the actual
amounts, types and locations of the wealth acquired by Saddan
Hussein and his associates. We are, however, trying to establish
those facts; and investigations are ongoing. If such assets are
located in U.S. jurisdiction, they will be blocked. If they are
found in a foreign jurisdiction, we will seek the foreign
government's cooperation in blocking or otherwise denying access
to then.
2. Q: It has been reported in the press that OFAC investigators
found foreign bank telexes, dated after August 2, 1990, detailing
Iraqi requests to transfer tens of million of dollars into
Jordanian accounts. To what extent has Jordan played a role in
sheltering Saddam's wealth? Is it true that ater the invasion,
Jordan banks and businesses protected and facilitated Iraq's
transfer of money and other assets to safe havens? What other
countries are not cooperating with the financial and trade
sanctions imposed against Iraq?
PAGENO="0414"
410
A: OFAC has met repeatedly with senior Jordanian diplomatic
and banking officials to stress the urgency of strict adherence
to the United Nations sanctions regime. The Jordanians have
assured us of their support for the sanctions against Iraq. We
continue to monitor Jordan's embargo compliance efforts.
Due to Jordan's geographic proximity to Iraq, its economic
interdependency with Iraq, and its close historical, cultural,
and religious ties, Jordan represents a likely venue for
sanctions evasion activity. OFAC continues its efforts to
investigate all credible allegations that Jordanian banks and
businesses have helped to shelter Saddam's purported wealth and
have facilitated transfers of Iraqi assets to safe havens. OFAC
is actively reviewing all available information concerning Iraqi
and Jordanian banking transactions to determine whether parties
in Jordan may have assisted Iraq in transferring Iraqi funds into
Jordanian or other accounts after sanctions were imposed.
We are aware of recent press allegations that Libya is working
closely with Iraq to evade the U.N. embargo and OFAC is looking
into those claims. OFAC also enforces a comprehensive embargo
against Libya and has recently named 48 companies as Specially
Designated Nationals of Libya.
3. Q: How certain are you that OFAC has completely identified
Saddam's U.S. network?
A: OFAC does not claim to have "completely identified' Saddam
Hussein's U.S. network. Consequently, we will pursue any
credible leads that may be presented to us concerning
participants in any part of Iraq's network, whether in the United
States or overseas.
4. Q: How did OFAC learn about Matrix Churchill, the small Ohio
machine tool distributor that became a front for exporting
weapons technology to Iraq?
A: On the basis of public source information which
demonstrated that the company was owned and controlled by Iraqi
front companies in England.
5. Q: How effective is the Specially Designated Nationals (SDN)
program in terms of denying access to U.S. merchants? How many
violators does OFAC detect each year? How many penalties are
imposed annually? How difficult is it to prove a violation of
OFAC sanctions? What changes could be made to improve this
program?
A: OFAC believes that the SDN program has a major impact in
denying access by Iraq and its agents to U.S. goods and services.
This works in several ways:
(a) U.S. businesses are placed on notice about many of the
parties with whom they cannot. lawfully deal. Knowing the
PAGENO="0415"
411
-3-
identities of Iraqi fronts and agents will help prevent honest
businesses from unwittingly dealing with Iraq, while those
inclined to disregard the embargo will be on legal notice about
the Iraqi fronts and will not have ignorance as a defense.
(b) Exports to Iraqi SDN's are prohibited; they will be
stopped when detected; and violators will be prosecuted
(similarly, imports from Iraqi SDN's are prohibited and will be
seized).
(c) Banks cannot participate in financial transactions
involving SDN's. Transfers to, from or otherwise involving SDN's
may not be completed. Such transactions are prohibited, and SDN
accounts and other property interests within U.S. jurisdiction
are blocked.
Overall, being placed upon the Iraqi Specially Designated
Nationals list raises another barrier against Iraq's attempts to
evade the embargo and to acquire the materials and technology to
rearm itself and maintain Saddam Hussein's militarized state.
Obviously, the number of potential violators of OFAC administered
regulations who are detected by OFAC varies from year to year.
This may be attributed to many factors; two of which are the
number of regulations in effect during the course of a year and
the number of personnel available for assignment to OFAC's
enforcement effort. During the most recent twelve month period,
for example, OFAC initiated investigations in over 75 incidents
of activity involving possible violations of OFAC administered
regulations. Many of these were and are being investigated
internally by OFAC Enforcement, while other cases are being
investigated in a joint effort between OFAC and U.S. Customs, and
other agencies. At present there are several hundred cases in
various stages of investigation throughout U.S. Customs which are
being coordinated and monitored by OFAC.
The OFAC criminal and civil penalty programs in 1990 resulted in
collection by Customs for OFAC violations of $5,790,985 in civil
penalties and forfeitures and $76,350 in criminal fines and
forfeitures. An additional $55,000 was deposited into the OFAC
civil penalty account. The total for all categories is
$5,922,335, and involves 765 cases.
It often is not difficult to prove that a violation of sanctions
has occurred. However, since the laws enforced by OFAC (e.g.,
Trading with the Enemy Act and International Emergency Economic
Powers Act) are specific intent statutes, it may be difficult at
times to obtain evidence manifesting knowledge and willfulness on
the part of the violator in order to sustain a criminal
PAGENO="0416"
412
-4-
prosecution. The ability to impose civil penalties under TWEA
would improve enforcement capabilities.
As with most federal regulatory and enforcement agencies, OFAC
could always use additional investigative and analytical
resources--investigators, analysts and clerical personnel. We
are currently working to gain access to on-line data bases of
publicly accessible information including local and state
governmental records, and sophisticated link-analysis software.
6. Q: What will be the eventual disposition of the $1.2 billion
in blocked Iraqi assets? How does your census of Iraqi claims
relate to frozen assets? Will there be enough money to cover
U.S. claims? Were U.S. exporters who shipped goods to Iraq or
Kuwait before the invasion permitted to be paid from the blocked
assets? To what extent are the Iraqis allowed to operate any
accounts?
A: The eventual disposition of the $1.2 billion in blocked
Iraqi assets has yet to be determined. It is possible that the
funds will be used to fund some type of claims settlement
program. Until a settlement program is established, presumably
in conjunction with or as a complement to the U.N. reparations
program, the assets will remain blocked.
The census of claims against Iraq was conducted by OFAC for U.S.
government planning purposes to determine the magnitude of U.S.
claims and what issues are likely to arise in a settlement
program. Until the claims are formally adjudicated it will be
impossible to determine precisely to what extent the blocked
assets will cover U.S. claims. Based on our census, it appears
that "hard" claims (i.e., claims likely to be judged valid under
applicable international or commercial law) are about three to
four times the blocked assets.
OFAC licensed payments to U.S. exporters only where goods had
been exported prior to the sanctions, the goods could not be
returned or diverted, and the letters of credit were confirmed by
a U.S. bank and fully collateralized.
OFAC has licensed for operation only Iraqi accounts related to
U.N. and diplomatic activities.
7. Q: What involvement will OFAC have with regard to war
reparations?
A: The nature of OFAC's role in a war reparations program
depends on how that program is structured.
8. Q: On January 27, 1991, The Washington Post reported that the
U.S. Customs Service was investigating 40 cases of arms-smuggling
to Iraq. How many cases are being investigated by the Federal
PAGENO="0417"
413
-5-
Government today? How many of these cases are related to OFAC
enforcement efforts? To what extent is OFAC involved in these
enforcement cases? How many of those cases are for substantial
violations? What evidence does OFAC have that U.S. commodities
reached Iraq after the August 2, 1990, embargo?
A: OFAC coordinates closely on criminal violations with a
number of agencies including the Customs Service, the FBI, the
Departments of State, Commerce and Defense. Preliminary
investigations are handled independently until the appropriate
stage of the investigation has been reached for dissemination of
information to the agency which can best assist. Joint
investigations are commonly worked between OFAC and the U.S.
Customs Service. OFAC investigators accompany the Customs
investigators in the field, when appropriate, and throughout the
judicial process, when able to do so. The number of enforcement
investigations changes from day to day in this very active
program. The validity and significance of any allegations of
violations can only be determined through continued
investigation. Investigations for export violations to Iraq are
underway and can be discussed upon final adjudication.
9. Q: Under the existing export control system, is the U.S. able
to protect its technology and equipment from falling into the
hands of potential adversaries? What steps can be taken to
strengthen our export control system? Does OFAC have sufficient
authority to implement its financial and trade sanctions? Do you
have sufficient penalty authority?
A: While OFAC plays a major role in preventing export after
imposition of sanctions, other agencies are tasked with
controlling the export of critical technology to enemies and
potential adversaries. Those agencies are better prepared to
discuss the effectiveness of the export control system. One
change in OFAC's existing authority to implement financial and
trade sanctions would be particularly helpful in facilitating the
efficient functioning of sanctions.
While the Office's civil penalty authority is adequate for
sanctions programs imposed pursuant to the general sanctions
authority in the International Emergency Economic Powers Act, 50
U.S.C. 1701-06, and specific legislation such as the
Comprehensive Anti-Apartheid Act of 1986, 22 U.S.C. 5001-116, and
the Iraq Sanctions Act of 1990, Pub. L. 101-513, OFAC has no
present authority to levy civil penalties in aid of sanctions
imposed on Cuba, Cambodia, Vietnam, or North Korea, which arise
under the Trading with the Enemy Act, 50 U.S.C. App. 1-44
("TWEA"). TWEA provides only for criminal penalty authority.
Thus, with today's burden on the court system, and competing
priorities facing the Department of Justice and U.S. Attorneys'
Offices, only major violations of sanctions are realistic
candidates for prosecution. Many infractions of sanctions
imposed pursuant to TWEA would be more appropriately and
efficiently addressed through an administrative civil penalty
program established within OFAC. Therefore, legislation
authorizing civil penalties as an enforcement tool would enhance
OFAC's enforcement and deterrence authority.
Thank you for this opport~nity to explain more about
our programs.
Sincerely,
R. Richard Newcomb
Director
Office of Foreign Assets Control
51-840 0 - 92 - 14
PAGENO="0418"
414
Chairman PICKLE. Our next witness is the Honorable Carol Hal-
lett, Commissioner for the U.S. Customs Service. Commissioner
Hallett, if you will please take your place at the stand.
Commissioner Hallett, we are glad to have you before us this
morning, and we would be pleased to receive your testimony.
STATEMENT OF HON. CAROL HALLETT, COMMISSIONER, U.S. CUS-
TOMS SERVICE, U.S. DEPARTMENT OF THE TREASURY, ACCOM-
PANIED BY JOHN C. KELLEY, DIRECTOR, STRATEGIC INVESTI-
GATIONS DIVISION
Ms. HALLETT. Thank you very much, Mr. Chairman. I am pleased
to appear before you and the members of the committee today in
order to discuss not only the roles and the goals of the U.S. Cus-
toms Service in enforcing U.S. export control laws, but I also ap-
preciate the opportunity to respond to your questions today.
I would like to introduce Mr. John Kelley, who is here with me
today. He is the Director of our Exodus program.
The Customs Service has worked long and hard to develop an
export enforcement program that is really capable of responding to
the law enforcement needs, not only in the United States but those
needs that affect our foreign policy and national security interests
of the United States.
Under the project name "Operation Exodus," the Customs Serv-
ice has developed this program to the point where it has become a
world model in the field of export enforcement. Today I would like
to share some insights gained from our experience in export en-
forcement that may, in fact, serve as reference points for your
analysis of the U.S. export control system.
As the principal U.S. border enforcement agency, the Customs
Service has long faced the daunting challenge of enforcing both the
import and export control laws of the United States, while at the
same time serving to facilitate the movement of goods and people.
In meeting this challenge, Customs officers have well earned the
title "protectors of independence."
The Operation Exodus program was developed in 1981 as a re-
sponse to the national security challenge of stemming the flow of
the illegal export of U.S. source arms and technology to the Soviet
bloc and other prohibited destinations. The fall of the Berlin Wall
caused many foreign policy, national security, and law enforcement
analysts to call for both relaxation of U.S. export restrictions and a
reduction in U.S. export enforcement efforts.
The Customs Service weighed these calls for reduced export en-
forcement against the law enforcement concerns dictated by ever
changing U.S. foreign policy and national security interests and
chose to maintain an aggressive enforcement posture. For our expe-
rience has really told us that the next Iran, Nicaragua, or Panama
may not be far off.
This decision has proven wise in light of the events of August 2,
1990. The countries and commodities may change; but as long as
the U.S. Government maintains the goals of promoting world
peace, protecting national security, and promulgating foreign
policy, there will be a continuing need for aggressive export en-
forcement.
PAGENO="0419"
415
In discussing the role of the Customs Service in the U.S. export
control system, I want to make it very clear that we do not serve
as an export licensing agency. This role is reserved for the Depart-
ment of Commerce, the Department of State, the Department of
Treasury's Office of Foreign Assets Control, and other U.S. export
licensing agencies.
The role of the U.S. Customs Service is to enforce the regulations
set forth by these agencies under statutes such as the Export Ad-
ministration Act, the Arms Export Control Act, and the Interna-
tional Emergency Economic Powers Act.
In addition to its authority to enforce both the Export Adminis-
tration Act and the Arms Export Control Act, the Customs Service
also enforces the outbound provisions of the Bank Secrecy Act, the
Chemical Diversion and Trafficking Act, along with other statutes.
This enforcement authority, coupled with Customs border search
authority, makes the Customs Service the only U.S. agency capable
of responding to all outbound enforcement problems at our ports
and borders.
Our export enforcement strategy has been developed upon a
three-pronged approach of interdiction, investigation, and interna-
tional cooperation. This strategy has been implemented by a force
of 300 Customs special agents and 135 Customs inspectors that are
dedicated exclusively to our export enforcement program. Their ef-
forts may be augmented on a case-by-case basis throughout the in-
vestigation of any case through the use of an additional 2,500 spe-
cial agents and 5,000 Customs inspectors located at our 300 domes-
tic and 20 foreign posts of duty.
The expertise developed by these Customs officers has resulted in
an increase of our seizure to detention ratio. Our increased efficien-
cy in targeting and interdicting illegal exports has been of benefit
both to the Customs Service and to the exporting public.
The investigative focus of the Customs Service ranges from the
referral of civil violations to the Departments of State and Com-
merce to the conduct of complex investigations which may require
undercover operations, electronic surveillance, or source develop-
ment. Many of these investigations result in global settlements
with assessment of both civil and criminal penalties upon convic-
tion of the violators.
One of our most important initiatives in the area of source devel-
opment has been an industry awareness program known as Project
Gemini. To date, Customs officers have made public awareness
presentations to over 5,000 companies that are dealing in the area
of defense as well as high-technology industries. The investigative
leads provided by Gemini contacts have resulted in a number of
significant seizures and arrests as well. The Customs Service works
hard at developing tips.
As part of our U.S. export control community, the Customs Serv-
ice maintains strong links with the licensing agencies, the Depart-
ment of Defense, other Federal enforcement agencies, and the in-
telligence community. Our Exodus command center has direct
links to both State and Commerce and is able to supply our field
offices with both licensing as well as lookout information.
The Customs Service maintains intelligence units both at head-
quarters and in the field for the purpose of receiving, analyzing,
PAGENO="0420"
416
and disseminating information obtained from the intelligence com-
munity. Intelligence information, information received from other
law enforcement agencies, and Department of Defense technical as-
sessments provide part of the basis for our interdiction profiles.
Successful interdiction techniques depend upon both strategic as
well as tactical information.
Recently, Mr. Chairman, we have expanded our cooperation with
the Department of State to include the posting of a full-time Cus-
toms agent at the Office of Defense Trade Controls to act as a spe-
cial coordinator for law enforcement. It is the intent of the Cus-
toms Service to assist the Department of State in screening export
licensing applications for law enforcement concerns. Our coopera-
tive efforts have also included a monthly exchange of case informa-
tion with the Department of Commerce.
Ever mindful of the fact that successful export enforcement re-
quires foreign cooperation, the Customs Service has made export
enforcement a priority for its foreign offices. The spirit of coopera-
tion engendered by these foreign offices and our participation in
COCOM has made the difference in a number of successful investi-
gations.
As acknowledged experts in the field of export enforcement, Cus-
toms officers are often requested to provide training to foreign gov-
ernments. Of particular, note in this area, is that we have been
able to participate in recent export training programs in Eastern
Europe. Hopefully these training programs will enable these newly
risen democracies to develop their own export control regimes.
On April 18 of this year, the Customs Service offered testimony
on two investigations relating to illegal export of U.S.-source items
to countries in the Middle East. I believe this testimony has provid-
ed the committee with excellent examples of investigations that
mirror our current enforcement efforts involving the Middle East.
Our experience indicates that although the commodities, coun-
tries, and routes of diversion may change, the basic methods of op-
eration used by violators have not. In the Alcolac International and
the Helmy investigations, we have provided examples of violators
attempting to acquire controlled chemicals and missile technology
for illegal export to destinations in the Middle East.
I can assure you, Mr. Chairman, that the investigations relating
to the illegal export of chemical/biological warfare agents and mis-
sile technology to the Middle East continue to be a matter of top
priority for the Customs Service.
In response to the Iraqi invasion of Kuwait, the Customs Service
activated a National Crisis Center as a clearinghouse for law en-
forcement and intelligence information relating to Iraq. The Na-
tional Crisis Center acted as a liaison with other U.S. agencies for
channeling and substantiating information as well as intelligence
relating to the conflict in the Persian Gulf. The National Crisis
Center was supplemented by an Iraqi task force which tracked and
analyzed all U.S. Customs investigations relating to Iraq.
Since the imposition of the Iraqi embargo, the Customs Service
has made more than 70 seizures destined for Iraq or Kuwait. The
Customs Service has also provided continuing cooperation to the
Office of Foreign Assets Control in the effort to identify specially
PAGENO="0421"
417
designated nationals of Iraq and block Iraqi assets in the United
States.
To date, both the U.N. and Presidential embargoes remain in
effect. Additional export restrictions resulting from the Secretary
of State's designation of Iraq as a country that has repeatedly pro-
vided support for acts of international terrorism also remain in
place. The Customs Service will continue to closely monitor exports
to Iraq as long as these restrictions continue.
The Customs Service is constantly looking for ways to improve
its ability to enforce U.S. export controls. One of our forward-look-
ing initiatives is the development of the automated cargo export
system. This system would allow for the automation of the Customs
outbound manifest, the shippers export declaration, and other re-
lated export documentation. This automation would permit the
Customs Service to more effectively and efficiently target suspect
export shipments for intensive examination.
Mr. Chairman, members of the committee, we have, as you can
see, brought with us today a number of exhibits which relate to
some of our closed investigations. I would be more than happy to
answer any questions about any of the materials we have brought
here for display and respond to all of your other questions.
Thank you very much, Mr. Chairman.
[The prepared statement follows:]
PAGENO="0422"
418
TESTIMONY OF CAROL HALLETT
COMMISSIONER, U.S. CUSTOMS SERVICE
BEFORE THE HOUSE OF REPRESENTATIVE
COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON OVERSIGHT
MAY 1, 1991
MR. CHAIRMAN, I AM PLEASED TO APPEAR BEFORE YOU AND YOUR
SUBCOMMITTEE TODAY TO DISCtJSS THE ROLES AND GOALS OF THE U. S.
CUSTOMS SERVICE IN ENFORCING U.S. EXPORT CONTROL LAWS. THE
CUSTOMS SERVICE HAS WORKED LONG AND HARD TO DEVELOP AN EXPORT
ENFORCEMENT PROGRAM THAT IS CAPABLE OF RESPONDING TO THE LAW
ENFORCEMENT, FOREIGN POLICY AND NATIONAL SECURITY INTERESTS OF
THE UNITED STATES.
UNDER THE PROJECT NAME, "OPERATION EXODUS", THE CUSTOMS
SERVICE HAS DEVELOPED THIS PROGRAM TO THE POINT WHERE IT HAS
BECOME A WORLD MODEL IN THE FIELD OF EXPORT ENFORCEMENT. TODAY,
I WOULD LIKE TO SHARE SOME INSIGHTS GAINED FROM OUR EXPERIENCE IN
EXPORT ENFORCEMENT THAT MAY SERVE AS REFERENCE POINTS FOR YOUR
ANALYSIS OF THE U.S. EXPORT CONTROL SYSTEM, PARTICULARLY AS IT
APPLIES TO THE MIDDLE EAST.
THE CUSTOMS SERVICE HAS BEEN IN THE BUSINESS OF EXPORT
ENFORCEMENT SINCE 1789. AS THE PRINCIPAL U. S. BORDER
ENFORCEMENT AGENCY THE CUSTOMS SERVICE HAS LONG FACED THE
DAUNTING CHALLENGE OF ENFORCING BOTH THE IMPORT AND EXPORT
CONTROL LAWS OF THE UNITED STATES WHILE AT THE SANE TIME SERVING
TO FACILITATE THE MOVEMENT OF GOODS AND PEOPLE. IN MEETING THIS
PAGENO="0423"
419
CHALLENGE, CUSTOMS OFFICERS HAVE WELL EARNED THE TITLE
"PROTECTORS OF INDEPENDENCE."
THE "OPERATION EXODUS" PROGRAM WAS DEVELOPED IN 1981 AS A
RESPONSE TO THE NATIONAL SECURITY CHALLENGE OF STEMMING THE FLOW
OF THE ILLEGAL EXPORT OF U.S. SOURCE ARMS AND TECHNOLOGY TO THE
SOVIET BLOC AND OTHER PROHIBITED DESTINATIONS. THE FALL OF THE
BERLIN WALL CAUSED MANY FOREIGN POLICY, NATIONAL SECURITY, AND
LAW ENFORCEMENT ANALYSTS TO CALL FOR BOTH RELAXATION OF U. S.
EXPORT RESTRICTIONS AND A REDUCTION IN U. S. EXPORT ENFORCEMENT
EFFORTS.
THE CUSTOMS SERVICE WEIGHED THESE CALLS FOR REDUCED EXPORT
ENFORCEMENT AGAINST THE LAW ENFORCEMENT CONCERNS DICTATED BY EVER
CHANGING U.S. FOREIGN POLICY AND NATIONAL SECURITY INTERESTS AND
CHOSE TO MAINTAIN AN AGGRESSIVE ENFORCEMENT POSTURE. FOR OUR
EXPERIENCE TOLD US THAT THE NEXT IRAN, NICARAGUA, OR PANAMA MAY
NOT BE FAR OFF.
THIS DECISION HAS PROVEN WISE IN LIGHT OF THE EVENTS OF
AUGUST 2, 1990. THE COUNTRIES AND COMMODITIES MAY CHANGE; BUT AS
LONG AS THE U.S. GOVERNMENT MAINTAINS THE GOALS OF PROMOTING
WORLD PEACE, PROTECTING NATIONAL SECURITY, AND PRONI1LOATING
FOREIGN POLICY, THERE WILL BE A CONTINUED NEED FOR AGGRESSIVE
EXPORT ENFORCEMENT.
PAGENO="0424"
420
IN DISCUSSING THE ROLE OF THE CUSTOMS SERVICE IN THE U.S.
EXPORT CONTROL SYSTEM, I FIRST WANT TO MAKE IT CLEAR THAT WE DO
NOT SERVE AS AN EXPORT LICENSING AGENCY. THIS ROLE IS RESERVED
FOR THE DEPARTMENT OF COMMERCE, THE DEPARTMENT OF STATE, THE
DEPARTMENT OF THE TREASURY `S OFFICE OF FOREIGN ASSETS CONTROL,
AND OTHER U.S. EXPORT LICENSING AGENCIES.
THE ROLE OF THE CUSTOMS SERVICE IS TO ENFORCE THE
REGULATIONS SET FORTH BY THESE AGENCIES UNDER STATUTES SUCH AS
THE EXPORT ADMINISTRATION ACT, THE ARMS EXPORT CONTROL ACT, AND
THE INTERNATIONAL EMERGENCY ECONOMIC POWERS ACT. WITHIN THE
CUSTOMS SERVICE, WE FEEL THAT THE SEPARATION BETWEEN OUR
ENFORCEMENT FUNCTION AND THE LICENSING FUNCTIONS OF STATE AND
COMMERCE CREATES A HEALTHY SYSTEM OF CHECKS AND BALANCES.
AS WE CONTINUE WITH OUR EXPORT ENFORCEMENT PROGRAM, ONE
PROBLEM CONTINUES TO SURFACE. THAT IS THE CUSTOMS AND DEPARTMENT
OF COMMERCE OFFICE OF EXPORT ENFORCEMENT DUAL ROLE WITH ENFORCING
THE EXPORT ADMINISTRATION ACT.
ACCORDING TO LEGISLATIVE HISTORY, THE INTENT OF THE SHARED
EAA ENFORCEMENT ROLES WAS CLEARLY TO COMBINE THE RESOURCES AND
SKILLS OF THE U.S. CUSTOMS SERVICE' S TRADITIONAL LAW ENFORCEMENT
ORGANIZATION WITH THE DOC `S EXPORT LICENSING EXPERTISE. WHILE
BOTH AGENCIES ARE CONTINUING TO COOPERATE, OPERATIONAL ISSUES
EXIST WHICH HINDER EFFECTIVE EXPORT ENFORCEMENT.
A
PAGENO="0425"
421
WE WILL CONTINUE TO WORK TO RESOLVE THESE ISSUES. IF WE
DETERMINE THAT ADDITIONAL LEGISLATION IS NECESSARY THE
ADMINISTRATION WILL SUBMIT A PROPOSAL.
IN ADDITION TO ITS AUTHORITY TO ENFORCE BOTH THE EXPORT
ADMINISTRATION ACT AND THE ARMS EXPORT CONTROL ACT, THE CUSTOMS
SERVICE AlSO ENFORCES THE OUTBOUND PROVISIONS OF THE BANK SECRECY
ACT, THE CHEMICAL DIVERSION AND TRAFFICKING ACT, AND OTHER
STATUTES. THIS ENFORCEMENT AUTHORITY COUPLED WITH CUSTOMS BORDER
SEARCH AUTHORITY MAKES THE CUSTOMS SERVICE THE ONLY U. S. AGENCY
CAPABLE OF RESPONDING TO ALL OUTBOUND ENFORCEMENT PROBLEMS AT OUR
PORTS AND BORDERS.
SINCE 1981, EXPORT ENFORCEMENT ACTIONS INITIATED UNDER
"OPERATION EXODUS" HAVE RESULTED IN TILE ARREST OF MORE THAN 1600
VIOLATORS AND THE SEIZURE OF MORE THAN 10, 000 SHIPMENTS OF ARMS,
TECHNOLOGY, AND EMBARGOED GOODS VALUED AT MORE THAN $786 MILLION.
FROM OCTOBER 1985, TO JANUARY 1991, "OPERATION BUCKSTOP" HAS BEEN
RESPONSIBLE FOR CURRENCY AND MONETARY INSTRUMENT OUTBOUND
SEIZURES VALUED AT APPROXIMATELY $351.4 MILLION. FROM FY85 TO
FY90, OUTBOUND ARRESTS FOR CURRENCY VIOLATIONS TOTALED 592. IN
ADDITION, CUSTOMS HAS MADE 61 SEIZURES OF DRUG PRECURSOR
CHEMICALS DESTINED FOR SHIPMENT FROM THE U.S. ALONG WITH 15
ARRESTS.
PAGENO="0426"
422
ANOTHER CUSTOMS OUTBOUND ENFORCEMENT INITIATIVE AIMED AT THE
ILLEGAL SHIPMENT OF STOLEN VEHICLES FROM THE U.S. HAS RESULTED IN
THE RECOVERY OF 1864 STOLEN VEHICLES VALUED AT ABOUT $12.3
MILLION FOR FY89 AND FY90. CUSTOMS OUTBOUND ENFORCEMENT ACTIONS
AGAINST HASARDOUS WASTE VIOLATORS HAS RESULTED IN EPA PENALTIES
IN FY89 AND FY90 OF ABOUT $665, 000.
OUR EXPORT ENFORCEMENT STRATEGY HAS BEEN DEVELOPED UPON A
THREE PRONGED APPROACH OF INTERDICTION, INVESTIGATION, AND
INTERNATIONAL COOPERATION. THIS STRATEGY HAS BEEN IMPLEMENTED BY
A FORCE OF 300 CUSTOMS SPECIAL AGENTS AND 135 CUSTOMS INSPECTORS
THAT ARE DEDICATED EXCLUSIVELY TO EXPORT ENFORCEMENT. THEIR
EFFORTS MAY BE AUGMENTED ON A CASE BY CASE BASIS THROUGH THE USE
OF AN ADDITIONAL 2500 SPECIAL AGENTS AND 5,000 CUSTOMS INSPECTORS
LOCATED AT OUR 300 DOMESTIC AND 20 FOREIGN POSTS OF DUTY.
THE EXPERTISE DEVELOPED BY THESE CUSTOMS OFFICERS HAS
RESULTED IN AN INCREASE OF OUR SEIZURE TO DETENTION RATIO FROM
31% IN 1982 TO 94% IN 1990. THIS RATIO TELLS US THAT 94% OF THE
DETENTIONS MADE BY CUSTOMS OFFICERS WILL RESULT IN SEIZURES FOR
VIOLATIONS OF U.S. EXPORT LAWS AND REGULATIONS. OUR INCREASED
EFFICIENCY IN TARGETING AND INTERDICTING ILLEGAL EXPORTS HAS BEEN
OF BENEFIT BOTH TO THE CUSTOMS SERVICE AND THE EXPORTING PUBLIC.
PAGENO="0427"
423
THE INVESTIGATIVE FOCUS OF THE CUSTOMS SERVICE RANGES FROM
THE REFERRAL OF CIVIL VIOLATIONS TO THE DEPARTMENTS OF STATE AND
COMMERCE TO THE CONDUCT OF COMPLEX INVESTIGATIONS WHICH MAY
REQUIRE UNDERCOVER OPERATIONS, ELECTRONIC SURVEILLANCE, OR SOURCE
DEVELOPMENT. MANY OF THESE INVESTIGATIONS RESULT IN "GLOBAL
SETTLEMENTS" WITH ASSESSMENT OF BOTH CIVIL AND CRIMINAL PENALTIES
UPON CONVICTION OF THE VIOLATORS. SINCE 1989, THE CUSTOMS
SERVICE HAS MADE A CONSCIOUS EFFORT TO REFER POTENTIAL CIVIL
VIOLATIONS TO COMMERCE.
ONE OF OUR MOST IMPORTANT INITIATIVES IN THE AREA OF SOURCE
DEVELOPMENT HAS BEEN AN INDUSTRY AWARENESS PROGRAM KNOWN AS
"PROJECT GEMINI." TO DATE, CUSTOMS OFFICERS HAVE MADE PUBLIC
AWARENESS PRESENTATIONS TO OVER 5,000 COMPANIES IN THE DEFENSE
AND HIGH TECHNOLOGY INDUSTRIES. THE INVESTIGATIVE LEADS PROVIDED
BY "GEMINI CONTACTS" HAVE RESULTED IN A NUMBER OF SIGNIFICANT
SEIZURES AND ARRESTS. THE CUSTOMS SERVICE WORKS HARD AT
DEVELOPING TIPS.
AS PART OF THE U.S. EXPORT CONTROL COMMUNITY, THE CUSTOMS
SERVICE MAINTAINS STRONG LINKS WITH THE LICENSING AGENCIES, THE
DEPARTMENT OF DEFENSE, OTHER FEDERAL ENFORCEMENT AGENCIES, AND
THE INTELLIGENCE COMMUNITY. OUR "EXODUS COMMAND CENTER" HAS
DIRECT LINKS TO BOTH STATE AND COMMERCE AND IS ABLE TO SUPPLY OUR
FIELD OFFICERS WITH BOTH LICENSING AND LOOKOUT INFORMATION.
6
PAGENO="0428"
424
THE CUSTOMS SERVICE MAINTAINS INTELLIGENCE UNITS BOTH AT
HEADQUARTER5 AND IN FIELD OFFICES FOR THE PURPOSE OF RECEIVING,
ANALYZING, AND DISSEMINATING INFORMATION OBTAINED FROM THE
INTELLIGENCE COMMUNITY. INTELLIGENCE INFORMATION, INFORMATION
RECEIVED FROM OTHER LAW ENFORCEMENT AGENCIES, AND DEPARTMENT OF
DEFENSE TECHNICAL ASSESSMENTS PROVIDE PART OF THE BASIS FOR OUR
INTERDICTION PROFILES. SUCCESSFUL INTERDICTION TECHNIQUES DEPEND
UPON BOTH STRATEGIC AND TACTICAL INFORMATION.
RECENTLY, WE HAVE EXPANDED OUR COOPERATION WITH THE
DEPARTMENT OF STATE TO INCLUDE THE POSTING OF A FULL TINE CUSTOMS
AGENT AT THE OFFICE OF DEFENSE TRADE CONTROLS TO ACT AS A SPECIAL
COORDINATOR FOR LAW ENFORCEMENT. IT IS THE INTENT OF THE CUSTOMS
SERVICE TO ASSIST THE DEPARTMENT OF STATE IN SCREENING EXPORT
LICENSE APPLICATIONS FOR LAW ENFORCEMENT CONCERNS. OUR
COOPERATIVE: EFFORTS HAVE AlSO INCLUDED A MONTHLY EXCHANGE OF CASE
INFORMATION WITH THE DEPARTMENT OF COMMERCE.
EVER MINDFUL OF THE FACT THAT SUCCESSFUL EXPORT ENFORCEMENT
REQUIRES FOREIGN COOPERATION, THE CUSTOMS SERVICE HAS MADE EXPORT
ENFORCEMENT A PRIORITY FOR ITS FOREIGN OFFICES. THE SPIRIT OF
COOPERATION ENGENDERED BY THESE FOREIGN OFFICES AND OUR
PARTICIPATION IN COCOM HAS MADE THE DIFFERENCE IN A NUMBER OF
SUCCESSFUL INVESTIGATIONS.
~17
PAGENO="0429"
425
AS ACKNOWLEDGED EXPERTS IN THE FIELD OF EXPORT ENFORCEMENT,
CUSTOMS OFFICERS ARE OFTEN REQUESTED TO PROVIDE TRAINING TO
FOREIGN GOVERNMENTS. OF PARTICULAR NOTE IN THIS AREA HAS BEEN
OUR PARTICIPATION IN RECENT EXPORT TRAINING PROGRAMS IN EASTERN
EUROPE. HOPEFULLY, THESE TRAINING PROGRAMS WILL ENABLE THESE
NEWLY RISEN DEMOCRACIES TO DEVELOP THEIR OWN EXPORT CONTROL
REGIMES.
ON 4/18/91, THE CUSTOMS SERVICE OFFERED TESTIMONY ON TWO
INVESTIGATIONS RELATING TO THE ILLEGAL EXPORT OF U.S. SOURCE
ITEMS TO COUNTRIES IN THE MIDDLE EAST. I BELIEVE THAT THIS
TESTIMONY HAS PROVIDED THE COMMITTEE WITH EXCELLENT EXAMPLES OF
INVESTIGATIONS THAT MIRROR OUR CURRENT ENFORCEMENT EFFORTS
INVOLVING THE MIDDLE EAST.
OUR EXPERIENCE INDICATES THAT ALTHOUGH THE COMMODITIES,
COUNTRIES AND ROUTES OF DIVERSION MAY CHANGE THE B1~~SIC METHODS OF
OPERATION USED BY VIOLATORS HAVE NOT. IN THE ALCOLAC
INTERNATIONAL AND ABDELKAR HELMY INVESTIGATIONS, WE HAVE
PROVIDED EXAMPLES OF VIOLATORS ATTEMPTING TO ACQUIRE CONTROLLED
CHEMICALS AND MISSILE TECHNOLOGY FOR ILLEGAL EXPORT TO
DESTINATIONS IN THE MIDDLE EAST.
I CAN ASSURE YOU THAT INVESTIGATIONS RELATING TO THE
ILLEGAL EXPORT OF CHEMICAL/BIOLOGICAL WARFARE AGENTS AND MISSILE
TECHNOLOGY TO THE MIDDLE EAST CONTINUE TO BE A MATTER OF TOP
PRIORITY FOR THE CUSTOMS SERVICE.
42
PAGENO="0430"
426
AS PART OF MY TESTIMONY TODAY, I WOULD ALSO LIER TO PROVIDE
THE COMMITTEE WITH SHORT PROFILES OF TWO ADDITIONAL
INVESTIGATIONS. THESE PROFILES PROVIDE EXAMPLES OF INVESTIGATIVE
ACTIVITY FROM CASE INITIATION TO CONCLUSION AND ARE
REPRESENTATIVE EXAMPLES OF THE TYPE OF INVESTIGATIONS CURRENTLY
BEING CONDUCTED BY THE CUSTOMS SERVICE.
THE FIRST CASE INVOLVES THE PROVISIONAL IRISH REPUBLICAN
ARMY (PIRA) ATTEMPTS TO PROCURE A STINGER MISSILE, C-4 PLASTIC
EXPLOSIVES, AND A NUMBER OF .50 CALIBER SNIPER RIFLES THAT WOULD
BE SMUGGLED FROM THE U.S. INTO NORTHERN IRELAND FOR USE BY THE
PIRA AGAINST BRITISH FORCES THERE. TEE CHART PROVIDED TO YOU
GRAPHICALLY DEPICTS THIS CASE FROM START TO FINISH. AS YOU CAN
SEE FROM THE CHART, CUSTOMS AND ATE SPECIAL AGENTS ACTED IN AN
UNDERCOVER CAPACITY TO MONITOR THE ACQUISITION EFFORTS OF THREE
IRISH NATIONALS AND ONE CANADIAN NATIONAL IN VIOLATION OF
SEVERAL U.S. EXPORT AND MONEY LAUNDERING STATUTES. THIS CASE WAS
THE RESULT OF A JOINT INVESTIGATION BY THE FBI, BUREAU OF
ALCOHOL, TOBACCO AND FIREARMS AND CUSTOMS AND SERVES AS AN
ILLUSTRATION OF INTERAGENCY COOPERATION.
THE SECOND CASE I WOULD LIKE TO DISCUSS INVOLVES THE
ATTEMPTS BY THREE VIOLATORS TO ACQUIRE COBRA HELICOPTERS AND
OTHER MILITARY AIRCRAFT, AIRCRAFT PARTS, AND OTHER MILITARY USE
ITEMS FOR THE COUNTRY OF IRAN.
PAGENO="0431"
427
THE CHART ON THIS INVESTIGATION DEPICTS SOME OF THE INTERESTING
ASPECTS OF THIS CASE. THIS CASE WAS DEVELOPED THROUGH A CUSTOMS
UNDERCOVER STOREFRONT SET UP TO TARGET THE DRUG SMUGGLING
COMMUNITY. YET, IRONICALLY, THE STOREFRONT CAUGHT THE INTEREST
OF VIOLATORS CONSPIRING TO ACQUIRE MILITARY HARDWARE FOR IRAN.
THIS INVESTIGATION ILLUSTRATES THE ABILITY OF THE CUSTOMS SERVICE
TO RESPOND TO THE FULL SCOPE OF ENFORCEMENT PROBLEMS AT OUR
BORDERS. ITEMS SEIZED BY CUSTOMS OFFICERS DURING OUTBOUND
ENFORCEMENT OPERATIONS ALSO INCLUDE GUNS AND CURRENCY INTENDED
FOR FOREIGN DRUG TRAFFICKERS, PRECURSOR CHEMICALS, AND STOLEN
VEHICLES.
IN RESPONSE TO THE IRAQI INVASION OF KUWAIT, THE CUSTOMS
SERVICE ACTIVATED A NATIONAL CRISIS CENTER AS A CLEARINGHOUSE
FOR LAW ENFORCEMENT AND INTELLIGENCE INFORMATION RELATING TO
IRAQ. THE NATIONAL CRISIS CENTER ACTED AS A LIAISON WITH OTHER
U.S. AGENCIES FOR CHANNELING AND SUBSTANTIATING INFORMATION AND
INTELLIGENCE RELATING TO THE CONFLICT IN THE PERSIAN GULF. THE
NATIONAL CRISIS CENTER WAS SUPPLEMENTED BY AN IRAQI TASK FORCE
WHICH TRACKED AND ANALYZED ALL U. S. CUSTOMS INVESTIGATIONS
RELATING TO IRAQ.
SINCE THE IMPOSITION OF THE IRAQI EMBARGO, THE CUSTOMS
SERVICE HAS MADE MORE THAN 70 SEIZURES OF GOODS DESTINED FOR IRAQ
OR KUWAIT.
y0
PAGENO="0432"
428
THESE SEIZURES ARE VALUED AT MORE THAN $10 MILLION. MANY OF
THESE SEIZURES WERE MADE IN THE EARLY STAGES OF THE EMBARGO, AND
WERE IN TRANSIT PRIOR TO THE IMPLEMENTATION OF THE EMBARGO - TEE
CUSTOMS SERVICE HAS ALSO PROVIDED CONTINUING COOPERATION TO THE
OFFICE OF FOREIGN ASSETS CONTROL IN THE EFFORT TO IDENTIFY
SPECIALLY DESIGNATED NATIONALS OF IRAQ AND BLOCK IRAQI ASSETS IN
THE U.S.
TO DATE, BOTH THE UN AND PRESIDENTIAL EMBARGOES REMAIN IN
EFFECT. ADDITIONAL EXPORT RESTRICTIONS RESULTING FROM THE
SECRETARY OF STATE' S DESIGNATION OF IRAQ AS A COUNTRY THAT HAS
REPEATEDLY PROVIDED SUPPORT FOR ACTS OF INTERNATIONAL TERRORISM
ALSO REMAIN IN PLACE. THE CUSTOMS SERVICE WILL CONTINUE TO
CLOSELY MONITOR EXPORTS TO IRAQ AS LONG AS THESE RESTRICTIONS
CONTINUE.
THE CUSTOMS SERVICE IS CONSTANTLY LOOKING FOR WAYS TO
IMPROVE ITS ABILITY TO ENFORCE U.S. EXPORT CONTROLS. ONE OF OUR
FORWARD-LOOKING INITIATIVES IS THE DEVELOPMENT OF THE AUTOMATED
CARGO EXPORT SYSTEMS (ACES). THIS SYSTEM WOULD ALLOW FOR THE
AUTOMATION OF THE CUSTOMS OUTBOUND MANIFEST, THE SHIPPERS EXPORT
DECLARATION AND OTHER RELATED EXPORT DOCUMENTATION. THIS
AUTOMATION WOULD PERMIT THE CUSTOMS SERVICE TO MORE EFFECTIVELY
AND EFFICIENTLY TARGET SUSPECT EXPORT SHIPMENTS FOR INTENSIVE
EXAMINATIONS.
THIS CONCLUDES MY COMMENTS I WOUI.D BE HAPPY TO ANSWER ANY
QUESTIONS AT THIS TIME.
PAGENO="0433"
429
Chairman PICKLE. Commissioner, I think all the members would
be interested in you pointing out and walking through some of
these instruments you have before us for display. Would you be
willing to do that?
Ms. HALLETT. I would be more than happy to, Mr. Chairman.
Would you like me to go up here and point them out?
Chairman PICKLE. Yes, if you would. Come around and take any
position you would like.
Ms. HALLETT. This happens to be a Venturi heater, and the Ven-
turi heater is part of a powerful assist system that is used in the
F-4 fighter aircraft. These are among the seizures that we made
throughout investigations that we have had ongoing over the last
several years.
In addition to that, this is a box of handgrenades that we also
seized in other cases.
I have here on my left a light tank weapon. It is an antitank
weapon that can be attached not only to a tank, but can be at-
tached to a jeep or another vehicle like that.
We have here a-
Chairman PICKLE. Let me interrupt you. Are these items manu-
factured now within our country and were being shipped across
and were interdicted by Customs?
Ms. HALLETT. That is correct. These are items that were manu-
factured in the United States along with this Stinger missile. This
is a case that was completed in February of last year in which
members of the PIRA were attempting to acquire Stinger missiles
to be used in Ireland. This was another very successful case that
we concluded last year.
Chairman PICKLE. Can you tell me, this Stinger missile, where
was it manufactured?
Ms. HALLETT. This also was manufactured here in the United
States. I am sorry I can't tell you-
Chairman PICKLE. The company?
Ms. HALLETT [continuing]. The company, but I may be able to
refer to that when I look at my notes.
Chairman PICKLE. Were any of the Stingers actually exported, or
did you catch the shipment?
Ms. HALLETT. We were, based on our undercover operation, able
to not only make a successful sale to the individuals who were
trying to acquire the Stingers, but we actually transmitted in
person the Stinger missiles to the individuals, and they paid us the
money. We seized everything at that time.
This is one of many gas masks that were being purchased for
Iraq and Iran during the investigations that we carried out with
those countries.
This is an example of a 30-gallon chemical container among sei-
zures that we also made, and that relates to the Alcolac case.
This vest, this was another very important item that was ordered
in significant quantities in a case in which we were able to seize all
of these bulletproof vests, and they too were manufactured in the
United States.
The weapon that I have here is an assault rifle. That is another
case in which this is merchandise that was made and manufac-
tured here in the United States. That is an AR-15 assault rifle.
PAGENO="0434"
430
Chairman PICKLE. Of what danger is the vest, and why was it
interdicted and stopped?
Ms. HALLETT. Because there was not a license that was acquired
for these goods to ship them to the countries that were trying to
acquire them. The licensing-as an example, these were all seized
prior to August 2, and these were not items that would have been
on the embargo list, but instead the individuals trying to acquire
them were trying to evade the licensing lists and/or were violating
the Export Administration or Arms Export Control Acts.
This is a TOW missile. This is a missile that was in an attempt
to acquire for Iran, Iraq, and Libya. This is a case in which this
last year, in March or April of this last year, we came close to the
conclusion of this case. The case was completed in early summer or
prior to early summer, in which we had individuals attempting to
not only acquire the TOW missiles, but also other goods as well.
And we did, in fact, at the time of the transmission of the money to
us and the TOW missile to the individuals who were agents, one
from Spain and one from Germany, we were able to make the sei-
zure that time as well as the arrest.
Chairman PICKLE. WhO manufactures this, do you know?
Ms. HALLETT. This again is a missile that is manufactured in the
United States, and I don't have the-this is a Hughes-manufac-
tured TOW missile.
Chairman PICKLE. Wasn't that missile confiscated?
Ms. HALLETT. That is correct. When we actually met with the
representatives who were trying to acquire these TOW missiles in
Florida, it was at that time that they handed us the money, and we
handed them the TOW missile, and immediately following we were
able to initiate the arrest and the seizure.
Chairman PICKLE. How was the package labeled?
Ms. HALLETT. Well, in this particular case, we were not worried
about labeling because we were making a transfer of the exact mis-
sile. So they were not in this case trying to camouflage it.
However, I might point out that during the ongoing case, the in-
dividuals did request that we refer to the missile as oil- or well-
drilling equipment. And that was the way in which to try to cam-
ouflage this particular item which would have been obviously
needed to have a license as a missile but not have a license if it
were drilling equipment.
Chairman PICKLE. Did most of these instances result from tips
you received from some source? Or did they come about by virtue
of your computer operations or your investigations at the docks or
in what way? Primarily tips?
Ms. HALLETT. Mr. Chairman, it was a number of different meth-
ods in all of these seizures. In fact, I might point out that close to
85 percent of all of our seizures-that is drugs, guns, and money-
have been based on tips. But I want to also emphasize that under
our Gemini program which we have developed, which I mentioned,
we have visited with over 5,000 companies telling them of not only
their responsibility but what the law is. Many of the cases have
been because companies have called us under their legal responsi-
bility and told us that they have been approached by agents of
other countries to acquire these goods illegally.
PAGENO="0435"
431
Chairman PICKLE. Now, your Gemini program was a matter of
both education and information, but it also resulted in your receiv-
ing additional tips from these different companies.
Ms. HALLETT. That is correct. We received information not only
from the intelligence community, from the licensing agencies, and
a host of other ways in which that information leads us to an in-
vestigation.~
If I may proceed to the microphone, this does, I think, cover the
various goods that we brought to display to you.
Chairman PICKLE. We thank you. That is very interesting. The
members may have some questions.
Ms. HALLETT. I am sorry. Might I just point out that it would be
difficult at that distance for you to see all of our charts, but I
would hope that following the hearing you and the members would
look at some of these because they show some of our cases from
beginning to end.
For instance, this is the Stinger missile case over here. It shows
the initiation of the case. In fact, this was an undercover store-
front. Maybe I could just go through this one quickly and hold it up
here. Maybe we should stand in front of the Stinger missile since
that is the item involved.
It started with a storefront operation that we had actually devel-
oped for other undercover purposes. And once we advertised our
storefront and that we were looking, we were able to sell weapons,
we were contacted by the individuals who were trying to acquire
Stinger missiles for the PIRA. That went forward and we actually
were contacted at our storefront from individuals who wanted to
acquire helicopters, helicopter parts, munitions and so forth. We, at
that time, when we were contacted-and this was by fax machine,
that we were contacted-we faxed prices back to the individuals.
And from our storefront account, we told them, in fact, we advised
them that we would need $25,000 credited to our account in order
to start the process of selling these goods.
That all started in June of 1987. By the time we got to November
of 1988, we were travelling to Canada and Texas to meet with these
individuals. They came to our storefront to meet with us to discuss
the potential acquisition of the Stinger missile and this went all
the way through a process that took all the way up until 1989, in
May of 1989, when we were actually able to arrest the individuals
at the time that they were presented with the Stinger missile.
So that shows that a case started in June of 1987 was not com-
pleted until May of 1989. I will be happy to respond to more ques-
tions. It is pretty lengthy to go through it all, but it gives you a
little something of an outline.
Mr. KELLEY. Mr. Chairman, if I may?
Chairman PICKLE. Mr. Kelley.
Mr. KELLEY. We have provided for you, also, on this chart to my
right, it is headed Means of Developing Investigations. The one box
that we didn't include there that we might make mention of is the
manner that the Commissioner just described on the Venturi case,
which is undercover approaches to gathering information and evi-
dence needed to prosecute these individuals.
But in addition to the undercover use, you can see those are the
types of sources of information which are quite varied.
PAGENO="0436"
432
Chairman PICKLE. Now, Commissioner, have you finished with
your statement?
Ms. HALLETT. I have, Mr. Chairman, thank you.
Chairman PICKLE. I am impressed with the shipments that you
have stopped and have actually prevented from export. It appears
to me that most of this was done by virtue of either undercover or
tip information you received, rather than the examination of our
export laws.
We must strengthen both aspects, but most of these things are
coming aI)out through tips and your Gemini program apparently
has been very effective. Now, I want to ask you some questions
about some of the four cases we looked at.
I am impressed with your testimony and thank you, very much,
for your statement.
Ms. HALLETT. Thank you.
Chairman PICKLE. Now, regarding the Helmy case, the Helmy
case where Dr. Helmy, who was a rocket scientist, participated in a
scheme to illegally ship ballistic technology to Egypt.
And it has been established that this technology was later used
to help modify Iraq's SCUD-B missiles. Now, Dr. Helmy, himself,
testified that he engaged in this underground procurement net-
work at the request of high-level Egyptian officials, including the
Defense Minister, and apparently President Mubarak, himself.
Were you, Customs, aware, prior to our hearing on April 18 that
the Egyptian Government had been consulting with Dr. Helmy on
this Condor II program, since its inception in 1984?
Ms. HALLETT. Yes, Mr. Chairman, we were aware that there were
ongoing discussions during the case between diplomats, here in
Washington, and other representatives of the Egyptian Govern-
ment, we were aware of that, right.
Chairman PICKLE. At that time, was there anything illegal about
Helmy offering technical advice to Egypt about their missile pro-
gram?
Ms. HALLETT. Well, Mr. Chairman, it's my understanding that
during that ongoing case, Mr. Helmy, of course, was working for
Aero Jet General and was releasing classified information to a for-
eign country which is illegal.
Chairman PICKLE. How did you know that?
Ms. HALLETT. That was part of our investigation. Of course, we
were made aware of that information with our discussions with the
Aero Jet General Corp.
Chairman PICKLE. Well, now, you are talking about 1988. I am
talking about when this thing started in 1984. Can you comment
about it from that timing standpoint?
Ms. HALLETT. Mr. Chairman, maybe I should refer you to Mr.
Kelley, but I am aware that as this case commenced and we
became involved in the undercover investigation, that, of course, it
was at that time-and we were advised, in fact, by some of our in-
spectors here, in the United States, that an individual who was
under surveillance was coming into the United States and was
going to go on board an aircraft going to California. We advised our
agents in California at that time that this was someone we were
looking for. It was because of our following that ii~thvidual that it
PAGENO="0437"
433
led us to Mr. Helmy. I am sorry that I can't tell you the exact year
that that occurred.
Chairman PICKLE. Mr. Kelley.
Mr. KELLEY. If I understand the question, in the 18th of this past
month there was testimony indicating that there was a 1984 in-
quiry, but I believe that dealt with the Alcolac case and it was a
suspicion, a tip that had been provided to the Customs Service. As
Mr. Bass indicated, during his testimony, that was investigated and
determined not to be a violation at that time. And the investiga-
tion in 1987 subsequently developed the information that there
was.
Ms. HALLETT. But I believe that all of the Helmy case, at least
our involvement, was initiated in March of 1988.
Chairman PICKLE. Can you think of any way then, from 1984 on,
other than by receiving a tip that Customs would have detected Dr.
Helmy's smuggling operations?
Ms. HALLETT. I would have to say, Mr. Chairman, based on the
facts and information available to me, that he was, indeed smug-
gling between 1984 and 1988, and particularly if the goods and
items, as well as, of course, the plans he may have smuggling were
being sent out of the country through diplomatic pouches and oth-
erwise, it would have been very difficult for us to be knowledgeable
about that, other than through licensing laws. But I believe every-
thing was listed in a way in which it would not have caused us to
question the licensing laws.
Chairman PICKLE. Well, why didn't Customs, at the time, that
some of these shipments were taking place, particularly the pack-
aging, why didn't Customs charge anyone at D&N Packaging with
conspiracy, or some other crime for their part in repackaging and
mislabeling the controlled commodities before they were shipped?
Ms. HALLETT. Mr. Chairman, that is not the Helmy case; that's
the Alcolac case.
Chairman PICKLE. All right.
Ms. HALLETT. Helmy had nothing to do with that case.
Chairman PICKLE. All right, let's jump `to the Alcolac case and
that again, I would like to get into a little detail there, because I
think it is a very important case. I am extremely proud of the work
our agents did, and particularly, the work that was pulled together
in this particular case, because it was in April of 1988 that our spe-
cial agent in Baltimore actually initiated this investigation into
this illegal export and diversion of the thiodiglycol. And as a result
of the investigation, which did center around Alcolac, we, of course,
did go forward and the investigation revealed that there were, in
fact, ongoing efforts later on which did result in our seizure, as
well as-
Mr. ANTHONY. Commissioner-
Mr. KELLEY. If I may correct-
Mr. ANTHONY. I think before your staff absolutely has a heart
attack, I think we would like to have you slow down and let them
have a chat with you.
Mr. KELLEY. If I may, I would appreciate that. Yes, I got the
Commissioner off on the wrong track on that. I thought you were
discussing the situation with Alcolac which had been reported in
1984, but what I see you referring to now, Mr. Chairman, is the
PAGENO="0438"
434
D&N packing that occurred for the packaging on the Relmy case. I
apologize, Mr. Chairman.
In that situation what you have is a company that was unwitting
and could be unwitting in those circumstances and would do this
process as part of their normal business and may not know what
the items are, and where they are going.
So unwittingly, in this particular case, they participated at the
direction of an individual who was causing this to occur.
Chairman PICKLE. Did the State Department or the Commerce
Department have any call on this situation as far as licenses are
concerned?
Ms. HALLETT. Mr. Chairman, I believe it would have been in that
particular case a licensing question for both the Department of
State and/or the Department of Commerce.
Chairman PICKLE. I am going to yield my time. I want to come
back to some additional questions, particularly about the Alcolac
case. But I am going to yield now to Mr. Anthony.
Mr. ANTHONY. Thank you, Mr. Chairman.
Welcome, Commissioner Hallett and Mr. Kelley. I am going to go
back and ask some questions about my favorite case, the Global
Helicopter case. Carlos Cardeon. Just to refresh everybody's
memory, this case involved the attempt by Carlos Cardeon to
obtain an FAA certification of a modified Bell Helicopter. It ap-
pears that he was developing a poor man's attack helicopter. He
calls it the Cardeonian 206-L-3, publicized back as far as 1988 in
publications.
Neither Commerce nor Customs was aware that Cardeon had
shipped his prototype helicopter to Dallas until the FAA wrote to
them. Initially Customs did not investigate, Commerce did. Later
Customs seized the helicopter for a technical import violation. That
is my first question right there. What was that technical import
violation and what was the authority that you specifically used to
seize the helicopter in March?
Ms. HALLETT. Mr. Anthony, the seizure was actually based on a
sealed affidavit that allowed us to seize the helicopter and because
this is an ongoing investigation I won't be able to comment further.
But it was, in fact, a sealed affidavit, sealed by the court which pro-
hibits us from disclosing any further information on that open
case, but that was the authority under which we actually seized
the helicopter.
Mr. ANTHONY. All right, and you are presently holding that prop-
erty under the authority of that sealed affidavit?
Ms. HALLETT. Under that court order, that is correct.
Mr. ANTHONY. Is that a civil or a criminal division?
Ms. HALLETT. Mr. Kelley, are you-
Mr. KELLEY. Criminal.
Ms. HALLETT. It is criminal.
Mr. ANTHONY. It is a criminal division and that is an ongoing
case. So when that investigation has been completed then you
would be able to be in a better position to more fully answer some
of our inquiries?
Ms. HALLETT. Certainly.
Mr~ ANTHONY. So you have got the same problem that Mr. New-
comb had prior?
PAGENO="0439"
435
Ms. HALLETT. Yes. I might just point out that this is a complicat-
ed and many faceted investigation and so it will be a case that we
will look forward to sharing with you once it has been concluded.
Mr. ANTHONY. Let me ask a more generic question that this case
brings to mind, though. I think you will be able to answer this par-
ticular inquiry. Let's set aside, for a moment, our embargo with
Iraq. Is it illegal for Cardeon or any other person to procure compo-
nents or know-how for any of his weapons systems from the United
States? Let's just take a hypothetical case of somebody out of the
country. Does that limit part of it, is there any legal activity that
just centers around that part of it?
Ms. HALLETT. Hypothetically, as long as-if goods are on the li-
censing list and they are acquired legally by applying for a license
and the license is, in fact, approved by the State Department or
Commerce, then there is obviously nothing illegal about that.
However, if the individual tries to acquire, as was the case with
this TOW missile, tries to acquire a TOW missile, but camouflages
the name or the, in fact, item, itself, by referring to it as well-drill-
ing equipment, and therefore, a license is not required, rather than
listing it as a TOW missile, which would require a license, that is
where you, obviously, run into the legal problems. And that is what
has been a favorite trick that many individuals have used.
Mr. ANTHONY. Mr. Chairman, and Commissioner, I have got just
some general questions I would like to ask in terms of how Cus-
toms, how you think Customs is presently operating, especially in
conjunction and cooperation with others.
It has been my impression that Customs has encountered grow-
ing problems with the Department of Commerce's Office of Export
Enforcement and you may even want to comment at that point as
to whether that is a correct impression.
Ms. HALLETT. May I hear the rest of the question?
Mr. ANTHONY. And for other agencies that have a role in either re-
stricting or expediting the exports of merchandise from the United
States, I have a two-part question. Can you tell us about the prob-
lems you have encountered and identify how you feel these prob-
lems can best be corrected? To what extent are these problems
jeopardizing our export control enforcement efforts?
Ms. HALLETT. Well, Mr. Chairman, we are working closely with
all of the licensing agencies along with the intelligence community,
which this list would include not only DOD, but it would include
State Department, it would include Commerce, of course, OFAC, all
of those agencies, in addition to the intelligence community, in an
effort to make sure that we do have access to all of their informa-
tion.
I would say, that just as an example, the intelligence community
tells us that they are sharing with us a full 90 percent of all of
their information and we feel that that is something that is work-
ing well. At the same time in working with the Commerce Depart-
ment, we have just, I have just had some very important meetings
with the Commerce Department-meeting with both the Secretary
and the new Deputy Secretary, Mr. Schnabel to work out ways in
which if we do have differences, we will hopefully be able to re-
solve them.
PAGENO="0440"
436
I have met, as recently as this week, with again, the licensing
people to discuss a new pilot that we will be able to carry out on
the licensing information being made available to us. I would like
to just point out that previously within the last two years we car-
ried out a pilot in the San Francisco Bay area, based on the use of
information from licensing. And while we have not firmed up the
actual way in which that pilot will be carried out, again this is an
attempt by our agency and by the Commerce Department to try
and resolve problems that have existed.
Mr. ANTHONY. Well, I like the way you phrased it. If we do have
problems, we are meeting and we are going to resolve them. I
accept that and I think that is a very delicate way to do it.
Ms. HALLETT. Thank you.
Mr. ANTHONY. I encourage you to keep talking and working with
them. Do your inspectors have access to Commerce and State De-
partment licensees at the port?
Ms. HALLETT. At some ports, but not all of the ports. However,
we do now have the licensing list from the Commerce Department.
We have ready access also to the license from the State Depart-
ment and that is based on during this Iraqi situation that resulted
aft~r August 2, we were given access to the State Department list.
All of that was at our command center which I referred to in my
opening statement. So that any time there was a questiOn or a
problem that any of our inspectors had they were able to immedi-
ately call the command center and get the information from us or
get direction from us, as well.
Mr. ANTHONY. Do you have link-up capabilities to Commerce li-
censing information?
Ms. HALLETT. In part we do, and that is one of the things that we
are discussing, not only with the pilot, but also, of course, what we
already have established with them, we are hoping to be able to
expand on.
Mr. ANTHONY. Mr. Chairman, I don't know where my time
stands, but I have several other questions that are basically aimed
in that same general direction, in terms of Customs and their co-
ordinated activities with the Department of Commerce. Maybe it
would be better if I submit some of those to the record.
Ms. HALLETT. We would be happy to do that.
Mr. ANTHONY. And then you could answer those and we could
discuss them later on. I would just like to close with this question.
Mr. Moody, in one of his seven points, indicated that he thought
there was a legitimate reason for separation of licensing and en-
forcement functions. I wondered what your view was on that par-
ticular item?
Ms. HALLETT. Well, Mr. Anthony, I guess that the best way to re-
spond to that would be to say that if this were a perfect world, and
the Congress were to decide that rather than having two licensing
agencies, or two agencies that carry out enforcement responsibility,
there was to be only one, naturally I think the Customs Service
does an outstanding job and should be the only one.
This is not necessarily a perfect world, but that is a decision that
the Congress will have to make and not ourselves. We are, of
course, oniy an enforcement agency and not a policymaking
agency.
PAGENO="0441"
437
Mr. ANTHONY. I think Commerce witnesses have made it pretty
clear that they think that it works better having both within their
agency and then cooperating with Customs. I don't know which is
best. I just asked the question. At least one member of the full
committee has indicated, in his own viewpoint, that he thinks
there may be an inherent conflict of interest. I personally don't
know and that is the reason I asked the question to kind of get a
feel from you.
Ms. HALLETT. Well, just as there are checks and balances be-
tween the administrative and the legislative branches, there are
checks and balances between agencies. Again, I would refer back to
the perfect world which we do not live in. I do believe that Customs
does an outstanding job and we are certainly capable of doing it all,
but on the other hand, we are not the ones that will make that de-
cision.
Mr. ANTHONY. Would it be fair for me to characterize the fact
that Commerce, Customs and State are in a battle with each other
for jurisdiction of export enforcement duties and investigations, or
is that too strong?
Ms. HALLETT. I think that's too strong, Mr. Anthony. I really feel
that not only have we had an excellent working relationship with
the State Department, but I want to really emphasize that with the
Commerce Department, we are working really hard to try and re-
solve differences that we have. I think the fact that we have agreed
that we are going to work out a way in which to carry out a test to
make sure that information is made available to us for cases.
Let me emphasize, also, that on all of our investigations we, on a
monthly basis, Mr. Kelley gives to the State Department, the De-
partment of Defense, as well as the Commerce Department an
update on every single investigation that we have ongoing. If there
are new names added, if there are changes in that case, that
update is given to those agencies, so that they, at all times, know
what cases we have ongoing. And when we have that kind of give
and take, I think it is very beneficial for everyone.
Mr. ANTHONY. All right, and again, I like the way you phrase it.
It's not a battle. That may be a little too strong a word, but you do
acknowledge that there is some dialog going on to try and work out
some internal differences in terms of policy and procedure.
In that regard, Mr. Chairman, if you would permit me one final
question?
Chairman PICKLE. All right, Mr. Anthony.
Mr. ANTHONY. It is my understanding that Customs is opposed to
the Department of Commerce investigators traveling overseas. I
have got a two-part question in that regard. Why does Customs
oppose the Department of Commerce investigators traveling over-
seas, if that is a correct statement?
And in the C-TEK computer case, Commerce Department special
agents traveled overseas at the direction of the Assistant U.S. At-
torney and their overseas investigation led to the arrest and con-
viction of the entire computer equipment smuggling ring. Accord-
ing to the assistant U.S. attorney, it was Customs' efforts to seize
the 8700 computer which almost jeopardized the investigation. How
would you characterize Commerce handling of the C-TEK investi-
gation?
PAGENO="0442"
438
Ms. HALLETT. Well, Mr. Chairman, on the C-TEK investigation,
or Mr. Anthony, I would like to refer that one to Mr. Kelley. I was
not involved and not with the Customs Service at that time, and it
was a case that he was well involved with, and I would like to refer
that to him.
Mr. ANTHONY. But first, was that a correct statement, that Cus-
toms was opposed to the Department of Commerce investigators
traveling overseas? Is that categorical statement true or false?
Ms. HALLETT. No, that is not a correct analysis of our position. I
would say, however, that-
Mr. ANTHONY. Then state it for me so I won't misstate it again.
Ms. HALLETT. I think this is really a coordination issue that
again, we are working on, and it does refer also to the legislation
that is currently in the House, where there has been reference to
investigations, particularly foreign investigations. But I would have
to say that the most important thing that we can work on together,
between our two agencies is coordination and we have made that
commitment on both sides to do that.
Mr. ANTHONY. I'm glad to hear that because there appears not to
have been much coordination in the C-TEK case, so if you could,
Mr. Kelley, just explain what happened.
Ms. HALLETT. Yes, I would like to have Mr. Kelley respond to
that.
Mr. KELLEY. There are three items. First, the items which you
describe and the alleged battles that take place, in all the contacts
that I have had with all the individuals in the export enforcement
field, I have never heard a comment from anybody, from any
agency that was attempting to do anything that would detract from
export enforcement. Their efforts would be to improve those ef-
forts, no matter what agency they came from.
Mr. ANTHONY. Well, I'm glad to hear that.
Mr. KELLEY. Second of all, in regard to our position for agents
from the Commerce Department traveling overseas, we do not
object. Our policy is not to take that position. However, we can
refer you to the law, as passed by the Congress, that indicated that
Commerce was a domestic investigative agency and the responsibil-
ity for the foreign investigation lies with the Customs Service. To
further that, we participate in investigations with the Commerce
Department when necessary and we have, on numerous occasions,
assisted them and their agents in investigations overseas.
With regard to the case in C-TEK, I would like to introduce, for
the record, if I may, in response to statements made by the former
U.S. attorney, Ms. Moore, a letter which we had received yesterday
from the U.S. Attorney's Office in Seattle, Wash. If I can quote just
one section of this letter, it states, that:
* * * nothing in our knowledge, however, indicates any serious lack of coopera-
tion or bad faith on the part of Customs, either here, in Seattle, or overseas. We
would disagree with any statements to the contrary or any interpretations of state-
ments which might lead to that contrary conclusion.
I would submit that that letter is from the U.S. Attorney's Office
in Seattle and I would be happy to provide that letter to the com-
mittee. It is signed-
Mr. ANTHONY. We would like to have a copy of it and you can
ask the chairman if he will make it a part of the record.
PAGENO="0443"
439
But let me say, her testimony did not go toward any bad faith.
Her testimony simply went toward the differences between the two
agencies and how best to fully conduct an investigation. I think the
evidence is very clear that Customs wanted to seize and take con-
trol of the computer and Commerce wanted the computer to contin-
ue along so that they could make a full and final criminal case.
In this case, Commerce's opinion won out. So the reason I
brought it up is to highlight the differences and the fact that you
do need some cooperation. Here was a case where, at least at the
outset, the lack of cooperation was about to blow a case that Com-
merce was working very hard on.
Again, Commissioner Hallett, we were shown a chart about how
this particular case, and how many countries were involved and
how difficult it was. I just bring that case up for illustrative pur-
poses in terms of trying to better define the scope of any problems
that exist.
Mr. KELLEY. Mr. Anthony, I think in this letter you will see that
the two U.S. attorneys, the assistant U.S. attorneys that took over
the case, subsequent to Ms. Moore's involvement, will indicate to
you the contrary that that information-that there was coopera-
tion and that the reason for-
Mr. ANTHONY. There was ultimate cooperation, I agree 100 per-
cent. And the case was eventually successfully concluded. Here was
a case, though, where that particular piece of equipment was down-
graded in terms of national security risk and it basically took away
the U.S. attorney's case. The courts ended up plea bargaining for a
much lesser offense, I think, than they would have if they had gone
to trial.
I agree and maybe I am nit-picking you a little bit here, but
there was a case where the initial impression was that Customs
wanted to rush in and grab it and Commerce had this other
scheme that they wanted to pursue. Eventually Commerce was
able to sit and talk with the agents and everybody worked it out. It
was just that that initial fear that the case was going to be dam-
aged.
Mr. KELLEY. Well, had the information been passed by Ms. Moore
to the Customs Service, we would have taken the appropriate
action and it was not in the early stages. This case, we could sit
here and dissect and-
Mr. ANTHONY. Yes, I don't want to do that.
Mr. KELLEY [continuing.] There were all kinds of accusations that
things were not properly coordinated. I mean it was a successful
investigation.
Mr. ANTHONY. She, by the way, for the record, was extremely
complimentary to the Customs personnel. So she was not derogato-
ry in any way to your personnel. We bring that case up more to try
to illustrate how much coordination is required when there is a
separation and when each has its own authority and has its own
ability to investigate. I guess what I will do, Mr. Chairman, is close
by just repeating what Commissioner Hallett said: "If we do have
problems, we are in a dialog and we are attempting to resolve
them."
PAGENO="0444"
440
I would just say, Mr. Kelley, that if anything can be learned
from that case, then I assume you all will be discussing it and im-
proving it. That's the bottom point I was trying to make.
Ms. HALLETT. Thank you, Mr. Anthony.
Mr. ANTHONY. Thank you.
Chairman PICKLE. The Chair recognizes Mr. Sundquist.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
Commissioner, and Mr. Kelley, thank you, very much. I notice
that there has been a change in the referring of civil cases from
Commerce to Customs. And see if these figures are right. How
many were referred to Commerce for civil sanctions in 1989, do you
know, offhand?
Ms. HALLETT. Mr. Sundquist, I would like to submit that for the
record. I can't tell you the exact amount for 1989 but I would be
happy to submit those figures for the record.
Mr. SUNDQUIST. Thank you, Commissioner. My numbers indicate
that there were none in 1989 and in 1990 there were 12 and in 1991
there is 89 or 90, according to Customs. It just seems to me that
that is moving in the right direction. Would you like to comment
on that?
Ms. HALLETT. There's no question about it. That is exactly the
way we think it should be going and we are definitely moving in
the right direction.
Mr. SUNDQUIST. In the Alcolac case there were unusually large
shipments of controlled chemicals that went undetected for a long
period of time, and does that indicate that we need a better way of
tracking these outbound shipments?
Ms. HALLETT. Well, I would like to just answer that in a couple of
different ways, at this point, Mr. Sundquist, because I think this is
a very key case, particularly in this investigation. We did come
into this case, which I started to tell you about previously, Mr.
Chairman, we initially were unable to identify that there were any
violations. So that also was a case that commenced, I believe, in
1984, and it was not until about 3 years later that we were actually
able to identify that, in fact, there were some specific and clear vio-
lations occurring.
Again, it is, I think, a good example of how working not only
with the officials of the company but also being able to identify
ways in which information was changed, that we did have to inves-
tigate that there are many ways that people can camouflage what
they are doing. This is a case, however, in which a. lot of informa-
tion has come out and there is, in particular-while this doesn't re-
spond exactly to your question-
Mr. SUNDQUIST. Yes, I have a reason to ask the question and
there is a followup question. If you want to say something else, go
ahead, bUt-
Ms. HALLETT. No, I will go ahead.
Mr. SUNDQUIST. Because Agent Burns, when former Customs
Agent Burns was here he suggested that we establish a watch list
much like what is required for drug precursors, or companies that
purchase sensitive dual-use commodities, like rocket fuel would
have to be listed by the manufacturer. I don't want to give manu-
facturers a lot more paperwork. But it seemed to have worked, the
watch list, in keeping relative to the antidrug program it seems to
PAGENO="0445"
441
have worked there. And maybe you have some evidence with how
it is working with the drug chemicals and then I have got a couple
of other questions along those lines.
Ms. HALLETT. Good. Well, first of all, I think that it does indicate
that there is much that we need to be doing, particularly in not
only identifying and targeting suspect sales of chemicals but we
work very closely with DEA in following not only those precursor
chemicals but other chemicals that are leaving this country and
that, of course, is something that is a licensing question, as well as
a question with respect to how we go about seizing and working
with DEA to seize precursor chemicals.
One of the things that we have also found is that working with
the Office of Defense Trade Controls that with the U.S. munitions
list there are items that are registered and we believe that prob-
ably one of the things that would help is to find a way in which
more of our domestic companies would have to register the sales of
those items that they are selling to other countries. I think there is
an opportunity here for possibly a strengthening of the law. It is
important for manufacturers to keep records of all domestic sales
and to have those available so that on demand we would be able to
inspect those particular records that were being kept so that we
could identify companies that are illegally dealing in precursor
chemicals.
Mr. SUNDQUIST. So you think it would be a good idea for us, legis-
latively, to consider extending that program into controlled com-
modities domestically?
Ms. HALLETT. Certainly if it relates to chemicals, specifically pre-
cursor chemicals.
Mr. SUNDQUIST. That's what I'm referring to, precursor chemi-
cals.
When we had those cases here a couple of weeks ago, in the Alco-
lac case, the product description, end-country clause, and the trans-
shipping clause were all altered or falsified and it seemed like it
was very easy to do. How can we prevent that from happening-
the ease of diverting controlled goods by altering shipping docu-
ments and product marking?
Ms. HALLETT. Well, really, Mr. Sundquist, I think that more than
anything else depends on the integrity or an individual. It is a very
difficult thing for us to legislate. It is, however, something that we
have pushed very hard, through our Gemini program and that is
educating companies what to look for. If you find an individual,
such as was the case here, who was working with others to change
figures or change information as to a diversion, it is very difficult
to do anything about that unless you have a company that is com-
mitted to stop it from happening.
Mr. SUNDQUIST. I think in one of the testimonies that I recall the
person said, if I had known how serious it was, I would not have
done it. So my next question is, wouldn't it help if we had a warn-
ing statement, like falsifying this document carries a penalty of
$50,000 fine or 5 years imprisonment? Because it is impossible to
educate clerks and people who are not at the top, who are not fa-
miliar with these kinds of things. Should we have that kind of
warning statement, wouldn't that help? Also should exporters and
PAGENO="0446"
442
freight forwarders be required to sign an end-use statement on all
shipper's export declarations?
Ms. HALLETT. Well, first of all, Mr. Sundquist, I believe that the
information is already there that requires, in fact, that that infor-
mation be disclosed, and that, in fact, penalties significant penal-
ties-
Mr. SUNDQUIST. It's on the document?
Ms. HALLETT [continuing]. Go with that, on the document.
Mr. SUNDQUIST. Could you furnish the committee with a copy of
that document?
Ms. HALLETT. I think it is $1,000.
Mr. SUNDQUIST. How much? That's going to scare them?
Mr. KELLEY. No, making. false statements.
Ms. HALLETT. It is a penalty.
Mr. SUNDQUIST. I don't imagine that anybody who sees $1,000 on
there that is $1,000 is going to be scared. But isn't it a fact that-.-
Ms. HALLETT. It is a criminal conviction, Mr. Sundquist, so that
should scare someone. It is a felony.
Mr. SUNDQUIST. Well, I would like to see a copy of the documents
to see if it is sufficient, because I don't think it is based on the tes-
timony we received here earlier.
Ms. HALLETT. We would be happy to submit that for the record.
And I would also-
Mr. SUNDQUIST. Submit it for the record, and send a copy to my
office, also, please?
Ms. HALLETT. We would be very happy to. Mr. Sundquist I might
just also offer to the committee, because I think it is very impor-
tant, a letter that has come to our attention from the two assistant
U.S. attorneys who, in fact, were responsible for the prosecution of
the Alcolac case. It is a very important letter from those two
AUSAs in which they are concerned about some of the questions,
and particularly, some of the suggestions that our Customs agents
did not carry this case forward far enough to be able to bring con-
victions of the upper level management of that Alcolac company.
I am very proud of the work that our individuals have done in
this case, our individual agents, and I think that that is certainly
supported by the AUSAs who did, in fact, prosecute the case. So I
would like to submit that for the record, as well.
Mr. SUNDQUIST. That's up to the Chairman, and I assume that is
OK.
I would like to ask some questions, because I had the feeling
when they testified that you caught one person but the higher-ups
got off virtually unscathed and they are still out there in business.
Let me ask you to clarify one question that I don't think you an-
swered and that is, should exporters and freight forwarders be re-
quired to sign an end-use statement on all shipment export declara-
tion, the SEDs?
Mr. KELLEY. That is certainly something that can be considered.
Mr. SUNDQUIST. Would you give us an answer for the record to
the committee on that question?
Ms. HALLETT. We will.
Mr. SUNDQUIST. Mr. Chairman, I have some other questions re-
garding the Alcolaë ê~&~UtIV~ and ~l~o ~omc of ~ that
PAGENO="0447"
443
former Assistant U.S. Attorney Moore made. I would be glad to ask
those questions on a second round if my time has expired.
Ms. HALLETT. And Mr. Sundquist, I would like to be able to re-
spond to one of the comments that you just made at that time, as
well.
Mr. SUNDQUIST. Thank you, very much, I will give you that op-
portunity.
Chairman PICKLE. The chair will recognize you again, Mr. Sund-
quist.
Meantime, Mr. Moody, we are glad you are with us today, and
would you care to ask any further questions?
Mr. MOODY. Thank you, Mr. Chairman, yes.
Ms. Hallett, I entered some testimony earlier, I don't know if you
were present or not.
Ms. HALLETT. Yes.
Mr. MOODY. I would very much appreciate any written response
or commentary you might provide to the points I made. I had seven
points, about three of which refer directly to giving Customs more
tools. I don't think anything I said was critical of Customs. In fact,
the thrust of my comments was that you may need more help in
some areas. So maybe I overstated it or maybe I understated it, but
I would appreciate your thoughtful commentary about my points,
and that would be most helpful.
Ms. HALLETT. We would be happy to, Mr. Moody. And would you
like me to just identify a few of the things that we think would be
beneficial?
Mr. MOODY. Sure, go ahead.
Ms. HALLETT. Because I mentioned in my opening comments,
that our automated outbound export manifest system, that is some-
thing that I think is absolutely critical for us to really get the job
done. It would give us information not only on chemicals that are
outbound, currency that is outbound, and a number of different
items that are outbound.
This is something that over a 5-year period, we estimate will be
expensive, but we are going to find the money for that one way or
the other, even if we have to move it from other programs, because
we think it will have such a beneficial impact on the future and
our ability to get the job done.
Mr. MOODY. And just the knowledge that you will have will in-
hibit a lot of illegal activity.
Ms. HALLETT. Yes, absolutely. Something else-
Mr. MOODY. So that's something that you do need to bring on-
line, that would be a universal information system?
Ms. HALLETT. That is right, and that would, also I think, enable
us to really become even more successful in all of our investigative
techniques. I might also say that certainly we want to be able to
share as much information with the committee on things like this
as we can. I think with this automated program, the manifest
system, that it will really be very helpful in the future.
I also want to point out that we are doing some extensive train-
ing. We are training not only in the area of chemicals and chemi-
cal use, we are also training our export people, we are working
with our foreign counterparts because we think this is critical to
have our foreign counterparts aware of our problems and ways in
PAGENO="0448"
444
which to help us. I might emphasize that we are working very
closely with not only customs services around the world, but other
law enforcement agencies as well.
Mr. MOODY. Ms. Rallett, I have only got a minute of time. Let
me ask you to put those things in writing that you are doing and I
know you are doing a lot.
Ms. HALLETT. We would be happy to.
Mr. MOODY. I just wanted to get some reaction. We asked you in
our letter, the chairman did in our letter of March 28, to bring out
the administrative, legal, and practical obstacles that you face in
some illustrative cases. So I just wanted to focus not on what you
are doing, we know you are doing a lot and we commend you, but
on some of the things that you might, some of the obstacles you
might still face. I mentioned several, as you know, in my state-
ment.
The general destination loophole-where Customs fortunately
saw the word, chemical, on the labeling and it was able to see
something that was headed for the Defense Ministry of Iran? We
had that brought up last time. That loophole and the Canadian
loophole, is that a problem for you?
Ms. HALLETT. Well, Mr. Moody, I would say that in terms of that
having been a problem, again we are working closely with Canada
to try and eliminate any problems like that. We have an excellent
working relationship with Canadian customs and the RCMP and I
am most hopeful that we will be able to deal with that issue. But I
would ce:rtainly emphasize that our working relationship, particu-
larly under the Canadian free trade agreement, has been excep-
tionally good.
Mr. MOODY. But it's true that something could be sent to Canada
and reexported and you would never be informed?
Ms. HALLETT. That is true, that could happen and that is what
we are working with the Canadians on at this time through bilater-
als.
Mr. MOODY. Do we need a legal change, or can you think that is
something that can be totally handled administratively?
Ms. HALLETT. Well, it is something that certainly can be handled
through COCOM negotiations, and, of course, both Canada and the
United States are COCOM members.
Mr. MOODY. But does COCOM apply to the Middle East?
Ms. HALLETT. Well, it certainly applies to this particular issue of
the resale of an item that is built in the United States, sold in
Canada and sold to a third party. That is where COCOM has direct
impact on that.
Mr. MOODY. OK, because my understanding that that avenue has
been extensively used in the past with or without COCOM.
Ms. HALLETT. That is true.
Mr. MOODY. COCOM has been around a long time.
We also were told that CIA, of course, in its tracking the develop-
ment of nuclear and other mass instruments of death does pass
this information up the chain of command in the CIA, but they are
not required to inform you as to what is going on in country X in
terms of a nuclear program. Is that not right? That is my under-
standing from talking to working-level people in these agencies.
PAGENO="0449"
445
Ms. HALLETT. I think that maybe-and I would like to be able to
submit something in writing, as well-
Mr. MOODY. Sure.
Ms. HALLETT [continuing]. On that, but certainly since the initial
onset of our Operation Exodus the intelligence community has par-
ticipated with Customs directly as well as indirectly. I think we are
both taking a more active role in this area. Part of it, I think, is
based on the evolution of the program and the way that we are
able to share information. I am certainly hopeful that that will
continue.
Mr. MOODY. Let me know your formal response later, and let me
ask you briefly my information led me to say in my statement that
it would be helpful for Customs if all licenses that had been ap-
proved by Commerce having any military potential at all, you were
told of, particularly those going to countries that were previously
on a terrorist list. Would that be helpful?
Ms. HALLETT. Oh, absolutely, that is essential information for us
to carry out investigations.
Mr. MOODY. Now, finally and my time is up, accepting the word
of the seller or the purchaser, as we have seen cases where in Eng-
land in a case I am following, that is now in trial in England where
one of your agents participated in a sting operation and they
caught people trying to sell nuclear triggers. They were called elec-
tric switching devices.
Ms. HALLETT. Correct.
Mr. MOODY. And just because we had a patriotic citizen in the
company, running the company in question that we were able to
set up the sting. And I commend you for all of that, but I am just
saying the generic issue is how do we get around this problem of
accepting the word of the purchaser?
And let me couple that with a question, also implicit in my testi-
mony, about the fact that the State Department has "kaboshed"
several attempts, I understand, by your people to followup on site,
in a country by not wanting to issue them passports under as-
sumed names which would be required for them to be successful in
that sting.
Ms. HALLETT. Let me answer the last part of that question first,
because that really was not an accurate assessment of what hap-
pened with that passport question. That was done by the individual
agent, without going through the Customs Service, and he was un-
aware of what was required. I don't believe there would have been
any problem had we gone through normal channels.
Mr. MOODY. So you are able to send, followup, in country, over-
seas when you think it is necessary?
Ms. HALLETT. Yes, we are.
Mr. MOODY. With the cooperation of the State Department.
Mr. KELLEY. Mr. Moody, if I could point out the fact that the
case that you are indicating, in fact, with the United Kingdom au-
thorities there was an undercover meet with that particular agent,
demonstrates that we can and do have that process.
Mr. MOODY. Right, and I commend you, as I say. I am talking
about sending people into a country like Iraq or Iran to make sure
the end-use is as they stated, and it is coupled with the generic
51-840 0 - 92 - 15
PAGENO="0450"
446
problem of accepting the word of the purchaser that they are going
to be used for the purpose so stated.
How do we get to the bottom of this problem of people saying
these are electrical switches and we find out later that they can be
used for nuclear triggering devices?
Ms. HALLETT. Well, let me go back to that, because that was the
first part of your question and part of it is simply a matter of in-
tegrity and I know that is a very difficult issue to deal with when
we have people out there who are more determined to make money
than to do things legally. So we must work with that. We believe
our Project Gemini has had a very big impact and, in fact, in that
nuclear trigger device case that was because of Project Gemini and
the way that we had been able to educate that company.
But we, I think, have to look at our laws to see if we are actually
being strict enough with individuals who do violate. If they throw
integrity away and they are dishonest, how are we going to deal
with them?
Mr. MOODY~ That's why I suggest that possibly moving the civil
penalties, rather than criminal because there is a much higher.
threshold of proof for criminal, obviously, and civil penalties would
be possible. I suggested, if it is, in fact, the end-use turned out to be
military that would put the burden on the selling U.S. company to
make sure that they were really getting straight answers, and if
necessary, send their agents over there to followup.
Any reaction?
Ms. RALLETT. That's a good point. I think it is certainly some-
thing that we would not disagree with. I think it is important,
many times, to have both the investigation ongoing where you will
be able to end up with both a civil and a criminal conviction at the
end of the case.
Mr. MOODY. All right, thank you, very much.
Chairman PICKLE. Mr. Kelley, before we go on to other questions,
I want to back up a little bit on a question I had asked you earlier.
I had posed the question to you of why didn't Customs charge
anyone at D&N Packing-I am talking about now the Helmy
case-with conspiracy or some other crime for their part in repack-
aging and mislabeling the controlled commodity. And as I under-
stood your response to me, it was that you had said that D&N was
unwitting and did not know what was in the contents.
Now, I am advised that D&N did know what was in the crates.
They had shipping documents, and that was clearly understood by
D&N. Is that correct?
Ms. HALLETT. Mr. Chairman, since I already led you astray once
before on the Helmy case, may I refer this one back to Mr. Kelley
since he is more familiar with it.
Chairman PIcKLE. I am asking Mr. Kelley.
Mr. KELLEY. The U.S. attorney's office did not feel there was suf-
ficient evidence to pursue them for a violation. That is something
we are required to do.
Chairman PICKLE. I don't know that that should be any question
or misunderstanding, and I don't know whether you are in a posi-
tion to know. But we know from documents that have been re-
leased that D&N did know what was in those crates, and the Jus-
tice Department knew that.
PAGENO="0451"
447
Now, they might have not known where the shipments were
going to go, but they actually participated in misguiding the con-
tents.
Mr. KELLEY. Mr. Chairman, if I may, when they were repacking
these items, they may not have known, as you stated, where the
destination was. And that is part of the law. It is a requirement of
the law. They must have specific knowledge that it is going to be
exported. As you have just described, they didn't have that knowl-
edge.
Chairman PICKLE. That is a technicality. They did know what
was in those crates. They did know for a fact. Just because they
didn't know where it was going wouldn't say that you would let the
shipment go.
Mr. KELLEY. There has to be a violation there. If they didn't
know it was going to be exported, you can't charge them with an
export violation.
Chairman PICKLE. Well, I would just say to you that the record
ought to show that if they didn't know, they should have known.
And I think they did know and they didn't do anything about it.
The record ought to show that. To indicate a technicality here and
just let people get loose and not be prosecuted for it, I personally
want the record to show that there is sharp disagreement on our
part of it.
Now, in the case of Alcolac situation, I don't understand why
Customs didn't catch Alcolac until it was 1988 when they had been
tipped off earlier about these illegal shipments. Why wasn't Alco-
lac monitored more closely after Customs received a tip from the
Dutch embassy in 1985?
Ms. HALLETT. Mr. Chairman, maybe I could refer at this point
again to the letter from the assistant U.S. attorneys, because they
have addressed that issue; not that we need to have someone else
respond for us, but I-
Chairman PICKLE. Well, we will ask that department when we
come to them this afternoon.
Ms. HALLETT. I will say just very quickly that the investigation
simply failed in those early years to provide sufficient evidence
that would actually show that there was corporate knowledge of
anything being done that was illegal or that these goods were being
shipped out of the country illegally.
Chairman PICKLE. I can't understand why-
Ms. HALLETT. Well, Mr. Chairman, from the investigation, it is
very clear to us as well as the U.S. attorneys that until 1987, there
were not illegal shipments going out of the country.
Chairman PICKLE. Well, I guess the facts will have to show. But
if you knew it from 1984 and 1985 on, why wasn't it stopped then?
Ms. HALLETT. Because we did not know and we do not believe,
based on all of the evidence available that there were illegal ship-
ments until 1987. Prior to that, the shipments were legal, and
there was nothing that we could have done even through an inves-
tigation.
Chairman PICKLE. Now, we are talking about the same case. Are
we talking about the Alcolac case?
Ms. HALLETT. We are talking about Alcolac.
PAGENO="0452"
448
Chairman PICKLE. All right. Now, they were shipping tons and
tons, hundreds of tons, in the early years of this commodity. It
can't be used but for one or two things. Any scientist and anybody
in your agency ought to have known there would be serious ques-
tions raised about that. They didn't have to be run over by a truck
to know that this was mustard gas that was going to be produced.
Now, why wouldn't that be exported illegally, and why wouldn't
you stop something that almost exclusively is going to be used, say,
for mustard gas? And you know it, and I know it, and anybody in
the scientific world would know it.
Ms. HALLETT. But, in fact, the investigation that was carried out
by our agents-and, of course, this was based on a tip-it deter-
mined that the shipping of thiodiglycol to any country that was not
a destination that was authorized was not occurring then. That did
not occur until 1987.
Chairman PICKLE. Well, I would say to you that it seems to me
that we openly allowed shipments of a commodity, the ingredient
of which we knew was going to be used for mustard gas. And
thought there might not have been a law against it, it was morally
wrong and we should have known.
When did they actually catch the shipment?
Ms. HALLETT. Well, in 1987 is the first time that it actually
became known to us that there were ifiegal shipments that were
taking place. And, in fact, I think it is very important to point out
that once we did discover that, in fact, illegal shipments were
taking place, we did something about it. And I think that again
shows the success of our agents, and they should be congratulated
for that.
Chairman PICKLE. Yes. Once you knew or at least from that date
on, you did take action and it has led to these shipments. But in
the meantime, with all this caution that was exercised, we know
that over 630 tons of this thiodiglycol was actually shipped across
the seas, and it was ready to and still may be used. Do you know
for a* fact, Commissioner, whether the chemicals in the stockpile of
Iraq has been destroyed?
Ms. HALLETT. No, I do not know that, Mr. Chairman.
Chairman PICKLE. I asked that question two weeks ago, and
nobody seemed to know. They are supposed to have been destroyed,
I think, by the first. We don't know whether that has actually been
done or not. Do you know whether our State Department is satis-
fied that it has been destroyed?
Ms. HALLETT. I could not respond for the State Department, Mr.
Chairman.
Chairman PICKLE. Well, we will ask the State Department. Be-
cause we are bothered that they would not have acted on this or
that we don't know that information, because if we don't know it,
for a fact, then we have actually shipped mustard gas, we have ac-
tually been a party in shipping mustard gas to Iraq to be used
against us and still could be used against us or the Middle East.
Ms. HALLETT. Well, we are making every effort to make sure that
that does not happen. And that is one of the reasons why we be-
lieve that our investigations are so important.
Chairman PICKLE. Well, Mr. Sundquist.
Mr. SUNDQUIST. Thank you, Mr. Chairman,
PAGENO="0453"
449
I would like to follow up on what the Chairman said in terms of
large shipments of controlled chemicals and in this case they went
undetected for a long period of time. Doesn't that show that we
need a better way of tracking outbound shipments?
Ms. HALLETT. No question about it, Mr. Sundquist and that is one
of the reasons why we feel that one of the things that we have pro-
duced this past year is the biological/chemical book. It is some-
thing that I would like to make not only a part of the record, but I
would like ~to just mention that this is something that we have pro-
duced because in terms of chemical and biological warfare that it is
an investigative guide. It tells people what to look for, how they
can make a difference and I think we are on the right track on this
and I would appreciate being able to share that with the commit-
tee.
Mr. SUNDQUIST. I so move that it be included as a part of the
record, Mr. Chairman.
[The publication, "Chemical and Biological Warfare" was re-
ceived and has been retained in the committee files.]
Mr. SUNDQUIST. Agent Bass said that an automated export
system would be helpful to track suspicious shipping patterns. You
also said that in your statement. That would allow Customs to flag
suspicious export shipments, would it not?
Ms. HALLETT. Yes, and it would help industry, as well, because
they, too, would be able to flag that information for us, so that this
is a really critical tool that we need to move forward with.
Mr. SUNDQUIST. Now, getting back to the Alcolac executives, and
the failure to prosecute them, why were they not prosecuted, in
just a short answer?
Ms. HALLETT. Well, Mr. Sundquist, it is hard to be quick on this,
but I would like to read to you from the letter from the assistant
U.S. attorney-
Mr. SUNDQUIST. I would rather not have that, I would rather
have an answer and you can include that for the record, if you
would, Commissioner, because I would like to have your opinion.
Ms. HALLETT. OK, well, the investigation simply failed to provide
sufficient evidence that would show that those corporate officials
had the knowledge that the final destination was Iran or Iraq
and-
Mr. SUNDQUIST. Well, who was specifically responsible for decid-
ing not to prosecute the Alcolac executives?
Ms. HALLETT. That was the assistant U.S. attorneys. We did not
have that responsibility.
Mr. SUNDQUIST. That was U.S. Attorney Wilcox?
Ms. HALLETT. No, in fact, it was two assistant U.S. attorneys, and
that would have been Assistant U.S. Attorneys Bernstein and Hi-
meles.
Chairman PICKLE. Mr. Sundquist, the Justice Department had
been asked to testify here today and they could not. They are in a
process of gaining information and answers to the questions that
we had submitted to them. They will be available for questions of
the subcommittee at a later date.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
It seemed to me that Ms. Hinkleman testified that her bosses
knew the activities, and even approved of them, so that I look for-
PAGENO="0454"
450
ward to getting that information from the Justice Department.
Now, former U.S. Assistant Attorney Moore testified that sentences
under the EAA are woefully inadequate. Is the maximum 10-year
sentence an adequate deterrent or punishment?
Ms. HALLETT. In my personal opinion, it is not. And I think the
tougher we make the laws, sentencing and otherwise the more suc-
cess we will have not only as a deterrent but making sure that
these individuals are not back out on the street 1 or 2 years after
they have been sentenced.
Mr. SUNDQUIST. What should the sentence be, do you think?
Ms. HALLETT. I think this is something that we need to work on
and we would be happy to work with you. Of course that would be
a Justice Department recommendation as the enforcing agency,
however, we certainly would be pleased to be involved and asked
for our opinion on this, and it is something that I would want to
work with our enforcement people in the Customs Service to get
their opinions on.
Mr. SUNDQUIST. We found that many export cases use the money
laundering statutes to obtain criminal forfeiture of illegal export
proceeds, does EAA provide sufficient forfeiture authority?
Ms. HALLETT. Well, I think there is always need for having more
authority, particularly with respect to forfeiture and that is some-
thing that we are working on separately. We would like to have
more authority, let me put it that way.
Mr. SUNDQUJST. Do either EAA or money laundering statutes
cover money transferred within the USA?
Ms. HALLETT. I think they do, yes.
Mr. SUNDQUIST. Are you certain?
Ms. HALLETT. I have an emphatic yes, Mr. Sundquist.
Mr. SUNDQUIST. EAA or money laundering statutes do cover
money transferred within the United States?
Ms. HALLETT. Yes, and in fact, it is because of that that we have
been able to seize a significant amount of money under the Export
Administration Act. Let me just give you an example. Last year,
under our Operation Out-Bound at the Customs Service, we seized
$52 million from passengers who were departing airports in the
United States for foreign countries without reporting that they
were carrying $10,000 or more and that was seized under the EAA.
Mr. SUNDQUIST. Ms. Moore said it does not cover domestic trans-
actions. You are talking about money that crosses the border. And
we are talking about domestic money that is moved around inside
the country.
Ms. HALLETT. Moved within the United States, I am sorry.
Mr. SUNDQUIST. Let me repeat my question. Do either the EAA
or money laundering statutes cover money that is transferred
within the United States?
Ms. HALLETT. I believe that we have full authority within the
United States, as well as outside the United States for those sei-
zures as long as it can be directly pointed to being drug proceeds or
illegal proceeds. I think that is absolutely the case.
Mr. SUNDQUIST. Would you respond for the record on that, be-
cause it is in conflict with Ms. Moore's testimony?
Ms. HALLETT. And in fact7 it is section 981 of title 18.
PAGENO="0455"
451
Mr. SUNDQUIST. Would you favor the creation of a Justice De-
partment task force specializing in export crimes as described by
Ms. Moore in her testimony?
Ms. HALLETT. May I submit that to you in writing because I don't
recall her exact statement.
Mr. SUNDQUIST. And would you also answer in that same letter,
would it enhance the chances of your cases going to trial?
Ms. HALLETT. I would be happy to discuss that in writing.
Mr. SUNDQUIST. Thank you. Thank you, Mr. Chairman.
Ms. HALLETT. Thank you, Mr. Sundquist.
Chairman PICKLE. Commissioner, I appreciate very much your
testimony and I appreciate very much the job that Customs is
doing in this area. In my letter to you originally and again last
week, I asked you to come and testify and I asked you at the time
to be specific and identify any of the problems that we have in this
area, in the export control laws and any loopholes that exist that
we need to close and to improve. I asked you to specifically list
those so that we would know what, in your views, were the prob-
lems and how we attack them.
Now, I must say to you that you have not identified any of the
problems and you have not been very specific at all about what you
request. You just said a minute ago that you do need and you
would like to have more authority. That is as near as I have heard
you say that we ought to make some changes. Now, I think that all
of the agencies, whether it is State, or Justice, or Commerce, or
Treasury, all would say that we have problems and we all know
that our export laws are almost in disarray. I have asked you spe-
cifically to list to me one, two, three, four, five, and you have not
listed to me those answers. I need to know specifically what are
those solutions to those questions.
I would want you to be specific about it, if you think that you
ought to have more authority and what ways are the problems. So
I would like for you to respond.
Ms. HALLETT. I would be happy to, Mr. Chairman, and I think
that if this were a perfect world and if Congress were to decide
that rather than having two agencies that were authorized to carry
out enforcement investigations that there would only be one, then
of course, we would hope that it would be the Customs Service.
Chairman PICKLE. Commissioner, you, two or three times earlier
said, if in the wisdom of Congress you think in this perfect world-
I want to know specifically you are in the field, what do you recom-
mend or what can you say are the problems and what are the solu-
tions? Not about this perfect world, tell us now publicly, what
should be done about it?
Ms. HALLETT. All right, well that is one of the reasons that I
have had ongoing meetings with the Commerce Department, so
where we do have differences or where we have been unable to
work out some of our problems, we are making a commitment to
do that. I think because of that we now have their license informa-
tion and I would agree while that did not happen initially when we
wanted it, the reason it did was because we sat down and talked
with one another about it. I think that is our responsibility be-
tween agencies and we are making a commitment to make that
work.
PAGENO="0456"
452
Chairman PICKLE. Well you observed in the wisdom of Congress
if we would order these procedures to be changed, you would accept
them and do it. Obviously you would if that is the law, if that is
what we said.
Ms. HALLETT. Of course.
Chairman PICKLE. But in order for us to make any changes we
need to have the recommendations and suggestions from the De-
partment. You are the heart of this. You may even be the one
agency, the customs, that can do something about it,. but as long as
you just scuttle along here, we are not getting anything specific.
Now, if you want authority you had better tell us what is the prob-
lem and what you think is the solution. If you want to talk with
the agencies, I can understand that you have to do that, and that
you are not in a position to tell them exactly what we ought to do.
But somewhere in order for the Congress to have the facts to make
these decisions, we need to get information and recommendations
from the agencies involved, and that includes Customs.
Ms. HALLErr. Well, Mr. Chairman, I think I have mentioned
some of the things we do believe should be done. I have mentioned
that the automated export manifest system that we should have. I
would also point out that we think that we should be able to
expand the missile technology control regime and the Australia
group. That would give the U.S. Government much more positive
steps in which we could increase, particularly, the degree of inter-
national cooperation that is so important to all of us. That's some-
thing, again, if we had that legislative authority that would make
it much more successful for us.
Chairman PICKLE. Have you made those recommendations to
Treasury?
Ms. HALLETT. We have discussed this with Treasury, we have not
made a specific recommendation but we will. Let me also point out
that we have some other recommendations I would like to discuss
with you in a closed door session. I think that there are two, in
particular, that would be very valuable to us, that if we were to
discuss it here, it would jeopardize some of the potential for the
future, and I would, like to request that we have that opportunity.
Chairman PICKLE. All right, well, we are commending you for
your actions and we are asking now for suggestions, and as long as
we just kind of fence around the bush about it, we are not getting
down to the harder questions. We will be glad to meet with you
and we want also, in addition to what you have just said, we want
any written specific recommendations and suggestions that you
have.
Ms. HALLETT. Thank you.
Chairman PICKLE. I thank you and we have been able to look at
only four cases, specifically, but obviously from this a great deal of
improvement must be made. And we do solicit your cooperation.
Ms. HALLETT. Mr. Chairman, if I might just close by saying that
we do appreciate very much having this opportunity to appear
before you and the committee, and I would like to specifically re-
quest that we be able to submit for the record, the letter from the
two U.S. attorneys in Baltimore on the Alcolac case, and the letter
from the U.S. attorney in Seattle on the C-TEK case, and the De-
partment of Justice's directive on administrative, their administra-
PAGENO="0457"
453
tive position with respect to the discussion of open cases, and final-
ly, the Department of Treasury's directive on their administrative
position and the administration's position with regard to the dis-
cussion of open cases. I feel that is very important for the record,
and would appreciate being able to submit it.
Chairman PICKLE. We will be glad to receive those documents
and we also may have an additional hearing to try and get some-
thing specific from you and others.
[The material referred to above was received and has l)een re-
tained in the committee files.]
Mr. ANTHONY. Mr. Chairman, would you yield to me for a
moment?
Chairman PICKLE. Certainly.
Mr. ANTHONY. Commissioner, I will bring this to your attention
and also for the Department of Commerce and the Department of
State since they will be testifying after you.
We have gone through the transcript which has been available to
you and your staff, as well as to the staff of Commerce and State.
By page and by case we have identified a bunch of statements that
indicate that those are problem areas. Then at the last, we have,
by page, through that prior transcript identified potential solu-
tions. I think that specifically is what Chairman Pickle is attempt-
ing to get to and I think you are just now beginning to see his frus-
tration beginning to come out. I know I have expressed a litl;le bit
of my frustration and then I backed off. I am about to get mine
back up here again, too, but we are going to have to go and vote
here.
What I would like to do is to make this available to you.
Ms. HALLETT. I would appreciate that very much.
Mr. ANTHONY. Let you look it over and see if you agree or dis-
agree that these are problem areas and then look at the solutions.
Whether you do it in public or whether we go back there in execu-
tive session so that nobody can see us, eventually we are going to
have to make some recommendations. And that is that everything
is honky-dory or we are going to have to make some recommenda-
tions that there are some problems and there are some rational so-
lutions to it. That is really where we are.
I just say to Commerce and State, if you want to take a look at
these before you testify, you are welcome.
Thank you, Mr. Chairman.
Ms. HALLETT. Thank you, Mr. Anthony. I appreciate your gener-
osity on that.
Thank you, Mr. Chairman.
Chairman PICKLE. Now, the Chair is going to call a 15-minute
recess. We have a vote on the floor.
[Recess.]
[The following was subsequently received:]
PAGENO="0458"
4M
T1EI~ SSIøi~1±n~ ~F cE~US'l'©~IS
WA~mNGTøN, D.C.
June 27, 1991 i-'
r~CEIVED
JUN 2 8 1997
Ways and Meant
Subcommittee on Oversig~~
Dear Chairman Pickle:
Please find enclosed the Customs responses to
questions raised during the May 1, 1991 hearing. In
addition, enclosed are the answers to the questions
contained in your May 14, 1991 letter.
Mr. John C. Kelley, Jr., and I were pleased to appear
before your Subcommittee regarding the U.S. Customs
Service export enforcement program. Should your
Subcommittee need any additional information, please do
not hesitate to contact me.
Sincerely,
Carol Hallett
Commissioner
The Honorable
J. J. Pickle
Chairman
Subcommittee on Oversight
Committee on Ways and Means
House of Representatives
Washington, D.C. 20515-6144
Enclosure
REPORT SMUGGLING TO UNITED STATES CUSTOMS SERVICE I-EON3E-AL~RT
PAGENO="0459"
455
UNITED STATES CUSTOMS SERVICE RESPONSE TO THE MAY 14, 1991 LETTER
FROM THE HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON OVERSIGHT
1. On March 28, 1991, I requested your appearance as a
witness at the Nay 1, 1991 hearing to discuss the
following: (1) Customs overall role and goals in
enforcing U.S. export control laws: (2) specific
Customs cases in the area, including both recently
closed and currently open cases (to the greatest extent
possible); (3) administrative, legal, and practical
obstacles or difficulties encountered by Customs
generally, and in the NELMY missile and ALCOLAC
chemical cases specifically; and (4) recommendations on
how to improve Customs ability to effectively and
efficiently enforce U.S. export controls. On April 22,
1991, I again asked that your statement focus on the
specific issues raised during the Subcommittee's April
18, 1991 hearing and your recommendations for what can
be done to resolve such problems in the future.
Despite the Subcommittee's repeated requests for
answers, the following basic enforcement questions
remain essentially unanswered:
a. With regard to U.S. export enforcement, what administrative,
legal, and practical obstacles or difficulties does Customs
encounter?
On Nay 1, 1991, the Commissioner indicated that there were
two recommendations to discuss in a closed door session
which if discussed at the hearing or herein would advise
criminals about the legal infirmities of the export laws.
We again want to request a closed door meeting with your
Subcommittee. Customs believes these recommendations would
address some of the obstacles Customs faces in enforcing
the export laws.
Customs has encountered some other difficulties that will be
briefly mentioned here yet further detailed in answers to
other relevant Subcommittee questions. Customs has had some
difficulties with Commerce on coordinating overseas
investigations. In addition, Customs has also experienced
some difficulties with Commerce's interpretation of the
confidentiality statute thus preventing Customs
unrestricted access to Commerce's licensing information.
Customs and Commerce have been trying to resolve these
issues through various mediums and discussions.
The practical obstacles or difficulties encountered by the
Customs Service result primarily from the sheer enormity of
the task at hand. For example, there are approximately six
million containers exported from the U.S. each year by
vessel alone. The number of exports is increased by bulk
cargo, air, truck, rail, courier service, car, mail, and
passenger shipments. From a license review standpoint, the
Department of State receives approximately 55,000 license
applications for the export of U.S. Munitions List Items
each year and the Department of Commerce receives
approximately 85,000 license applications. The Customs
Service must constantly look for more effective ways to
target suspect companies and shipments for enforcement
action.
b. What are your recommendations on how to improve Customs
ability to effectively and efficiently enforce U.S. export
control laws?
As the Commissioner stated at the hearing on May 1, 1991,
PAGENO="0460"
456
the Customs Service has three recommendations that will
improve its ability to enforce U.S. export control laws.
1.) Automated Export Manifest System
The automation of the outbound Customs Manifest and the
Department of Commerce Shippers Export Declarations
would be a major step forward in developing trade
efficiency, accurate and timely recording of trade
statistics and as a means of targeting and tracking
shipments.
2.) Expansion of the Missile Tech Control Regime, Australia
Group and other Multi-lateral Controls
The U.S. Government should take positive steps to
increase the degree of international cooperation in
export control and enforcement. An increase in the
number of effective multi-lateral controls will
decrease the number of potential diversion countries.
3.) Complete field access to the Department of Ccrmnerce's
licensing data base.
Complete on-line access to Commerce's database
containing licensing information would allow Customs
field inspectors to help shut the door on illegal
exporters. Currently, Customs Headquarters has
restricted access to Commerce's Export Control
Automated Support System )ECASS). Export shipments
have time-sensitive export schedules and Customs
inspectors must quickly decide if the export shipment
being examined is a valid export.
2. On September 27, 1990, John C. Kelley, Jr., Director,
Strategic Investigations Division, U.S. Customs Service,
testified before the House Government Operations Committee.
In responding to questions, Mr. Kelley stated that "there is
a controversy between U.S. Customs and the Department of
Commerce over the enforcement of the Export Administration
Act EAR). The Department of Commerce Office of Export
Enforcement is seeking additional authority while Customs
and Treasury believe the only real solution is legislating
sole authority for all export enforcement matters, including
the SAn, to Customs." On the May 1, 1991, you did not
identify any problems that Customs is experiencing with
Commerce and failed to recommend sole enforcement authority
for Customs.
a. What problems has Customs experienced with Commerce in the
area of the export enforcement? What steps is Customs
taking to address these problems?
The U.S. Customs Service has experienced three major
problem areas with Commerce which are:
1) Illegal searches and seizures;
2) Uncoordinated overseas travel and investigations; and,
3) Limited access to Commerce licensing information.
Customs and Commerce have constantly had discussions over
the above issues. As the Commissioner stated at the hearing
on May 1, 1991, recent discussions between Commerce and
Customs on some of our differences were held. As a result,
a Memorandum of Understanding (MOU) was recently submitted
PAGENO="0461"
457
to Treasury for forwarding to Commerce. If the MOU is
agreed to by Commerce, these problem areas should be
resolved.
b. Why was Customs less than forthcoming in discussing export
administration and enforcement problems during the
Way 1, 1991 hearing?
The Customs Service believes it was forthcoming during the
Way 1, 1991 hearing.
c. What has transpired between September 27, 1990, and
Way 1, 1991, to cause Customs to back away from its position
ofsole enforcement authority?
Curing the Commissioner's testimony on May 1, 1991, she said
that if Congress decided that there should be one export
enforcement agency, she declared that naturally it would be
the Customs Service because it does an outstanding job.
3. During the September 27, 1990, Government Operations
Committee hearing, Mr. Kelley stated that "we [Customs]
believe that there is no need for the DOC [Department of
Commerce] investigators to travel overseas. Commerce
investigators often do not follow protocols established by
the Department of State, the U.S. embassies or the host
governments." On May 1, 1991, Mr. Kelley testified that "in
regards to our position for agents from the Commerce
Department travelling overseas, we do not object."
a. What is Customs position with regard to Commerce agents
travelling overseas?
The Notice of Procedures issued jointly by Commerce and
Treasury in accordance with 50 USC App. 2411(a)(7) states
that... "Customs shall be responsible for EAA
investigations outside the United States. Commerce may
assist Customs in foreign investigations with Customs
concurrence and subject to coordination by Customs 50
Fed. Reg. 41545 (1985). The Federal Register notice also
states that if during a pre-license check, post shipment
verification or an investigation for antiboycott
violations... "Commerce receives or discovers an allegation
or evidence of wrongdoing, Commerce shall promptly inform
Customs. Customs shall then be responsible for pursuing the
foreign aspects of the investigations.. ." Id. Customs fully
supports the responsibilities of Customs under the Export
Administration Act.
Customs still believes that there is no need for Commerce
agents to travel overseas. However, we do not object to
Commerce agents traveling overseas to conduct investigations
if they comply with the Export Administration Act. That is,
that Commerce obtains Customs concurrence and they
coordinate with Customs. Sensitive and long-established
protocol relating to overseas activities are effected when
the overseas investigations are not coordinated. As the
Commissioner stated at the hearing on May 1, 1991, this is a
coordination issue that we have discussed with Commerce on
numerous occasions.
Customs currently honors all of Commerce's requests for
foreign investigations and has offered to fulfill all of
Commerce's investigative needs for both criminal and
administrative actions. U.S. Customs has spent more than 40
years developing rapport with foreign governments and
PAGENO="0462"
458
foreign law enforcement agencies that enables us to carry
out our enforcement mission. We do no want to jeopardize
these valued relationships by confusing our counterparts as
to who to deal with on export enforcement investigative
matters.
The U.S. Customs Service has conducted many complex
investigations over the years and regardless of the details,
has in most instances, referred the foreign leads to the
Customs Attaches or Representatives rather than sending the
domestic case agent. The Customs investigators overseas
have a much greater knowledge of the procedures which must
be implemented in order to conduct the appropriate
investigation abroad.
b. Why would Customs provide two different Congressional
Committees with two different answers to the same question?
Customs did not provide two different answers. Mr. Kelley
stated on September 27, 1990 that `.. .Notwithstanding the
additional travel costs to the U.S. Government caused by
DCC investigators traveling overseas, the EAA clearly
establishes that U.S. Customs is responsible for EAA
investigations outside of the United States.'
Mr. Kelley testified on May 1, 1990 ".. .We [Customs) do not
object... However, we can refer you to the law, as passed by
the Congress. that indicated that Commerce was a domestic
investigative agency and the responsibilities for the
foreign investigations lies with the Customs Service."
c. What problems has Customs experienced with Commerce
investigators travelling overseas?
Commerce investigators have traveled overseas without
country clearance or coordination with the appropriate
embassies and Customs. Customs has received formal and
informal complaints about Commerce agents conduct overseas
from U.S. embassies, from Her Majesty's Customs and Excise
in England, the Department of Justice, and even from U.S.
industry. Commerce investigators have solicited private
industry to intervene when the host government specifically
denied Commerce's request for travel to that country.
Additionally, lack of coordination with Customs has resulted
in Commerce agents telephoning directly the subjects of
Customs foreign investigations.
The U.S. Government should speak with one voice overseas
with respect to enforcement and investigations of export
violations, U.S. Customs has spent more than 40 years
developing rapport with foreign governments and foreign law
enforcement agencies. Unauthorized activities overseas do
not just affect Customs and the U.S. export enforcement
efforts, but affect all U.S. enforcement agencies.
Additionally, host government investigations can be
jeopardized by unlawful or unauthorized and uncoordinated
activities.
4. Customs recently seized a shipment of specially designed
pumps destined for Iran's Defense Ministry that had been
cleared for export by the Commerce Department. Dr. Stephen
Bryan testified before the Oversight Subcommittee on
April 18, 1991, that Customs had intercepted eight crates of
special nickel-plated pumps that can be used in the
manufacture of gunpowder, propellants for rocket motors, or
plastic explosives of the type used to blow up Pan Am Flight
103 over Lockerbie, Scotland. According to Dr. Bryan, the
PAGENO="0463"
459
State Oepartment classifies Iran as a `terrorist country"
for which export licenses are required for the shipment of
high-technology goods. Commerce did not classify the pumps
as high-tech items.
a. Please provide the Subcommittee with information on this
case.
b. In The Washington Times, dated April 27, 1991, a company
official stated that the company did not tell Commerce that
the pumps were destined for the Iranian Oefense Ministry and
was not legally required to give such information. Is the
company official correct?
c. Should these pumps be classified as high-tech items? Oid
the company know where these pumps were going? Is the
company cooperating with your investigation?
d. Or. Sryen testified that Commerce is "trying to figure out
how to reverse its previous decision (to license to pumps)."
Is this true? What can you tell us about this?
e. Or. Sryen's testimony indicates that two other shipments
were made in the 1980's, possibly with Commerce export
licenses. Is Customs aware of the other shipments? If so,
explain.
The detention of these pumps is related to an open Customs
investigation. As the Commissioner stated at the hearing on
May 1, 1991, it is the policy of the Oepartment of Treasury
and this agency that information from open cases cannot be
discussed or disclosed prior to their resolution or the
information being made public during ludicial proceedings.
Accordingly, the Customs Service is unable to make further
comment.
Enclosed is a Oepartment of Justice memorandum dated March
24, 1989 outlining the established executive branch policy.
(Enclosure #1)
5. In terms of strengthening the U.S. export control system by
targeting few commodities, what assurances are there that
the "higher fences around a fewer number of goods" will
work? To what extent does the move toward "higher fences
around a fewer number of goods" assume that there are
adequate resources to keep the "higher fences" from
developing "holes?" Ooes Customs have adequate resources
and tools to effectively enforce this new concept?
While the relaxation of export controls of some dual use
commodities may slightly reduce the number of
investigations, the overall impact to the EXODUS program
will be negligible. With the special emphasis on nuclear
and missile technology and chemical and biological warfare
agents, there will be increased demands upon the U.S.
Customs Service within the next decade. Less
industrialized nations and terrorist groups will continue to
attempt to increase their status among the world powers by
acquiring this "way of the future" technology. Even as
export controls are relaxed on some of the dual use
commodities, new technologies on the leading edge of
industry will continue to be developed. As the Commissioner
stated at the hearing on May 1, 1991, and as mentioned in
other portions of this response, an export manifest system
and complete field access to the Commerce licensing data
PAGENO="0464"
460
bases would most certainly improve our outstanding track
record with regard to export enforcement.
The Customs Service will continue, as always, to request
additional resources as necessary through the
Administration's budget process.
6. The following questions relate to the HELMY missile case
investigated by the Subcommittee.
a. Were you aware, prior to our hearing on April 18, 1991, that
the Egyptian Government had been consulting with HELMY on
the Condor II program since its inception in 1984? Was
there anything illegal about HELMY offering technical advice
to Egypt for their missile program?
As the Commissioner stated at the hearing on May 1, 1991,
Customs was aware, prior to April 18, 1991, that the
Egyptian Government had been consulting with Helmy on the
Condor II program. Our knowledge of this was limited to
information uncovered during the course of our
investigation of Helmy into the illegal transfer of
technical data and equipment in violation of U.S. export
laws.
Disclosing or transferring licensable technical data to a
foreign person, whether in the United States or abroad is
considered a violation under the International Traffic in
Arms Regulations (ITAR).
b. Why didn't Customs charge anyone at 08W Packing with
conspiracy, or some other crime not necessarily related to
export laws, for their part in repackaging and mislabeling
the controlled commodities before they were shipped to
Baltimore? Provide all documentation relating to the U.S.
Attorney's prosecution of this case.
As Mr. Kelley testified, the U.S. Attorney's office did not
feel there was sufficient evidence to pursue them for an
export violation. O&N Packing was responsible for repacking
and shipping goods domestically from Ohio to Baltimore.
They were not involved in any direct exports nor was there
any evidence to show that 08W knew such goods were to be
exported. All of the material that was sent to 085 Packing
was sent under the instructions given by Mr. Huffman. The
activities that took place at 085 Packing which included
repacking, relabeling, and shipping were managed and
supervised by Mr. Huffman. The removing of the `HAZARDOUS
MATERIAL" warning labels was done by Mr. Huffman and his
son. However, 085 Packing did have knowledge of this and
may have been culpable of violating laws prohibiting
transportation of hazardous material without the proper
labeling since they were involved in the transfer of these
hazardous materials.
A 08W Packing representative advised Customs Officers later
that Mr. Huffman requested to have the hazardous material
warning labels removed. When 085 Packing refused to remcve
the warning labels, Mr. Huffman and his son did so.
PAGENO="0465"
461
Documentation related to this prosecution which includes:
the reports of investigation; the plea agreement; memorandum
of sentencing; and licensing information, have been
submitted to the Subcommittee by Senior Special Agent
Robert Stiriti.
c. After reviewing the transcript of the Subcommittee's
April 18, 1991, hearing, are you aware of any situations
where Customs has evidence that contradicts any statements
made by HELMY before the Subcommittee? If so, explain those
situations or provide the evidence.
As the Commissioner testified on May 1, 1991, the Customs
Service is not aware of any evidence that contradicts
statements made by Helmy during the April 18, 1991 hearing.
7. The following questions relate to the ALCOLAC chemical cases
investigated by the Subcommittee,
a. Do you believe that Commerce, which had responsibility for
issuing licenses in the ALCOLAC case, should have detected
these illegal shipments through the licensing process? Did
the fact the Commerce gave ALCOLAC inaccurate licensing
advice ever cause Customs a problem?
The DOC licensing process should have detected at least the
shipment to Singapore. This was the shipment substituted by
Customs. It was learned through information discovered
during the search warrant at ALCOLAC that the Commerce
licensing branch advised ALCOLAC that a license was not
required for Singapore. This determination by Commerce was
based on information provided by ALCOLAC which included the
wrong commodity control list (CCL) number. However, ALCOLAC
did provide the proper commodity name and usage of the
chemical. It is hindsight at this point to suggest that
Commerce should have requested additional information from
ALCOLAC based on the quantity of the shipment and the end
use.
The inaccurate licensing advice allowed Customs the
opportunity to substitute the shipment. Customs was aware
that thiodiglycol did require a license to Singapore, its
stated ultimate destination.
b. If someone wanted to smuggle precursor chemicals by
mislabeling the drums and doctoring the shipping documents,
as in the ALCOLAC case, does anyone at the docks have the
ability to uncover the scheme before the commodities are
exported?
With more than 200 years experience, the U.S. Customs
Service has detected many illegal export methods and
diversion schemes. However, new innovative and more complex
methods and schemes evolve constantly. Special Agents,
Inspectors, Auditors, and Intelligence Analysts have
developed indicators and profiles to assist field operations
in the detection of potential violations. These indicators
and profiles are constantly being refined to address new
trends.
c. How many proliferation cases have been initiated as a
PAGENO="0466"
462
direct result of Customs inspections at the docks?
There is no record of any proliferation cases initiated as a
direct result of a Customs inspection at a port of exit. As
stated by Commissioner Hallett during her testimony on
May 1, 1991, about 85% of all seizures are based on tips
through various sources while 15% of all seizures result
from cold hits by inspectors.
d. Why weren't senior officials of ALCOLAC prosecuted for their
involvement in the illegal exports of thicdiglycol to Iran
and Iraq? Did Customs recommend prosecution to the U.S.
Attorney's office? Did the U.S. Attorney's office decline
to prosecute or recommend against prosecution of any ALCOLAC
official other than Ms. HINKLEMAM? Provide all
communication between Customs and the U.S. Attorney's office
regarding the prosecution of this case.
As the Commissioner testified on May 1, 1991, the decision
not to prosecute officials of ALCDLAC was made by the United
States Attorney's Office. A letter, dated April 22, 1991,
from the former AUSA's who prosecuted the case is enclosed.
(Enclosure #2)
During the course of the ALCOLAC investigation, there was
never sufficient evidence uncovered to determine that
ALCOLAC officials knowingly and willfully violated any
export laws.
Customs did not recommend prosecution of senior officials of
ALCOLAC to the U.S. Attorney's office.
The U.S. Attorney's office did not decline to prosecute or
recommend against prosecution of any ALCOLAC official other
than Ms. HINKLEMAN.
8. The following questions relate to the GLOBAL HELICOPTER
case investigated by the Subcommittee.
a. Why didn't Customs open an investigation on Carlos CARDOEN's
helicopter as soon as it arrived in Dallas last year?
b. Under what authorities did Customs seize CARDOEN's
helicopter? Provide the subcommittee with all documentation
relating to the ownership and seizure of the helicopter.
c. If CARDOEN's modified bell helicopter is determined by State
to be a civil aircraft will cARDOEN be permitted to export
it to Chile? If not, why not?
d. When was Customs brought into this helicopter case by
Commerce?
e. What other Customs investigations target CARDOEN or any of
his various companies? Describe those investigations.
At a press conference in Dallas, Texas on March 27, 1991,
the Customs Service announced the seizure of a 206L-III
attack helicopter prototype and the execution of a search
warrant at GLOBAL HELICOPTER TECHNOLOGIES, INC. The seizure
was made as part of an investigation into violations of U.S.
import and export laws.
As you are aware from the Commissioner's testimony on
PAGENO="0467"
463
May 1, 1991, this particular matter and other matters
concerning Carlos CARDOEN are under investigation by the
Customs Service. It is the policy of the Department of
Treasury and this agency that information from open cases
cannot be discussed or disclosed prior to their resolution
or the information being made public during judicial
proceedings. Accordingly, the Customs Service is unable to
make further comment. (See Enclosure #1)
9. The following questions related to the C-TEK computer case
investigated by the Subcommittee.
a. When did Customs first become aware that C-TEK was illegally
exporting computer equipment?
The U.S. Customs Service first became aware of the C-TEK
investigation when on March 13, 1989, Special Agent Jerry
Hobbs, Commerce's Office of Export Enforcement contacted the
Customs Special Agent in Charge, Seattle, Washington, and
requested assistance in the examination of computer
equipment due to be exported from Seattle-Tacoma
International Airport, Seattle, Washington, to Singapore.
Customs Special Agent Steven Bond assisted DOC Special Agent
Jerry Hobbs, in examining documents and the suspect cargo.
b. Why did Customs release the DEC VAX 8700 for shipment from
Seattle to Singapore?
The DEC VAX 8700 was released at the direction of the
Commerce Special Agent.
On March 15, 1989, Special Agents Bond and Hobbs, and
Customs Group Supervisor Meisenheimer met at Seatac Airport
to discuss the case. Hobbs stated that a determination had
been made by Commerce Headquarters, that the computer was
not a licensable commodity in its current configuration.
Hobbs also stated that there was a possibility of executing
search warrants on two business locations in the Kukland,
Washington area. Meisenheimer, believing Hobbs was
conducting the investigation in the Seattle area by himself,
offered tactical support in the form of surveillance
personnel and equipment in an effort to help establish
probable cause in support of the warrants. Hobbs stated he
appreciated the offer and would let Meisenheimer know when
that was needed.
c. To what extent was Customs involved in retrieving the 8700
from Singapore? Why did Cqstoms seize the 8700 while
Commerce was developing their undercover operation to
identify the co-conspirators in the case?
The Office of Customs Attache, Singapore, conducted an
intensive investigation on Commerce's behalf. Coordination
between the Customs Attache and the Singapore trade
authorities resulted in unprecedented action in the return
of the computer equipment to the United States.
The DEC VAX 8700, which was prematurely released at the
direction of the Commerce agents, was returned to the United
States and seized at the direction of Commerce. In fact, in
a document entitled "Synopsis of the C-TEK Computer Case,
PAGENO="0468"
464
Case Summary - EQ 0389009 A2," which was furnished to
Customs by Commerce near the conclusion of -the C-TEK
investigation, on page 5, para. 2, the document states, "The
DEC VAX 8700 was returned from Singapore and seized by the
U.S. Customs Service, at the direction of the Office of
Export Enforcement." Special Agent Hobbs never informed
Customs personnel of any ongoing undercover activity with
regard to the C-TEK investigation. Additionally, if Custcms
had not seized the equipment upon its return to the U.S.,
that in itself would have looked suspect and not routine.
Customs was not advised by Assistant U.S. Attorney Moore or
Commerce of their intention to attempt an undercover
operation in order to lure the co-defendants to the United
States. Had Assistant U.S. Attorney Moore or Commerce
shared that information with Customs, notification
requirements could have -been addressed at the pre-seizure
stage versus post-seizure. This type of incident, although
not singular in nature, was a reflection of the lack of
information provided to Customs by Commerce.
d. Did Customs ever have a problem with Ccmmerce conducting the
overseas aspects of this investigation? Why?
Customs generally did not have a problan with a Commerce
agent and Assistant U.S. Attorney Moore traveling to
Singapore and Australia to conduct an investigation. The
Customs Attache cabled Assistant U.S. Attorney Moore on
September 8, 1989 (Enclosure #3), and outlined the
feasibility of the travel and investigation. This was done
in order for Assistant U.S. Attorney Moore and Commerce to
determine if the trip would add any significant improvement
to the investigation and if it was cost effective.
In the cable, the Customs Attache states. . . "The following
information is provided concerning the feasibility of
Department of Justice and Department of Commerce officials
conducting interviews in this region, and to assist in
making determination of whether subject travel by both
Assistant U.S. Attorneys and Department of Commerce
officials is necessary..."
The cable also states... "We do not anticipate any problems
in Assistant U.S. Attorney Moore and the Commerce agent
accompanying Assistant Customs Attache Meisner on the
subj ect interviews..
Enclosed are case outlines prepared by the Customs Attache,
Singapore, Customs Attache, Ottawa and the Special Agent in
Charge, Seattle, regarding their participation in the C-TEK
investigation. (Enclosures #4, 5, and 6 respectively)
10. Desert Storm has emphasized the need for special vigilance
with respect to illegal exportation of U.S. commodities.
- a. Do you anticipate any changed procedures or enhanced
activities as a result of Operation Desert Storm?
We do not antlcipate any changes or enhanced activities as a
result of Operation Desert Storm.
Under "Operation EXODUS," the Customs Service has developed
an export enforcement program that is capable of responding
to sudden shifts in foreign policy and national security-
emergencies such as Desert Storm. Because of-our broad
enforcement authority and organization, the Customs export
PAGENO="0469"
465
enforcement strategy can be tailored to include increased
levels of enforcement activity when the need arises. An
example of the willingness and capability of the Customs
Service to respond to a national emergency was the
establishment of a National Crisis Center and an Iraqi Task
Force.
The Customs Service currently participates in a number of
interagency working groups that monitor U.S. exports to
sensitive areas of the world. Two of the most prominent
groups are the Chemical/Biological working group and the
Missile Technology Control Regime working group. These
groups serve as interagency sounding boards for licensing
and enforcement matters. The Customs Service is committed
to continued participation in these groups and anticipates
increased efforts to enhance the groups effectiveness.
The Customs Service currently has twenty foreign offices
which serve in part to conduct investigations of illegal
exports in cooperation with their foreign counterparts. In
general, the levels of cooperation exhibited by foreign law
enforcement agencies showed significant increases after the
initiation of the U.N. Embargo. It will be necessary to
maintain these levels of cooperation in order to
successfully implement sanctions against Iraq and create an
international enforcement atmosphere that will deter arms
proliferation.
Under Public Law 100-204, applications for the export of
U.S. Munitions List items are reviewed for foreign policy,
national security and law enforcement concerns. In
cooperation with the Department of State, Office of Defense
Trade Controls, the Customs Service has developed a program
to review license applications for law enforcement concerns
with tangible results. The Customs Service believes that
these efforts will result in an enhancement of the U.S.
Government's ability to deny the export of U.S. Munitions
List items to unauthorized end-users. It will be necessary
to increase the levels of cooperation between Customs,
State, Commerce, and Defense, to ensure that foreign policy,
national security and law enforcement concerns are
adequately addressed in U.S. export control policy.
b. Other than Iraq, which prohibited foreign destinations is
Customs giving special attention to?
It is the policy of the Customs Service to give attention to
all prohibited destinations specified in Part 126.1 of the
International Traffic in Arms Regulations (ITAR). The
Customs Service has also given special attention to those
countries that have repeatedly provided support for acts of
international terrorism. These countries are listed in Part
126.1(d) of the ITAR and Section 6(J) of the Export
Administration Act. The countries currently listed in this
category are Cuba, Iran, Libya, Syria, North Korea, and
Iraq.
Under "Operation EXODUS," the Customs Service has developed
an export enforcement program that is adaptable to the needs
of U.S. foreign policy, national security and law
enforcement concerns. Our program has enable us to deny
illegal exports to both countries and groups, such as
foreign drug traffickers and terrorists, that pose a threat
to the U.S., its allies and world peace.
c. Since Jordan appears to be the major diversion point, is
particular attention being given to that country?
During the Persian Gulf crisis, the Customs Service placed
PAGENO="0470"
466
special emphasis on the examination of outbound cargo
destined for Jordan. The Customs Service also assisted the
Office of Defense Trade Controls, Department of State in
conducting intensive reviews of all export license
applications for the shipment of U.S. Munitions List items
to Jordan.
11. Under the EXODUS Program, Customs has sought to intercept
the illegal export of sensitive technologies, arms,
munitions, weapons systems, etc.
a. What was your level of activity under this program with
respect to Iraq in the two years prior to Desert Storm?
In the two years prior to Desert Storm, the Customs Service
detected a marked increase in the activity levels of Iraqi
procurement networks. These increased levels of activity
were particularly noticeable in the areas of missile
technology, chemical/biological warfare and fuse technology.
The active participation by Iraq in the Condor II Missile
Program became one of the catalysts for this activity.
As early as September of 1988, the Customs Service initiated
an investigation into the efforts of a U.K. based Iraqi
procurement network to acquire nuclear detonation capacitors
for illegal export to Iraq. These detonation capacitors are
licensable for export from the U.S. under the U.S. Munitions
List and are designed to provide electrical energy to a
triggering device in a large conventional or nuclear
warhead. This Iraqi network was disrupted after a March
1990 controlled delivery of "dummy" capacitors to an Iraqi
front company in the U.K. The controlled delivery was a
joint U.S/U.K. Customs effort that resulted in the arrest of
several persons.
Since the initiation of the U.N. sanctions, the
investigative case load of the Customs Service relating to
illegal exports to Iraq has more than doubled. Much of the
increased activity has been due to the embargo of previously
non-licensable commodities such as foodstuffs and our
efforts to assist other countries with sanction
investigations, In addition to these sanction
investigations, the Customs Service is conducting a number
of significant investigations relating to licensable items.
b. How many cases, aside from ALCOLAC, did Customs investigate
prior to the invasion involving the illegal exportation of
goods to Iraq?
Approximately 21 investigations involving Iraq were opened
prior to the invasion.
c. Did Customs ever raise any concerns to Commerce or State
regarding the increased activities of the Iraqi procurement
network prior to the August invasion of Kuwait? If not, why
not? If yes, where were the concerns raised and what was
the response?
The U.S. Customs Service, on a monthly basis, furnishes
Commerce and State a list of open investigations.
Additionally, Commerce is furnished a monthly list of all
Customs seizures in support of their administrative/civil
penalties function. The increased levels of activity,
particularly noticeable in the area of missile/nuclear
technology, chemical and biological warfare, and fuse
technology were discussed with various interagency working
groups. Customs, Commerce and State are all participants in
these groups. The working groups include the Australian
Group, the Missile Technology Control Regime and the Nuclear
Violations Working Group.
PAGENO="0471"
467
12. If goods which were important to Iraq's chemical, biological
and nuclear weapons programs are decontrolled by COCOM, how
will it affect Customs ability to prevent countries like
Iraq from obtaining such goods? To what extent will
decontrol make enforcement more difficult? Won't
enforcement have to rely more on intelligence? How can
Customs rely more on intelligence when 80 to 90 percent of
all cases are initiated from tips and intelligence already?
Although the Export Administration Act requires permission
to re-export u.s. origin goods, it will be more difficult to
enforce such laws because of some foreign government views
that such attempts are extraterritorial in nature. Customs
will rely more on enforcement intelligence from various
agencies in order to stop the shipments and apprehend the
violators before the shipments leave the United States.
Customs will also have to depend more on our established
informal counterpart contacts to assist us in preventing the
diversion of such shipments even though the shipments will
no longer be controlled by their countries.
It should be pointed out however, that as a member of COCOM,
the U.S. would most likely also decontrol the same nuclear
and chemical/biological related goods. If that is the case
Customs would have no authority to enforce or prevent the
exports.
13. To the extent that such goods remain subject to unilateral
U.S. control, how will the fact that such controls are
unilateral affect Customs' ability to enforce them? What
are the most important differences from an enforcement
perspective in enforcing unilateral versus multilateral
controls?
Customs has the ability to effectively enforce controls
whether unilaterally or multilaterally imposed. However,
a problem can exist with items unilaterally controlled that
are re-exported from another country. If the country does
not impose controls on items to the final destination and
has not been notified by the United States that a problem
exists, the re-export will be allowed. Fortunately, through
the efforts of our Customs Attache Offices, we have been
able to sensitize these countries to concerns of the U.S.
Government. If these foreign customs services discover an
item that may be exported contrary to U.S. law, they will
often contact U.S. Customs so that action can be taken to
prevent the exportation from occurring. As previously
mentioned, our established informal overseas contacts have
assisted in obtaining cooperation in these circumstances.
14. Customs personnel in the field have complained that they are
hampered in several areas such as the lack of automation of
the export area. The imports to the U.S. are largely
automated, and that system has a "lookout" feature to help
identify high risk commodities.
a. Does Customs have a recommendation or proposal for
automating export manifests?
b. How will this help in controlling exports and related
enforcement?
~84C 11~S
PAGENO="0472"
468
c. What data bases will be included?
d. How much will it cost the Government? The private sector?
a. Will industry benefit? How?
The Customs Service has designated the Automated Export
System' (ASS) as an approved project in its master automated
data processing plan. The ASS will be a joint project
involving the Customs Service, the Department of State and
the Census Bureau. Preliminary work is being done to
structure the administrative, technical and logistical
aspects of developing this system. ASS will be a phased
project with a projected five year development cycle.
During the first phase a pilot project will be developed,
using cooperating sea carriers and their exporters. After
the pilot is completed, later phases will expand AES into
the other shipping modes.
AES has the potential to offer significant enhancement to
the Customs Service export enforcement responsibility in
several ways. First, AES will improve the Customs Service
ability to identify the scope of the export universe on a
timely basis. Analysis of on-line export transactions will
enable Customs managers to anticipate export trends,
identify potential problem areas, adjust resources and
facilitate the flow of legal exports. Data incorporated
into AES will include Shippers Export Declarations,
manifests and licenses.
The projected costs for the Customs Service, through FY-97,
are $jl,750,000. The Census Bureau is expected to reouest
approximately $975,000 per year in their budget to cover the
Census Bureau's proportion of system costs. The private
sector should experience a cost savings due to increased
productivity, elimination of paperwork and a reduction in
fines and penalties and will benefit from expeditious
handling of export shipments. Because the current autcmated
import system will be considered in developing ASS, the
import users will not have to purchase additional ecuirment
to use ASS.
15. Commerce wants to have sore export enforcement related
duties overseas.
a. What is the role of the Customs Attache? Do they conduct
investigations overseas?
A Customs Attache is the officer in charge of an office
located in a capital city of a foreign country. The office:
in charge is accountable for directing all office activities
in those countries which have been assigned as correspondin:
areas of responsibility. In the performance of their
duties, Customs officers abroad deal directly with high
ranking officials of the host country and with high
officials of the U.S., including U.S. Ambassadors, principal
State Department officers and high ranking military
personnel. Included in their duties is the development of
sources of information able to furnish evidence of
violations of laws enforced by the U.S. Customs Service and
other Treasury agencies. They conduct investigations
involving the full range of Customs investigative activities
such as smuggling, fraud, money laundering, technology and
munitions diversions, etc. In connection with these
investigative activities, they must maintain close liaison
with representatives of law enforcement agencies of the host
governments as well as representatives of other U.S. law
enforcement agencies stationed overseas.
b. Is it important that only Customs perform the liaison role
overseas? If so, why?
The United States Customs Service is an enforcement agency
PAGENO="0473"
469
with an enforcement strategy based upon investigations,
inspections and international cooperation. Customs is the
front line defense in intercepting most illegal exports.
Our objective is to apprehend violators and seize and
prevent illegal exports. We do not make license
determinations. However, our efforts affect licensing
decisions. Customs already has the authority to enforce all
U.S. export laws, and plays a vital role in determining
United States policy positions on export enforcement in the
international arena. Customs had an instrumental role in
establishing the elements of the Common Standard Level of
Effective Enforcement among our COCOM partners. Customs has
representation on a u.s. delegation which is presently
discussing this issue with our COCOM partners. Our
counterparts throughout the world regard Customs as the lead
U.S. export enforcement entity worldwide. In most foreign
countries, the Customs authorities are also the agency
responsible for export enforcement. Customs is the only
U.S. enforcement agency with a natural counterpart in every
country in the world. We also have the broadest warrantless
outbound search authority of any U.S. agency.
The Customs Service has a major role in the overseas
investigation of export violations. Pursuant to the Export
Administration Act, as amended in 1985, Customs is
responsible for Export Administration Act investigations
outside the United States. Commerce may assist Customs in
foreign investigations with Customs concurrence and subject
to coordination by Customs. Except for Customs
responsibility for Export Administration Act investigations
outside the United States, Commerce, subject to the role
assigned by law to the Department of State with respect to
negotiations with foreign governments, is responsible for
* dealing with foreign authorities on Export Administration
Act policy and operation matters relating to licensing or
* administrative sanctions. Commerce's Export Administration
Act enforcement responsibilities outside the United States
consist solely of (1) pre-license checks and post-shipment
verifications and (2) investigations of suspected
antiboycott violations.
c. Should Commerce be permitted to perform the liaison role
overseas?
Customs believes that there is no need for Commerce to
perform the liaison role overseas. The Department of
Commerce is represented overseas through their Foreign
Commercial Services (FC5). FCS provides support to foreign
commercial concerns by promoting trade between the U.S. and
host countries. FCS provides Commerce's Office of Export
Enforcement with background information of foreign
commercial entities concerning potential recipients of U.S.
origin controlled commodities. In many instances, the FCS
is called upon by the Office of Export Enforcement to
conduct pre-license and post-shipment checks. With regard
to the law enforcement liaison, we do not want to jeopardize
these valued relationships by confusing, our counterparts as
to who to deal with on export enforcement investigative
matters.
d. Does Customs conduct pre-licensing and end-user
verifications for State or Commerce? How many requests does
Customs receive annually? How many checks or verifications
are performed annually?
Customs conducts pre-licensing and end-user verifications
for both State and Commerce when called upon to do so in
countries as required by local government and U.S.
Embassies. Customs however does not maintain records as to
the number of requests received and the number performed in
any given period. Requests are sent directly to the
Customs foreign offices worldwide. Customs domestic field
offices usually deal directly with the Customs foreign
PAGENO="0474"
470
office and Commerce's Office of Export Enforcement field
offices.
e. Where do you have Attaches posted?
Customs officers are located in 20 locations in 16 different
countries. These offices have investigative oversight for
all countries around the world. The enclosed list
identifies the offices and regional responsibilities.
(Enclosure #7)
f. What kind of agreesents does Customs have regarding the
conduct of overseas investigations? What countries do you
have agreements with? To what extent do these countries
cooperate with is, export investigations? Why would other
countries be reluctant to enter into such agreements?
Customs presently has Mutual Assistant Agreements with 19
countries and is in the process of negotiating an additional
13. These agreements are based upon mutual assistance in
Customs matters primarily concerning the exchange of
information, investigative assistance and law enforcement
cooperation. The enclosed list identifies the countries
with agreements and the countries to which negotiations are
underway. (Enclosure #8) All countries for which agreements
are in place exhibit admirable enforcement cooperation with
regard to exchanging information and investigative
assistance. Customs has not experienced any reluctance to
enter into an agreement from any country thus far.
16. 00 you believe that there is a legitimate reason for
separation of licensing and enforcement functions? If yes,
why?
Customs currently enforces all export laws. As a criminal
investigation proceeds, it is not uncommon to discover that
more than one export law has been violated. In scme
situations an investigation is initiated for what are
believed to be violations of the Export Administration Act
when it is later determined that there are also violations
of the Arms Export Control Act or other export laws.
Customs, because of its broad investigative authority, can
continue the investigation without the disruption which
would be caused by referring the matter to another agency.
For example, Commerce has had to refer cases to Customs
because their investigation disclosed Arms Export Control
Act violations and not an Export Administration Act
violation.
The separation of enforcement from licensing does not
detract from the technical expertise of the criminal
investigator. The U.S. Customs Service has a 200 year old
enforcement/investigative history. The Customs Special
Agents utilize their investigative expertise in
coordination with, and by drawing upon the technical
expertise of the licensing agencies. The licensing officer
rules as to the licensability of a particular commodity.
The Customs Special Agents utilize their criminal
investigative expertise to prove a violation of the export
laws. The licensing officer is the technical expert
required by the Department of Justice to testify in court.
It is he who must testify as to the technical application
and export licensability of a commodity, not the
investigator. This excellent coordination effort is one of
PAGENO="0475"
471
the reasons Customs is so successful in export violation
investigations.
a. Are you aware of any instances in which the commercial
concerns of Commerce have overruled the enforcement concerns
with the result that Commerce authorized a questionable
export?
The Customs Service is not in a position to comment on the
basis for policy decisions by another agency.
b. To what extent does trade promotion take precedence over
export enforcement? Give examples.
Customs does not know to what extent trade promotion may
take precedence over enforcement as this involves policy
decisions of other agencies.
17. How does Customs coordinate enforcement activities with
Commerce?
a. In the last five years, how many criminal cases has Customs
referred to Commerce for civil sanctions?
From 1987 through Hay 1991, Customs has referred 110
criminal cases to Commerce for civil sanctions. As shown
below, Customs has been trying to increase the number of
referrals.
1987 - 3
1988 - 1
1989 - 4
1990 - 85
1991 - 17 (as of May(
b. How many referrals has Commerce made to Customs?
Commerce does not make referrals of its criminal cases to
Customs for civil sanctions.
c. Do the two agencies have a mechanism set-up whereby
licensing and enforcement information is freely exchanged?
If no, why not?
A mechanism has been set-up whereby specific licensing and
enforcement information is exchanged. However, non-
specific, but nonetheless necessary, licensing information
is not shared by Commerce with Customs due to their
confidentiality concerns of Section 12(c( of the Export
Administration Act of 1979, as amended. (50 U.S.C. App.
2411(c((3((. Even though the law states that "The
Secretary and the Commissioner of Customs, upon request,
shall exchange any licensing and enforcement information
with each other which is necessary to facilitate
enforcement efforts and effective license decisions."
Furthermore, the process by which Customs must request and
receive specific licensing information from Commerce is not
timely.
Customs coordinates its activities with Commerce in a number
of ways. On a monthly basis, Customs furnishes a listing
of all individuals and companies under investigation by
Customs to Commerce's Office of Export Enforcement (OEE(
and Office of Export Licensing (OEL(. Commerce furnishes
Customs with a similar list. The purpose of the list is to
prevent Customs and GEE from opening investigations on the
same subject. GEL matches the list against license
applications to identify potential violators who apply for
export licenses.
PAGENO="0476"
472
Customs has a senior special agent assigned as a liaison
between Customs and Commerce. The Customs Service refers
all investigations to Commerce for administrative action.
These referrals include notification of Customs arrests,
indictments and seizures. In January 1982, Customs
established the Operation EXOOUS Command Center which is a
communication link for licensing and enforcement information
between Customs field personnel and all U.S. licensing
agencies, including Commerce.
d. To what extent does Commerce use section 12(c) of the Export
Administration Act to limit access to information and
prevent Customs from knowing what is moving internationally?
Upon specific request, Commerce does furnish Customs with
license-specific information that relates to an ongoing
Customs investigation. However, over the last eight years,
Commerce has refused to furnish Customs with any generic
licensing information, such as a list of denied licenses for
exports to countries such as Iraq. This list has
subsequently been furnished to Customs. The reasons
Commerce has always given for not providing the requested
information are that the information is protected by 12(c),
and might be `leaked by Customs to the public, that 12(c)
prevents Commerce from releasing the requested information
because Commerce believes the information requested has no
law enforcement value.
Customs believes licensing information, such as export
licenses denied to specific countries, would be invaluable
for export enforcement intelligence and in identifying
potential targets of investigation.
In addition to requests for generic licensing information,
Customs, over the last eight years, has been refused direct
and complete access to the Commerce-controlled data base
called the Export Control Automated Support System (ECASS).
Such access would assist Customs Inspectors in making quick,
intelligent decisions about the legality of an imminent
export.
18. How effective are Commerce's administrative penalties?
a. How effective is placing a company on the "denial list?" To
what extent do companies denied export privileges change
their identities?
b. To what extent do foreign countries recognize Commerce's
denial list?
Customs believes that administrative sanctions, including
the denial of export privileges, is one of the mechanisms to
punish exporters or consignees involved in illegal exmort
activity. Certainly, legitimate exmorters cannot legally
conduct export business with those whose name is placed on
the Oenial Orders. Placing a company or an individual name
(foreign or domestic) on the Oenial Orders, however, does
* not guarantee that their illegal export activity will stop.
Our enforcement experience has shown that smaller companies
and individuals can change identities with relative ease,
* enabling them to circumvent the Oenial Orders. One example
of such an individual is Richard MUELLER, whom Commerce
placed on theOenial Orders in August of 1981. Information
has been received that MUELLER is still active in illegal
technology exports and operates from Europe, utilizing
various company names. Additionally, certain foreign
governments do not recognize the Oenial Orders, thus parties
in foreign countries can obtain similar foreign technology
that is available outside of the U.S. and utilize the items
for purposes that the Oenial Orders are trying to prevent.
PAGENO="0477"
473
19. When enforcing the re-export of sensitive U.S.-origin goods
from countries, such as Great Britain and West Germany to
third-World countries like Iraq, how would you describe the
level of cooperation Customs has been receiving from these
re-exporting countries?
The level of cooperation received from foreign counterparts
and other foreign enforcement authorities regarding the re-
export of sensitive U.S. origin goods has been exceptional,
including investigations involving Iraq. This cooperation
extends to investigations of foreign individuals and firms
violating U.S. export laws.
a. What is the attitude of most enforcement agencies in
friendly countries regarding the export or re-export of
advanced and/or sensitive technologies to countries like
Iraq?
Customs over the years has developed an excellent rapport
with its counterparts throughout the world. As one of 108
members of the Customs Cooperation Council (CCC).
enforcement cooperation between member countries is
facilitated. Customs can solicit enforcement cooperation
from our counterparts formally through the Mutual Assistance
Agreement and Mutual Legal Assistance Treaties, or
informally through either the CCC or the contacts developed
over the years by our Attaches in U.S. embassies abroad.
The United States along with its multilateral control
partners view Iraq as a "proscribed destination."
b. How cooperative is the Canadian Government?
As a member of COCOM, the Government of Canada is very
cooperative in intercepting U.S. origin goods to proscribed
nations, providing that the goods are licensable per the
Commodity Control List. The Canadian Import Export Permits
Act is consistent with the U.S. Export Administration Act.
Where our national policies differ are in the enforcement of
U.S. sanctions pursuant to such U.S. laws as the
International Emergency Economic Powers Act, Trading With
the Enemy Act, and the International Security and
oevelopment Cooperation Act. The Government of Canada
considers U.S. origin goods, entered (duty-paid) into Canada
as "Products of Canada" and will permit the re-export of
such goods to sanctioned nations provided the exportation
does not violate Canadian law. Except the case of Iraq,
Canada does not, however, restrict the exportation of non-
strategic goods to most other U.S. embargoed nations.
U.S. origin goods moving "Inbound" through Canada will be
detained and referred to U.S. Customs for investigation. In
extraordinary cases (i.e. export of a large shipment of U.S.
origin scuba gear to Iran, for which no license was required
by either Government) the Government of Canada exhibited
extraordinary assistance and detained the shipment until
appropriate U.S. regulatory amendments could be enacted.
In Canada, enforcement of the Import/Export Permit Act and
Criminal Code violations, rests with the Royal Canadian
Mounted Police and to a lesser extent with Canada Customs.
The licensing body in Canada is the Oepartment of External
Affairs (U.S. equivalent of the oepartments of State and
Commerce, combined). Canadian law enforcement agencies will
"react" to known violations of their laws.
Canadian law enforcement agencies have been very supportive
of U.S. investigations of Canadian individuals or firms
violating U.S. export laws. A number of those U.S-led
PAGENO="0478"
474
joint investigations have resulted in the arrests,
convictions and sentencing of Canadians, in U.S. courts.
Canada Customs frequently advises the U.S. Customs Attache
office in Ottawa of U.S. origin gcods being legally (per
Canadian law) shipped to U.S. esbargoed nations by Canadian
firms. However, in order to support a criminal prosecution
under U.S. law, we must be able to prove that the U.S.
exporter knew the goods would be re-exported from Canada to
an embargoed nation. Goods purchased in Canada, even though
of 100% u.s. origin, may be licensed by External Affairs for
export to U.S. embargoed nations.
20. What are your recommendations on specific administrative or
legislative reforms that would enhance the ability of
Customs both to obtain the information it needs to perform
its statutory duties and to improve the nation's ability to
enforce export controls?
As mentioned in the Commissioner's testimony of May 1, 1991,
the U.S. Customs Service needs unrestricted access to
Commerce licensing information; an automated export
manifest system and; increased and expanded membership of
the Australia Group.
Customs also supports the proposed Comprehensive Violent
Crime Control Act of 1991, Senate Bill 635 and House Bill
1400, which includes several provisions relating to export
enforcement. (Sections 737, Enhanced Penalties For Certain
Offenses; Section 745, Authorization for Interceptions of
Communications; Sections 746, Participation of Foreign and
State Government Personnel in Interceptions of
Communications; and Section 747, Disclosure of Intercepted
Communications to Foreign Law Enforcement Agencies).
a. Do you think Customs should be the agency with sole
statutory authority for criminal and civil investigation of
violations of the Export Administration Act instead of
Commerce having that jurisdiction? Why?
b. What is the strongest argument that you can make for
concentrating this country's export enforcement efforts in a
single agency? What are the benefits? What are the
disadvantages?
aand b.
During the Commissioner's testimony on May 1, 1991, she
indicated that if the Congress were to decide that one
export enforcement agency is more efficient and effective
than two, the one agency naturally should be U.S. Customs as
the agency does an outstanding job.
Listed below are a number of reasons which support Custcms
as the U.S. Government's export enforcement' agency. Given
Customs successful working relationship with other
licensing agencies, Customs thinks there would be no
disadvantage to a single export enforcement agency.
o Customs has been involved in export enforcement since 1789.
This authority was expanded in 1917 with passage of the
Trading With the Enemy Act. Also, the export enforcement
functions of the Department of Commerce regarding licenses
have been performed by the Customs Service since at least
1917 when regulations authorized and directed Customs to
PAGENO="0479"
475
enforce the Commerce Department end Export Administration
Board export licensing requirements during World War I.
Increased emphasis was placed on export enforcement in 1981
as a result of assessments by the Reagan Administration.
Customs has been the lead agency in informing the public,
establishing liaisons, developing information and
investigating violations of all export laws and regulations.
o Except for shared domestic enforcement of the Export
Administration Act with Commerce, Customs enforces all
other export laws for the U.S. Government. These laws
enforced by Customs involve the United States Munitions
List, Missile Technology, nuclear weapons and research,
Foreign Assets Control, CHEMCON II (drug manufacturing
precursors), stolen vehicles under the Motor Vehicles Theft
Law Enforcement Act of 1984, currency, chemical and
biological weapons to name a few.
o As a criminal investigation proceeds, it is not uncommon to
discover that more than one export law has been violated.
In some situations an investigation is initiated for what
are believed to be violations of the Export Administration
Act when it is later determined that there are violations of
the Arms Export Control Act or other export laws. Customs,
because of its broad investigative authority, can continue
the investigation without disruption which would be caused
by referring the matter to another agency.
o Customs has unquestionable, court tested, warrantless export
border search authority. This authority provides for
efficient and effective enforcement and prosecution.
Commerce, by law, must have a Customs Officer present in
order to take enforcement action at ports and borders. This
redundant use of personnel is not cost effective or
efficient.
o Customs has established foreign offices in 20 locations, and
has long, well established relationships with not only
foreign Customs officers, but also with most foreign
enforcement and intelligence agencies. These 20 offices
have investigative oversight for all countries around the
world. Customs officers are the primary enforcement
authorities for import/export violations in most foreign
countries, especially COCOM countries. This natural
counterpart relationship allows for the most expeditious
handling of matters through already existing channels.
Customs has established formal Bilateral Customs-to-Customs
Mutual Assistance Agreements under which investigations can
be requested and a mutual exchange of information takes
place.
o Customs is authorized by law to conduct overseas
investigations for all violations of U.S. export laws to
include those investigated by Commerce for violations of the
Export Administration Act. Customs currently honors all
Commerce requests for foreign investigations and has offered
to fulfill all of Commerce's investigative needs for both
criminal and administrative actions.
o The U.S. Customs Service is successful in export enforcement
because it has designated export enforcement as a major
priority and has invested a considerable amount of manpower,
training, and money into this effort. U.S. Customs has a
well-trained, experienced cadre of 300 special agents and
135 inspectors who are dedicated solely to export
enforcement. Customs has an additional 2500 special agents,
PAGENO="0480"
476
5000 inspectors and auditors to call upon for assistance as
needed. U.S. Customs is also located at core than 300
domestic locations in the United States and its territories.
o Because of its flexibility and broad enforcement authority,
the U.S. Customs Service is able to shift export enforcement
resources based upon U.S. policy and therefore utilize
Customs resources in the most cost efficient manner to the
U.S. Government. Custom enforcement authority is not
subject to renewal of the Export Administration Act but has
full authority granted under 19 USC l589a.
o The U.S. Customs Service possesses the traditional law
enforcement resources and personnel to effect multiple
enforcement operations (simultaneous search warrants,
electronic interceptions, 24 hours multi-location
surveillances, etc. (.
o The U.S. Customs Service, over the years, has obtained
extensive experience in the establish,ment of businesses for
use in undercover operations to detect and successfully
investigate violations of U.S. export laws, to include the
Export Administration Act. Additionally, Customs has in
* place the Justice Department mandated infrastructure and
training to support these successful operations.
o Although the Department of Justice has an established policy
that criminal investigations have priority over civil
investigations, Customs does not believe that Commerce's
ability to deny export privileges and issue civil penalties
would be hampered by Customs assumption of sole enforcement
authority of the Export Administration Act. Customs Special
Agents have historically conducted import civil fraud
investigations and have developed an expertise in the area
of fraudulent shipping documents, for both imports and
exports, unsurpassed by any other federal law enforcement
agency. In FY-90, Custcms collected more than 929.8 million
dollars in penalties as a result ot civtl import fraud
investigations. Investigations by two different agencies
for the same violation, one criminal and cne civil, is not
cost effective for the U.S. Government.
o As is currently done with Customs import fraud
investigations, Customs can investigate and obtain all
information necessary for both the criminal and civil
violations of the Export Administration Act under
established U.S. guidelines for the collection of evidence,
and refer the results to Commerce's administrative law
judges and counsel for administrative action and fines.
This procedure is presently in place with the Department of
State for Arms Export Control Act violations, and the
Department of Treasury for other export violations.
o Customs has well established relationships with dcrestic
transportation companies, freight torwarders, brokers, and
the entire import/export coc~un±ty at large in the United
States. That community looks to ~ustccs as the enforcerent
experts.
o A merger of Commerce enforcement personnel with Customs
would only strengthen export enforcement and greatly improve
career opportunities and geographic mobility for the
Commerce employees.
o Economies of scale may be realized through consolidation of
Commerce's export enforcement office with Customs. The U.S.
Government could save all current attendant costs of
supporting Commerce investigative offices in the U.S. and
abroad, all of which are located in the same cities as U.S.
Customs.
PAGENO="0481"
477
21. How good is the relationship between the intelligence
community end Customs? Go you receive edequate end timely
intelligence on the ettempts by other countries to ecguire
U.S. technology to enable you to defend egeinst eny
attempted exports?
By and large the relationship is one that has proven
beneficial to the Customs Service and the country.
Interaction between Customs and the Community occurs
routinely through electronic and telephonic contacts on
issues in areas of mutual concern. Through these contacts,
this agency has established a good working rapport with
individual Community members, establishing what each can and
cannot provide with respect to their areas of concern and
expertise. As such, Customs has been able to elicit
significant esport enforcement data from both highly
specific and general Community reporting, as well as via
telephone calls, which assist in both tactical operations
and strategic trend analysis.
Customs personnel are members of various interagency panels
with Intelligence Community representatives with the aim of
eschanging information at the working level. These
interagency panels discuss matters in a wide range of
strategic trade areas including missile technology, nuclear
technology, weapons and munitions, and other high technology
components end finished products.
Participating in these panels affords Customs the
opportunity to meet face to face with members of the
Community and engage in a personal dialogue with members of
agencies whose primary mission and focus is not law
enforcement. These meetings thereby provide a forum for
both the Community and Customs to better understand the
policy perspectives, operational methods, and informational
needs each has in striving to fulfill its role in achieving
the common U.S. Government goals. Such understanding
increases the efficiency of Customs export enforcement and
interdiction efforts and provides an atmosphere for maximum
cooperation between the Service and the Community.
while Customs does obtain valuable information for export
enforcement purposes from Community members, this agency
reciprocates that assistance. Providing specific feedback
to Community members assists them in assessing the value of
the information they collect, and in determining what types
of reporting is beneficial to this agency. Giving this
feedback has the benefit of letting the Community know in
concrete terms the contribution it has made in protecting
U.S. interests and safeguarding the national security.
However, a second equally important form of "feedback" or
benefit, albeit less recognised, is also deri~.çed by the
Community from the relationship. Customs investigative
actions sometimes uncover information/data which is of
particular value to Community members for further research
or future collection purposes. Customs attempts to provide
this type of information to desirous members where
appropriate, occasionally through the dissemination of
Reports of Investigation (ROTs).
The relationship has proven beneficial to both parties in
the past and seems fairly solid. It should be noted that
some feel that certain Community members do not share enough
of their law enforcement related intelligence. However,
when considering the vast amount of raw and finished
intelligence which is collected, analysed, and reported
51-840 0 - 92 - 16
PAGENO="0482"
478
daily, it is extremely difficult to assess whether or not
this is indeed the case.
In general, data provided by the Community has proven to be
both adequate and timely in the pursuit of export fraud.
As a matter of daily routine, information in the form of
cable traffic is received from the Community and screened to
see if it is usable for Operation EXODUS. If it is deemed
to be pertinent, the information is subsequently analyzed
and tailored to fit Customs law enforcement needs. Most
often the information is provided with enough lead time to
enable Customs personnel to put the information out to the
appropriate enforcement field office for its action.
The information provided is usually complete enough that
Customs personnel do not have to go back to the Cornunity
for further elaboration or explanation. When those
occasions arise where additional information is needed, the
Community acts to cooperate to the extent that it can to
satisfy Customs request. If the request is not very
routine" in nature or if there exists a policy conflict
over the inquiry, however, the Community response may
sometimes be delayed beyond what most would consider a
reasonable waiting period.
It sh&ild be added that even when Customs does not receive
"timely" information from the Community, this agency still
may be able to put the intelligence to good use. In large
part, this is because Customs has the ability to bring
criminal charges against violators even if the illegal
shipment has reached its intended destination without being
interdicted.
Obviously, Customs walks a fine line when using Connunity
information. A balance must be struck between the Cocunity
need for anonymity and Customs need to distribute
information that can be used to protect the national
security. That this has been successfully maintained for
such a long period of time attests to the cooperation and
understanding between Customs and the Community.
THE FOLLOWING ANSWERS ARE IN RESPONSE TO QUESTIONS FROM
CONGRESSMAN SUNDQUIST ON MAY 1, 1991
i. Would you favor the creation of a Justice Department task
force specializing in export crimes as described by
Ms. MOORE in her testimony?
The Customs Service coordinates the prosecution of all
export investigations with the Internal Security Section,
Criminal Division, U.S. Department of Justice (OOJ). Within
the Internal Security Section, DOJ in the early 1980's,
established an Export Control Enforcement Unit. This unit
is responsible for establishing DOJ's policy with regard to
export enforcement and monitoring export enforcement
prosecutions by U.S. Attorneys. The attorneys assigned to
the Export Control Enforcement Unit are OOJs resident
experts on export enforcement.
The Export Control Enforcement Unit provides many valuable
services to investigating agencies and U.S. Attorney's
offices. Among these services are assistance in drafting
legal documents, such as indictments and affidavits, legal
research, and serving as the OOJ interface for contact with
the legal staffs of other U.S. agencies and the intelligence
community. Attorneys assigned to the Export Control
Enforcement Unit have traveled to a number of U.S.
Attorney's offices throughout the U.S. to offer advice and
PAGENO="0483"
479
assistance on specific prosecutions. On a number of
occasions, Export Control Enforcement Unit Attorneys have
even served as members of the prosecution team at lengthy
trials.
Over the years, the Strategic Investigations Division of the
Customs Service has developed a close working relationship
with the Export Control Enforcement Unit. We believe that
this relationship has fostered both better investigations
and prosecutions. The Customs Service views the Export
Control Enforcement Unit as DOJ's ad hoc "national task
force to coordinate the prosecution of export violations."
2. Should exporters and freight forwarders be required to sign
an end-use statement on all shipment export declarations?
On the Shipper's Export Declaration (SED) form, it is
required that the country of ultimate destination be
identified. The SED must be signed by the exporter or his
agent. The country of ultimate destination serves as an end
use statement on the SED.
3. Wouldn't it help if we had a warning statement, like
falsifying this document carries a penalty of $50,000 fine
or five years imprisonment?
The Shipper's Export Declaration form (7525-V) does contain
a warning statement that criminal and civil penalties may be
imposed for making false or fraudulent statements (SED
sample, Enclosure #9).
On all license applications. Commerce does ask "the seller
and purchaser what their intentions are?" Upon filing an
Application for Export License (Enclosure #10), the
application certifies that "to the best of my knowledge,
information and belief all statements in this application
including the description of the commodities or technical
data and their end-uses, and any documents submitted in
support of this application are correct and complete and
that they fully and accurately disclose all terms of the
order and other facts of the export transaction." The
Application for Export License also contains the following
warning "Waking any false statement or concealing any
material fact in connection with this application or
altering in any way the validated license is punishable by
imprisonment or fine, or both, and by denial of export
privileges under the Export Administration Act of 1979, and
any other applicable Federal statues."
Similarly State export license applications (DSP-5,
Enclosure #11) require the applicant to "Warrant the truth
of all statements made herein, and acknowledge, understand,
and will comply with the provisions of Title 22 CFR 120-130
and any conditions and limitations imposed." Title 22 CFR
123.9 states in part... "The country designated as the
country of ultimate destination on an application for an
export license, or on a shipper's export declaration where
an exemption is claimed under this subchapter, must be the
country of ultimate end-user... Exporters must ascertain the
specific end-user and end-use prior to submitting an
application to the Office of Munitions Control or claiming
an exemption under this subchapter. End-use must be
confirmed and should not be assumed..
4. Do either the EAA or money laundering statutes cover
money that is transferred within the United States?
On April 18. 1991. Ms. Portia Moore testified that "one
thing the money-laundering statute did not allow us to get
was money that had been transferred wholly inside the United
States." (Hearing on the Administration of U.S. Export
Control Programs Before the Subcommittee on Oversight of the
House Committee on Ways and Means, 102 Cong., 1st sess.
248). On May 1, 1991. the Commissioner of Customs was asked
whether that opinion comported with the agency's
understanding regarding the scope of the money laundering
laws. As the Customs Service disagreed with Ms. Moore's
PAGENO="0484"
480
statement, the following explanation was prepared at the
Subcommittee s request.
The Money Laundering Control Act of 1986, as amended, (`the
Act"), established a comprehensive statutory framework
addressing money laundering offenses involving financial
transactions and international transportation of funds. 18
U.S.C. 1956 and 1957. Set forth in 18 U.S.C. 1956 are four
offenses pertaining to financial transactions; three
pertaining to the international transportation of funds or
monetary instruments; and three pertaining to financial
transactions involving property represented by a law
enforcement officer to be proceeds of specified unlawful
activity. Both the Arms Export Control Act, 22 U.S.C. 2778,
and the Export Administration Act, 50 U.S.C. 2401 at sea.,
are predicate offenses of the Money Laundering Control Act
of 1986, as amended.
The civil forfeiture component of the Act, 18 U.S.C. 981,
authorizes the forfeiture of any property, real or perscnal,
involved in a transaction or attempted transaction in
violation of 18 U.S.C. 1956 or 1957 or 31 U.S.C. 5313(a) or
5324 (currency transaction reporting and structuring
provisions), or any property traceable to such property.
Not only does this provision allow for the forfeiture of
property actually laundered and the commissions derived
therefrom, but any property traceable to or with a
substantial connection to the property involved in the
illegal activity in violation of 18 U.S.C. 1956 and 1957 and
31 U.S.C. 5313(a) or 5324 may be seized and forfeited. The
term "involved" is broad enough to reach property used to
facilitate money laundering violations. See United States
v. All Monies ($477,048.62) in Account 90-3617-3, 754 F.
Supp. 1467 (0. Hawaii 1991)(Court held that the balance of
money from legitimate sources in an account which helped to
conceal the tainted money was subject to forfeiture under
18 U.S.C. 981 as property used to facilitate money
laundering offenses).
The position that 18 U.S.C. 981 authorizes the forfeiture of
any property used to facilitate a money laundering offense
is supported by the legislative history from the Money
Laundering Prosecution Improvements Act of 1988, P.L. 100-
690. As explained in the section-by-section analysis:
[TJhe term "property involved" is intended
to include the money or other property being
laundered (the corpus), any commissions or
fees paid to the launderer, and any property
used to facilitate the laundering offenses.
134 Cong. Rec. S17365 (daily ed. Nov. 10, 1988). Thus, 18
U.S.C. 981 permits the seizure and forfeiture of any
property laundered, traceable to the property laundered, or
used to facilitate the offense. The statute contains no
restriction pertaining to transactions conducted entirely
within the United States. To the contrary, no international
element is required in the majority Of money laundering
offenses to obtain forfeiture of property involved in a
violation. By way of example, if an individual exports arms
from the United States in violation of 22 U.S.C. 2778 (the
Arms Export Control Act), receives $1,000,000 for his
services and then deposits $100,000 in a Federal bank
intending to use these proceeds to acquire and export more
arms in the future, an offense under 18 U.S.C.
1956)a)(1)(A)(i) has been committed. Consequently, 18
PAGENO="0485"
481
U.s.c. 981 would permit the seizure and forfeiture of any
portion of the $1,000,000, any property traceable to the
funds, and any other property involved in the violation.
Finally, we note that upon the criminal conviction of any
person for a violation of the Export Administration Act, 50
U.S.C. App. 2410(g) provides for the forfeiture of any
property involved or used in a violation of the Export
Administration Act as well as any proceeds from the illegal
act. see also 18 U.S.C. 982.
THE FOLLOWING ANSWERS ARE IN RESPONSE TO QUESTIONS FROM
CONGRESSMAN MOODY ON MAY 1, 1991
1. Is there a conflict of interest within lead U.S. agencies
when the primary function is to promote and facilitate U.S.
exports, not to curtail them?
customs does not know to what extent there may be a conflict
of interest as this involves policy decisions of other
agencies.
2. Today, criminal penalties apply to U.S. companies only if
they willfully and knowingly misrepresent the end use of an
exported product. The U.S. Government must, therefore,
prove that the firm had prior knowledge, which is no easy
task. There is, therefore, a clear incentive under the
present structure for U.S. firms not to ask too many
questions, much less follow up on the end use to verify what
that end use would be.
Congressman Moody's suggestion is to amend Federal law to
impose civil penalties on U.S. parties that export dual-use
articles subsequently found to have been used for military
purposes contrary to representations in the license
application. The type of violation described in Mr. Moody's
scenario might subject the parties to civil penalties under
50 U.S.C. App. 2410(c) and/or 22 U.S.C. 2778(e) if, for
example, the evidence showed that the exporter knowingly
made the false statement on the application. The Customs
Service, however, would support any amendment to the export
laws designed to require greater vigilance on the part of
U.S. exporters and to penalize breaches thereof.
Under the customs laws, similar provisions make carriers
liable for the importation of unmanifested controlled
substances. See 19 U.S.C. 1484. While 19 U.S.C. 1484
imposes civil penalties on an almost strict liability basis,
the law provides by way of an affirmative defense that if
carriers can prove that they did not know and could not have
known by the exercise of the highest degree of care and
diligence that such drugs were on board, no penalties shall
be imposed. 19 U.S.C. 1548)a))2). When this provision was
amended in 1986, Congress indicated that the changes were
designed to encourage greater vigilance by, and to increase
the accountability of, carriers. N.E. Rep. No. 99-794, 99th
Cong. 2d. Sess., 14-15 (1986). Accordingly, the customs
Service believes a similar provision could be enacted to
address the export of dual-use items and their unauthorized
military use.
3. There is a loophole in the so-called general destination
)G-DEST) classification allowing a commodity to go anywhere.
The G-DEST license requirement does notprevent customs from
detaining the shipment, examining documents and questioning
persons in order to determine if the export is legal or
falls within the G-DEST requirement.
4. Is there a Canadian Loophole?
As a member of COCOM, the Government of Canada is very
cooperative in intercepting U.S. origin goods to proscribed
PAGENO="0486"
482
nations, providing that the goods are licensable per the
Commodity Control List. The Canadian Import Export Permits
Act is consistent with the U.S. Export Administration Act.
where our National policies differ are in the enforcement of
U.S. sanctions pursuant to such U.S. laws as the
International Emergency Economic Powers Act, Trading With
the Enemy Act, and the International Security and
Development Cooperation Act. The Government of Canada
considers U.S. origin goods, entered (duty-paid) into Canada
as "Products of Canada" and will permit the re-export of
such goods to sanctioned nations provided the exportation
does not violate Canadian law. In the case of Iraq, Canada
passed legislation, consistent with the U.N. sanctions.
Canada does not, however, restrict the exportation of non-
strategic goods to most other U.S. embargoed nations.
5. Is there a lack of cooperation between intelligence and
enforcement?
The relationship between the CIA and this agency has
generally been a good one. The flow of information between
the two agencies is not only continuous but also reciprocal.
Each agency continues to benefit from the other's
information and feedback, but, on the whole, it is Customs
who is the greater beneficiary of the information flow.
Indeed, more of the intelligence that this agency receives
from CIA involves trend analysis and long-range reporting
as opposed to tactically-oriented information. However,
this seems merely a consequence of the nature of their
operations and mission, and the tactical intelligence that
they do identify as pertinent to Customs concerns,
especially concerning possible U.S. export violations, is
normally brought to the attention of this agency in a very
timely and complete manner. Finally, it should be noted
that the CIA, like all Intelligence Community Members, is
authorized, while not mandated, under Executive Order 12333
(Section 2.6) to assist law enforcement authorities through
"cooperation," and participation in certain `law
enforcement activities' (e.g., referring law enforcement
intelligence to these authorities).
6. There is a lack of cooperation between licensing and
enforcement agencies.
The Customs Service agrees that to be even more effective we
need more cooperation from Commerce with regard to obtaining
licensing information.
Also, any requests for licensing information should be
released to a law enforcement agency that is mandated to
enforce U.S. export laws. The Customs Service believes the
language of the Export Administration Act is cuite clear
regarding the exchange of any licensing and enforcement
information (See 50 U.S.C. App. 2411(c)(3). If conflicting
interpretations of the confidentiality provision cannot be
resolved, legislative clarification might be desirable.
7. Customs resources concentrate on imports rather than
exports.
As indicated in the Commissioner's testimony of May 1, 1991,
the Customs Service implements its export enforcement
strategy with a force of 300 Customs special agents and 135
Customs inspectors. Their efforts may be augmented on a
case-by-case basis through the use of an additional 2500
special agents and 5000 Customs inspectors located at over
300 domestic and 20 foreign posts of duty. There is no
question that the Customs Service deploys most of its
resources on imports. The Customs Service is, however,
constantly adjusting its export enforcement program to meet
the foreign policy, national security, and law enforcement
concerns of the U.S. These adjustments include
reprogramming positions and the development of new systems.
For example, during the Persian Gulf crisis Customs
reprogrammed enforcement positions to augment existing
export enforcement efforts focused on the Middle East. It
is extremely difficult to estimate the percentage of
illegally exported related items interdicted by the Customs
Service. Since 1981, the Customs Service has made more than
10,000 seizures valued at more than $786 million that were
destined for illegal export. Because many of the
illegitimate end-users are foreign Governments, it is highly
unlikely that the U.S. Government will ever receive enough
international cooperation to make an- accurate accounting of
the "ones that got away.' This is particularly true when
certain diversions do not take place until years after the
initial export from the U.S.
PAGENO="0487"
483
Mr. ANTHONY [presiding]. Our next speaker will be the Honora-
ble Kenneth Cutshaw, the Deputy Assistant Secretary for Export
Enforcement of the U.S. Department of Commerce, and Mr. Cut-
shaw, for the record, will you identify any personnel that you have
with you?
STATEMENT OF HON. KENNETH A. CUTSHAW, DEPUTY ASSISTANT
SECRETARY FOR EXPORT ENFORCEMENT, BUREAU OF EXPORT
ENFORCEMENT, U.S. DEPARTMENT OF COMMERCE, ACCOMPA-
NIED BY lAIN BAIRD, DIRECTOR, OFFICE OF EXPORT LICENS-
ING
Mr. CUTSHAW. I will, Mr. Chairman. On my left is Mr. lain Baird
and he is the Director of our Office of Export Licensing at the De-
partment of Commerce.
Mr. ANTHONY. Will Mr. Baird be giving testimony or is he just
there to assist you?
Mr. CUTSHAW. No, sir, he is here to assist me in responding to
questions.
Mr. ANTHONY. You are now recognized for your testimony and
the committee will be happy to take your full statement and intro-
duce it in the record, and you can read it or summarize, as you
wish. You are recognized.
Mr. CUTSHAW. Thank you, Mr. Chairman. I will attempt to sum-
marize my testimony and submit the full statement for the record.
I would like to begin by saying that the Commerce export en-
forcement mission is very straight-forward, it is to prevent the vio-
lations of the Export Administration Act, and to bring to justice
anyone who does violate the Act and its regulations. The profes-
sionals we have at Commerce's Office of Export Enforcement are
dedicated to stopping the diversion of U.S. goods and technology
and, thereby, supporting the critical national security and foreign
policy interests that the act seeks to protect. We are a modern Fed-
eral law enforcement agency with up-to-date equipment and train-
ing. In addition to the traditional law enforcement training that we
have, our agents receive in-depth training concerning the export
control system and certain investigative techniques that are useful
for uncovering export control violations. We have 80 criminal in-
vestigators, as well as additional support staff and we have them in
eight field offices and headquarters here in Washington and we
have an intelligence division to carry out the functions.
Export enforcement officers have a single mission and that is to
enforce the Export Administration Act. We devote 100 percent of
our resources in focusing on this one particular law. We seek to
prevent violations in three important ways: First, through our
Project Outreach, OEE agents contact exporters and alert them to
the export control laws and the need for compliance. OEE has
found that most business people are conscientious, and the care ex-
ercised by these exporters promotes good export control compli-
ance. Further the business community has been very helpful in
alerting our investigators to potential problems, which, in turn, has
prevented violations and helped bring violators of the law to jus-
tice.
PAGENO="0488"
484
Second, our Office of Export Enforcement reviews the export li-
cense applications to ensure that each proposed export does not
present an unacceptable risk of diversion to an unauthorized end
user. OEE performs this important function in cooperation with
another office in Commerce, the Office of Export Licensing, which
Mr. Baird is the director of. This particular office analyzes and
makes decisions on all license applications under the Export Ad-
ministration Act.
When the Office of Export Enforcement and the Office of En-
forcement Support review export license applications, they rely on
information developed in the course of our investigations at Com-
merce, information supplied by Customs from Customs investiga-
tions, and information from the intelligence community. Finally,
our mission entails that we investigate violations of the Export Ad-
ministration Act and pursue criminal and/or administrative sanc-
tions against violators.
* Here, the Office of Export Enforcement works in the fashion of
other Federal law enforcement agencies in pursuing criminal viola-
tions. Besides the traditional sanctions of criminal fines and im-
prisonment, Commerce can seek administrative sanctions of fines
and the denial of export privileges. Administrative cases are han-
dled in Commerce for the Office of Export Enforcement by the
Office of Chief Counsel for Export Administration. These adminis-
trative sanctions provide a unique tool to use against foreign per-
sons or firms that violate our laws, but are located overseas,
beyond the reach of U.S. jurisdiction for criminal prosecution.
These sanctions can be imposed in administrative proceedings
that parallel criminal prosecution, or they can be imposed follow-
ing completion of criminal cases. OEE seeks administrative sanc-
tions, especially because the denial of export privileges comple-
ments the traditional criminal sanctions and provides a deterrent
for potential violators of the export control laws.
Some of the issues I believe that were discussed and encountered
by Commerce in enforcing the export control laws were discussed
in your hearing on April 18. I would like to identify several points
from those issues. One, it is essential that we have cooperation
from law enforcement officials of other countries, as we conduct
our investigations into possible export or reexport violations. For
example, the mechanisms for enforcement cooperation are develop-
ing in two groups-COCOM for national security controls and the
Australia Group for controls on chemical weapons precursors. In
COCOM, we have developed the common standard for effective en-
forcement, which represents the undertaking by the member gov-
ernments to maintain export control systems that have certain
minimum regulatory and enforcement components. Included in the
common standard is an undertaking to cooperate with other gov-
ernments on enforcement matters.
In the Australia Group, which is the group that looks at controls
over chemical weapons precursors, the enforcement officials from
the participating countries have met to discuss the harmonization
of their export controls, to look at common enforcement problems
and to conceive practical ways of cooperating on these enforcement
matters.
PAGENO="0489"
485
Today, many violations of the Export Administration Act do
occur overseas rather than in the United States, as diverters have
learned that they can be arrested here and prosecuted quite vigor-
ously for criminal violations. Consequently, I believe that interna-
tional cooperation is vital for the future enforcement efforts.
Let me clarify what U.S. export officials, whether they are Com-
merce or Customs or other U.S. agents, can and cannot do in for-
eign countries. There are legal limits on the operations of U.S. law
enforcement agencies abroad. For example, for any documents we
may obtain overseas we must be sure to follow the applicable for-
eign and U.S. rules pertaining to proving that the documents are
authentic, and therefore, admissible as evidence in U.S. courts.
Thus, the cooperation of our foreign enforcement counterparts is
necessary and critical to accomplishing our mission.
Second, it is essential, in my view, that Commerce enforcement
personnel conduct their own prelicense and postshipment checks
overseas, especially under the initiatives that we have taken in
Poland, Hungary, and Czechoslovakia, because it is the responsibil-
ity of the Commerce enforcement people, under the Export Admin-
istration Act, to determine whether to issue licenses for exports to
those countries.
As Commerce officials are held accountable to Congress for ap-
proving licenses to these emerging democracies, and as Commerce
is authorized by the Export Administration Act to conduct these
checks, Commerce should do them and we will continue to do
them. Commerce is well-suited to conduct these checks in a manner
that is timely and accurate and to conduct them using personnel
who are accountable to those who have the licensing authority and
responsibility.
Because of our special training of the agents on dual-use export
controls, these~ agents know what to look for when they are doing
these prelicense and postshipment checks.
The same principle applies with respect to other countries, where
the primary concern of the United States is the proliferation of nu-
clear, biological, and chemical weapons and their missile delivery
systems.
Third, we should reflect carefully on the enforcement policy
issues that underlie the decision of whether to prosecute a violator
in the criminal justice system, which can lead to criminal fines and
imprisonment, or within the administrative system, which can lead
to civil penalties and export denials, or whether to prosecute
through both the criminal justice system and the administrative
system.
The choice to proceed down which path or another can have sig-
nificant legal, policy, and diplomatic consequences. Currently, the
Customs Service enforces only the criminal penalties under the
Export Administration Act, while at Commerce we enforce both
the criminal penalties and the administrative sanctions.
The decision whether to seek criminal or administrative sanc-
tions, or both, should be based on the merits of each case, not on
which agency happened to have uncovered the violation. At a mini-
mum, I believe, and I think the Customs Service agrees and the
Commissioner said as much, that every criminal case that Customs
investigates should, when that part of the case is over, and wheth-
PAGENO="0490"
486
er the case concludes with the imprisonment of the violator or with
the Justice Department declining to prosecute, be referred to Com-
merce for possible administrative sanctions. In that way, we can
impose sanctions on the violators, thereby protecting the U.S. na-
tional security and foreign policy interests. In the cases where par-
ties are denied export privileges, we can also alert the law-abiding
business community not to deal with those parties.
You have asked in your letter to Commerce what we need, to do
our job better? I think in response I would say that the administra-
tion is continuing its efforts to develop better international and bi-
lateral agreements to obtain admissible evidence.
As I mentioned, these efforts are taking place in COCOM for na-
tional security controls and the Australia Group for chemical
weapons precursors. On a practical level, we are also attempting to
develop direct contacts among all U.S. law enforcement agencies
charged with enforcing the Export Administration Act and their
counterparts in other countries so that we can cut down on the
time required to obtain admissible legal evidence through the
proper legal channels and so that we can obtain sufficient informa-
tion during our prelicense and postshipment checks, in time to pre-
vent diversions from occurring overseas.
However, Congress, in supporting our efforts, must be mindful
that, as with many international initiatives, it can take a good deal
of time to reach effective agreements among countries having di-
verse governmental and legal systems, even when those countries
agree on basic principles to control dangerous technologies.
Export enforcement is a challenge and a responsibility and our
export control laws are very complex here in the United States and
other countries. International business transactions are also quite
sophisticated. The United States has worked closely with its allies
over the years to develop international arrangements for control-
ling sensitive technology effectively, and this administration is ac-
tively working today to develop these arrangements with others.
We, in Commerce Export Enforcement, appreciate the opportuni-
ty to play, I believe, a very important and significant role in pro-
tecting the country's national security and foreign policy interests
and we certainly look forward to continuing to participate in this
process.
Mr. Chairman, that concludes my testimony and I will be happy
to answer any questions.
[The prepared statement follows:]
PAGENO="0491"
487
Statement of Kenneth A. Cutshaw
Deputy Assistant Secretary
for Export Enforcement
Bureau of Export Administration
Before the Subcommittee on Oversight
House Committee on Ways and Means
May 1, 1991
Commerce's export enforcement mission is simple--it is to prevent violations of the Export
Administration Act and to bring to justice anyone who does violate the Act and its
implementing regulations. The professionals of Commerce's Office of Export Enforcement
(OEE) are dedicated to stopping diversions of U.S. controlled goods and technology and,
thereby, supporting the critical national security and foreign policy interests the Act seeks to
protect.
OEE is a modern federal law enforcement agency with up-to-date equipment and
professional training. In addition to traditional law enforcement training, OEE special agents
receive in-depth training concerning the export control system and investigative techniques
most useful for uncovering EAA violations. OEE has 80 criminal investigators, as well as
additional support staff, in eight field offices and an Intelligence Division. Export
Enforcement officers have a single mission--to enforce the Export Administration Act. Their
resources focus on this one area.
OEE seeks to prevent violations in three important ways. First, through its Project
Outreach, OEE contacts exporters and alerts them to the export control laws and the need for
compliance. OEE has found that most business people are conscientious. The care exercised
by these exporters promotes good export control compliance. Further, the business
community has been very helpful in alerting OEE investigators to potential problems which,
in turn, has prevented violations and helped bring perpetrators to justice.
Second, OEE reviews export license applications to ensure that each proposed export does
not present an unacceptable risk of diversion to an unauthorized end-use. OEE performs this
important function in concert with its sister office, the Office of Export Licensing, the
Commerce Department office that analyzes and makes decisions on all license applications
under the Export Administration Act. When OEE and another sister office, the Office of
Enforcement Support, review export license applications, they rely on information developed
in the course of OEE investigations, information supplied by Customs from Customs
investigations, and information from the intelligence community.
Finally, OEE investigates violations of the Export Administration Act and pursues criminal
and administrative (civil) sanctions against violators. Here, OEE works in a fashion similar
to other federal law enforcement agencies. Besides the traditional sanctions of criminal fines
and imprisonment, OEE can seek administrative sanctions of fines and the denial of export
privileges. Administrative cases are handled in Commerce for OEE by the Department's
Office of Chief Counsel for Export Administration. Administrative sanctions provide a unique
tool to use against foreign persons or firms that violate our laws but are located overseas,
beyond the reach of U.S. criminal prosecution. These sanctions can be imposed in
administrative proceedings that parallel criminal prosecution, or they can be imposed following
completion of criminal cases. OEE seeks administrative sanctions, especially the denial of
export privileges, to complement traditional criminal sanctions in an effort to deter violations
of our nation's export control laws.
PAGENO="0492"
488
Some of the difficulties encountered by Commerce in enforcing the export control laws
were discussed in your hearing on April 18. 1 would like to highlight for you several points
that apply generally to our enforcement efforts.
First, it is essential that we have cooperation from law enforcement officials of other
countries as we conduct our investigations into possible export or reexport violations. For
example, mechanisms for enforcement cooperation are developing in two groups, CoCom for
national security controls and the Australia Group for controls on chemical weapon precursors.
In CoCom, we have the Common Standard for Effective Enforcement, which represents an
undertaldng by the member governments to maintain export control systems that have certain
minimum regulatory and enforcement components. Included in the Common Standard is an
undertaking to cooperate with other governments on enforcement matters. In the Australia
Group, enforcement officials from the participating countries are meeting to discuss the
harmonization of their export controls, common enforcement problems and practical ways of
cooperating on enforcement matters.
Today, many violations of the EAA occur overseas rather than in the United States, as
diverters have learned that they can be arrested here and prosecuted for criminal violations.
Consequently, I believe international cooperation is vital for our future enforcement efforts.
Let inc clarify what U.S. export enforcement officials, whether they are Commerce or U.S.
Customs agents, can and cannot do in foreign countries. There are legal limits on the
operations of U.S. law enforcement agencies abroad. For example, for any documents we
may obtain overseas, we must be sure to follow the applicable foreign and U.S. rules
pertaining to proving that the documents are authentic and, therefore, admissible as evidence
in U.S. courts. Thus, the cooperation of our foreign enforcement counterparts is necessary
to accomplish our mission.
Second, it is essential, in my view, that Commerce enforcement personnel conduct their
own pre-license and post-shipment checks overseas, especially in Poland, Hungary, and the
Czech and Slovak Federative Republics, because it is the responsibility of Commerce, under
the EAA, to determine whether to issue licenses for exports to those countries. As Commerce
officials are held accountable to Congress for approving licenses to these emerging
democracies, and as Commerce is authorized by the EAA to Oonduct these checks, Commerce
should do them. Commerce is well-suited to conduct these checks in a manner that is timely
and accurate, and conduct them using personnel who are accountable to the Under Secretary
who has the licensing authority and responsibility. Because of our special training on dual use
export controls, we know what to look for. The same principle applies with respect to other
countries where the primary concern of the U.S. is the proliferation of nuclear, biological and
chensical weapons, and their missile delivery systems.
Third, we should reflect carefully on the enforcement policy issues that underlie the
decision whether to prosecute a violator within the criminal justice system, which can lead to
criminal fines and imprisonment, or within the administrative or civil system, which can lead
to civil penalties and export denials, or whether to prosecute through both the criminal justice
system and the administrative system. The choice to proceed down one path or another can
have significant legal, policy and even diplomatic consequences. Currently, the Customs
Service enforces only criminal penalties under the EAA, while Commerce enforces both
criminal and administrative sanctions. The decision whether to seek criminal or administrative
sanctions, or both, should be based on the merits of each case, not on which agency happened
to uncover the violation first. At a minimum, I believe, and I think the Customs Service
agrees, that every criminal case that Customs investigates should, when its part of the case is
over and whether the case concludes with imprisonment of the violator or with the Justice
Department declining to prosecute, be referred to Commerce for possible administrative
sanctions. In that way, we can impose sanctions on the violators, thereby protecting U.S.
national security and foreign policy interests and, in the cases where parties are denied export
privileges, we can also alert the law-abiding business community not to deal with those
parties.
PAGENO="0493"
489
You have asked what is needed so we can do our job better. In response, I would say that
the Administration is continuing its efforts to develop better international and bilateral
agreements to obtain admissible evidence. As I have mentioned, these efforts are taldng place
in CoCom for national security controls and the Australia droup for chemical weapon
precursors. On a practical level, we also are attempting to develop direct contacts among all
U.S. law enforcement agencies charged with enforcing the EAA and their counterparts in
other countries, so we can cut down on the time required to obtain admissible evidence
through the proper legal channels, and so that we can obtain sufficient information during our
pre-license and post-shipment checks in time to prevent diversions from occurring overseas.
However, Congress, in supporting our efforts, must also be mindful that, as with many
international initiatives, it can take a good deal of time to reach effective agreements among
countries having diverse governmental and legal systems, even when those countries agree on
basic principles to control dangerous technologies.
Export enforcement is a challenging responsibility. Our export control laws are very
complex. International business transactions are quite sophisticated. The United States has
worked closely with its allies over the years to develop international arrangements for
controlling sensitive technology effectively, and this Administration is actively working today
to develop these arrangements further. We in Commerce export enforcement appreciate the
opportunity to play an important role in protecting our country's national security and foreign
policy interests.
PAGENO="0494"
490
Mr. ANTHONY. Thank you, Mr. Cutshaw.
By letter of April 22, 1991, to the Under Secretary, there is a sen-
tence that says, a copy of the hearing transcript and testimony re-
ceived by the subcommittee has been made available to your office.
It says for this purpose and the purpose was to try to identify prob-
lems that had been illustrated by four specific cases. Have either
you or Mr. Baird or one of the people behind you reviewed that
transcript to identify those problem areas?
Mr. CUTSHAW. Mr. Chairman, I believe that Mr. Pickle has indi-
cated the same thing, I have not reviewed that transcript for those
purposes but will certainly look at it.
Mr. ANTHONY. Have you reviewed the transcript for any pur-
pose?
Mr. CUTSHAW. Frankly, Mr. Chairman, I have not personally re-
viewed it.
Mr. ANTHONY. I understand. I just asked if you or some of your
support staff reviewed it?
Mr. CUTSHAW. Mr. Chairman, I will have to claim a little bit of-
I just got married and I have been on my honeymoon and-
Mr. ANTHONY. You are forgiven. [Laughter.]
Mr. CUTSHAW. And I actually would like to still be on my honey-
moon. The transcript was reviewed extensively by staff and I just
returned the first of the week and will pursue that.
Mr. ANTHONY. And you have not had a chance to converse with
them about the review?
Mr. CUTSHAW. No, sir.
Mr. ANTHONY. Well, let me clarify for the record: I waved around
a transcript, prior to the committee's casting a vote, of the previous
witness stating what we had gone through-we, being our staff-
and had identified several problem areas. I made the decision not
to release that, in as much as that was our personal work product
and we were not being precise by the language of the testimony
and we were paraphrasing sometimes. So rather than create more
of a controversy, what we would ask you to do is read it and make
your recommendations from the identification of those problem
areas. Then we can compare what we think we saw in the tran-
script compared to what you think you saw in the transcript and
then come forward with some recommendations.
The problem with getting a "no" answer to my first question is
that it prohibits me from going into the second question which is
what are some of the solutions? To some extent our hearing today
is handicapped by the nature in which we catch ourselves. But love
and marriage wins out a lot of times over government procedure
but we will continue to work with you on that.
[The following was subsequently received:]
In response to the request that we review the transcript of the April 18, 1991,
hearing and make recommendations, I would like to insert in the record at this
point an appendix which provides a menu of items for discussion which could be
considered in the context of enhancing the enforcement of U.S. export laws and an
appendix which addresses the export enforcement issues raised in the April 18 hear-
ing.
PAGENO="0495"
491
APPENDIX A
ists of a menu
t be considered
by the Departr
:he Administrati
.ed by the Subc
~u of items for
ieration in the
)rcement of U.~
STRENGTHENING EXPORT ENFORCEMENT
Ideas for consideration which might result in better cooperation between
agencies and more effective tools for government-wide export
enforcement.
Objectives:
~ Establish a working mechanism to share information and
coordinate activities between the U .S. Customs Service and
the Bureau of Export Administration.
~ Improve routine information sharing and provide the same
tools to those agencies responsible for enforcing the EAA.
~ Enhance judicial remedies for export enforcement.
PAGENO="0496"
492
-2-
U. N G: ~1 1NATU NE 1~ LAGENCES
* Have both Commerce and Customs copy each other on all cables relating
to the enforcement of the Export AdminIstration Act.
* In order to provide more information and better coordination of
enforcement operations, Commerce and Customs could copy each
other on all EAA related cables.
* Develop) a pilot project to help Customs inspectors at the ports.
* In order to assist Customs in their inspection of cargo at the
ports, Commerce could develop a pilot project to provide selected
Customs offices in ports with terminals to allow them to check
whether a license has been issued, and whether the information
agrees with what has been provided in the shipping documents.
* Hold regular meetings between Commerce Export Enforcement and the
U.S. Customs Service.
* These two offices could meet on a regular basis to discuss
current operations, to provide better coordination between the
two agencies, and to provide a mechanism for resolving problems
and disputes.
* Coordinate criminal and administrative cases through interagency
meetings involving the U.S. Attorney's office, Customs and Commerce.
* Customs and the Justice Department could coordinate their
criminal cases with Commerce to ensure that (1) Commerce receives
all available information on indicted parties for use in making
proper licensing decisions, and (2) the statute of limitations
doesn't expire before Commerce can bring administrative sanctions
to bear against violators. In addition, Customs should refer to
Commerce all completed EAA criminal cases, EAA cases where Justice
has declined to prosecute, and those EAA cases which Customs
decides not to refer to the Justice Department because they fail to
meet the minimum evidentiary criteria for criminal prosecution.
* The Department of State and the Customs Service could refer all
completed Arms Export Control Act cases to Commerce for possible
administrative actions under section 11(h) of the EAA.
* Under Section 11(h) of the EAA, Commerce has the authority to
deny dual use export privileges to any party who has been convicted
of violating either the EAA or the AECA (among other statutes).
This denial can be for up to 10 years from the date of conviction.
Referral of these cases to Commerce would result in additional
preventative enforcement actions against violators.
PAGENO="0497"
493
-3-
~
~ Permanent "police powers" authority for Commerce special agents
* Commerce special agents have police power authorities under the
Export Administration Act (EAA). However, in those instances when
the Act lapses, it is not clear whether the Commerce police powers
continue under the International Emergency Economic Powers Act
(IEEPA).
* Forfeiture Authority
* Currently, when Commerce searches and seizes shipments being
exported in violation of the EAA, it must rely on sister
enforcement agencies, such as the U.S. Marshals Service and the
U.S. Customs Service, to "adopt" the seizure, failing which it may
be required to return the goods to the violator.
* Authority to Waive Certain Restrictions on Undercover Operations
* Currently, the Department of Commerce has the authority to
conduct undercover operations. However, unlike its sister
enforcement agencies [e.g., the FBI, DEA, and Customs] it is not
exempt from certain existing statutes which contain limitations
or have requirements that hinder such operations.
* Authority for Commerce to complete investigations it initiates [both
domestic and overseas aspects]
* Providing this authority might reduce delays in Commerce
enforcement cases when investigations are otherwise conducted by
others on its behalf.
* Penalties could be increased
* Penalties could be increased for all EAA violations, both
criminal and administrative.
~ The running of the statute of limitations for administrative sanctions could
be "tolled" in instances where a foreign national has been indicted for
possible export control violations. In addition, the authority to temporarily
deny export privileges could be extended so that foreign nationals could
be denied solely on the basis of such criminal indictments.
* These might enhance the reach of U.S. export enforcement
efforts and provide an additional incentive for indicted foreign
parties to voluntarily face criminal prosecution.
~ Guidelines could be considered for pretrial detention, allowing defendants
who are foreign nationals to be held without bail.
PAGENO="0498"
494
APPENDIX B
As you requested, my staff and I have reviewed the April 18, 1991, testimony before your
Subcommittee. We believe the cases which the Subcommittee examined illustrate several
important issues concerning export control enforcement. I would like to discuss the following
issues which arose during the testimony.
Extradition:
Extradition of foreign violators of U.S. export laws has long been a concern.1 Thus, it is
not surprising there are still fugitives at large in the Alcolac case. Although some countries
cooperate with the U.S. on export control matters, we need to continue to pursue the goal
of modifying extradition treaties to include these violations.
Further, extradition illustrates the importance of multilateral controls. A country is unlikely
to extradite for an offense which would not be a violation of its own law. In fact, some
CoCom member countries have `blocking statutes" that are designed to prohibit certain
cooperative law enforcement activities unless the offense violates their own statutes. This
has particular importance when the offense is a violation of a unilateral U.S. foreign policy
export control imposed under section 6 of the Export Administration Act (EAA).
AutomatedExport Reporting:
Former Customs special agent Bass noted the desirability of having a more efficient means
to track exports from the United States. My office has been working with our sister agency,
the Census Bureau, to review Shipper's Export Declarations (SEDs) electronically. This
project is a major step toward automated review of exports. We look forward to working
A reportprepared by the Congressional Research Serviceof the Library of Congress for Senator Nunn in 1982 notes
the seeming inability to extradite foreign violators of U.S. export laws. [Transfer of United States Hizh Technolozy
to the Soviet Union and Soviet Bloc Nations; Hearings before the Permanent Subcommittee on Investigations,
Committee en Governmental Affairs, United States Senate, 97th Congress, 2d Seas., May 4,5, 6, 11, and 12, 1982,
at 75-78.]
PAGENO="0499"
495
-2-
further with Census, the Customs Service, and the Congress to develop a fully automated
system which will protect our security interests while reducing paperwork for the exporter.
Knowing the Customer:
For several years Commerce's Office of Export Enforcement has had a public awareness
program with the theme "Know Your Customer". The Alcolac case illustrates the danger
of firms being unfamiliar with the "end-user" of its exports. Greater attention should be
devoted to this issue.
Mistakes in the Paperwork:
The Alcolac case demonstrated the importance of careful review of documents and other
paperwork relating to the shipment in the export control process. The case also illustrates
that many mistakes can be made on the paperwork for "innocent" reasons. The review of
export and shipping documents is important when there is intelligence or other information
to indicate that a review is warranted. The burden is on the exporter to ensure accuracy.
Inspector's Need for Licensing Information:
One of the most difficult challenges in export control enforcement is to maintain a cadre of
knowledgeable and trained professionals who keep up-to-date on the highly technical and
frequently changing export regulations. BXA is fortunate to have a dedicated cadre of well
trained personnel with adequate technical expertise to assess export shipments. Commerce
is helping the Customs Service by providing technical assistance. Commerce has already
provided a Customs liaison representative direct access to Commerce licensing officers and
the Commerce data base since January 1982, so that these important questions can be
answered quickly. Further, in May 1986, Commerce provided Customs headquarters direct,
on-line computer access to our licensing data base so they could verify a purported export
license number and the names of the parties to the transaction. Once the resource, hardware
and software problems related to expanded access to our data base can be resolved,
Commerce intends to start a pilot project to give Customs inspectors at selected ports the
same direct on-line access to the export control data base as they currently have at their
headquarters in Washington, D.C.
PAGENO="0500"
496
-3-
Penalties:
As mentioned in testimony on the C-TEK case, there is a need to increase the penalties for
violations of the EAA. Often people view white collar crimes as less important than other
felonies. However, let me put this into perspective for you. In the 1980s,
Toshiba/Kongsberg illegally sold the Soviets a 9-axis machine tool. The Defense
Technology Security Administration (DTSA) estimates that it cost the U.S. taxpayers $3-4
billion dollars to transform our country's antisubmarine warfare program to meet the new
threat of quieter Soviet submarines.2 National security violations under section 5 of the
EAA should be dealt with as severely as capital crimes. I would favor significantly
increasing the maximum criminal and administrative penalties for all EAA violations.
Oufreach - A Key Asset for Export Enforcement:
The Export Administration Act controls only exports. We have no jurisdiction, nor do we
seek it, over domestic sales, regardless of the level of technology or the possible end-use.
This means that sensitive materials can be sold within the country by a legitimate and law-
abiding conscientious business person to a nefarious person. It also means that our
enforcement officers must watch a large number of potential exporters.
To address this concern, the Office of Export Enforcement has enlisted the aid of legitimate
business people. They include manufacturers of high technology products, trading companies
and freight forwarders who are urged to keep their eyes open for indications of suspicious
export activities. These indications, or "red flags", are not foolproof, but they have alerted
us to many potential violations. Most of our significant cases are based on tips from
business people or similar sources. Many of these people have attended one of the BXA
export licensing seminars or come in contact with one of our special agents.
The need to spread the word about the importance of vigilance in the business community
is one of the reasons why our special agents are dispersed around the country. The large
U.S. economy produces a limitless supply of potentially sensitive exports. As a result,
export enforcement is a big, and often expensive, activity.
Licensing Determinations and Commodity Jurisdiction:
During the hearing, several Subcommittee members noted what they termed the "long" delay
in getting a licensing determination as to whether the modified Bell Long Ranger helicopter
needed a munitions license. It is essential that licensing authorities respond quickly to
enforcement inquiries for licensing determinations, both to assist in the prosecution of
violators and to ensure that legitimate sales are not held up on the dock.
Having the export licensing and enforcement functions within the same regulatory agency has
worked very well at Commerce and has helped reduce this problem. In the Bell Long
Ranger matter for example, BXA's Office of Technology and Policy Analysis responded to
OEE's request for a licensing determination Within three working days. This good working
2 The Defense Technology Security Administration (DTSA) estimated that during the 1910s the cost of diversions, including
the ToshibalKongsberg export, cost the Defense Department over $10 billion to counter new threats from Soviet
submarines.
PAGENO="0501"
497
-4-
relationship is one of the reasons that Commerce feels that licensing and enforcement should
continue to be located together. We have experienced first hand the impact when licensing
and enforcement are responsive to one another. In those few instances where there are
problems, we have the advantage of being able to escalate the issue to managers who oversee
both parts of our regulatory agency to get a quick remedy to the situation.
The question of commodity jurisdiction becomes important from an enforcement standpoint
because it determines who has the investigative authority. The Customs Service investigates
criminal violations of the Arms Export Control Act (AECA) for the Department of State,
which administers that Act. Violations of the EAA fall within the jurisdiction of both the
Commerce Department and the Customs Service, Commerce having the authority to
investigate for the imposition of both criminal and administrative sanctions, while Customs
investigates for criminal sanctions exclusively.
As pointed out by the Global Helicopter case, there are a number of instances where
Commerce investigations uncover violations of the AECA. In those instances, Commerce
special agents refer those aspects of the case to the Customs Service for further investigation
or work the case jointly with them.
Enforcement Need for Export Licensing Information:
There was some confusion during the hearing over the question of what export information
is useful in detecting export control violations. It is correct to say that export information
from export licenses and SEDs is helpful in providing substantiating evidence, proving
knowledge of export regulations by exporters, and other evidence needed for trial. It is also
correct, and an important function, that our enforcement personnel review export license
applications in order to prevent exports to questionable end users and to provide information
useful in making decisions on whether to approve individual licenses. However, providing
enforcement personnel with lists of approved export licenses is not very useful in terms of
discovering or uncovering major export violations, while targeted inquiries for licensing
information on specific companies or specific types transactions can be helpful in
investigative work. As a practical matter it has been our experience that the vast majority
of our significant cases, both criminal and administrative, are the result of tips. We believe
this experience is similar to most white collar crime enforcement activities.
As we see a reduction of license applications, BXA is looking to augment the information
in its data base. One such activity is the SED program where BXA is working with its sister
agency, the U.S. Census Bureau, to help develop an automated SED system which will
provide a broad spectrum of export information. It would be extremely useful to both
Commerce and Customs enforcement to have automated SED information available to their
agents provided these agents can make "targeted" inquiries. Again, very seldom are major
cases uncovered by scroffing through licensing or SED information. The ability to make
targeted inquiries for selected information is the key to successful investigations.
You should note, again, that in January 1982 Commerce provided Customs with access to
licensing information through a Customs liaison officer housed within BXA. In addition, in
May of 1986, Customs was provided a computer terminal with on-line access at its
headquarters in Washington, D.C. Since installation, the Customs Service usage of this
PAGENO="0502"
498
-5-
terminal has averaged about one inquiry every two days. We have been and continue to be
committed to providing appropriate export licensing information to Customs in support of
its EAA investigative activities.
Is There a "Conflict" Between Commerce's Trade Promotion and Enforcement?
The Commerce Department has many functions. The International Trade Administration
(ITA), whose duties include the promotion of U.S. products overseas, and the Bureau of
Export Administration (BXA), whose duties include export control policy, licensing and
enforcement, are each led by a separate Under Secretary who administers very different
programs which have different responsibilities.
So, the short answer to the question "Is there a conflict between Commerce's g~p~
enforcement and export promotion functions" is n~, there is absolutely no conifict between
these functions. More importantly, there is no conflict between the regulatory, or export
licensing, responsibilities of the Department and its export promotion activIties. I am
not aware of any instances in which Commerce's export enforcement activities have ever
been in conflict with the trade promotion activities of our sister agency, ITA. ITA has no
mandate to promote illegal exports, BXA's licensing operation has no mandate to stop legal
ones, and our enforcement arm enforces the Act and the regulations.
Finally, the record speaks for itself. Perhaps the best evidence that there is no conflict is
that, each year, BXA is responsible [through its joint OEL/OEE review of export license
applications] for the refusal to license the export of hundreds of millions of dollars worth of
goods. Commerce is proud of this record.
Lack of Jury Appeal:
When looked at as a general matter, export control violations which go to the heart of our
national security should have good "jury appeal." Despite this, all too often they do not.
Experience shows that cases can involve naive actors, benign appearing products, subsequent
decontrols, and other similar factors. Jury appeal can be undermined by any of a number
of factors. Export control cases often address very complex issues. Investigators and
prosecutors must address these problems. The business community and the public need to
be made aware of the impact of illegal exports on our national security.
Need to Improve Interagency Coordination:
The C-TEK case illustrated the difficulty an already overworked prosecutor had as a result
of poor interagency coordination, specifically in the failure to assist the Assistant U.S.
Attorney in the overseas aspects of the case. It is important that we work cooperatively with
each other, supporting increased tools and resources for our export enforcement operations,
while respecting each other's activities. We must work together for the national good.
Commerce and the Admininstration are committed to working cooperatively to resolve
disputes as they arise.
PAGENO="0503"
499
-6-
Resources:
Export control cases are very expensive. Had the C-TEK case gone to trial, its cost to
Commerce would have been even greater than the $600,000 it did cost. The Justice
Department also had significant costs, which would have been multiplied had the case gone
before a jury. These costs cannot be avoided if the goal is having an effective export
enforcement activity. Without an effective enforcement activity, the regulatory mandate
would be severely undermined.
Canada:
The Canadians are among our closest export control allies. We have worked very well with
them over the years. Our system has long recognized the importance of the North American
industrial base by eliminating the need for export licenses for most items crossing the border
for consumption in either country. We have met often with the Canadian officials to share
our export control concerns and coordinate our activities. Additionally, a great deal of
informal cooperation occurs along the borders among the four law enforcement agencies
involved in export control (Canadian Customs, the Royal Canadian Mounted Police, U.S.
Customs and Commerce's Office of Export Enforcement). We will continue to work with
the Canadian government to see that our special relationship prospers and supports the
common security interests of our two great friendly nations.
PAGENO="0504"
500
Mr. ANTHONY. I have got some speciflä questions that maybe you
can respond to. ~I worked on two of the cases, and one was the
Global Helicopter and the other was C-TEK, so I would like to ask
you some questions concerning that.
If Cardeon's modified Bell Helicopter is determined to be a civil
aircraft, can Cardeon export it to Chile now, under current export
law?
Mr. CUTSHAW. Now in response to your question about the Bell
Helicopter, if it is a civilian aircraft it can be exported to Chile
under the general destination license.
Mr. ANTHONY. It could be?
Mr. CUTSHAW. Yes, sir, it can be.
Mr. ANTHONY. If the helicopter is determined to be a military
aircraft, can Commerce prevent its export to Chile?
Mr. CUTSHAW. Mr. Chairman, if it is determined to be a military
helicopter then it falls under another control regime-the Arms
Export Control Act-which is administered by the State Depart-
ment. And that takes it out of the jurisdiction of Commerce.
Mr. ANTHONY. That would take it over to-
Mr. CUTSHAW. To the State Department, under its authority.
Mr. ANTHONY. I take it that that determination has not been
made as of today? Who actually makes the determination?
Mr. CUTSHAW. The State Department would make the determina-
tion if it falls on the munitions list.
Mr. ANTHONY. They would do that in cooperation with, in consul-
tation with Commerce?
Mr. CUTSHAW. Normally a decision is made by the State Depart-
ment. On issues relating to the specifics on the licensing procedure
I will defer to Mr. Baird.
Mr. ANTHONY. But this is a case though where you had a piece of
property that was detained by Commerce, seized by Customs, and
the ultimate decision has to be made by State. Is that a correct in-
terpretation of the situation that we find ourselves in, in the
Global Helicopter case?
Mr. BAIRD. When we looked at the helicopter initially, we be-
lieved that it was likely to be a commercial item. In an unmodified
form it was definitely a commercial item. If it were, it could move
to Chile under a general license, the G-Dest license.
Mr. ANTHONY. Which it, in fact, did?
Mr. BAIRD. Yes, initially, that is right, before it came back.
Mr. ANTHONY. Then it was sent back to Dallas?
Mr. BAIRD. That's correct. In looking at it a second time, when it
was sent back to Dallas, we suspended the general license authori-
zation because we had information-
Mr. ANTHONY. Based on the modification request?
Mr. BAIRD. No, based upon the information that Mr. Cardeon
was going to reexport that helicopter to Iraq. That would have
been a violation of the Export Administration Act and the Presi-
dentially imposed sanctions, and accordingly we suspended the gen-
eral license authorization at that time. At the same time, because
modifications were being made to that helicopter, we did refer the
case to the State Department to determine whether or not it was a
munitions item-which would mean any export license, even to
Chile, would be reviewed by State.
PAGENO="0505"
501
Mr. ANTHONY. At what point was Customs brought into this
transaction?
Mr. CUTSHAW. If I could ask Len Patak to respond to that. He
was the special agent-in-charge of our Dallas export enforcement
office.
Mr. PATAK. If I could respond, Mr. Chairman?
Mr. ANTHONY. Surely.
Mr. PATAK. We initially looked at this in July and we detained it
under the authority of the Export Administration Act to see if it
did require license. Then, after the imposition of the embargo on
August 2, we continued our detention, and contacted Customs soon
thereafter regarding the detention of this helicopter.
Mr. ANTHONY. So Customs detained it?
Mr. PATAK. No, we initially detained it under the Export Admin-
istration regulations.
Mr. ANTHONY. So who actually is holding the helicopter now,
Customs?
Mr. PATAK. The helicopter has been seized by Customs for an
import violation.
Mr. ANTHONY. Who is in physical control of it right now? State,
who has got to make the ultimate decision, or Customs who seized
it, or Commerce who requested that Customs seize it?
Mr. PATAK. Commerce does not have the helicopter any longer.
Mr. ANTHONY. Does Customs have the helicopter?
Mr. PATAK. Yes, sir, they do.
Mr. ANTHONY. Has State seen it?
Mr. PATAK. I am not personally aware if they have or not, sir.
Mr. ANTHONY. You have got to be kidding me.
[The following was subsequently received:]
Mr. Anthony, I would like to insert in the record at this point a chronology of
events relating to our handling of the Global Helicopter case. The Subcommittee
may find it helpful in understanding the sequence of events.
July 26, 1990-Commerce's Office of Export Enforcement (OEE) requested that
the Office of Technology and Policy Analysis (OPTA), within Commerce, make a li-
censing determination as to whether the helicopter needed a Commerce license as a
"dual use" item.
July 27, 1990-Commerce OEE case agent contacted the Aviation Section of the
Department of State, providing them with a copy of the specifications needed to de-
termine if the helicopter needed a State Department "munitions" license.
July 31, 1990.-OEE Dallas received a licensing determination from OTPA indi-
cating that if the helicopter was a commercial item it could be exported to Chile or
Iraq under a general license; but that the Department of State might be able to
claim jurisdiction under the Arms Export Control Act.
Aug. 2, 1990.-OEE Dallas contacted the Aviation Section at the Department of
State to follow up on the July 27th contact and was told that the Department of
State was in the process of making a licensing determination. -
Aug. 6, 1990.-OEE Dallas detained the helicopter based on information that Mr.
Cardeon was going to re-export prototypes of it to Iraq, which would have been a
violation of the August 2, 1990, Presidentially-imposed sanctions against Iraq. OEE
sent a memorandum to Commerce's Office of Export Licensing (OEL) recommending
that the general license authorization be revoked.
Aug. 7, 1990.-OEE Dallas contacted USCS Dallas, notifying them of the case and
suggesting they might wish to get involved because it might end up being a muni-
tions case. OEE Dallas was told USCS would assign an agent to the case.
Aug. 31, 1990.-OEL notified Global Helicopter and Swissco Management Group,
by letter, that the general license authorization was revoked for the Bell Long
Ranger Helicopter.
Oct. 16, 1990.-Supervisors from OEE and USCS in Dallas met. OEE Dallas ex-
pressed concern that the USCS agent assigned to the case had not yet contacted the
PAGENO="0506"
502
OEE case agent. Shortly after the meeting, the USCS case agent met with OEE
Dallas and was briefed on the case. A joint investigation was subsequently conduct-
ed.
Mar. 27, 1991.-Customs seized the helicopter based on an import violation.
May 20, 1~92.-Representatives of the Department of State and the Defense Tech-
nology Security Administration (DOD) physically inspected the Bell Long Ranger
Helicopter in Dallas. As of that time, no licensing determination has been made by
the Department of State.
Mr. ANTHONY. What about you, Mr. Cutshaw, are you aware of
whether or not State has seen the helicopter?
Mr. CUTSHAW. No, Mr. Anthony, I am not aware of whether
State has actually seen the helicopter.
Mr. ANTHONY. What kind of cooperation and coordination have
you got going with each other? You have got the officer in charge,
you have got the Under Secretary, and this case has been going on
and it has been aired in public before this subcommittee and no
one can say whether State has seen the aircraft to determine
whether it is a modified civilian aircraft for military purposes for
you to make a decision and everybody has been testifying that
there is no problem between agencies and cooperation and coordi-
nation? That's not what I am getting from this. What I am getting
is that you all don't talk to one another. State is going to be up
here next and I hope that State will go and make a few phone calls
and be able to answer that question as to whether or not anybody
within the State Department has actually physically gone out and
looked at this helicopter to make a determination as to whether or
not it is a civilian aircraft or it is in the process of being modified
to a military aircraft and, according to Mr. Baird's testimony, I
assume from some type of intelligence, was going to be exported
back to Chile and from Chile to Iraq. That was the authority under
which Commerce detained it and I still don't know, although I
asked Commissioner Hallett under what specific legal authority
Customs actually seized the helicopter.
Are you the agent who seized it?
Mr. PATAK. No, sir, my office is the office that detained the heli-
copter. Customs actually seized the helicopter.
Mr. ANTHONY. Who seized it?
Mr. PATAK. The U.S. Customs Service. We detained the helicop-
ter pending receipt of a licensing determination. We have been in
contact with Customs throughout the entire investigation and we
have given them our support and information which enabled them
to secure an affidavit for the seizure warrant for the helicopter.
Mr. ANTHONY. No, I understand all of that. I got Commerce's fin-
gerprints all over that helicopter. I got Customs' fingerprints all
over that helicopter. But the one agency that has to make the final
determination to tell Commerce what to do with it, so that Com-
merce can tell Customs what to do with it, you cannot tell me as to
whether anybody in your two agencies have communicated with
State. I find that very appalling.
Now, I can forgive you for not having read the transcript, Mr.
Cutshaw, because of getting married but this was going on while
you were in courtship. You could have had time to talk to State
over this.
We will go on and we will ask State if they have seen this heli-
copter and if they have not, I hope they send somebody out before
PAGENO="0507"
503
they come and testify so that they can say, yes, we have seen it but
we only saw it 20 minutes ago. I hope they can at least say they
have seen it.
Now the C-TEK computer case. The one positive thing that you
have said is that you are seeking international and bilateral coop-
eration so that you can obtain admissible evidence and that is a
goal that should be pursued. I encourage you to continue it. But
under that case, we had testimony by the former assistant U.S. at-
torney in the case that testified that the Canadian Government
failed to execute search warrants in support of the C-TEK investi-
gation. The question is, to what extent is Canada required to assist
U.S. investigations involving export control violations as we under-
stand it today or as it was in that case?
Mr. CUTSHAW. Mr. Anthony, we have encountered very good co-
operation with Canada over the years. They are a very active
member of COCOM and they have an export control system that is
similar to ours. In regard to investigations, we cooperate with them
on a regular basis and on a very active basis and in the C-TEK
case, they cooperated as well.
Mr. ANTHONY. But you have got the prosecutor saying they failed
to execute the search warrant. You have the prosecutor who is in
charge of the investigation saying that she had trouble pursuing
the case because of the Canadian Government not doing something
and you testify that you have got great cooperation. I am hearing
conflicting statements. I don't know which is correct. Are the Cana-
dians required to inquire whether a reexport license was obtained
from the United States before they issued their export licenses for
U.S.-origin commodities? Is that a requirement in Canada?
Mr. CUTSHAW. No, sir, the responsibility for that lies with the ex-
porter and he is the one who has to seek the reexport authoriza-
tion. If he seeks to reexport something from Canada, he has to
come back to the U.S. authorities to seek that authorization.
Mr. ANTHONY. So if he just exports it to Canada and lies to the
Canadian Government it appears to me that that is a loophole wide
enough to run not only C-TEK computers through but maybe this
Global Helicopter through too and a multitude of other things.
How are you going to stop that?
Mr. CUTSHAW. Well, Mr. Anthony, we have-
Mr. ANTHONY. Other than through a tip?
Mr. CUTSHAW. Our systems are very comparable. We have both
established export control systems and we have reexport authoriza-
tion requirements. The reason we allow goods to go to Canada
without export licensing is that their system is similar to ours.
Now, the exporter is under the obligation to seek reexport authori-
zation and he would be in violation of our law if he seeks to export
from Canada without it.
Mr. ANTHONY. I understand the regulations and the statutes, but
when you have a guy named Casperson who testifies and says,
what I would do again, now having learned all of this stuff, is just
ship it to a legal entity in Canada and just let them ship it on out
of Canada and nobody would ever know about it, if there was not a
tip.
PAGENO="0508"
504
Now, Customs testified that 85 percent of their cases were devel-
oped by tipsters, and what is the percent of cases that Commerce
gets involved in based on tipsters?
Mr. CUTSHAW. Mr. Anthony I would say the overwhelming ma-
jority of the cases are created through business cooperation and
business tips which result from our Project Outreach. It is a result
of the good relationships we have with the business community be-
cause we work with them on a daily basis.
Mr. ANTHONY. Mr. Cutshaw, I have actually been told by some of
your staff that the figure is as high as 95 percent, not below 85 per-
cent. I can understand our having a voluntary income tax program
and relying on volunteerism. I guess what is troubling me is that
the more we continue to discuss this, that there is no problem be-
tween State, Commerce, and Customs, even when you lay out some
cases where problem areas just jumped out at you, there just seems
to be a hesitancy to publicly acknowledge that those were problem
areas. It looks like to me that you are saying, yes, that was a prob-
lem but that was the only case you can find to say that we had a
problem with. What you are saying is that there are just no prob-
lems whatsoever. I am getting real frustrated by it.
Then to find that most of the cases are actually discovered by
tipsters. I guess the key question would be how much of our intelli-
gence is involved in that particular determination of tipsters versus
a mad business competitor who is trying to stop the sale because
they would not violate the law and suspect somebody else, and the
problem is we will never get that answer because intelligence is
always going to remain a secret because of national security pur-
poses. You can see my frustration too, I guess.
Mr. CUTSHAW. Mr. Anthony, if I could interject, I do see the frus-
tration and I do not mean to leave the impression that there are no
problems in the system in the United States or Canada.
Mr. ANTHONY. Stop right there. For the next 3 minutes just list
out some of the problems, and then take another 3 minutes and list
some of the solutions. I yield back my time to you for those 6 min-
utes.
Mr. CUTSHAW~ Well, Mr. Anthony, like any system you have to
work to get to the perfect model. Frankly, we. have been working
on that over a number of years. The enforcement of export viola-
tions is a difficult thing to accomplish. You have some very sophis-
ticated criminals, white-collar criminals that do use the most so-
phisticated methods and various points of diversion. We are work-
ing, both within the Department of Commerce and with other
agencies, to identify the diversion points and the methods used by
EAA violators. This includes information sharing. I think that it is
critical to the process to share pertinent information among the
agencies. We share information with Customs, sometimes on a
daily basis, but at least periodically. We exchange our case lists, we
exchange the names of those people we suspect may be in the proc-
ess of violating the export control laws.
[The following was subsequently received:]
Since January of 1981, we have had a Customs Liaison Officer assigned to Corn-
merce to assist in the free flow of investigative information between our two agen-
cies. In addition, in May of 1986, we provided the Customs Service headquarters
PAGENO="0509"
505
here in Washington with a computer terminal to allow them direct access to our
licensing data base.
Mr. CUTSHAW. We also have problems with regard to working
internationally. Each country has its own governmental interest
and certain diplomatic interests that are involved in dealing with
export violations. By their very nature, export violations involve an
overseas transaction. And that brings into play the individual
country's nationalities and sovereignties as well as ours in the
United States.
We have tried to tackle those problems by working through the
Coordinating Committee known as COCOM and trying to coordi-
nate the transfer of technologies among Western countries. I be-
lieve that we are looking at that very significantly in the sense
that in COCOM we are attempting to establish a common standard
of enforcement that will be adopted by all the COCOM countries.
There are 17 countries that are involved in COCOM. I was privi-
leged to chair a conference in April of 1990 where representatives
from all 17 countries met to share views and to determine where
we could cooperate better. Multilateral cooperation is essential be-
cause by their very nature, these violations involve more than one
country. I think you saw that very well in the C-TEK case.
Also, in the proliferation arena, very difficult enforcement chal-
lenges are posed in the sense that tracking the sales of these items,
like the chemical precursors, the biological agents and missile tech-
nology, can be very difficult. I know this administration has under-
taken a very strong initiative to address the problems we have had
in the past by establishing the Enhanced Proliferation Control mi-
tiative-EPCI. My Department has been a major player in this ini-
tiative. What EPIC has done is to try to increase the controls on
the chemical precursors, making them worldwide controls, and ex-
panding controls on chemical and biological production equipment.
We are, right now, undergoing a review of the controls over missile
technology, working very closely under the Missile Technology
Control Regime-MTCR---to try to create better multilateral coop-
eration and more systematic and harmonized controls over the
technology that deals with the production of missiles.
In addition, under EPCI, we are in the process of developing a
regulation that would allow us to prohibit the export of any type of
commodity, whether a toothbrush or a licensable computer, that is
destined for a missile, chemical-, or biological-weapons facility in
certain countries. That regulation was put out for public comment
6 weeks ago. We expect to have a final regulation adopted soon.
That will go a long way toward correcting any problems we may
have seen in the past where items are exported and may be used in
weapons against us.
[The following was subsequently received:]
We are also reviewing the menu of discussion items, mentioned earlier, and in-
serted in this transcript as Appendix A, to see which can be implemented in order
to enhance the enforcement of U.S. export laws.
Mr. CUTSHAW. Those are some reforms that we are addressing
and we are trying to implement very aggressively.
Mr. ANTHONY. Thank you, that was a nice summary.
PAGENO="0510"
506
It appears to me that that is very manpower intensive and de-
mands significant manpower to do an adequate job, is that correct?
Mr. CUTSHAW. We are continuing to review our manpower re-
sources, but at this point we have adequate resources within Com-
merce; the current resources are adequate.
Mr. ANTHONY. It is my understanding that in 1986 the Congress
approved 197 positions for Commerce's export enforcement pro-
gram, is that correct?
Mr. CUTSHAW. I believe that is correct, sir.
Mr. ANTHONY. It is also my information that at any given time,
the maximum number of special agents assigned to the task of en-
forcing export controls was 90.
Mr. CUTSHAW. That is correct. However, let me elaborate a little
bit on that. Those 197 positions are more than just agents. Within
Export Enforcement we have an Office of Enforcement Support
that looks at the export licensing process and works very closely
with Mr. Baird's operation in reviewing the license applications.
We also look at the antiboycott laws. We have a full staff that han-
dles violations of the antiboycott statute. And so our mandate is
broader than just hiring agents. The maximum number of people
we have had on board was 172, in July 1989.
Mr. ANTHONY. I understand, and maybe you can submit a break-
down of each category so that I will make sure my comments and
my impression will be correct.
[The following was subsequently received:]
PAGENO="0511"
CHART #1
Export Enforcement Manpower Figures
[As of March 1991]
Category FTE On Board
Assistant Secretary's Office 21 11
Export Enforcement Support 26 23
Office of Export Enforcement 109 89*
[* Includes special agents and clerical support in the field (75), special agents and clerical support
in the Director's Office and special agents, analysts and clerical support in the Intelligence
Division (14)]
Office of Antiboycott Compliance 30 23
186
I
I
L~
~
-
NA N/1CI~! I
1OA~DO~/2CI~&
9DOWDOD/2 CNTIo~I
7~N~2C1~DO1
I
I
* I
I U
III
I
I
U I I U I I
-~----,
5A~WN~/1 Cs- I~ I DOWN 5/
A
-
~7~-~-----~
3AgWDON/1C5~ I /2 AWN
5AusDON/2C15/ICN I/I
507
Total
146
COMMERCE/OEE MANPOWER FOR THE 19905
FTE verses On Board Strength ++
AUTHORIZED FTE ON BOARD COUNT
WAFO ____________________
LAFO
CHFO
M FO __________
BOFO _______________
DAFO ___________
I NTEL ______________________
HO
DOs,t, AWtNC,-125d CIs/ ICNI MODe 2Nd
~AAWNIysNNANCNW,IDOd
[OEE on board count as of May 15, 1991]
PAGENO="0512"
508
Mr. ANTHONY. The President's budget request for fiscal year 1992
shows a reduction of 30 authorized positions for Commerce's export
enforcement program and so I guess what I need to get from you is
a breakdown by policy groups under your department so that I can
specifically see where your personnel level has been and where it is
proposed to go under next year's budget. Could you do that for me?
Mr. CUTSHAW. Yes, sir, I could.
[The following was subsequently received:]
PAGENO="0513"
509
ChART #2
FTE, ON BOARD COUNT, AND FUNDING FOR
TilE BUREAU OF EXPORT ADMINISTRATION'S
EXPORT ENFORCEMENT OPERATIONS
[Fiscal Years 1989 - 19921
[Excluding administrative support and centrally funded items]
FY Assist. Export Office of
Office of
Secretary's Enforcement Export
Antiboycott
Office Support Enforcement
Compliance
[Dollar Figures Shown in Thousands]
1989 FTE 16 FTE 29 FTE 111
FTE 30
0/B 13 0/B 29 0/B 108
0/B 22
$ 1,098 $ 1,202 $ 6,135
$ 1,185
1990 FTh 20 FTE 24 FTE 112
FTE 30
0/B 11 0/B 27 0/B 99
0/B 23
$ 902 $ 1,011 $ 6,720
$ 1,721
1991 FTh 21 FTE 26 FTE 109
FTE 30
* 0/B 11 0/B 23 0/B 89
0/B 23
$ 1,197 $ 943 $ 5,973
$ 1,324
1992 FTE 19 FTE 26 FTh 79
FTE 30
** $ 1,245 $ 1,002 $ 6,304
$ 1,391
* Note: The on board [0/B] count noted for FY 1991 is as of March 1991.
** Note: The on board [0/B] count has been omitted for FY 1992 and the FTE indicates the
figures contained in the President's FY 1992 budget proposals.
51-840 0 - 92 - 17
PAGENO="0514"
Mr. ANTHONY. At first blush, it looks like Congress has asked
you to hire a lot more people and you have only hired a certain
number and the administration is even asking that 30 of those
people be reduced for next year. Before I make a misinterpretation
of those numbers, if you could, just for the record, break them out
for us by groups within your department?
Mr CUTSF~W I ~. oudo be ~enn to ~ e I a~e a u~o ware 75 to
90 agents au any g o a' e a SU~~DLL stafi of a~ot~ e
20 on top of that which support those agents. That would represent
about 95 to 110.
We have an Office of Enforcement Support which works with the
licensing office to make sure that we catch any unauthorized end
users from receiving controlled technology that consists of around
20 people. The Office of Antiboycott Compliance, which enforces
the antiboycott provisions of the Export Administration Act has a
staff of approximately 25 as well, and that brings it up to about 140
to 155. Then my staff and the Assistant Secretary's staff and the
policy staff consists of around 10 people. So we are upwards of 150
to 165 people that we try to fund. Now, the President's 1992 budget
request did ask for a reduction of 30 positions in export enforce-
ment positions that have never been funded by the Congress. Due
to a lack of funding, we have not been able to fill those positions.
Our FTE under the President's budget would be 186.
Mr. ANTHONY. I thank you for that explanation. If you would
break that down for me.
Mr. CUTSHAW. I would be happy to put that in writing.
Mr. ANTHONY. Thank you, Mr. Chairman.
Chairman PICKLE [presiding]. Mr. Sundquist.
Mr. SUNDQUIST. Thank you, Mr. Chairman.
Mr. Cutshaw, I want to ask a question in terms of the tools that
are needed to strengthen export enforcement and specifically
where a foreign national has been indicted, that person is at large
and that individual is beyond the immediate reach of our criminal
justice system, would it be helpful to lengthen the statute of limita-
tions for bringing the administrative charges in those instances?
Mr. CUTSHAW. Yes, I think it would be very helpful if we could
toll, or extend, the statute of limitations in cases where there is a
criminal indictment, so that we do not lose the ability to impose
administrative sanctions. Also, if we have a fugitive at large, if we
could also have additional authority to impose a temporary denial
order based solely on an outstanding criminal indictment, it would
be helpful. This would allow us to immediately notify the law-abid-
ing business community that they are not to deal with the fugitive
prior to bringing him to justice.
Mr. SUNDQUIST. This would involve some people who have still
remained in business somewhere, right?
Mr. CUTSHAW. That's correct. They can remain in business in a
foreign country and this is not an extraditable offense, so that it is
hard to get them back to this country.
Mr. SUNDQUIST. The second question in regard to the permanent
police powers that lapsed in September, the Export Administration
Act when it lapsed, the authority of your special agents to exercise
police powers under section 12 of that Act came into question.
Would it be helpful to make that police power permanent so that it
PAGENO="0515"
511
would be available when regulations are extended under the Inter-
national Emergency Economic Powers Act?
Mr. CUTSHAW. It would be very helpful. When the Export Admin-
istration Act expired there was some uncertainty as to whether the
police powers that were granted in 1985 to the Department of Com-
merce under the EAA were still in effect. To ensure that we had
these police powers and out of abundance of caution, we chose to
seek to have our agents deputized as special deputy U.S. marshals
so that there would be no question that they could continue to ex-
ercise their police powers. It would be extremely beneficial to have
permanent police powers just like most other law enforcement
agencies already have. Permanent police powers should be provided
by statute so that they do not expire in the event that the Export
Administration Act does expire again.
Mr. SUNDQUIST. Has that been harmful to your operation, that
expiration, and are you losing any people?
Mr. CUTSHAW. I think it has been harmful in terms of our en-
forcement effort. However, during the 4 months when our agents
were unsure of their police power authority-October 1990-Janu-
ary 1991-there was low morale because our criminal investigators
were trying to do their job, but doing so without the necessary
tools. This doesn't do much to help the morale of the special agents
responsible for enforcing the EAA. I think we stepped in and cor-
rected it as quickly as we could and we got the cooperation from
the Justice Department to deputize our agents.
Mr. SUNDQUIST. Have you had to bring in some Customs Agents
to serve warrants and make seizures?
Mr. CUTSHAW. There have been a few instances where assistant
U.S. attorneys were unsure of our police powers and asked that the
Customs Service accompany our agents in serving warrants and
making seizures. In other instances, we have acted independently
with no adverse impact on our cases.
Mr. SUNDQUIST. You are not losing any Commerce agents be-
cause of that who are going to work for the FBI, DEA, or Customs?
I have been told that as many as 40 percent could leave.
Mr. CUTSHAW. I don't think that is a completely correct charac-
terization. We may have lost a few agents but I don't think it was
totally as a result of losing the police powers. We did attempt to
quickly put those back in place although it took several months. As
you know, there was some uncertainty about the possible passage
of the EAA in the last Congress. As soon as we determined that
there was some uncertainty, we chose to go the path of seeking the
cooperation of the Justice Department to have and deputizing our
agents deputized.
Mr. SUNDQUIST. But the police powers are not back yet?
Mr. CUTSHAW. No, we do not have police powers under the
IEPPA. They are exercising police powers under deputization from
the U.S. Marshals service.
Mr. SUNDQUIST. Will Justice accept your cases if they don't in-
volve Customs officials in those acts?
Mr. CUTSHAW. The answer is generally yes, they have accepted
most of these cases. There has been some concern by certain
AUSAs, but we have been able to work it out to make sure that
our cases are handled properly within the Justice Department.
PAGENO="0516"
512
Mr. SUNDQUIST. I want to talk about the things I asked the Com-
missioner in terms of sentencing and penalties. Former Assistant
U.S. Attorney Portia Moore, when she was here, identified several
barriers to successful export investigations. She talked about low
sentences provided for in the EAA and civil penalties also were
considered too low. I believe the civil fine for foreign policy controls
is $10,000 per count and for national security controls it is S100,000
per count. And she also cited legal obstacles that prevented forfeit-
ure of illegal proceeds from export crimes. Is the maximum 10-year
sentence an adequate deterrent or punishment for sentencing
under the EAA?
Mr. CUTSHAW. .Mr. Sundquist, I think it would be appropriate to
have stiffer penalties. I believe it is apparent to Congress and to
people who enforce the laws that stiffer penalties would provide a
greater deterrent and I believe that this administration supports
stronger penalties. As to what level it would be raised to, I think it
is still subject to discussion, but stiffer penalties in terms of longer
imprisonment and higher fines are certainly appropriate.
Mr. SUNDQUIST. How about a 10-year minimum and 20-year max-
imum?
Mr. CUTSHAW. In my personal opinion I think that sounds very
reasonable, but I cannot speak for the administration in the sense
that it has not been studied in terms of what level of penalties we
would like to see.
Mr. SUNDQUIST. In many export cases we found that money laun-
dering statutes were used for forfeiture. Does EAA provide suffi-
cient forfeiture authority?
Mr. CUTSHAW. The EAA does not really address the money laun-
dering issue but to the extent there is an export violation that does
have cash transactions involved, we do have the authority to seize
the cash involved in that transaction. The Commerce Department
does have the authority to detain and seize goods. We do not have
the authority to forfeit the goods and in those cases we have to go
to other agencies and rely on their cooperation.
Mr. SUNDQUIST. Would it be helpful if you all had that?
Mr. CUTSHAW. I think it would be helpful to have that and we
are currently seeking that authority within the administration.
Mr. SUNDQUIST. Now, do the EAA or money laundering statutes
cover money that is transferred within the United States?
Mr. CUTSHAW. The EAA has no oversight over domestic transac-
tions. It has to involve an export transaction, so in that case it
would not.
Mr. SUNDQUIST. So there may be a window there that somebody
involved with exporting, laundering money within the United
States, transferred within the United States, there may be a fluke
in the system there?
Mr. CUTSHAW. I have very little knowledge about the money
laundering act.
Mr. SUNDQUIST. Maybe you can respond for the record.
Mr. CUTSHAW. I will be happy to look at that.
[The following was subsequently received:]
Mr. Sundquist, in the April 18th hearing, former Assistant U.S. Attorney Portia
Moore, expressed concern that funds transferred within the United States for the
purposes of violating the EAA were not caught by the money laundering statute.
PAGENO="0517"
513
She suggested that the law be changed to allow the U.S. Government to have legal
recourse against these funds in the context of export control violations. What Ms.
Moore is suggesting is applicable to more than just the EAA. It could equally apply
to other "white collar" crimes. Consequently, I would reserve judgment and ask that
you refer this issue to the Department of Justice, which has a broader jurisdiction
that we do at Commerce.
Mr. SUNDQUIST. In the Alcolac case, the company did not have a
list of prohibited chemicals on hand and the export manager had
no training in export controls. Would you comment on whose fault
that was? Who bears the responsibility?
Mr. CUTSHAW. As far as the export controls, it's the obligation of
the company to become aware of the export controls. Now, we un-
dertake strong initiatives, not only on the enforcement side, but I
know that Mr. Baird's operation on the licensing side has extensive
seminars. They have them once a month throughout the country
and we try to do the same with Project Outreach to reach all these
companies and explain the export controls and advise them of the
regulations and the list that are involved for those controlled
items.
Mr. SUNDQUIST. Should that be mandatory, this training in the
more sensitive industries like chemicals or aerospace?
Mr. CUTSHAW. I think it is appropriate to say that exporting
firms should attend one of these seminars but I would not favor
making this training mandatory. I think those industries that have
technologies or sensitive goods are very familiar with the export
control system. They have the associations that represent them
here in Washington, and we have extensive contact with those as-
sociations and industries.
Mr. SUNDQUIST. Should we make it mandatory?
Mr. CUTSHAW. I think it would be difficult to make it mandatory
given the amount of international trade and number of U.S. ex-
porters. I think it is pertinent for the individual as an exporter to
be aware of the laws. In a sense, it is mandatory that U.S. export-
ers know the law and the controlled items or they could be found
guilty of violation of the Act.
Mr. SUNDQUIST. Let me talk about the effectiveness of denial
orders again in the Alcolac case. I believe that Commerce believes
that denial orders are effective, do you?
Mr. CUTSHAW. We certainly do.
Mr. SUNDQUIST. Now, Defense and Customs have said that they
think they are ineffective. And that raises questions about whether
we can help strengthen these enforcement tools. In the Alcolac
case, do you have the authority to put a firm out of business in
that instance?
Mr. CUTSHAW. In the Alcolac case we did deny the export privi-
leges of Peter Walaschek, who was an individual involved in that
particular export, and two of his affiliated companies. The denial
order imposed on that individual and those two companies prohib-
its them from engaging in the export of any U.S. technology and
prohibits any other U.S. firms from selling or exporting to them.
We feel that this type of deterrent is very effective. I just would
submit that most of the major corporations that deal in exporting
controlled technologies have very elaborate systems within their
PAGENO="0518"
514
organization and they check the denied party list regardless of the
transaction.
Mr. SUNDQUIST. Would it be helpful to give you the authority to
put a firm out of business totally and entirely?
Mr. CUTSHAW. Well, in effect, when we remove their export privi-
leges they are out of the international business entirely and, as far
as domestic transactions, the Export Administration Act does not
reach domestic transactions.
Mr. SUNDQUIST. Do you have authority to prevent firms from re-
ceiving Defense or other Government contracts?
I think you may have answered that.
Mr. CUTSHAW. No, sir.
Mr. SUNDQUIST. Would that be helpful?
Mr. CUTSHAW. That's an issue that I would like to give you an
answer--
Mr. SUNDQUIST. Maybe you can comment on all of those ques-
tions in more detail.
Mr. CUTSHAW. I would be happy to.
[The following was subsequently recieved:]
Mr. Sundquist, we deal with export control and export enforcement issues. The
area of procurement is pretty much out of our realm of responsibility. I would say
that the export denial tool that we currently have is a very powerful deterrent
against violations. Most firms are very careful to obey the export regulations, espe-
cially those firms which are involved in extensive international business dealings.
On the issue of linking violations of the EAA to a prohibition against domestic pro-
curement, I would defer to the Department of Defense, which has extensive procure-
ment actions, and to the General Services Administration (GSA).
Chairman PICKLE. Mr. Cutshaw, I have a few questions. Let me
follow through with two questions. In the press last fall there were
stories that pointed out that Americans had sales to Iraq totaling
about $1.5 billion. That was verified this morning by one of the wit-
nesses. And we have enjoyed very brisk sales to Iraq. And this was
a sale of equipment, computers, electronic equipment and other
items that was sent to their Defense Ministry and obviously being
used for that purpose.
Sometime last year, apparently the Commerce Department
thought that we ought to cut down in the licensing of sales to Iraq
and recommended that we slow down and pull back on it. We were
advised, according to the press that the State Department balked
on that, that they said, no, we don't want to right up to the time of
the invasion.
So my question to you-Did the Commerce Department slow
down the issuance of sales to Iraq last year?
Mr. CUTSHAW. Mr. Chairman, after it came to our knowledge
that the Iraqis did launch some missiles, we did begin to look at
the licensing on a case-by-case basis consistent with the ädministra-
tion's policy.
Chairman PICKLE. What information did you, Commerce have
that recommended that you slow down these sales and the State
Department said, no?
Mr. CUTSHAW. Well, Mr. Chairman, we did operate within the
administration position to look on a case-by-case basis and, of
course, after August 2, when the embargo was imposed then we-
PAGENO="0519"
515
Chairman PICKLE. My question to you is what information did
you have that you recommended that you ought to slow down the
sales at this time?
Mr. CUTSHAW. Mr. Chairman, the Director of the licensing office
can answer that. I would defer to him for that answer.
Mr. BAIRD. Mr. Chairman, in my capacity as the Director of the
licensing office, we were concerned about the bellicose action of
Iraq in its threats towards Israel and we were also concerned about
their successful launches of ballistic missiles. As a result, the
Under Secretary directed that, before any Iraqi license be issued, it
be reviewed at the most senior levels in BXA to make sure that its
issuance would be in conformity with what was then an evolving
administration policy.
At the same time, there were discussions with other agencies,
the State Department, the Defense Department, as to what should
be the policy toward Iraq and whether any modifications should be
undertaken. During the course of those discussions, the Commerce
Department did impose these additional management reviews of
Iraqi licenses.
Chairman PICKLE. Well, I could understand why you would want
to do that based on your statement and yet, the State Department
said, no, we ought to go ahead with these sales. It seems like there
was a direct conflict between the two.
Mr. BAIRD. I think both agencies were in discussions as to what
that policy should be and I think that policy was evolving all
during the spring up until the time when Iraq did invade Kuwait.
Chairman PICKLE. Well, why is it, if you were cutting back on
sales, that you were also recommending cutting positions out in the
enforcement area of your division. You were going to cut out the
enforcement positions, is that correct?
Mr. CUTSHAW. Mr. Chairman, we have a small enforcement
agency of approximately 80 or 90 agents and the recommendation
of the fiscal year 1992 budget is only consistent with the fact that
30 FT slots had never been filled because of lack of congressionally
approved resources or lack of funding. But we do continue to per-
form our job with the agents that we have and we have a stable,
consistent enforcement agency and we have been consistent at this
level for a period of time.
Chairman PICKLE. You are saying you really didn't need them
and therefore, you just cut them back?
Mr. CUTSHAW. No, sir, what I'm saying is that those positions
were never filled due to a lack in congressionally approved funding
and we are trying to make do with the resources that we have. We
feel like we are doing an effective job with the resources that we
have.
Chairman PICKLE. I want to ask you a question about some of the
sales to Iran. The press ran a story that you sold some pumps to
Iran and they were sent to Iran Defense Ministries and the custom-
ers intercepted them. And these pumps could be used for military
purposes, at least that was Customs contention and they seized
them. It has been quite a controversy. One of the people who testi-
fied at our hearing last time, on April 18, pointed out that these
shipments of goods to Iran was very questionable and shouldn't
have been done. I quote now his statement, Dr. Stephen Bryen. He
PAGENO="0520"
516
said, that these near shipments of the pumps to Iran illustrates
quite clearly that the export licensing system that we have does
not work. Now he is the director of the Defense Department Invest-
ment area.
And he said, there is little or no oversight in the export control
system. I see no evidence, he says, of quality control as a reàsona-
ble person would understand it. And he points out that the goods
were shipped directly to the Defense Agency of Iran.
Now, here is your top man in the Defense agency saying we
really have no control. Is that true?
Mr. CUTSHAW. Mr. Chairman, if I could kind of paraphrase your
question, I think you are trying to determine if the licensing
system is working within the U.S. Government and, frankly, I be-
lieve it is working. There is significant cooperation. I believe one of
the earlier witnesses indicated that the Defense Department does
review a large number of licenses that Commerce has the final au-
thority to issue.
I would defer to Mr. Baird to respond further on this cooperation
between Defense and Commerce.
[The following was subsequently received:]
I would point out that we at Commerce must follow the laws as passed by the
Congress and the regulations as published in the Federal Register. We have a trans-
parent export licensing system and we cannot deny an export license unless there is
the legal authority to do so. That is one of the reasons the new EPCI proposal is so
important. It will give us the authority we need to stop some of the exports which
previously we could not stop.
Chairman PICKLE. You would say it is working nicely but after
two hearings, at length, we have been told over and over again
through the examples of these four instances that it is not working
as smoothly as it should and a lot needs to be done. I have the feel-
ing that you and the other agencies agree with that, but I think
you are having some difficulty how you are going to get together
and how you are going to handle that. Admittedly it is a complex
question, but I think that most people feel that the Commerce De-
partment will issue a license for almost anything. They would sell
their mother-in-law if you let them. They want to sell anything and
they give a license for almost anything.
Perhaps you are right that we pride ourselves on making ex-
ports, making sales, and the State Department on the other hand,
wants to encourage the favorable cooperation of all the nations and
they hesitate to cut off sales of anything until the very last, almost
up until the time in the Iraq case when we dropped the bombs on
them. Until at least they invaded Kuwait.
Now, that is a tendency that is inherent in both of your depart-
ments. Customs is just an enforcement agency and you both kind of
pull them back at different times so that they won't get too tough
to cut off or curtail sales. Now, these are opinions and I think that
many people feel them. To the extent that this correct, I would
think it is high time that these various agencies get together-al-
ready today we have been after some closed sessions, and we will
be glad to meet with the various agencies, but we are going to talk
with other committees, and I hope in the public we can reach a
conclusion on how we can do this thing better.
PAGENO="0521"
517
Your department is the very base of our problems. You give the
license, you start it more than anyone. I just simply say there is
lots of ground for improvement and I would hope that we could get
our parties together. We are going to make our recommendations
and we would like to have your cooperation too.
Mr. CUTSHAW. Mr. Pickle, I can agree with you that we do have
some concerns to look at, but I would like to ask Mr. Baird to com-
ment on his licensing operation at Commerce, if you would allow
it?
Chairman PICKLE. Fine.
Mr. BAIRD. Thank you, Mr. Pickle, I will be brief. Obviously
there is always room for improvement and we will look forward to
your recommendations for improving our system. But I would like
to state quite emphatically that the process is not broke. It actually
works extremely well. The Iraqi cases, for which we have gotten a
good deal of bad press and concern from people like Dr. Bryen, ac-
tually demonstrate that an extremely high degree of coordination
that takes place in licensing. Of all the licenses that were issued to
Iraq during the past 5 years, virtually 70 percent of them were re-
viewed by other agencies and their comments considered. In no
case was a license issued by the Department of Commerce over the
objection of another agency without that agency having full oppor-
tunity to escalate the matter to the policy level. I just disagree em-
phatically with Dr. Bryen's characterization that the system is in
disarray.
Chairman PICKLE. I accept your statement that you believe the
process is not broke, and I hope that that is correct, but it sure is
in need of repair. There is too much frustration and confusion
going on out in the world about which agency does what and I be-
lieve there is clear ground for improvement.
We took four cases and examined them, they were cases of
record and many cases where convictions have been made. And we
have pointed out over and over and over, dozens of instances where
one agency did not know what the other agency was doing. Now,
overall perhaps we are doing better than most people think. I
would hope that is correct, but I have serious reservations about
accepting that as a fact. We are going to pursue this by talking to
other agencies.
Right now we are going to talk to the State Department. I thank
you, very much for your testimony.
Mr. BAIRD. Thank you, Mr. Chairman.
Mr. CUTSHAW. Thank you, Mr. Chairman.
[The following was subsequently received:]
PAGENO="0522"
518
UN~mmD ETATEP ~TVmN7 C~
Durccu o~ Expmrc Ac ii trct~on
WaCmngton. D.C. 2023C
August 2, 1991 jqo~
The Honorable J.J. Pickle
Chairman Subcommittee on Oversight
Committee on Ways and Ileans
House of Representatives
Washington, D.C. 20515
Dear Hr. Pickle:
Thank you for your letter of May 14, 1991. I was pleased to
testify before your Subcommittee on Oversight concerning the
enforcement of U.S. export controls. The following are my
answers to the questions posed in your letter. I understand that
these follow up questions and answers will be included in the
public record. To the extent I have been able to answer your
questions, those answers may be made part of the public record
either because the section 12(c) confidentiality provisions do
not apply or because they fall within the scope of the national
interest determination made pursuant to section 12(c) for your
April 18 and May 1 hearings. We do not believe an additional
determination is necessary. Please understand that I cannot
provide you any information concerning our ongoing
investigations. I thank the committee for providing the
opportunity for BXA to respond to these issues in a thorough and
comprehensive manner.
Sincerely,
nneth A. utshaw
Deputy Assistant Secretary
for Export Enforcement
PAGENO="0523"
519
1. The Customs Service recently seized a shipment of specially
designed pumps destined for Iran's Defense Ministry that had
been cleared for export by the Commerce Department. Dr.
Stephen Bryen testified before the Oversight Subcommittee on,
April 18, 1991 that Customs had intercepted eight crates of
special nickel-plated pumps that can be used in the
manufacture of gunpowder, propellants for rocket motors, or
plastic explosives of the type used to blow up Pan Am Flight
103 over Lockerbie, Scotland. According to Dr. Bryen, the
State Department classifies Iran as a "terrorist country"
for which export licenses are required for the shipment of
high-technology goods. The Commerce Department did not
classify the pumps as high-tech items.
a. Why did Commerce issue a license for specially designed
pumps destined for the Iranian Defense Ministry? Why
aren't these pumps classified as high-tech items?
b. In The Washington Times dated April 27, 1991, a company
official stated that the company did not tell the
Commerce Department that the pumps were destined for
the Iranian Defense Ministry because it was not legally
required to give such information. Is the company
official correct? Did the company ever ask the
Commerce Department whether a license was needed to
ship the goods to Iran?
c. Did Commerce ever inquire about the Iranian end-user?
Did the company know where these pumps were going?
d. Dr. Bryen testified that Commerce is "trying to figure
out how to reverse its previous decision (to license to
[sic] pumps)." Is this true? What can you tell us
about this?
e. Dr. Bryen's testimony indicates that two other
shipments were made in the 1980's, possibly with
Commerce export licenses. Did the Commerce Department
issue licenses for previous shipments of pumps to Iran?
Answer
These questions concern a matter which is the subject of an
ongoing investigation. Once the case has been closed, we
will be happy to revisit the issue with you. I would point
out, however, that these questions contain several
assumptions of fact which, while they may or may not be
true, give the appearance of implying that Commerce is
somehow at fault. In coordination with representatives of
the Department of Defense, I have determined that Commerce
PAGENO="0524"
520
licensing and enforcement officials have made no errors in
assessing the licensability of the pumps.
2. The Subcommittee on Oversight is aware of another case being
investigated by the Department of Commerce involving a Texas
company that shipped oil drilling equipment and spare parts
illegally to Libya after the U.S. trade embargo.
Provide the Subcommittee with a complete report on this
investigation, including the detailed description of the
illegal shipping scheme, the parties involved, the evidence
gathered, and the disposition of the case. Also, provide
the Subcommittee with relevant documentary evidence
collected during the investigation and used to prosecute the
culpable parties.
Answer
This matter is still an ongoing case and I cannot comment on
it or provide the information requested. Once the case has
been closed, we will be happy to revisit the issue with you.
3. In terms of strengthening the U.S. export control system by
targeting few commodities, what assurances are there that
the "higher fences around a fewer number of goods" will
work? To what extent does the move toward "higher fences
around a fewer number of goods" assume that there are
adequate resources to keep the "higher fences" from
developing holes?" Does the Commerce Department have
adequate enforcement resources? To what extent is Commerce
export enforcement being asked to give up positions?
Answer
The theory of higher fences around fewer goods makes good
sense. It can work in practice, provided the CoCom members
develop appropriate systems for controlling exports and
commit sufficient resources to enforcing those controls.
Currently, CoCom members are in various stages of fulfilling
their commitment to attain the agreed upon Common Standard
for Effective Enforcement. We need to see how these export
control systems are defined and implemented before we can
determine whether there are likely "holes" in our fences.
Concerning whether Commerce has adequate enforcement
resources, I would like to explain our enforcement budget.
The Fl 1992 congressional budget request for export
enforcement is for 177 positions and $16,151,000. This
amount includes the Offices of Export Enforcement,
Enforcement Support, and Antiboycott Compliance, as well as
3
PAGENO="0525"
521
the offices of the Assistant Secretary and the Deputy
Assistant Secretary for Export Enforcement. This amount
includes a pro rata share of BXA administrative support
positions and centrally funded items such as space rental,
phones, etc.
With respect to your question concerning whether Commerce
enforcement is giving up positions, I would like to clarify
the situation. The FY 1992 budget request does reflect a
reduction of 30 positions below FY 1991 levels. These
positions were approved in FY 1986, but were never fully
funded by Congress. Since BXA cannot afford to fill these
positions, the Administration proposed that they be
eliminated from our authorized staffing levels.
The export enforcement program is currently facing the need
to expand program activities to deal with a number of
issues. Among the most pressing are the newly emerging
control regimes related to chemical and biological warfare,
nuclear nonproliferation, missile technology, and
supercomputers. The need for additional resources beyond
those contained in the FY 1992 budget request will be
addressed as BXA develops the FY 1993 budget.
4. With regard to the Helmy missile case investigated by the
Subcommittee, it seems that most of the commodities, if not
all of them, that Helmy procured for Egypt were "dual use"
items. Did any of them require a Commerce Department
license? If not, why not? Would Commerce have had
jurisdiction to investigate this case?
Answer
In response to your last question, Commerce has jurisdiction
to enforce the Export Administration Act, but not the Arms
Export Control Act. If an item is controlled under the
AECA, we would not have jurisdiction to license it or to
investigate any violations for the purpose of imposing
criminal or administrative penalties. The Helmy case was
investigated by Customs. We are not in possession of the
list of commodities that you refer to. If provided, we
would be happy to furnish you with a license determination
of the commodities in question.
5. With regard to the Alcolac chemical case investigated by the
Subcommittee, over 630 tons of "thiodiglycol", a mustard gas
ingredient, was illegally shipped to Iran and Iraq over a
14-month period. During this time, Alcolac's export manager
asked Commerce officials whether she needed a license to
ship thiodiglycol to Singapore, one for (sic) the diversion
points, and was told that she did not.
4
PAGENO="0526"
522
a. Why did Commerce tell Alcolac that they did not need a
license to ship thiodiglycol to Singapore?
Answer
We are familiar with the assertion that Alcolac's export
manager was told by Commerce officials that a license was
not needed to export thiodiglycol to Singapore. We have
investigated this assertion, but have been unable to confirm
it. At the tine the shipment was nade a license would have
been needed to ship thiodiglycol to Singapore. A license
would have been required as of July 29, 1987. Currently, it
is an Australia Group List chemical controlled in category
47983, and a validated license is required for all
destinations except Australia Group members.
b. Under current procedures, can Commerce recognize the
brand name, Kromfax, or the alternate chemical name,
thiodiethalene glycol, as a controlled chemical?
Answer
Under the current procedures Commerce cannot recognize the
trade name, Kromfax, as a controlled chemical. Trade names
are never entered into the licensing system. Chemicals are
identified by their C.A.S. number. The alternate chemical
thiodiethylene glycol is recognized as a controlled
chemical; thiodiethylene glycol is listed in the Export
Administration Regulations Part 799.2 Interpretation 23 as
an alternate name for thiodiglycol (C.A.S. 111-48-8). All
applications to export chemicals must now include the
relevant C.A.S. number.
c. How many chemicals are controlled by Commerce?
Answer
Until March 13, 1991, 11 precursor chemicals were controlled
to all destinations except to the Australia Group countries
and an additional 39 chemicals were controlled to Iran,
Iraq, Syria, Libya, North Korea, Vietnam, Cambodia, Cuba and
to military and police entities in South Africa.
After March 13, 1991, all 50 precursor chemicals are
controlled to all destinations except the Australia Group
countries. Two intermediate chemicals useful to chemical
warfare are also controlled.
d. Did Customs ever refer the Alcolac case to Commerce for
civil sanctions? If not, why not?
5
PAGENO="0527"
523
Answer
Customs did not directly refer the Alcolac case to Commerce
for civil sanctions. Customs and Commerce share their lists
of active investigations on a monthly basis in order to
coordinate enforcement activities, but Alcolac did not
appear on the Customs list. Commerce first learned of the
case through the newspapers. We understand that the
attorneys for Alcolac were the first to raise the issue of a
"global settlement" -- resolving any administrative case to
be brought at the same time that the criminal case was
concluded and they brought the matter to the attention of
the U.S. Attorney's office. The Assistant U.S. Attorney
handling the matter contacted Commerce. In return for what
we understand to be a criminal plea and penalty that was
acceptable to the U.S. Attorney's Of f ice and to Customs,
Commerce did not pursue administrative charges against
Alcolac. We did, however, deny the export privileges of
Peter Walaschek, the West German businessman who purchased
the chemicals from Alcolac and diverted them through
Singapore to Iran and Iraq.
6. With regard to the Global Helicopter case investigated by
the Subcommittee, neither Commerce nor Customs was aware
that Carlos Cardoen had shipped his prototype helicopter to
Dallas until the FAA wrote to them.
a. If Cardoen's modified Bell helicopter is determined by
the State Department to be a civil aircraft, can
Cardoen export it to Chile now? If not, why not?
Answer
If the U.S. determines that the Bell helicopter modified by
Cardoen is a civil helicopter, the Department of Commerce
will still require an export license, and we have notified
Global to that effect. This is because there is evidence
that Mr. Cardoen intends or intended to reexport the
helicopter to Iraq.
b. If the helicopter is determined to be a military
aircraft, can Commerce prevent its export to Chile?
How?
Answer
Commerce is not authorized to enforce the Arms Export
Control Act. If the helicopter is determined to be a
military helicopter, then the sole licensing authority rests
with the Department of State.
6
PAGENO="0528"
524
C. What is Commerce's procedure for referring Arms Export
Control Act cases to Customs?
Answer
Our procedure is to refer such matters to Customs whenever
it is determined that an item is controlled under the Arms
Export Control Act or the International Trafficking in Arms
Regulations. In such a situation, the Commerce Special
Agent-in-Charge refers the case to the appropriate Customs
Special Agent-in-Charge or Resident Agent-in-Charge. If a
case involves some goods controlled under the ITAR and some
under the EAR, Customs will be brought in to handle the
investigation with respect to the former items.
d. When was Customs brought into this helicopter case by
Commerce?
Answer
On July 24, 1990, the Dallas Field Office received its
initial information about the prototype helicopter from the
OEE Intelligence Division. OEE Dallas checked the Customs
list of active investigations and found no case that
appeared to involve Global or Cardoen. The OEE Dallas
office first contacted the Dallas office of U.S. Customs on
August 7, 1990. U.s. Customs subsequently decided to enter
into the case jointly with our agents.
e. Under what authority did Commerce revoke Cardoen's
general license to export his modified Bell helicopter?
Answer
Section 771.2(c) of the regulations provides:
(c) Prohibited shipments. No general license may be
used to effect an export to any destination if:
(1) The general license has been suspended, revoked, or
is otherwise not applicable to the intended
destination. (General licenses and other
authorizations to export may, at any time without prior
notice, be revised, suspended, or revoked by the Export
Administration as set forth in section 770.3(b) of this
subchapter, whenever there is reason to believe that
the export regulations have been, or will be violated.)
f. Under what authority did Commerce detain the
helicopter?
7
PAGENO="0529"
525
Answer
Commerce is authorized by Section 786.8(b) (6) of the Export
Administration Regulations to hold or detain goods in order
to, among other things, obtain a licensing determination
from Commerce's Office of Technology and Policy Analysis.
g. Is Commerce aware of any other attempts by Cardoen, or
any of his companies, to procure weapons system
components or technology in the United States?
h. Has Commerce issued an export license to Cardoen or any
of his companies? If so, to whom, when, and for what
commodities?
Answer
I cannot comment on whether other investigations are being
conducted. Any information specific to export licensing is
subject to the confidentiality provisions of Section 12(c)
and cannot be disclosed without a national interest
determination.
i. Has the State Department ever issued any export
licenses to Cardoen or any of his companies? If so, to
whom, when, and for what commodities?
Answer
I would refer you to the State Department for the answer to
this question.
7. The C-TEK case involved shipping computer goods to Canada
without benefit of a U.S. export license and then, utilizing
a Canadian export license, shipping the goods from Canada to
Singapore and India.
a. How hard is it to get a license from Canada to re-
export U.S.-original computer technology? What is the
average length of time to get a U.S. export license?
What is the average length of time to get a Canadian
export license? To what extent `is the Canadian export
licensing process similar to the Commerce Department's?
To what extent are there differences?
Answer
We consider Canada to be a stalwart ally in export control
matters. Canada participates actively and constructively in
CoCom, the Australia Group, the Missile Technology Control
Regime and the Nuclear Suppliers Group. Moreover, we
8
PAGENO="0530"
526
believe Canada has a fully effective export control system
and works closely with us on export enforcement matters.
In the U.S. it now takes on average about three weeks to
obtain an export license. I cannot say "how hard" it is to
get a Canadian export license. The answer depends on the
nature of the technology and the destination.
b. Are the Canadians required to inquire whether a re-
export license was obtained from the U.S. before they
issue their licenses?
Answer
No. The responsibility for complying with U.S. export
control law, including the need to obtain any required
reexport authorization, lies with the U.S. exporter and the
reexporter.
c. Can the Canadian diversion scheme be applied to other
countries as well? What impact will a U.S.- Mexico
free trade agreement have on export control
enforcement?
Answer
A scheme such as what occurred in the C-Tek case could be
attempted and might succeed whenever trade takes place.
Whether diversion subsequently occurs depends in large
measure on the export control system of the particular
country and the degree of cooperation with the U.S. The
cooperation that exists between the U.S. and Canada is
exemplary. In a U.S.-Mexico free trade agreement, as I
understand it, the U.S. would be negotiating tariff, trade
barrier, investment and market access issues. The U.S.
would not be negotiating export control issues. I expect,
however, that we will be talking with Mexico on these issues
soon.
d. Shiv Mohan Mukkar still maintains that he has `done no
crime at all. Everything [he] was buying was within
the law. What we wanted to import was under legal
license by the Canadian government for export to
India." How extensive was Mohan's involvement in the
procurement of U.S. computer technology? Did Mohan
have other operatives in this country besides
Casperson? Has Mohan's procurement operation been
completely shut down?
9
PAGENO="0531"
527
Answer
Mohan was very involved in procuring U.S. computer
technology. He identified the needs of his customers,
initiated contacts to make the deals, fronted the funds to
acquire the equipment and followed the progress of the deals
at each stage. We believe Mohan did have other operatives
in this country besides Casperson. I cannot comment on
whether other investigations are being conducted. We
believe that Mohan's procurement operation has not been
completely shut down.
e. Where did Mohan get his money to purchase U.S. computer
equipment?
Answer
We do not know all of the details of these financial
transactions. What we do know and can tell you is the
following. Mohan told his associate in New York, Sham
Malhotra, that Mohan would transfer $3 million US from the
Union Bank in Switzerland to an account in the New York
branch of the Bank of Credit and Commerce International
(BCCI). Mohan directed Malhotra to wire transfer this money
to an account in BCCI-Bonbay, India, where it could draw 10%
interest for three years. Malhotra was to use the interest
from that money to obtain a line of credit from BCCI-New
York for $1.5 million US, to be used for various deals by
Mohan and Malhotra, including a restaurant, real estate, and
illegal technology transfers.
We also know that some of Mohan's financial resources were
secured at BCCI-London, using a bank account in the name of
Perfect Technologies. Mohan also used funds from accounts
located in the American Habib Bank in Dubai, UAE.
f. Mohan submitted end-user statements to government
authorities from Virtual Computers to obtain export
licenses. The Commerce Department maintains that these
were false. During the hearing on April 18, 1991,
Mohan submitted for the record a document (copy
enclosed) retracting statements made by Mr. K.R. Naik
to U.S. authorities relating to these end-use
statements. What does the enclosed statement mean?
What is Mohan's relationship to Virtual Computers? Was
Virtual Computers a valid end-user for Mohan's U.S.
computers?
Answer
Mohan had a business relationship with Virtual Computers,
which included a loan he made to Virtual at one time. If
10
PAGENO="0532"
528
the case had gone to trial the U.S. Government was prepared
to produce evidence which would have demonstrated that
Virtual Computers was not a valid end user for any of the
products as Nohan claimed, and, in fact, did not
specifically order any of the products Nohan claimed it did.
Agents Sike and Hobbs have not reviewed the document
submitted by Nohan. It should be noted that Mohan did not
submit this document retracting the statement by Naik during
any of the court proceedings prior to his guilty plea, nor
was it available during the discovery proceedings.
g. What did Mohan say during the meeting in Buffalo that
established his culpability in the Tektronix diversion
scheme? Provide a copy of the transcript of this
meeting.
Answer
Nohan's mere attendance at this meeting, which was set up by
Townsend and Casperson to deal with the problems that had
been created by the illegal attempt to export the VAX 8700,
as well as the planned diversion of the Tektronix
workstations, demonstrates his culpability. Mohan's
culpability was further established through several of his
actions and statements during the Buffalo meeting. Mohan
asked David Whyte, the Canadian, about the licensing for the
workstations - which he knew to be U.S.-origin. Mohan
discussed the terms of a GLV license (how to export
commodities from the United States with a value of less than
$5,000); he discussed exporting computer connecting cables
under the provisions of G-DEST, and said that he could have
it shipped myself. I can take it up to declaration at
Customs, in the United States of America, and I am taking
this cable with me. Mohan demonstrated a working knowledge
of U.S. export laws and regulations.
h. In terms of dollars, manpower, and other resources, how
much did it cost the Commerce Department to investigate
this case? How many agents and support staff were
assigned to the investigation? How much travel was
involved?
Answer
Three agents were assigned almost full time to the case:
the supervising agent, the case agent and another agent to
assist, The investigation and preparation for trial lasted
almost 17 months and used as many as 32 Commerce special
agents at particular times, depending on the needs of the
case. The official travel was extensive. The three agents
assigned primary responsibility for the case were
11
PAGENO="0533"
529
essentially on travel status for the entire 17 months.
There was critical overseas travel to Australia, Singapore,
India and the United Kingdom. There was also travel to
Buffalo to effect the arrests; travel to Washington, D.C. on
two occasions to consult with other agencies; and travel to
Denver and Boston to interview prospective witnesses. The
total Commerce travel costs for the investigation were
approximately $150,000. The total cost associated with the
investigation was in excess of $500,000.
i. Is the Commerce Department still investigating any
companies related to the C-TEK case? If so, explain.
Answer
I cannot comment on whether other investigations are being
conducted.
j. The former Assistant U.S. Attorney in the case
testified that the Canadian government failed to
execute search warrants in support of the C-TEK
investigation. To what extent is Canada required to
assist U.S. investigations involving export control
violations?
Answer
I would refer you to our Justice Department to determine the
extent that there are mutual legal assistance agreements or
other arrangements that require Canada to assist us in our
investigations.
k. Was the $1.5 million fine levied against Mohan ever
collected? If not, why not?
Answer
The fine has not been collected. I would refer you to the
Justice Department for further information.
1. Does the Commerce Department have any evidence that
Mohan lied or misled the Subcommittee during his
testimony on April 18, 1991 regarding his role in the
illegal export of U.S. computers? If so, explain and
provide the Subcommittee with any documentation which
contradicts Mohan's statements.
Answer
We are reviewing the transcript of the April 18 hearing and
comparing Mohan's statements with the evidence we have
12
PAGENO="0534"
530
* developed in this case. We will notify the Subcommittee as
soon as we complete this review.
8. Press reports, including The Washington Post dated November
1991, indicate that last spring the Commerce Department
unofficially began to slow down the process of issuing
export licenses to Iraq. In late July, Secretary Baker
asked Commerce Secretary Mosbacher to impose more rigid
controls on sales to Iraq. A few months earlier,
Administration sources stated that the State Department had
balkeclat imposing tighter controls.
a. Did the Commerce Department slow down the issuance of
licenses for Iraq last year? If so, what information
did Commerce have that required this policy?
Answer
As Mr. Baird testified before this committee on May 1, there
was concern about Iraq's missile activities and threats
toward Israel. Our policies evolved over time based on what
we perceived as a generally deteriorating situation. While
discussions were going on with the State Department and
Defense Department about whether our policy toward Iraq
should be modified, the Under Secretary directed that
license applications for Iraq should undergo additional
management review. No license was issued without receiving
review at senior levels in BXA to assure that issuance would
be in conformity with the evolving administration policy.
b. To what extent was the State Department eager to see that
trade continued and improved with Iraq?
Answer
Export control policy toward Iraq is defined in Part 776
(special commodity policies) and Part 785 (special country
policies) of the Export Administration Regulations. The
State Department is routinely consulted on export license
applications for Iraq that involve foreign policy
considerations. For views on State Department policies or
opinions, please contact that department.
c. Why did the State Department balk at imposing tighter
controls earlier with regard to Iraq?
Answer
13
PAGENO="0535"
531
Questions regarding the position of the Department of State
on export control policies tovard individual counties should
be directed t; that Department.
9. What are your recomniendat ions on specific administrative or
legislative reforms that would enhance the ability of the
Commerce Department to obtain the in~rmation it needs to
perform its statutory duties and to improve the nations
ability to enforce export controls?
Answer
No further statutory authority is needed to allow us to
`obtain information" needed to perform our statutory duties.
However, I can identify three important legislative reforms
that would enhance Commerce's ability to perform its
Congressionally mandated enforcement duties. These are
reforms that we have been coc~f:rring, and do not
necessarily reflect administ'~ation cleared positions.
First, Commerce currently lacks the necessary statutory
forfeiture authority. The Export Administration Act
authorizes Commerce to seize and detain goods but not to
cause them to be forfeited. If we have to turn the goods
over to ~nother agency, such as Customs in the C-Tek case,
they have to comply with their own statutory and policy
guidelines, which can compel then to proceed with a
forfeiture regardless of the consequences for a Commerce
investigation. This obviously complicates the process.
Second, while Commerce does have the authority to conduct
undercover investigative activities, we lack exceptions from
various banking and other statutes. Because we do not have
these exceptions we cannot use some of the standard law
enforcement undercover techniques, such as store front
operations. In other words, we cannot rent a store without
identifying the Commerce Department as the lessee, and we
cannot open a bank account under an assumed name. Other law
enforcement agencies, such as the FBI, the DEA and Customs,
have these exceptions, and we need them. These are standard
tools that any law enforcement agency needs.
Third, we believe the statutory penalties for violating the
export control laws should be much higher. We believe these
are extremely serious crimes, crimes that can truly threaten
our country's security. Diversions of sensitive dual use
technology to unfriendly countries can require us to spend
huge amounts of money in defense research and development to
maintain a technological edge.
14
PAGENO="0536"
532
E.TEXAS. CHASMAN DAN ESS1EN~0WSKT. LURSS. CA.&JRM.&N
COMMITTEE ON WAYS AND MEANS "~ ~
U.S. HOUSE OF REPRESENTATIVES
WASHINGTON 0020515
SUBCOMMITTEE ON OVERSIGHT
May 14, 1991
The Monorable Kenneth A. Cutshaw
Deputy Assistant Secretary for
Export Enforcement
U.S. t)epartment of Commerce
Washington, D~C. 20230
Dear Secretary Cutshaw:
I want to thank you for your testimony at the Subcommittee
on Oversight's May 1, 1991 hearing on the administration and
enforcement of U.S. export controls. To complete our hearing
record, I would appreciate receiving your answers to the
questions asked at the hearing for inclusion in the body of the
hearing transcript, and, in addition, a separate response to the
following questions by the close of business, Friday, May 31,
1991. It is intended that these follow-up questions will be
included in the public record. Therefore, I am requesting that
you provide complete answers to the questions and make a
determination under section 12(c) of the Export Administration
Act that it is in the national interest for this information to
be publicly disclosed.
1. The Customs Service recently seized a shipment of specially
designed pumps destined for Iran's Defense Ministry that had
been cleared for export by the Commerce Department.
Dr. Stephen Bryen testified before the Oversight Subcommittee
on April 18, 1991 that Customs had intercepted eight crates
of special nickel-plated pumps that can be used in the
manufacture of gunpowder, propellants for rocket niotors, or
plastic explosives of the type used to blow up Pan Am Flight
103 over Lockerbie, Scotland. According to Dr. Bryan, the
State Department classifies Iran as a "terrorist country" for
which export licenses are required for the shipment of
high-technology goods. The Commerce Department did not
classify the pumps as high-tech items.
a. Why did Commerce issue a license for specially designed
pumps destined for the Iranian Defense Ministry? Why
aren't these pumps classified as high-tech items?
b. In The Washington Times dated April 27, 1991, a company
official stated that the company did not tell the
Commerce Department that the pumps were destined for the
PAGENO="0537"
533
The Honorable Kenneth A. Cutshaw
May 14, 1991
Page Two
Iranian Defense Ministry because it was not legally
required to give such information. Is the company
official correct? Did the company ever ask the Commerce
Department whether a license was needed to ship the
goods to Iran?
c. Did Commerce ever inquire about the Iranian end-user?
Did the company know where these pumps were going?
d. Dr. Bryen testified that Commerce is `trying to figure
out how to reverse its previous decision (to license to
pumps)." Is this true? What can you tell us about
this?
e. Dr. Bryan's testimony indicates that two other shipments
were made in the 1980's, possibly with Commerce export
licenses. Did the Commerce Department issue licenses
for previous shipments of pumps to Iran?
2. The Subcommittee on Oversight is aware of another case being
investigated by the Department of Commerce involving a Texas
company that shipped oil drilling equipment and spare parts
illegally to Libya after the U.S. trade embargo.
Provide the Subcommittee with a complete report on this
investigation, including a detailed description of the
illegal shipping scheme, the parties involved, the evidence
gathered, and the disposition of the case. Also, provide the
Subcommittee with relevant documentary evidence collected
during the investigation and used to prosecute the culpable
parties.
3. In terms of strengthening the U.S. export control system by
targeting few commodities, what assurances are there that the
"higher fences around a fewer number of goods" will work? To
what extent does the move toward "higher fences around a
fewer number of goods" assume that there are adequate
resources to keep the "higher fences" from developing
"holes?" Does the Commerce Department have adequate
enforcement resources? To what extent is Commerce export
enforcement being asked to give up positions?
4. With regard to the Helmy missile case investigated by the
Subcommittee, it seems that most of the commodities, if not
all of them, that Helmy procured for Egypt were "dual use"
items. Did any of them require a Commerce Department
license? If not, why not? Would Commerce have had
jurisdiction to investigate this case?
PAGENO="0538"
534
The Honorable Kenneth A. Cutshaw
May 14, 1991
Page Three
5. With regard to the Alcolac chemical case investigated by the
Subcommittee, over 630 tons of "thiodiglycol', a mustard gas
ingredient, was illegally shipped to Iran and Iraq over a
14-month period. During this time, Alcolac's export manager
asked Commerce officials whether she needed a license to ship
thiodiglycol to Singapore, one for the diversion points, and
was told that she did not.
a. Why did Commerce tell Alcolac that they did not need a
license to ship thiodiglycol to Singapore?
b. Under current procedures, can Commerce recognize the
brand name, Kromfax, or the alternate chemical name,
thiodiethalene glycol, as a controlled chemical?
c. How many chemicals are controlled by Commerce?
d. Did Customs ever refer the Alcolac case to Commerce for
civil sanctions? If not, why not?
6. With regard to the Global Helicopter case investigatedby the
Subcommittee, neither Commerce nor Customs was aware that
Carlos Cardoen had shipped his prototype helicopter to Dallas
until the FAA wrote to them.
a. If Cardoen's modified Bell helicopter is determined by
the State Department to be a civil aircraft, can Cardoen
export it to Chile now? If not, why not?
b. If the helicopter is determined to be a military
aircraft, can Commerce prevent its export to Chile?
How?
c. What is Commerce's procedure for referring Arms Export
Control Act cases to Customs?
d. When was Customs brought into this helicopter case by
Commerce?
e. Under what authority did COmmerce revoke Cardoen's
general license to export his modified Bell helicopter?
f. Under what authority did Commerce detain the helicopter?
g. Is Commerce aware of any other attempts by Cardoen, or
any of his companies, to procure weapons system
components or technology in the United States?
PAGENO="0539"
535
The Honorable Kenneth A. Cutshaw
May 14, 1991
Page Four
h. Has Commerce ever issued an export license to Cardoen or
any of his companies? If so, to whom, when, and for
what commodities?
i. Has the State Department ever issued any export licenses
to Cardoen or any of his companies? If so, to whoa,
when, and for what commodities?
7. The C-TEK case involved shipping computer goods to Canada
without benefit of a U.S. export license and then, utilizing
a Canadian export license, shipping the goods from Canada to
Singapore and India.
a. How hard it is to get a license from Canada to re-export
U.S-original computer technology? What is the average
length of time to get a u.s. export license? What is
average length of time to get a Canadian export license?
To what extent is the Canadian export licensing process
similar to the Commerce Department's? To what extent
are there differences?
b. Are the Canadians required to inquire whether a
re-export license was obtained from the U.S. before they
issue their licenses?
c. Can the Canadian diversion scheme be applied to other
countries as well? What impact will a U.S.-Mexico free
trade agreement have on export control enforcement?
d. Shiv Mohan Mukkar still maintains that he has "done no
crime at all. Everything [he] was buying was within the
law. What we wanted to import was under legal license
by the Canadian government for export to India." How
extensive was Mohan's involvement in the procurement of
U.S. computer technology? Did Mohan have other
operatives in this country besides Casperson? Has
Mohan's procurement operation been completely shut down?
e. Where did Mohan get his money to purchase U.S. computer
equipment?
f. Mohan submitted end-user statements to government
authorities from virtual Computers to obtain export
licenses. The Commerce Department maintains that these
were false. During the hearing on April 18, 1991 Mohan
submitted for the record a document (copy enclosed)
retracting statements made by Mr. K.R. Naik to U.S.
authorities relating to these end-use statements. What
does the enclosed statement mean? What is Mohan's
relationship to Virtual Computers? Was Virtual
Computers a valid end-user for Mohan's U.S. computers?
51--840 1265
PAGENO="0540"
536
The Honorable Kenneth A. Cutshaw
May 13, 1991
Page Five
g. What did Mohan say during the casting in Buffalo that
established his culpability in the Tektronix diversion
scheme? Provide a copy of the transcript of this
meeting.
h. In terms of dollars, manpower, and other resources, how
much did it cost the Commerce Department to investigate
this case? How many agents and support staff were
assigned to the investigation? How much travel was
involved?
i. Is the Commerce Department still investigating any
companies related to the C-TEK case? If so, explain.
j. The former Assistant u.s. Attorney in the case testified
that the Canadian government failed to execute search
warrants in support of the C-TEK investigation. To what
extent is Canada required to assist U.S. investigations
involving export control violations?
k. Was the $1.5 million fine levied against Mohan ever
collected? If not, why not?
1. Does the Commerce Department have any evidence that
Mohan lied or mislead the Subcommittee during his
testimony on April 18, 1991 regarding his role in the
illegal export of U.S. computers? If so, explain and
provide the subcommittee with any documentation which
contradicts Hohan's statements.
8. Press reports, including The Washington Post dated Novethar
1991, indicate that last spring the Commerce Department
unofficially began to slow down the process of issuing export
licenses to Iraq. In late July, Secretary Baker asked
Commerce Secretary Mosbacher to impose more rigid controls on
sales to Iraq. A few months earlier, Administration sources
stated that the State Department had balked at imposing
tighter controls.
a. Did the Commerce Department slow down the issuance of
licenses for Iraq last year? If so, what information
did Commerce have that required this policy?
b. To what extent was the State Department eager to see
that trade continued and improved with Iraq?
c. Why did the State Department balk at imposing tighter
controls earlier with regard to Iraq?
PAGENO="0541"
537
The Honorable Kenneth A. Cutshaw
May 13, 1991
Page Six
9. What are your reconunendations on specific administrative or
legislative reforms that would enhance the ability of the
Commerce Department to obtain the information it needs to
perform its statutory duties and to improve the nation's
ability to enforce export controls?
Your attention to this matter is greatly appreciated. If you
have any questions, please contact Patrick Heck, Assistant
Counsel, at (202) 225-5522.
Sincerely,
C~Lu~.
fr. ~J.J Prcfkle, Chairman
9~u~cominittee on Oversight
JJP/phl
Enclosure
PAGENO="0542"
538.
REPUBLIC cF INDIA
CITY OF NEW DELHI ) ss*
EMBASSY OF THE UNITED
STATES OF AMERICA
I certify that the official named below, whose true
signature and official seal are, respectively, subscribed and
affixed to the annexed document, was, on this day, empowered to
act in the official capacity ~esignated in the annexed document,
to which faith and credit are due.
J.L. Piole, Section Officer, ~A
(Typed Name of Official)
(Signature1pf Consular Officer)
Rennv T. Smith
(Typed Name of Consular Officer)
Consul of the United States of America
(Title of Consular Officer)
July 25, 1990
(Date)
Seal
PAGENO="0543"
I~ K.R. Naik, Director of N/s. Virtual computers Pvt.
Ltd. having my office at C-121./l22 Ansa md, EstateS, Said-
Vihar Road, Bombay-400 072 do hereby solemnly affirm and
state as follows.
1. I repeat, reiterate and confirm the statement made by
me before CEI authorities (Delhi) on 2nd January, 1990 and
deny and retract all other stat~ments made by me which are
contrary to or inconsistent with the said statement made
before the csm authorities (Delhi) on 2nd January, 1990,
say that the statements made by me before Ms. Dorothy
er, a u.s. foreign cozrmercial Consul stationed in
were made under duress and due to the fact that
Lutter threatened me stating that my Companies would be
black-listed and debarred from importing any u.s. equipments.
Without prejudice to the aforesaid I say that the said state-
ments made by me before Ms. Lutter have been misunderstood
PAGENO="0544"
540
~
- -,. ,. - -
Th s
- `.~r. ~ ~f ~ -
~ 4-~~.rce ~
~
:2:
and thisinterpreted. I therefore hereby retra~
the said statements made by rue before Ms. Lutter
on 19th June, 1990 and 25th June, 1990.
Solemnly affirmed at Bombay
Before me,
~ S. K. SHETTYJ L*U.M.
I I ~ I ~ NOThRY.U~IONOFINDrA
Sr. M.rt.IDi. S~crttz~7
:-~D
:~Ew ~1.~-iL
this i~cdayof
PAGENO="0545"
541
APPThAVIT OP MR. ICJ. NAIK
Dated thia day of
51-840 0 - 92 - 18
PAGENO="0546"
542
Chairman PIcKu~. Our next speaker will be Mr. Duelfer, Deputy
for the Defense Trade to the Assistant Secretary in the Depart-
ment of State.
STATEMENT OF CHARLES A. DUELFER, DEPUTY FOR DEFENSE
TRADE TO THE ASSISTANT SECRETARY, AND DIRECTOR,
CENTER FOR DEFENSE TRADE, BUREAU OF POLITICO-MILI-
TARY AFFAIRS, U.S. DEPARTMENT OF STATE
Mr. DUELFER. Thank you, Mr. Chairman.
I will he very brief. I was warned ahead of time that this commit-
tee had a lot of endurance, and I did not realize that that was actu-
ally an understatement. I think my statement basically says that
the organization and the improvements which we have made in the
State Department over the past year and a half in what we call the
Defense Trade function, as I understand the purpose of your work
here to be mostly on the enforcement side, let me just emphasize a
few aspects of our role in that area, and in particular our close re-
lationship with Customs.
From my perspective, Customs and State are two sides of the
same coin. The regulatory body of law that State has the responsi-
bility for is managed under my jurisdiction, however the enforce-
ment is strictly Customs. So to the extent that there is confusion in
other areas, at least in my area it is very simple. If something is
under the U.S. munitions list the Customs Service is the sole
agency to enforce our laws.
We have tried to integrate Customs people and requirements into
our organization as much as possible. I have Customs personnel
who live and breathe within my office, and they work hand in
glove with our officers. They are, in fact, detailed to our office.
They have access to all of our material, all of our licenses. We are
in the process of establishing a computer link between the two of-
fices. We are working very hard to make them an integral part of
our operation.
We are, however, the policy side of the equation and policy side
of the coin and Customs takes, as has been stated, its lead from
what our decisions are in terms of the control of items on the U.S.
munitions list.
Let me just stop there and the rest is in my written text, and if
you have any questions I will be happy to try to answer them.
[The prepared statement follows:]
PAGENO="0547"
543
TESTIMONY OF CHARLES A. DUELFER
DIRECTOR, CENTER FOR DEFENSE TRADE
BUREAU OF pOLITICO-MILITARY AFFAIRS
U.S. DEPARTMENT OF STATE
Thank you for the opportunity to appear here today to
discuss the defense trade compliance function at the Department
of State.
I will be speaking today primarily of export control or
enforcement in the context of exports produced, designed, or
modified for military use. I would differentiate here those
articles and services covered by the United States Munitions
List (USML) from those exports that, under the Export
Administration Act, are also subject to certain controls to
ensure consister~cy with our foreign policy (e.g., controls on
terrorism equipment, crime equipment, chemical/biological
precursors and nuclear controls).
State's Role
On the eve of World War II, the Congress enacted the
Neutrality Act of 1939. By terms of this statute "every person
who engages in the business of manufacturing, exporting or
importing any arms, ammunition or implements of war" was
required to register with the Secretary of State and obtain a
license, which in turn required notification to the Department
of State of the purchaser and terms in each sale. Export or
attempt to export without a license was made unlawful. Under
this statute, the Department of State began to administer a
comprehensive arms licensing program.
The legal basis for State's current authority to control
munitions is the Arms Export Control Act (AECA) and its
implementing regulations, the International Traffic in Arms
Regulations or ITAR. The latter specifies, in the form of the
USML, articles and services that are under State's jurisdiction
as well as the requirements for licensing. The State
Department's involvement in export control of defense articles
and services -- including enforcement -- however, is
fundamentally a question of foreign policy and national
security.
State's Defense Trade Function
As a result of a dramatic increase in the volume of
munitions export license applications, defense trade staffing
in the State Department was found to be inadequate and system
enhancements were needed to keep pace with the growing and
increasingly complex workload. In order to address these needs
the old Office of Munitions Control was revamped and the t~enter
for Defense Trade was established on January 8, 1990. The
reorganization of the State defense trade function also included the
injection of substantial new resources and the undertaking of a
thorough workload reduction initiative. Creation of the
position I now hold, the Director of the Center for Defense
Trade and Deputy to the Politico-Military Assistant Secretary
for Defense Trade was designed to provide full-time, senior
level leadership on commercial defense trade issues.
In addition to an early emphasis on making the licensing
process more effective and efficient, we were also cognizant of
the fact that the ability to control the destination and
ultimate use of U.S. defense goods is critical to the conduct
of our foreign relations and the safeguarding of our national
security interests. Therefore, in addition to revamping our
licensing mechanism, we have been working to reinforce our
compliance efforts. I should note that these two activities go
hand-in-hand and are mutually supportive. For example, we have
installed a new computer and system for licensing. This now
allows us to manipulate our database in ways which are very
helpful in our compliance activities.
PAGENO="0548"
544
State-Customs Cooperation
During the last year, the State Department has expanded
its' working relationship with the U.S. Customs Service in the
area of enforcement and compliance. The relationship has grown
dramatically in terms of case referrals, overall information
exchanges, criminal investigations initiated, and a better
integration of U.S. Customs officers in day-to-day DTC
operations. Currently, Customs has two full-time employees on
detail to the compliance division of the Defense Trade Controls
office (and a third will be provided shortly). One position, a
Special Coordinator for Law Enforcement, provides senior level
interaction on policy and investigative enforcement matters as
well as oversight in the screening of export license
applications for law enforcement concerns. The second
position, a program analyst, is the main link between the
Customs EXODUS Command Center and the State Department. This
individual is responsible for coordinating all communications
from the Customs operational field offices involving
detentions, seizures, license certifications and determinations
with the two agencies' headquarters. Also, State and Customs
are working on the development of a database interface which
will enable frontline personnel in both organizations to
communicate rapidly about several aspects of enforcement,
including the registration of persons in the defense trade
business, the status of ongoing investigations, the disposition
of requests for export licenses, and the shipment of articles
licensed by State.
The Compliance Work Program
Areas of particular scrutiny in State's compliance function
include current and actual registration information, review
(particularly in terms of indictments or convictions) of
officials empowered by firms to conduct defense trade business,
proper licensing to stem illegal exports, and the
bona f ides of stated destinations and end use of U.S. defense
trade articles and services.
Our work program reflects these concerns:
-- The initial and renewed registration of the over 4,000
persons in the defense trade business.
-- End-use checks of which over 150 cases have been
conducted under a program initiated in September 1990. Pre-
and post-shipment checks on articles and services covered by
the USML are conducted by personnel assigned to U.S. diplomatic
posts abroad, including Customs where available. This program
has becomne a focal point for review/analysis by the
intelligence community and Customs as well as a discussion
point with friendly governments.
- --Assistance rendered to U.S. attorneys inplea bargain,
cases, in indictment procedures, and trial preparations.
-- Records investigations to assist-other goventment
agencies in documentation of controlled items and verification
concerning controlled items.
-- Suspensions and debarments of suspected or known
violators of the AECA and ITAR.
Industry's Role
Finally, I must note that we have been successful in
raising the awareness of industry to compliance issues and
concerns. I find most firms I have dealt with have taken
extensive internal measures to assure their activities are
consistent with munitions export regulations. I was heartened
to see the following quote in a trade journal by a defense
industry giant last October: `...selling armaments should be
done as an instrument of government policy. . . . the world we
are going to see is going to be less and less stable so I would
believe that it is appropriate for governments to play a major
hand in deciding where exports should be made," We believe
there is an industry role in compliance and are making every
effort to encourage private sector interest, emphasizing
vigilance, compliance, and cooperation."
PAGENO="0549"
545
Chairman PICKLE. Well, let me run through a few individual
questions about the cases that we have looked and you could re-
spond quickly and if you would like to submit additional answers,
that would be all right.
With respect to the Helmy missile case, what does the State De-
partment know about Dr. Helmy and his connection with the Egyp-
tian Government?
Mr. DUELFER. It is not the State Department's role to investigate
these cases. What we know is what has been determined through
the investigation. We do know that there was a connection between
Helmy in some fashion and the Government of Egypt.
Chairman PICKLE. But did the State Department have any
knowledge of the Condor II missile program prior to the arrest of
Dr. Helmy?
Mr. DUELFER. I can't tell you for certain. I will have to get an
answer for you for the record.
[The following was subsequently received:]
Yes, the State Department was aware of the Condor missile program before
Helmy's June 1988 arrest. By that time we had raised our concerns about the
Condor program with other MTCR partners, in order to restrict further develop-
ment of the missile.
Chairman PICKLE. Well, you started to say you believe they did
something, what?
Mr. DUELFER. I believe that we were aware of a Condor missile
program.
Chairman PICKLE. Well, you knew something. If you did not you
had blinders on for years down there. But if you did and that was
the case, did the State Department know that the U.S. origin goods
and technology were being used to support Egypt's missile pro-
gram?
Mr. DUELFER. Not that I am aware of, sir.
Chairman PICKLE. You did not know that at all?
Mr. DUELFER. I will have to check for the record, sir, but it is my
understanding that before the Helmy case we did not know that
U.S. materials and technology were involved in that particular pro-
gram.
[The following was subsequently received:]
The Department was aware that U.S. origin goods and technology were being
sought for use in Egypt's missile program, and that some U.S. origin items had in
fact been put to use in that missile program. It was precisely these reports which
led to the investigation that resulted in the arrest of Dr. Helmy.
Chairman PICKLE. Well, it is generally understood now that Dr.
Helmy was sending this information to the Egyptian defense de-
partment purportedly with the knowledge of President Mubarek, is
that correct?
Mr. DUELFER. I am not sure what the transcript of the trial
shows, but it is my understanding that, yes, Helmy his activities
were known to the Government of Egypt.
Chairman PICKLE. Well, were any of the Egyptian officials ever
brought to justice in Egypt for their role in this case?
Obviously Helmy has pled guilty that he was working in collu-
sion with the Egyptian Government and now, were any of the
Egyptian officials ever brought to justice, to trial on this case?
PAGENO="0550"
546
Mr. DUELFER. Not that I am aware of but I will have to check on
that.
[The following was subsequently received:]
To the best of our knowledge, there have been no prosecutions of Egyptian offi-
cials relating to the Hemly case.
Chairman PICKLE. Well, are there any outstanding arrest war-
rants in the United States for any Egyptian officials involved in
this case?
Mr. DUELFER. No, not that I am aware of.
Chairman PICKLE. Why didn't the United States pursue extradi-
tion in this instance?
Mr. DUELFER. I think that is actually a question that the Justice
Department will have to answer. But I believe that what they will
say is that for every individual for whom they had adequate evi-
dence to bring to trial, that they, in fact, pursued that case.
Chairman PICKLE. In the Alcolac case, we have the top officials
who are under indictment here and they have fled the United
States. One has gone to the Netherlands and one to Germany and
have we asked the German Government to return those individuals
for trial? Or the Netherlands Government?
Mr. DUELFER. We have raised this with the German Government
but the German Government like ours, faces a quandary because
the Federal Government does not control local prosecutors in local
jurisdictions. So the Federal Government is well aware of the
United States concerns. But it is not necessarily within their own
power to-
Chairman PICKLE. In other words, we cannot expect any help
from the Netherlands or the German Government to return either
of these individuals for trial?
Mr. DUELFER. I think that is correct at this point.
Chairman PICKLE. We are not getting any cooperation in an ex-
tradition sense, just none?
Mr. DUELFER. Well, I think we have to understand how the
German system works. We have raised it with the Federal Govern-
ment. With their own internal laws, they are constrained about
what they can and cannot do.
Chairman PICKLE. You are going to have cooperation from the
German Government or Syria or any of these other countries in-
volved with respect to this new special defense category, the SDN
category that the Commerce Department said that these people are
doing business with Iraq and Libya and therefore it is against the
law. What good is that going to do in other areas if those countries
will allow business to crop up and operate and circumvent what we
have issued? Are they cooperating with us enough?
Mr. DUELFER. To the extent that we can get cooperation to inves-
tigate activities in our own country, that is one set of problems.
But when someone does it in another country that is a very differ-
ent set of problems.
Chairman PICKLE. I would ask you what leverage does the
United States have to enlist the help of European allies, and you
hope they will give us some cooperation but we can't depend on it.
Mr. DUELFER. Well, sir, when we are pursuing a U.S. citizen in
another country that is one type of problem. When you are asking
PAGENO="0551"
547
another country to pursue its own citizen, that is another set of
problems.
Chairman PICKLE. I understand that, but it frustrates us that in
a case of a security matter, particularly in the area of mustard gas,
we can't get the cooperation of these other countries. We don't
know for sure, now that we have published these businesses that
are doing business with Iraq that these other countries are going to
abide to that. We are advised the German Government is doing a
considerable amount of trading now with other countries, even
Libya to help them build up some of their nuclear powers. I don't
know whether that is a fact or not, but I am very disturbed if it is
so. Do you know whether that is so?
Mr. DUELFER. I don't know if that is so. I know we have raised
our concerns about export controls at very senior levels with the
German Government. It continues to be a matter of discussion be-
tween our two Governments. It is a very high priority for us.
Chairman PICKLE. In the broadest sense, with respect to other
nations generally, is it true that Egypt, Iraq and Argentina still
maintain very active ballistic missile development programs?
Mr. DUELFER. To the best of our knowledge, the Condor missile
program is terminated in Egypt. We typically point to that as-
Chairman PICKLE. Beyond that, you don't know?
Mr. DUELFER. Well-
Chairman PICKLE. The Condor has been terminated, but beyond
that one program you are not certain.
Mr. DUELFER. I am unaware of any other activities.
Chairman PICKLE. Mr. Sundquist, do you have any questions at
this point?
Mr. SUNDQUIST. I do, thank you, Mr. Chairman.
Mr. Duelfer, let me go back to the Global case. Has anyone at
State seen the helicopter in question, and has State made a deter-
mination as of yet?
Mr. DUELFER. In point of fact, we don't need to physically see the
helicopter. The way we make decisions on what we call commodity
jurisdiction is based upon technical data provided to us and we
have had technical data provided to us on the case you are refer-
ring to. We are in the process of evaluating that.
Mr. SUNDQUIST. Does that include pictures?
Mr. DUELFER. Yes, I think we do have pictures.
Mr. SUNDQUIST. Who provides the technical data?
Mr. DUELFER. If I am not mistaken, Customs provided us with
that information, sir. We have photographs and videotape.
Mr. SUNDQUIST. Have you made a determination?
Mr. DUELFER. Not yet.
Mr. SUNDQUIST. Why on earth when it is almost a year, July of
1990, why on earth have you not made a determination yet?
Mr. DUELFER. Well, the question was not posed to us a year ago.
Our first task to make a determination on that came in August.
Mr. SUNDQUIST. August of?
Mr. DUELFER. This past year.
Mr. SUNDQUIST. OK, so it is not July of 1990 it is August of 1990
so that is just one month less.
Mr. DUELFER. Let me finish the tale. The initial time we were
asked the question we had insufficient information to make a judg-
PAGENO="0552"
548
ment. When we get these queries we take the data and we package
it and we send it to expert agencies. At that time there was insuffi-
cient information provided to us to make that judgment. We re-
cently had additional information provided to us in March and now
we have a more complete picture of the helicopter and I feel very
confident that we will have a decision in the next couple of weeks.
Mr. SUNDQUIST. Is it not true that the U.S. Embassy in Chile
knew as early as March of 1990 about his plans for an attack heli-
copter, Cardeon?
Mr. DUELFER. I don't want to get into a lot of our diplomatic ex-
changes but-
Mr. SUNDQUIST. Well, will you respond for the record on that?
Mr. DUELFER. I will, sir.
[The following was subsequently received:]
The Embassy first reported on the possible military use of Cardoen's 206 L-3 heli-
copter in June 1990. The telegram quotes a Jane's Defense Weekly reporter on Car-
doen's alleged plans to sell the 206 L-3 helicopter to Iraq for military purposes.
Mr. SUNDQUIST. And also the same time will you respond to the
question, did the U.S. Embassy in Chile send any letters or cables
to Washington, warning about Cardeon's project?
Mr. DUELFER. I would like to respond to the record on that.
[The following was subsequently received:]
I have described the June 1990 cable. In a November 1990 telegram, the Embassy
referred to Cardoen Industries' marketing brochure on the 206 L-3 that refers to
possible military uses for the "civilian" helicopter.
SUNDQUIST. Let me go back to the Helmy case, and the Defense
Minister of Egypt, Mr. Ghazalak.
Mr. DUELFER. The former Defense Minister.
Mr. SUNDQUIST. Are you aware that he was involved in that di-
version scheme?
Mr. DUELFER. We are aware that he was at least involved
through information which came up in the course of the investiga-
tion.
Mr. SUNDQUIST. What does that mean? You were either aware
that he was involved or you are not aware that he was involved.
Mr. DUELFER. We are aware that it is alleged that he was in-
volved.
Mr. SUNDQUIST. You all answer questions differently at the State
Department than I am used to, so pardon me. Were you aware that
President Murbarak approved of the program in 1984 and met with
Helmy?
Mr. DUELFER. I don't know the answer to that. I can provide
that..
Mr. SUNDQUIST. Will you provide that for the record?
Mr. DUELFER. Yes.
[The following was subsequently received:]
We are not aware of any meeting between President Murbarak and Helmy. Nor,
to the best of our knowledge, did President Murbarak approve of the program in
1984 or any other time.
Mr. SUN]JQUIST. Also for the record, why did the State Depart-
ment instruct Agent Burns to remove the names of high-ranking
Egyptians from his affidavit?
PAGENO="0553"
549
Mr. DUELFER. I don't agree with the question. That issue, we ex-
pressed a view to the Justice Department and it is a Justice De-
partment decision that we expressed the view to the Justice De-
partment that the name of high-ranking Egyptian officials which
were not necessary to obtain the indictment that we better, from
our perspective, if they did not appear.
Mr. SUNDQUIST. It was a diplomatic decision to avoid embarrass-
ment?
Mr. DUELFER. But it was not our decision and we did not instruct
anyone.
Mr. SUNDQUIST. What pressure did the State Department put on
Egypt, Iraq and Argentina to stop the Condor II project?
Mr. DUELFER. Well, I mean this is obviously something that we
raised at senior levels in our bilateral diplomatic exchanges and
that was a constant issue.
Mr. SUNDQUIST. Were you successful?
Mr. DUELFER. We believe we were, yes.
Mr. SUNDQUIST. One last question, that is getting back to the
denial list, is it true that certain foreign governments do not recog-
nize the denial list?
Mr. DUELFER. I will have to provide that for the record.
[The information follows:]
The denial list is the product of a Department of Commerce program, so that
agency is most familiar with it. I can say, however, that our colleagues in Commerce
have advised us that they are unaware of any country that has officially or publicly
denigrated the validity of the denial list.
Mr. SUNDQUIST. I believe it is and assuming the answer is yes,
my next question would be what is State doing and what have they
done to change this?
Mr. DUELFER. We will provide that.
[The information follows:]
If it came to the attention of the U.S. Government that a foreign government did
not recognize the denial list, a diplomatic demarche would be made. As a matter of
foreign policy implementation, the State Department would have the agency lead in
actually making the demarche, obviously in close coordination with the Commerce
Department.
Mr. SuNDQuI5T. Thank you.
Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Duelfer, I don't want to appear curt but I
want to thank you for very little information. You have a lot of an-
swers, I just don't know and I accept it, I can't say that you know
all the answers. But we have been in touch with you now off and
on for the last month for some specific questions, and we have not
got specific answers, although you said you would try to give us in-
formation.
I am going to submit for the record, a closing statement here
that summarizes some of the difficulties we have.
[The statement follows:]
PAGENO="0554"
550
CLOSING REMARKS
THE HONORABLE 3. 3. PICKLE
CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON WAYS AND MEANS
WEDNESDAY, MAY 1, 1991
The two days of hearings held by this Subcommittee clearly
illustrate that we do, in fact, have a serious export control
enforcement problem. The most disturbing aspect of this entire
investigation is the fact that there are numerous examples where
sensitive commodities and technology are routinely exported
illegally to potential adversaries with relative ease and without
any questions being asked.
The Commerce Department issues licenses for commodities not
knowing if the goods are what they purport to be; ever reach their
intended destination; or, are used for the stated legitimate
purposes. Sometimes licenses are issued despite objections and
national security warnings from other Federal agencies. The
enforcement agencies rely heavily on intelligence and other tips to
make its cases and do not currently have the tools necessary to
systematically target illegal shipments. Enforcement depends too
much on the "luck of the draw".
Over the course of these hearings, witnesses recommended
several significant reform measures. These suggestions have ranged
from enhancing our detection abilities by developing an automated
export manifest system to increasing our civil and criminal
sanctions. Some have recommended tighter restrictions and
reporting requirements on duel-use items; increasing awareness and
business education on export controls; facilitating the exchange of
export information among the various Federal agencies; improving
the area of licensing; and, consolidating export control
enforcement functions into a single agency.
Possible legislative and administration actions alone will not
solve the problem of illegal exports and proliferation. The recent
war with Iraq has taught us that proliferation is truly a global
security issue requiring political attention at the highest levels
of all governments. We must confront this issue head-on and compel
our friends and allies to cooperate in this endeavor. I hopeful
this message is finally being heard.
While we examined only four cases, we have raised hundreds of
questic)ns regarding the adequacy of our export control system.
After today's hearing, the Subcommittee will make findings and
consider the recommendations offered by the witnesses for inclusion
in the Subcommittee's report to the full Committee. I expect this
Subcommittee's work to contribute to the strengthening of our
export control laws. As we move toward this end, I hope we have
the cooperation of the departments and agencies involved. We
simply must do better.
PAGENO="0555"
551
Chairman PICKLE. These 2 days of hearings illustrate that we, the
Congress, does have a serious export enforcement problem. The
most disturbing aspect of this entire investigation is the fact that
there are numerous examples where sensitive commodities and
technology are routinely exported illegally to potential adversaries
with relative ease and without any questions being asked. That
goes all the way from the Commerce Department to the other
agencies involved. We have only examined four cases, but we have
brought out innumerable facts that shows that considerable im-
provement needs to be made.
We are going to be in touch with each of these agencies and we
are also going to be in touch with the committees who have juris-
diction on the Hill to see if we can't find a better answer. Our pri-
mary concern is in the field of Customs, but we can't get Customs
to make specific recommendations, and/or the Treasury Depart-
ment saying they will review it much more than they would talk to
them. A lot talk is going on between the agencies we understand I
hope that something constructive can come of it.
I must bring this meeting to a close, but I do thank you for the
information that you have given us and we will be in touch with
you later.
Mr. DUELFER. Thank you.
Chairman PICKLE. The committee stands adjourned.
[Whereupon, at 2:57 p.m., the hearings were adjourned.]
[Questions submitted to the Department of State and response
follow:]
PAGENO="0556"
552
United States Department of State
Wa.shington, D.C. 20520
July 12, 1991
- JUL 1 1991
Dear Mr. Chairman: Vysand~~s
Subcomm~ttee on Oversignt
Following the May 1, 1991 hearing before the Subcommittee
on Oversight at which Charles Duelfer testified, additional
questions were submitted for the record.
Please find enclosed all but six of the responses to those
questions. These outstanding responses will be forwarded to
you as soon as they are completed.
Sincerely,
~/ 7)7~L~L~4;~
Janet G. Mullins
Assistant Secretary
Legislative Affairs
Enclosures:
As stated.
The Honorable
Dan Ro::tenkowski, Chairman,
Committee on Ways and Means,
House of Representatives.
PAGENO="0557"
553
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
/k. Q: (.Helrnv Missile Case: In this case, Dr. Adelkader Helmy, a
rocket scientist, particpated in a scheme to illegally shp
ballistic missile technology to Egypt. Dr. Helmy testified
that he engaged in this underground procurement network at
the request of high-level Egyptian officials, including
then Defense Minister Ghazala and, apparently, President
Muba r ak.
a. Why were missile components prohibited for export to
Egypt in 1988? Are they still prohibited today?
A: Since 1987, the U.S. has restricted exports of missiles and
related technology under the Guidelines of the Missile
Technology Control Regime (MTCR), which the U.S. helped
create in order to control the spread of missiles.
The Guidelines, and U.S. export controls, apply to
missile-related exports worldwide, not just to one
country. These controls are still in effect today and
have, in fact, been strengthened recently under the
Administrations Enhanced Proliferation Controls Initiative
(EPCI).
b. What does the State Department know about Dr. Helmy
and his connections with the Egyptian Government?
A: The information available to the Department of State with
respect to Dr. Helmy's connections to Egyptian officials
originates primarily from documents on the public record
already furnished to the Subcommittee, and from Dr. Helmy's
statements under a cooperation agreement with the
Department of Justice. Further inquiries on this
information should be directed to the Department of Justice.
PAGENO="0558"
554
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q: c. Did the State Department have any knowledge of the
Condor II missile program prior to the arrest of Dr.
Helmy? If so, did the State Department know that
U.S.-origin goods and technology were being used to
support Egypt's missile program?
A: The State Department was aware of the Condor missile
program before Helmy's June 1988 arrest. By that time we
had raised our concerns about the Condor program with other
MTCR partners, in order to restrict further development of
the missile.
The Department was aware that U.S. origin goods and
technology were being sought for use in Egypt's missile
program, and that some U.S. origin items had in fact been
put to use in that missile program. It was precisely these
reports which led to the investigation that resulted in the
arrest of Dr. Helmy.
d. Was the State Department aware that the Egyptian
Government was receiving technical advice from Dr.
Helmy from the origins of the missile program in 1984
to Dr. Helmy's arrest in 1988?
A: The State Department became aware of Dr. Helmy's activities
during the course of the investigation, but the extent of
his connections to the Egyptian Government did not become
clear until he detailed these connections as part of his
plea bargain.
PAGENO="0559"
555
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
e. Were any of the Egyptian officials ever brought to
justice in Egypt for their role in this case? If not,
why not? Are there outstanding arrest warrants in the
U.S. for any Egyptian officials involved in this
case? Why didn't the U.S. Government pursue
extradition?
A: To the best of our knowledge, there have been no
prosecutions of Egyptian officials relating to the Helny
case. At the time of Dr. Helmy's arrest, we urged the
Government of Egypt to take appropriate measures against
responsible officials in Egypt.
Two Egyptian military officials were indicted in the Helmy
case. They are presently fugitives with outstanding arrest
warrants, and we believe they are residing in Egypt.
Unfortunately, our extradition treaty with Egypt does not
cover the types of crimes these officials are alleged to
have committed.
Two other unindicted Egyptian officials who were identified
as co-conspirators but who had diplomatic immunity were
officially withdrawn by the Government of Egypt after the
arrest of Dr. Helmy in June 1988.
f. Did all the missile component items contained in
Egypt's shopping list, such as rocket fuel
ingredients, require State Department licenses? If
not, why not?
Q: All items on the MTCR Equipment and Technology Annex,
including rocket fuel ingredients, require a U.S. license
prior to export. Most of these are controlled as munitions
items and licensed by the Department of State. A small
number of MTCR Annex items are dual-use items licensed by
the Department of Commerce.
PAGENO="0560"
556
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
g. The Helmy case involved the use of the Egyptian
Embasssy facilities and Egyptian C-l30 military
aircraft. Does the State Department have any
knowledge that U.S.-origin commodities are being
exported illegally through diplomatic means in other
cases? If so, please explain.
A: The State Department has no such knowledge with respect to
items on the munitions list, nor do I have any such
knowledge with respect to other exports.
Q:haThe Iraqi organization "BADR General Establishment~ is one
of the Saddam's contractors for military equipment and
supplies. BADR was the prime contractor for the high
temperature furnaces intercepted by Customs. The furnaces
were to be used for Iraq's missile and nuclear programs.
i. What information does the Department of State have on
the Iraqi organization BADR General Establishment?
ii. When was the Department of State first made aware of
the covert targeting and collection activities of
BADR? What did you do about it?
iii. Did the Department raise any concerns about the
activities of BADR General Estalishment? If so, at
what level? What did the Department do with the
information?
A: The Department of State knew that the BADR General
Establishment was involved in steel works, including
casting, cutting and milling, and that BADR supported
Iraq's military production industries. We began to suspect
its involvement in Iraq's missile program when it started
to search for precision casting and milling equipment in
1989.
At that time, the Department, along with other agencies,
began to monitor BADR's activities more closely, and to
scrutinize U.S. exports to the establishment carefully. No
exports of MTCR Annex items were allowed to go to the BADR
General Establishment. On a number of occasions, we raised
with Iraq our concerns about the dangers of missile
proliferation in the Middle East.
PAGENO="0561"
557
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q: i. "Pro~èct 395~ is the name of Iraq's primary ballistic
missile development program. What information does the
Department of State have on Iraq's Project 395? Does the
Department know how this project is tied into Iraq's
indigenous ballistic missile development program? Did the
Department of State ever discuss this projct with Egypt or
our allies? If so, when and how was this done and at what
level was it done? Did the Department ever raise any
concerns with other Departments over this activity? Or
with Iraq itself?
A: The Department of State is aware of the nature of Project
395, and its role in Iraq's ballistic missile development
efforts prior to the Gulf War. Most of the information on
this project is classified, however.
The U.S. discussed Iraq's missile development activities on
numerous occasions with Egypt and other allies prior to the
Gulf War. In some cases, the discussions were aimed at
thwarting specific procurement efforts by Iraq. In others,
the discussions focussed more generally on Iraqi
capabilities and intentions. In addition, on a number of
occasions we raised with Iraq our concerns about the
dangers of missile proliferation in the Middle East.
Within the U.S., all relevant government agencies
participated in interagency discussions of Iraqi missile
development activities, including planning and executing of
U.S. actions in response.
Question
A. j. j. The Saad 16 is a facility located inside Iraq involved in
missile research and development. A number of U.S. exports to
facilities, such as Saad 16, were not covered under the annex
of the multinational Missile Technology Control regime. One
example was a hybrid computer exported to Iraq in 1987. The
Department of Defense (DOD) objected but it was licensed
anyway. Commerce had informed DOD that there was no legal
basis to deny the export to Iraq either under foreign policy or
national security grounds.
i. What did the Department of State know about the Saad
16 facility? What did the Department do about it?
PAGENO="0562"
558
ii. Could the computer have been denied for export, even
though it was not on the annex? If it could not have
been denied for foreign policy grounds, could it have
been denied for national security reasons.
iii. Did the Department of State know that BADR was
involved in the Saad 16 project for which the German
company, Gildemeister, was the prime contractor? Did
State go to the Germans raising concerns about the
facility? What was the German government's
response?
Answer
As the Department became aware of the nature of the Saad 16
facility and its importance to Iraqi missile development
activities prior to the Gulf War, the Department led the USG
effort to contain the threat posed by Iraq's missile
activities. The Enhanced Proliferation Control Initiative
(EPCI) is one direct result of this effort. On a multilateral
basis, the effort included numerous discussions with the German
government about the involvement of German firms in Iraq.
Under existing authority and regulations, computers not
covered by the Missile Technology Control Regime or other
foreign policy controls could not have been denied to Iraq
solely on the basis of concern that the end user was engaged in
/ missile-related activities. The Enhanced Proliferation Control
Initiative (EPCI) now provides authority to address this
situation effectively.
Prior to implementation of EPCI, items not specifically
covered by one of the foreign policy controls, e.g. missile
technology controls, were not subject to individual licensing
except under the national security (section five) provisions of
the Export Administration Act. Items controlled for national
security reasons but not subject to specific foreign policy
controls could generally have been denied effectively only to
the proscribed destinations specified in section five of the
Act, e.g. the Soviet Bloc and China. Any effort tocontrol
items to Iraq under section five in the absence of multilateral
controls would have been ineffective because of the foreign
availability provisions in the Act.
PAGENO="0563"
559
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q:K.Despite the actions taken by the United States with regard
to Dr. Helmy and his activities to procure components for
the Egyptian-Iraqi-Argentina missile programs, isn't it
true that Egypt, Iraq, and Argentina still maintain active
ballistic missile development programs? What is the United
States doing to curb this activity?
A: Missile development activities in these countries have been
significantly affected by international events and domestic
political constraints.
Iraqs missile program, of course, was dealt a substantial
blow by attacks from coalition forces during the Gulf War.
Under UNSC Resolution 687, Iraq is required to destroy or
surrender its weapons of mass destruction, including
ballistic missiles of greater than 150 km range. The UN
Special Commission charged with implementing UNSCR 687 is
now in the process of carrying out its mandate.
Argentina has announced the termination of the Condor
program and is discussing with the U.S. ways to eliminate
Condor-related equipment and facilities.
Egypt has reacted favorably to the President's recently
announced Middle East arms control initiative, which calls
for a ban on the development and production of all
surface-to-surface missile systems. We hope Egypt will
take the lead in efforts to rid the Middle East of
destabilizing weapons.
For more detail on missile development activities in these
countries, I would refer you to the Report on Missile
Proliferation, submitted to the Congress pursuant to
Section 1704 of the National Defense Authorization Act for
Fiscal year 1991, PL-10l-5l0.
PAGENO="0564"
560
Question for the Record submitted to Charles Duelfer
Before the House Ways and Means Committee
Subcommittee on Oversight
Appearance Date: May 1, 1991
/~ 2. Alcolac Chemical Case: In this case, over 630 tons of
"thiodiglycol", a mustard gas ingredient, was illegally shipped
to Iran and Iraq over a 14-month period. The principle
operatives, Peter Walaschek and Frans van Anraat, remain
fugitives today because the German and Italian governments
failed to take action. The Italian courts refused to extradite
van Anraat and he remains at large. Waiaschek fled the United
States before sentencing and resurfaced in Germany where German
authorities have refused to extradite him.
a. What is the State Department doing to ensure that those
charged with violating U.S. export control laws are brought to
justice?
The Department believes that appropriate action should be
taken against all persons who violate U.S. export laws. The
Alcolac case involved violations of the Export Administration
Act's regulations and falls under the jurisdiction of the
Commerce Department. Several foreign nationals were arrested
based on the work of U.S. Customs officials.
Generally speaking, our agencies work together to eensure
compliance with the various export control regimes but the
ultimate responsibility of enforcement lies with the agency
charged with carrying out the regulations in conjunction with
the Justice Department. In this instance, the specific agency
concerned was the Commerce Department.
PAGENO="0565"
561
Question for the Record submitted to Charles Duelfer
Before the House Ways and Means Committee
Subcommittee on Oversight
Appearance Date: May 1, 1991
A.2. b. What role did the State Department play in trying to
secure the extradition of Walaschek and van Anraat?
The Department of State only makes extradition requests
when asked to do so by the Justice Department, which ultimately
prosecutes persons for violations of U.S. regulations.
Because Walaschek is a German national, he was not
extraditable to the U.S. under German law and the U.S.-German
Extradition Treaty. Like many countries, the FRG will not
extradite its own nationals. However, DOJ's Office of
International Affairs of the Criminal Division and the State
Department worked through the appropriate diplomatic channels
and prepared a requst for Walaschek to be prosecuted in the
FRG. DOJ requested a transfer of the proceedings to the FRG
but the ultimate decision as to whether prosecution could occur
rested with the German prosecutor and ultimately with the FRG
court. Such a determination, however, is clearly out of the
jurisdiction of the Departments of State and Justice.
Van Anraad was arrested in Italy but an Italian judge was
prevailed upon to lower the charge to one for which there is no
extradition provision in the U.S.-Italy Extradition Treaty.
PAGENO="0566"
562
Please note that EtJR can provide only mininal information on
this case. PM/PRO should be able to handle the general
question and fill in the German part.
QA2c. In-- this case, over 630 tons of "thiodiglycol", a nustard
gas ingredient, was illegally shipped to Iran and Iraq over a
14 month period. The principle operatives, Peter Walaschek and
Frans van Anraat remain fugitives today because the German and
Italian governments failed to take action. The Italian courts
refused to extradite van Anraat and he remains at large.
Walaschek feld the United States before sentencing and
resurfaced in Germany where German authorities have refused to
extradite him.
c. What leverage does the United States have to enlist the
help of our European allies? How do the Germans and
Italians view violations of U.S. export laws?
A. The U.. S. Embassy in Rome strongly protested the Italian
court decision in September 1989 to refuse van Anraat's
extradition to the U.S. on the grounds that this offense
was political. Italy takes, seriously the issue of control
of arms and related interests. Its new arms export control
law places severe limits on the export, import and transit
of biological as well as conventional armaments. We
receive excellent cooperation in these areas.
0. A.2.d. Should the Department of State get involved in the
issuance of licenses for, such chemicals as thiodiglycol which
is used for mustard gas? If no, why not? Isn't thiodiglycol
the critical ingredient?
A. The State Department is involved in the process of
approving export licenses for chemical weapons precursors,
including thiodiglycol, which is a precursor for mustard gas.
Applications for licenses to export 50 chemicals -- which
comprise the Australia Group CW precursor list -- to
destinations outside the Australia Group countries are referred
to the State Department and other relevant agencies by the
Department of Commerce for their views before an export license
is issued,
PAGENO="0567"
563
Question for the Record submitted to Charles A. Duelfer
House Committee on Ways and Means
Subcommittee on Oversight
May 1, 1991
Q. 3 The Global helicopter case involved the attempt by Carlos
Cardoen to obtain FAA certification of a modified Hell
helicopter. The Commerce Department determined that the
helicopter was most likely for military purposes and, therefore,
in August 1990 requested a determination from the Department of
State regarding the requirements for a State Department license
for re-export of the helicopter to Chile. This request is still
pending.
Why has it taken the State Department so long to determine
whether Cardoen~s helicopter requires a State Department license?
A. On June 24, 1991, the Department of State advised the U.S.
Customs Service of its determination that the modified Bell~
Long Ranger helicopter belonging to Carlos Cardoen is covered
by the U.S. Munitions list and requires a munitions license for
export from the United States. This determination was made in
through a formal Commodity Jurisdiction determination, in
consultation with the Departments of Defense and Commerce.
The Bell Long Ranger helicopter in its unmodified form is
a civilian aircraft subject to Commerce Department
jurisdiction. In response to a request from the Customs
Service as to whether the modifications made to the Cardoen
helicopter had transformed it into a munitions item, State
initiated a commodity jurisdiction review. The initial
information obtained by the Department was insufficient to make
a determination as to whether the modifications had changed the
nature of the aircraft. Further information, including written
material and technical data, was sought and, after some delay,
obtained by April 1991. This new information allowed the
Department to make its final determination in this case.
PAGENO="0568"
.564
Question for the Record Submitted to Charles Duelfer
House Ways & Means Committee
SubCommittee on Oversight
Hay 1, 1991
~4. C-TEK Computer Case
a. Detailed information on the C-TEK Case is best
obtained from the Department of Commerce and from the
U.S. Customs Service, both of which were involved in
this case. Our understanding is that the failure of
the Government of Canada to execute search warrants
requested as part of the investigation was due to the
inability of the Assistant U.S. Attorney to provide
sufficient probable cause to Canada to enable that
Government to comply with their law. Canada is a
member of COCOM and has therefore pledged to
cooperate with other COCOM members, such as the U.S.,
in the investigation of these types of export control
violations. There is an excellent record of
cooperation by Canada Customs and the RCMP in this
regard in the case of controls agreed upon both
bilaterally and multilaterally. The U.S. and Canada
have entered into both a bilateral Mutual Legal
Assistance Treaty and a bilateral Customs Mutual
Assistance Agreement which provides an international
legal basis for this cooperation.
b. It is not entirely accurate to say that Singapore did
not cooperate with the U.S. in this investigation.
Trade authorities in Singapore, it should be noted,
returned the DEC VAX 8700 Computer to the U.S. at the
request of the USG. The Government of Singapore,
through its Trade Development Board, did advise the
U.S. in this case that it could not provide requested
documentation because Singapore's Trade Development
Act specifically prevented the GOB from providing
documentation to any government body - foreign or
Singaporean - except in the instance of a prosecution
in the Singapore courts. The Government of Singapore
does not prohibit the U.S. from obtaining needed
documentation directly from private companies or
freight forwarders. The GOS cannot provide such
documentation to us under this interpretation of
their law. The United States is discussing a broad
range of legal cooperation matters at the present
time with the Government of Singapore, including
cooperation in both money laundering and in export
enforcement.
With regard to the cooperation of the United Arab
Emirates in this case, we have no direct knowledge of
any lack of assistance on the part of the UAE,
although we understand that in the C-TEK computer
case, there were some problems caused by the manner in
which the U.S. requested the information. In general,
our experience has been that the UAE has been
cooperative on law enforcement matters. You might
want to check with the U.S. Customs Service on this,
since their Attaches would have been responsible for
coordinating or conducting any export control
investigation in the UAE, or with Commerce, since this
was their case, for the detailed information you seek.
With regard to the assistance provided the State
Department to assist U.S. investigators in obtaining
overseas information, this can take many forms. The
best method is through the conclusion of bilateral
agreements of cooperation and assistance in legal
matters, such as Mutual Legal Assistance Treaties, or
executive agreements such as Strategic Trade Memoranda
of Understanding and Customs Mutual-Assistance
Agreements. The 5K benefits of the Export
Administration Act are incentives to cooperate with
the U.S. on strategic trade. There are a number of
PAGENO="0569"
565
other diplomatic tools available to the U.S. to use in
gathering evidence in export cases. As you know, the
responsibility for conducting overseas investigations
of violations of U.S. export control laws rests with
the U.S. Customs Service. For that purpose they have
over 100 employees stationed at embassies ann
consulates around the world, and their operations are
fully supported by the Department of State.
G. Each diversion scheme that we uncover differs from others
to a certain extent. However, most diversions of U.S.
origin high technology goods tend to be through countries
with which the U.S. has a large volume of trade in high
tech goods, such as Canada, the United Kingdom and West
Germany. There are very few allegations of diversion
through Mexico. There does seem to be a trend in
diversions to have them go through many countries before
being diverted to a proscribed destination. We think it is
important to look at our overall system of export controls,
which we believe is highly effective. There have always
been, and will continue to be successful diversion
attempts. They are not numerous enough, in our view, to
significantly affect the strategic balance, and the large
number of successful criminal prosecutions and
administrative penalties for export control violations is a
powerful deterrent.
FOREIGN POLICY CONCERNS VERSUS EXPORT CONTROLS
3.1. A Washington Post article dated November 1, 1990, indicates
that last spring the Commerce Department unofficially began
to slow down the process of issuing export licenses to Iraq.
In late July, Secretary Baker asked Commerce Secretary
Mosbacher to impose more rigid controls on sales to Iraq.
A few months earlier, Administration sources had stated
that the State Department had balked on imposing tighter
controls.
c. To what extent do foreign policy concerns override
export controls? Please give examples.
U.S. defense firms which violate the Arms Export Control
Act (AECA) (22 U.S.C. section 2778) and other U.S. export
control legislation are prohibited from exporting defense
articles and providing defense services. The Department of
State may grant special exceptions because of overriding U.S.
national security and foreign policy concerns.
In making its decision, State consults with DOD and other
relevant agencies. In the past months, after careful
interagency review, State has granted exceptions for some
compelling cases; examples are summarized below.
o An exception was recommended for a defense export in
order to permit a NATO ally to fulfill its commitment to an
PAGENO="0570"
566
important alliance project, the Multiple Launch Rocket
System (MLRS) program. Allowing the requested transfer
furthered U.S. national security interests and encouraged
collective security efforts within NATO. Impeding such a
joint venture at this critical juncture in NATO~s history
could send the wrong signal to U.S. allies.
o In a case involving a friendly democratic nation, an
exception was recommended to permit the export of
components for aircraft which are essential to the country
in maintaining its defense preparedness.
o A firm prohibited from exporting requested to sell
communications equipment to a U.S. ally. An exception was
recommended because the nation provided crucial assistance
to the U.S. in the Gulf war effort.
PAGENO="0571"
567
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
2. Under the terms of the United Nations Cease Fire agreement,
Iraq purportedly disclosed on April 18th the location of all of
its chemical stockpiles, nuclear materials and ballistic
missiles, which are to be destroyed several months later.
a. To what extent have the Iraqis complied with the
agreement? How does the U.S. intend to ensure that Iraq
completely discloses this information? How will the
destruction of these weapons be carried out?
b. Are the huge quantities of the mustard gas precursor,
"thiodiglycol,~ that were from Alcolac International listed as
part of Iraqs chemical stockpiles?
A. Iraq has not declared all the information required by UNSC
Resolution 687 about their weapons of mass destruction and
ballistic missiles. The UN Special Commission has requested
additional information from the Iraqis to supplement their
original declarations. Although the Iraqis provided more
detailed and forthcoming information, the USG still believes
they have not made full disclosure. In the USG view, we should
not expect full Iraqi disclosure, but should instead use the
inspection regime mandated by UNSC Resolution 687 to
investigate Iraqi sites and facilities. This procedure is the
best means to increase confidence in our information about
Iraqi facilities and capabilities.
UNSCR 687 calls upon the UN Special Commission to remove,
destroy or render harmless Iraqi nuclear material, facilities
and equipment, weapons of mass destruction, and ballistic
missiles over 150 km range. The Iraqi nuclear fuel which was
inspected and placed under tamper-proof seal last month will be
removed from Iraq. The Commission demanded -- and the Iraqis
agreed to -- a procedure and schedule for the Iraqis themselves
to destroy ballistic missiles (under Commission observation) by
crushing them. The destruction of chemical weapons is a much
more complicated task, and the UN Special Commission has not
yet decided how to proceed. The Iraqis have offered to
destroy their CW themselves under Commission observation in
PAGENO="0572"
568
order to minimize costs. The Commission is considering the
Iraqi plans to see if they meet required standards. If Iraq is
allowed to destroy its chemical weapons, we will insist that it
be done under Special Commission supervision and control.
The Iraqis did not identify "thiodiglycol~ in their
declarations to the UN Special Commission.
3. We know that German companies have been in the forefront of
proliferation in chemical, biological warfare, and missile
and nuclear weapons development in Iraq and other third
world- countries. In response, the Germans have made
pronouncements that they have improved their export control
laws to guard against proliferation. Yet, we continue to
get reports that German companies continue to supply
technology and equipment to such companies as Libya, India,
Pakistan, Syria, and Iran for these unconventional weapons
efforts. It is my understanding that the German
government, as a matter of policy, does not conduct
pre-license or post-deliver shipment checks to ascertain
the bona f ides of end-users. Further, a recent New York
Times article reports that the German legislature has
rejected the proposed German proliferation control laws.
a. What are we doing to get the Germans to make a more
concrete effort to ensure their exports to these
countries are not going for unconventional weapons
development?
b. What can we do if, the Germans continue to reject
proliferation control efforts? -
A: Since Rabta, the Germans have taken impressive steps to
improve their export control regime and have cooperated
closely in investigations of suspected export control
violations involving German firms. Last year, the Germans
adopted a series of export control reforms, giving then
among the toughest export control laws in the world.
As a follow up.measure, the German government introduced
new legislation this year stiffening-penalties in some
areas and expanding the investigative autho~rity of law
enforcement agencies in export control cases. This
legislation passed the lower house of parliament, but was
held up in the upper house due to objections to wiretapping
PAGENO="0573"
569
provisions. German authorities are nevertheless optimistic
that a compromise bill, with few modifications, will be
approved shortly.
The Germans have established a special list of countries of
proliferation concern that includes all of those noted in
your question. Exports to these countries of a wide-range
of dual-use and other items that might be used in NBC
weapons programs require special export licenses.
4. It is German policy to say that it does not support
proliferation in third world countries. At the same time,
German companies contend that they do not break German laws
despite what we know to be the contrary. The Germans
end-run the system by "piecemealing" components for systems
which later are joined together outside of Germany. German
Economic.Minister Moellemann has indicated that it was
through this method that German companies were able to
build proliferation facilities in Iraq.
a. What are we doing to get German authorities to focus
and take action on this apparent end-run of stated
German policy?
b. Are the Germans trying to have it both ways --
supporters when it comes to international policy but
shrewd businessmen when it goies to trade?
A: The German government shares our concerns over potential
diversions of sensitive items through third countries. For
that reason, it now requires that German exporters exercise
due diligence in determining the bona £ ides of their
customers. If diversions occur due to a German firms
negligence, it can be held criminally accountable.
Drafted:
EUR/CE: JFSammis 6
SECEFRG 3183 6/21/91
Clearances:
EUR: RJohnson
EUR/CE:OGrobe'~\ .,
EUR/CE : WMenold
PM/PRO:JDavi5
PAGENO="0574"
570
Taken Q&A
Charles Duelfer
House Ways and Means Committee
May 1, 1991
CHINA~S NUCLEAR COOPERATION WITH ALGERIA AND PAKISTAN
Question:
~. China reportedly is assisting Algeria in nuclear weapons
development. We also had previous indications that China was
supporting Pakistanjs nuclear weapons development program.
What is the Administration doing to warn China to stop this
activity? When was China told to stop this activity? What
does the Administration propose to do if China does not stop?
Does the State Department have any information indicating that
U.S. firms are supplying nuclear assistance to the Algerians?
Answer:
Algeria
-- We have had constructive discussions with the
Algerians and Chinese over the last- several months on
the matter of their nuclear cooperation.
-- We have not concluded that China has agreed to provide
assistance to Algeria for nuclear weapons development.
-- Both the Chinese and the Algerians have publicly
acknowledged their heretofore confidential cooperation
on a nuclear reactor project; have agreed that the
reactor being supplied by China will be placed under
ThEA safeguards; apd have issued assurances that the
cooperation is strictly for peaceful purposes.
-- We understand Algiers has initiated discussions with
the IAEA; we want a safeguards agreement between -
Algeria and the IAEA tO be concluded promptly.
-- -- China has publicly- and privately pledged on a number
of occasions that-it does not engage in nuclear
proliferation and that it will not help other
countries develop nuclear weapons, and has also said
that it will require safeouards on its nuclear exports.
PAGENO="0575"
571
-- We have stressed our concerns about nuclear
proliferation to the Chinese on numerous occasions; we
have told them that we expect China to abide by its
public commitments on nonproliferation as well as its
private assurances to us.
-- We will continue to review China~s nuclear
nonproliferation practices to determine whether they
are consistent with its pronouncements in this area.
-- The State Department has no information to indicate
that U.S. firms are supplying nuclear assistance to
Algeria.
Pakistan
-- We have held discussions with China on nuclear
proliferation issues, including our concerns abo~it
Pakistan's nuclear program, on numerous occasions,
including in recent months and weeks.
-- China has pledged that it does "not engage in nuclear
proliferation" nor does it "help other countries
develop nuclear weapons."
-~ We have told China that we expect it to abide by its
publicly stated nuclear nonproliferation policy and
private assurances to the U.S.
-- We are monitoring the situation to determine whether
China's practices are consistent with its
pronouncements in this area.
-- Congress will be kept informed of developments in this
area through briefings offered under provisions of the
Nuclear Nonproliferation Act.
PAGENO="0576"
572
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
Nay 1, 1991
understanding does the Administration have with the
Chinese Government concerning a halt to further missile
sales in the Middle East? Is Pakistan included in the
Middle East?
A: The Chinese stated May 30 that, apart from sales of CSS-2
missiles to Saudi Arabia in 1987/88, China has not sold
intermediate-range missiles to any other countries.
China has also stated that it will not sell
intermediate-range missiles to the Middle East and has
specifically denied press reports of M-9 missile sales to
Syria.
There is some ambiguity in the Chinese use of the term
`intermediate-range." We are engaged in discussions with
the Chinese to ascertain precisely what Beijing means by
this term.
China stated it has no current "exchanges" concerning
missiles with Pakistan, but has said that it did deliver a
"tactical" missile to Islamabad. We are in the process of
ascertaining what China means by "tactical" missiles.
The Chinese have supported the President's Middle East arms
control initiative and participated in the July 8-9 Paris
meeting of five major arms suppliers.
PAGENO="0577"
573
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q: To what extent does Pakistan have its own ballistic missile
program? Does the State Department have any information
indicating that U.S. firms are supplying, either knowingly
or unknowingly, missile components to Pakistan?
A: Pakistan is reported to have an advanced ballistic missile
development program. Pakistan has developed the HATF-l and
HATF-2 rockets and may be working on additional rockets.
For more detail on Pakistan's missile development
activities, I would refer you to the Report on Missile
Proliferation, submitted to the Congress pursuant to
Section 1704 of the National Defense Authorization Act for
Fiscal year 1991, PL-lOl-5l0.
u.s. missile-related exports to Pakistan are tightly
controlled to prevent them from contributing to Pakistan's
missile capabilities. In the past year several license
requests for MTCR Annex items were denied by the U.S. out
of concern that they would be used in Pakistans missile
program.
Q: Which-countries does the State Department believe pose a
ma]or threat to the United States in terms of
proliferation? Which countries are currently operating
major underground purchasing networks to acquire U.S.
technology and goods?
A: Although certain countries have gone further than others in
developing programs of proliferation concern, U.S.
nonproliferation policy is global in nature. The goal of
our policy is to encourage multilateral action by all
nations to restrict the spread of weapons of mass
destruction and the missiles that carry them.
Specific information on countries and procurement networks
is classified and should be handled through appropriate
channels.
51-840 0 - 92 - 19
PAGENO="0578"
574
Question for the Record Submitted to Charles Duelfer
House Ways and Means Committee
Subcommittee on Oversight
May 1, 1991
Ouestiori
B.8. We know from the Iraq war thatmost of the damage was
caused by conventional "smart weapons" like cruise missiles and
laser-guided bombs. It is now apparent that every country will
now want such weapons in their arsenals.
a. How much importance has the Administration placed on
the proliferation of conventional weapons? How concerned is
the Administration about proliferation and what specific steps
have been taken to address this issue?
Answer
o One of the Administration's major concerns is the
proliferation of conventional weapons in the Persian
Gulf. It forms one of the elements of the President's
initiative for Middle East Arms Control,
o The initiative called for the five major suppliers of arms
to the Middle East to meet and discuss the establishment
of guidelines for restraints on destabilizing arms
transfers. This could include formulation of a general
code of responsible arms transfers, establishment of
effective controls onthe end-use of arms or other items
to be transferred, and~ a mechanism for regular, ongoing
consultation among the major suppliers.
o The five suppliers--the UK, France, the USSR, China, and
ourselves--have agreed to meet in Paris in July.
PAGENO="0579"
575
Question for the Record submitted to Charles A. Duelfer
House Ways and Means Subcommittee on Oversight
May 1, 1991
~Q~IY~NTIQNAL WEAPONS PROLIFERATION
8. We know from the Iraq war that most of the damage was
caused by conventional "smart weapons" like cruise missiles
and laser-guided bombs. It is now apparent that every
country will now want such weapons in their arsenals.
c. Will unilateral action on the part of the U.S. make a
difference in terms of weapons proliferation?
The United States has a genuine interest in identifying
opportunities for practical, verifiable controls on the
spread of conventional weapons. However, unilateral U.S.
action is not likely to lead to such restraints, as there
are numerous. other sources for such weapons.
The United States regularly works with its friends and
allies to control weapons proliferation. It has encouraged
other countries to adopt similar regulatory mechanisms and
arms export control laws. Furthermore, proliferation of
conventional weapons has been the subject of numerous
meetings and negotiations. Clearly, it remains at the
forefront of the Department's diplomatic efforts.
PAGENO="0580"
576
Question for the Record submitted to Charles A. Duelfer
House Ways and Means Subcommittee on Oversight
May 1, 1991
CONVENTIONAL WEAPONS PROLIFEpAT~Qji
8. We know from the Iraqwar that most of the damage was
caused by conventional "smart weapons" like cruise missiles
and laser-guided bombs. It is now apparent that every
country will mow want such weapons in their arsenals.
d. To what extent will the imposition of unilateral
restrictions undermine more effective u.s. efforts to
develop am international regime to stop weapons
proliferation?
Unilateral steps will complicate efforts to develop
effective mulitlateral restraints, so long as there are
numerous other supplier nations who, for political and
economic reasons, place a heavy premiumon arms exports,
and there is a significant demand for defense articles by
recipient nations.
The United States has taken the lead in international
efforts to limit the proliferation of conventional arms and
reduce global tensions. At the same time, it urges other
supplier nations to develop arms export control regimes
comparable to those of the United States.
While seeking viable multilateral actions, the United
States does not jeopardize its ability to meet its security
commitments to friends and allies, but encourages other
countries to follow its lead in limiting the spread of
conventional arms.
PAGENO="0581"
577
Question for the Record Submitted to Charles Duelfer
House Ways and Means Committee
Subcommittee on Oversight
May 1, 1991
Qu~ian
B.8.e. To what extent will unilateral controls divert business
from the U.S. to countries that don't put the curbs in place?
To what extent can unilateral restrictions be enforced?
Answer
o Our first responsibility is to ensure that U.S.-origin
goods, technology and services do not assist CBW or
missile programs in countries of concern.
-- This is one of the major goals of the President's
Enhanced Proliferation Control Initiative (EPCI), which
has now been implemented by the issuance of new export
control regulations.
o We recognize that export controls are more effective if
they are applied multilaterally. Thus, EPCI also is the
basis for the U.S. to lead in urging its nonproliferation
partners and others to adopt comparable export controls.
-- We have already had a notable success in this effort as
the Australia Group agreed in May that all members
would control exports of all 50 CW precursors listed by
the Group and that all members would adopt controls on
a list of dual-use equipment that could be used to
produce CW; both elements are important parts of EPCI.
o Unilateral export controls do pose the risks of
competitors increasing market share at the expense of the
U.S. or diversion of trade from U.S. firms.
o We believe, however, that these risks are minimized
because our controls are not unilateral as our allies
adopt comparable export controls and many nations that
remain outside the nonproliferation organizations are also
adopting stronger export controls.
PAGENO="0582"
578
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
~. Q.~.Has the Administration given any thought to supporting a
plan for regional ballistic missile disarmament in the Middle
East? Does the Administration support Egyptian President
Mubarak's plan for a nuclear and chemical weapons free zone?
How is this idea viewed by the State Department?
A. As you are aware, the President has announced a Middle East
Arms Control Initiative that addresses the need for elimination
of weapons of mass destruction and ballistic nissiles in the
region. The plan calls for, in part, the elimination of all
surface to surface missiles, beginning with a freeze in the
production, acquisition and testing of such missiles. The
Administration has long supported efforts to achieve a Middle
East zone free of weapons of mass destruction and fully
supported the Mubarak proposal. In fact, the Mubarak proposal
and the President's arms control initiative have parallel
objectives. Those objectives are also embodied in paragraph 14
of UNSCR 687 which states that steps taken by Iraq in
fulfilling that resolution's requirements represent~steps
towards the goal of establishing in the MiddleEast a zone free
of weapons of mass destruction and all missiles for their
delivery.
PAGENO="0583"
579
Question for the Record submitted to Charles Duelfer
House Committee on Ways and Means
Subcommittee on Defense Trade Controls
May 1, 1991
10. According to press reports, Syria recently received some $2
billion as a result of its involvement as a coalition
partner in the Gulf war. Syria almost immediately turned
around and purchased arms, including "improved" Scuds from
North Korea.
a. Do you have any evidence to confirm this allegation?
If so, have any North Korean missiles or launchers
been transferred? How many?
b. What has the Administration done to get Syria to halt
its new round of weapon purhcases?
c. How do they justify these purchases in light of the
severe economic straits Syria finds itself in?
d. Are we to expect a request to waive Syria's
outstanding debt to the U.S.?
e. What's wrong with telling President Asad that such
behavior is unacceptable? If, as in the case of
Saddam Hussein, we don't give the Syrians a clear
signal, isn't that a signal of acquiescence in the
mind of someone like Asad?
We can confirm that Syria has received some improved Scud
missiles from North Korea.
As part of the President's Middle East arms control
initiative, we have told the Syrian and other governments in
the region of our wish to curb the spread of nuclear, chemical,
and biological weapons, the missiles that can deliver them, and
destabilizing conventional arms build-ups in the region. We
have stated publicly that a spiraling arms race in the Middle
East does not serve either the cause of peace or the interests
of the individual countries involved.
Our understanding is that Syria views a strong military as
necessary to its security.
PAGENO="0584"
580
Questions for the Record Submitted
to Charles Duelfer, Director for the Center for Defense Trade
Subcommittee on Defense Trade Controls
May 1, 1991
B. General Export Control Policy Questions
10. According to press reports, Syria recently received some
$2 billion as a result of its involvement as a coalition. -
partner in the Gulf war. Syria almost immediately turned
around and purchased arms, including "improved SCUDs from
North Korea.
e. What has the State Department done to impose leverage on
such countries as the USSR to tell North Korea and Syria
to back away from these sales and purchases?
A. We have made clear in many diplomatic exchanges with the
USSR our deep concerns about the proliferation of arms,
especially in the Middle East. The USSR has responded that it
shares these concerns and has indicated that it will attend -
next month's Paris meeting of arms suppliers. Unfortunately,
Soviet leverage over North Korean and Syrian arms sales and
purchases is limited.
13.fl.
Q: Brazil and Argentina have refused to sign either the
nonproliferation or Missile Technology Control Regimes.
Yet, these countries have a history of developing
unconventional weapons and have shared their technical
exports with other proliferating countries in these
fields. For example, Argentina was actively involved in
the Condor II missile program. Brazil was instrumental in
aiding Iraq's nuclear weapons developent program. Despite
this history, the United States continues to allow business
as usual through the technology exports we allow to these
countries.
a. What actions would the Administration contemplate
against another government for failure to prevent (or
convertly condoning) their firms from participating in
or supporting proliferation programs?
b. What policies does the Administration intend to take
against developing countries, such as Brazil and
Argentina, to get them to alter their support policies
for these programs?
c. What leverage through limits in controlled exports do
you anticipate being necessary to exert any necessary
Changes in these countries' policies?
A: Brazil and Argentina have taken several significant steps
in the last year to improve their nonproliferation
credentials. The U.S. has welcomed these steps.
PAGENO="0585"
581
On November 28, 1990, the Presidents of Brazil and
Argentina issued a Declaration of Common Nuclear policy
which called for bilateral inspections of nuclear
facilities, joint negotiation of a full-scope safeguards
agreement with the International Atomic Energy Agency
(IAEA), and steps to bring the Treaty of Tlatelolco into
forcefor both countries. The two countries have met
regularly to develop the bilaterral inspection program.
They have also met with the IAEA and have indicated their
desire to sign an agreement with IAEA in September of this
year.
In addition, Brazilian President Collor announced last fall
at the UN General Assembly that Brazil would not engage in
any nuclear research or development activity which would
involve nuclear explosions, even for peaceful purposes.
Argentina has announced the termination of the Condor
program and is engaged in a high-level dialogue with the
U.S. on final disposition of Condor equipment and
facilities.
Following revelations last year that a retired Brazilian
Air Force general had been working on an Iraqi air-to-air
missile project, the Government of Brazil has introduced
legislation to control the foreign activities of former
government officials and military personnel. Brazil is
also reviewing its regulations and procedures concerning
controls on arms exports.
U.S. policy towards Argentina and Brazil recognizes the
steps these countries have taken. At the same time,. we
continue to urge then to take additional steps to improve
their controls on exports of sensitive technologies. For
example, we have encouraged both countries to implement the
MTCR Guidelines, and we have held in-depth discussions with
PAGENO="0586"
582
Brazil on technology transfer and export controls. Both
Argentina and Brazil have expressed interest in
implementing the MTCR Guidelines.
We are confident that our cooperative approach towards
Argentina and Brazil is the appropriate one for achieving
our nonproliferation goals with these two countries.
Q. C.l. Do you believe that existing proliferation control
programs control enough of the sensitive technology to slow
down current foreign weapons development programs and to deny
these technologies to potential adversaries?
A. Existing proliferation control organizations are doing an
increasingly effective job of developing the lists of goods and
technologies that can be used in weapons of mass destruction
programs. The U.S. is leading these efforts ~to identify the
appropriate technologies for common controls with our
nonproliferation partners. In the CBW field, the Australia
Group recently agreed that all members will control all 50
listed CW precursor chemicals, and that common controls on a
list of dual-use CW equipment and technology would be adopted.
Control of BW organisms and dual-use equipment is on the agenda
for the immediate future. The Missile Technology Control
Regime is completing a review of its Annex to ensure that the
right technologies and items are controlled. In the nuclear
area we have enjoyed effective cooperation for many years with
other supplier countries through the multilateral arrangements
of the NPT Exporters (Zangger) Committee and the Nuclear
Suppliers Guidelines. The 26 countries that adhere to the
Nuclear Suppliers Guidelines have recognized the growing
problem posed by the potential use of nuclear dual-use
materials, equipment and technology to develop nuclear
explosive deviáes. They are examining arrangements to control
nuclear dual-use items.
PAGENO="0587"
583
Question for the Record Submitted to Charles A. Duelfer
House Committee on Ways and Means
May 1, 1991
Q. C.2. Has the Administration conducted a consolidated
review of-proliferation control regimes?
A. Responsibility for nonproliferation policy in the USG is
focused in the Nonproliferation Policy Coordinating Committee
(PCC), which is chaired by the State Department and includes
representatives from all relevant agencies. The PCC is
-continually reviewing the structure and performance of the
proliferation control regimes to find ways to make them
stronger and more effective.
Q. C.2.a. Who is responsible for developing and implementing
a cohesive proliferation control program?
A. The interagency Nonproliferation Policy Coordinating
Committee, chaired by the Department of State, directs the
development and implementation of U.S. policy in this field.
Q. C.2.b. What effect does the Administration believe will
result from the Enhanced proliferation Control Initiative?
A. We believe that implementation of the Enhanced
Proliferation Control Initiative (EPCI) will have two positive
effects: 1) it will prevent goods and technology flowing from
the U.S. to foreign CBW and missile programs, and 2) it has
already enabled the U.S. to take the lead in establishing more
effective international controls by urging our nonproliferation
partners and others to adopt comparable measures.
In fact, we have already seen the Australia Group agree that
all members would implement important elements of EPCI, i.e.,
export controls on all 50 AG-listed CW precursors and agreement
to control the export of a common list of dual-use CW-related
equipment.
PAGENO="0588"
584
Question for the Record Submitted to Charles A. Duelfer
House Committee on Ways and Means
May 1, 1991
Q. C.2.c. Would a centralized office in the National Security
Council to handle the consolidated issue of proliferation be
helpful in giving political weight to our export enforcement
efforts?
A. We believe our cooperation with the NSC and other executive
departments on nonproliferation policy and development of
export controls is excellent. The NSC includes an office that
deals specifically with nonproliferation issues. The recent
implementation of the Enhanced Proliferation Control Initiative
(EPCI) after extensive interagency deliberations is a good
illustration of our effective cooperation. The President has
given the proliferation issue high visibility in a number of
public statements ánd-initiatives. To add an layer of
bureaucracy would not appear likely to enhance significantly
either the political priority given the issue or the
implementation of specific measures.
Q. C.2.d. What about a multilateral, COCOM-like office to get
our allies to control their technology from going to
* proliferation programs of concern?
A. We do not believe that creation of a single COCOM-like
off ice is the most effective way to pursue-efforts to control
proliferation. The areas in question -- nuclear, chemical and
biological weapons, and missile proliferation -- cover a range
of technologies which differ widely in the degree to which they
use dual-use inputs and the nature and scope of current
controls. In these and other respects, current
nonproliferation efforts bear little resemblance to approaches
and procedures used in COCOM. COCOM-like rules and procedures
therefore would not be read~ly transferable- nor necessarily
effective in pursuing nonproliferation objectives. Rather it
might add an unnecessary and complicating factor to our efforts
to gain the cooperation of our allies. In our view, what- is
needed is to strengthen and expand the existing
nonproliferation organizations, where sensitive and significant
work is now going on which promises to improve our ability to
effectively to restrain the spread of proliferation-related
technologies.
PAGENO="0589"
585
Question for the Record Submitted to Charles A. Duelfer
House Committee on Ways and Means
May 1, 1991
Q. C.4. (sic) As multilateral regimes are constructed, are
there any areas under these control mechanisms that fail to
prevent the diversion of sensitive technologies to weapons of
mass destruction?
A. The multilateral proliferation control regimes are doing an
increasingly effective job of controlling the spread of
sensitive technologies usable for the development or production
of weapons of mass destruction. Nuclear nonproliferation
partners are drawing closer to agreement on controlling
dual-use technology in that field; the MTCR is completing an
updated and strengthened Annex of controlled equipment and
technology; and in May the Australia Group took the
unprecedented step of agreeing that members would control all
50 listed CR precursors and a common list of dual-use CR
equipment.
Perhaps the major gap in the coverage of these organizations
now results from the fact that not all major suppliers are
included in their ranks. We are working to strengthen these
organizations by expanding their memberships where
appropriate. We must take into account, however, the
inclination of some suppliers not to join and the attitudes of
our partners toward expansion of the groups. Where membership
is not appropriate or desired at this time, we are striving to
have non-member supplier countries apply comparable controls.
Another potential weakness relates to controlling exports of
goods, technology or services that are not on any specific
list, but which could assist in CBW and missile development in
countries of concern. The U.S. has a "safety net" provision
that controls the export of otherwise non-listed items in this
way. We are urging others to adopt a comparable measure and
several countries are giving it serious consideration.
drafted: PM/PRO: JGDavis
6/11/91 0l66L x7l430
cleared: PM:CDuelfer
PM/PRO:FAxelgard
T:GDunn
PM: RMantel
PAGENO="0590"
586
Question for the Record Submitted to Charles A. Duelfer
House Committee on Ways and Means
May 1, 1991
Q. C.5.a. How responsive are our allies in bringing under
control additional technologies ~apable of unconventional
weapons development?
A. Our nonproliferation partners share our view that
controlling sensitive technologies applicable to weapons of
mass destruction, including dual-use equipment and technology,
is vital to international security and stability. They are
taking positive actions to adopt additional controls, both in
cooperation within multilateral groups and unilaterally to
strengthen their own export control regimes.
For example, in the CBW field the Australia Group recently
agreed that allmembers will control all 50 listed CW precursor
chemicals, and that common controls on a list of dual-use CW
equipment and technology would be adopted. Control of BW
organisms and dual-use equipment is on the agenda for the
immediate future. The Missile Technology Control Regime is
completing a review of its Annex to ensure that its members are
controlling the right technologies and items. In the nuclear
area we have enjoyed effective cooperation for many years with
other supplier countries through~ the multilateral arrangements
of the NPT Exporters (Zangger) Committee and the Nuclear
Suppliers Guidelines. The 26 countries that adhere tO the
Nuclear Suppliers Guidelines have recOgnized the growing
problem posed by the potential use of nuclear dual-use
materials, equipment and technology to develop nuclear
explosive devices. They are examining arrangements to control
nuclear dual-use items.
PAGENO="0591"
587
United States Department of State
Washington, D.C. 20520
July 17, 1991
Dear Mr. Chairman:
Following the May 1, 1991 hearing at which Charles Duelfer
testified, additional questions were submitted for the record.
On July 12, 1991, the responses to most of those questions were
submitted to you. Please find enclosed the responses to the
outstanding questions.
Sincerely,
Janet G. Mullins
Assistant Secretary
Legislative Affairs
Enclosures:
As stated.
The Honorable
Dan Rostenkowski, Chairman,
Committee on Ways and Means,
House of Representatives
PAGENO="0592"
588
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q. A.2.c In this case, over 630 tons of thiodiglycol, a
mustard gas ingredient, were illegally shipped to Iran and Iraq
over a 14 month period. The principal operatives, Peter
Walaschejc and Frans van Anraat, remain fugitives today because
the German and Italian governments failed to take action. The
Italian courts refused to extradite van Anraat and he remains
at large. Walaschek fled the U.S. before sentencing and
resurfaced in Germany where German authorities have refused to
extradite him.
What leverage does the U.S. have to enlist the help of our
European allies? How do the Germans and Italians view
violations of U.S~ export laws?
A. Our European allies take very seriously the need to control
the spread of nonconventional arms and violations of U.S.
law in this area, including export controls. This is
illustrated by the passage since 1989, in both Germany and
Italy, of a number of arms and technology export controls,
resulting in significantly stronger export control regimes
in both countries.
The U.S. protested strongly the refusal of these countries
to extradite the fugitives in question. In at least the
Italian case, this refusal was based on a court
determination that the offense was political. More
generally, the U.S. is working closely with its allies in
the Australia Group to harmonize export control regimes and
enforcement, which should help to eliminate such
misunderstandings.
PAGENO="0593"
589
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q: A. Questions regarding specific subcommittee cases:
4. d. Did the State Department approve or disapprove of any
license in the four cases the Subcommittee reviewed?
A: The Department has not granted, under Sec 38 of the Arms
Export Control Act, any licenses in the four cases reviewed by
the Subcommittee: (1) Helmy Missile Case; (2) Alcolac Chemical
Case, thiodiglycol is covered by the Commodity Control List
administered by the Department of Commerce; (3) Global
Helicopter Case, the Department has determined that the
helicopter in question is covered by the U.S. Munitions List,
under Category VIII(a); and, (4) C-TEK Computer Case, the
computer equipment in this case is covered by the Commodity
Control List administered by the Department of Commerce.
PAGENO="0594"
590
Question for the Record Submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q: B. GENERAL EXPORT CONTROL POLICY QUESTONS:
1. A Washington Post article dated November 1, 1990, indicates
that last spring the Commerce Department unofficially began
to slow down the process bf issuing export licenses to Iraq.
In late July, Secretary Baker asked Commerce Secretary
Mosbacher to impose more rigid controls on sales to Iraq. A
few months earlier, Administration sources have stated that
the State Department had balked on imposing tighter controls.
a. To what extent was the State Department eager to see
that trade continue and improve with Iraq?
A: o We attempted to build upon indications of Iraqi moderation,
including improved relations with Jordan and Egypt and
creation with them of the ArabCooperation Council in 1988.
o The United States government provided no direct assistance,
but for several yearsdid extend credit insurance for U.S.
exporters to Iraq under two programs:
-- The CCC, which guaranteed U.S. exporters short-term bank
financing of 1-3 years to enable Iraq to purchase basic
foodstuffs from American farmers. The program grew from
a few million dollars in 1983 to about $1 billion in 1989.
-- Exim, which provided short-term finance for Iraqi
purchase of a wide variety of American products. From
its inception in 1987 to mid-1990, the program financed
about $270 million in sales.
PAGENO="0595"
591
Question for the Record Submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q: B. GENERAL EXPORT CONTROL POLICY QUESTONS:
1. A Washington Post article dated November 1, 1990, indicates
that last spring the Commerce Department unofficially began
to slow down the process of issuing export licenses to Iraq.
In late July, Secretary Baker asked Commerce Secretary
Mosbacher to impose more rigid controls on sales to Iraq. A
few months earlier, Administration sources have stated that
the State Department had balked on imposing tighter controls.
b. Why did the State Department balk at imposing tigher
controls earlier with regard to Iraq?
A: 0 U.S.-Iraq relations have been troubled at best over the past
decade.
o The United States and Iraq renewed diplomatic relations in
1984, following Iraq's expulsion of the Abu Nidal terrorist
group.
o At that time, Iranian victory in the Gulf war was an
imminent possibility. The military defeat of Iraq would
have disrupted the regional balance and subjected other Gulf
states to the immediate threat of political/military
pressure from the militant Iranian regime.
o The U.S. took steps to prevent this from happening:
-- Operation Staunch, the campaign to block international
arms sales to Iran, helped limit Iran's military
capabilities.
-- Information exchanges with Iraq on Iranian military
capabilities.
-- Reflagging Kuwaiti oil tankers at Kuwait's request
ensured a stable export income to Kuwait, a major
financial backer of Iraq throughout the war, and
preserved the free flow of Kuwaiti oil to the
international market.
o U.S. diplomatic efforts helped win passage of UNSCR 598 in
1988, ultimately bringing about a ceasefire after eight
years of war--a very constructive step in the interests of
the United States and all countries in the region.
PAGENO="0596"
592
-2-
o When hostilities ceased, the U.S. government recognized two
P?Ssible approaches to dealing with the disproportionate
military capability Iraq had acquired: either seek to
isolate Iraq through international sanctions; or attempt to
draw Iraq away from policies of militarism and expansionism.
o Aware that amy sanctions effort would lack essential
international support, the United States actively encouraged
Iraq to:
-- Improve its human rights record,
-- Develop its economy for the benefit of the Iraqi people,
-- Cease efforts to forestall progress toward resolution of
regional conflicts, and
-- Become a constructive member of the community of nations.
o We reacted strongly to Iraqi misbehavior:
-- The United States protested the use of CW against Iraqi
Kurds in late 1988. We maintained an active dialogue on
Iraq's abysmal human rights record and monitored Iraqi
abuses.
-- In March 1990 USDA postponed action on the CCC second
tranche due to alleged program violations.
-- The same month an Iraqi plot to import U.S. capacitors
with nuclear applications was exposed. We informed other
Arab governments of our "fundamental differences" with
Iraq on nuclear, CBW, missiles, and human rights.
-- In April1990 we protested Saddam Hussein's threat to
"burn half of Israel" with CW if Iraq were attacked. A
few days later, we expelled an Iraqi UN diplomat for
involvement in a murder plot.
-- In May 1990 the Administration formally suspended action
on the CCC second tranche.
-- Following our action to halt export of a shipment of
furnaces suspected of having nuclear weapons
applications, action was under way at the time of the
invasion of Kuwait to impose further foreign policy
controls on sales to Iraq and enhance MTCR controls.
PAGENO="0597"
593
Question for the Record submitted to Charles A. Duelfer
House Ways and Means Subcommittee on Oversight
May 1, 1991
~. 8. We know from the Iraq war that most of the damage was
caused by conventional `smart weapons" like cruise missiles
and laser-guided bombs. It is now apparent that every
country will now want such weapons in their arsenals.
b. What is the State Department doing to prevent
potential adversaries from acquiring the technology
and equipment necessary to manufacture their own
conventional weapons systems?
The United States has assumed the lead in international
effOrts to limit the proliferation of conventional weapons
and to reduce global tensions. It has also urged other
supplying countries to develop arms export controls which
are comparable to those of the United States. This process
involves consultations with other nations through numerous
mechanisms: the United Nations, NATO, the Australia Group,
the Missile Technology Control Regime, the Nuclear
Suppliers Group, and COCOM, among others.
On May 29, the President announced a number of proposals
intended to counter the proliferation of nuclear, chemical,
and biological weapons in the Middle East, in addition to
the missiles that could carry such arms. These proposals
reflected U.S. consultations with allies, governments in
the region, and major suppliers of arms and technology.
The President's initiative focused on the Middle East,
given that region's unique situation, as a starting point.
It was also meant to complement other initiatives announced
by U.S. allies.
PAGENO="0598"
594
Specifically, the President's Middle East arms control
initiative called for the following: a meeting of the five
major arms suppliers to discuss establishment of guidelines
for restraints of- destabilizing transfers; a freeze on the
acquisition, production, and testing of surface-to-surface
missiles by states in the region, with a view toward
ultimate elimination of such missiles; regional application
of existing international nuclear non-proliferation
mechanisms; rapid completion of a worldwide chemical
weapons ban; and strengthening of the treaty banning
biological weapons.
On July 8-9, representatives of the United States, the
Soviet Union, France, the United Kingdom, and the Soviet
Union met in Paris to discuss arms transfer and
non-proliferation matters. In a communique, they noted
with concern the dangers associated with excessive arms
buildups and the threats to peace and stability posed by
the proliferation-of nuclear weapons, chemical and
biological weapons, and missiles. They also undertook to
seek effective weapons control measures in an equitable,
reasonable, comprehensive, and balanced manner -- on a
global and regional basis. Finally, they expressed strong
support for the objective of creating a weapons of mass
destruction-free zone in the Middle East.
PAGENO="0599"
595
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q: C.5.b. To what extent have the allies initiated
investigations of diversions or undertaken investigations
based on information supplied by the U.S.?
A: Our allies have been very cooperative in investigating
possible diversions of nonconventional weapons technology,
whether based on information we have furnished or
information from their own sources. The allies recognize
the serious threat posed by proliferation and are in
agreement with our position that urgent efforts to stem the
spread of nonconventional weapons are a priority task for
the international community.
PAGENO="0600"
596
Question for the Record submitted to Charles Duelfer
House Ways and Means Committee
May 1, 1991
Q. 6. Does the Administration have any indication that once
the United States finishes its intensive look at this area,
it will be business as usual?
A. We have no indication that things will ever be the same
again the field of nonproliferation. Our allies and
nonproliferation partners continue to strengthen their
export control regimes and the nonproliferation
organizations in which we participate, such as the
Australia Group and the Missile Technology Control Regime.
In addition, a number of nations other than those
traditionally concerned about the proliferation of
nonconventional weapons are recognizing the seriousness of
the threat and-taking measures to -improve their control
systems and cooperate more closely with international
nonproliferation efforts.
PAGENO="0601"
597
APPENDIXES
APPENDIX A..-U.S. General Accounting Office, Letter Dated April 12, 1991,
From Allan I. Mendeiowitz, Director, International Trade, Energy,
and Finance Issues
f1 A ~ United States
General Accounting Office-
National Security and
International Affairs Division
B-243620. 1
April 12, 1991
The Honorable J.J. Pickle
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives
Dear Mr. Chairman:
As you requested, this fact sheet (1) describes U.S. export
controls that apply to selected countries1 in the Middle
East; (2) summarizes U.S. licensing decisions on exports of
dual-use items (i.e., militarily significant commercial
items) to these countries; (3) provides data on levels of
approved exports of dual-use items; and (4) provides summary
data on overall U.S. trade with the selected Middle Eastern
countries, including government-to-government sales of
military items.
RESULTS IN BRIEF
Most countries in the Middle East are subject to similar
controls on U.S. exports of dual-use items, munitions, and
nuclear-related items. During the past decade, five
countries covered in this report (Iran, Iraq, Libya, the
People's Democratic Republic of Yemen,2 and Syria), however,
have been subject to stricter export controls primarily for
foreign policy reasons. For these five countries, the U.S.
government annually approved about 67 percent of all
applications for exports of dual-use items during the past 4
years. In contrast, the United States approved an average
of 94 percent of applications for dual-use exports to the
other five countries.
The total number and dollar value of approved export
licenses from 1987 through 1990 are shown in table 1.
1As agreed with your staff, are providing information on
10 Middle Eastez~n countries: Egypt, Iran, Irac, Israel,
Jordan, Kuwait, Libya, the People's Democratic Republic of
Yemen, Saudi Arabia, and Syria.
21n mid-1990 the People's Democratic Republic of Yemen
merged with the Yemen Arab republic to form the Republic of
Yemen.
PAGENO="0602"
Egypt
Iran
I rag
Is rael
Jordan
Kuwait
Libya
P.D.R. Yemena
Saudi Arabia
Syria
Total
Annual average
apt)R Yemen denotes
Yemen.
Source:-Based on data
Approved Licenses for
dual-use items
Number Dollar value
1,208 $ 1,018,616
451 300,197
478 726,960
9,048 4,254,019
446 259,828
762 470,762
342 259,833
58 5,250
2,465 2,686,656
142 25,807
15,400 $10,007,928
3,850 $ 2,501,982
the People's Democratic Republic of
from the U.S. Department of Commerce.
During the past decade, total U.S. exports to the 10
selected Middle Eastern countries have averaged $10.9
billion per year; this sum represented less than 5 percent
of total annual U.S. exports. Of the $10.9 billion in
average annual exports to these countries, about $3.2
billion pet year~ represents government-to-goverument
military sales.
Appendix I provides a more detailed discussion of U.S.
export control policies for selected Middle Eastern
countries and includes a schedule of foreign policy controls
that affect these countries. Appendix II shows~ aggregate
data on licensing decisions by the Commerce Department
regarding the export of dual-use items to these Middle
Eastern countries. Appendix III contains information on
level of approved export licenses of dual-use items.
Appendix IV provides. data on foreign militarysales.
Appendix V contains economic data on the level of U.S. trade
with the Middle Eastern countries reviewed.
598
B-243620.l
Table 1: U.S.-Approved Licenses for Export of Dual-Use
Items to Selected Middle Eastern Countries, 1987-1990
(Dollars in thousands)
2
PAGENO="0603"
599
B-243 620.1
SCOPE AND METHODOLOGY
To obtain information on current U.S. export control
policies we reviewed applicable statutes, regulations,
studies, and articles. We also spoke with officials from
the Departments of Commerce, State, and Defense and the
Nuclear Regulatory Commission. For a historical perspective
on foreign policy controls for the Middle East, we reviewed
the Department of Commerce's annual reports for export
administration and foreign policy control reports for
fiscal years 1981-1990.
We obtained statistical information from the Commerce
Department on the number and dollar value of license
applications for exports of dual-use items to selected
Middle Eastern countries from October 1986 through December
1990. We requested similar data from the State Department
-on exports of defense-related items and services. However,
the State Department could not provide us with this
information in time to include it in the report. We
-compiled statistics from the Department of Commerce's and
the United Nations' trade data bases to present an overview
of the level and commodity structure of trade between the
United States and the Middle Eastern countries reviewed.
Finally, we used Department of Defense reports to summarize
the extent of foreign military sales to the same countries
over the. past decade. We did not attempt to verify the data
we obtained. We conducted our work during March and April
1991.
As you requested, we did not obtain written agency comments.
We did, however, discuss certain aspects of the information
provided with responsible agency officials and have included
their comments as appropriate.
Unless you publicly announce its contents earlier, no
further distribution of this report will be made until 30
days fran its issue date. At that time, we will send copies
to other interested congressional committees and to the
Secretaries of Commerce and State. Copies will also be made
available to others on request.
PAGENO="0604"
600
8-243620.1
Please contact me on (202) 275-4812 if you or your staff
have any questions concerning this fact sheet. Major
contributors to this fact sheet are listed in appendix VI.
* Sincerel~~ yours,
@LQL~~ ~
Allan I. Mendelowitz, Director
International Trade, Energy,
and Finance Issues
PAGENO="0605"
601
CONTENTS
Page
LETTER 1
APPENDIX
I U.S. Export Control Statutes and Policies 7
Affecting Exports to the Middle East
II U.S. Decisions on Export Licenses to 14
Selected Middle Eastern Countries
III Approved Applications for Exports to 20
Selected Middle Eastern Countries
IV Foreign Military Sales to Selected 22
Middle Eastern Countries
V General Trade Data for the United States 24
and Selected Middle Eastern Countries
VI Major Contributors to This Fact Sheet 31
TABLES
1:1 Number and Dollar Value of U.S.- Approved Export 2
Licenses to Selected Middle Eastern Countries,
1987-1991
1.1 U.S. Foreign Policy Controls Applicable to 9
Middle Eastern Countries
1.2 U.S. Foreign Policy Controls That Directly Cite 11
Selected Middle Eastern Countries
111.1 Extent of Approved Applications for Exports of 21
Dual-Use Items to Selected Middle Eastern
Countries
IV.l Foreign Military Sales Deliveries From ~he 23
United States to Selected Middle Eastern
Countries
V.1 U.S. Trade With Selected Middle Eastern Countries 25
V.2 U.S. Exports to Selected Middle Eastern Countries 27
V.3 U.S. Imports From Selected Middle Eastern Countries 29
PAGENO="0606"
602
FIGURES
11.1 U.S. Decisions on ExportLiCenses for 15
Dual-Use Items to Egypt
11.2 U.S. Decisions on Export Licenses for 15
Dual-Use Items to Iran
11.3 U.S. Decisions on Export Licenses for 16
Dual-Use Items to Iraq
11.4 U.S. Decisions on Export Licenses for 16
Dual-Use Items to Israel
11.5 U.S. Decisions on Export Licenses for 17
Dual-Use Items to Jordan
11.6 U.S. Decisions on Export Licenses for 17
Dual-Use Items to Kuwait
11.7 U.S. Decisions on Export Licenses for 18
Dual-Use Items to Libya
11.8 U.S. Decisions on Export Licenses for 18
Dual-Use Items to P.D.R. Yemen
11.9 U.S. Decisions on Export Licenses for 19
Dual-Use Items to Saudi Arabia
11.10 U.S. Decisions on Export Licenses for 19
Dual-Use Items to Syria
6
PAGENO="0607"
603
APPENDIX B.-U.S. Department of State, Letter Dated April 26, 1991, From
Janet G. Mullins, Assistant Secretary, Legislative Affairs
United States Department of State
Washington, D.C. 20520
APR 2 6 991
Dear Mr. Chairman:
Please find enclosed the ten tables regarding munitions
exports that you requested through the General Accounting
Off ice (GAO). As I understand you and my deputy Steve Berry
agreed at your meeting yesterday, these tables show the number,
dollar value, and disposition of applications for exports of
munitions and related equipment and technology during calendar
years 1983 through 1990 to Egypt, Iran, Iraq, Israel, Jordan,
Kuwait, Libya, P.D.R. Yemen, Saudi Arabia, and Syria. I am
hopeful that this information will satisfy your needs, and that
you will so indicate to the GAO.
In addition, in response to your letter to Secretary Baker
of April 22, 1991, requesting his appearance at a hearing
before your subcommittee on May 1, 1991, I am pleased to inform
you that Charles A. Duelfer, Deputy for Defense Trade, Bureau
of Politico-Military Affairs, will be available to represent
the Department.
Please let me know if we can be of further assistance.
Sincerely,
Janet G. Mulli1~s
Assistant Secretary
Legislative Affairs
Enclosures: As stated
The Honorable
J.J. Pickle, Chairman
Subcommittee on Oversight
Committee on Ways and Means
House of Representatives
PAGENO="0608"
604.
Lnte~i ~t~Les D~partm.~nt ~r ~ite
JVashin~ton. D.C. 20520
~FR 2 5 99~
Dear Mr. Chairman:
Please find enclosed the ten tables regarding munitions
exports that you requested through the General Accounting
Office (GAO)~. As I understand you and my deputy Steve 9erry
agreed at your meeting yesterday, these tables show the number,
dollar value, and disposition of applications for exports of
munitions and related equipment and technology during calendar
years 1983 through 1990 to Egypt, Iran, Iraq, Israel, Jordan,
Kuwait, Libya, P.D.~. Yemen, Saudi Arabia, and Syria. I am
hopeful that this information will satisfy your needs, and that
you will so indicate to the GAO.
In addition, in response to your letter to Secretary Baker
of April 22, 1991, requesting his appearance at a hearing
before your subcomrn.ittee on May 1, 1991, I am pleased to inform
you that Charles A. Duelfer, Deputy for Defense Trade, Bureau
of Politico-Military Affairs, will be available to represent
the Department.
Please let me know if we can be of further assistance.
Sincerely,
Janet G. Mull±~s
Assistant Secretary
Legislative Affairs
Enclosures: As stated
The Honorable
J.J. Pickle, Chairman
Subcommittee on Oversight
Committee on Ways and Means
House of Re~resentatives
PAGENO="0609"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO EGYPT, 1983 TO 1990
1983
1984
1985
1986
1987
1988
1989
19902
4,713, 538,064
919, 760,365
466,285,441
724,104,606
861,067,083
1,000,447,110
2,584, 149,484
Disapproved Licenses
Number Value
5 11,500
3 0
7 0
7 4,070
12, 000,000
36,252,050
11 5,733,690
10 175,210
24
32
43
36
45
37
41
18,853,208
13, 501,466
107, 658, 341
29,936,663
48,233, 131
95, 652, 678
2,403,025,032
1/ Excludes data for re-exports and revoked licenses.
2~ In 1990, 1.0 percent of applications were still pending.
Approved Licenses1
Numbei Value
256 820,835,414
401
341
291
310
318
281
351
Returned w/o Action
Number Value
37 163,317,625
15
13
0
PAGENO="0610"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO IRAN, 1983 TO 1990
Approved Licenses1 Disapproved Licenses Returned w/o Action
Nurnbe~i Nunthei Va].ue ____
1983 0 0 2 10,577,589 2 1~ 000,000
1984 0 0 2 270,552 0 0
1985 0 0 0 0 5 24,284,423
1986 0 0 2 18,204 1 0
1987 0 0 1 0 2 15,154
1988 0 0 1 0 1 0
1989 0 0 0 0 4 61,790
19902 0 0 1 26,910 3 5,384,505
Excludes data for re-exports and revoked licenses.
In 1990, 0 percent of applications were still pending.
PAGENO="0611"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO IRAQ, 1983 TO 1990
~/ Excludes data for re-exports and revoked licenses.
2~ In 1990, 0 percent of applications were still pending.
Approved
ithei
Licenses'
Value
DisapprOved
Numbei
Licenses
y~jn~
Returned w/o
Number
1983
1
8,800
1
371,140
9
650,076
1984
2
5,001
0
0
5
54,258
1985
2
1,255,787
3
1,278,064
4
1,305
1986
2
169,045
4
80,271
1
451,000
1987
1
350,000
6
362,762
4
428,288
1988
4
1,494,813
6
453,099
3
279,750
1989
3
1,606,907
3
33,169
2
26,460
19902
0
0
2
11,200
3
123,979
PAGENO="0612"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO ISRAEL, 1983 TO 1990
Approved
Nurn1~e~
Licenses1
i~&hi~
Disapproved
luinbej
Licenses
~
Returned w/o Action
NLm1~ei VaIue
1983
1,479
1,378,148,182
12
1,796,102
170
1984
2,295
9,190,591,625
17
176,599
228
330,955,176
869,232,067
1985
1,857
1,853,936,540
34
2,315,629
228
358,401,882
1986
2,687
1,997,789,327
44
3,309,815
460
506,397,835
1987
3,455
1,946,723,027
42
4,679,711
742
474,894,015
1988
2,250
2,299,896,044
51
2,665,444
295
406,481,634
1989
1,940
2,605,019,749
31
628,945
182
19902
2,290
2,586,785,203
68,460,271
0
Excludes data for re-exports and revoked licenses.
In 1990, 1.2 percent of applications were still pending.
PAGENO="0613"
1983
1984
1985
1986
1987
1988
1989
19902
Approved Licenses'
ll~iinb~t
217 478,923,574
292 6,810,926,332
282 285,434,763
252 279,900,320
259 44,829,104
188 83,731,614
97 45,988,882
86 66,047,915
Disapproved Licenses
~In~
2 240
4
3
1
1
4
w/o Action
68,975,640
225,423,895
60, 238, 574
5,701,225
6,913,270
989,371
1,034,421
539, 047
1/ Excludes data for re-exports and revoked licenses.
2, In 1990, 2.7 percent of applications were still pending.
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO JORDAN, 1983 TO 1990
0
2,161,000
0
8,884
1,000
Returned
25
37
23
19
10
8
6
9
1
14
0
0
566,769
PAGENO="0614"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO KUWAIT, 1983 TO 1990
Approved Licenses'
Numbei Value
70 143,413,853
185 268,872,442
80 103,032,563
112 8,761,237
79 70,522,037
94,799,810 8
56,192,593 6
5,283,024 4
Num~
VaJ~~ue
Returned
Nunibei
w/o Action
Value
3
50
9
448,065
0
0
10
12,124,240
1
0
9
15,216,221
3
0
8
4
0
10
150,516,983
82,065
6
680,792
50
14
1,902,968
1, Excludes data for re-exports and revoked licenses.
In 1990, 0 percent of applications were still pending.
1983
1984
1985
1986
1987
1988
1989
19902
103
71
50
2,472,018
PAGENO="0615"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO LIYBA, 1983 TO 1990
Approved Licenses' Disapproved Licenses Returned w/o Action
Niinib~i Va 1u~ 1j!.4fflbe~ ~L~JJI~ Number Va ltie
1983 0 0 2 13,629,037 0 0
1984 0 0 0 0 2 122,532,716
1985 22 374 0 0 4 42,936
1986 0 0 0 0 1 61,266,358
1987 0 0 0 0 0 0
1988 0 0 0 0 1 0
1989 0 0 0 0 0 0
1990~ 0 0 0 0 0 0
~/ Excludes data for re-exports and revoked licenses.
2~ Licenses granted to embassy of friendly foreign country
for diplomatic personnel transferring to Libya from the U.S.
3~ In 1990, 0 percent of applications were still pending.
PAGENO="0616"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO P.D.R. YEMEN, 1983 TO 1990
Approved Licenses1 Disapproved Licenses Returned w/o Action
Vaiu~ Numb~i Va1q~ lluinbe~ __
1983 0 0 0 0 0 0
1984 0 0 0 0 0 0
1985 0 0 0 0 0 0
1986 0 0 0 0 1 0
1987 0 0 0 0 0 0
1988 1 6,340 0 0 0 0
1989 0 0 0 0 0 0
19902 0 0 0 0 1 8,763
Excludes data for re-exports and revoked licenses.
In 1990, 0 percent of applications were still pending.
PAGENO="0617"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO SAUDI ARABIA, 1983 TO 1990
~/ Excludes data for re-exports and revoked licenses.
2~ In 1990, 1.5 percent of applications were still pending.
1983
1984
1985
1986
1987
1988
1989
Approved
Number
Licenses'
Value
Disapproved
Number
Licenses
Value
Returned w/o Action
Number Value
227
1,636,638,496
8
825,000
36
1,088,198,442
347
2,783,984,527
5
272,248
24
1,299,675
208
1,310,844,281
2
1,000
27
1,523,546
282
1,874,083,624
5
0
27
198,047,206
250
858,729,576
7
0
9
26,522,963
254
644,026,021
7
200,050
36
229,013,045
249
374,274,116
8
5,261,380
24
271,429,698
19902 429
1,598,683,177
PAGENO="0618"
NUMBER AND DOLLAR VALUE OF APPLICATIONS FOR EXPORTS OF MUNITIONS
AND RELATED EQUIPMENT AND TECHNOLOGY TO SYRIA, 1983 TO 1990
Approved Licenses' Disapproved Licenses Returned w/o Action
~Jnm~ Y~1u~ Num~
1983 0 0 1 10,250 2 148,090
1984 7 1,322,009 0 0 0 0
1985 0 0 1 264 1 285
1986 0 0 0 559,350 0 0
1987 1 0 0 0 0 0
1988 1 400 2 57,186 0 0
1989 0 0 0 0 1 1,233,560
19902 0 0 0 0 0 0
1/ Excludes data for re-exports and revoked licenses.
In 1990, 0 percent of applications were still pending.
PAGENO="0619"
615
APPENDIX C.-Honorable Richard L. Thornburgh, Letter Dated
April 22, 1991, From Chairman JJ. Pickle, Subcommittee on Oversight,
Committee on Ways and Means
j.J P~C~LE. TEXAS. CM.'It ~ DAN ROSTENKOWSKI. IUJNOIS. CHAIRMAN
~H.-~MMtTTLEONOVUI3IGHT CO~UO~RS~~ -
COMMITTEE ON WAYS AND MEANS ~
U.S. HOUSE OF REPRESENTATIVES
DISXSOUta~,,W3flVA1EA WASHINGTON. DC 20515
AN SUBCOMMITTEE ON OVERSIGHT
April 22, 1991
The Honorable Richard L. Thornburgh
Attorney General
U.S. Department of Justice
Main Justice Building, Room 5111
10th and Constitution Avenue, N.W.
Washington, D.C. 20530
Dear Attorney General Thornburgh:
As you are aware, the Subcommittee on Oversight of the
Committee on Ways and Means is currently investigating the
administration and enforcement of U.S. export controls by the
U.S. Customs Service. The Subcommittee held the first of two
hearings on April 18, 1991. During the course of that hearing,
it became apparent that to properly complete the Subcommittee's
investigation, the Subcommittee would need to examine the
Department of Justice's role in export control enforcement.
Therefore, I request your presence, or that of your designee, at
the Subcommittee's hearing on Wednesday, May 1, 1991, in room
1100 Longworth House Office Building, beginning at 9:30 a.m. The
Department of Justice's Office of Congressional Affairs was
advised of this request on Friday, April 19, 1991
In addition to presenting a general statement of the
Department of Justice's role in export control enforcement, the
Subcommittee Members would be particularly interested in hearing
exactly what Justice's role was in the four cases examined by the
Subcommittee on April 18, 1991: the Helmy case; thG Alcolac
case; the Global Helicopter case; and, the C-TEK case. If you
have any questions regarding these cases or what transpired at
the Subcommittee's hearing on April 18, please contact Beth
Vance, Staff Director, or Thomas K. Arnold, Assistant Counsel for
Investigations, at 225-5522.
Pursuant to Committee rules, please deliver 150 copies of
your written statement, and 25 copies of your oral statement
if you decide to summarize your written statement, to room
1135 Longworth House Office Building, before 4:00 p.m. on Monday,
April 29, 1991. Thank you in advance for your cooperation,
especially in light of the lateness of this invitation.
~~J~&1an
ttee on oversight
JJP/tal
PAGENO="0620"
616
APPENDIX D.-U.S. Department of Justice, Letter Dated April 25, 1991, From
W. Lee Rawls, Assistant Attorney General, Office of Legislative Affairs
U.S. Department of Justice
Office of Legislative Affairs
Office of the Assistant Attorney General Washington, D C 20530
April 25, 1991
Honorable J.J. Pickle
Chairman
Subcommittee on Oversight
Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
Thank you very much for your letter of April 22, 1991,
requesting that, the Department provide a witness for your May 1,
1991, hearing on the administration and enforcement of U.S.
export control by the U.S. Customs Service.
Regrettably, the Department must respectfully decline the
invitation for that date and request that the Department of
Justice's participation be delayed until the period of May 13th
to May 16th, inclusive. As you are aware from your hearing of
April 18, 1991, the four cases about which you received testimony
(the Helmy, Alcolac, Global Helicopter and C-TEK cases) were
handled in several jurisdictions around the country. To properly
prepare the Department's representative, therefore, the
Department must retrieve and review the files from those offices,
including any classified materials contained therein, and consult
with a variety of officials. Similarly, in order to be prepared
to respond to issues raised in your April 18th hearing, we will
want to review the transcript of that hearing, which we have not
yet received.
We look forward to working with you and your staff to
prepare for this hearing.
Sincerely
W. Lee Rawls
Assistant Attorney General
PAGENO="0621"
617
APPENDIX E.-U.S. Department of Justice, Letter Dated May 24, 1991, From
W. Lee Rawis, Assistant Attorney General, Office of Legislative Affairs
U.S. Department of Justice
Office of Legislative Affairs
Office ot the Assistant Attorney General Washington. D.C. 20530 P Fc ~ `` ~
-it1L.
May 24, 1991
M~Y 2 ~9g~
``yy~ ano ~t
- - ~.
The Honorable J.J. Pickle
Chairman
The Honorable Richard T. Schulze
Ranking Minority Member
Subcommittee on Oversight
Committee on Ways and Means
House of Representative
Washington, D.C. 20515-4610
Dear Mr. Chairman and Congressman Schulze:
This is in response to the request of Subcommittee for the
views of the Department of Justice on whether there is a need for
any legislative change in the area of export controls. Moreover,
the Subcommittee requested our response to certain questions
relating to United States v. Abdelkader Helinv, et al., a case
involving the unlawful export of missile parts and components to
Egypt in 1988. Finally, for our information and comment, the
Subcommittee forwarded correspondence and testimony it has
received from current and former Assistant United States
Attorneys relating to several other cases the Subcommittee has
reviewed during the course of the hearings.
By way of background, it may be beneficial for the
Subcommittee to understand the Department's role in the
enforcement of the export control laws.
The Internal Security Section of the Criminal Division has
oversight responsibility for cases developed under the Arms
Export Control Act, 22 U.S.C. § 2778, the Export Administration
Act, 50 U.S.C. app. SS 2401, ~ and the International
Emergency Economic Powers Act, 50 U.S.C. SS 1701, et sea.~, the
Trading with the Enemy Act, 50 U.S.C. app. SS 1, et sep., and
related statutes. Over the years, the Internal Security Section
has supervised a number of significant cases under these acts.
In August of 1982, the Criminal Division established the
Export Control Enforcement Unit in the Internal Security Section.
This unit has general oversight responsibility for the
development and prosecution of cases under the export control
PAGENO="0622"
618
-2-
laws. Attorneys in the unit work closely with the investigative
agencies and the United States Attorneys' offices to develop and
prosecute export control cases. Over the years, the Department
has assigned a high priority to export control cases, and the
United States Attorneys and the Criminal Division have vigorously
pursued such cases, and will continue to do so.
In addition to our case work, the Criminal Division arid
other offices in the Department work on interagency committees
which address .a broad spectrum of issues relating to export
control issues.
Justice and the State Department have taken technology
transfer and export control issues into consideration in setting
priorities for the negotiation of treaties on extradition and
mutual assistance in criminal matters and in assuring, to the
extent possible, that such treaties and agreements encompass
export control offenses. Our Office of International Affairs
works closely with the United States Attorneys' offices on the
extradition of fugitives and on obtaining evidence from foreign
countries.
As you are aware, during the last ten years all agencies
have significantly upgraded and revitalized our export control
enforcement program. In 1981, the Customs Service initiated a
national enforcement program, called "Operation Exodus'1, to
prevent the illegal export of military and strategic technology
to the Soviet Union and other proscribed destinations. During
that period, the Commerce Department increased its resources in
this area and opened new field offices.
These enforcement programs are in place today, and the fine
work of the Customs and Commerce Agents has resulted in
significant prosecutions which protect vital national security
and foreign policy interests of the United States. Since 1981,
the Internal Security Section has worked with the investigative
agencies and the United States Attorneys' offices on
approximately 260 export control cases in which over 750
defendants have been prosecuted.
The Federal Bureau of Investigation also plays a vital role
in the export control area. As a member of the intelligence
community, it develops intelligence which supports our law
enforcement efforts. Although Customs and Commerce investigate
violations of various export control laws, foreign
counterintelligence investigations and other criminal
investigations by the FBI can also uncover such violations. When
this occurs, the FBI may continue the export control
investigation or refer the matter to Customs or Commerce.
In addition, the FBI conducts a program to develop public
awareness of the real threat posed by hostile intelligence
PAGENO="0623"
619
services. This program, called DECA, Development of
~~~nterintelligence Awareness, is directed at defense-related
companies involved in classified work. There are currently over
11,000 of these companies. The DECA program seeks to alert each
company's management and security personnel to the threat posed
by hostile intelligence services.
With regard to the area of new legislation in the export
control area, on March 11, 1991, the President transmitted to
Congress comprehensive legislation which subsequently was
introduced in Congress as the Comprehensive Violent Crime Control
Act of 1991, Senate Bill 635 and House Bill 1400. This
legislation includes several provisions relating to the export
control area. Section 737, Enhanced Penalties For Certain
Offenses, provides for increased penalties for violations of the
International Emergency Economic Powers Act (IEEPA), 50 U.S.C.
§S 1701, et seq. Specifically, the Bill increases the current
maximum criminal fine from $50,000 to $1,000,000. Moreover, the
Bill increases the current maximum civil fine from $10,000 to
$1, 000, 000.
As the Subcommittee is aware, the maximum amount of the
fines under a criminal statute has a direct bearing on the amount
of fine a court may impose under the sentencing guidelines. For
example, if the statutory fine is raised above the level of
$250,000, the sentencing guidelines provide that the sentencing
guideline maximum, which could be as low as $40,000 depending on
the nature of the offense, is not controlling and the Court is
permitted to impose the statutory fine. In short, the sentencing
guidelines can limit the amount of the fine imposed, and
therefore, it is essential that export control offenses have
substantial fine penalties above the sentencing guideline
maximums.
Section 745, Authorization for Interceptions of
Communications, adds additional crimes to the list of Title III
predicate offenses (18 U.S.C. 2516(1)(k)) for interception of
wire, oral and electronic communications. The offenses added
include violations of the Export Administration Act, the
International Emergency Economic Powers Act, the Trading with the
Enemy Act, the Neutrality Act and other statutes. In
recommending this legislation, we noted that the Arms Export
Control Act is currently a Title III predicate offense.
Section 746 and 747 would also greatly enhance the
effectiveness of Title III wiretaps in export control
investigations. The statutory comment accompanying the Bills
provides as follows:
PAGENO="0624"
620
-4-
Sec. 746. Participation of Foreign and State Government Personnel
in Interceptions of Communications
This section would amend 18 U.S.C. 2815(5) to make clear
that foreign and state government personnel, if acting under
federal supervision, may help in conducting court-authorized
interception. The current language in the statute permits such
assistance by "Government personnel," but it is doubtful whether
this covers foreign and state government personnel as opposed to
federal employees.
There is often great utility in permitting foreign and state
government personnel to assist in monitoring a wiretap, such as
in joint investigations involving terrorist or other offenses in
which the particular language skills of such personnel are
necessary. Currently, federal agencies such as the FBI may
employ such personnel through the cumbersome device of cross-
designating them as federal agents. See United States v. Bynurn,
763 F.2d 477 (1st Cir. 1985). The paperwork involved in such
methods is burdensome and costly, with no corresponding benefit
to privacy or other interest served by- the statutes. It would be
far more efficient, and consistent with the purpose of the 1986
amendment adding "Government personnel" to 18 U.S.C. 2815(5), if
that provision expressly authorized foreign or state government
personnel, acting under the supervision of a federal officer, to
participate in the conduct of a Title III interception. Section
746 would effect this result.
Sec. 747. Disclosure of Intercepted Communications to Foreign Law
Enforcement Agencies
There has been a dramatic increase in recent years in the
amount of international law enforcement interaction, necessitated
by an increasingly sophisticated and active international
criminal element. This has created a need for authority to
disclose information obtained through electronic surveillance to
foreign law enforcement agencies, in order to address effectively
international criminal activity, including international
terrorism.
This section accordingly augments the definition of
"investigative or law enforcement officer" in 18 U.S.C. 2510(7),
for purposes of 18 U.S.C. 25l7(l)-(2), so as to include foreign
law enforcement officers. This would permit disclosure of
intercepted communications to, and use of intercepted
communications by, such officers in ft~rtherance of the
performance of their duties as provided in 18 U.S.C.
2517(l)-(2).
In conclusion, the Comprehensive Violent Crime Control Act
of 1991 contains important provisions which will enhance the
PAGENO="0625"
621
-5-
enforcement of the export control laws, and we urge the members
of the Subcommittee to support this legislation.
In regard to the jj~ case, the Subcommittee has inquired
as to why no freight forwarders or Egyptian officials were
prosecuted. The Subcommittee has also asked whether the State
Department attempted to influence the conduct of the
investigation.
No freight forwarders were prosecuted in the fi~Jj~ case for
the reason that none were knowingly involved in criminal
activity. With respect to Egyptian officials, two were, in fact,
indicted and two others are listed as unindicted coconspirators
in the indictment.
The two Egyptians named as defendants in the indictment are
Ahmed Al Din Yossef Khairat and Fuad Algamal. Both men are
colonels in the Egyptian Army. Khairat was responsible for
coordinating the development of the Condor II missile project
with several European companies. Algamal was the Condor II
project's chief engineer. The two are presently fugitives
residing, we believe, in Egypt. Unfortunately, our extradition
treaty with Egypt does not cover the types of crimes Khairat and
Algamal are alleged to have committed.
The two Egyptian officials named as unindicted
coconspirators in the indictment are Abd Elrahin Elgohary and
Mohamed Abdalla Mohamed. These men worked for the Egyptian
Procurement Office in Washington, D.C. Both had diplomatic
immunity and could not be proceeded against Criminally in this
case. They were officially withdrawn by the Government of Egypt
following the arrests of Helmy and his codefendant James Huffman
in June of 1988.
The evidence in the case was insufficient to charge any
other Egyptian officials with participating in the illegal export
scheme.
The Department of Justice routinely consults with the State
Department about criminal cases which might affect adversely U.S.
foreign relations, or which involve foreign government officials
as potential defendants. This case was no exception to the rule.
The State Department was apprised early on of the Department's
investigation of Helmy and his Egyptian coconspirators. During
the course of this investigation, Justice and State consulted on
a number of issues. In view of State's statutory
responsibilities under the Arms Export Control Act and its
general mission, duties and responsibilities, suçth consultations
were essential and appropriate. After obtaining State's views on
various issues, the Department of JustiCe made the final
decisions. In brief, the Department of State's role in this case
PAGENO="0626"
622
-6-
was totally consistent with its mission, and did not adversely
affect the conduct of the investigation or prosecution.
The Department has furnished the Subcommittee with a
statement of facts, plea agreements and sentencing memoranda
which provide extensive information on the evidence and decisions
made by the United States Attorneys in this case.
With regard to the case of United States V. Alcolac
International, Inc., we note that former Assistant United States
Attorneys who handled this case have sent a letter, dated
April 22, 1991, to the Subcommittee. In this letter, the
prosecutors directly address the question regarding the decision
not to charge other senior Alcolac executives. In pertinent part,
the letter states that "The investigation disclosed that all of
the shipments at issue were handled by Alcolac's export
department, for which Leslie Hinklernan had primary
responsibility. She was the only person who ever saw the vast
majority of documents that suggested the shipments might be
diverted." In brief, there was insufficient evidence to prove
that any other corporate official was knowingly involved in
criminal activity.
In addition to the April 22 letter, the Subcommittee has
been furnished copies of the statement of facts, plea agreements
and sentencing memoranda for this and related cases which provide
extensive information on the evidence and the decisions made by
the United States Attorney in this case.
With regard to the case of United States v. Shiv Mohari
Makkar, et al., we note that former Assistant United States
Attorney Portia Moore testified before the Subcommittee on
April 18, 1991, and furnished written testimony to the
Subcommittee. As counsel for the Subcommittee is aware,
Ms. Moore did not clear her testimony with the Department. The
views and opinions expressed by Ms. Moore are her personal views
and not those of the Department.
Subsequent to her testimony, Dave E. Wilson, an Assistant
United States Attorney who is the Chief of the Criminal Division
for the Western District of Washington, sent a letter, dated
April 29, 1991, to Laurence A. LaDage, Special Agent in Charge of
the U.S. Customs Service in Seattle, Washington. This letter,
which has been furnished to the Subcommittee, addresses some of
the issues raised by Ms. Moore's testimony. Specifically,
Mr. Wilson states that the Customs Service provided substantial
assistance to his office in the prosecution of the case which was
essentially a Commerce Department investigation. In view of this
and from our knowledge of this case,~ we are at a loss to
understand why Ms. Moore was critical of Custom's performance in
this case. The Internal Security Section has worked with the
Customs Service in a significant number of cases, and we believe
PAGENO="0627"
623
-7-
it does an outstanding job in the investigation of export control
cases.
In addition to this issue, Ms. Moore made several
suggestions regarding improvements of the export control system.
In brief, we believe that the forfeiture laws in the export
control area are sufficient to cover the forfeiture of property
related to criminal offenses. We do not believe that a national
task force is needed to handle export control cases or that
changes are needed in the Bail Reform Act as it relates to export
control cases.
The Department has furnished the Subcommittee with copies of
the statement of facts, plea agreements and sentencing memoranda
which provide extensive information on the evidence and the
decision made by the United States Attorney in this case.
It is our view that the Customs Service, the Commerce
investigators and all three Assistant United States Attorneys who
handled this case did an excellent job in bringing this complex
case to a successful conclusion. As the Subcommittee is aware,
two Assistant United States Attorneys took over the case when
Ms. Moore left to go into private practice. They handled it for
six months before obtaining guilty pleas from all of the
defendants.
Please let us know whether the Subcommittee desires any
additional information.
Sincerely,
W. Lee Rawls
Assistant Attorney General
Office of Legislative Affairs
PAGENO="0628"
624
APPENDIX F.-Honorable Richard L. Thornburgh, Letter Dated
June 12, 1991, From Chairman JJ. Pickle, Subcommittee on Oversight,
Committee on Ways and Means
LI. PICKLLrExAs. CHAIRMAN CAR PC$TPIHCWRKL !W~ICS. CA.&~V.*.'~
COMMITTEE ON WAYS AND MEANS ~~``
U.S. HOUSE OF REPRESENTATIVES
WASHINGTON, DC 20515
SUBCOMMITTEE ON OVERSIGHT
* WHOA June 12, 1991
The Honorable Richard L. Thornburgh
Attorney General
U.S. Department of Justice
Main Justice Building, Room 5111
10th and Constitution Avenue, N.W.
Washington, D.C. 20530
Dear Attorney General Thornburgh:
I am writing this letter to follow-up on my earlier request
for your testimony at the Subcommittee on Oversight's May 1, 1991
hearing on export control enforcement and W. Lee Rawls' letters
to the Subcommittee of April 25 and May 24, 1991. Needless to
say, I was disappointed that you were unable to appear at the
Subcommittee's hearing. However, I do appreciate receiving the
Department of Justice's position on this important catter from
W. Lee Rawls in his letter of May 24, 1991.
There are still a number of questions that the Subcommittee
would like you to respond to in order to complete our hearing
record. Therefore, I would appreciate your response to the
following matters, before close of business on Wednesday, July 3,
1991.
1. The Subcommittee's examination of export control enforcenent
raised the question of whether the legal standard for proving
export violations is too stringent to allow for prosecution
in certain circumstances.
a. Discuss, in general terms, the difference between
"specific intent" and `general intent" legal standards.
b. Discuss how the "specific intent" standard currently
applies to violations under the Export Adninistration
Act and the Arms Export Control Act.
c. What would be the pros and cons of changing from a
"specific intent" standard to "general intent" for these
export violations?
d. Provide Justice's position on such a change, and
rationale for that position.
PAGENO="0629"
625
Hon. Richard L. Thornburgh
June 12, 1991
Page Two
2. The Subcommittee received testimony from the Department of
Commerce officials indicating that Commerce export control
agents no longer have valid police powers, due to the
expiration of the Export Administration Act in September
1990.
a. Provide the legal analysis for why Commerce export
control agents no longer have police powers as a result
of the lapse of the Export Administration Act.
b. Discuss whether the police powers can be extended under
the International Emergency Economic Powers Act and the
legal rationale for your position.
c. Are Commerce agents currentiy able to make arrests or
seizures, or serve search warrants, after being
deputized as Special U.S. Marshals?
d. What procedures are currently being followed by U.S.
Attorneys' offices to deal with the loss of police
powers by Commerce agents?
e. To what extent are other law enforcement agents, such as
Customs or Federal Bureau of Investigation (FBI) agents,
being used to serve warrants and make seizures in place
of Commerce agents?
3. W. Lee Rawls' letter of May 24, 1991, stated that the
FBI plays a vital role in the export control area.
a. Discuss the circumstances where the FBI would pursue an
export control investigation, and provide specific
examples where this has occurred.
b. Discuss to what extent the FBI coordinates its
Development of Counterintelligence Awareness (DECA)
visits with the Customs Gemini Program or the Commerce
Business Outreach Program, and provide specific examples
where this has occurred.
4. It appears that numerous persons involved in export control
violations are foreign nationals or naturalized U.S.
citizens.
a. Does Justice systematically pursue possible violations
of the Immigration and Naturalization Act with respect
to such persons?
PAGENO="0630"
626
Hon. Richard L. Thornburgh
June 12, 1991
Page Three
b. For example, when a foreign national is imprisoned for
an export control felony, does Justice act to insure
that the person is promptly deported after his release?
c. Are steps routinely taken to insure that such a deported
criminal alien may not enter this country in the future?
d. What is the responsibility of Justice vis-a-vis the
Immigration and Naturalization Service (INS) in carrying
out such deportations, and in guarding against the
re-entry of such criminal aliens into the United States?
e. How does Justice coordinate such cases with INS? Is
there an established referral/coordination procedure, or
is the process ad hoc? What is the established
referral/coordination procedure?
f. In some cases, it appears that individuals have been
involved in export control violations at the time they
petitioned to become naturalized U.S. citizens.
i. Would a person's participation in illegal munitions
smuggling mean that he did not have the "good moral
charactert' required by section 316 of the
Immigration and Naturalization Act as a
qualification for naturalized citizenship?
ii. Does Justice systematically followup to determine
whether or not a person may have misrepresented his
qualifications to become a naturalized citizen, by
virtue of his felonious activity in smuggling
munitions?
iii. How many cases has Justice pursued to revoke the
naturalized citizenship of convicted export control
felons based on the grounds that they misrepresented
their qualifications?
If you have any questions, please contact Beth Vance,
Staff Director, or Thomas K. Arnold, Assistant Counsel for
Investigations, at 225-5522.
Sincerely,
4.~yf. ~ickle, chairman
6\~thommittee on Oversight
JJP/tal
PAGENO="0631"
627
APPENDIX G.-U.S. Department of Justice, Letter Dated August 1, 1991,
From W. Lee Rawis, Assistant Attorney General, Office of Legislative Affairs
U.S. Department of Justice
Office of Legislative Affairs
Office of the Assistant Attorney General ltfoshington. D.C. 20530
Auçsst 1, 1991
The Honorable J.J. Pickle
Chairman
Subcommittee on Oversight
Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515-4610
The Honorable Richard T. Schulze
Ranking Minority Member
Subcommittee on Oversight
Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515-4610
Dear Mr. Chairman and Congressman Schulze:
This is in response to your letter of June 12, 1991,
concerning various legal and policy issues regarding the Arms
Export Control Act, the Export Administration Act, the
International Emergency Economic Powers Act, and the Immigration
and Naturalization Act.
1. The state-of-mind necessary for provina exnort control
violations.
Generally, a defendant acts (or fails to act) with "specific
intent" if he knows that his actions (or omissions) violate the
law. A defendant acts (or fails to act) with "general intent" if
he intends the natural consequences of his actions (or
omissions). Traditionally, general intent is presumed merely
from proof of the occurrence of the voluntary act or omission.
Specific intent, on the other hand, requires additional proof.
See Committee on the Fed. Criminal Jury Instructions of the
Seventh Circuit, Federal Criminal Jury Instructions § 6.02
(1980).
Currently, violations of both the Export Administration Act,
50 U.S.C. app. SS 2401-2420 and the Arms Export Control Act,
22 U.S.C. S 2778, require proof of specific intent. That is, the
defendant must have voluntarily exported (or attempted or
PAGENO="0632"
628
-2-
conspired to export) the item knowing that the export violated
the law. ~ United States V. Markovic, 911 F.2d 613, 615 (11th
Cir. 1990); United States v. Murphy, 852 F.2d 1, 7 (1st Cir.
1988), cQ~. denied, 489 U.S. 1022 (1989); United States v.
Durrani, 835 F.2d 410, 423 (2d Cir. 1987); United States v.
Malsont, 779 F.2d 1228, 1234 (7th Cir. 1985); United States v.
Jan11, 707 F.2d 638, 642 (2d dr. 1983); United States v.
Lizarraga-Lizarraga, 541 F.2d 826, 828 (9th Cir. 1976).
The Department does not recommend amending the statutes to
eliminate the specific intent requirement. Eliminating the
statutes1 specific intent element threatens their constitutional
validity. The Commodity Control and Munitions Control Lists are
not lists of specific items. They are lists of categories.
Frequently, the government is confronted with the argument that
the Lists do not sufficiently describe the included items to give
fair warning, as required by the Fifth Amendment Due Process
Clause. We have defeated such motions by relying, in part, on
case law which states the well-settled rule that a criminal
statute's specific intent element protects it against a vagueness
challenge. See Hoffman Estates v. The Flipside. Hoffman Estates~
7jjg~, 455 U.S. 489, 499 (1982); Screws v. United States, 325 U.S.
91, 101-103 (1945) (plurality opinion); United States v.
Swarovski, 592 F. 2d 131, 132 (2d dr. 1979); United States v.
Edler Indus., Inc., 579 F.2d 516, 520-21 (9th Cir. 1978).
Imposing strict liability for such serious offenses as
export control violations (up to ten years in prison, 22 U.S.C.
SS 2778(c), 2780(j) (1988); 50 U.S.C. app. S 2410(b) (1) (B)
(1988)), clashes with the widely accepted view that crime-
without-fault offenses should carry only a light penalty. See
Model Penal Code S 2.05 & Explanatory Note (1985); 1 W. LaFave &
R. Scott, Jr., Substantive Criminal Law S 3.8 (1986). In this
respect, the Department believes that eliminating the specific
intent requirement would diminish the importance of these cases
in the eyes of both the judiciary and the public. The Munitions
Control and Commodity Control Lists encompass thousands of items,
some of which the layman would not consider subject to export
restrictions. Where an exporter does not possess the requisite
knowledge for a criminal conviction, the problem should be
addressed in a civil or administrative proceeding.
2. The Subcommittee received testimony from the Department of
Commerce officials indicating that Commerce export control agents
no longer have valid police powers, due to the expiration of the
Export Administration Act in September 1990.
a. Provide the legal analysis for why Commerce export control
agents no longer have police powers as a result of the lapse
of the Export Administration Act.
PAGENO="0633"
629
-3-
Unlike the Customs Service which derives its law
enforcement authority from the Customs laws, specifically 19
U.S * C. S 1589 (a), the Commerce Department's police powers,
are derived exclusively from Section 12 of the Export
Administration Act (EAA), 50 U. S.C. app. S 2411(a). Thus,
when the EAA expired, the police powers expressly granted by
statute to the Commerce Department's export control special
agents expired as well.
The International Emergency Economic Powers Act
(IEEPA), 50 U.S.C. S 1701, et seq., the authority under
which export controls are now maintained, contains no such
express grant of authority to Commerce agents, and it is
unclear whether police powers can be inferred from IEEPA's
general grant of investigative authority. Moreover, while
the Executive Order issued under IEEPA to deal with the
emergency brought about by the termination of the EAA,
continues in effect both the EAA and the regulations issued
thereunder, a question exists as to whether this preserves
the statutory basis for the Commerce Department's law
enforcement powers. See EO. 12730 (Sep. 30, 1990)
Accordingly, because of the potentially far reaching
implications, particularly in terms of personal liability
for the special agents should they be sued for damages
arising from their exercise of police powers, Commerce
obtained Special Deputy Marshal status for its agents during
the EAA's lapse.
b. Discuss whether the police powers can be extended under the
International Emergency Economic Powers Act and the legal
rationale for your position.
As noted above, IEEPA does not specifically authorize
police powers, and it is unclear whether such authority can
be inferred from IEEPA's general grant of investigative
authority or preserved through the issuance of an Executive
Order. Certainly, Congress could amend the EAA's
termination provision (50 U.S.C. app. S 2419) to exclude
Section 12, or portions of that section relating to the
Commerce Department's enforcement authority; Commerce's
export control agents could then continue to exercise police
powers in enforcing export controls without having to
request Special Deputy U.S. Marshal's status, should the
other provisions of the EAA lapse, and IEEPA be used to
maintain export controls.
c. Are Commerce agents currently able to make arrests or
seizures, or serve search warrants after being deputized as
Special U.S. Marshals?
PAGENO="0634"
630
-4-
Yes. As Special Deputy U.S. Marshals, Commerce Special
Agents can make arrests, execute search warrants and make
seizures, and carry firearms.
d. What procedures are currently being followed by U.S.
Attorneys' Offices to deal with the loss of police powers by
Commerce agents?
Because of their Special Deputy U.S. Marshal status,
Commerce agents now have police powers. Nevertheless, some
U.S. Attorneys' offices, out of an abundance of caution,
have enlisted the services of other law enforcement
agencies, most notably the Customs Service to assist
Commerce Department agents in the conduct of its
investigations.
e. To what extent are other law enforcement agents, such as
Customs or Federal Bureau of Investigation (FBI) agents
being used to serve warrants and make seizures in place of
Commerce agents?
Answered above.
3. W. Lee Rawls' letter of May 24, 1991 stated that the FBI
plays a vital role in the export control area.
a. Discuss the circumstances where the FBI would pursue an
export control investigation, and provide specific examples
where this has occurred.
As we stated in our letter of May 24, 1991, as a member
of the intelligence community, the FBI develops intelligence
which supports our law enforcement efforts. Although
Customs and Commerce investigate violations of various
export control laws, foreign counterintelligence
investigations and other criminal investigations by the FBI
can also uncover such violations. When this occurs, the FBI
may continue the export control investigation or refer the
matter to Customs or Commerce.
The FBI would continue an export control investigation
where the Bureau has lead agency responsibility, as it does
in the area of foreign counterintelligence and
counterterrorism. Since 1982, by Presidential Directive,
the FBI has had lead agency responsibility for combatting
and investigating terrorist-related activities in the United
States. Moreover, routine criminal investigations of
offenses for which the FBI has sole investigative authority
may develop related export control violations. For example,
in the area of counterterrorism, the FBI has investigated a
number of cases involving the export or attempted export of
weapons to the Provisional Irish Republican Army (PIRA) in
PAGENO="0635"
631
-5-
Northern Ireland. In a recent case, United States v.
Richard C. Johnson. et al., District of Massachusetts,
Johnson and three PIRA associates received substantial
prison sentences on August 20, 1990, following their
convictions for conspiracy to export missile technology and
remote control bomb detonation devices to the PIRA in
Northern Ireland, to be used against British military
helicopters and troops. This case was investigated by the
FBI.
The FBI has also assisted the Customs Service in PIRA
investigations. In United States v. Kevin McKinley. et al.,
Southern District of Florida, McKinley and two associates
were sentenced to 51 months of imprisonment, after which
they were to be deported, and serve three years unsupervised
probation outside of the United States. On December 11,
1990, after a three-week trial, a jury found McKinley and
his associates guilty of conspiring to purchase and export
Stinger anti-aircraft missiles to be used against British
helicopters in Northern Ireland. This case was developed
from a U.S. Customs undercover investigation, and the FBI
worked jointly with the Customs Service to assist in
developing this case and its counterterrorism aspects.
In 1990, an FBI undercover drug investigation resulted
in the arrest of two Colombians who were attempting to
purchase and export a large quantity of Stinger anti-
aircraft missiles to a Colombian drug cartel. Luis Arcila-
Giraldo and Alfredo Ramos-Tinoco were indicted and convicted
in the Middle District of Florida for conspiracy and an
attempt to export military weapons, in violation of the Arms
Export Control Act. Both defendants were sentenced to
prison terms exceeding five years and three years'
probation.
In 1988, an FBI foreign counterintelligence
investigation led to the indictment of Mousa Hawamda and
seven associates, in the Eastern District of Virginia, for
conspiracy and substantive violations of the International
Emergency Economic Powers Act and the money laundering
statute. Hawamda and his associates had diverted a large
amount of Libyan student aid funds to pay for unauthorized
travel to Libya. A lead defendant, Saleh Al Rajhi, pled
guilty and was sentenced to five years' imprisonment and a
$100,000 fine. Hawamda is a fugitive and has probably
returned to Libya. The remaining six defendants pled guilty
and were sentenced to pay a fine of $100,000.
The FBI is the lead agency charged with the
responsibility for conducting neutrality investigations.
Cases developed under the neutrality statutes also
frequently involve export control offenses. For example, in
PAGENO="0636"
632
-6-
1986, in United States v. Thomas L. Den1ey~ et al., Eastern
District of Louisiana, Denley and 13 associates were
arrested by the FBI for conspiracy to overthrow the
government of Suriname. In addition to violations of the
neutrality act,. 18 U.S.C. S 960, the defendants were charged
with the attempt to export weapons to support their coup, in
violation of the Arms Export control Act. All of the
defendants pled guilty, and the leaders of the coup attempt
received prison sentences.
In 1985, the FBI and the Customs Service uncovered a
group that was engaged in the large scale theft of military
aircraft parts in California, which were being shipped to
Iran. Ten defendants were charged in a 61-count indictment
with violations of the Arms Export Control Act, the Theft of
Government Property Statute and related offenses, in United
States v. Saeid Inanlou, et al., Southern District of
California. All of the defendants received prison terms;
the lead defendants were sentenced to 18 years' and 13
years' imprisonment; three other defendants received prison
terms of five or more years.
In conclusion, the FBI plays a vital role in export
control enforcement, and will continue to give a high
priorfLty to investigations within its area of
responsibility.
b. Discuss to what extent the FBI coordinates its Development
of Counterintelligence Awareness (DECA) visits with the
Customs Gemini Program or the Commerce Business Outreach
Program, and provide specific examples where this has
occurred.
The FBI does not coordinate its DECA visits with the
Customs Gemini Program or the Commerce Business Outreach
Program. While the FBI's DECA program does relate to the
export control area, it is primarily focused on protecting
classified programs from compromise by hostile intelligence
services. In that sense, the FBI program addresses issues
which are broader than technology transfer issues.
4. It appears that numerous persons involved in export control
violations are foreign nationals or naturalized U.S.
citizens.
a. Does the Justice. Department systematically pursue possible
violations of the INS with respect to such persons?
b. For example, when a foreign national is imprisoned for an
export control felony, does Justice act to insure that the
person is promptly deported after his release?
PAGENO="0637"
633
-7-
Aliens who are in this country without permission to be
here or remain here are deportable. If an alien legally
here has committed a felony, depending on the nature of the
crime, he or she is also deportable. A finding of
deportability must be made by an Immigration Judge at a
deportation hearing.
It is the policy of the INS, as often stated by
Commissioner Gene McNary, that the removal of criminal
aliens is one of our highest priorities. However, INS does
not single out persons guilty of export control violations
as a special priority.
Under section 241(a) (4) (A) of the Act, an alien may be
subject to deportation for any activity relating to
violation of laws of the United States prohibiting the
export of goods, technology or sensitive information. This
provision is new, having been added by the Immigration Act
of 1990, Pub. L. No. 101-649. It does not appear from the
language of section 241(a) (4) (A) that an alien must actually
be convicted of an export control violation in order to be
deportable. The Service would, nevertheless, have to
present clear, convincing and unequivocal evidence that the
alien had engaged in the proscribed conduct in order to
obtain a deportation order. See Woodbv V. INS, 385 U.S. 276
(1966).
c. Are steps routinely taken to insure that such a deported
criminal alien may not enter this country in the future?
Section 276 of the Immigration and Nationality Act,
8 U.S.C. 1326, provides that an alien, once deported, who
attempts to. reenter this country without consent of the
Attorney General is guilty of a felony, and subject to
imprisonment. INS maintains information at ports of entry
regarding such aliens, and would deny them admission if they
attempt to enter through such a port.
d. What is the responsibility of Justice vis-a-vis the INS in
carrying out such deportations, and in guarding against the
re-entry of such criminal aliens into the United States?
e. How does Justice coordinate such cases with INS? Is there
an established referral/coordination procedure, or is the
process ad hoc? What is the established referral/
coordination procedure?
The Immigration and Naturalization Service is an agency
within the Department of Justice. INS initiates proceedings
to exclude or deport aliens, but these proceedings are heard
and decided by immigration judges in the Executive Office
for Immigration Review, a separate Department of Justice
PAGENO="0638"
634
-8-
entity. The rules of procedure for these proceedings nay be
found in Parts 3, 235, 236 and 242 of Title 8, Code of
Federal Regulations.
INS coordinates prosecution of criminal violations of
the Immigration and Nationality Act with the Criminal
Division of the Justice Department, and refers files
involving possible criminal conduct to the appropriate U.S.
Attorney' s office.
f. In some cases, it appears that individuals have been
involved in export control violations at the time they
petitioned to become naturalized U.S. citizens.
i. Would a person's participation in illegal munitions
smuggling mean that he did not have the "good moral
character" required by Section 316 of the INA as a
qualification for naturalized citizenship?
Section 101(f) of the Act outlines the types of
criminal convictions that preclude a finding of good moral
character. In particular, section 101(f) (7) provides that
an alien may not be found to be a person of good moral
character if, during the period for which good moral
character must be shown, the alien has been convicted of any
crime and confined to prison for an aggregate period of 180
days or more. This definition is not exhaustive, so that a
convicted alien may be found to lack good moral character
even if the crime for which the alien was convicted is not
specifically included in the classes of crimes in section
101(f), and the alien did not serve at least 180 days.
As noted, export control violators may be deportable
even :Lf they have not been convicted. Under section 318 of
the Act, an alien may not be naturalized if the alien is
subject to pending deportation proceedings. Thus, the
Service would oppose the naturalization of any alien, if the
Service had evidence that the alien was subject to
deportation for export control violations.
ii. Does Justice systematically follow up to determine
whether or not a person may have misrepresented his
qualifications to become a naturalized citizen, by virtue of
his felonious activity in smuggling munitions?
INS makes security and criminal background checks on
all persons applying for naturalization. Once a person is
naturalized, however, there is not a routine follow-up on
the background check. The Service has authority to
institute proceedings to revoke naturalization if the
Service discovers that the person obtained naturalization
through fraud, such as by concealing criminal convictions or
PAGENO="0639"
635
-9-
other disqualifying factors. The Service bears a heavy
burden of proof; however, it must present clear, convincing
and unequivocal evidence that the individual procured
naturalization unlawfully. Federenko v. United States, 449
U.S. 490, 505 (1981).
iii. How many cases has Justice pursued to revoke the
naturalized citizenship of convicted export control felons
based on the grounds that they misrepresented their
qualifications?
Without an examination of virtually every case in which
naturalization has been denied or revoked, the Service does
not have the means to identify whether aliens who have
concealed convictions for export control violations have
been denied naturalization or de-naturalized. If the
Committee has reliable information indicating that a person
convicted of one of these crimes has nevertheless been
naturalized, the Service will appreciate the opportunity to
examine the evidence in order to determine whether to seek
revocation of the person's naturalization.
Please let us know whether the Subcommittee desires any
additional information.
Sincerely,
W. Lee Rawls
Assistant Attorney General
PAGENO="0640"
636
APPENDIX H.-Additional Background Information
1. Helmy Case
"Shopping lists" and notes found in HELMY's garbage.
M~-~- ~-~T26 ~T
6
J~- S 5~
`V ~ 15~
,~ ~ ,~`.-. ~
I ~
\~- \?.J" ~ ~ji~ç~ -: .~
~ 5°,7 ~ 3~If
-
- ~ c
- ~(A~(I~ P~AJJLS~
~ ~ -~ ~
PAGENO="0641"
637
117 +`t~
lifl
14v.-ç 1(1~
3o~z1! ~r~M
~ EP~t~
v~
Rz4~ NT
~ S t',~f
L~xI,i~to ~
~t~4i'O k4f04
7$O~L~j -bz~sro~U%
~ ~
gz~, +i~'~-~ t~* y~ ~
-4? 1
S'o
51-840 0 - 92 - 21
PAGENO="0642"
~\ -t~-~\ 2 ~
,~ ~~T7~T~C Z
~ ~ c~)
( ~l ~
-
C - ~ ------~-
PAGENO="0643"
639
~A~x (c7~v~c p-~(d.2) ?c
Dec~J~&~ (J~~ ~ ~cd
~ ~ lf~) 2 ~
~ `~ 1 2 ~ -.( ~ Z ~
~~-2--2~t ~-~- ~ 7~ fr
F -~-~ fr
A ~ ~j ~ Co~'Js~t) ~ ~.
C BC? ~
15 t~0~1
r~c
____ * (~ ~ ~. ** j ~
~ *i4)
PAGENO="0644"
640
k~&v~tt+o~ ~
1i~d~4 AA ~`2
~t CJ3~7$~j
F~A
~ C / ~3 972 (
Iv, ~T ~
L ~
AT ~ C I ~? ~
AA~
?~-~ cI3itx~ ~z
PAGENO="0645"
641
C~'LI GI-~ t::c'f'~)
\\~KM
Sc~A~)
1~'C) ~ ~
~fl~4~(Qj~
~Ck ~ Va4~
PAGENO="0646"
642
S~,!Ution ~ I ~ -c&. CdWtWI
hi ~ ~-L~4 ~ )`~i~c. ~c,c'd.
~
c~ V~c.
e~f ~ ~
PAGENO="0647"
643
gp~ ~ag ç~
D v~rs4~,,;4~ fI#c, c)~dh1 ~or ~ ~
~ 1tc(H~ck~rJ)
-VT,IX V~ficj ~od cJ ~
~ ?~eC~* ~ c-c
~ ~ C-t°o4~ &J ~ ~c.
~ ~tndh14st ~
~
c~ O7b,a~ ~t-1~_ ~ (i~~c~&) ol ~,L
t~oL~,' Th~'p. ~ ~J~J~J
j14.A. /`~ I It ~..* p. 1~4~ )L
j~jj-ta ~)tV4~) -r4~fr ,~L&
~ ~ ~ ~
~ ~it r4
PAGENO="0648"
644
Invoice and shipping document
T~rHca1 Cewi~c~ 0~~i
~X 704493.5227
vancid Cerarn~c Mateiais 0ea~i~ Febric~t(on
~XEllBiL4
and specifications for sissile
GREENLEAF TECHNICAL CERAMICS
P.O. BOX~7
HENDERSONVILLE, NC. 28739
. Fri .1~:
- ~ . rn- r rn~n
SOLD :. . -I
TO: :; ~ * . ,
-rn,
SHIP .~ r. 4t~:.n3 :tnrvE
TO: :LL~, n~. F~4~.0
32X1.22RW0-l0Q
CFNE3
4ER F~RT
L~WG 00022
.,EiJ~t, * ~3-3976X382X122R -000
HI iNtER H~S BEEN F'A.tt! BY
iA3H tN .~t'V~NCE
REH'ININC BAct<-oRr' t
nose cores.
HER
INVOICE
(PLANT) 7O4.~93..~J.5j
FOb. 5.~ S
~
~`N~
. ~...,
,.~
L~
S
6/0P~N8
BLUE
AM0~T
636.00
636.
RMS IOTW2STh
FROE 1 636.00
.00
PAGENO="0649"
645
SC IENCES AND TECHNOLOGIES APPLICAT LONG
111~ ST. ANDREWS DR.
ELDORADO HILLS~ CA 95430
~
PURCHASE ORDER :. -`
TO: GREENLEAF rECHNICAL CEFAMICS
~~19 VIKING STREET
~iAYWARD, CALIFORNIA 94545
-~r~a
~"~- ~.d~V'~*
* .~ :
`I
.:~r
~ PURCHASE ORDER NO. 0020280
~ DATE ORDERED 02-12-1988
~.O.8. DESTINATION
SH1b~ VIA, S~T JAY
PROPOSED SHIPPING
QUANTITY~ UNIr PRICE IC
2 ptocot 636.00 127:
I!LI1
i~
*...~ DESCRIP1~9N
~
*`~~`i'. ~
Conc,.~p~d~.Z~ttaCh0d àk~ch
MatOrts1t~'W8 100 ,ftrQd .
.
,
UNI1~
~
*
--..-".--,~,".-J'-~
3H1~ Ii : LII! SAINT ANDREWI3 OR.
LZLDQRADO HILLS CA,9~63J
~I~MENT : ATTACHED CHECKIPULL AHUUN1.
APPROV~;
A.M, MEL Y
PAGENO="0650"
646
_.i - - - - - -
-.
~LLt fri. --
s~-i~ -~ct~r- ~-~--r
I _~.
ITEM Cu~~ ~
c~ c-~i~ £I5C;I~-~::N
~ ~
~ ~:~)~A ~-~S ~ ~a
I?~ ~Vf~CE - -
~ ~ -: -
~
~ OI)(JCT ~ R~LI ~E ~
~X~ORT LXCENE~ TO ~X?C41.
~(E CUSTGMEM'S ~
D SECtiRE TP-E EX-CF~1 ~
-. Ex~c~-r *_I~N~
f~EQtJI RED.
~-Gr~: ~-4I~ -~C~GE ~4Y ~ ~ ~f-~Th ~ b-~I - -
CT ~ .-~j L ~ E ~ -~
~ ~ ~
PAGENO="0651"
~4i~c~
647
~)~/~1a (4~'1s)
~\~r ~?~rcL ~
rc~
c~ C ç
PAGENO="0652"
648
~c~c~p ~.
is t~c ck~ch ~ f,L pc~ z
~;~CLk~s',t~ H ~ ~ ~ ~ ~
W. N~W~n~ ~ ~
~( 1~?Ot!4J~ Ji(~ ~ D~ ~d
~ p4~v1~ r~ ./~csk.4~ ~Lid ~L~i~i
`~4~J , ~
c~ee
~ ~
~/ `(~.4.~~4 ~
//~r ~.~#4J/ i~esj2~
c)r~ i.~ ~
PAGENO="0653"
649
PAGENO="0654"
m
~ U
~
~ ~g~11~
~ L~-~ ~ ~J
/ ° ~- ~=~) ~-~-~1
j4frX"
l=~
1 (~E~ ~
1~4J (~`2) ~) 0
U
c/T)
PAGENO="0655"
No industry is more demanding of its
materials hart aerospace. Weight is
measured in grams and temperatures
in thousands of degrees. Materials
specifications can be hundreds of
pages long. Mistakes are too costly to
contemplate.
The demands of those applications
required new materials. So Fiberite
developed MX and Karbon broad-
goods. tapes. and molding com-
pounds.
Now those products are available
for new applications, with Fiberite's
same expert assistance in research,de-
velopment.quality control and process
technology.
The Ablative Materials Operation
combines a range of fibers and a full
spectrum of tesins. permitting devel-
opment of an infinite number of for-
mulations specifically tailored to the
designer's performance criteria.
That's why Ablative Materials is more
than a product line-it's a new world of
design opportunity.
MX
* Broadgoods
* Tapes
* Molding compounds
KARBON
* Broadgoods
* Tapes
* Molding compounds
651
Ultimate Performance
Prepregs
HIGH STRENGTH
With the ase of high-strength graphite
tibers,the ness high-performance abla-
tive products eliminate the need for
structural overssraps.
PAGENO="0656"
652
Sa~.
INSULATING PROPERTIES
MX arlatises offer therrttai protec:~crt
en in the temperature es:cemes
rocket laonch.
HEAT RESISTANCE
Korkots products svsthstatid temperatures
cier dOOO5F.redocicgdes~po constraints arl
expanding petfotmance possibilities.
FLEXIBILITY
High temperatore. high char yield elasto-
me es are incorporated to improve elooga-
tioo aod flexibility. This can eliminate
stress aod steoctoral failures.
~
EROSION RESISTANCE
Katboo products coo produce thin-walled
stroctoces that withstand 5.000°F firing
conditions of solid propellant rocket motors.
PAGENO="0657"
Research and development
it F:bet::o .\r'iati. e ilatetras Opera-
se~.irare concerns. ii e teaiize hat
dot Comes .0 treiv products with
ex.ic:lv'h e r:ght combination ofbuali-
rev. s he purpose of research. Thats
been the attitude or he people at
Fiberire rum he beginning. As a re
suit. there ire now literally hundreds
ot isorkabie resin systems for our cus-
tomers to choose from. Yet our re-
vearch and dovelopment team is still
willing to ssork on truly custom for-
mulatiuns. oven or applicar~ons that
reuuire lone. complex. and costly qual-
ticatron procedures.
Response time
Ablative Materials R&D people aren't
the only ones interested in meeting
customers materials needs. In fact.
everyone at Fiberite is. So whether ifs
a design requirement a processing
problem. or a tight delivery deadline.
you'll find Fiberite people there to
help.
Production technology
products her no at
novarive production :eotnr~oe~
many of the processes vt
broadgoods. tapes. ant moiurrvo
pounds are .iblatrve Mater:aiv rOots.
ion oxclusives. That Civot
depth and ability to do hines
materials that other compost
Quality control
Ar Frherire .\blarr. e ~tatetr.i- ttt'ot
rials before they re snipped it
svith inspection or incoming tars te-:n
and reinforcements. It 500tinsios i
inspection of compounded resns mu
impregnated fibers and fabrics. Arid
ends with inspection betore and
storage prior to shipping.
Fiberite Ablative Materials .ysaiir~
control procedures are so vincent.
they're approved by NASA. And hey
pass repeated inspections ~y audit
teams from the aerospace industry.
653
The ultimate
performance of
Fiberite materials is
assured by the
outstanding performance
of Fiberite people.
p
Technical Service
Fiberite Ablative Materials Operarion
will supply the right material. on
schedule and on spec. But our per-
formance doesn't stop even there.
Well provide technical assistance
to make sure that the product vu
create from our material also meets ins
deadlines and its quality require-
ments. That means paving attention to
assure fabricabilirv. And asking your
production people how they want ma-
terials packaged.
Fiberite supplies technical assist-
ance because we know the perform.
ance of our people and materials
makes a critical difference in the per-
formance of our customers' products.
That's why so many demanding cus-
tomers have made us their number one
Qualified Supplier.
PAGENO="0658"
654
Fibertte isa qualified surpi~eroih~gh~
performance advanced composites
ablative materials md retnforced
molding compounds to a range of
industries includtng aerospace. aircraft.
sporting goods. electrical' electronics.
But Fiberite is qualified to supply
more than ust materials. We can also
work with you ri:
* Materials selection
* Materials research and developtrient
* Analysis and testing
* Fabrication information
* Process troubleshooting
For help in any of these areas, call or
write today.
AunaoleeamceChemowttoisiOfl
The Qualified Supplier
501 Went 3W SI. Vdristra, MC 55967 507) 454.3511
FIELD SALES ENGINEERS IN THE U.S.A.
Nairre Ternrory City S:ae n ert~e
Bob Cannon East Coast Staten Bethpoge NY 5
B:) Pedt S.W & Lower Mid.West Stares Cree Cceur MO 3t~
Pat McGill Mounta~n Staten Fruit HwghtS ,UT 5Cr
Bob McMurtie Washington State Seattle ILk 2C5
Mike Scott N. California and Oregon Stinson Beach CA 4t5 aSS.2b
DISTRIBUTORS IN EUROPE
M. Luc Jurving Ste. Anonyrne des Em F Chevassus (33).3.451.00.4r
M. P A. Deneve 35. Charnps.Elysees
29 Rue Dc Manignan TeTen: 50795
75008 Parts. France . Ferus Paris
Mr. P. L. McManus Vigilant Plastics. Ltd. 44).1.773.t337
Mr 0. W. BarOer 2 Plurepton Way
Carshalton Te!m: 297tb5
Surrey 5M5 2DG
England
PAGENO="0659"
655
The materials you'll
need tomorrow
are available from
Fiberite today.
Sometimes you'll be desicning some-
thing brand nesv. `or an application no-
body bad beard 01' yesterday. And
sometimes you'll be changing a design
because or changing needs in the mar-
ketplace. New design or design
change-either will require a change
- It might be a material that's mute
heat-resistant, to withstand higher
brake temperatures in today's icr aie-
cratt. Or a material that can be abet-
cared to close tolerances. to avoid
costly machining. Or a material that's
lightee and steoegev to increase fuel
efficiency and payload potential.
`ll'hates'ee that material is, if it requires
the ultimate to performance, chances
are the Ablative Materials Operation
of Fiberire can supply it.
C1 :1,
~ -s
Today
Rwirer eeozoreoocoees of
abirove MX.
~
Stoto, atse ossuiauoo of
abijove MX.
Tomorrow
Tbermai peoociioo or wooer
~
High-com~ ee~er ci
Jet eegiom ho i'~oc',or `
iereperaiu ret tot inpro' ia ~r v - r - -.
retail traces or t,erperarote-
Karboeoroiaiegeorepoued
PAGENO="0660"
656
ABLATIVE BROADGOODS AND TAPE
0'hca
Svca~~J3acr~e
Preroi,c v.reioc
20 35 35
`~
Ca~:cr
Ca~c~
3'a~:e
C~a~z
weroc
31
we'c.c
41
astorer
5
~eroio
35
P~-O..C
3
ceco
31
:e~
35
°:`
1 72 1 77
~
180 30.0
1 54
~2~L
1.44
J!2
1 26
105
140
090
~0
1 75
65~
1 80
~
3
Sc
80.0
18 0
55.0
300
12.0
850
60
40.0
60.0 45.0
20 0
35.0
32.0
18.0
600
2
2.5 5.5 5.0
3~
42
3~
1.1
35]
TYPICAL APPLICATION QUALIFICATION
* Tactical Missiles
Exit cones
Case Insulation
Externai insulation
* Strategic Missiles & Space Motors
Exit Cones. Polaris. Poseidon. Minuteman, Trident C-4. Peacekeeper, Scace Shuttie. IIJS. Scout. Ar.are
Case Insulation Trident C-4. Space Shuttle. Aniane
Entrance Section Polaris. Poseidon. Minuteman. Trident C4. Peacekeepen. 120" Eoosrer
Flexible Bearings Trident C-4. Peacekeeper
* Other
Thermal Protection Vertical Launch System
FABRICATION
These products are engneered for ease in tape wrap, involute or pattern
fabrication using hycrociaves. autoclaves or presses.
The tight control of critical parameters aios in the production of small arid
large hardware for missile components.
KARBON~ BROADGOODS
~7
~"'
~1 / /1./f
-
3 harness Graoniie
Pair Fabric
Plan Weave
- Pan Fabric
Plan Weave
Picr Febec
Flat
Fabec
GcaGate
Fabrrc
PlOt
FoOt~s
ria.1 rae -ar
~oo'.~us WI
Phenoiio
Phenolic
Furane
Plrencec
0evo
35
35
35
35
35
35
34
1.53
-
- 1.54
1.45
1.62
1.45
1.65
158
22.0
2etG
1~0
20.0
40.0
37.0
30.0
30.0
35.0
25.0
35.0
32.0
50.0
16.0
15.0
13.0 -
28.0
20.0
30.0
230
-
3.0 . - 3.5 3.4 3.0 4.5 4.5
TYPICAL CARBON/CARBON APPLICATIONS
5
* Aircraft Brakes
* Jet Engine Slats
* Upper Stages on Strategic Missile Exit Cones
* Space Booster Exit Cones
* Handling Surfaces for Hot Glass and Metals
FABRICATION
The molding criteria are established by the end product ranging
from compression molding to hand layup and vacuum bag cure
Fiberite has the researcfr facilities capable of recommending the
system to assure carbonization and subsequent processing of
superior hardware
Tortanawk. Navy Standarc. Persning II. Tartar. Lance
Terrer. Penpuin. TOW
Sprint. Patriot. Sentry. Pershing It
PAGENO="0661"
657
Material Properues
Fiberites Ablative Materials Operation
develops systems of resins and
reinforcements whose qualities, individually
and in combination, provide the properties
you need in your end products.
Shown below is a sampling of a wide range
of materials systems that are available to
meet your performance criteria.
ABLATIVE MOLDING COMPOUNDS
~
T~ C, ~ C,
S S S S S S
IDENTIFICATION S S
FORM
"2"
`2" X 1~2'
~2" X `2
"`/2'~'2'
o `/o"
"2" 0 `2
"`12'''2"
X 2'
2'
REINFORCEMENT
Graphite
Graph~e
CarSon
Quartz
Gloss
Gass
RESIN TYPE
Phenolic
Phenolic
Phenolic
Phenohc
Phenolic
Phenolic
Phonohc
~0Ghed
Pne~o',c
RESIN CONTENT.
30
26
30
50
35
35
35
32
40
SPECIFIC GRAVITY
1.65
1.76
1.74
1.44
1.40
1.45
1.76
180
1 72
TENSILE STRENGTH, r~
6.0
0.5
6.0
11.0
5.0
7.5
17.0
12.0
7.5
FLEXURAL STRENGTH, Ks~
10.0
14.0
14 0
29.0
12.0
14.0
30.0
20 0
17
COMPRESSION STRENGTH, I(~i
30.0
30.0
30.0
26.0
16.0
32.0
42.0
400
270
SHEAR STRENGTH, I(cI ,
7.0
00
7.0
4.0
0.0
9.0
6.0
70
TYPICAL APPLICATIONS . QUALIFICATIONS
* TactIcal MIcoiIoo
Exit Cones. Patriot. Hawk. Stingor. Novy Slandcrd. Ton'icr
Throat Insulator. Terrier. Tomahawk. Harm
Forward Insulator . . Sidewinder Harpoon. Shrike. Submoc
Entrance Cap . . . Redcye. Standard Missile. Sparrow Movnnck
* Slrstaglc Mfcoifoo t~ Spoon Molors
Closure . . Minuteman. Delta
lgnitors . . . Space Shuttle. Trident C4. Peacckeopor
FADRICATION
Thoso molding compounds ann dtts~gnod for
controllnd flow for coon in compression and transfer
molding. Tho success of these formulations assures
the fabricator of consistent Sigh quality parts.
PAGENO="0662"
658
-
MAIN OFFICE - F~QNE (5~'~ £5~.3ei1
ROt WESIThIROSTREET
WINONA.MINNEEOTARRRE7
05/05/8! 13:01:02
(PACE 1)
IF MESA ASSOCIATES
3 dO D & NRACEINI
135 PJ CAROLE.ITUET, SEAS
SNELPY OH 44S75
LO MESA .ASSOCIATEI
0 355 WEST.MAZW STREET
LEXIINTON OH 44904
;Nc~I~~ CF
.12~.4344.0, 05104I~
~
1147~ 79750
~
JIM NOPEMAN 419~$s4~3731
~
TUSKA. PETE 216-531-003;
I WINONA 5$ COLLECT
-`~~
~ lIST WAY~-SUlPAtZ
~
NIl 30 -*Pi/~F
RE0~D 6~1~~(L 0S~'jU ~
-
C001 11-1410-3-000 HID OdE
~~ll~lEl~
4OO.O0.~l3
48.05 ~12I31J95
-~~!~` ~~QRL ~._
-
~ ~
SATINS N/I, CIA
*0* $PEC1AL~ I~ST*UCTI0NS~,***..
$ $ S $ 40 DEC P
8111*171 SPEC 42*
5i~-S4U 1313S
/
~ ,1
PAGENO="0663"
659
~ /~-
ILL.T~ S~i7-1C ~ ~r'P ~AT~
a4~c~
-
-
~uOra ~ J~OJ~~
P.0.0 _~,..i2fr7 - ar A :fr-?.V~ov42. ~
~INV INS SLSMN# ~ FRT(P/C).~~
- CA~RIER# NAME ._~ MET~C~
- ORD. DY -
TOP C0TM S:d~ O~-
~
PTMOD DESC. ~ ~ZD
ADDITIONAL
INCREMENTS
~
LINE CCMMENTS:1~~
~ ~
P _ L TM_ MI5C~ ITY _ DRICE
NIAC DESC.
SOTTCM CCTMMtNTS:~~~I~
PAGENO="0664"
660
i~romptIy BOB BRIN K -
185 STEUBEN ST. WINONA. MN 55587
Telephone (507) 4521568
CONSIGNEE
- - SHIPPER -
WAYBILL DATES. NUMBERS AND POINTS OF TRANSFER OF ALL PREVIOUS CARRIERS 5~'P~EPS NO
NO. PIECES PM DESCRIPTION OF ARTICLES
t'~'~'
,~/
~ V
/ el
I (~~`
l~ 1 A
~j) ~.i
~-1 ~
`
Ij2._~
I 1- r 1 Tt
T,;~EFFCL, 1r~-N~I4iFrEt :Y-rpIEF~_
.~ii `1 :1 T'~Et' ~F ~.4 .11-ER
I!IITF TIIL,YtfI fl-ElF Ft iTJ1~L
I-.:.I;I .I~ -;E~i T-E)rI' r~II::FYrFTE[.
IQ~ TI-IF-I.I)I.H II fl EFMEC I TE I.?
IT I r-iT~ HEF ~II [TEll:. I T Hi:IJT THE
1LFI~~I~ .~ll1 VEIl -~FlFUvAL IF VilE
J~t'J..'. t-FF~r.TvlE;IT F:. ~T~TE.
~` Received The Above Dcscnbed Pncpenty In Good Ccnliti~n Exce~S-~'.S N~ted Date Oe:vv~c
.a~ ~4 .~ E~tUE1--c,f_O.~j~&~ nA~~4)~ veDe:vI~/ -
IBM - SNow ~ DELW~c~~CEPT
~HI5 FREIONT BILL IS DESI8NED TO MEET ~ COMMISSION AND liaR FREIDAT
Cl-fARCES MUST BE PAlO AS REQUIRED By ~ WTTRIIN 7 DAYS OF DEUVERY
PAGENO="0665"
RECEIVING REPORT
D & N Packing & Forwarding, Inc.
135 N. Gamblo Stroet (Roar) - P.O. Box 20
Shelby, OhIo 44875
Rec'd. From: Ftber!te Corp For: MESA
Date
Pro. No. _________________ Received____________
P40. of Cotflolnoro Oty. Per Totet Qty.
5 cartons
Phone
(419) 347.1095
661
N9 14174
Carrier
Bob Brink
Pert Number O.tctlptton
Cloth or fabric
Condition __________________
Comp)ete ~ Yes D-No
PAGENO="0666"
CA&9 CHA5C~ COO. PAiD OUT ~ATD. M02.
CUAPA. OESCSIPflON
R~C~ CPA
ACCT.
P~CE
E~S
AMC~.NT
1pi~,4$_I_/ ~.-
-
~4é~'? /fl4ZA~~ 12~~ ~
~ ~j 4 -~-Fg
I~~2
*~7~
L;?
~*g~
4~, AL;~ ~
/~j'9~' TAX
/~ TOTAL
ALL Claims and Retvrn.d Goods MUSTS. Accampan~.~iS4L~~-'
662
SHELBY BEER DOCt~ INC.
36 MANSFIELD AVENUE
SiIELBY, OHIO 448z~
ThA~
330235
Customers
Order No..
SOLD TC)_
pci ,&-` Pi ~
PAGENO="0667"
Th M~a~dum ~ Z~~1 thIl I E~3t~ L2~ t13 t~ ~ t~t tt~ ~fI~ W d tzf~
~ Ci~1 ~fr~crrcz~7t
~c ~ ~
I ~ ~ ~ r.u. DU)~
d ~ r'~.~v b I~t~ ~
663
-~
Ship1p~'c No. ~
Company Agont'c No.
74-65 ~4 Cand1e~ood ~
~armans~ Ct~t~c~ ~~1ary land 21077 ~~~_______________
T~1 - 202-726-8006 Shousha
Vehi~
DtTVJ C~T1~? 1'
~~-COflLQOfLS Versmit 125
T6~T
rc, ~ ~
~r
.JA~.~fj2ont~nt$ 4-baqs Cyanox
l-Bo~-C0ntents 11 bags hntlmony uxi~
-
3400
7t~D
1~~Z~fl
-
-
-
1 fl~flI1
~-c4~#~--,~ ~-~p.~----- ~- - -
i-B~x Cont~flt c1~~CTOtt) or rauric
i'~uti
~~Th7Fr-P-u~-----~ 0
`~TT~i~ SHUUSHA
J/Y~
~-j~
BILLIFRT TO: DM~ Packing & Fudg. Inc.
~
,~
-
-
Pr eo a! d
Prepald
____________________ r _________________ r--~. -~
~ ~ 5r1e1uy~uff1u~813T -
PAGENO="0668"
664
PAGENO="0669"
c~J
2~3
c:D
©
=1
uu
0
uu
c-,1
n ~c~j ~~OE3 ~ B ~
PAGENO="0670"
666
Invoices and shipping dccurenCs
relating to R45MT/R4SM.
5ELEST CE~F
SO. NO.
050165
NalPacking
135 n. ~amble3t. (rear)
Shelby, Ohio 44R75
~ Inc.
*5ES~EO
Lo~.~ie~ I~'-H
~.
uNIrrED
TECHNOLOGIES
CHIIMICAI.
SY!~~EMS
FCC METCALF AD
SAN JOSE. CA 5138
N
.~::
Lexington, Ohio 44904
Residual Material
- otMImrv SW E~
PART NO.
~J
oE~
1
71 dr
R-45-M Polybutadiene
(
PP1'0X*
5,500 lb)
Lo~ 27,34, and 35
\
PAGENO="0671"
667
~ -E.P N :ECL E ~ -
FeE OR EXPOSURE CA~. 0L..XREE `-XGG-~2s-3OC
~-2
Zos,
Street
IOria,n
.-~I
Veh~cIe
Nurnbrr
~..
35500
IIPPER: ________________________
1OATE ,- -/z -~&.`-` DATE:
174480-22250//U70
FOR HELP IN CHEMICAL EMERGENCIES 1NVOIVtNG SRLL LEAK.
FIRE OR EXPOSURE CALL TOLL-FREE t-tOO-424-t300 DAY OR NIGHT
Street
UL~A~
Consianee AT~3~4~ I~ ~
Root-
A-~IATII1JiI7 & N ~S~I UEMT~ TN~RTC~IGT~T2~L.
ttrT'T~TDF~r FTXEICSfl'Wf
-~--. o~ ~ ~ I
ITHIS MEMORANDUM
~
-
Shtppers No. 05O]65.~.
-..
Carriers No.
SCAC Date ?45Y 11. 1985
1DR
)estinay~.~. ~ - -.---`-.~-. -
7~
--
~_____
--_____
-~-
,.
-
~L EU~: ?~
Remit COD. to: - - flcoo. FEE:
Address: 5'5fl~ Prepaid ~
-City: State: Zip: IJeI1JJEJ) Aint: $ Collect o $
FREIGHT CHARGES
~ PREPAID COLLECT
FORMIO.ELS.C(3pLy)
51--MO 1407
PAGENO="0672"
NON-REVENUE BILL
Billing &
Collection will
be made by
general
eunless
freight charges are COD.
GRIPPE/S NAME & ADORESS NAME & ADDRESS OP PA~1Y CONSIGNEE'S NERO & ADDRESS
PICK UP POINT1 PAYING FR EIGRTCVARGES DELIVERY POINT)
IJWITE 1rECHNQLOC$ES MESA ASSOC1ATIOMID & ~ PAC(ING
135 N ~L.L ST
SM J~~,C*
B/LNO 050165 OVERD/MENS/ONAL/OVERWEIGRTPEREITSORDERED_RES _NO ESCORTSCVCEREO........,~ES _~C
0 0 CES ____________
71 ~ ct~it~t.s ff01 35530
RECEIVER TREABOVE DESCRIBED PROPERTY IN G000CONSITIORI EXCEPTAS NOTED - L.~Y~LK~ 1~s06258
DRIPPERSSEALB p = ~ INTAC'TAT DESTINATION
- NSIGNEE BY: DATE
~ ALLSI10R1AGESANDJOPDAUAGESMUSTBEREPORTEDTOROCKFOPD I-DO-12-1ISSIIWROI$CRIY) UFRER YES GGEEVENCS
ILLINOISOFFICE. EEFORECONSIGNEESIGNSTI-IESERLLS.. .C.&jj~ 1-~.43R-4373 5S962-YR5Y:CA'~:/
-
TRAILER TYPE: FLAT.. .._....... VAN: DROP-OECK______- IOWBOY____~._ CREED IF RT~OR NOPE PULLET)ZET _________
WITH POWER: YES......................... NO........_.____
5APPT DATEITIUSIYAMYI:
ARRIVED DATEI1~IE:
DRIVERS BREAIETIBES:
*
COMPLETED c~'run~
RELEASED DATE/TIME:
I
PARTY TO BEBILLECIINIBRI &AddR~
-
.
.
APPT. DA~Tl~lRARyI:
SRIPPERSSIGNATSWE
ARRIVEDDATE/TIME.
/
DRIVERS BREAK TIMES.
COMPLETED DATE/TIME:
-
RELEASED DATE/TIME.
.
CONSIONEES BUS1NESSHOURS,
PARTYTO BE BILLEDIN&W.& Add~I:
CONSIGNEESSJ~lAiLWE
668
DELIVERY RECEIPT
INDEPENDENT FREIGHTWAY
P.O. BOX 7013
ROCKFORD, IL 61125-7013
FREIGHT BILL NO. UJ-001418
DATE 5-128a
WRIITECOPY: RRK&RRRHOWCS
YELLOW SIUREEP
PINE: CRDEçR - GOLD D.~
PAGENO="0673"
669
(419)347-1055 RECEIVING REPORT
D & N Packing & Forwarding, Inc. N2 14167
135 N. Gamble Street (Rear) - P.O. Box 28
Shelby, Ohio 44875
United Technologies CrienicaL MESA
Rec d. From: ___________________________ ~or: ___________________________________
Carrier Independent Frtwy Pro. No. __________________ Reived_____________
Part Numbsr No. of CoaNoners Qty. Per Totof Oty.
r-45-M Polyburadiene 71 dru~s
Condition -
Complete ~ Yes
°Exceptions
51-840 0 - 92 - 22
PAGENO="0674"
15AN
c~7~ *-~ / 17~
I
r-
670
183578
___ c~
City ~~#*<: ~ - ~1to Stat, ~ S41P_~Z~ ~ ~ -
Ship To V1A___.~12,~'!= ki~~
CN**M C.O.O. J PA3OOUT11 U?VL040MOIa.
QU*t4T11r ~ ~ua
]~ 1~.b5 1Q-'7'6 ~
L4~ ,A~1
liii - ~
-~
1c~
7~7~L
~-
I IlL-
-
-
--t-
~GNATURE
ALL ~ia arvrna ~ooo: MU~I ~O A000tpartisd 5y This SW
PAGENO="0675"
671
Vega ~ Re~* to: ~`~` ~`ea~s~
0. So, 64.SOQ
ass roan Lame PurchaSe order specifications amUImo.,M021a4
~ 22ia0
and invoice for radio antenna.
13847
FAX; ~ ~
~ I~Se Associates INVOICE DATE: .~AY ~3,19~
~5 West ~1n Street PACKING $HEE1 NO.: b
~ Ohio .14904 DATE snIrr~: DIE: JüTy 22, 1998
wIBa,GBLNO.: VA ~9-1Q7
FOB: Vienna. VA --
INIPPED TO: ~ Assoclatas BILLED TO: I~ese Assoclites
355 West Mils Street 355 Jest `am Strert
Lexington. Oblo 44904 Lcxinqton. (i~1o 44~04
Attantion: Accounts Payebit
VPL No.: 5203
~ ~ ~ DESCRFflON UtAl PRICE AMOUNT
T
2
3
2
Mtenna. tA~,~e1 3.,~I$-1
jote (1) Psyncnt us been recci'sed
(t~si Associates cneck jteó).
5~I1fl
~3O
i1,t20 D)
~PARrNP~ ALIIIPMIIIT TOTAL
I -~`Ify e* ec abax 5* U cornct and lust and that tayment theretor has not been reca~~d
isU.IR ~PRESENTS mg GOODS OP SERVICES COVERED BY iwS WERE PRODUCED IN COMPIJANCE'
WtTH THE REQUIREMENTS OP TIRE FAIR LABOR $1VWOARO$ ~I OP 103& AS AMENDC~ /
ec.es ax. en
PAGENO="0676"
672
- -MESA Associates, Inc.
FAX FORM
14 ~ s!~i~1iiII
FROM~)I~ kI~, *419484~3565
SUBJECT__________
REFERENCE/q~ ~ f.J,7.~
~ «=e-r
oc ~. ~ ~
.3so GM~.
"me,
-~ 355 W. MAIN ST. LEXINGTON. OHIO 449Q4 PHONi 41ø~U4-3731
PAGENO="0677"
673
FROM L)E3~ ?03 9386311 06 15 3
s.
11
11
II
-
1~::::
-
-
-
-
-
-
%
-
-
-
- - ~ 11. ~ MS
MS~ SS55~ ~M
tYPiCAL LVI4TH vs. P~IQUINCY
TYPICAL RADIATION PATT1RN$
ON 4 )~ 01*. (300 usa) 4ROUNO PI.AN~
* y ~ssi.fl ~ ..a L~.
V CUAMIMS F~ ~ 4.45'
V RAY ~
JsiâI
OUTUNI 0lUI14$ION$ dM0518)
5808
PAGENO="0678"
674
FROM )E3A ~`O3 S38~
SWEPT BACK POINTER ANTEKNA
UHF4AND
MODEL 825U4
P/N 302209-1
The Model 826U-1 Swept Back Pointer
Antenna is designed for sounding rocket
* telemetry, and other related functions
where a rugged narrow band antenna Is
required.
The antenna mounting and radiating
element are stainless steel. A heat
conducting Insulator is instilled at
the base of the antenna to control the
te~erature of the connector center
conductor.
The Model 829J-1 frequency is tunable
over the frequency bandwidth by cutting
the length of the element. The length
to frequency relationship is dpicted
on the back page.
Applications Include mounting on rockets, aircraft, and remotely piloted
vehicles which may require rugged features and narrow bandwidth.
The antenna coverage is displayed by pattern illustrations on the back page.
___ ~ PRECISION LABORATORIES, INC.
- A Cor.iruDi~ Co~v
SPECIFICATIONS
Frequency Range, Tunable 225-550 lIz
Frequency Bandwidth 5%
VSWR (Across Tuned Frequency Bandwidth) 2:1, mixi~
Input Impedance 50 oP~
Connector INC jack
Power:
Peek 5~ W
Average 50 W
Temperature:
Normal -50F to 300F
~rans1ent 1300'F for 30 seconds
Seal (Hellue Leak Test) I part per thousand per hour
PAGENO="0679"
To
*oo~gU
dry
.1
j-
3~Ot* MO
1174
,~&4 14~5OC~
SHIPTO (~`~5 ~h1. 1144 /AJ ~ T
ADORISS ,t~M I AL
~ ~1~io ~vg9~
OA?~
.~
e~.,
675
PURCHA.SE ORDER
4 Pr ~ ti~)A j
"~
I4J~LI~4J VA a~2/~'c
-7
2
O~.
~4t_ (i.. /
;,
rD~ A ~
,~I
-
L
~!I1
12
~L3
II
i4~- - - - - -
U
`21
17
1$
MIMS a______ ~ o co~ics or youR INVOICS WSflI ORIQ~N*%- SSLL 0, LAOIMC
I OUR OROSR NUMSIR MUST APPSA$ ON ALL IN.
VOICU. PACIIAGIS. $TC.
L$TSOIIO$$YOA?IPSCIPIEO
1H 145 Rsdh~,m
ORIGINAL
I `90 II 2 - -~ 2
PAGENO="0680"
MESA ASSOCIATES, INC.
LEXINGTON4 OHIO 44904
.5
Address_____________________________
City Stats___________________
Ship To
?j fl,~,
7_ l;j-7
I 47~e
I
I
~ ~ I~i4at
~cA~gL~,I,f!.
-(V -
Cf rI
-~
F~. -~
i~? ~
i-i2)L2~
(1
.<~1
£~. ci
ci
676
183577
DATE
CU~OM~
owa NO~~
VIA
QUANTITY
(A 4/ "~s LL c z4~L D,c!,e7yL 4 Z
~cc
,..-~ - --
~/.3S/~~
-~ ill
V~R.s1~~
- TL /7it4'SC.7I/~t~
.co
g:.7.
.5 ~
4~Il~)cIA1~A ~ P/.~J~A~2j~.jJI
~9
2~
CASH CHASSI C.O.D. J PAIDOUT UTUSIIVDMDH& J LICHIVID ON ACCOUNT
-~J
`~L~ ~ I- `~-*----~
--
-
.
.-_;I, - -
~
-
-
-
L~-
~
Pd' ujQr J)s Uk(~ ~/.a. Nontritorea. -
Viennaet. Katepaoheu. neCatia. anless dslrens'rae-authoeond ho the
_UnitedStases. . . -
If the etport requires a s-alidaied license for Po(gnd. Hungary or Romania.
`these countries shall be included. If the export does nor nequtee a validated'.
license'for a country in the peebibited list, that country may he deleted.
(uI Validated licersse ahipntersss. For a validated licensO sbtpmem-
(Al The country of uftinsalq desttnalion nastred on the license shall
he entered in the first space: an~
IB) The coontry(iesl shown on the license as approved for disnsbu.
lion or resale shall be entered to the lass.space. Iso such coonmy is shown
on the license, the word `tsone" shall be entered in the last space.
(3) Statement 3.
Uaand States lam prohibits disposition of inter correendiors to
the Sunset Boc,~~* Laos Libya. hiatUs Roma. Vaotaes. Kom-
pnchea,oeCab..aainaaatherssae~uendbYiie UniaadSoaes.
Statement 3 permitudisasbutions or resale to any country in tIer world other
than those specifically excepted in the statement. if an espoes to an
excepted country does nor require a validated license, that country may
Ii) Dicert any cargo to any country of oltimure destination oilier than
that named in the Declaration or in the bill of lading or air waybill as
descrthed in I 386.6: or
liii Request or demand that any carrier or its agent divert cargo from
the country of ultimate dest.inaltOn named in any such document.
In addition, no agent of any carrier shall instruct or authorize the masler
ofthe-vesasttodlveet any cargo~sg~otherccuaayof ultimate destination
without peter written aatlsoit~i~ the Office of Eopoet AdmInistra-
tion (See I 372.lI(flCZ) for ~mems unloaded prior to arrrval at the
country of ultimata destinatilnx.thR do not enquire the naming of an.
intermediate consignen.) - `
141 OpdesaI poetsan bW of ladhageralrwa~l. No camershajl issue
shill ofladiogor sir waybill prnnsdiagfee-delivery of.cargo to the-ultimate
- consigtean named in the Decheatiow at optioeTal poets, wbere~ne of such -
optsenth porno is ace fn the country of jaltimate destination named on the' -
license or Declaration. without peiorwrstten pathornzalion from the Office
of Export Admosinmattots. Hoofever where the Declaroclbn provides for'-
delivery of catgo to optional intermediate consignees located in poets-in
different cnunoses. the carrier may issue bill of lading or air waybill
providing for delivery at such optional poets.
(6) UnloadIng of Cargo at a Pore in Other than Caaatpy of
lnaoewaedimt or Ultinate Desrinadon
(11 Reasons beyned carrier's control. Nothing contained in the Export
A4mia~tetcn Regsilati-ossa shall be deemed to prohibit a carrier from
- ordoading cgo at a poet caassidr the country of interinidiate or ultimate
destinition shown on the Declaration wheew. for reasons beyond the co~
trot of the earr~ (as set forth in the standard prnvisioess of the camera
- bill o(lading or air waybill. such as acts of God, penIs of the sea, damage
to the carrier. strikes, war, political disturbances. or insurrectionsl. isis -
tot feasible so definer the cargo at the licensed port of desnnatton.
(2) Req*ed actions for on,chedalnd loading. Whenever cargo is an-
loaded at a port in any cottony other than be intermediate or ultimate
destination shown one the Declaration, except where the cargo may hg
-- enpoesrd under a'generaLlicense directly from the United Stales 10 such -
mommy
Ii) The career shall, within 10 days afltcdate of unloading~eepoet the
facts to the nearest Amencan Consul andto the agent.of the carner located
- in the United States Within fd4ays after receipt of such report. the agent
shall send a copy of the report to the Office âfEopoes Administrosion: -
This report shall consist of-
(Al A copy of the manifest of sacledineetod cargo,
(B) A statement of the place of anloading. and
(C) The name and address of the person in whose custody the cons.
modities or technical data were delivered. -
lii) The Office of Espors Administration wilt inform the exporter of the
cargo diversion. Within 10 days following receipt of ibis notice. the -
enpoeter shall blotter the Office of Espoes Administration of the proposed
disposition of the commodities or iecbnicaJ data.-
liii) No person. including the exporter. licensee, consignee. carncr.orr
any person diting on the carrier's behalf, shall take any-steps to effect
dtlivery or entry of ihir commodities or technical data into the corionecce
of the country where unleaded withont prior appevval cif the Office of
Report Adnmnisrrarion. The mottler shall sake oreps so assure that oath
commodities or technical data~reptacod in custody under bend or'oeher -
guaranty not so enter the consmerce of such cosaasp or any cosasoy other
Than the countries of the uleirneee and itstoesnodiaiC'asnsignees'shownoo
the Declaration without astib prior approval. ` -
3163-DESTINATION CONTROL STATEMENTS -
Ii) Reqoireaeent for Dead~n Conarnd Sare.oag
When required by this 316.6(a). as appropriate destination control state-
rem is required to he roamed on all copies of die bill of lading. the air
waybill and the commercial invoice covering as export from the United
Stales. The sante statement shall appear on all copies of all such slsippeng
docunsents that apply to the same shipment. As the disuretiose- of the
exporter or his agent. a destination coetrol statement may he entered on
the shipping docanents for espoe'ss for which no destination control ssnte-
mete is reqtored. ` . -
II) Exports to alt dostiaatloou except the Repoblk of Sooth Africa "ne Ca~ atneecn,rtreo eoden oapincnor~ee, hi ~esuin One onan~n hen -
~4 Na*a. Per cogonu so a desaaoataoa other than the Republic of `espnua rrnsaepod ho I Ott thaOlOii nornpt at. or toot O.Oteis pe.aan oe'nt.oa
onteh~or Naraoloa5 one of dto.deee deottoatamo consent oatemenm °~°~
descitbUd ix I i86.litcl aesdildl is required loran esportuadne-- .* -- ~~Oa tether ~. an oa,hns. osit a.an~ pie~eened'iboanose~ a~s eon -
Ii) A vsralated licgnse ,. - .` - edt n sScb nt cmarn ot atimas thsnono xttrcti and aoanthpmee5~ ~aaa b~
`il Gaoersj Ljrntss GLV. GTF.VS. GTE, or GL.I: sc - . . ~ :s~ :~;otse sior'
I Genteel Lcca*~DEST if Oar cnmeaodssrs me aider aladeted `c~r~ co~ ~srontamJinand Hanger a~ma e~nia.. ~ as
PAGENO="0788"
784
be deeied If an esport to Poland. Hxngao'). on Rorea~u imloons T~n ocino ~eotco .so~g be oorenerro~ ~
validated license, these emanines should be aIded to the rentbiied dent infennion to prior or sues nririrnisstoe &nrn Oat
nations listed. to any of the ahovn.r.soi~ prisons. prrrsded ~
eerdSuneesonat adrqxa.ely tdeiit.lIes the thipnrmei. As an otoentatree..~ ~ ~ ,
- Pie cornmerriai ioi'nace such person ray send aoopy~~~
A destination control statement may be ptnpnnted on bills of lading. Its or air waybill corcasot ~ deseisatson cuemnt ~
waybslls. or commercial invoices. But in this case, only ore of the three ~ c~~i0i ~ cer'-rirg a ri
destination control statements shone nay be sltoucn on airy one of these agent receives from dat enponon a copy of conrrene~
documents. - d/e correct dear coe~ s~rs~n~, ~
(I) Permamin Rsropewu (Al Norify dat eopretor ~ wrtnng;. -
If as exporter or his agent uses a moee tnstrtctive desssnatton control (B) Roquesa wrtsnn atoonanon from the eopoi~ that-
statement that is nmatsaaty. the reexport provisions of 374.2 may ~ ThOdeSlUi*ttOC control statethent Ku b~ xvpneiy~.
~rthelesu authoeson recxpoes to certain destinabons. ~reeoport ~ all other coptes of the commercial invoice, and
auibonzed. theesporsccnsay so advise his foreign iotpoeterwithous obtain- - - (21 Any ether person oho macwed ass invoice wnth~ ~
ing further authonzaaixea from the Officend Export Adminisoattod. Its all ment has been informed as srtting of dat resescsom ~ fort ~
other instances, specific authoeffasion'shull he obtained from 1* Office : cut~~ -: - - -
of Export Administration (see-f 374.3). -. - . - .
- (11 Eqserdseapgenpournscatmnenuenhincopyo(theati~
(V Renpsenoibility fee Lao ofsraiemw . ` - (2~ Return i(ts dat espmn~ for propm complerinec ~
(I) PrImary responsibilIty. - - -. . (Dl Keep and triakir asadalile for inixpechon. in neom~
hI Getsera!. The exporter has the primary responsibility for assuring 387.13. a copy of his nocil)cacioe to the exporter arid 6w ontgi~ ~
entry of air approprtate destination control statement olt the cornerasrcxal exporters assurance to birnlfcr further recorilkeepring reqco~~
invoice, regardless of whether be prepares this document. If a forwarder. § 387.13.1
career acting as a forwarder, or any other party prepares, presents. fk~ Refrain if Car~4y by Cceser'
and/or executes this iltresuneet, the forwarder. crersen. or other ~t1~ ta No curer sIsal) relmae cusucily of a shiptnsenn cnrnred by 6w
also mespoesible for assiarsng that an approprtate statement is entered of thisl 386.6 to sen ~rr wtt~ surrender by that arry. to 6w
the document. The catvser. as the patsy Ibis issues the hi Ic tvg of at copy of the bill of lading on sin wnyhlll bearong on no f~ ~
oraybilt. bus-the prtnsat-y mnspoesihslssy furansurnng that the samestateimepat ~l~le de~ ~ asSess eiilur -
appearing on the cnrnexpaxading invoice also apprats on6w bsllo(ladiel ~i Sitntu)tuzteorzsly with the release, the cart-er del/sets to mat
or air-waybill. Arty other parry who geepares a hI) of ladtng or aarwuybsll ~ ~ oft, ~ control statement. contained is
is also responsible foe atatarseg that an aPrnttrtaoe statement is placed on - copy of the bill of lading on an wuyhill for the shipment. The wri~ ~
the document. - I ~ shall identify the shipmens.hy bill of lading or air waybill comber.
(xl Approprsoe . P~~' - s 11 number dice and of s'tL The
standing must he reached between the exporter and forwarder. tamer, or ~l ol - either ped ` ed fthewnoen ~
~ otherequinalem
the commercial invomne. he'cuss deatrmiete the aPPeo~naxe desoins~e . ~2lThgulis~s of the innprenieg coiuesuy require Oat eaonsodelise
control statement - . ` - - the comrtioditaes directly into the pltjsicai potsessete and coetsol o(cus
`(i)Gensa'ral.No carrier shall issiae (and ~cs e;porter. licensee. ship~r, joma or 0t~t~~ gonemmere ~ for delis~y se the consigom on hi
ness gnor con gsaee gene oranyodsenperson shall prepare orprorane) ~ Ic ce the cart-at- not gone -on -recesne f-ten Ow
a bill-ollading coveistri es enpoet forwhictsadestinaciotn cseozoluoat~ - gos-mssanent agmey. - - .gom -
is required aesder the peos'isioes off 386.6(al. unless all copies of each g - - - -
- bill of lading (including all non-negotiable and office copieslootain.tbu fsJ Node, a~Prekdealee Agonat Dimension- -
same statement in clearty legible form. (11 Coodare afhe' recelnieg ~ recoin/rig en inrnicn. hO C
(ii) Air waybill. In Ow case of shipments by sir (other than airmail or l.sd~. .i~-~iji. onery ~dncxirumt cer.tatrrt; rreeico.cf the prohib-
air parcel p0511. this esqsaeemeet applies so any air waybill, including one nolan agsisnot dinerseds sat fcnth isa desonaasee coe~ cuenrunt, on after
issued by a consolidator (indirect crrior( for an espas included is a meceining cmxi entice of such pptbibiaien. no prmsce so ncnfied iscliadieg
consolidated shipment. However. dseseprovisioess do riot ipply,toamas- the ultimate consignee, intermediate consignee, or or-forssrilirg curser
or" air waybill issued by a carrier in cover a consolidazod-shiper~. aliail divert. trsns*rip. ormaspoan (oncsuxe tube diverted. trsinssltfpped.
(iii( More Mae oat sraremeeranpplicabl~ ro bill ifladiegjf one bill of or seespoeced) any shipensera described in the reritsen.ornexi notice an
lading is issued for two or sense indinidaai shipments is which differesat - country roe authorized is mah nnaon. ` , - - -
destination coetrel stuatemesses ~ply, the aiplieable ataaemese-.atidl be (21 Ppoofifno&e. In ony adminisosecive coenpliatsre proceeding heougist
entered beneath each ahipmesf or greupofahipmessas. However, (Ow bill tg~od8lce of Enpmr A niatmiua. e~aaze of Ow soiding of each
of lading shows a single fseigbi aati6c~mon an descrOw 9~id o~oi.ce. bill of lading, xar waybill, or other fonts of notice of the peobib-
commodities which eeqsabie thnaai of measdion one atwiatet, ~ ` ition aguinsi dinirraoo to yperson. shall coasaesttariep~smafncie pmot'of
impeacsicbble to separue the cs,eyessedisies oat ~ae bill of ladirsg, Ow most that person's roreipe Owreaf. This shall also coestittnre notice the
ensatictive statement applicable to nsy of the gsveps shall be used. The -- coesrra.odisses hare been licensed for a ponicnular cimunmy of ul~imace dmai-
cotnnsemcial invdfce ateould. neveedrelesa, pegsto Owcuesnrudiry grinça - nation arid nay not he lawfully d/rer~ to any otl~ cncr~. In addition.
and show she pmpe~ ntaeasse* (or each groap. . - of o~ sending of such notice ne the tnncrrridoate consignee Mall he
(31 Slaeemout - csseW linslce. - doee~ notification of such pecdilbicioe so Oat utitmaco consigma at-al
(i) Graerd. Ho bceesse, shipper. consignor, axpotler. ugene. or y per-t~
other person ds~ psepue or iaaaae a c~neecial'invoice for aahi~at
for which a d~nathaa ceonol moement is meqstired under the provisions. (f) Lifer (Farrtgo Lame - - -
of § 316.6(a), ealmo thecepiea o(the issneinela) eaonin~ uaee~t~. J.eox~ boeey c~ in a ` o~ ~
tine ceemel atatemene a clemfy te~at. This ~ ab~ ~ ratio-re apy ~ laser. (See I 3i&9.)
applacable aoeaameee as fio~he B ~6(~ow. - ` - - -. ~` no - -
("1 Diurribsinose qrcopiesa(ou~swv ~6eeseea4i~Oat~ - - - -.
is issued containing the prescnlbeddtn6iee content mae~ ~1b~n. (a) l~ is - -
per or other person isxuusg such introit atsll proesØy seed copies as- A-atippi~ideeemSd j~ ~, ~ ~ o~thn unxhipped balance
(A)- The ultimate consignee aid the sraaisadie~~. ofa csasenedey-..evm4~ export lica~ ~s the qeaacsey specified
- dps-isat eeemudlty in ~asees VwetgW on ~. 4 pa~ bare)
(B) The inteemedaae consignee; aid. - - `-f~ . ~ ~ sebt-~. -
(C) Any other poexoon ai6 ~ - ..2. - -- - - -~` - -
foreign country. Nothing contained herniae shall be conerand as linsat the .. -
persons or classes of persons s~whom such tnvoices. billsofladiasg orait - `°Aia I rn-ri a ~atne ps~ dat on taO
waybills am aseally and csasaaeraiily ~attn the course of capon e~. - . - -
PAGENO="0789"
785
ca1 ~7~~Q4 ~U-ü ktn.
-- ORIGINAL
CONSOLIDATED MARINE SERVICES LIMITED
17*. 0j7! C1~T~J, L4LAZA3, 1j%~7 WIIZ000U* ~MA#4 tOAO. *0*0*-i 7*05070*
1. TRAN$H!P ?~MIT CULL No.826
To7 TU~ 10U$C'IQR OR CUSTOM8 ~
~frj~ ~j ~en~~pv$fro~ t4zq S. S. PC:54 ~ srrived have
- o under jopig colours from~j
per 8.LRAN ~sfl- EG
4,
PAGENO="0790"
CASE Al - THIODIGLYCOL
Belgium Switzerland
10/21/87; 604 66-gallo. drums Cited as
- ~ I.Wum destination of
U $ Iiotl; i tina (66 ciI. dsir.~~.)
~fl1~n'irjjd I~. fl~Itar~t~a~ 1st shipment
10/81 3/88 2/4/88; to Rottsrdam, `Western
Correspondence from EUrope' cited as sod-ussr ~, %~,
U. w 2/20/88; 478 drums, West.rn b% \~.
~ ~ .~rcan~ Europ. cited as end-ussr %% ~
toAlcolacrequutliig ________
ThIodI~ycol shipments ~ Jordan
Actual
destination of
_____________ Iraq al 4 shipments
Liberia ___________
1st Shipment ,
Possible end-user of
- 2nd ShIpment plp~i~y end-user al 4 shipments ~
3rd Shipment of ThIoiglycol -~
(i~LImately nised)
4th ShIpment
PAGENO="0791"
787
EXHIBIT 8
Attached documents show that Tanaka and Anraat were shipping
chemicals precursors (e.g. phosphorus oxychloride, trimethyln
phosphite, etc.) from Japan to Iraq as early as 1984 and knew of
their uses.
Phosphorus oxychloride is a key ingredient of the deadly
nerve gas Tabun; if it is inhaled or absorbed through the skin, a
drop the size of a pinhead can kill a person within minutes by
short-circuiting the nerve impulses to his brain.
In January 1984, Tanaka telexes Anraat concerning trimethyln
phospite shipment from Japan:
"Also, we have a duty to make report to our
Ministry of Industry and Trade Institute (Central
Government) that where the tri-phosphite is going
to be shipped out. And the final usages as like as
D.D.T. At least you can tell me the destination,
because Japanese govermt is worry about these
material can make a poison gas or gunpowder. So, I
like to suggest you that these materials will be
consumed by insect-killing medicine like as D.D.T.
and plc telex to me the end user's name and
unloading port (I am OK that you can tell us a
necessary lie).
PAGENO="0792"
788
~ ~:3-'~ -- - - - - :- - - - - -
~ ~ ~ -: -~:.... ~
,~!VEF T~'* NU:~'~ - : - - -
- ~ `3
~ ~ - TIi~ t~L~13.~ S~5~jL3 ~ ~ ~
:~ FJr'~. FJFr-~ ~ -~:~
- :-~~: _:~~:~ ~ ..-
~ ::~:~~:~ ~
!!~-:-R! -~4: 3T.ir4.VrI~N ~;:z3T -
* PL3 A~7VI3Z. - - _-
- =
~I3:N5 RS2'a5~3
~-222q B NASAFI 1K - -.
~ 00.02.14 -
PAGENO="0793"
- `~ ~ *~
I
1%
- M~ ~
- ~CAE~~ ~MCE - -
~ L-~~ -
~EAP AM - - - -
rp ~W~YLM ~
IETCPIC T~N C~:.! t~!EOR ~ -
~ o~-c~sc~:~ ~
- -:
PACE L~.fS ~ V~L'.EC~ .~4E ~O 5.
AS I 1~'Lt- v-:~ ~:s ~ THESE ~`s~ c~ ~ ~°~-NJCE
irus IN -J~~1, ~ECEN1L~ AL5~- ~.F YDO c~ GET c-~.~cs
US ~M(W ~ S'L°PNG~ MAPp
SEll ~EGA~5
C. rAMA~A - -
P5: SENT :TEL~ ID MICHAUD ALREAEY.
789
!
_____ -I
PAGENO="0794"
790
M~'5 ~-P:
S ~`Tt~IN'5 P~24~54
- M~G ~C-P~ - - - - --
* ~-G - - --
- -5 KTI5IN~ P52455455S5 - - - -
- ~ KAWASHOA J24277 -
tttsiai~ J69~O
~~,ATTN* MISS POISE
NOV 15' 1~B4 TMC-002B
FCA-SINGAPOPE - - --
DEART POISE - -
MANY THANKS FOR YOUR GENEROUS TAKE CARE FOR US REGARDING THE
RELEASE OF PAYMENT IN GOTTARODO.
I JUST HAVE GOT INFORMATION FROM OUR SUMITOMo BANK.
* PLEASE KINDLY TELL TO YOUR BOSS MY GREAT APPRECIATION ANO ALSO
-. _______NG FOR H-IS COMMENTS NEXT ITEMS (CAUSTIC-SODA AND
~ PCL3. POCL - - -
- MMP IS COKCERP4TD~ IT jS-VERY DIFFICULLTO FIND OUT-
f- MILL IN JAPAN. BUT NOW THERE IS ONLY ONE PRODUCER IN-NORTH LAST
JAPAN. HOWEVER~ THIS PRODUC~..~ID~ THE BUYER SHOULD BE
INFORM THE FINAL-USAGES oFcoss~ BECAUSE THEY ARE WORRY- ABOUT
- TO USE A ROW MATERIAL AS TOP~WE A-POISON GAS. - -
AS SOOS AS YOU CAN LET ME KNOW THE USAGES OF DMMP~. I WILL BE ABLE
TO- OBTAIN OFFER FROM PRODUCER. : -
OBESI REGARDSt - * - - - V - - -
- C.TANAKA - -* - - - - -
NNNN~'~"~ f~j41i~wdc oxye~4Lo#t,O~
~ KTISING P524884 - - - -
PAGENO="0795"
791
,~, I
~ ~TIStNG. P124584
~ IQ/tt/B4ADDITIONAL
~ATTEN - MR. F. VAN ANRAAT
- T~1C.-O0~0 - - -
DEAR FRANS, - -
- IT WAS NY BIG PL~ASURE TO HEAR YOUR HEALTHY VOLCE BY PHONE.
PEt PCLsPOCL CONTINE.&9~ - - - -
* BOTH- I?EM5 ARE CONTAINED NET 280 KG THEN INVOLVED TARE WEIGHT IS
ABOUT. ~O0 KGFOR ONE DRWI. - -
ACCORDINGLY' WE CAN BE.LOADED ON 57 PIECES.OF DRUMS FOR ONE 2OFT
* CONTAINER. - - - -
- - THEN' DECEMBER -SHIPMENT IS 60 MT EACH FOR PCL3~ POCL3
-°WE NEEDS 440 PIECES OFDPUN ANO-7 ~(SEVEN) 2QFE~ CONTAINERS.
POCL3 BALANCED 60 MI WILL BE SHIPPED ON LATE-~JANUARY.
P.S DMMP - THERE IS NOT TOO MUCH DEMAND FOR IT IN JAPAN.
BEST REGARDS -
C.TANAKA -
PAGENO="0796"
792
MSG 07-R: -.
~ KIISING R524814
-+1ST NOV. ~984 - -~ -. -
AllEN- MR. F VAN ANRAAT -- - -- -
FRM-TNC-0013 - -
* TO FCA SINGAPOIE - -
- DEAR FRANS~ - - - - - - - - --
-~ YOUR REGUESTED 3:~TE~ C PCL3~.P0CL3 AND CAUBTI SODA-AND D.N.P )
ARE CONCERNEDi I AN GOI$~ TO VISIT ON THOSE MILLS RESPECTIVELY
THEREFORE, ALL COMPLETED AND BINDINGORDEP WILL~COME3~UT WITHIN &
0FEW DAYS. -
AS PER YR REGUE3T~ AN HARDLY TRYING TO GET MORE COMPETITIVE PRICE
FOR YOU IN ANYWAY.
THIS IS AU.. FOR TODAY. -
THANKS AND WARM RE~GARDS~
TANAKA -. .
-o -
~ MuSING ~24884
PAGENO="0797"
793
~ ATT!N - MR. FRANS V. ANRAAT
- O1~9/84
- FRN: CHARLES TANAKA
- DEAR FRANS. - - - - -. -- . -- .- - - .- - - -
R~: T..Z1.P ~./C ISSUING -. - : -
I HAD THE MEZ~NS WITH KUREHA MEMIAL INDUSTRIES C~RPS DIRECTOR IN
TOKY'~ AT TWICI DURING MY STAYED OVER CHIBA OFFICE.
AS I TOLD YOU BEFORE. I ALREADY PAID UP THE ADVANCED MONEY TO OUR
* MILL AND FINISHED THE CONTRACT. 1SWEVER. THIS~ IS MY FIRST BUSINESS
* :-. WITH OUR MILL EVENTHOUGH THERE IS SOME GUARRANTEE OF KAWASAKL STEEL
* CORP AGAINST KUREHA CHEMICAL CORP.
ACCORDINGLY. OUR MILLS DIRECTOR ASKED ME TO SUBMIT A COPY OF YOUR
- L/C ~4HEN IT ARRIVED ON NEXT MONDAYWHICH YbU TOLD NE ON THE PHONE
- LAST THURSDAY MORNING. IF YOUR- L/C ARE NOt ARRIVED tO TANAKA METALS
UMTIL ~TK. SEPTEMBER' CARGOES-R!ACV AT `)US.NILL SI~E WILL. 3E
* DELAYED. : - * **. -. - .* -
- DEAR F~ANS I WOULD LIKE TO LELI~/EYOU-SURELrBUT, ITJS VERY-HARD
* TO BELIVE THAT YOUR CLIENT CAPS TAKE bUT L/C FOR YOU CERTAINLY.
* IN THE ANYWj~Y~ PLS LET ME KNOW YOUR CORRECT -INFORMATION OVER TKE UI
* ISSUING SITUATION ON NEXT IIONDAY- 3V RETURN TELEX OR PHONE.
- I AM Pf OSAKA HEAD OFFICE. - -
THE OTHER~HAND. PCEASE LET US KNOW YOUR SHIPPING-MARK IMMEDIATELY.
* -. : --`~ ~.-
* - AtSO. WE HAVE A.OUTY TO MANS R~PO*T.TO OUR NINITRY OF INDUSTRY AND
- TRADE INETUITE C CENT~*L GOVERPCENT)THAT WHERt THE TRI-PHOSPHITE IS
GOING TO BE S1~IIFPED OUT. AND THE F~N*1. UBAUS AS LIKE AS D.D.T - --
-
AT LEAST -YOU CAN TEU. PIE THE DESTINATION. BECAUSE JAPAP
IS WORRY ABOUT THESE MATERIAL CAN MAKE A POISbN GASOR
SO. I LIKE TO SUGGEST YOU THAT THESE MATERIAL MILL BE CONSUMED BY
INSECT-ICILLINI MEDICINE LIKE AS D.D.T AND PLS TELEX -TO MET-HE END
USIRCNMIE AND UNLOADING PORT C I AN OK THAT YOU CAN TELL US A
-NECESSARY LIE). - * -~ -
ANFRATEI PLS* ICEEP IN T~VCH WITh NE-O!~ MONDAY.
- - ~SEST REGARDS - - - - - -.. --
- - - C* TANAKA - - - -
i'~ * -
PAGENO="0798"
794
EXHIBIT 9
Attached are the shipping documents relating to Alcolac's
first shipment to Iraq in October 1987.
The invoice dated October 21, 1981 and signed by Leslie
Ninkleman, Alcolac's export manager, indicates that Alcolac sold
NuKraft Mercantile 277,200 pounds of thiodiglycol at 57 cents a
pound and consigned the order to Companies, Inc., in Switzerland.
the total price was $158,004, plus $9,800 ocean freight. The
space for the country of destination in the diversion clause was
left blank in violation of U.S. law. The draft invoice indicates
that the decision to leave the diversion clause blank was
deliberate.
Patron Services, at Alcolac's request prepared the bill of
lading for the shipment. The bill of lading indicated that the
`!textile additives",, nowhere identified by name, were shipped via
the vessel European Senator on October 22, 1987. The port of
discharge was listed as Antwerp, Belgium. the diversion clause
on the bill of lading stated that the ultimate destination was
Switzerland.
A copy of a telex dated October 29, 1987, from Industrial
Project Forwarding, Ltd., the forwarding agents for Ariraat, to
NuRraft, was found in Alcolac's files. The telex stated:
"according to the information we have received
all transshipment costs in Antwerp have to be Senator
account."
On the following day, NuEraft instructed Alcolac to revise the
bill of lading to indicate "goods in transit". Alcolac complied
with these instruction. At Alcolac's request, Patron prepared a
* second bill of lading indicating in the routing instructions
section: "Goods in transit. Senator Linie (sic) responsibility
terminates at Antwerp."
The shipment of thiodiglycol never reached Switzerland.
After its arrival in Belgium in November, 1987, the chemical was
transshipped by vessel to the Port of Aqaba, Jordan, with its
final destination being Iraq.
These documents establish the fact that Alcolac participated
in concealing the destination of its chemicals and knew of the
transshipments.
PAGENO="0799"
- S~~PER (._._ ~ ~ ~P I
ALX~r~c. Ln~ern.atL~a-i, L'~tc.
3.!.W) £`a.~rtieid Ro.&a * 1~~E
Ba1tiz~re, Z~. tJS~ L21225
-
~::~-rl S :~.~L~9-~1I6) ~-~1r1~
t~xti1e odc~j~.j~
~DMc:t
-- -
\.
~TER UI NO. ES TO TRNI&UC11ON
- - 0 Rs~
~L1W~E OCN~ -
Ccx~parties It~.
~ia t'~derrx 10
~~it~rt~ -
Notify Sane
.
FOR~O W
?atrc*s Serqices -
21 S. CaJ.vert Str~t
~itir!ore, ?~. 21202
~oi~ s~pyt~ o~ o~.o..om FTZ ,io ICOIJNTRP OF i~is
Baltitore, ~V. L~A 1,3~itzer1az~
SHIPPER'S LETTER OF INSTRUCTIONS -
NOTE. G A~ LNOERTAIP OF fl~ ~IUIU I CO~OCIT~ 10-00 ICY TYPE IT El-WI WIL~.ETE~10I P~E3IElGi5S.v. -
~ W~PPIO nil MNT~NLTOul VIAil NJJCCAilIIR-PUAI1IM IS 11W ls.vCCU~aSNYML lPPPlGORT~. AIC PECEPTOI PlO.
~ ~V~AJ1LL~ 1145 WI~ ME.? IS C~WrTE ~IJI 3MPIWN1~W4Th TIE ElL~CA~ -
- - S~ TO PCI UP TOP SlUT NC 5014 TNt P1IET IUPS CICItOIATIONIETI PIll N~ -. - -
SAP! thIEF. N~ - ~)ATI - ~~~15 - -
2671 - jJ()/21,7 - C AIR * OCEAN
...
~ ~ ~--
- - - -
0 CONSOLiDATE 0 DIRECT
SAL
~
T-j~-1~.~
Nos.lOp/
-I-
-~ -
... -
-*
- -
.
-
- - -
- 000489
-
- -- -I.
VALiDATED UCE1WENOJ~IUIS. UCENIE SYNIQI. ECCN `~*
i,~-' r' e~s. -
-*~~
SI~1PPER MUSTCHECK* ~ PREPMD OR
- fl COLLECT
l~s ~L50sJ c.o:o. AMOUNTS
795
a
421.3290 277200~- 2963524
ussT~a4.
SPECIAtINSTRUCT1ONS - Price i~ C & F , Ters~i: Net 3( Days, B/~ ~o TUt~e ou~ T~ O~er -
en~rs~ - S~ii~y Shio2er - Calpnniel Inc., Tie.scriDti'~1 o~ ~cExt~. `extila ~c~-eTI
- - - I SHIPPER S INSTRUCTIONS IN CASE OF INABILIrY TO OEuvER
* - ~-``-- I CONSIGNMENT AS CONSIGNEO- ~ABANOON ~ RETURN TO SHIPPER
CE SURIE~pP~I JPTOPSNCETANDSIGNThE FIRST - VIP TO
CU~TOSC'-ARAT1ONWffH PEN 5 SIYPPEP REQUESTS ~
~ES s
PAGENO="0800"
THESE COMMODITIES UCE. ~ U S F
ULTIMATE DESTINATION ,~
OTVERSI000NTA
CONSIGNED C1 )-~~ P~ `- ~
TOORDEROF. ~~-.-1~~.cr1O i~j
~ I~1) -
* . INVOICE
796
ARotac
International, Inc.
SOLD t~JU~ jk~ç1~4k fflEcc~-.~*k Coc~.
TO * boo &3~ S1~-~~*~
~ t~J.L?.)Y~O?
NOTIFY -
`~ You~ORof~NuUuR
--
- -. - -
-.
;;~
- -
-
- - --
N~i ~
- -.
-
I$LANDCAMI~
-
-
~tLss
* MAR~AHO NUMSERS -
.-
*
~tUT~tt~.
.OESC~tP1IOw *Pcfc~, ~
-~`~- ~`~`
~ ~:"-P)-~~
-. - -
- - - - -
-- - -
-. - -*
-7I~
~
~ ~
. 3!
-~ec~N4~:cRL
~)o~-
t'j~1
-~
~ - - -* : -
~ ~ ~ ~ -
C~O~ ~ ~Jo~ - -
r~-~' ~ ~
~ ;.)`~ ~ ~
~
Gc~Je
Z~rdo~ rn~4~c:cJ-~ -.
Uaf,.~~J$U1. ~$~) ~ ~( *- -
~ `~°~
*
*
~CO4~
ISOSSWE)Ot(T *TWEIGNT
,~ -..7~oO
3 kIlOS / ~ ~
A$ccAac IUMmaEoti~. tic- fCictIfMd Cic~icfl
~ - / - /
KI~DS -- - - -~- -~ f `1' - p1, ~ I
~Ji-Oqu i~j
PAGENO="0801"
797
~ ~
- ~
Com~o~ ~
Cccu-~~7~ ~
s2~_ ~
- ~
~ ~ - -
- C.1L~ ~ ~
N~A~Q~-~ 73 ~1'i'/
Co~ MLh&~L~
- - -
~ ~JC'
i1L~- ~
~-~-Q ~;~-~_`
~ ~
~
~7~4- ~ 1T
~a-~j ~;~:`~
C. -
,.-~ (_ -s;-
2 LO~'~.~' ,- ~&- ~1\.) I
_~`CLC -
t'jJ~r~;~
-1 -~J~- ~q
~ `-;/7~D'~'
51-840 0 - 92 - 26
OOO4~ 1
PAGENO="0802"
798
~
~ ~PS-60~(247i)
- ORDER OF SHIPPER
Fi-1C-2158 PATRON SEEVICES, ONO.
190.21Z02 ~
- - - -
CON~AOIE3 INC. -
VIA M/DERNO 10
6900 LUGARO EEL
SWITZERLAND
`GOODS IN TANSIT"
~ -~
SENATOR LINIE RES?0NSIBILITy~ k~E~
TERMINATES AT ANT.ERP'
EUROPEAN SENATOR EALTI}IORE-
ANWE9P~
-~ ~
PORT EAST-S. CLI~ZoN ST.
~QUPP TO EP~E
I 10 0OTAI000 000
- -
AMATEX 87-3-232
MOE 1 OP/504
-
- C0NTAINE~ NOS:
CCCU-2c19170--9
CTIU-236410-4
CLOU-216406-7
*0. 0~ 0000 GO&CPPTIOH OF PACKA~5 L.FD G.OO~ ooo~ w~-~-
ONtOANDOc-T22~CR7 -
7 20 HOUSE TO E0USE-~ONTAIMERS S~T.C:"~~'95,352I
504 x 53-GALLON POLrLTh'ED STEEL DRUXE
TEXTILE ADDITIVES (NON-HAZARDOUS 134,424 SZGS)
AL NOS- MATERIALS, - NOT RESTRICTED, NO tABELS
2581 (#1/72 REQUIRED)
2582 (#73/1 4)
2585 (#145/ 16)
uj~op~
5,544 C
(156.990
-
XTRU-837445-2
SSIU-360476-0-
!TRU-85-6835-5 -
CLOU-221220-.5
2584 (#217/ 88)-
2385 (#289/ 60) THESE COBO~0DITIES LICENSED FOR ULT:
2586 (#361/ 32) DESTINATION SWITZERLAND. DIVERSION
587 (#433/ 04) TO U.S. LAW PROHIEITED, -
!!~T ~
.4TH
DNTRARY -
.
~
-
F~
11 t~ 5-. ~-1
- -i -
OCT22 1981- ~
LINIE
1538
0O'JTMS00(!TE.&tf.iw
GMSH&COKG
B~E~N
- -
/ /
O1-~4Q
KU KRAFD ?~RCANTILE CORP.
1000 ESSEX STREET
BROOKLYN, N.Y. 11208
PAGENO="0803"
5.0/COO AWONUMEEM
Al//AlEX 81-3-232
NOS l UP/504
(ONTAINER NOS: SE
/CCU-269170-9 02
TIU-236410-4 02
/ .00-216406-7 02
5110-837645-2 02
5510-360476-0 02
6100-856835-5 02
IAflJ-221220-5 02
FREIGHT PREPAID ON BOARD
20' HOUSE TO HOUSE CONTAINERS'.S.T.C:
504 55-GALLON POLYLINED STEEL DRUMS
TEXTILE ADDITIVES (NON-HAZARDOUS
MATERIALS, NOT RESTRICTED, HO LABELS
REQUIRED)
) SHIPPER'S LOAD, STOW, AI~()~
THESE COMMODITIES LICENSED FOR U
7) ` DESTINATION SWITZERLAND. DIVERSI
4) TO U.S. LAW PROHIBITED.
/1/ K//AFT MERCANTILE CORP.
I I//I) ESSEX STREET
///////Kl,YN, N.Y. 11208
5/ I/RI/ER
I/IA//K ENDORSED)
.PS-6872 (2671)
111208
MC-2I88 PATRON SERVICES, iNC.
* 31 5. CALVNRT STREET
BALTIMORE, MD. *, 21202 USA
aPOllO ISTATEIOF050II100ETZNUN*eEI
MD.
~~UPo,1
l//EIAONJOHOPIZEO
OFFIcIO OF EM~OOTh
izi~:0...~~0
Dna,
S//CO /P000VIIN010M00770E
AMPANIES 1NC.
V / A MAI)FRNO 10
.0)0 LUGARO BEL .
SWITZERLAND
/ C*IOAGF IV , iI.PUCEOFOFCMOIVPIECAOIOO
, , .
,
. .~ ,
,
`
o~k~r"1~':'
5.~EATIOFWO5TA0ll~Wa.~
,
1EuIOl1~ATnlU"
$~E~D
VT000INGCAINEI `
ISROPEAN SENATOR
~IO)GO7FOII 0FONN0100//o..,.'.*J
A//TWERP , .
J.p01070t000sR,Exr010
BALTIMORE
/?.,`LACIOFOEUVEIYBOONCAIIOIO
,
0. LOAOINOPIE0/10RMONAL `
PORT'EAST-S. CIiINTON 5T. .* .
.1. TYPE OF MO//I' II..CONTAEIEIZED(V..,.IldFI
HOUSE `TO hOUSE ` ~Jv.. Os,
(~~II
,. ~ n~ ~
Dad
-~
UIO'
IladdO) S dos..
AND N//MOORS
//~)
DESCROP010NOF COMMOIOT0SA5CG.d/A,fldD~I
75 .
°~NU~
70)
NEASUIEMENT
70 . 75
ll..sna,5.Nool)
NOS:
1. (#1/72)
2 (173/14
3 (#145/2
4 (121712
5 (1289/3
6 (#361/4
N~ (#433/5
296,3521
34.424 KçS)(l
TIMATE
ICUNTRART -
.544 CFT.
6.?92 P13)
31.5890
C-OAth's
158.004
LIK4SOUIEINO.
277,2001
~
ThNI,0000,00b.FUFIO.IOpdAO,d. No'ov4..,v),.nsnb,obtdnn.df'snth.5.,.a.oIth.C.o.,,.
I .5 Ss.I0I;IIUSC SS.100EOOA000SC A~ 7405.
* ` GE ICES, INC. . 10/20/87
~ ~
PAGENO="0804"
TIESE COMMCCrr;ES LICE. s~ LI S FOR
ULTIMATE DESTINATION
DWE~SIONCONTR~ARYT USL~AW PROH
CONSIGNED C~.-~jes Inc.
TO ORDER OF. Via e~ 10
:G9O0t~oaro~l -
~itzerlar~d -
INVOICE
C~CEkO
2671
800
- International, Inc.
NOTIFY * Sa.e
S~D Nu Kraft Nercsntilé Corp.
101)0 Essex Street
Brccklyn, NY 11208 -
/~vOuRoooRNuMBER ~
125 A & B Net 30 teys
S 0 ESCC~O
- - I 7 x 20' H,"16 Cootsirlers etc ead~ - -
P~natex 87-3-232 72 x 33 -gaulcn ~lylined steel dr'~±ia, ea~ ~ntemninc,
Nes_ Up! 588 Lka.Gross. - 266.71 Kgs.-
- - - - 38-the. Tare 17-.24 Kgs.
- - - 550 L~. Net 249.47 Kgs.
Kraefax - 277200 the; Net - - SSG.57/In. 153108004.
- - 125735.15 Kgs. Net -
- - - - ~tS ~ 8~L0O.U5S 158004.
Thiodigy1~1 - Textile ~itive -
TecI~i~I Grade ~r~ax! - - -
017'-. C&F USO
~ZE-~7~J5 !~I?L5
os~r ~ici~ - t.a~s REOJIR~
- -- - Country of Origin: United -States of certca -
O0O48C~
GB055wEIrso NET WE}GMT Alooiie IStv,,atiee4. Ie/çC,-,if I.e Cc~sset)
96352 LBS 277200 LBS. tc -1/ A
SILOS 128'38 18 SILOS ~ ~ L) !=_62~s,.~ e -
PAGENO="0805"
801
I~ugaflO, October 29, ~87
To the att~rttiOfl of- Mr. N~.ck ~e±i~
RE: ~.7 Cont~nerS shipped ret Mv. E':r~pear S~at~r ~:~m
Baltimore tO Antwerp. - -
This-is Ind.istrial .rcjet ~ - - -
Cornparu.eS r~corporated S~i `~r~ ~ f-w~.:~g- agnt-'.
We love heefl-~nfOrm~d by r~r -~r~ ~rAr~t~ierr t~st ~ootcr -
~ ~p a n ~ a ~ ra r~ T- cs~
`lease thcrefore~.COfltaC-t i..~ ~`: Lfl ~ait:1.c:~~ ~
±nstrLiOt t~em to ir.fo~ -`~-~ ----` -~ ~-: ~ :-
`~o~r Lr~tet~ent1on ~s ~ , `.:-.r :r..
ra:utr' teLeX. - - -
T~nkS ar'.d-best regard~. -
-~ustrial Pr ect~For'w~Y-~ U.
PAGENO="0806"
~` i~r~ ~
f.~7
~/ ~ ~ ;/~
802
ø00497-
4~ t1~
7 ,~J_i_ A~s~
ANGIE SMITh
PAGENO="0807"
803
-
I c
-. / ~
/ ~
~ ;;~ I - 14~L~ / ~
- - - - -~ 000498
- - - *- ANG1f~ SMITH
-: A~TW
- -~----~
~T~J~1 iFW~q
-- - - - ~ (cftT~S ~
PAGENO="0808"
804
I I
h)~
7
/*~`~"
- - - ANGIE SMITH
PAGENO="0809"
805
5ft' PP/MG 9OcuMcb
TO
ZFc'IPM3
5744/17~ -.
~a
tQ2-~' j
/31 4V!c~ 4~~$\J~1c$LuOENGEWMRMtBJcT
*7iui-snN43
~m'ii c1iPcn~
~A61b1 41SCAc
PAGENO="0810"
806
OGGErTO
OESCE!Z1ONE
~ :~li:
~
VALU1A~ M~RT~
~
-
ut~ Mfr&~
PAGENO="0811"
807
- -
* - - -
-:
- -.
= ~:-~-~:; ~ - - - -
~ - -;~~ :* ~~-:
73*~~ ~ - :-~-~-
PAGENO="0812"
808
EXH1BiTj~
The second shipment to Iraq was shipped on the vessel Decart
Atlantic on January 12, 1988. Although thebilLef lading listed
the port of discharge as Antwerp, documents obtained in
Rotterdam, The Netherlands, indicated that the shipment was
discharged there and never actually reached Aritwerp.
Alcolac's preparation of the shipping documents without
reference to Monrovia, Liberia, its use of an improper diversion
clause, its designation of Western Europe ac the destination, its
agreement to indicate on the bill of lading that the. shipment of
was in transit, and its assistance in purchacing the shipping
containers rather than using the shipping line containers all
assisted NuKraft in transshipping the thiodi~1yco~ to Iraq.
Tele:c dated March 24, 1988, indicates that truck shipment -
from Jordan to Iraq was diverted by Iraql government to Samarra
from Baghdad (Note: main Iraqi chemical warfare complex located
near Samziara). -
Also included in this package are the shipping documents for
the February 4, 1988 and February 21, l9S~ shipmc~it~ divertedto
Iraq.
PAGENO="0813"
809
laT $H1PPQ~G ~SRUCT3Q~ ~ ~ srei ~ et~ Ln~I~
- . -- - P.O.00X20307
`0 George Lileron - - - - 1703 CAST .IOPPA ROAD * DALT4MORE. MAR YLANO 212
- - - - - PWONC (2OI~ COZ-44~ * TCLIX: 4CR14$ ANCHOR $A~ c*
- - . .. - - PAX: 30*1 002-2103
I1P00T90D0~2~~ __~J1i 1/8/88... 10
- i~ ~ ~.atioead go~a Itnee been .bipp!d-to jc~-~ - * vie Ringzr to ~rt Lir~g,'Thir
nd OTt tobe banjiod wpe? en? IOUTOZIOII$ iedicat*d be1o~: ~* ~ _______
-~-
- ~a,to ~d Kenton
~nateX
WC 87-3-2790
~b. 1 t.~*/504
-;-
CIA
- 7.
-~- ~
-. Ctoeen ~
20' S/B ~~ta.ir~s etc -~ 2963520
72 ~ 55 ~iil~ po1yI~thvd crt ~t1 .
~tme tenctile ~itivo
-
*
2772000
~
1~Uen1~tt$
5544~t
.
Bcx~tingNo. B~-O1 3030 -
.
.
- - *
..
Kj*tp..ZDt3e493329° -
. .
OfA~0'RA elO
-
ID
:
P1en.,*0'~$eni 0~ O*W 0~ i'eni. ~ 0 ~`S ~ 0* - h~*~RR*
- ~ I*',~NItg~
.
PUASI aE~0oWAaD TO DLSTINATIQN .~ ..~ WITI4 1~~- ~ D4SItIUCTIOOIS.
e,ioWo. . - - - .- - -- - -
1. -lou. billofladingin the ~ ~i.Z*1 ~ . ~_.. ._.
2.. Coosignto thecfdOf vi .$~`. ~Z~14lId-..-~~---------.
3~ D,utinodao: ~St~rp. -. *. .~. Pan vi dochorce: ...&ITb2rp
4 Perty so be ~ ***~~ ---..-.... -...- -~ -
S. Addreee - - ....-. - __~._ -._-......--. ..~.
4. Valise fee elisppere cnpor~ J.clarttion laO ~ _-~-_
7. Vaue f~I cOn'uiir invOiCt is TA S. -$ ....:.. ... .. - - CIT. 5. * - * .
~ Jason foeS . - plus chge.plOi ~ againat fo8on-ing rinks: .._._ _. ....._~..-
9 Cbargeiail f,ctghttoU. S. soapce~t - - . ticoosignee D to to candor) D
). C1,erge cartage or lighteTage sa-steaoer - en cposageee D -. to to (ane~or) ~. -
1. Chargeocean(reiglll - toconeignee D .. .- t~c~(needt) 9
2. Charge insistence pe0IDin~ - . to cooeignoe 0 - to c~ (condor) 0
3. Charge consu'ar ~ -. ~ ~ D . . ~ ~
4. C~'s~~ f raiding cetvice feea . . . ~. to consignee -D ~.. . to (tender) D..
S. Cflectcnrinvc'cefcT~ ...
16. t~&J 3 cngin~1bil1s e4 lading to .*~..oU- ~ to-3~1ce1r~~---- -. - -~ .-.
17. hiad - topics of bdls ci lading to ..~.. . - ~.------ -~ -
50. Special instructions: ~ ~tdi~~-ZTi71 ~ii~ã ~Eö~
i~ofC..d~Od, ~
~ ~ ..~- th~ -tip frd~ijv~~to
Un ~iestndirito1y -. - 1151674 CO74SULATJ DCCLA11ATIOW 111 ~ - -
qoo
~ * * . -~. ~. . . ~ ~, ~ ~oto9G~~-j
- - ~. -. - -- - -. . --- - - -
Ta~0 r0~° ~Iisad ~ ~ 1E-
A~L t1U91*tU UnMOTAcCO ZUBJSCT TO ~3 OteiDlIlteis AZ ~ ~
5T let B*~TIisOflt CuSlOosOJlC 000cUSO POO~ 34(5 Tnirf~o1d _____________
CaflDIflS *000ATICO. COST avail.MU U?Of3 CCCSIC$1 -n- ~ -- - -
* - -
PAGENO="0814"
810
DA..~RT CONTAINERLNE
- BILLOF LADING
-~
~D~JST~LAL P OC~1!J~3~T CO~?. - -
~O 6U8~
~ I -I I -
C~~I!S, W'C. ~T~!A2IO~L
ra~ v~ ~M~C 17~3 ~. :0r2A E~. ~ 2ii24
1~X ~O. 41 91 511707
6900 L5C~3~ ~L, $VIT~~.1~ - - 1Th.ILS,A. - -
-
-
~E-CM~&G1 S~ *.~21- - - 1 ~ ~ `~ - - - -
007 U~ 0~
-
£~?V.I-LP
1 ~OO~LtUR~ t~OMC.&~t!*~7~ ~ CF ~CT~ -
- - - -
FARItCULARS FURP4I5H~ rr SP~IPFER
~~i;
!JC - 07-32790 7 ~z4' ~tn ca~ z.~.c. ~ ~, i~
-~0. 1/504 fl~CL~ - ~ 72 P0L7LW~ SI~1~ ! 35 G6L. ~.- 42,336 L~ ~ - 512 ~
- COP~ - I - - - - - 1~,203
- ~ ~ ~~1'S ~ - -
MflM ~~~(`o IABL~-~~ - - -
- I'4U I V L ~ - - - ~0T~ - ~ L~B ~
"?~gg ~ ~ ~2YiD 8~X2~ ~U?~~TZ W~8T~1
1~ DU~~ ~ ~ ~T D~T7~Afl0~ ~ ~0Vt~ 3I~, * L12!L, ØJ ~
VI~1fl, C4!~ ~2& ~S o~ji~ A~r~o~x~ gy ~ ~UJfl~!'* I
PAGENO="0815"
I I ~
- D~9VS?flUL P1~O~T 9~~* ~1303O
1000 £~U~ ~TP2~ -
- 1!100~.TI!, IL!. 111C3 - PT~1'f~flZ~?. CO. 2752
- - - ~t7~_%3t't 1~L?V. to. e3113/&J
~ ~ I I
~
P~A2 ~. 61 91 607707 1703 ~, 3OPP~ ~ ~fl~0O.U, to. 2U34___
6990 1.0 DIILL, CITZ1COJ~I~ - - V
~
AD~A-P~Tr! ~JlD -
:
~ *~ - - -
:
- - - - - -- -
t~L~lAl - ~ ~ rl~
0O7D~ wz5o3Dri.~ ~4IR~9OD, to -
~
~ -~m~JD ~
~~fr
~A~T
~
1:-i ~ -1-- ~`
~! P.. r~ 3486C~2 2) 9O~'fl 2057490 (2) C~TZ'a. CO 22 19~)
~C4L CO. O25L~O - - CO. 02290 C9~LC0~ 022C~ -
ro'fl. 1172 - VT2O~O. 73/14~ - t0'13. 142/21Ci :
C4) 007? a. to s409029 ~) o~ a. to 3311020 ((i) C9~2'-fl~ to
C~C0.(~VO2S~ - CflJILCO. (~299. V CP.9!.to. 02990 V
£993. 21T/ZFJV0~ - to~f3, 29/290 - -t:D~O, 291/429 - *V~~
- -. - - I V ?) r~V~IL ~).!ES~2O) CVAV £9. C29~VV - O0LO7~
V - - 1 tD'C. 422/29~ - jQf)~)! `T~ -
~ C*DDDA S LAeSr.~-~DPl AD YAL~ ~fl~A lb C~ dAD ~A dl t~dl ~ V - j~VV -~
A ~ ~ AD ~5l A ADS A V V V -
~ A
,~...,lASAb$~Ay
S. ~ddAD A~i _~ dl AD~ADAl 57 Cdl.? ~dl ddlADl A CSADJ ~
811
I ~. J~ART co~~-~ -
- -~ - ~ BILL OF LADING
(SD M.qADAD. Us~. ~AAD5?AD
*) t~Li~-~b -
p T~___. t7 t S s~-~ 5~V 0 AD~AD. e~7rel. ~ ci ~ c~J ~1 C~7 7~ D~tD CidlitS
6 ____ 7?AD
- - _*~~_~ ~ Ci ~ CADV D.?
V 7
tdl~ Ci=cAD~ dl dl~
1JT1~~J~pi
PAGENO="0816"
812
1/13/88
George, Per our telecon this date and
confi~tiorr fran Leslie -
- 2J~-c~ange bill of lading ~o -
.s~hc~ - -
Consignee Car~nies, Inc.
~tify Party Leave Blank
Marks to. read Arr~tex
L/C87-.3-2790
~. 1/504-md.
Please use long diversion clause
4 ,tj_~ `V ~ ~ A/ ~A ~
ANGIE SMITh
Baitim&e,
Hamsburg,
P~ttsburçjh,
Troy, OH
MD
PA
PA
(301) 6757550
(717) 774.41M
(300) 1301241
- (513) 338'llSS
AtJsrna, GA
Charlston, SC
Jacksortvull, FL.
Savannals, GA
(404) 8224350
(803) 5544114
:(904) 3545112
(112) 184.1415
PAGENO="0817"
813
THESE CO~tODITIES - LICENSED BY THE. UNITED
STATES-?OR ULTIMATE DESTTNATION WESTERN
EUROPE FOR DISTRIBUTION ~)R RESALE IN ANY
DESTINATION ENCEPT SOVIET BLOC, LAOS, LIBYA;
N. KOREA, VIETNAM, CAMBODIA, OR CUBA UNLESS
OTHERWISE AUTHORIZED BY THE UNITED STATES".
1'
~j0ic'1i~t?5 t~L~j~5 -r?t~i~
1'~ ~
1u6r cV~~
U~tp -
¶~. ,wcc~?D
Baltu~ore. MD
Harri6burgL PA -
Pthsburgh, PA
Troy, OH
(301) S75.7550
(717) 774.4100
(80~) 030.1240
(513) 330~100O
AtI~nta, GA
Ch&1e~ton. SC
J~ck~onviIIo, FL
S~nn~h, GA
(404) 0224350
(00!) 5544914
(004) 3544192
(012) 9141415 -
L%icenteflflia! 2?ansport ~
PAGENO="0818"
Ico~
LIIDU~t1UAL PftOCU ID1E~T coat'.
* `104Xk ESSW( STTLEiIZT
moc~xL~m, u.~. ii~oo
*~ ~O. 275
MQIWR'9 oth~ NO. 6113/88
1703 0. J0?PA ROAD
8ALTfl1Ot'i~~ M*R1iAND 2) 234
FXPtRUIft
DULY AU1HO~ZDD
~INATBX
~.IC 07-3-232
110. 1/504 It~
co~rrtt's. t.c. ,stuot'uü'o 110*0,
3&CLI 72 X 55 OAt. ~`OLTL1N20 SJ~1ZttL b~I~3(
~
1~011-4L&ZAtLflG11~J ,,HATEILT.ALS *
1101 STIUCTIID `- 114) lAnE~.S RJ~UX1thD
S LIC1t111~n 01 T~11C U.~L. 3~* WJZI8*Tt'~ DIISTI
21 TO (/.S. `IA11t'ROH10ITh~,"
- S~Md.b ~
)9,a~~ LU.
0.
Do...-~
4ovPAYrvrmAT$c'~c.i ~
1k~USThXAL pnocwtr~sr cots. * * * "L~fA A& 80. 3
* ~aa ti~wonr,o 10 ** * LMflWTADUN~~
6900 L113A0110 DIlL!., 9UI7Z03LAI~2) *
T~U-
f~,dLTZ&jt$414D
*
f~f9i'rwrrxc v ooi ~~W!i~ tt&aamt ~nn
* *_____________ * 041sb.e.d DN..,.i.(.d
~ JI.U~CD&~Ov~ YI..CTAZID(Y....J11&~~ ~ ~ .~.,i ~ y., by 11$
* Do. N.
*~-$M~nr~*tYe~:t3 * ~ * * MYASUDIMINT (~fl
I!~I - ~ "y~1m~ ~3 III $21 18
7
CO3~ODIT]
`11011 COOT
* *
* DIVI
:owcr
792 ci~
22.421 Ci
ST01JACLC, A11~)
42,336 Ln~
19,203 aoti
1A~V21l R1flT~8
~ULUL!DULD.D2~ DU.,UUYJW.Ic(N?D $YLY~OL ~$. (CCN (bSY~..~
~. L4L31. ~.q~.hd)
2. OuA~TiW
3auAlmTV
o~..p.1t11..I13U,1C$,,, 20$. 220$ c.$..T4pI 001 C S.o I00I.~~d$OU$C~A~24I($
PAGENO="0819"
815
CONSIGNED -
TO ORDER-OF. -
* ~Lcx.Lc:ic~ -*
Intemationa~ Inc.
- )~ ~A?I~LD ~*O
- CA~1~O~ MA~YL~
U.&A.
sot.o Ir~ustria.l ProcuraT~it O~rp.
TO 1~00 Ess~c.Str~t
Hr~dy~,NY 11208 -
THESE COMMOOmES Li SED BY U.S. FOR
ULTiMATE DEST1NAT1
DIVERSiON CONTRA TO U.S. LAW PR.OHI
- ~ D(A~ O~ ALCØ~AC INC.
- ~zz.
- v~.=
-* 6= -.
NO11FY --- --
INVOICE..
NUNCER
-. r*YNENT1~ -
CVOICC ~o.
DATE
125 A -- *
~.sh~athst ~o.~nts - - - =
2752 - .
1/7/88
INL&DCARR?W
* PORTOV DE~NATOC~ .
VECCELEE
- - -
Ant~VErp,-Be1gi~ - - - - ~Dart At1~ntic VO0-7
-1/10/88
MA~(SANO NUNCERD -.
* * . * - DCZC~PT)ON. . . -
~CEItD.
*
- ** .
~natex. - * -
14/C 87.-~-2790
*
- . . *
-
- .
.
7 x 20' H/H ~tairVErs ctc e~di ~
- - - - - -
72 x 55 ~U~.~]y1ii~ c~1 druirn, eath c
588 tho.Q~s 266.71 igo. - = - -
38 t~. Thro 17.24 Rgo. *
55OT.~.Nzt - 249.4lItqo. - .
Thxtito AddittvD - 277200 ~ -
--.- - -12Sj35.15!~qo. tDt -~
~ ~ILB
~r ~ - ~
: t~itcd Stat~ of ~ri~
~
&Au~ #0049 i.~ ~i1UL#~jj~ .~
R~ oF /N1~~Ct7~ ~J1'
t$crn~1 ~ ~ cbeI~e~
Wfi~1~6 j0 ~ ~MO~O~S
* .
.
tAthir~:
- -
-
E$0.57/zb. S$15à,004
-- Prejght - 9,800
~tain~r thg. 5,950
3I~L C B P
G
~si~s~
~
~
~ so
~_-°j--~
AI~d~ t~Tc~S~ b~ (CcVED3d C~
296352 L~ 277200 L~ -
.._.fl4422. 3 `°~°~ 1257331~ IOL~ ~
PAGENO="0820"
816
MEMORANDUM
* To: - Distribution ~ ~ ~g, 1987
* Froñi: - Lee TertTune -
Subje~: Nu-Kraft Mercantile Corporatlon/
United Steel & Strip Corporation
Visitors: Nicholas J. Defino, V.P. United Steel and principal of Hu.Kraft
Charles Tanata, Japan/Xorea office of United Steel & Nu-Kraft
Fran.z Van kwaat, Cmrçanies-I~c., Lugano, Switzerland -
- - - (Complete addresses on attached sheet)
Nu~Kraftis affiliated cqrnpanyofUnlted Steel forned 10 years ago ~o import
- non-steel products. United Steel is 50% owned by-Tokyo Bokiwl, in business -
for 35 years. Hu-Kraft is owned-by Harold Greenberg, President of Unlted St-eel.
Tokyo- Bokiwl is not Involved in-Nu-Kraft. - -
* Mr. Van Nnraat Is Europasn agent/custo~r for Mu-Kraft. He in t~rrn seTis the
Kromfax to- European distributors, e.g. Italy ~nd Geraa~ny iAo than dilute -and/or
repackage for sale to actual users - all fortextilé application.- Van ~a5t~~
-primary business-is ~onstruction he eentioned food processing plants; Also
- international, trading, ~hipping, and fowa-rdthg Operations. - - -
Considerable discussion on ~lght supply and escalating-prices of raw naterials,
- -10 ant H2S. However, both Franz and -flick ~re ~hatlc that lowerprice of
- - Kronfax was necessary to maintain and -increase their sales position.- Final
offer las for their total require~nts at $056 per pound.. He gave Nick t~ -
* copies of the attached contract. -
- -- Apparently Morton Thiokol has made only one shlpeent to th~ and did not
perfo,~ well with--rngardto scheduling and-paperwerk. Nick was veryc~lieentary
regarding the help and cooperation he has received fr~ Leslie. - -
Note to Bob Singer and Eddy Mahieu: He really need eere earket information
on the use of Krozfax in both U.5.A. and Europe.
Edt~': Pleaseaak~ contact with Van ~r~at. ant usc C-olieez in Germany and
-Ui~i: in Italy.-. Datt is our oldo~t rr~fax custo~r in Europe; could we offer
him s~e Incentive for information?
_____ -. -
- *t~Terhune' - * - -
*.~1- "lW
LTzea - -- - * - - * * - - * - - .- -"
* P1st: 0. Gleeson,~~~~'P. 3ones, E-. Hehieu, R. Mlelsen, 0. PhIllips,
* R. Singer -_ - -
*w~i 154
PAGENO="0821"
817
~:Qo~oTc T©~II~ CO~~C0
~ W. Pat~p~c~ Avénu~..
- - - Baltimoro, M~4~n~ 21225
[3355~47jJ~ OUT OF MD &)O~ 47~126
27~_~7c~
-
.
- *~Lk. 2~-3~~
~
~
*
PAGENO="0822"
818
1OISST. TRUCKING CO~,
616 W.Pataps~Av~i~
Baltimore, Maryland 21225
OUTOFMD 8~547-O126
PAGENO="0823"
- -TO:
i~:~i~ ~
i~i~: ~3O1.~'O~9-49OO
r~x NL: - - 3C13~9-4929
~ K~E~ OF P~LS (I~C.ZZIN~ ~J1~ ~ -
iF ~c: N~T- ET~'EAL `1~-i P~, PLE~S? t~?J~ Q?
- -- - - = - - - - -
~ (~&4~ C&~~? co~A4) ~`
-~ .-~ ~gi1 -
~ } Ip
- S\L ~2~°~'~- ~ - °1~ ~. - -
~ ~`& `O~ $~c~-
~ ~9vocw~'~' v~"~ ~
`~ P: ~
819
~~SSION ~ ~A~I~t - -: -
:Sk ~ -
PAGENO="0824"
820
A[COLQc,
lAX ~ -
~.Z: 1/13/88 - - -
- TO: FrariS-Van Anr~t ~ L~lie Eix*1.e!~t
~: ~ - -
C:: 1~ick~Pir~
~-.. ~ OF P~L~ (L~.~i~G W~ ~ 1 -
`~ ) N~ R ~1. ~I pG~ P~V~ "`~L~ ~ ~
~` ~Z-Z (~. ~.): ~t11~it1S~ ~der -
Per ~,r te1~% this &ta plas ~ ~tk is:
-- Ph~1~Iis I~ti~ii1;~ -. - -
-. - - P1~e r~t b~ ~ . .- -- - --
- ~vift4~ R~ 33 P~. -
T~1~ - rrr 4990118
* ~ ~~it to A1~.1.i~ Intermti~a1 Ii~.
- Ac~zit IC. 0147 3360 - - - -
- - ~ toc~ies Ir~ -- - - - - -:
~ ca~ to ~ -- -- -- - - - - -: .. 2
~ ~ -
~~3O1/8!9-49O0
- :
PAGENO="0825"
821
/OATCH - - -
/NTF
/WUW B'.83797:L0
25 JAN.1959
ATN MR.H.HAUNERT/DOC. CREDIT DEFT.
F:E COMFANIES INC. -MR. FSANS VAN ANRAAT - OUR INVOICE NUMOER 27!2
IN THE AMOUNT OF USDL1737!~.00 - DILL OF LADING NUMOER DA:)13:'3( -
PLEASE CONFIRM DY RETURN TELEX THAT WIRE TRANSFER WAS MADE TO OUR -
ACCDUI4TAT THE PHILAD~LFHIA NATIONAL DANi -- ACCOUNT NUMOER 0147- --
3360 - ~wIFTOR TELEX PNO-PUS 33PHL - ITT 4990118-- WE WEF:E
ADVI-SED THAT ~TRANSFER WAS MADE ON 2~TH JANUARY, OUT WE STILL 1IAVE
NOT YET RECEIVED- CREDIT IN ~OU~ ACCOUNT. PLEASE SEND YOUR - -
CONFIRMATION OR" R-EIEF:ENCE NUMOER FOR THIS.- TRANSFER IMMEDIATELY. IF
HARD COFY ISAVAILAOLE, PLEASE FAX-TO US AT (301~ ~!9-4929. WE
APPRECIATE -YOUR ASSISTANCE IN THIS URGENT MATTER. - - -
THANP YOU AND YIND AEGARDS - - - - - -
LESLIE HINI..LEMAI4 - -
ALCOLAC LNTERP~ATIONAL~ INC. -
TELEX 8762Z
FAX- (301)S~9-4929 - - - ---
MMMM - : -. - - -. : -
~ArCw MESSACE NUMEER 766~420C - - - - - -
ACCEPTED -1 MRSSA~E - - - - - - --
- ph change-Sw~tzer1and into Nestern EurdpsT, in the phrase of
- - "these coaaodities h-sensed ", like on the jpv'~ce.
* ~.B, pie aake sure that under DATLLASCK ON B07~RD ~he~ tI~e
-. siqnature.on the original IlL of Ceapoc Services Inc., as
- - -~ - Agents. - - - - -
- - This is all for the coalents. - -
Now pie send the original plus three ~on-n.gotieble copies by DNL
courier directly to: / -
lanque Continental. du Luxestbourq, A~ ~
-- - - - - Rue S.Servais 2 -. S -
* - -- -- - -- ?.O.$QX 1405- - - - *- - - -
-~ -- .- - - - - L/1014 WXE1~OYRG - - - -. -
- - - - Grand Duchy - -. - - -
-. - : - - - - - Attn:Mr.~H.KaUflSrt/DOC Credit Dept. -
-Nb.náed to send the invOic~ to SuropC,:that chould go to IPC i1~
Irookly~. Por this.shipeent, paysent will be code directly tO your
* account upon receipt of the relevant docucents. for good order pie
* - fs~ u; the naate of your lank ante account nr. or include your draft
Many thanks and very )4aPPi `~
/ ~i ~ Trans
* ,S*l `~/ ~A,SC~f~ ~ 000640
;jji ~ *i~* 1q#7
- ~/J .: ~
PAGENO="0826"
822
tes- 15:52 FAX
- 2°"
* w ~`?* 1~* -t
Ji, ::~tL
PAGENO="0827"
PiL 98/88 -
Messers -
Industrial Project Forwarding Ltd0
Shipping and Forwarding Agents
Lugano Office, Via Delle Aie- 1/A
SWIT2~RLAND
Subfect:I~AQI MLNIFEST NOS: 322731, 322732, 322733 dated-22.3.88
- 024992 - dated-18.4.88
- 7 containersBx-M.V."Red Sea enterprise
- - Arrived Acaba on 7.3.1988~ B/L 3O215-1~
DearSirs, - - -
- Enclosed, please find 4 copies of Iraci manifest
duly si~ed by receivers" S.E.O.R.G.I." in Sanra'a, the-
* : manifestes advocate delivery 7 X ~2O f~ containeiu to the above -
* mentione4 receivers. - : - - - - - -
- * With regard to weight of eontainers as shown in - -
- manifests and -you can note- the-exact weight of the cbntainers
= which are at average each unit approximately- 22 ~tone. -
- - - Also, please find our invoice No. Ph, 2018& dated
3.5.1988 which is self explanatory. - - - -
Therefo~o, you are kindly reauested-to -transfor the
-; sum ~f US Doijcrs "iO433,2O!!~ to our account: - -
Philadelphia Corporation for shipping agencies.
Bank of Jordan - Jabal Al Hussein Branch
Account NO; 4001
Telex ~o. 21272 Banjor JO -
Ainman~~Jorden -- _: - - -
-. - -- -- Thanking ~you ~or
tour co~~operatton.
- : - a faithfully, - -.
F- ~
General Manager
823
- ~ `t~L~, ~_~i
- P$1ILflDELPtIIfl COQPO~TiOfl-FOQ 5~1IPPflO lO~(E5
0.,7th Nay, 1988
end:
- AB/an
PAGENO="0828"
824
PHILADELPHIA CORPORATIQN - 6 ~a
FOR. SHIPPING AGENCIES - -
- ?.O.Joz 164003 : -
T.là 23646 ~HILCOQ - - ~ ~Y%t~ ~~_K
- : Td661237.661209 -
)~c 3.5.1938 - - - N~ Ph. 20/88
M(sscn Indus~ria1 Project Forwarding Ltd.- Switzerland.
- - On carriage oU7-X20 feet containers
- Ex N.Y. "Red Sea Enterpriseu B/L
* 3O215..111~ Liner-out Aqaba P.O.T.
- Baghdad, 2~t weight per i~nit.
- -- Rate as agreed ~er our telex -~ 1236
* - dated. 10.9.87 at 3D'~50 per-u~.it.~ ~
* containers, .- -
Transit-Taxis per attached"receipt
No. 317t76". - - -
- Storige fines as per attached
receipt Nos: 73993,8O~90.- -
-. - - Diversion o~ trucks to Samra'n-
as shown in nanifeats~ l5lMt I
.TD 1.82 per ton.
- %Ve hstc dzb*ced ~cur A/C-.ith tb. followiag
- - - - -:
- ~
- - - - - - -~ D.t*tla -
- - - - - --
USD - CENT
J~- D. Fil
3150 *000
~
29 600-
27L~ 820
99
36 -
36
-121
88
820
- ~US~DOLLA~ ~ ~C~SAflD ,FOVR -- -
* - - EU~ AND ~TY ~ AND -
- 20 CENT ~0IILY. : - -
20
1Qh~33
~20
R.O.E. I USD J~ O.335~
PAGENO="0829"
825
432~ :n:: . - - - -
o : s a ~- t ~ar~o
e a a -~
.1
return:1; :ruc~ ::`es LeO ce~1Ve0r~ t'sse con'.a~as ars
presentlj'g man:~es:es ~`.ao;e~ an: s:gnc: t-~ rcv:s an: t'.a-.:n; that
the~ ~1-so~arge~ cgos ot sears a at: km n:rtn of ta::a an: no:
t Ia;nta: as rer agreement. orO~n tr.anCOQ t aw cc~e -.:: ~:-ve the
ør:ver tneoot:On of refus:ng seon a ~tve'.!0fl to h:s ::u:e :ut
protects hts claIm for extra transoort costs. :ns reorm
whO are a :a:t c a ~uo~:c sector coro. are no: aS~t .fl-L :csit:on
to meet such cs:ms es:e:Ia::y ~n the oresent uar s:tua::cn; the -
-~r:-~èr has t~e nj~ht to- due fm ~ e-cannot ca:m t c-or;:rate
-or a:k :~ a :e- ver-~ .::nt:~d~. :r. `.e. :~st ~e
H~ana;ec to arm::: :~ec.~ mx~:a- :01t5 t~e~ -are o~- -~ caoe~. a'.
~present al~ co~ta:herm ar9 Oe:r ::s ~ at. aar.:s *a an-i `.111
tè our cos1ts a~t~j0 t .8~. ~er ton. - - --
we -:n: no cc-tion 5ü'. to ~atme tn~s matter -with u as u ar~ ~ :0. -
rea:h the ~lh5~ r:vrs more effe:tivaliy for the co'.Le:ticn ~t theme -
extra costs. theactuai re:e:ct mani~steS mai1e-~ to u shd-.1 the
c- ::crar;e. - .
g@OIcF~rz~ S
CM~ft1ICI~S Dfl/f;1~~9 r~
a~: :dour -- - -
23s'~6phi1ca-jo~
8~32e9 ~ On -
rsmmm - -
.O'~ .88' 10:00
PAGENO="0830"
-- -.
- -- - -
Tun~D& :c38 ~2:3~'. -
a43.~ ir~-: cr - -
iO'~~ june 8th 1983
scrg~ ik
it,~ ~
4
8811 i~ 33
826
.i~.staipre-t-r~a-rding
Ltr~.c3e~ercia1 dept./51
te~~5~ ofthisj~ornir~g
y~: .te1e~ ~nder5tari Liat a~SQ tbe r~'~ices a1ieady~aiu~.
~ia~e~hta ca~. f s~uc~ir~g age~i-es~ cf~: traspo:t-cf 7 + ~.
~rs-~- have- ~ ~e-~e~it to iraqi trar~s~crt c~pany. ~-1s -
a;~vis~i~g rtamé of the~er~chthese:-invoicee have tc be se.~t
tha~~ fo' a :very ~r~mpt reply.
~eoaz~s /-i.p.f iu~arto
:58
il(._ - - - ~ ~
S --
PAGENO="0831"
827
~~t23 19~ ~
I~-3721 sor~ ~ -
~b~2o9 in~ ch
t~04 4/ ~ne ~3
irt~Ls a1 2 c~ect for d~aro~ng
~ ci' e~~-'a
~coiimè:ci~ai ~ - - -
e t ~f~fi
-
7 ctrs -rs~ sea eiiterpriso' + t~ ctns ~ed son er1v~#
P01" ot~r teLex 0409 of ~ur.e ~th-~ls get ~n touco w~tn rness:~ -
~iadelprua ccrporetio~ for shipping ~g~r1cies for the pa\'mer,t c~ tne
~t~ady etfec ed forwarding s~ pe~tt s-f ~9 of the ~i c+ns arrivec in
on ment~o~e.iz-~ves~e1s. we -ore not ~ wtth the pàyment~
~1~nd tr.~r~o:t_of th~sectns so ~ou siould~et ~rtc~c~ with t~es ~
to tel-I -then w~o -t~ey. nave to ser.~ th~i~. invoices to-. wé~èoeat
s nce they ~tLL1 bav~ in the r war~houso tn-c last ~ ctrs t~y
not-be refor~Jarded- to-ys-u until thoy :ecei-v& th.e~onev. --
~skeep inrn~rc the matter is very u~ent,-the more tise 2asses the
~Jghex~ stcraoe-cnarges for-the 1-act 2 dtns ~ou will have to face.
D1S conf~irs-everythj..~ xcttlee 5sa - = ~ -
~ regards- - - - - - - -
V ~.f - - - - -
- : - --
md oh
~Q414
PAGENO="0832"
828
i3~ -
r13 :~~1
26~9
L~721
~`àO4O9f~ur.e ~:I ~
~roa ihCL~str~a-1 ~ro;e:-tr~arcir~g
to eor~- - - -: -
st-tn; ~ - c'~:~ -- - -
re. shL;~s ~r vms~ej~ `re~sea m~ter:r:m~ ar: re: sea e~:.-
ar:L/e: a:a~a r~s;e:t~vei~ ~`.~3.33 and ~ a~: a~:ea:~
refcr~;:e: to s:te as ~er ~ar~oL.s tmexes ot ~ - - -
~i11 vcc~oj~ t in contact `~:th oh~jadei~ja ccr~. ~o: s~~;::r~
~qenc~es - :o. box 1a4003 - amman (jo~an) - t1x23646 phslc: ~o ~::
th_e paymer.t of the ir.i4r~ transpcrtatj~ or 19 o~ the 21 conta~nerj
~rived on the t~o above me~tior.ed vessels. - - - -
:ontainers o~t.of these 2~ are-st:ii
~areho~se.- s~rnent-a~t.r~ ~a~9mEr.t. * - - --- -
`is confirs è~e:yth1r :c1~a- :
est re~az'~ -
tP.~f :uQanc:
3721~scrd ~ -
~3~69 in~ -
~6~&8714: ç4
PAGENO="0833"
829
I /
51-840 0 - 92 - 27
PAGENO="0834"
830
~ ~s~ucrio~s ANCHOR INTERNATIONAL
- P0 BOX 283-87
rn George i.i~eron l7O3EAST.J0P~AWA0 * BALTIMORE. MARYLAND
- - - Pi4OPi~ 301) IIZ-1a45 *1CLtX £00143 A0C*Q~ AL
Gentlemen EXPOST OlDER 81* .2846 FAX3 ~ ~
- flit below mentto~td good~tt*ve bent shipped to you ci, vta ~.nger to TFL Lir~s/~lT
and are to be hanJled 51 pIT cur iflItruClions indicated below: ~. ,., --. - - , ,.~ ,~
Uarbs aid W**'beT
Coatests
Grma~gi
Wctwgi-
-
Musurraiee,s
~~znatex
L/C 87-3-2790
Ho. 1 Up/479
.
7 20' H/H Ca-~ta.thers stc
479 x 55 gall~ ~1ylined a
drors textile a~.itive -
Bcoking Ho. ~JO1905O0
SCflLDULI 1 0. 439.3290
281652*
ci
-
263450
5263cft
.
Piaiai.rai.n tmy 0 *it~ *` O?~1. *~y 10 ~`t *10ai'st.*l~C0 Ii~ ~ mei m.wcim. -.. ~ -
PLEJ~SE RETOQWARD TO DESTINATION jN AC~O0DANCf-WITPl TNt ~OU.QWIN~ ITOIJCTIONS.
BtemNo. -. - . - - - -
I. heir bill cif lading in the ~tne of ~
2.. Consign to the order of ..CaT~.n.teS.,~.Inc. ..............
3. Destination Ant~rp . Port of diseharge:.. .Aro~.
4. Party to benott8ed cccoparLes Inc. - Infortra .V.Ha~. fa Street 112030 Antwerp,
S . Address Frans Van ~nraät ,. F~X Pb.. 4.1. 91 6B7.70.7.~.S900..Liga~ Bell, ~itzerland -
6. Value Inr.ihippers export dtéfaration j1 5 150167 . . . ....
7. \`aluefnr connalar invoice is F.A.S. . $ : - . . : C.LF. $
8~. Insure for ~. . plots chgs. p1st 86 agsinst-folloajng rioks: ... . .
9. Charge rail freight to U. S. seaport . -Zo-eonuig~ee ~ to as (seeder) ~
10. Charge cottage-or lighterage to steamer to- consigner 0 _ to vs (sender) ~ -
11. Charge ocean freight . - to consignee ~ to as (sender) C
12. Charge insurance premium - to consignee 0 - to us (tender) Q
13. Charge consular fees and formalities . to consignne 0 - to us (sender) C
14. Charge forwarding service feet . . to consignee ~ . to us (sender) 0 -
15. C~.1lect oar invoice for $ .. . ~. .p~us ite~ncu . .
16. Mail original bills of lading to ~ .~fl ~cxnents- to- ~
17. Mail `op'esofbullsofladungto
18. Special instructions: . 9xic.. is...C&. .F. Teor~:. .Cast~..agair)sl..~co~nta,...BjL to .~. rade cue. TO..CP0~. -
Blank endors~ ~ ~~la tfi~ ".Pocds r 6~i George Pls get the ortg~al B
.ck frat SB line ~5 ~J~fl~y ASPCSSIBI2 Have rrmssenger p~ck-uo & del~r ~
~ ~ RE~ D~ (~ofrad):. - --
L-,~er dtwzs.ion ,.1mr~.- - - - - .- - -
DoctameataZac1~.d - - -
l~aotns - Paiksg - Inland Import .Or*,r
hut - aia7biU tiensit - doeeaests -
- $KIPP~R1 NANE klcolac Irtter-.aoional,
ALt. BUSIWEII UwOEITACEW SUBJECT 10 110*5 AND COoOITiOaS AS
ItCOseIsDID Br Tot BaLTIs050 CuSTOwlOJtt 15OCt51 & FO5* 3440 Fairfield R~d
SAIDEIS ASSOCIATION. TEXT *vait.*st.g up~ haunT. ADDRZ*S - . . ... - -
Baltircre, ID. ~SA 21226
PAGENO="0835"
COMB~4t&.~ TR~NS~~-
PORT ~O.PORT Trans Freigtit Lines
BILL OF LADING ______
~S~~ii~ItE
ALCOL*C INTER~&I!-J~!AL ~. L2~~'-'~
340 f~L~ffELu ~TOAO --
BALI rH0RE, MARYLAN(~ ?122',/L',.~
~°°~ ~ ~ F 2
~JQlOQ - V
-.
1HLPP~OI~ °EF 2844
ANCHTR'' REF o!83 88
TO ORDER: 22212~2
.
.
AN~H1R INTERNA1LONAL
17')2 o. JOPPA 5000 -
`BALTIMORE, MARYLAND 212)4
fIT! LW C0ML01~ 01 0~5N
MO./U.S.A.
WID! WIlT !~oeKf
INFORTA N.V. OCOO~~
HAIFA ST~EEI 11
2030 ANTWERP, I0~L~IUM -
OWDY'C E0uTITG;UP0~ L~TWXfl~ 00,-I
- L~.......
.
-
-~ - -_ -
l1WCA~*QEIY -
-
0' ~C0F!
D~ETWQ cAE1WN 3311.
-
CLARENCE 020E
~ET-O1 0*03W -
øALTZ1.qGP~E ~-
*110*30 *1tA30 30.10100 - -
-
- - -
.
301101 ~ - -
ROTTERDAM - .
LACE 0* 01*1*130 -
tNt~EPP-
CAI30E 1WCIIPO
PARTICUL&RS FURNISHED BY-SHIPPER -
MARKS AND NUMBERS
AMATEX
-
L/C8?_3~2.7
NO. 1/479 I~.
-.
-
THESE COMMOD
,ESTERN EIJR~
- LAOS, LIBYk,
AUTHORIZED-.!~
NO OF PIGS
.
- 7
*
~L
~
- -
- -
jILTS LI
C ~IJ5 CI
`IjJDT~ K-
-TWA UNI
DESCRIPTION OF PACKAGES AND GOODS
1:-iIFP,EU ON B_3R0 F0~IGWTTO ~E
- 10' H/H LO~-T~.~ s.T.c-. ~HIPPERS L,~
479 X 55 ;~i. JOLVL INED STEEL 0°-j'
TTATILE AD~.)II t~lE - -
I') TRANSIT S~tIP'ER'- OIJFI C3NT4ITIcR
N -HA ROU'JL MATERIALS -
NOT PAEST-RICTLO - NO LABELS REQ~Jt~E
NSI') BY THE ~TE'I ST~TES FOR LJLTT40
T7IBUTION u5 QSALE IN ANY- OESTINErr
EA, ,IcTNAM, ~,MPIjCHEA, CR CUBAI `flE
ED S1~TES. - - -
GROSS WEIGHT
REPAID
~ -S 10* 4L1
2~I * 6~2
127,755~(.
- - -
E OESTIrsT
N EXCPT SC
SSOTHFRWI
MEASURELI
~
CLIUNT
8~
S.149.2
-
ON
LET BL
E -
-
E1CE~ OLLOAflOIL 31113 TOCkA051 20# 3101.01 1*03 -
NUMBER ~~~ooo
A 3103011 103101, ~dMN~. ~o1W'10o~'.
00 ___ 010 31 0010 1130.'1~ A
10 - I ow o*co'o~ o 1w ~ 30~3l~
310 003~ OoDAt 0033001313001*101*9103030
3103 31303093010.1W 0131010.
wmw. o30s ~30.0033 O31930 TO. go31
30 10 II .~LJ03 A 1W0303~I3o&A0E0w,1
1113100. 3*3010 11330$ 101W *!o,1001* 3010003$. 0030011* 301.1$ $30
103010 0~T~E~3I I~3~ ~ 3W 311*304
10013130~ - ~l*9~ WIIA 1.31*3 MOlE
ow $0011 011010030.~Ol owA*3W0$o3.,.l.wo.01,30-30.$
0*01 *0 P03? 0*0*1530 0*~0 0301
z~-n'~-.o~ 5O.O0i22~
CA~ ~. .300.00 ~ ~O.OOO ~
Ti,C H.- 165'$Oa(:19.O0/22o
~- ~
- 1260,0
- 2319.:.
- ` -
~
831
-- OCEAN FRE1GHT-CHARGED 0N
1
NON NEGOTTATLE COPY
187437 (U) FE~ LI4~ 1~oS u~'~ " TOTAL CHARGES ~
TI-ItS ~TLL OF LALI~G t:. IS~u11 ~y p~ n, TA!~,0RI (11L) LLMV'~r) U/B/A rUA~ST~3?E~
01*0. 0C000I~I-I~ T f~j. 1*lcTUT ~ `.LI1JL~ TIQ PtC C~.TAT'-~'oc roLl LIMIT
PAGENO="0836"
~RCVV1OW
.4 .4.4'. ~ ~ p.
.4P .4 -~ 4 `~$ 44 4 .4 .4.4 4 ~p ~W
.4... P4 .44~ ~ -~
- P.., *~ ~ .~ ~
- 44~. ._. ~ .4 .4~ .4's - YP. -` p.~~' W~
.4 .4 A ~ A P~,. 4.
C 3) ~`
.4.4 4 POPO
OPTO PT P04004 I.~B3M~ £40'PI
832
COMEm4ED TRANSPORT
-. 1~J~[L1 Trans Freight Lines
~i-u'o~Te. - - I'-~-'~~ jOx*4.A0.0.4. A~E 2 ~F 2 ~Z1C~-~:~-
~ALCOLAC INTER~4ATILNAt. INC. ~ -~ jQjqr~503 - 1'
3440 FALRFIELW ~~AD - -
BALT'EMOR~, MARYLO2I2~6,USA ~ IPP~Q'5 GEE `!C, 254b
- - -~ - :~ - CH~R'~ ~EF bIA3/88
C04P40PRL -. .4044
TO ORDER: - I~ ?fl22~2
.
-
.
O44*~ £GL0T-4tFp4~$
ANCHOR LNrER?~A0roNAL ~
1702 ~. JOPPA QUAD
~ALTTMORE, MARYLAND 21234
4o.J'J.c.A.
ENFORT A N V L~Q~ ~
HAIFA STREET 11
2030 ANTWE(CP. 2tLGILJ'4
-~ ~ ~ijro~ ~pp~y ~
-
- - - - -
- - -
`~~ca~ 4! - - ~AC1 ~ -
EXQPO.4 CA~0 ~3$0J -
CLARENC~020E -
~PT OP ~O*OP.G -
bALrLMa~E
PPOP$0.4.P40 4~JT40 -
- -
- - --
.
~.i OP
ROTTERDAM -
-
t*c~ o oiu-.-o'-'
ANTWEPP
C44* 4~T
MARKS AND NUMEERS
*
NO OF PEGS
- PARTiCULARS FUR~
DESCRIPTION OF
NED BY SHIPPER
PLC~AGES AND GOODS
GROSS WEiGHT
MEA~E~
-
(1) CONTR NC
ICS!J 3jg94)1p
- SEAL Nfl.
0ZS95
(5~ CONIF NC
USLU 211
SEAL NC)-.
Q2894
*;
(4)
*
*
-bC
2'.
CONTA I~ER ~!.3'5. -
LJNTQ NO Ci) CUlT' ~O (4)
~LU-i2935R - USLU 2~ot3Q4 - -
~AE NO, - TL4L NO.
4994 - - - 03047 - -
CINIP NO. (1) CO~)T~ N0.
JSLU 212017o U~LU 2129684
E..%L. N0.-~ - SEAL NO.
~97 0289 -
~N1R
SLU 2i1~7
SAl `4Q.
2~~4
-
-
~
VAtuAl,0N 44F(4t0CL*UU~04.tV(*US1OI
1ITEMNUMBERj
~~9~O2O00C
FREIGKTCHARGUPAYAIUAT: BY
- OCEAN FREIGHT CHARGED 0$ -
J~EI
~A NON NEGI~TIAQL.E COPY
SPINO 40
187437 CU) F~E 04, 1TI89 TOTAL CHARGES
THIS SILL OF La1rNr, t~ 15.'JE) RY P%~j Ln:TATNTRs (TEL) LIMITED 0/4/A r~ANS**E.
580 f~.P1 0~.! W~tI~ 0~ O;Qfl oc:n (~~TATN5OS 1 ~- I LINT
PAGENO="0837"
L~ 87-3-279T)
TIC. 1/479 It~CL
"Cl.W~ CU UIJA9D ~1~1CU~ .F~EP~TD"
20' 11/1! C0~i~r1'S. S.T.C. SHT1~PEa'9 WAD
419 X 35 G~. ?0L~L7NED ~iT1~LDR1JHS
`rg~Iu~ ?~Dfl~flY~
`111 `IUA 01,~' tUP?LUt'~ Q~14' C)N'r&~N1UW
`uoNz.A1~~q U4Trfl~41g.
* tOT aES~SJ~D-1'O I 1W~LS SEQUIIUW
DY TUE UU~ED STATES L'OR ULT~HATE DX
I OS UXSALE It~ AN* OEflIATIuTi ~C~1'~t SOV
~H, CAMBODI4, `911 CODA UIIUIES O).'iIERW1S~ AL
iS DEPARTMENT O~' COMMERCE - ~URTAL) OF Too COLLOOS - OT000ATLONAL TR000ADLAU$TRATOtI CORWLOENTLAL -
7526.V.ALT,flnterrcd&)slocoL' SHIPPER'S EXPORT DECLARATION
iizo~yS°~??~
rc~~i )~AL L~( 00 R~NCE
`40 i'~fltYu?LO 1(40 . , iUt1l'~ft' `1 59'. ~
~0LT1}D)RE, HA4tYL~ND 21226/USA [i~cooo ANCIIOR' S R1(F. NO. u103/UU
"~NiNiQt4LD TO * 000AIL AGENT 00'00000000,, - ,i.~,Ao..)
ooiCup1~ Iw~Rsi~thob~ 1435 *
.tDJZR 0?' C1!WPES: ` , 1703 11. JO1'PA ROAD * *
11ALTD10RE~ LEYLAND 21234
-
~r~TT1~°"
& OCTET PARTTILFLTEOCODIATI 0000I001000OCOO,à'&R*,C,I 1 ~O0I~ioTiC kOIJTNLLiEuOoTNaTpg~oTOns `I `
gmsvmcAooI44~o.~~
I
~o~~4ooo
CLTNT1TOLA$DQ~T ou~o~
~
~`~~-`~-- -~----
IM~TOQPGiITAT,ON00~41.'A
~
~ ~
IPORTh H.V. , `
I, UPA STREET 11 *
~)30 A1~Ztf4~P~ ~ I `
* ALSO WY1'127Y:' C0t~PANflS~ IXCi *
, PRANS VAIl AIIPJAT
* `. ` 6900 UJGAh~) B~LL, , `
SWZTZ~LPJID
PAXHO. 41 91 607707.' ` ` *`
L.E'~A~PNM0,A~Lk.,.OCL
.*
. Lc~oo,uLuMthoesu.uooe1
~,
~
`
$&~AETLAO0TY ` , *
%OC~00~ET00ETETOC~G&O~T0ftthN*L
,AREIICX V. 20 F!,A0O'J TIM,TTMOITE 1303
WJTILSAT000MTTP3
*
(1T3 * `~
HOMIER
OPPACLT.000.$
o'G
* OTTCTTWTTOIICT005OC ERHSo0oL,~600h I
`
*
* `O0000WELONT
L
5*)
MORA~0UT ~
, `*
~R', GOM4LL*H ~ ~LO~)(N~~ ~CL$ 00*
I
`~
`I flH.~, flo*,
DrlA
~)ITL1~8~ LIC
)Ls'ru.IIuTl
)9E&0 VlSI
ES."
STO~Jh~, AND
281,652 LEN
"Thi~SX (0th
E1JU0I'R FOR
LIBYA, H.
UHLTKD ETA
52~9 ~?
ID ~ a630413 La~
rZT755"E~o
~
.,*,,,,,,,*,*,,,,.,,,-.,_-
£49;7174'cI
~i
~
*(0NO~4~
~oinut'',
1~4~
~
TIHATWII NESI ~l " ~ AAUE
NY hIOC, LAGS * *~ S
.1* VAlIDATED 1)00000 PLQJASD000AL. LKLGI$3O $0000). fl ECCNIOC*~
~0
9.050?.
-: ~
PAGENO="0838"
Infortra N.y.
NOTIFY Haifa Street 11
2030 Ant~rp, ~lgi~n
CONSIGNED- Ccsrt~anies, Inc.
TO ORDER OF * Frans Van Anraat
-- -- 6900 LL1gar~c Sell, ~iitzer-~
INVOICE
Ca.ah?gast~ctrrents 2846- *29/86
INLANOCARPIER
P0
R1OFCESTiHATio~
* Rii~er
MARKS ANO NIJMBERS
- Ant~xp, Belgitsn -
*-L.~_ DESCRIPIION
VESSE~.SS
-. clarence V.20 -
7 x 20 H/H Cootainers st~ - - -
479 x 55 gallon polylined steel dnrs, eath ~`J_-c:
588 L~. Gto~s 266.71 Kgs.
38 L~. Tare 17.24 -Kgs.
550 L~. Net 249.47 Kgs. -
Textile P~.itive - 263450 Lbs. Net ~SS0.57/Lb. CS5~~
- -. - 119498.29 Kgs. Net -~~ean Fre~n: - 9800.:
~ ~T~IAIS
~Cr R~I~ICI~ - NO L,GSZ~ R~JIR~ Q~arge 6650.
C~intry of Origin: IJnited States of Nre.rica TOTAL ~ & F
- - IN~LDINO
Goods in Transit . - -
- - - . - - - - - ~TS CSS666~6.
GROSS WEIGPIT -~ETWEIGkT Ai~i~
281652 LBS. 263450 LBS.
_.1.1~71ica ~I KILOS I1OAOO ~ KILOS
834
~ T~~ESE COMMCCIT;E~ L~CE~SEC ~J-S ~CF
~ ULTIMATEDESTINA7~CN~s:9_.~-..ce
PC _ - DIVEF5~ C0NT~aRY TO US- LiW
ALCOLOC
International, Inc.
SAC PAIRP1ELO ~ap
- - RALTIMORL ~ARI~.u~ si~
SOLD lodustrial Procur~rent Corp.
TO * 1000 Essex Street
Brooklyn, NY. 11208
125W
( VOURORDERIIUMBER . - - PA~EN11ERMS
M~atex
tIC 87-8-232 -
No. 1 IJp/479
`000565
Leslie B. HLrJde~ao, E~c- Yao~a
PAGENO="0839"
835
IP4DUS~ 419~ 68?y'O' TEL No. - 419L687707 i3.O1~88 17:~6 P~O1
I.
I ~~7Tø1-
I.. --~-~
- - ~rttL6V~X ME)1OItI~HOU~4 -
?1~: cotpani~i~T~c. - -
DATO: 13/01/1900
tO : Mrfl.LeVliO Ilinklotio.n - J~LCOLAC z?rrL. INC.
Door LecliO, - - - - -
- -- - thanke for feat not,eogo. othicla ate received `ast night.
More ore our coenofltc; - - -
1/ invoice jia oh, .oaocopt undor "conoigncad to carder of~ , legally
Inductriol Proclar000nt Corp, catitzorland doec not catict yet,
therefore ehould reet ~`CC~3pcafliCt0 Inc.° or loevo it blank.
2/ 0IL. under notify pert~7 (~) the ncu~eO2 IPC cbouldbo deleted
end left blonh. - -
under (16) plo add 27D0 caftor 07-3-232, to read 67-3-232/2790.
- - -pin cbnngoStlitZórlCfld into t300tora Btropo, in the pbreoo of
~thOOOCO~DOditi0-~ liconcod ".. liho on the invoice.
N.)). p15 nake cure thet under DAtO LADON ~a SOAR)) there s the
caignetuxo on the ori~the1 D/L of ceopec OerviCOC Inc., as
- Agento, - -
thie-te all for tho cccaontc.
-~ l7cat pie et,ndttio original piwa three noo-acaçetic'blo pies-by D~L
courier directly to: - -
D~n~uo CotatincutelO dat Lur ~.boerp.
Two 0.oervaic 2 -/
* - P.O.t~oat 1609
- L/l016 LUZZ!O~OtOG
- -~ grand Ductiy
Atn:L~.fl.tounOrt/~~~ Credit Dept..
170 need to co~4 the inYotco to Tluropc,~th6t cabould go~to XPC in
- : - -. DroohlyD. Per thin chipuont, p tei1lbQI71~0 directly to~you
* -account oipon receipt of tho relevant do oeto,.)?ot good order p1
Len uc the onee of your Dank end ecceunt. er. or Include your draf
-~ - -. _ - - -T tieny thenke end very nnppy
PAGENO="0840"
:~ ~
F H
Co
PAGENO="0841"
837
~ ~ Z.~~_~~#/'*
~ nO~CE~
Ph. 92/88 7th May, 1988
Messers - -
Industrial Project Forwarding Ltd.
Shipping and Forwarding Agents
Lugano Office, Via delle Aie 1/A
SWITZERLAND
Sub.1ec~ ~.AQI MAN~ES~ NOS: 024991, 024992 dated 18.4.88
- - 024996, 024997 dated 20.4.88 -
- - 7 containers Ex MV- "Red Sea Envoy."
- arrived~ Aqaba on 6.4.88 B/L 3O~15_12E.
Dear Sirs,.
Enclosed, please find 4 copies of Iraci Manifest
duly signed by receivers "S.E.0.R.G.I." in Samra'a the
sanifestes advocate. delivery 7 X 20 ft container5 to the
- - ab~ove mentioned receivers. -
-We regard to weight of containers as shown in
manifests and you can note the exact weight of'the containers
- which are at average each unit- approximately 20.5 tons. -
- - -Also, please find our invoice No. Ph.21A/88 dated
3.5.1988 which is self explanatory.
Theref.ore, you are kind.ly requested to transfer
the sum -bf US Dollars ~!9886.k5" to our account.
Philadelphia Corporation for shipping agencies.
Bank of JoHan~-Jabal Al Hussein Branch
Account No. 4001
Telex No. 21272 Banjor Jo
Am~an.Jordan -
* Thanking yeu- for your eo'operation. - -
* *~ tthirs faithully,
- -
/ /N. `1ald~1~
- Genera]. Manager
eric].:
AB/un
PAGENO="0842"
838
PHILADELPHIA CORPORATION
FOR SHIPPING AGENCIES .
- P.O. ~oz 184003 - ~ *
Ammn~ Tclei 23646 PHILCO JO - ~ T ~1 .$Z.-
Tel. 661237- 6.81209 ~A~T-~
3.5.1988 ~ Ph. 21-A/88
DIJIT NOT2
~ industrial project forwarding ltd. Switzerland.
We Ii~~ .Lebue~ `our A/C o,tb cbe felIaw,.g
D~u~L~
- - -
- -
USD CZ~'i~ -
j~
J. 0. Fil
- On carriage of 7 X 2Oft containers
Ex M.V. "Red Sea Envoy" B/I 30'~15-126
Liner-out A~aba P.0.T. Baghdad 20 Mt
weight PfIllnit. -
-. - .Rat~ as agreed per our telex Ph. 1236 -
dated 10.9.8? at 3D 430 per unit 1 7 - -
containers. - 8985 08 30~O COO
- - Transit tax as pe~.attached r~ceipt
Noo~ 320962, 320997, -~ - 106 35 700
- S~torage fines as per attached -
receipt Nos. 81317, 80607 - 17 91 C6 COO
- - .Djversjon~ of tracks to. Sanra'a- -
as shown in manifests ~ 143 Nt -
I 3D 1.82 per ton. 776 90 260 26C
- TOTAL: 9886 45 3311 960
- USD DOLLLRS: Nine tbousend,Eight - - -. - - -
hundred, eight7 six and 45 cent - . - - -
only. . . - . -
R.0.E. I USD ~- 3D 335
PAGENO="0843"
839
5W' /~,flE~7
~7Th
PAGENO="0844"
`~i~LiO1u h¼&:~,,~O.~cfl3~fldii
840
-
~
RO~.~r ~
:.Y-2 ~
~,
IOTT*OCOU~rOTO~G,~OFCOOOO
NoT'TP*RrTCo~PtE7ET*~.E*NOAOORES5C*gpE~,rqEspdsIe(E,O~
~LURE TO NOT~ - -
(12(IPflIA~ cARRIAGE BY * ((3(PL*CEOF YETTA(. RE~1WT
- GOT: GLRGILI5I~RTOBtOAORG
n-::
I QBT OF OIOCRARGE - I)FLAC1OFOEL,GEBT3YQG.c~~F[~
PAR11CLJL&R~FIJI
IA~3OTOaOUnQSTR~CTO,~S -
.
(O(t&OGTf~tY(R~,~&1
G;:
~ IORI~OC&»=S*F.I~FI&E
-
RFS & ROS ,coRTAFAB SOS SQ OF-PROS
III - -Ill)
-
GLL~ ~ -
~. ~ ~iC
~21
-
- 3~-i. -- -
-~4) c~'rt-~. ~ *
- ~LU2~2-'8Z
- - sfAi. ~!3. 23~39
5FFEOBYSF4(pp~R
B OESCRIYTOB OF Fl :*Ou ASO 00005 - BF&SUFE&
- - ~I (21' (221
- - . - --
= - - - - ~L~Q ) 13:
- - -- - - [ii,
- - - ~c- L -
~- ,-
-. -: : - - -svi. :-~. OZ~13 -
- - - -
---.-~ - - -
~- - -
PAGENO="0845"
~ci7~JALT. ~ 3HIPP A~1~OT ECLAFIATION
T70)000007TJ )7))~)) .0.
L'~
L-3 (u&~I
~j~-co~c IN TIOTi&LO z.t~c. T ~ , AUNT~CAOON(WO.' ,.qol~)d)
*~:~440 ç~ fI&& ROAD .
~. ~Df~D iiALWMIiD 21226/U&T4 z~Pco4T~ SI1LPP~R'8 ag~'. fl()u LPC-TIIIB THOU3710TT3773000UT7700ZC$
* ~ ~P. N;). o?061b8
- 7 7O~AOOTNO t0* .0) -
* *~-~ *. .~-. *-i.a~, `~cJciit ü~tt()ltAL , CQflT,.NOC#$TOM3~O)7S
JOPP& ~I~o
7. ;* - -. , - . - . O7F~CLR OftIMPLOYM7~- --
ç . i!T.~E 4L'LL.~ffl 2i2~
~ ,~ ~ ~ ~ 0 o'~'
TO co~e~)0tJ- *~. L , O)STT74CROTO .~L~MA~0
.
I t ~ 3
Ir.!~TA 1 TI TO)))
fl4I~IA S~ZIWET it . ..;
*-:~T.~o~o T~&RP, ~`1~I'JU f) . . OF ULTIU~T!
ITuao?1~
* 11.
t7. 77 . Ot )XPO3T~R7IH NUU)7R
t~
~ T~ C~ LOLT~. 7 73 LOAOT7TO FT L * PART)U TO TOANOACT700
.
,C3o~.f~~f3J~ *.. . ~(T773~ 0 RololOd 0 77~o-i*ia77d -
L. , is. OF 5)073 * iE.CO3TAAO(00)0)~~'71
I 1 TO) [1 ~
* L~77TS3 3A~3 7~.T!~T4O7OO25)OO*YI~3~' 30)~O)flOF0) wEO)HT 5)&A3&NT00777T - a.ooo II .0) uS
4)70)0) 00)107
OTW~.3
* (T~) 0) 7)0 00)0)77 - 3)01434(0300)
261C00
I ~
* ~- * * . . ~~o's. .
~ ~f~) couTLt. * . - (5} ~ 1.50 107.00
~ UBLU 21 Si40 USLU s I ~0
~`4'~ ~ IIZIAL 0 O~.!,T ~T0~ 1Ii) 02013 ~
`*q*~ ~ ,~
-~ ~ 112 ~ -
T'~J.i 1 0 [1~19 ~ ~11AL ~`() 02014
~~3~T(s~) ~0~R'tt. ~- * * (7)~ GQUT'R. ......- -. .* 71471
U~W ~ T * * 1UITO 2~I6 192 UANTITO
~ OIL tiO ~ -~ * . * 0 s&~x. 1k). 02p15 * * OOV 10
- `~(4) cojrr'~. I
LICOPTU OT070t ~ 77074 7~ )0)77)4)40))340)01000O330)0~030~ O4I&I.I
USLU 41 ~3D2 .77.070 .u.~i347~oW0) ~
02009 0 DOOT ~ :~_;0E?T 02/~WU
PAGENO="0846"
a
PAGENO="0847"
843
HEPCK C.
C~t~ at.
~
- octt~ E
PAGENO="0848"
844
:~:~ :a~ ~ ~
tc- -- -
~:-tc: ~e.'~e:a.
cc c~:~e~~a -ct.
c:~:: - - - - -.
~ t~ ~o-t',a~ ~
fr~'r ~ ~e ~ -~-:::~ r~. ~:
~ :ea ~ ar~: `:~: e~,vc~ a-:a:a - -
t:
- :-~ gh~~ :.e ~c~:
:.-a- ~:an~::; -.~: ~~;:-~ ra~e ~ a:~:-~:: a:-
1~~.:--.a ~::::~a~:r
~mar~- - : -
Ix 2:,~ ~ - - - - - - - -
t ~nc~~y ?eturn telex ~ ~e ~ar :u~:~ t~a~~e
yc~r naee ar~ adc:es;. - -
~ let u~ kr~c~ ~ t~Lex.
t6:
PAGENO="0849"
845
~ ~ I1~\~MIIU1NML
- P0.8-OX 28387
(P-zrge Lijeron 1703 EAST .IOPPA ROAD * BALTIMORE. MARYLAND 212
- - PHONE (301) $$&.4400 * YEI.EX: 1t0141 ANCN0~ 0*~ CI -
- - - FAX: 3011 152-2102
Gentlemen: EXPORT ORDER fl~ ...28.20..~ _...._._i] .. FOb. 2Q, `1-988- - 1*
The bs~ow mentioned goods have been shippedie 70000 - - vihRii2~ei~ to Hapag - -
and sre to be hanjled as pet set lnstTect.ons indicatetbelow: SO: Stuttgart E~cpress V906 sa.ilina 2120/RR
- MuhsudNsmkrs
*~:~
- C~5u Gf155~$L
Umwgt
261800*
;w~.1.
1/C 87-3-2790
No 1 IlrI/
- : --
.
7
-
-
20' WI! Ccettairmrs stc
476 x 55 gaiboo po1y1ine~
drIlls Textile ~ditive
Booking No. ST13063675
5CNEDUL& ~ 4393290 -
1 279888*
-5236cft
. -
.
-
- . ,, ,, ~ ~,* ~ s me~sto ~ mu' ~ *110 ~ uO~*1I*~ -
- - PLEASE WO*WARD -TO DESTINATION IN ACCORDANCE WITH THL~PQ1.LQWINIi IN~T~UcTlQt*.
Item NO.- - - - - - - - -
1. lucy bill of Jad&ng in the',s.ame of .I~ustria2. .Px~r~nt..Coep,...-..-~' - ._ .. ~- _..
2.. Consign to thi order of ..~.... -. - .. ...- ~ ......: ~
3. Destination: ~ Pen of djsnharge: .~t~torp
4. Party to be noti*ed Cxpanies Inc... Infortra..LlJ..-Hsifn..Strect *-13--203O--Mt~mrp.,-Belqirten
3. Address Frans Van .fij~raat,~FAX No, 41.91. .682i079~I~=.Bell. ~tzerlai - -
~ Value fit, shippers capon decliration la 8 - 14. ...._ ... ~. . -
7 ~ ~ .:.. -. - ..` `......... C.1.F~$ . ... - -.
-, Insure for $ plu~chgs. plus - % against followmg risks -.
9. Charge rail freight to 1.1:5. seaport to consignee D - lo us-(sender) 0~ -- - -
10. Charge cateagt or lighierage to steamer to consignee D - - to as (sender)' Q
11. Charge ocean freight - . - -- to cottsignee D - to to (sender) 0
12. Charge insurance prerniwn . - to consignee ~ - - so as (sender) 0 - -
13. Charge consular fees and foçvnaiitiea to consignee D to as (sender) ~
14. Charje forwardIng service fees - - so consignee 0 to'os (sender) ~ -
ES.. ~olleecoor invoice fo$ - - .. -. ...plas~teoi~on. ......... -...- - -~-.- -
16. Mail original bills of lading to ~ ~ .
17. Mail ropies of bills of lading to - _.__....__.._.__.._._..... --.-..... -
16. Specisi instructions: ~ Threm ;.Ca~h .~nbe~ ~
b1ar~ ~ rse~ * B/L asiat sE~ "Goods in Transit" G~ nm c-' -~-`--` - k--k fm 55 line AS
Ha nsssenger - r~i~-i~e
- - - -- - . PORZICN EONSVLAR DI~CLARA?1ON (If ~çelved):1 - - -.
- : - - `~ ` (55O*o 00 bm~ 5i 01311005; . - -: -- - - - - -
- Pis prepare a.si last Obiprnnt - ~.ll if any quez~i~ - - - - - - - - -
Deeemesta EecHaed . - -. . -- - . - - - - - - -
Psc5m~ - laksd - I lispoet - OiM~
ban . oa~bi5 5; - - - . . . . .. - -
- . - ` - BttzPPE*'C 13AM5 Aboolac. Intarnatia2al.~Inc~
A1~L BUSINESS tjiio(l7*EeN SUBJICT TO 7510$ alto CONDtTtON$ £5
SICOuMIsDeD ii me SA~TsoD1I CUSTOSNOJSI seoeess a toe.
BaROnS all~aTtON. TesT avalt.a*l.1 1250111101.1557. ADD 34.4O...FaiXf351d..~.
21226
PAGENO="0850"
T~E95 COYMODi~ES L~OE~3E2 S
ULTIMATE DESTINATION ~
DIVERSION CONTRAflY TO US. L&W PRO~SIT9
~ Su~A~~ C~ ~ :~
* Infortra ~.V.
Eaifa Str~t 11
2030 At~rp~. ~1gitri
CONSIGNED - - - - -
TO ORDER OF * Ire.
Fra.i.s Varl A~aat
6900 i~gar~ Bsil, ~itzer1a~
7 x 2O'-~/H C~th st~- -.
476 x 55 .lla~ o1y1ir~d ateDi dz~rE, ea~ c
588 Lbn. ~eas 226.71 1~gD..
38 Lö~. Ts.re 17.24 P~:s.
550-tth.Nst - - - 249.47
Tcnctilo ~itivo -. ---: 262808 L~. )~t -
118749.86 F.gz. 9~t
~ -~
~r ~i~xc~ - ~ i..~-m.s R~1IR~
~mtxy of ~igin: T.htt~ States of ~
~G~z in ~anait
846
AiC°~aC
International, Inc.
-- 3~OFMTSI.EOAO
TiWO~. UAR~1AND~1~
- ~- - u.s-k NOTIFY
~ Xthustrial rz9TentCorp. -
TO 1000 s~sex Street
Brooklyn, NI 11208
* ~YOuROBDEB ~IUMDEE
125-A-B
~sh Aga~thst ~c~zr~t
INLANOCABRIEB -
- - INVOiCE
PAYMEHTTIRLdS
NVO,CENO. CArE
Rihger -
An1warp,~ Belgitzl1 - - -. 1Stitt~z~
~zess V906
2/20/88
MARESANO NUMBERS -.
- - DE~flON - - - -- f
PRICE 1LJ
- -
2870
2/20/88
L55AL5~S
ALIUNG DATE
P,nate~
2/C 87_3z.2790
No.lUp -
S$O.57/th.
ri~
~ta~
D~LC & P
tE$149226.C
-- 9934.OE
7000. CC
~166160.0~
~3$I ~12?2 -. ~s1
PAGENO="0851"
847
PPO(I~ LIST
custa5~r: IfldUStzlal Proc.1r~Tent Corp.
Order No.: 125-A-8
Inoice No.: 2870
Vessel; Stuttgart ~cpress V90& Salix~ ~ oi~ a~it:-2"20~'88
~scription: 7 x 20 H/H Ca~tainers stc - -
476 x 55 gall~ ExDlylin~I steel dr~Ts, each ~taining:
588 Lbs. Gross 266.71 Kgs.
38 Lbs. Tare 17.24 Kgs.
- 550 Lbs. Net 249.47 Kgs.- - - -- -.
Textile Mditive - 261800 Lbs. Net - (Thiodiethylerie Gly~l) ~t4-H~ZARIXY
-. 118749.86 Kgs. Net - -- I'tT~IAIS -
- ~Cotsitzy of- Origin: Unit~ States of ~u~ri~m -
- ~: ?IMtex
tIC 87-3-2790
No.lUp-
~ntori,ati~al ~3440 Fairfield Poad/ 8alths~ro, Mar~tlaz~ 21226-9987 US~/ 301-355-2600 Telex 8~
(1) C~ amer b~s±er
- U51L12116160
-- Seal No~ 02811
- No;ltJp/68
(2) Ccr&tainerN~ither:
- USLZI21O621.8
~ea.L ~. u2810
- No. 69/136
- (3) C~ita.iner Ntz±er
U~.U 2124700- -
I Sea~l No. 0281
No. t37/~04
~4) C~tainer ~ber
(SW 2124382
- - Sea]. ~ 02809
- Ne. 205/272
(5) Cáitainer )~zber
* USW 2110650
- Seal No. 02813
:No. 273/.340
-- - (6) C~tair~r 9s~ber~
- - - tSLI.~ 2128205 - --
Seal No. 02814 -
* -. No. - 341/408
- - (7) C~itairar N~rt~r
- - I~J 2568792
-. S~alNo.02815
- Na. 409/476
PAGENO="0852"
~ ~~*G~CTO M~%CA) ~C ~.
~Q -
- O...~ CA&.T~O~* -
848
Ha~ag-Uayd Aktlengezeflschaft
florth A~er~-E~r~ce ~
ALCOLAC I ~NATI0~AL, IHC.
3440 PAIR-ItELO ROAD S~?fl'S RI?. ~3D. ~C - FF2
MLTDiORZ. !4&RTL.A»=(D 21226/USA ~ ~
(3~IG~t( ~UTt *A~C
* - - -
- TO ORD!R:
- : - - - - -
-- - - - - - -.
- - -
)F~~G~T P~.C ~.
~(C - 1433 AIC~R IRTRR2~ATIO~ZAL
1703 E. JOPPA ROAD -
3ALTI~3RZ, MAflLL~) 21234
~~flTANO ~tJNTCT ~O~$ O~ *~ - -
MD.IO.S.4. - - - - - - -
C~~NOT~3PO$t2~.L FOC
- FAU.lJ~ TO NOT~TY). -_ - -
INTORTA N.V. - -
CAIFA STRZZT 11
2030 ANTWF2P, Z~.GIUN
~~FFF-~Vfl~OAj,Q PI$t~Lt1~N* - -
- - - -
- -
,2~,MmM. CA~U~T CT j(1Z'L~ OF ~7W. ~~PT
-: j14~VU~t. - - YO~ F~AG~1O~T OF .3~F@ - -
~
-i
O~t.O&~ ~ u `t~i~u~o~
~
- - -
MXLI N0SJ~NTA1NXLNOL
NO.OF PE~.
PART1CULA~$ FUFPIISHCO CYSb4IPPEC
H~ - OIXCXIPflOXOF PaWCUA,~GO0CX - OXO~MX1~(T
- urn-
-. - -
- --
-
L/C81-3-2790
80. -1/68 fl~
T~ Ca
- * WESTESS
DLO IA
IlT80ItIZ
~fL2'~2&
*
1
-
~ITI30
ROPS ?~
,L15!&
DTT~
2Z2L
- ~- - - 2) -
"~3D'P~ ON 88430 TREIC~ - - - - --
20' 8/8 C08TR'S. ~ S~~'S~ tOAD, ~JLCE~ A30 ~
68 1 55 GALLO8 POLTLI~ ST. DRV~ t - 9.984 US- SA- ~r
1T~T~.8 ADDITIVES -: - 8,137 cs ~ : .20i~
18 tRAFISIT ~P181'S C~ ~ -
~`o8-8&L82D~S MAI~I~LS
80? EZSTLICT80~tD LA3~S- !Z~UIR80 -
~30 ST ~ StA~ FOR ULW(&ZE V~ FIRA!I~ -
SFUI30TIO!i ~ ~ZSAL8 18 43T D3STIEA21~ ~ ~T SQV~T
ECESA, vtirrs&'i, E&2U'0~lL, 01 ~3A, ~ 133 0T~JI3I
Y80 STATES. --- - -
,
P... .MFFTX3 DA~D VA)UT Q4)FREPGI4T
~ ~ P*YA~L1
$ AT~Y
I
O~CTTO~OT)~1
- -
~ *3~:4~
~
- - - - j~14f~
~D$~
4~-
~
~tucr
-
~
*--
-
- TOYM
1j9~q4~
711
HLA47 IF$$ F~r tA,~$4~ Or rXXF rn~ Fern T~ Prnt $rnm~ -
PAGENO="0853"
849
4. Global Case
~ ~
~IL ~Y~J.-..~.---------
*PP. tNG.__~-.--------
AT?: MR. JIN AUTRY ______
FAX NO. (617) 2803631 (BELL) ______
FLL
AS PER OUR CONVERSATION OP TODAY BETWEEN YOURSELF * FRANK
ICING AND THE UND!RSIONKL, i AR M~CLUSINU THE NAMES AND
ADDRESSES OF THE COI~WANISS WHICH COULD BE INVOLVED WITH
TECHNOLOGY TRANSFER FROM BELL:
A) C0I6'ANIES IN SPAIN
I~W.Z.C. ~I. A.
(VWUflRIAS I~?ALURGICAS ESTRATEGICAS DR CANTABRIA S. A.)
ORAL. 14CR.: ICR. HERMAN CENIJ?I
ADDRESS : CTRA. A PIIDROSA NO.75
POMTRJOS-IIARIMA DC CUOCTO
CANTADRIA
PHONE : (942)502-303
TELEX : 35754 13538* C
E.S.A.U.fl.E.
(ENYUDIOS7PROYECTOO V REALIZACIOI7 DR AU'2OCATIZACIONES
TITRTRTAT.MN)
ORAL. 1403%.: 153. MARIANO RODRIGUEZ
ADDRESS :. AXULAJI S
APARTADO 27
PONTUGALETE (VIZCAYA)
PHONE : 49-50011
TELEX : 32034 ESAUIIR
B) COIWASY Ill PAIIACA:
IOB~C~~EISEZ INC.
PRESID~ AND LEGAL RZPI%ZSRMTATXVE: MR. PABLO J * ESPINO
NOIPICZO TONED BARCOSUR
P100 16 ________
APACTADO POSTAL 1824 -
PANAMA 1, NEPUBLICA DR PANAMA
TELEX : 2729-3611 RORGAC PG ~J/ ~-
PHONE : 636621 (PANAMA CITY)
BEST REGARDS, /
CARLOS CARDOEN . -
SANTIAGO (CHILE), NOVEMBER 13TH, 1988.
PAGENO="0854"
850
Dr. Carlos azdosn Cor5sjo
Cardoac L~V&.
Los Coaquistadorsa 1700
Ssatiaqo-'~i1s
Dear Carios:
This La to soot iso ~ diacvasioa of this soiaq so tha ~oiat
attack h isoptar project.
vs fool that vs _. ha's soovqb issigbt into ska soacspt to
c~lsts a daciqs st~y. ~-- pvsposs of this st~y ~3d be to
detegoiso ths feasibility of using tha sit aM ~ fvas]aqs a~
cuirsot dynics of a MU ~.l 20443 as part of tha Cardoso
attack belicopt~.
This stody vsuiâ be dooo by MU aM incl~s
- Thrss-visw strueturat arraeqnt.
- ~n~o%t s~jSt cosoopt.
- Seating arrsng~t.
Prsl1a1~iexy weight aM bsiaace ~ry.
- AirspeM aM ~so psrfosoaacs.
arisE statot of ~k to ~lsta tha propesM unit.
we ask yea to participate in tha soot of this s~y, with tha
Cardoes s~x. being 1 15,000 to be paid $ 5,000 ~ aM tha baLance
over 50 days.
Cazld yea plssss give vs y~ f~l sqrs~t of Cardosa
financial participatiac aM that ~ aMarstaM this is a atMy to
slice beth sides to rsvi feasibility, prier to ea~r is?~t,
aM does rs~sssot a ~ittasct by tither party.
:"~`~`ff
PAGENO="0855"
851
~ c3olico~tor~
INTgfl.~ç?pjC~~ MEMO
April 14, 1987
F1:RCC:bb-016
p~N0 TO: Attendees: R. Courtney, J. Garrison, 3. Justen,
R. Marion, P. Prince, R. Wharton
COPY TO: M. Carter, F. King, N. Primis
SUBJECT: MINUTES OF MEETING DR. CARDOEN
REFERENCE: a. Profile prepared for I.. Homer
b. Memo from N. Joiner dated 1 April 1987
c. Agenda of discussion items
d. Preliminary program definition and schedule 13
April 1987
The following items represent the minutes of the emoting held in
our facility on 13 April 1987 followIng a lunch which Mr. Homer
attended:
1. The scope of the Documentary Feasibility Study was discussed
and the options provided to Cardoon for approval. Given the
facts presented, Cardoen approved proceeding with the NTE 350
hours of Engineering at a cost of $25,000. This amount will
be paid with $10,000 imoediatoly and the balance upon completion
of the study which was estimated at 6~8 weeks from go~ahead.
This agreement will take the form of a Cardoon standard Purchase
Order containing the contents of Engineering's proposed
Statement of Work (Reference b.).
The original check dated 6 February 1981, *in the amount of
$5,000 from Or. Cardoen was returned to him during the meeting.
2. In review of the preliminary 30 sketch of theaircraft, it was
pointed out by Or. Cardoon that sliding doors and a hoist were
required for the rescue work and outside litter application
envisioned.
3. The extent of Bell involvement in the project was discussed
at length and Dr. Cardoon was interested in considering the
question of Boll marketing assistance. He felt that he would
work with Boll or their authorized dealers in certain countries
if we jointly felt it could benefit the sale of the aircraft.
To what extent this might occur and what comeissions, discounts,
etc. might evolve was left for discussion at a later date.
Dr. Cardoen did make the point of the retention of Boll's name
on the aircraft would be a positive sales factor.
PAGENO="0856"
852
Distribution ~~prfl ~, ~E7
Page 2 F1:RRC:~-O~
4. Bell's involvement with respect to supply of spare parts and
ongoing technical support was similarly not addressed in great
detail but concluded to be via Bell's dealer network.
5. Regarding qualification of the aircraft, be It FAA or another
form, i.e., Spanish or Canadian equivalent, was discussed and
decided that qualification would be desirable only if time and
cost-permittedand it were a necesary Ingredient for the sale.
Bell did -agree to work with Cardoen in development of a Bell
qualification plan and would assist through its guidance and
supervision to obtain a qualification test. Car-doen wants Bell
to supervise the design efforts or possibly even perform the
design.
6. The question of training of Cardoen employees was addressed
and considered to be a requirement In that Cirdoert wants to
follow Bell standards. Bell will estimate the training to be
furnished when the extent of training requirements has been
made available to us.
7. Whatever technical data would be required to furnish Cardoen
on the 206L would be Identified and made available when
required. -
8. The~potentlal market areas Identified for the low cost attack
helicopter proposed was related by Dr. Cardoen as follows:
a) Ecuador e) Jordan
b) Brazil f) Egypt
c) Mexico g) Eventually Chile
___ -~
It was clearly pointed out by R. Marion that sales of armed
helicopters to Iraq is not approved by our government and we
would not presently sell 2061.'s for MOD and arming by Cardoen
for resale to this country.
The -question of the Southeast Asia market was raised to Dr.
Cardoen and hs responded that this was felt to be a significant
market as wall but it has not yet been developed.
~em asked by the undersigned about the impact on the project
without the Iraq sales, Dr. Cardoen stated that the viability
of the project was still good enough to proceed.
9. It was also made clear by the undersigned that although we saw
no direct competition with Bell's other models should Cardoert
producethe low cost armed helicopter, we would have to be aware
and work together on possible competition for available funds
in certain countries.
~ i~
PAGENO="0857"
853
Distribution A~ri1 14, 1987
Page 3 F1:RCC:bb-016
10. The question of Bell's Product Liability and Warranty as it
related to a Cardoen modified Bell 206L was discussed. It was
pointed out by P. Prince that it depends on the extent of Bell
involvement and participation in the MOD program.
11. The program definition and schedule dated 13 April 1987, was
discussed by J. Justen and modified (Reference d.) during the
meeting. Dr. Cardoen was In agreement with this preliminary
schedule of events.
12. It was finally decided that our next meeting would be at Bell
on or about 1 July 1987. During the Interim, Bell would prepare
an estimate of all the areas of Bell participation and
associated cost which Dr. Cardoen would be responsible for
funding to Bell.
The meeting was concluded at approximately 4:15 p.m.
R.C. Clegg
Manager, International
Business Operations
Attachments
PAGENO="0858"
854
REF.
ESTRACA~C*~
23~ ~
T4e~ ~1~C
iti~e 1.07$ Satisi~i,1 ~
PURCHASI ORDER N!R. 0421
1. TO: CELL MELTCOPTEX TEXTRON, INC. 2. DATE: Apr~1 29, ].967
BOX 402
FORT WORTH, TX 76101
UNITED STATES 0? AN!RICA 3. ATM: KR. RON COUWNEY
TEL: (017) 200-2090 REGIONAL NANA(~!R
TLX: 758229
FAX: (017) 200-363].
4. FOR: STAT~WT Of WORK
FOR 20G43 VARIANT CARDOEN STUOY
3U~ARY: Thic Study shall identify a preliminary orcreft
configuration for usin5 a206L-3 mid and Oft fusels~e with & ne~
forward fumol000 concept for an arced sing].e pilot contig.Lraticn.
Included in thiø Study m~.ell be:
1) A 3-vic~ prolicinar7 concept dowtn4
2) The becie concept ortoll identify: -
A) PuceIOL30 cnd cteucti.iriil ccdifiCCticrLG to the 206-033-CC].
Forcscrd Pucota~e Acceebly.
0) Plight control elwngcc to the 206-001-010 Collective Controls
Inctolatten, 208-001-011 Cyclic Pitch Ccnt'o1~ installation,
end 206..001-044 Directional Controls installation.
C) Weapon oyetem configurstiofl far nose ucunted gw~ turret and
"Texac flenger" type aids mounted weapons.
0) CocWpit armored seat installation based an the Kàdel 406 Conbat
Scout configuration.
E) Instr~ent panel modification from the existing 206-075-443
instr~ent panel installation.
3) A brief Work Statement of thooe parts r.~uirtng change fran t~e
206L-3 configuration.
4) B weig)~t and balance atatement for the preliminary confIguration
of thO rotsrcreft.
~ ~tLXVERY; Soonest, via Courter to: IKIC, LA.
Ctrs. Pedrosa, 75
6. PRICE: Not to exceed USDLRS 25,000.00 39518 PONT~J05
Cantabris, SPAIN
7.PAY71I.NT: With this order: USDLRS 10,000.00
Balance up to USDL~ 15,000.00 upon receipt of Study
- Plenne unc our PlO nun. 0421 on all correspondence related to th~.s
order.
- Kindly confirm via telex receipt of thiS PlO and payront.
~Mts1re~
PAGENO="0859"
855
BELL HELICOPTER TEXTRON
FT. WORTH, TEXAS
PRELIMINARY DESIGN REPORT
NO. PDR47O6~O1
MODEL 2O6L~3 A~ED VARIANT
FEASIBILITY STUDY
~
Preliminary ~s1gm Preliminary sign
X3835 X8438
Approved By:
Chief, Pr iminary Design
X4278
PAGENO="0860"
856
TABLE OF CONTENTS
SECTION TITLE PAGE ~O.
1 INTRODUCTION 1
2 AIRFRAME MODIFICATION DEFINITION 2
3 STRUCTURAL MODIFICATION SU~ARY 3
4 CONTROLS SYSTEM MODIFICATION SU?~ARY 4
5 WEAPONS SYSTEM INSTALLATION LUCAS T~JRRET 6
6 WEAPONS SYSTEM INSTALLATION ROCKET PODS
7 INSTRUMENT PANEL MODIFICATION SUI~RY 16
8 ANCILLARY EQUIPMENT AND A~OR INSTALLATION 17
SU1~1ARY
9 WEIGHT AND BALANCE SU~ARY 18
10 PERFO~1ANCE SU1~RY 32
11 CONCLUSIONS 34
T~
PAGENO="0861"
857
LIST OF ILLUSTRATIONS
F I GURE NO. TITLE PAGE NO.
1 GENERAL ARRANGEMENT SIDE VIEW 35
2 GENERAL ARRANGEMENT - TOP VIEW 36
3 GENERAL ARRANGEMENT FRONT VIEW 37
4~ COCKPIT CONTROLS - CYCLIC AND ELEVATOR 38
5 COCKPIT CONTROLS TOP VIEW 39
6 COCKPIT CONTROLS COLLECTIVE 40
7 COCKPIT CONTROLS DIRECTIONAL 41
8 INSTRUMENT PANEL CONFIGURATION 42
9 PILOT SEAT A~4OR CONFIGURATION 43
10 CONTOUR LINES Z- ISOMETRIC 44
11 CONTOUR LINES FRONT VIEW 45
12 CONTOUR LINES SIDE VIEW 46
13 CONTOUR LINES TOP VIEW 47
14 HOVER CEILING, OGE 48
15 HOVER CEILING, IGE 49
16 VERTICAL RATE OF CLI~ 50
17 SPECIFIC RANGE, SEA LEVEL ISA 51
18 SPECIFIC RANGE, 2000 Fl', 75°F 52
19 SPECIFIC RANGE, 4000 Fl, 95°F 53
II
LE~1~H:: ~:~L~'(j
PAGENO="0862"
858
PRELIMINARY DESI~ REPORT
POR~~87O6-O1
MOCEL 2O6L~3 A~D YARIANT
onloduction
The study embodied in this report was corrrissioned by Cardoen Industries
Ltd. to investigate the feasibility of an armed version of the Bell
model 2061.3 having a single piloting station.
The configuration requested by the customer requires; the modification
of the airframe forward of the front turnover bulkhead to provide
a single piloting station on the aircraft centerline, the provision
of pilot seat and engine armor, and a Lucas turret mounting of a single
.50 caliber P460 machine gun. In addition, weapons provisions are
required for the mounting of 2.75k rocket pods or other stores, near
the aircraft rotor station to minimize the center of gravity shift.
The requirement also exists for a civilian configuration of this same
aircraft that would transport four to five persons In the main cabin.
This will require the removal of the armament package or any part
of same to reduce empty weight and allow the aircraft to balance within
center of gravity limits.
PAGENO="0863"
859
~ ie'~
~eI1
ctrr - D~te~ ~~_2oct~co ~e~x~a8~101
17 Novenbor~ 2L.._.~..
Fl : RCA : oc~6 e 1
M. William B. Robinson, Direcr~~
P~MMC Room 800 SA~6 ...,L~-.-.
Department of State
Washington, 0. C. 20520
Dear Mr. Robinson: dill (~-)
Boll Solicopter Textron received Department of State
Export License No. 022554 validated March 22, 1982 covering
a demonstration tour of our Bell Model Toxac Ranger (206L
armed with twin 7.62mm machine guns) to Brasil, Colomhia,
Mexico, Peru and Venezuela.
We now have interested parties in Panmma and Spain who
would like to purchase Bell Model 206L's from Bell Eclicopte:
in Fort Worth and then modify them to accommodate arms in tmeir
factories in Panama and Spain. Those modifications would incLude
external hard poinus, gun mounts and olect:±:al to accommodate
7.62 machine guns and unclassified 2.75 rockouc.
Those modifications would be done under a technical assistance
agreement between Bell Eclicopuor Textron and Induct:ias
Metalurgican Estrategicas e Cantabria S. A. and Entudics,
P:oyectos y Roalizacion Do Automat~zac~cflo0 duct:iales of
Spain and Zodiac Entarp:~zoo Inc. of Panama.
Our customer certifies that they will ad~ero to all ~. S. State
Department Regulations and the holic:;toro will only be sc1~ to
those countries zactionod by the . S. State Department.
If it is determined to be. consistent with the ;c1~:ies of t~e
Onitot States, approval is :e~estod for Bell to propose the
technieni assistance agreement to cur ruztomo:s in Panama and
Spain.
If you require more information, dlense contact the undo:s.gned
or Mr. Patrick Briggs of cur Washington of fico at 289~5858.
Sincerely,
a. C. Autry
:-e:-ationaY Matketing
s::atiofl
PAGENO="0864"
860
Bell HeUccpterki~ ~Tri1I~i1
Reff H.ffcep~r ~x~on Inc. P~ C~ct SCX 412
A ~3)OSf~' ~ ~ 2 June 1987 F~ Wcr~. r.XSS 75101
F1:RGA:oc~681 (517)250.2011
Ms. Rose Biancaniello
Office of Munitions Control
P~MZ4C Room 800 SA~6
DeparTment of Stats
Washington, D. C. 20520
Reference: GC~080O~86
Dear Ms. Biancanlello:
Bell E.licopter Textron received Department of Stats Export
License No. 022554 validated March 22, 1982 covering &
demonstration tour of our Bell Model Texas Ranger (206L
armed withtwin7.62 machine guns) to Brazil, Colombia,
Mexico, Peru and Venezuela.
We now have interested parties in Panama and Spain who would
like to purchase Bell Model 206L's from *B.ll Helicopter in
Fort Worth and then modify them to accocdate arms in their
factories in Panama and Spain. These modifications would
include external hard points, gun mounts and electrical to
accommodate 0.30 or 7.62 machine guns and unclassified 2.75
rockats as options. The arms will be supplied from B.lgiun,
Prance, Turkey, Portugal and Spain. -
These modifications would be done under technical assist~
ance agreement between Bell Helicopter Textron andindustrias
Metalur icas Eatrat icas Dc Cantabria S. *~aad Estudios,
Proyectos y ea sac on e i2~Iones Indust:iales of
Spain and Zodiac Enterprises Znc. of Panama.
Our customer certifies that they will adhere to all D. S. State
Department Regulations and the helicopters will only be sold to
those countries sanctioned by the D. S. State Department pcten~-
tially Ecuador, Brazil, Mexico, ~ordan and Eypt.
If it is deteined to be consistent with the policies of the
Onited States, &ppraval is requested for Bell to propose the
technical assitance agreement to our customers in Panama and
Spain.
If your require more information, please contact the undersigned
or Mr. Patrick Brigga of our Washington office at 2895858.
Since el
R. C. Autry
Irtternation ~jrketing
- -~ - -: AfninistratiOn
PAGENO="0865"
861
United StaL - Depart~ent of 5tate
Wizthingron, D.C. 20520
1NT~NATTCNAL MARKETING ~1 -~ ~
In reply refer to
MC case GC~042287
Mr. R. G. Autry
Bell Belicopt3r Textron Inc. w.~
P. 0. Box 482
?ortWorth, Texas 76101
Ft1.E
Dear Mr. Autry:
Reference is made to your letter dated June 2, 1907 requesting an
advisory op relative to providing tec~nica1 assistance to
Panama an pain ocessary to modify the Model 206L helicopter to
accommodate
The Dep4rtment of State has determined that there is no
objection, in principle, to the proposed trannactio~ at this tine
with Spain only. Such a transaction vitha firm in Panama would
not be in furtherance of the foreign policy of the United States
at this time. This determination, however, is not an
authorization to export any defense articles, defense services,
or technical data as designated in 22 C~R Part 121.
A proposed technical assistance agreement must be submitted for
consideration pursuant to 22 CPR Part 124. It must contain the
infornation and clauses required by Sections 124.0 and 124.9, and
the transmittal letter must include the information specified in
Section 124.12. In addition, the agreement must specify the
final avionics, commu5.tcations, and weapons configuration.
Please reference the above case number in the transmittal letter.
Sincerely yours,
Willi m 0. P.o~inson
Director ~`
Office of Munitions
-
51-840 0 - 92 - 28
PAGENO="0866"
862
REF. `c
Dc~fl ~
Cc~2 ~ Thzr~cn me.
A SuD54~i~ Of Tc~tr~ IflC. F~r~ wo~m. Thx~s 76101
(817) 280.2011
28 Moreh 1988
M2:RCC:jkrn..029
Dr. Caries R. Cardoen
President
Industries Cardocn Ltdn.
Los Con uistadorce 1700 - Piso 22
Snticgo,, Chile
Doer Canoe:
It Is with sincere re~jret that Boll Helicopter Toztron, Inc., cannot work with
you on yo&w Single Station Crow Variant to the 20GL~3.
~ p~ ~oti~ nvoetod much time on your project, lVs felt by our
management- that required U.S./Ccru~an govornmcntaj l~ wcuj~ not
approve the calca~
You have already bean notifIed In t~tr. Z cn-r!d's rne~e of 2 March 1928
regcir~ng the otattr~ of yew' 222, end Bell IooIn~ forward to rceclvlag your eircrn.tt
at ow' Van Nuy's facility.
Based on your conversation with Ben Cle~ on 25 ~1arch, Boil will caned your
order for 206L-3 helicopter, S/N 51022, end return your deposit of $50,500.
Bell end I personally wish you maccoos In eli your future andenvors end look
forward to working with you again In the future.
Sincerely,
BE~94ICO~T~.xTRoN INC.
~nIotATico Pr~rsldent
,~øethierciei B~ain~
PAGENO="0867"
863
~ 525 -v - -- -
~WZ~RC0 C17~T2fl C~3?4F.'1H( ~tC. ________________________________________
1549'S ~(T~ NE~F L'~htE SOTT2~E~ ,7E~Mc .9 ..`C~...o ~ 9~
t1t7~1T t.A~C1, FL. 13014 __________________________________________
50-2453121 - ~
~f±~S CtR130E34 LTDA. A'?. 9.01 CC1SQUIST ORC~
17F0 PTCC) 29
E -
BNIC'3 5~D Abt~tCM!0
DR?rrrAco, CIt ILE
I24rE~?TATI DNRL FOTfIUAROtSG CO.
345 W. 74th Plscn, 01_josh, Fl. 33014 O9A
FMC: 7722 R0Ft 51223
c-~~ ~ wni~i't'. ~ UUOC Q#
P0297 OP fl0t~ LEA20 .
ff11. 29,9.11Th Rt72~ V.2900 POP'2 OF NEIl 0PL2~Uo. L7~.
VRLPRFJ9TIO. CRILE X~~3 D~O
.U2905 uCS. 900 SIF SCO2900t.E 0 909.03CR 99990039 - 590905035999953 (9.9099:09000.0.!
?tt!9CP3CF? 1~ND OP.CC1ICSthFT; ,~stb PARTO rrtot~or, u.s.P.
NOUXII.ITARY 4II1PL?T2929: OCED OR RIIUUILT.!.. 1 19291
AR A12019. D~ 6°4.402C3
1 fl2LICOP'~ER
1
2300 LOS
PRC~ED IN~1
400 CORTASItEP
SEAL ED.
03030*LU000SZ 59500t.
120. TItIU 41
pG4S663 sn4
22.24.994
7202-4
~S4S669
.~
2994.305300 ucUNO.
0-DEOT
.ICOP?EP
$ 490,000.00
2flo290eoS3flo.0~~00
U U.S 4.0$ 0303904000 3 USC. s.o. 305.22 U.S.C. 5.0. `02 :0 U.S.C.
Sm. 003. 50U5.C. !~. 22303. ____________________________
-~i
~
The Correct W~y to F:If Out the Sf3392909 s Soport 000t3r3t:0n :s avatLobte from the But-ecu of ho Census. W~,hrngtOfl. D.C. 20233.
PAGENO="0868"
864
`15200 CHARTEA CIMPANt
5485 EAGlE JEST l.AHC -~
1171 210
:11.50 LAKES, FLORI2A 31014 :PPEo3 115':
0 TIORDIR ORB 10 SOD A R I
I
FOR TUE APPLICANT I. . -- -~
I001STRIAS CARICIN ~ I~~' : * - -
11. LOS ~Jiw1':ST1IoRES ---.
P 502851 lAO C
------------~--:~-~------~-----------
V. SANTA RITA V.806 REM ORLEANS. LA. I.R.A. ~ -.. -
Sc ~- (,,._,
:
C 1253/88". PART 1x40' 4CONTAINER. 1 HELICOPTER ~~QL~lT~ 2.2O0Lss.~ SRI
24
1 6ELICOPTERO MARCA SELL 206-Li USADO
1981 SERIE 45593 CON T000S SOS ACCESORIOS.
I,... SHIPMENT FROM TEE PORT OF HEM ORLEANS. LA.
`AN ON BOARD ~` U.S.A. TO VALPAARISO CHILE. CONTAINER `;C.TRII 410111-
GOODS BULKS AND 00001-SENDS ARE MARKED "pc: SEAL VI.
CONT. NO. TRIU-4 0202-4 2333/88".
SEAL NO. 3845663 cod THIS TRANSACTION IS COVERED BY IMPORT LICENSE
3845669 NO. 068334.
BANCO SilO AMERICASIO IRREVCCASLE CREOCO 21O:f
18210474
SHIPPERS tOM: .STpwA~
BANKERS TRUST COMPANY NO. R724222
bUNT
NITED STATES LAS4 PROHIBITS ISPOSITION OF THESE CCHMODIDIES TO THE CCI-L'L'IST CHIEA.
`.010. HONG KONG.I COMMUNIST REAS OF VIET HAM AND LOAS AND CUBA UNLESS ~THERWSE AUTHCRIIIO BY
~S ~R.'5~9 ~ATESAcsj
M~GHT CHARGES PAYABLE AT:
~ ITEM NUMBER
BY
~CE*S~ScE:GcrCccR5EQ0N I .~.c
I / I -.
~="~==~. ~ ~
B
,~,
~
TOTAL CHARGES
PAGENO="0869"
865
ACREEMtNT
s a~rae-e~: ~s ~ade an e-:ermd into thz.s 2 ~ day a:
~ ly and de:'~ear.
::SR:As CARCCCN L~A., a lz.~uted company incorporated ur.:er the
a.s ci c:-)e, ~aiin; ~:z gs:ered offices at t.cs Cancu:cres
P:sc 25 San::aga, C~zile, heretnafter referred to as `tCl
c.::3r. r:::::Frz~ TZC:-~cLCc?, tNC., a Texas corporation with offices
a: S~CC ~ni:y Slvd., Suz.ta 101, Kt.zrst, Texas 76053, U.S.A., hereinafter
rm~'arrmc :cas
~HE~ZS, 1C zs ur.der:ak:ng the modification of the Bell Helicooter
4cce~ 2'6L-3 to oo:ain ar S..C. for the Cardoen Single Crew Staz~cn
::z.:y nel:ccp:er. This modif:cation to be accomplished an Chile.
~t~ZAS~ ChT as interested an providing the engineering effort and
caner program management as necessary to obtain from the FAA an S.~.C.
the Candoen Single Crew Station Utility Helicopter.
::~t~z~:sz, the parties agree as follows
* CCI and ChTC agree to enter into an agreement for desagn and
development of a single cre~w station in the Bell Helicopter ~4odel 2061-3
(Ion; Ranger).
* ChTZ is commited to obtain for ICI, art FAA-STC to operate the
Helicopter with all modifications descrived in annex 2 of this
agreement.
/ IA Dallas Field Of fi~è
A
~ N~, - /2 `~~~~-`-
PAGENO="0870"
866
Page 2 of -
ACREENENT
IC. AND c~crrI
* 0H1 agrees to conduct pilot ta~ning sufficient to
operation of the single crew stat~on a~r:raf:.
* GHT agrees to allow iCI one time use of the CHTZ pending S.T.C.
in mcd~fying the existng door to a sliding door config~rat.~.
~tion of ONT: S..C. ounerzhio must be octerved and a:piL:z::~
drawings will be returned to GHT at completion of door modifL:~n.
* ONTI would be ha~cy to work out a business arrangement with
in use of th~s S.T.C. on subsequent aircraft.
- PROVZSCNS TO BE P.WVZDED BY ICI
* Helicopter with all support requirements.
* gineer/Draftamen.
* Drawing to FAA standards.
* The Test Equipment available in Chile.
* Transportation and lodging for GHTI personnel while in Chile.
Article II - TASKS TO BE PERFORMED BY GHTI
* Provide necessary engineering dIsciplines conaistant with require-
* ments to obtain applicable FAA-S.T.C.
* Conduct and perform required meetings and/cr design revie~s
with the FAA.
* Prepare and perform applicable flight and instr-~mentaticn test
plans required -for submittal results to the FAA. -
* Participate in program review meetings with ICL on regularly
scheduled basis to assure contract performance accordingly
to intended cronogram (annex 1).
* Instrument the aircraft sufficient to record the required data
in accordance with approved teat plans.
* Conduct static/ground and flight teat as required for FAA-Sr. C.
* Conduct and perform an ENC- test in accordance with FAA require-
ments for all electric/electronic equipments on board.
* Assist Id. on flight manuals, eaintensnce and tec~'.nIcal document-
ation revision.
/ Dallas Field~Office
IA * Case No. _A44~ O P 9~i 1/
Date ~ / -74
I.-' Serial No. ~
PAGENO="0871"
867
"-C? Page 3 c:~
AGPEZ'Z~T
1C. AhO CHIt
prfor~ the requireo data reduction. analysis of the test results
and prepare and subm~t firal test re~ort to the FAA.
Prciide the instr~menat~On neces5ar:~ for execut~on of task
contracted exceo standard equipment that IC~ can octo~r. ~n
C~T: is commited to obtain the SIC approved by the FAA doing
all fl~gnt test ~n ChLle.
Art~c1e - Pr~ce
3.1 In consideration for the services to be rendered by CHIt. lCd
shall pay to CHIt a sum of $227,292.00 1~.S.D.
3.2 This price mentioned hereabove shall be paid am follows and
GHT will invoice based on these event3 and ICL wtll pay with~.n
seven (7) calendar days.
I. 534,094.00 at signing of contract.
I:. $64,399.00 at start of flight test
/ 11. $64,3g9.oo at completion and eubmital to FAA of aid
repports.
IV. $54,399.00 at S.T.C. approval by FAA.
Article IV - PROTECTION OF PROPRIETARY Er4F0RZ4AT:oN
4.]. Each party shall use and reproduce the Proprietary InformatIon
obtained from the other party exclusively for the purpose of
executing its obligations under this agreement and shall disclose
same only to its employees having a necd~to~kflow.
4.2 Each party shall refrain from disclomitg the Proprietary Inform-
ation obtained from the other party to any other person, without
the prior written consent of the said party; in such a case
the recipient of the Proprietary Information shall cause such
person to undertake the same commitments of protection of Proprietary
Information as set forth in this agreeaent. and shall for.'ard
to the second party a copy of any sucZ~ agreement. for approval
prior to the disclosure of any Proprietary Information.
4.3 During the time that either party t~ol~s Proprietary Information
obtained from the other party, it shall take all reasonable
measures and care in order to prevent any discloeui'e of same.
11/ 1 Dallas Field Office
$eri~! ~
PAGENO="0872"
AGRE~4ENT
ICT.. AHD GHTI
868
Page
4.4 The FAA S.T.C. approved will be the sole ~;erty of ICL.
Article V - t.IABILITY
* CHT will be resoonsjbi.e for any personal injury over his own
persortrier Mn~.le act~ng ~n Chile
* ICt. agrees Gh'TI shall. bear no reepcnsibiljty or ljl.~-,
the future for possible danages arising frcn the design a~
data used to secure a S.T.C. on the Model 2C61.-3.
Art~cl~ VI - GZt{ERAL PROVZ!:CN
5.1 This agreenent enters into force upon signature and shall. rerain
valid untj. all parties have performed their ebligaciors here-
under. -
5.2 Zf the program is determined by both parties agreement to be
impractjcaJ~ aridlor inappropriate, both parties agree to mutually
terminate the said program without further :cbljgat~on to either
party other than return of the parties respective property.
5.3 The present agreement is governed by the laws of Chile.
5.4 AU. disputes arising in connection with the present agreerent
shall be finally settled under the Rules of ConcilIation and
Arbitration of the International Chamber of Connerce by cne
or more arbitrators appointed in accordance with the Rules.
In witness whereof, the partIes hereto have, as of the date first indIc-
ated above, hereby executed this agreesent.
IyWCJ5TRIAS CARDOEN LT~A. GLOBAL HELICOPTER TEChIiOLOGY, INC.
Represented by: Represented by:
Name: G~Z.C.Lv1 ~ Name: CL e'~i ~ 1. ~
Title: ~ ~ Title: ~
Signature: ~ ~ ~
And by: * And by:
Name: ~4~fO `~` Name: ____________
Title: `~1~v0~7ic~. Title: ________________________
____________________ Signature: -Oallg~ FiC!d Office
-~ Case No. ~
Date -y~
Q~r~i ~r /5 ~.
PAGENO="0873"
869
C 345 West Seventy Fourth Place
II ~ Hialeah, Florida 33014 (USA]
Phone: (305) 825-8475
CHILE S.A. Telex: 221160 C(FCO UR
FAX: 825-8575
Consolidated international Forwarding Co. FMC 2722
M~O1CRANDtJM MR.073
TO c:~CC M::.~1:/~TT: MR. PATRICK ~JALSH
FROM CIFCO SCL
DATE : DEcEMBER 2.st., 1989
REP. INCAR HE~COPTR
This is to in~ocm you that via Lufthansa flight 519/30, we will
be shipping Carcloen's helicopter for final destination Dallas
The ~ain reason forusing Lufthansa for a transhi.pment inFrank~
furt ~s that the main piece doesn't fit in 707.
Anyway I'm attaching copy of breakdown of pieces with their
di~cnsiOnS and weights.
The main reacon why I'm confirming this to you , is that this
unit has to be returned to Chile by air freight also by Luf~
thansa, at negociate rate of (JSD 43.000.- if air freight co~
llect and USD 42.000.- if prspaid.
The person to contact in Lufthansa Dallas ~S Mr. Jens Juergen
StammnitZ, Cargo Manager and/or Mr. Ernie Bilg, Service Manager
or secretacy Ursula, Phone: 1 (800) 4427518
(214) 5742838
Fa:c : (214) 5741538
Aproximate shipping date for return will be february 15th., in
order to have helicopter on time on Chile for FIDA'90 (Interna-
tional Air Fair).
So pls. whenever you think it's conveniell , cc Ct ufthansa
people in order to coordinate the air fre g t ck Chile.
Best Regards
J S K. TR NCH
Latin America: FOIIEIGN OFFICES Europed
1901 C1FCONhndoIUfld Sp.dIt(on GMSH
Santiago. Chile 0.2800 Bremen I
Phene: 1561 (21 3517467.6-54 W. Germany
Fox: 150) (2) 2312681 Phone: (49) (421) 550844
lix: ~41O54 Fan: 551614 TIx: 245156 CIFCD D
PAGENO="0874"
870
245 West Seve~ty
- H)afesn. Fcrica
CHILE S.A. Te!ex: 22t tOO CFC3 j3
Consolidated lntemz~onaI Forwarding Co.
MEMORANDCJ! N' 039
TO: CIFCO MIAMI/ MRS. RAQUL CAST1000
FROM: CI?CO CH:L:
DATE: FED/3/90
3SF: CARLOS CARDOEN HELICoPTER.
I AM ATTACHING SO~iE P:CTUCES -~ :-o~:c:~ rot- NY APPREC:AT:
HOW WE STOWAGCD THE ME000PTER ON THE SPEC:AL PALLET
P7E,660, LONG 6,60 x H. 2,44, GROSS N. PALLET: 500 .t~.
IN ORDER THAT YOU CAN GIVE INSTRUCTIONS HON TO LOAD SAME,
WHEN EVER TINES READY TO SHIP BACH TO CHILE.
REGARDING COllISION LUFTHANSA CHILE WAS WILLING TO PAY
ALL COMISION TO CIFCO CHILE IN CHILE. AS WE NEGOTIATE
THEN ROUND TRIP RATE OF )JSD 79.000,00.-, BUT I THINK,
(ALSO FRANCO SR.) THAT THE HOST FAIR IS THAT I WILL
INSTRUCT LUFTHANSA TO PAY CIFCO MIAMI A 2.5% OF THE
USD 42.000,00.- PLUS HANDLING AND THE BALANCE ( USD
1.050,00.-) WILL BE PAYED DIRECTLY BY LUFTHANSAS
CHILE.
FINAL? AS INDICATED BY PHONE TO YOU WILL A?PREC:ATZ
YOU CAN OBTAIN SOME PICTURES OF THE UNLOADING, TRUCKING,
RECEPTION AT GLOBAL HELICOPTER, AS WELL AS SHIPMENT
BACH TO CHILE, WHEN THE TIME CONES, (AROUND FEB/15/90).
REG)~RD
tin America: FOREIGN OFFICES Europe:
CO Chile S.A. C)FCO Handel Und Spedllian GUSH
Prnvidancla 2633/0?. 1901 Lehnstedtsr3tr. 19
antlago. Chile 0.2200 Bretnen I
~ (569(2) 2517467.6-5-4 W. Germany
ax: (S6112) 2312681 Phr,nn: 1491 (`711 7fl5-t~
ix: 341654 -
PAGENO="0875"
871
-~--~---~..
Thc!~ -.
d
PAGENO="0876"
872
A'. ?RCV~CENc~ :~;~
C~:oA~31cd I:e ctal For.~arth~; C~.
PIN - `- __________________
NO.: -_________________________
TO: :`:::: A~AN/RA~::: C~ST:.Lo --
~TTN. -_________________________ -~
I~X TRA~S~I1SSIC?~
~ ~j
~ c~:os o.;~;c:~: Ns::c:TT:R
-__________________
-~ CcMPL:::sN:A~y ~ N:::c 5N0 YCtJ DAMS AGO,, o.~=s :s
CO?~ CF A~E 22O962.~C33 Cs LFONANSA. NCA?~C5~A;:s
C:Fcc :t:?.~: CCORL::ATss CLEARA~ACE O~ CF C~SCCIIs
-~ AND COORDINATES ONE LOWBOY :Rcc< FROM DALLAS AIRpORT TO OLOBAL
~- `~- HELIcOPTER ;~cJss , so PLEASE Do ALL NECESSARY AND SILL
"~- `i'- `~ EXPENSES DIRECTLY TO IXDUSTP.IAS cA~.COEN, REF. PCI ~333/SS.
THE ?ERSCM TO CONTACT IN GLOBAL ISQ~R. MIKE ROSlN~)OR HER SECRE
N, TAPY, MRS. MELLOW AT PEONE 817-2841212.
``ANY WAY, MR. CARLOS NIELSEN, INCAR ENGINEER, IN CHARGE CF THOB
PROJECT MILL ALSO SE THERE.
THE FLIONT 442 OF LIJFTHANSA WILL BE ARRIVING TO DALLAS TODAY
~ (O1.O~9O) AT 15:25 P.M. SO PLS COORDINATES BY PHONE WITH
/` ~., A?C~f'~/~EOPLE INORDER TO TAKE ALL NECESSARY STEPS IX ORDER TO
/ IN G~DBAL S ~L~tCE ~
PAGENO="0877"
873
CIFCOFPX MESSAGE~
ROM: CONSOLIDATED INTL FORWARDING CC. (CIFCO)
345 U. 74TH PLACE/HIALEAH, FL. 33014 U.S.A.
PHONE: (305) 825-8475/TLX: 221160 CIFCD UR
BOUR FAX NO.: (305) 3~S-9575@
TOTAL PAGES THIS FAX:
DATE: January 5, 1990
TO: CIFCD CHILE S.A.
ATTN: JAMES K. TRENCH
REF: STATUS ON INCAR - HELICOPTER
TEXT
COST FOR CLEARANCE OF HELICOPTER (CUSTOMS FEES, CUSTOMS BOND,
CUSTOMS ENTRY, PICK UP AND DELIVERY) OBTAINED FROM FRED HALL AND
ASSOCIATES INC. (CUSTOMS BROKES) IS: $4133.00.
HAVE CHECKED AMOUNT OF BDND. AMOUNT IS CORRECT, AND IS REQUIRED
BY STATE LAW. THERE IS NO WAY IT CAN BE REDUCED.
WE ARE SENDING CHECK FOR FULL AMOUNT VIA COURIER TO CUSTOMS
BROKERS TODAY, IN ORDER TO GET HELICOPTER PICKED UP ON MONDAY
AND DELIVERED TO GLOBBAL.
RGDS,
RAQUEL CASTILLO
CIFCO
PAGENO="0878"
874
CU3~CMKauSE Q~E~ NTE~AT1C~iAL FREIGHT FARGER.S
G-04-90 Q~ ~
ATTN: PA WALSH ~
FROW: RI K MO$LZY
RE: CHIL RELZCOPTZR
PAT:
THE FOLLO INC IS A COPY OF OUR BILLING GUIDE LISTING TEE
CHARGES B E OW THE EEELCO?TER TB GLOBAL HELICOPTER.
WE :-!UST H VE THE FUNDS IN OUR HANOS BY TOMORROW TO AVOID STTB.;GE
OF $45.00 PBR~±FFECTIVE WONDAY 01-08.
THE ENTRY HAS ~FOT CLEARED CUSTOMS AS OF YET, HOWEVER WI WLL
HAVE THE ELEA~E TOMORROW KORNING 01-05. WE MUST HARE DELIVERY
TOMORROW .AV4ID. STORAGE.
WE WILL C NIBACT THE DELIVERY OF THE AIRCRAFT AT A RATE OF ~I00.
PROVIDED LI. 7 CRATES WILL FIT ON ONE FLAT BED. (WI UNDERSTAND
FROM GLOB ,~ I~ WILL).
OUR P~YSI :ADDRESS IS AS FOLLOWS:
FRED HALL~ & ~S$OC~A~ES, INC.
8405 STER rN~,!SUXTZ* 102
IRVING, T ~AS 75063
OUR REFER NC~ NUMBER 31234
IF Y 11A11 ANY QUESTIONS, PLEASE CONTACT THE UWDERSIGNZD~
VICE PRES~
PAGENO="0879"
~,-
17) -~
I ~ ~
Customer Ref: _______________________
Bit. or AWB: ~ ~E~/ 2~T3 3__
Descript: ____________
~/~:~73~Y ~
(Invoice No. / Cuit. No.
-
Carrier:
Entry No:3//'CC ~3/23C/-~7
875
(Oats)
Entry data: _______________
*
Iendor
---~---
Vendor ~
D~acript~on
T/C
AOUflt
Duty 7~((~//~('~:, /7,?
100
-~
Ocean Freight
101
- -k------
Air Freight
102
Port Pee:
103
Insurance & Placement
106
Delivary/Pic3CUp
107
In-Bond Transit Fee
108
-~-4~-----
ii
- -k
Custom: Bond ~
(!~L&C~ /~c/~~'9~ &h~
-
109
~
~~6r~J
= ~
;~-
7/C
Descriptio~
Amount
T/C
Description
AEouflt
300
Customs Entry
gs~~e
315
.
(CL
COD Fee
319
Bond - FHLA
02
Add1 C1aa4
320
Transfer Doca.
03 Add' 1 rnvo4~ee - 321 C.~. S * C*
04 Spec. Mess~nqerj -
330 De1iVer~ FIUA
07 Other Govt~ Agency 35~f~('~S.
Out Po;t Cdord. - AE:a~ .
- -4------- -
10 Mess._CustcfrRel. ~
MESSAGE TO CL~1T:
~
~
PAGENO="0880"
876
Z~U L ~
~
-~ -: ~
z:~c:c~ ::;c.
~3co ~ .0:. S
76053 -.~:o: or
- -
CPCO c3I~ S.A. - --. - - - -: ~. -
- ~v. O7I0Z~c~\ G3~ OP 080. - -- - - -
~
çp~odoro \70~2ro florioo n~.t0~ 3~/77J~/~rW - - --~ *:-~- ~-- -
-~ - ~-
F0~7 ~ ?o~ La p~'~ r~ oa~ ~ix ~ - - - -. --
~S~S~) ILZ/9/30LE/442,021- ~
or~c::z6LocCz~o A0~0~ 00 . -
C~\NC.~ 0 000079 D~ 17 08 83
DEL~\
- ~~IcoP
~S~IZ 453~~191~
~~~5;.
Z:0,66x0,23a1,03 2$.~~:
3 0 56~ 4E~5 2 ~a
7 0 3S~ 62x1 1.5
- -
PAGENO="0881"
877
*, ~
~TALAJE CE KELICOPTERO
P~kir1E do Helicóptero Cardoen 206L-III trasladado a U.S.A. el que ccns~a
do 7 cajos y que a con~inuación so detalla ci contenido de coda uria de
alias.
CAJA N 1
Cuerpo central do helicóptero
Interior
1. 1 Antona OCR
2. 3. Eje mando rotor de cola
3. 43apas
4. Conjunto del teen de aterrizaje
5. Engine Log
6. Aircraft tog
7. 7.0.7. Indicator
8. Manual de vuelo
9. Certificado TrataMiento termico
10. 1. par de fonos
1 Rotor de cola
Historia3. de Helic6ptero
CAJA N' 2
Conjunto cola de Helicóptero
Los Conctisitadores 1700. Pi,~ 2~ - Fonos: 2313420.2314219 - 1*1cc 340997 INCAR C1(
SANTIAGO . CHILE
PAGENO="0882"
878
14 ~
CiJA N 3
2 Apas (~i~) d~ ~e!ic6ptero
CAJA N' 4
3 A1cta~ v'!rtica1c~ de He1~.c6ptero
CAJA N' 5
1 CQr&jur~t~ rnaot~2 d~ Te1ic~pt3x-o
CMA N' 6
Cor2junto estabilizador horizontal
CAJA N' 7
Corijur.to cubo rotor principal
Lo~ Consulst~dorn 1700 . 20 - Fono~: 2313420.2314219 Th~x 340997 INCAR C?~
SANTIAGO. CHILE
PAGENO="0883"
SWIESCO CNARTZR COMPANY iNC.
15485 EAOLE NEST LANE
SUITE 210
H.NI tAXES. FLORIDA 33014
879
. .-
SHIPPER'S RE?: MO 653
~NSOM( ~
SUD AMERI~i~Q 34S N. 74T:t pt~
:~02;~1~0
-
`SANTA RITA V.306 REM ORLEANS, LA. U.S.A.
it ARAISO cli
,IANRS ANO ~V'OE~H ~ OF P - QESC::PTIOP: OP
.,.2~R ~LN AL
CHAOE3 ANti 00006 QROSSwE;GsF M*NJM(UEN
`PCI 2353/88'. PART 1x40' CONTAINER. 1 HElICOPTER 2.300 LBS. 850 C3F~
I 1.043 NOD) 24 M')
- 1 HELICOPTERO tIARCA DELL 208W. USADO
1981 SCAlD 45593 CON T000S BUS ACcEsoR:OS.
EHIPHENT PROM THE PORT OF NOW ORLEANS. LA.
CLEAN ON SOAZOD U.S.A. TO VALPABAISO CHILE. CONTAINER N0.TNIS 4102~
GOODS BULRS AND DOdCZZSTS P.RE MAXXW ~ SEAL NO. 38 5663. 384S~
ODN. PlO. TRIU-4~02O2-4 2353/88.
SEAL NO. 38456631 ond TIlES TRANSACTION IS COVERED DY IMPORT LICE SE
3845669 ~ 068354.
/-S. I 3ANCO GOD AMERECANO IRREVOCABLE CREDIT NO
* ....L. 1923.0474
P.9.5 .L3~O, mACE & DANXERS TRUST COI'.PAH? NO. R724222
cO'-54T
0 STATES LAP~ PROHIBITS IDPOSITTOP4 OP THESE COMMODITiES TO THE COl .751ST CHINA, NORTH KORE
MACAU. HONG so.o.I COMMUNIST READ OP VIT NAZI AND LOAS AND CUBA UNLESS ~THERW1SE AIJ'TIHORIED DY
~L'BN UN9788 N8TA1t33R401$ 70DM MM~1M.S 475 -
FREIGHT CHARGES PAYABLE Ar: ~`r~ NUMEEB
OCEAN F~*DG$T C~4ARGt0 ON ~MM'o~ co~tC?
----.-`
75N~ABgWUPAOVICT.7NC.
S.E.L. MADUR (FWR)1)A), NC'~"~
~PtN1'~ ~p `4*
11111T
B
4, r**
~-
0
47
`~`
*00
I~
/ ~
P.
PAGENO="0884"
SHIV MOH.AN )WXXAR,
Defendant.
COMES NOW the United States of AmerIca, by and th.rough
Mike MCJcay, United States Attorney for the Western District of
Wa5h;Lngten, and Paula S. Bogge and Thomaa C. Wales, Assistant
United States Attorneys for the District, and the defendant,
SHIV MORAN MUXXAR, and tim counsel, Albert .7. Krieg.r and
John U. Lundin, (collectively, the ~PartL.s~) and enter the
following Plea Agreeaent pursuant to Rule 11(e), of the Federal
Rube of Criminal Procedure (the ~Pl.a AgreementS or
~Agroement"):
1. SHIV MORAN XU~AR having ben charged in Counts I~
XXIV of the Third Superseding Indictnsnt (the ~In4ic~nt)
agrees to plead guilty to Counts V and XVII of the indic~ent,
which charge him, in Count V, with exporting a DWC VAX 8700
I5!TW STATU A1T~1T
3$X Sisfirn P~tth A~ Pliia
Sssttle, MIhllgt Z104
(20) 442-757U
880
5. C-TEK Case
2 Judge Dwyer
3
4
5
6
UNITED STATES DISTRICT COURT
7 WESTEM DISTRICT OF WASHINGTON
UNITED STATES OF AMERICA,
Plaintiff, ) NO. CR89..247WD
V. ) PLEA AGRZEME~T
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
ruau ~ PLEA AGP.ZEMENT/MUXXAR - 1
~I*Ii} (521!~FS)
PAGENO="0885"
881
computer without a licence, in violation of 50 U.S.C. app.
2
~ 24 10(a) and 18 u.S.c. 5 2, and, in Count XVII, with money
laundering in violation of 18 U.S.C. 5 1956(n)(2)(A). SHIV
4
MORAN MUICKAR understands that the maximum penalty for Count V
5
is imprisonment for a period not to exceed FIVE (5) YEARS and a
6
fine not to exceed five times the value of the DEC VAR 6700
7
described in Count V (approximately $2,500,000), end, for
3
Count XVII, iznpriaoruuont for a period not to exceed TWENTY (20)
9
YEARS and a fine not to exceed $979,970. SHIV MORAN IfLJItIUkR
10
further understands that, subject to the provicioric of
11
paragraph 2 below, the actual sentence will be left entirely to
12
the discretion of the Court. SHIV MORAN I(UIUtAP. ecknowledgoc
13 that, other than the provisions of poragiaph 2 below, no
14 promises of any typo have been made to h4.m with respect to the
sentence in this matter.
16 2. The Parties agree pursuant to Fed. fl. Cnn.
17 P. 11(e) (l)(C) that, if this Agreement i~ accepted by the
18 Court, the sentence in this matter, as t~ imprisonment only,
19
shall not exceed 42 montha' izspriconmefltt~with credit for time
20 carved end for 54 days/year good-time earned in pretrial
21 detention (based on Duronu of Pricono' standard manner of
22 calculation), unloec SHIV i~oa~ rw~ c~n~itc en infraction
23 that would effect the Euronu of pnicons'calculation of his
24 1 good-time earned.
25 ~ The Parties further agree that the ~otal finn/forfeiture
26 in this matter nhcll total $1,500,000, w~iCh figure shall
(SITED ETATEE ATTtY
35O~ !e~fir3t Fifth Awnm Pieu
Dwttio, hirTIm (S1C4
~ ~u..; PLEA AGREEMENT/RUIKAR - 2 (25~) uh.7~75
~ (5219FS)
PAGENO="0886"
882
include the value of the DEC VAX 8700 (valued at $490,000 for
2 5.
this purpose), the $8,Zl,283.34 seized by the Government, and
3
the $90,000.00 currently in the custody of Robert J. Casperzon.
4
As to the moneys just specified in the preceding sentence,
5
SHIV MOHAN MU1~KAR agrees to substitute is~ediately equivalent
6
cash (;~.n U.S. dollars) if a ~ucces~ful claim is nade to these
7
funds by a third party.
8
The Government agrees to make a motion if neceesary to
9
bring this Agreement into accord with the Sentencing ~
10 Guidelines.
Subject to the express limitation on imprisonront
12 just specified, the Parties reserve the right to argue in favor
13 of differing positions as to tho apprcprLate of fense levels
14 under the Sentencing Guidelinec relating to the offenses to
which SHIV HUMAN MflUtAR is pleading guil~y. Specifically, SHIV
18 HUMAN MtIHAAR admits that, vhilo ho is guilty of the money..
17 laundering charge contained in Count XVII, ho reserves the
18 right to argue that the provisions of Sentencing ~uidoliaec
19 ~ 251.1 should not be applied to this cave; the Government
20 believes, and will, argue to the Court, that this provision does
21 apply. &IIV HUMAN XUX~AR also reserves the right to ar~iao to
22 the Court, as to Count V, that level 14 £5 the appropriate
23 unedjusted offence level under Sentencing Guidelines 5 215.1.
24 The Government believes that level 22 is~ the appropriate
25 unadjusted offence level under this provision, and will argue
26 this to the Court. ~s to each count, and the conhin.4 offense
~IITW 5~TAT~ A~T~T
~O Sc~fIrst FI~h ~
I Sssttl.. ~1~thçt~ C104
PLEA AGRET.XENT/flu7ir.AR 3 (~) 4C.7V5
(5219FS)
PAGENO="0887"
883
2 level, the Pertioo reserve the right to c~ppooI datorznientiona
by the Court that are contrary to the ponitiono outlined obovo.
3. SHIV MOFIAN MU1U~AR ogreec to forfeit voluntarily to
4
the United Statec any end all moniec and goodn identified end
S
alleged to be forfeitable in the Indictment end to teko
6
whatever ctops era necoccary to pace clc~r title to the
7,
United Statoc. Thece ctopc include but cm nmt linit~d to
currender of title, the cigning of ci conCent decree, a
9';
otipulation of facto regarding the trano~or end bade for the
101
forfeituroc, and cigning of other docure9tn neccoonry to
11
of fectuate ouch tranofero. It Ic hereby otipulated and agroo4
12 I
between the United Statoc and SHIV I~HAN MU1UZ~fl that the
13;
property cubjoct to forfeiture ac doocribed ciheve inciudeic any
14
and all of SHIV !4OHAM MURI~.AR'c intorect 4n the follc~ing
15'
prupurty: $851,283.34 previously ceined~and forfeited by the
16 United States as having pacced through beak eccounte of
17 John To~rncond, Robert J. Caisperson, C-ToI~ Computers, Inc., and
18 Computer Acquisition Specialists, Inc.; ~ho DEC VPiZ 8700
19 computer described in the Indictment; an4 the cun of $~0,0OO,
20 together vith arty and all accrued intcro4t, currently in the
21 custody of Robert J. Ceoporeon, which ho~obtained fran artothor
22 defendant vhilo cooperating with the Gov4rnnnnt.
23 4. Ac to all cach paynento specified in this Agrocnent,
24 the Government agrees to inquire of the t~nitod States
25 ~par~nt of State ~rhothor thoec funds i~ny be peJ.d to the
United States Embassy in Ne~ Delhi, india, in Indian currency,
L~ITE) STATES ATT~IY
1~ SmfIr~t F~ fth Il~o P1~z~
Sr~nIo. ~Mt~Tc~ Ei1~
PLEA AGnEEMEWrIM'JERAR - a (~) ~
(5219FS)
PAGENO="0888"
884
2 if the Government of India will not permit the transfer of
thes. funds out of the r.nuntry of India.
5. The United States agrees to move for dismissal of the
4
remaining counts of the Indictment as to SHIV MOKAN XUIXAR at
5
the time of sentencing. SHIV MOHAN MU~XAR expressly waives his
right to challenge the reinitiation of these charges if he
7
breachee this Plea Agreement.
8
The United States further agrees that no additional
9
charges will be brought against SHIV MOHAN MUIKAR based on
10
evidence now in the Government's possession and arising from
11
the acts underlying the charges contained in the Indictant,
12
unlesu SHIV MOHANMUXEAR breaches this Plea Agreement.
13
G. The United States expressly reserves the right to
speak to the Court at the tim of sentencing pursuant to
Rule 32(a)(].)of the Federal Rules of Criminal Procedure. The
16 United States further reserves the rightto provide to the
Court and to the United States Probation Office a statement of
18 facts relating to all the criminal conduct for which SHIV HUMAN
19 MUICEAP. was responsible; and further reserves the right to
20 correct and cousnt on any misstatements'of fact made by SHIV
21 MOHAN MUXKARor his attorney in the course of the presentence
22 inveetigation or in the course of the sentencing or other
23 proceedings. SHIV MOKAN MURXAR reaffirms his rights under
24 Rule 32 of the Federal Rules of Criminal~ Procedure.
25 The United States and SHIV MORAN KUFIAA acknowledge that
26 the above~.etated terms and conditions constitute the entire
.111W TrAit! A1T~Y
~X 3stfirit ~1ft5 Plus
- !~ttls, ~M151PIqt~ ~1O4
PLEA AGREZMEN'r/xuEy.AR 5 (~) ~
(52].9PS)
PAGENO="0889"
2
3
4
5,
6
7
6
10
ii
12
13
14
15
11
18
19
20
21
22
23
24
25
26
aIlED STAllS A1T~Y
3~OD ~flrst Ttfth A~ Plus
Sn~ttts. ~ 53104
(203) 442-7570
885
Plea Agreement between the Parties and deny the existence of
any other terms and conditions not stated herein.
DATED THIS - day of _________________, 1990.
SHIV MOMAN MW(KAR
Defendant
PAULA H. BOGGS
Asaistant United Statee Attorney
ALSERT J. nr~n~~r.n
Attorney for D.fsndant Mohan
THOMAS C. WALE5
Assistant United
States Attorney
JOHN P4. LUNUiN
Attorney for Defendant Mohan
PLEA AGUEXZNT/XUETJsE - 6
(5219PS)
fl
PAGENO="0890"
886
EXHIBIT 2
Judge Dvyer
2
3.
4
5
6 UNITED STATES DISTRICT COURT
7 WESTERN DISTRICT OF WASHINGTON
8 UNITED STATES OF AMERICA,
Plaintiff, ) )lO. ~RB9-247Wg
10 V. ) PLEA AGRED~ZNT
ROBERT J. CASPERSON,
12 Defendant. )
13,
14 COME NOW the United States of A~.rj~a (the 5united 5tates~ or
15 "Govlzrnment"), by and through Mike McKay', United States Attorney
16 for the Western District of Washington, and Paula H. Boggs and
17 : Tho~s C. Wales, Assistant United State* Attorneys for the
18 District, and the defendant, ROBERT J. CASPERSON, and his
19 attorney, Kenneth W. Sheraga, (collectively, the 5Parties5) and
20 enter the following agreesent pursuant to Rule 13. the Federal
21 Rules of Crixinal Procedure (the "Plea Agr.uent" or
22 "Agrrn.a.nt5):
23 1. ROBERT 3. CASPERS0N, now being charged in Counts I
24 (Conspiracy), II (conspiracy), III (exp~rt of Micro Vax II), VI
25 through XI (false state~i.nts Bade in connection with export of
26 DEC VAX $700), XII (att*tpted export of Tektronix 4225
URITE~ STATES A~0R2~Y
3600 Seafixit Fifth Avenue Plaza
Seattle, WA 9e104
PLEA AGRXEMENT/CAZPERSOH - 1 (206) 442-7970
(1658FP)
PAGENO="0891"
887
wor)u,tctiorto), an.I XVI through XXIV (money 1~undorinq) of the
2 ~°°~`~ p0mm~~~~g Indictment, agreoa ~o plead ~1~iity to each of
3 the coi~nte in which ho in charged. In thin regard, ROBERT J.
4 CASPERS0~ underatanda that the maximum penalty thet tho Court w.~y
S impeno upon hin pica ot guilty in ce
o coj~jLi MAXIflUN~IMPRI~QN~4~ MAXI,~UNIIRE
7 I 5 Y0~~ $ 250,000
o ii $ 15,699,700
9 III $(v~1ue of 5x5
Micro Vax
113 II'n)
Ii
VI $ 250,000
VII $ 250,000
`3
VIII $ 250,000
14
IX N $ 250,000
19
X N $ 250,000
10
XI $ 250,000
I?
XII $(valuc of 5x23
Tektronix
4225' 0)
`9
XVI 20 yearn $ 979,970
90
XVII $ 500,000
91
XVIII $ 500,000
92
XIX $ 500,000
93
XX " $ 500,000
9 1
ii XXI $ 500,000
XXII " $ 600,000
U~I~ZD SThTES Z~?~1~TEY
3600 Scat i~nt ?ifth Av~r~o Plaza
S~attlo, B~ 90106
(206) 442~7970
PLER ACRE ENT/CASPERSON - 2
(2658FP)
PAGENO="0892"
888
1 XXIII " $ 500,000
2 XXIV $ 500,000
3 ROBERT J. CASPERSON acknowledges tb.at no promises of any type
4 have been made to him with respect to the sentence in this
5 mattor.
6 2 * ROBERT J * CASPER.SON egress to forfeit voluntarily t~ the
7 Unitod States any and all monies end goods idefitified in the
8 Second Superseding Indictment. It is htreby stipulated and
9 agreed between the United States and ROBERT J. CSPE~O)~ that the
10 property subject to forfeiture as described above ccnsist.s o any
11 and all, of ROBERT .7. CASPERSON'5 interait in the following
12 property: funds -- approximately $800,000 - previously seized
13 and forfeited by the United States as having passed through ban)~
14 accounts of ROBERT.7. CASPERSON, C~Tek Computers, Inc., and
15 : Computer Acquisition Specialists, Inc.; tna DEC V&X $700 computer
16 described in the Second Superseding Indkctmant; and the sum of
17 ~ together with any and all acc~4~ed interest, currently in
the custody of ROBERT.7. CASPERSON, which he obtained from one ot
his co~d.fendants while cooperating with the Goverr~ent. The
20 Parties further stipulate and agree that ther. shall be no
21 additional, forfeitures imposed an ROBERT.7. CASPERSON;
22 Susan Casp.rson, his wife; C~TeJc Computers, Inc.; or Computer
23 Acquitsitian $p*ciali~ts, Inc., as a result of the conduct of
24 ROBERT ~. CASPERSON, based on evidence now in the Government's
posseosion relating to, or arising fro*~ the events underlying
26 the Sucond Superseding Indictment.
UNITED STATES ATTVRSEY
3600 Seafirst Fifth Avenue Plaza
Slattie, WA 98104
PLEA AGREEMENT,'CASPERSON - 3 (206) 4427970
(L6Sarp)
PAGENO="0893"
889
3. ROBERT J. CASPERSON ogroon to coo~OratO fully with the
2 united Stataa. Thin cooperation ahall include providing the
3 GOVO~I'BCflt with all truthful inforaati9fl known to bin rolating to
4 the chargon contained in the Sccond Su~orncding Indictn~rnt and
5 tontifythg fully, coeplatoly, end truthfully before any Grand
s Jury or at any trial or retrial at whic~b thin tantinony in dooaod
7 noconcery by the United Staten.
5 4. In exchange for ROflERT J. CAS~P.SO~3'$ eqroeRO1~t to plead
9 guilty end to provide full end truthfu]~ cooperation, tho
10 United Staten aqreoo that (1) it will ~rthg no additional ChST~OS
banod on evidence now in ita peocecoioi~ relating to, or arising
12 f roe, the ovanta underlying the Second Suparooding Ind~Jatnont;
13 (2) purnuant to Sentencing Guidoliflon 181.0, it will ~ot una
14 neif-inerimincting information that hcii~ been and tYill b~ provided
by ROBERT J. CASPERSON an part Of bin ~li~ntiofl to cooperate--
10 and which wan not known to the Govornnc~flt prior to R081~tT J.
17 CASPEPSON'S cooperation coxauancing flaz~h 31, lOC~~for any
purpone, including determining the app3~icnblc guidalino range
19 under the Sentencing Guidelines, oxccp~ in a proaccution for
20 perjury or giving felon statceonto or 4' the event ROOEPT J.
21 `~ CASnaOU brnnchco thin Plea Agroeront~ and (3) it t5ill recommend
22 to the Court at ncntencing, purcuarit t~ Sentencing Guidelines ~
.1, that the Court depart from the +idolintX) and nentenco
24 ROBEI~T ~. ~ to a aentonce bo1o~ the range ethorUica
20 applicable to bin cane, an may be doceT appropriate by the
20~ court.
~7RX~T3D ~`i~Z~T~3 A?POR~1ET
3600 Soafi~ut Pifth Avenue' Plaza
~~aettlo, ?IA 00104
PLEA AGUZEME~4T/CASPERSON 4 (206) 442~7970
(1658FF)
PAGENO="0894"
890
1 5. RODERT 3. CASPERSON expressly understands that the
2 Oov~rnmsnt'~ obligations under this Plea Agrseacnt are
3 conditi~cd on hic complete end truthful cooperation arid
4 performance of him other obligations under this Agreement.
S ROBERT J. CASPERSON further understands that this Agreement will
6 provide him no protection whatever againet prosecution for
7 perjury or making a falce statement in connection with his
5 testimony or other obligationo under thLs Agreement.
9 ROBERT J. CACPEPSON recognisoc that, if this Plea Agreement
10 is breached, the United Staten expressly retains the right to
11 withdraw from thin Agreement and to prosecute fully all criminal
12 violationc cotablichod by the cvidonco, including perjury,
13 subornation of perjury, and obotructionjof justice.
14 ROBERT ~. CASPERSON oxprencly waivc~ his right to challenge
the initiation of additional chargen agi~inct him arising cut of
16 the obove-dencribed conduct if ho brcecttec thin Pica Agreement.
17 5. The United St~tcc oxproncly rocorven the right to cpoa)~
18 to the Court at the timo of nentoncing purmuant to Rule 32(a) (1)
19 of the Federal Rube of Criminni Procedure. The United Staten
20 further rocervoc the right to provide to the Court and to the
21 United Otateo Probation Office a otate~nt Of facts relating to
22 all the criminal conduct for which RSB!T 3. CASPERSOB was
23 reoponcibbo; and further renorvon the r~g2tt to correct and
24 comment on any misstatements of fact mache by ROBERT J. CASPERSON
25 or his attorney in the course of the sentencing or other
26 proceedinge.
WilTED STATES ATTORNEt
1 3500 Seafiret Fifth Avenue Pl~Z~
Seattle, WA 91104
PLEA AGREEMENT/CASPEP.saw - 5 (206) 442-7970
(1651FP)
PAGENO="0895"
891
1 7. The United Staten end ROBERT ~. c~?ERsQII have
2 pravicuely reached agroonante outlirtoci in lottoro dated March 3].,
3 198P~ Juzio 30, 1BOS; and 8optoc~er 22, l98~. Thcco lcttorc arc
4 attzichcd hereto ac Exhibita A, B, and C, rcopectivc3~y, ~tn~
B incorporated heroin fully, except incofar an they ore
6 inconniatont with thia Agroenont, in which eeoc thic Agrcoeent
7 shaLl control.
0 0. The United Staten and EOBERT J~. C1~P~SOM nc~owlodgc
9 that the abovo-atatod tor~c and conditi~no ~~ituto the entire
10 Plea Agreement botween the Partion and ~ony the c~icti~nce of any
other tome and conditione not ctatcd
.12 DATED THIS day of ___________ ______, 1DEO.
13
14
~ ROBERT J. CASPERSON PM~Q~E.
Defendant Anciatant ~nitcd Statec Attorney
10.
17 KENNETH W. SHARJ~A -- THOHM ~
Attorney at Law Ancintant nitad Staten Attorney
1~
20
21;
22
23
24
25~
20
UNI~ED 0TA~ A~I'0RSEY
3600 Setifi~St ]~`ift.t Avew~cpla~n
Sóettlo, ~1A 90104
PLEA AG1~EE1'1EHT/CASPV%SQN - 6 (206) 442-7970
(].6S~PP) I
PAGENO="0896"
892
EXHIBIT 3
The attached docu~entis Mohan's "wish list~ of e~ipnent and
the prices he was willing to pay.
PAGENO="0897"
893
F~X COVER S~EEL
TO: ~ ~
FAX ~:
FR~1:
DATE: TIt~: /~:~
CUR FAX #: 26-~1-8~84
No, ~ PAGES: fO (Dlc. mis `~)
Oi4~/~I
IL:$ i.S~ 4 ~ c1~1
~ / ~ .i~11d
- ç'J~ ~7 ~. C,". ~
~r /,~ti& -rL~ pcc..~s 11,Z~t g~~:
Lix1~J AD C Q~T~ f~ ~ ~ic~
Q~r ~ U.S. v. SHIV MORAN
CAUSE ~~_~7wn
PLAIN11FF
~4flN.E~ 124th St. EXHJB~T
-i(Imland, WA 98034 ADM3TIED____________
206-823-5563 .
51-840 0 - 92 - 29
PAGENO="0898"
LI E~C R I? t ION
LIE LUA-N
H4005 TRANSCEIVER
TRANSCEIVER CABLE BNE3H-jQ
$ BNE3H-20
$ ?NE3H-40
O!ZMPR HULTI?0RT REPEATER
LIESTA-AA STATION AOAE'TER
BC1GH-3(; THIN WIRE ET~1ERNET CAE'LE
a S S a
BNE2A-tiC COAXIAL CABLE 117M
EINE2A-ME 70~j
~INE2B~,1C 117V1
BNE2B-MB ` ION
BNE2B-'NA * 23?1
tEREP-AB RFPEATER
E~ECSA-EA ROUTER SERVER
LJC~AX-LA 4 LiNE SYNCH R5232
UebAX-LC 2 LINE ASYNCH RS232
BC17L-04 CABLE
DC17F-25 CABLE
L'EeNkI-Ljos EUR P5/2 QVAOS-A1
bECNET-vAx 00004-NM
DECNET-1]pi+
L'ECNET ROUTER SERVER 0P725-HM
ETHERNET INSTALL GUIDE
NETSIART PLUS
ETHERNET iNSTALL TOOL KIT
TRANSCE1v~ iNSTALL TOOLKIT
BARREL CONNECTORS
TERN INATORS
PRICE u~
3, 400. OC
199.Q(
99.0(
135.O
~ 94~.C~
270 . CC
29.O
22.O(
I ,464.
974.O
83C~.0
5~G. CC
230.0(
1 ,7~0.0(
8,~OO.OC
1 ,bSB.0(
420 .0C
48.00
12~.OO
460.00
1 ,925OC
549 a
37.0C
37.
12.0(
ç~;:,~) ~49
894
ALL P~z~a.s
~
QUA r~t 1TY
32
14
B
10
S
a,
3
S
4
4
5
6
6
4
1
1
1
1
2
40
2O4~'
PAGENO="0899"
895
ETHERNET TURNAROUNZI CONNECTITh H8223A I 12.00
ETHERJAC)< t$EXJI~ 30 33~00
THINWIRE T~CCJNNECT0R AN!.' BOOTS H8223A 20 12.00
THINWIRE TE~MINAT0RS AND LOOTS H822~A 8 .12.00
ETHERNET TESTEJ~ 1
F~S/2 SOFTWARE COSMOS/M STRUCIUI~AL 2
kESEA}~CHAND MAINTENANCE SYSTEMS
MSC/PAL 2 V 2.0 MACNEAL SCHWENL'LER C0~P 9
205C ~3(~96
PAGENO="0900"
896
UUANTITY
1~A23-AR, RAG3u, F?, 16~iB, t~0, TOIC~0
TUI~0, tiF0rJA-~i, C!:-LiEUNA~~~, TRILIM H9646
0Z004-HZ MED ~ DOGS
MV2000, F?, Rti~4, 6Mt',.5A40, [`E~TA-AA X 3
r~5o + ~ Box, Rt~4 I~X? ~ox
TE~TRONICS 4325 ,19' 12R0 X 1024 RES 01SF' X 16
oPrION9 3A, lo, 4200F2A, 4~O04M, 4300F3E,
4200FUB,
OPTIONAL ACCESSORIES; SERVICE MA4UAL,
DISPLAY CALI~RAT~ON GRATWULES, GOFTWARE
PORTING GUIDE, GRAPHICS PROGRAMMERS REFERENCS
IJTE~ COMIIANI' REFERENCE, IJTEF~ TOOLS,
C REFLPE~NCE MANUAL, X WINDOWS REFERENCE
NFS ~EEEI~F.NCE
TA~sLET SIJiItIAGRA?HICS, 17 X 24' X 16
VAXSTATTON I1/f3PX (SV-~VXG~-~N X 4
TABLET GRAPHIC TECHNOLOGIES CO. X 4
0113)-f'AD TYPE S OR 5A ~2' X 18'
EMULEX OD3~ (MSCF') X 7
I?ORMATTING I DIAGNOSTIC SOETWAHE X 1
EMULEX CVX ~51804-2 ON TK~O
NEC 02363 DISK DRiVE WITH 3M CABLES X 14
EMULEX TC03 TA}'E COUPLER X 6
KENNEDY 9600 TAPE DRIVE WITH 3M CABLES X 3
-t$EQA TAPE 111750 CARTRIDGE STREAMER X 3
EULL-WIDE CONFIGURATION WITH 3M CABLES
DSRVC-4B DECROUTER 200
DOCup,EP4TA:r ION ~ SOFTWARE
DSRVBAE. DECSERVER 200
DUCUIIENThT ION I SOFTWARE
L'NE4C-l5
H4000
1'ESTA~.AA WITH CO~4NECTQR
X4
X2
X 20
F'RICZ uso
X 7 22,823.00
14,708.00
ci ,000.oo
:3, 150.00
23,990.00
1,700.00
19~.00
1 ,~iO.0()
4, 500.00
14,OSt,.00
3,000.00
421.00
X 2 2V5.00
X 14 290.00
2051
p. `~- `is"
X 1 4,788.00
PAGENO="0901"
897
EMUL.EX CSO9/CP09 16 LN ASYN PULL MOO~M X 6
ABLE P1UXMASTER WITH rJHV EMULATION HOST X 1
B LINES X 1
RACAL-VADIC 9GOOVP MODEM X 6
C-ITOH CIT-326 240V NTH AMER KEYBOARD X 48
WHITE PHOSPHOR
Ig~.T~0NIX~.42O7~ITH OPTIONS. ~ XB
TA8IJT. 4557 `7 -
DATA PRODUCTS B300 WITH ACOUSTIC CAB X 1
WITH 0-BUS CONTROLLER
STEEL PRINT BAND 2500410228 X 2
250529-0~2 PROM
STEEL PRINT BAND 250134-049A X ~!
2~0G48-049 PROM
UZOO4-H5 X 1
VAX/VMS SERVICE EOR MS-DOS 0ZA93- X 1
REMOTE SYSTEM MANAGER(RSM) FOR SERVER X 1
AND CLIENT SYSTEM QZB13 $ QZB14
LOCAL AREA VAX CLUSTER SOI~TWARE (LAVC) X 1
QZ-ZCE
TERMINAL SERVER MANAGER/VMS (TEN) X 1
02-Z42
NNCC/VAX ETHERNET QZ-514 x i
ENGiNEERING DATA CONTROL SYSTEM (EDCS) X 1
(AZ-SiR
VAX DATA DISTRIBUTOR W/RUN TIME X 1
ENVIRONMENT (IZ-Z96
VAX LISP V 2.O,,OR LATER `2Z-917 X 1
VAX SESSION SUPPORT UTILITY (SSU) X 1
OZ-ZAV
THINWIRE ETHERNET CABLE PVC 1000 FT. X 5
210 .00
1,100.00
3,700.00
1,895.00
800.00
550.00
~5,7SO.Q0 ,
4,7~54.0O
243.00
243.00
3. 9')5. 00
6~0.00
2, 096 .00
2, 485 * 00
9,908.00
12,821.00
5,990.00
5,488.00
719.00
PAGENO="0902"
898
VAX X-UAY QZ-729 X 1 2,39~.00
EXECUTIVE SOFTWARE INC DISKIIEPER ~`OR X 1 9~i.0O
VAX/VMS
RAXCO R~BE4IT SOFTWARE RABBIT-5 X 1
ARCHIVING BACKUP
RAXCO RABBIT SOFTWARE RABBIT-7 X 1 9~)5.O0
VMS DISK OPTIHISER
VAX RALLY QZ-A8C, X 1 17,995.oo
VAX TEAM DATA OZ-741 X 1 5,040.00
LET'S C NOW BY REX ~AESCHE, 2 VOLE x 2 60.00
PRO~'ESSIONAL PRESS
INTRODUCTION TO VAX/VMS BY TERRY X 2 50.00
SHANNUN PROFESS 1Ut4AI. PRESS
VAX/VHS INTERNALS $ DATA STRUCTURES BY X 2 50.00
KENAN L.J & RATS S.F. DIGITAL PRESS
THE DICITAL DICTIONARY BY ROBERT E. X 2 50.00
MURROTTA LIII3ITAL. PRESS
DX-ZNAQ1'~C5 MUAX II DIAUNOSTIC ON TKSO X 1
DX-ZNAAA-CX MVAX II HARDWARE DUeS X 1
GENESIS (ENCODE TECHNOLOGIES INC , X 1
12, COTTON RD. NASHUA, NH06063, (~ARY
GUY (603) 882-1666)
-NC PROGRAMMES (NC HICROPROUuCTS. INC., X 1
* 3333 NORTH CENTRAL EXPRESSWAY,
SUITE 380,RICH*RDSON, TX 75080,
RAY WHEELER C~14) 234 6655
ENULEX QD33 X 1
EMULEX TC03 X 1
HOC CARTRIDGE POE HTI5O X 100
TK5O-I( DATA CARTRIDGE FOX TKSO X 20
DEDNA-M X I
* ~ 2O~
DELLIA-M X 1
~ Q.
PAGENO="0903"
RRON ____________
899
I ~
24
7.j
~ L
~ 1
9 ~ ~ *c#~e* C.t'~g~
`1.7 ~
~Z~r~4~5 5.0 Vti~
W~:~ r'w~ ~
dei.ivecy
25~ 2~
I,
I'
15I?c~ (,
/qo~ 5T9c~
~
#4
zil/* * * is
~ ~To~M
Is.
7q9s~ ~
~~OOo~ `Q ~
* II
`4
~qo~ `I
I2~Q .
iqqe i~
~
1i9o ~rc
-.
f4IçQ.. ~
*/07$' Z (ji.
2054
~
0*
ALL ?OLLO~4ING £QUIPMEN~ IS NEW.
~.E,C ~3OQZ~A3. MICrCV~ II
sys~sm OuHding ~.1cck
D.~.C Ms6~3O~CA, 0mb Memu'y *
Na~sem~ NS638~IM. 8mb Memory 27oo
D.Z.C I~ZQ~(A~M. Ethernet Contrc~1or
~,3.C CX~OEQNA-~C?, Cabinet Xit
O.E.C ~$E3X-~O, iom Cabie
D.E.C ME3ZC-'2O. 2Cn~ Cable
D.!.C BNZ3K~'4O, 40m Cable
D.E.C RQ1~X3~~AA. Q ~
D.~.C RX33A-AA. ,2mb Diskette ~r~vtE
DE.C RX33A~'A3, 1,2mb Pi~et~o Drive
* Emuiex QP3~, Ccntrci.ier
?u~it~*.~ M2361A. 5ec~mb Diek ~ive
Fijiteu M2442AC, Tape ~rive
Eauie~ TCO3, Contro1~er
* Sigma L~RV-l6, Mi'~ipie3car
* c~(.DHV~16. CabInet X~t
TRIMM 59046. T;im* Cabinet
D.E.C QZOO1-44Z. Twe ~aer
D.?~.C OO~R!, Doe. and Media
* ~.E.C ZNAA~'C~. ~Ltàga and Manua~ (inei.
~
PAGENO="0904"
900
PROs ~
`I Q'I~Y ZC~I?T~0~! ~
D.~.C 63CQZ~A3, M~'QVax z: 1Z'~2S~ 2~eelc,
System Building Block
2 D.~.C M5t330-CA, 8mb Me~cry ~ ii
~ 2 Natsami NS63I~8Z1, 5mb Memory 2.7~ ~
~ 1 0.E.C DEQNA-~4, ~t~tern.~ Ccritro3..tsz' I5~'tS~
`~ 1 D.Z,C CX~Dtt~8fAK7. CabIr~e~ ~Ut i'jo~ 5~%~Q,J~
~- 1~ D.~.C BNE3ICI.C, 1Cm Cable
D.g.C 3NE3~20, 20* Cable ~ ~
Z 1).1~.C 3?(3~C-4Q1 40m Cable 2.i~ ~
1 D.i.C ~QDX3~AA, Q5~* CCZ~t2'O1l.z' j3~o~ ~
`3:~ 1 1~,E.C RX33A-AA, r. 2mb ~iskette Diiv. ~
~ I e.E.C ~I(33A'A3, 1.2mb Disks~s Drive
1 EmuIex QD33, ComtrcjU.r . is~ f'-~k
?ajltsu M2381A, 190mb DImk DrivE 5I~~?~'~ ~ /1
?ijitau t~2442AC, rape Drive
1. Emulex TCO3, Contz'oil.r
`~ 1 Sigma DMV.16. uittpi.x~r
~ 1 Sigma CX-PMV-ie, Cabinet 2Cit (qQ~
T~ZMM H9546, Tr~mm Cabinee /~4~ ~
o.~.c ~zco~.vz, ~wa ~ae; lia.nc* ~
~L 1 II.E.C QZC0'~fl5, Doc. and Mad~a
I D.E.C VfAA~C8, Diags and Mariua.1 (mel. ~
L4~ 2 D.Z,C v'r220-F3. V.D.~' q'7o~ qi4i0~ ~
1 D.E.C O$L~f~AA, £I.A.N IDtRr~ac* ji'~,o~ ,....~
:~ 1 D.~.C DIL~7AAA. !tbá'n.t :nterfa~ ~ n
21'L I .D.Z.C U30-AA~ 95mb rap. Drive aJo~ ST~*
~ ?~IC50-AA, Co~trcil.r
p21' ~o *~.g.c TX80-'~. Thp. Cartridge 31 ~
3.. ~ ~ ~
I ~ ~
2O5~
~- ~
PAGENO="0905"
901
?5~
~ ~!.2 ~
~!sC~Ip'rroN ~ _____
D.!.C 630QZ-A3. Mir~v~x II
Sye~Cm 1i~d~ng 3~ce~c
~ M~83Q~CA, ~mb Memo~'y
NAtsemi NS638-1M1 8Mb Meir~ory
D.LC C~NAM, £ther~et CQn~z'ofler/ri,~s~ ,`1
D.Z.C CX~D~QNA~ICP, C~bi~iet Kit rno~- STod)
D,E.C 3NE3~-1O1 lOrn Cable
D.K.C RQDX3-AA, CQn~Z'O11er L35o~ sro~
D.~.C RX32A'AA, Disk Drive
D.LC RX33A~AL ~.tak Drive 3
Eaulex QD32, Cuntroller
~
1'- A ~b io,j~- ft ~zs~ ~
s'~ Mb~ ~
Me4~t
~k~'t a~e % ~
~*Je Nee~* ~t~ø ,~
~ %4~~L 4,d~k *f~ I$Q~ ØU~ ~e,ce.
`U 3ø'e-~ Q,wJ iJ~~
.~ ~.1*, ~
*" %~I ~
205C
~
PAGENO="0906"
902
EXHJBIT~
The attached document is a declassified intelligence cable
which describes a distribution system set up to import western
electronics/computers from the United States through India to the
Soviet Union. This cable describes exactly how Mohan operated
his purchasing network.
Note that the Soviets pay cost plus 33 percent for the
equipment.
PAGENO="0907"
PAGE:000 1
005 138MIDB
UPID
903
INQUIRE~D0C2D
ITEM No:001169813
ENVELOPE
5T~T~ 5722 0000000ZM R
S
lEADER
~ff~Yuw RUEKJCS5722 0971921_SSS5__RUEALGX.
ZNY SSSSS
R 07192~lZ APR 87
FM JCS WASHINGTON DC
INFO RUEADWD/OCSA WASHINGTON DC
RUENAAA/CNO WASHINGTON DC
RIJEAHQA/CSAF WASHINGTON DC
RtTEAIIA/CIA~ WASHINGTON DC
RUERC /SECSTATE WASHINGTON DC
RUEAMCC/CMC CC WASHINGTON DC
RIJETIAH/DIRNSA FT GEORGE G MEADE MD
RUEACMC/CMC WASHINGTON DC
RUCQAAA/IJSCINCCENT MACDILL AFB FL
RUWSAAA/}4.AC INTEL CEN SCOTT AFB IL//INO//
RUETIAQ/MPC ORGE G MEADE MD
RUEALGX/SAF~ (.
E~ O7161~Z APR~87
Vl'O RUEEJCS/DIA WASHDC
INFO RUEKJCS/DIA WASHDC//RTS-2B/DT-53/OA-14//
RUSNNOA/1JSCINCEUR V~IHINGEN. GE//ECJ2//.
BT
- cONTROLS
SECTION 01 OF O2/~'~
hR J0182 87
Lu.'..
USSR INDIA (IN).
~ ,~182 871 T~CU~OLOG! TRANSFER
DISTRIBUTION SYSTEM/
(U) THIS IS AN INFO REPORT, NOT FINALLI
EVALUATED INTEL.
7~ 87O~
SERIAL:
BODY
COUNTRY:
L..
WARNING:
L. EDO!:
~REQS:
SU?*(ARY:
1 THIS hR DESCRIBES A DISTRIBUTION
PAGENO="0908"
904
-J FAG~:QOO2
/
ADHIN
~PROJ:
jCOLL:
J IHSTR:
~ PREP:
D~ APPR: *
~ARNING: WARNING NOTICE-INTELLIGENCE SOURCES ~
- AND METHODS INVOLVED
DE~L:OADR
15722
PAGENO="0909"
905
PAGE: 000 1
INQUIRE:DOC2D
ITEM N0:00~46982O
ENVELOPE
5722 0000000ZM R 0051414M1D3
S JPID
HEADER
i~FfUW RUE~JCS5722 097 192Lt~SSSS_~RtTEALGX.
ZNY SSSSS
R O7192~Z APR 87
FM JCS WASHINGTON DC
INFO RUEADWD/OCSA WASHINGTON DC
RUENAAA/CNO WASHINGTON DC
RUEAHQA/CSAF WASHINGTON DC
RtJEAIIA/CIA WASHINGTON DC
RUEHC /SECSTATE WASHINGTON DC
RIJEAHCC/CMC CC WASHINGTON DC
RUETIAHIDIRNSA Fr GEORGE G ~ADE MD
RUEACMC/CMC WASHINGTON DC
RUCQAAAIUSCINCCENT MACDILL AFB FL
RUWSAAA/MAC INT~ CEN SCOTT AFB IL//INOI/
RUETIAQ/HPC FT GEORGE G IADE MD
RUEALGI/SAFE
~~71~13Z APR 87......
~TO RUELICS/DIA WA~DC
INFO RIJEICJCS/DIA WASHDC//RTS-2B/DT-5B/OA-4//
RU~ ~IOA/USCINCEtTR VAIHINGEN .GE//ECJ2//
BT
CONTROLS
J SECTION 02 OF
____4~ERIAL: \\ IIRF ~O182 87
COUNTRY: USSR (13W); INDIA (IN).
~~~JHJECT: ~JJ~ 0182 87 TECIP~0LOGY TRANSFER
PAGENO="0910"
906
FACE :0002
SYSTEM WHICH IS SET UP TO IMPORT WESTERN ELECTROUICS/
COMPUTERS ThROUGH INDIA TO 7~ SOVIET UNION.
TEXT:/
1. / TNE FOLLOWING TEXT DESCRIBES A DISTRIBUTION
SYSTEM WHICH IS SET UP TO IMPORT WESTERN ELECTRONICS-
~0UGH INDIA TO THE SOVIET UNION. THE SYSTEM INVOLVES
THEEE ELEMENTS: THE FINANCIAL BACKER, THE CONTRACT
SIGNER AND COORDINATOR, AND THE INDIAN IMPORTER/EXFOETER.
2. . THE FINANCIAL BAC~R IS DR.S. ((BOSE)),
WHO OWNS/RUNS PERFECT TEC}~ZOLOGIES LIMITED (ADDRESS:
34 RAVENSCROFT AVENUE, LONDON, NNI1ORY, TEL: (01)
455-1342 OR (01) 209,1278, TELEX 918093 PT!. LDN;:
HOTEL INTERNATIONAL 2, APT 937, ~ASNOPRESNEN5KAYA
NALE. 12 MOSCOW, TEL: *253-29-37, TELEX 411432 CO~Q1 SU).
DATA ON DR. S. BOSE ARE AS FOLLOWS:
-INDIAN NATIONAL IN HID-40'S WHO USES TITLES M.D. AND
PH.D. ON HIS BUSINESS CARDS.
-EXPORTS BIOMEDICAL ELECTRONIC E~UIP~T TO USSR~
-HAS WORKED FOR (POSSIBLY CREATED) PERFECT TECHEOLOGIES.
FOR TWO AND ONE HAL.F YEARS.
-PREVIOUSLY MANAGED CALIFORNIA TECNNOLOGI (OR TECNNOZ.CCIES)
INTERNATIONAL TRADER (OR TRADERS) IN PALO ALTO,
CALIFORNIA. - THE FIRM IS NOW CLOSED/OUT OF BUSINESS.
-HAS ASSOCIATE FIRM CALLED TECNNICON IN VIENNA,
AUSTRIA.
3. * THE CONTRACT SIGNER/COORDINATOR IS DR.~
S. C. ((ROY)), WHO RUNS OR WORKS FOR CAPSTONE LIMITED
(ADDRESS: 2 CAMBRIDGE TERRACE, DOUGLAS,- ISLE OF MAN;
NIKITIVSKAYA TJLITSA 2, Ky; 2, MOSCOW, TEL: 165-05-88).
DATA ON DR. ROY ARE AS-FOLLOWS:
-INDIAN NATIONAL IN MID-30'S.
-HAS SUPPLIED COMPUTER AND DISC DRIVES TO SOVIET
FOREIGN TRADE ORGANIZATION (FTO) ELECTRAUORGTECHNICIA.
-HAS SIGNED CONTRACTS WITH FTO'S MACRINOIMPORT AND
MASHPRIBORINGTORG.
4. `,.... ) ~ INDIAN IMPORTER/EXPORTER IS KOHINOOR
IMPEl PVT. LTD (ADDRESS: 1/25. ASAT ALl ROAD, NEW DELHI,
INDIA). THE FIRM OBTAINS THE IMPORT CERTIFICATE AND
ADDS ABOUT 33 PERCENT TO PRICE ITEMS BEFORE THEY ARE
SOLD TO THE USSR. ACCORDING TO DR. ROY, THE FIRM DOES
ABOUT 300 MILLION RUPEES TURNOVER PER YEAR IN TOTAL
BUSINESS.
5. HERE IS HOW THE SYSTEM WORKS. CAPSTONE
(DR. ROY) SIGNS TWO CONTRACTS IN MOSCOW (OR LT COULD BE
IN THE SUPPLIER'S CITY OR A COMBINATION OF BOTH): ONE
PAGENO="0911"
907
PACE:0003
CONTRACT IS IN DOLLARS AND IS WITH THE SUPPLIER; THE
OTHER CONTRACT IS IN RUPEES WITH THE SOVIET FTO
REPRESENTATIVE. PERFECT TECIDJOLOGIES (DR. BOSE)
EXAMINES THE DEAL, AND IF ALL IS PROPER, OPENS A LETTER
OF CREDIT FOR CAPSTONE (MOST OF THE FINANCE PURCHASES
ARE FOR 60 - 90 DAYS). THE WESTERN SUPPLIER SHIPS THE
ITEMS FOB BOMSAY OR NEW DELHI AFTER TIE LETTER OF CREDIT
IS ESTABLISHED IN TIE SUPPLIER'S BANK. KOHINOOR OBTAINS
II~ORT CERTIFICATE AND EXPORTS TIE ITEMS (COST PLUS
33 PERCENT) TO THE SOVIET FF0 UNDER CONTRACT FROM
CAPSTONE.
COMMENTS:
ADMIN
BT
#5722
NNNK ST
PAGENO="0912"
UseO
908
EXHIBIT~
~f7ç s-*(T~77 -
oo ~y g~TA~*~ THt$ ~OP WH(R sueMtrTTvea YOUR APPlICATION
I ~ I
JCATmNIOS :
a~ lnternanional Materials Exchange. Inc.
33 Agassi: Street
av~gn~ Cambridge, MA 02110
~ 1IIJI1I[i_
.~m Rabin. fratittzte of TV Manuf~'tb~~'
Ilagrarjonoyskj Parelok Macse 7
em~ .lAht~tm. USSR
2~.
* * 25
25
* * 25
* *. 25
* 25
25
25
(4 deicrtgtcne brnchvee01 thin item i*~d.
: ____________
- ~ I ~ E
C
~
TDI.: `, p/t~xb 1 Pt I~ * Itis PASITMTNT uFr oweçs J*I ONLY * - ~* . I
:. ~ ~ ~l~f7
r~Jr 3 /
PAGENO="0913"
909
EXHIBIT 7
The attached document is a letter to John Townsend from
"Deepah Sharma" on Virtual Computers' letterhead. It is dated
"08-05-1988" -- the date on which Townsend first met Mohan.
Mr. Townsend has stated that he did not receive this letter
until November 1988, when additional documentation was requested
by the Department of Commerce, concerning Virtual Computers'
order for MICRO VAX. Townsend passed this request to Mohan and
received this document in return.
Naik has stated that no one named Deepah Sharma has ever
worked for Virtual Computers nor has the company ever order such
computer equipment, or sent the letter to Townsend.
PAGENO="0914"
910
RJP~ COMPUTE~5 PVT. LTD.
Mfgrs. cf vlrtucl-cornputer & c6mmur~4c~11cn ~
~ * Oe~-os-i.g~~~
Mr. J. ~
M/~. Capricorn C~~iti~g Smrvic*a
pty L~.
1. £v~ M.. North Rydm,
I1$W. 2113.
~iJ5!R?4~e
1~a.r Six.
1~aes ccpt ~r ordar for th* fo11owi~q ~
c~f ___
5
MO~ZI~ DU~-63OQ5 MS
1E~C]~ ~W~Ss
PP~, iata M~4O~, C~1~R ?8$O ~n
\ ~~L*Z ~c2.3 ~m ~ ~n
~(TJL*X Q~33 ~ ~T~L .~R
~4ULZX S~3. 16 L~iZ M~X
~GA. ~M2 CP~2~E~, VM.. 5O??~4MZ
10 ~ M2361. 69~3 ~ ~V~3
P*y~t viU~ bs by irr.~cca~1. 1.t~ of cr~it against
31~ippi~q do~ita.
X~u~y .c~cw1dqs t~ re~ipt ~ or~r an~ issu. cr~r
Tc**rs fatthf~i1].y,
for V~~L ~PUTZAS * LTD.
ATTACHMENT E
- .. 2O4~
PAGENO="0915"
911
EXHIBIT~8
The attached document was provided by Mohan to Townsend for a
Commerce Department re-export license that would permit shipment
of MICRO VAX II computers from Australia to India. The attached
end-user statement was completely false and fraudulent. Blank
letter hear stationary was obtained by Mohan's right-hand man,
K.B. Baligia. The statement was submitted to Commerce without
Virtual Computer's knowledge.
Mr. Naik of Virtual Computers told a U.S. Foreign Commercial
Consul stationed in Bombay, India, that his company never agreed
to purchase MICRO VAX Ils or workstations from Mohan and has
never submitted end-user statements for such equipment. Naik
said Baliga approached him sometime in 1988 and asked for blank
letterhead. Naik gave the stationary to Baliga because Mohan had
given Naik access to a line of credit to get his business
started.
PAGENO="0916"
912
VIRTUAL ~OMPUTERS PVT. LTD.
C.122. Aris* nduetrl*I 3*1st., 5.,. .Vilt~, ~:.`.d, 90?.fOAy.4oQ 072. ~j PHO?JE 58 38 49
20th t~..
0 3 C r. A A A ~1 row
`~.`E hereby declare that our ccn~pany is not engaged
by or ~3s~ciaeqd with any Nucluer Assoctated Industry.
Further ~e wis to declare that the ecuipment ic
for resale in India end wili not be ~re~sxpcrted to
destination outside India without authorjsatj~ of
U.S. Dept. of Cc~arce. ,
f VIATUA3. CO.MPUTEI1S PV'r. LTD.
DIAETOR.
D~aclar~icn gi'~.n tos
I CAFCOM AUSTRALIA
~ ~ed, 1~t
Itonlit r::cc, *431* ZJ.J.J
ATTACHMEW2~A_
PAGENO="0917"
913
EXHIBIT 9
The attached document is a letter from Casperson to the
Department of Commerce stating that C-TEK received the 5 MICROVAX
II computers. These computers were subsequently shipped to India
via Canada.
PAGENO="0918"
914
Deceober 15, 1988
Mr. Paul E. S~raughn
U.S. Deparrnent of Cerce
Office of E~porc Eriforcenent
2400 E. Devon Avenue
Suite 300
Des Plaines, IL 60018
Dear Paul:
This letter is to confiro our receipt in Seattle of
5 each Micro Vax II Model DH 630-Q5 syscens. These
sysceos were sold to us by Capricorn Ccrputing Ser~rices
Pty, Ltd., 1st Floor, 1 Avon Road, North Ryde, N.S.W.,
Australia and shipped to us fr~ Singapore to Sea::le,
Washington.
If I can ke of any further assistance, please don':
call.
U.S. v. SHIV MOHAN
CAUSE C989-247WD
PLAINTIFF
EXHIBIT
NO. 90
ADMrrrED________
~411 N.E~ 124th St.
( `te145
\~..jkIand, WA 98034 1 `J
206-823~5563 (~ q
~3i~-~ (~
P.JC/cs
PAGENO="0919"
915
EXHIBIT 10
The attached is a copy of the serial number plate removed
from the VAX 8700 and discovered in Casperson's office.
PAGENO="0920"
ri'
I
hi
p.'
p.'
~1'
r
PAGENO="0921"
917
EXHIBIT 11
The attached documents are the "smoking guns" which
established Casperson's knowledge of illegal conduct and were
used to convince Casperson to cooperate with the Government.
51-840 0 - 92 - 30
PAGENO="0922"
C~k
TO: John
FAX #:
FROM: Bob C.
DATE: 12/27/88 TIME: 13:00
OUR FAX #: 2O6-82i-333L~
i~O, OF PAGES: 2 (INc. THIS PAGE)
John,
I hope you had a Merry Christmas. We had a very nice one.
think that we are going to go skiing on Thursday. I hope that
it will be nice.
We still have not received the wire transfer. The bank said that
they were unable to trace it from this end and that the sending
bank would have to do the trace. Boy I hate banks.
Page two is the article on the Vax 8800 smugglers. Boy we
are sure going to have to be carefull.
Today is a holiday in Canada, so I won't know anything about
our licenses until tomorrow. I will fax you as soon as I
know something.
Did Ron's VMS license show up? If not, we should be able to have
a duplicate to him this week.
Regards U.S. v. SUIV MORAN
CAUSE 0R89-247WD
rw~
Bb EXHIBIT
NO.____________________
ADMiTTED_________________
*~ 3/:~~ -
~ ~
~it7
918
FAX CO~IERSHEEL
11411 N.E. 124th St.
ite 145
~_.rkIand, WA 98034
2064323-5563
PAGENO="0923"
lION fl Filday. December 23, 1958 iSle Times 01
Computer-sn*iggling ring reportedly broken
Fool Lsodsedatu Shims & $uts'$snltttui lbs aelsoes of the Ill mii005 computsr O'$elsn said lb. Sosiet deCent. eyste,n "W* need So detetmtos cheiher these prntolsed to betp ttuk sm..gels
sod Asauctaled 555.5 ctitetlnatc'I an ci td-otooth htoesilgatios. begat, c oeolcg to V~X compotens soul. companlrs hot trscoyotied sod tooditted cutoponr to liotgsts. hr ho.'ici his.
uatd Pstrmk O'lbien. apodsi sgenl Its erltt lit. `80.. the sods incus losolctng bootcmcly,° center for counpoter technology, 0 lIeu
MIAMI - A liigtaiechootogy smog' cbae sot Costoms to Miami. "Itot he cannot hoOd heir `sos. lb. Sheehanasid. said.
gtlng elaug thacghl to ha the laciest `IL coot er hhciy otcobl hans been only mu t~ey cue fin its through ha "Tb. bcihens sen lbs people that mets tlc.k, 42.1*. Dotch nstloost ohs to.
eepoclee ot coetosdur ipcttset to Clot' `used by the Soniel detent. ayaltm. (Jotted Stiles' O'tlneo seld. "II n's can aCten." Ofleec sdded. `They sue the in tinlsete. Belgium A tuao4 sty tetoni.
eec bloc couatiefes has been cescbeI by O'Belessald. deny theta tests tubing ours, thu hans to roy1. tabs aus gob to cbs Ii hots a thneeC000l codolotnttt o1sn~;tny Ii,
US Customs sgeuts Is Miami, officials `By getting on. at these computers hoOd the tsoeones. Is comes oJot their re~imau. tsdosiry so~ gins it to illogic' nub conspiring to tllefally e~poi1 oonq..
scildyesteediap. ` they bans used ihemaeioes 0 years .O~I delenos boitget ted really slums them lmsle iedostuy.' en equtpmeOt tom I C coed SisInt
Agents scioeds 11.1 ecitilosmaiatesas' haaadncdsatetill000 of cioilarsio eesesecb duo's.° Thee. ants other smuggling netsuotbo of Bob ana.
computerbooms us VAX U(8 - which asd dsvetupmeni,° asld Michad Sheebso. Customs offIcIals said targets of the similarucope. Sheehan scud. It coccuided of alt coocis, utah co
csscocleot systems Isis Iauoolaludgolda aaoaharCaotouttupObesmsn.' lonestigatios Include msoofsctorees. (sub's netwoub lila year has por' rececee a maoitoum senience ul Si
ballistic missiles, opeeuls radar ci' asia a `Those counlties see walhlcg teem the beobees sod shippers itt Boston; Chicago' chased and dinetiod oumeroou VAX corn' in prtoon soda $575 million line.
msutcaosk em - tail mesh at Miami StosedgsbtiOths 2iatceotufyhsooeatr~t New Youb; Newarb, Ni.; Itouslon; GraoJ poiers, O'Bneosaid. A ledetal magtalralu yesterday dcci
Inaeroatbtuat~7~pttetbetttreknuIhlItPcd at the eopuooe of the Unbefi Stoles, sod Itaplds, blob.; Ootgseis; Yogoulaoia; Ito' Ageoha areeoted lash on Dcc. 14 sher hood for itash aher peocecnbou% aeiJ
So Bolgatia. they're using thIs tecbtsoIo~ for loteneots mama; tlongaey Belgium; Aootris, libya; ha paid $50005 in So'iss (tints to under' prohubl tcooid flue this coontty it .11cc
Tbsseresa ateddyGorssdcaatlaakasd ccear.sytu OaiaudStales iutsrests.', rat, cod lesq. coner agents, OCtet saul. They had to pout bail.
~
~
PAGENO="0924"
920
EXH1BITj~
:
H
~:
.;
~+-H~
I;
~1TT s-i-
41
r~-1e~~
TE
s-i
~w; ~
-
T ft :~ç
r I
~ cC)
:
~ L
~-`ii
:;!~
I~---j--J--
~-:~
.4 -H
1)
-
Ii
-I
S
- -
~rI~
-
- -A
- -
IL
--t--~--~
~
I I
Ifld
`4
c~
-
`.#.
-I- I
-
iLJ~LLjflLJj
u.S. v. SHIV MOHAN
CAUSE~_
PLAmTWF
scwsrr
NO____~ 450a
- ADWrrs__
t ITI ri
II
~!
...i....J.:fi
PAGENO="0925"
921
~XJ-1IBIT 14
U.S. v. SUIV MOHAN
CAUSE ~RRQ-~47Wfl
PLAINTiFF
EXHIBIT
NO. 427
ADMITTtD________________
PAGENO="0926"
1
Co
ND
ND
)` zm-n
0 oX
*2
9
A
`U
F-'
`1
PAGENO="0927"
923
PAGENO="0928"
924
EX}1IB1Tj~
The attached documents relating to the payment of $490,000
from Perfect Technologies to C-TEX for computer equipment
destined to the Soviet Union.
PAGENO="0929"
925
Perfect Technologies Lisited
Perfect Technologies Lihited have requested U5 to effect a
telegraPhic transfer for US$490,000.00 favouring C-Tek Computers
bc, being advance payment for equipment being purchased under
their contracts, with Russia for US$562,000.00 (obtained during
the recent exhibition, copies enclosed for your reference). The
difference being their profit margin.
Perfect Technologies Limited will draw Bills on the Russian
buyers on 30 days acceptance basis, which will be sent on
collection through us. However, they have requested the E.0.L.
for a period of 30 days and propose to adjust the excess from
proceeds of an earlier contract, for which we issued a, L/C for
US$1,754,000.00. Acceptances due for Payment:
USS 332,519.80 on 19.12.88 and balance
US$1,438,002.93 on 09.01.89.
These figures are inclusive of interest being charged under the
L/C.
Documents under these have now been sent for collection to BCCI,
Bombay, total value: US$2,484,000.00 on sight basis, drawn on
Khoinoor Impex (P) Limited, who we have been ad-vised are
considered good for the amount. Documents sent by courier on
09. 12.88~
Consisting of the following
(i) US$1,343,500.00
(ii) US$ 480,000.00
(iii)US$ 234,620.00
(iv) US$ 40,880.00 -
(v) 05$ 385,000.00, of which we anticipate immediate payment
under documents valued US$480,000.00 as these goods were Air
Freighted and will be used to adjust the excess being requested.
In the event that we enter into this transaction the outstanding
position would be:
TOTAL CASH SECURITY AVAILABLE.
1. Letters of Comfort from BCCI
Isle of Man
(i) US$ 244,000.00 US$ 244,000.00
(ii) £ 794,000.00 ~ 1.83 US$1,453,020.00
(iii)US$1,445,000.00 US$1,445,000.00
2. Funds under lien on subject
customer's A/C £150,000.00 t 1.83 US$ 274,500.00
TOTAL US$3,416,520.00
SANCTION LIMIT US$3,400,000.00
(cont 2)
PAGENO="0930"
~ontd .11
926
Lees Outstanding Liabilities / Mar~~~
Overdraft
OlD US$1,920,000.00
J.L 48,500,000 ~ 123
£ 146,00000 ~ 1.83
Total Overdraft
Dr S Bose Overdraft
£7,000.00 ~ 1.83
£7,000.00 ~ 1.83
Letters of Credit
1B03403 (Russia to Singapore - 100%)
US$76, 270.00
1B04027 (U.S.A. to U.K. - 20%)
US$105,364.00 US$21,072.80
USS 781,247.17
USS 11,643~89 plus
(2) US$80,000.00
being credited to customers
$1,920,000.00
$ 394,308.94
$ 267,180.00
US$2, 581, 488.94
US$ 25,620.00
Acceptance.
1B03628 - £ 63,666.03 ~ 1.83 (100%) US$116,508.83
1B03628 - £ 63,666.03 ~ 1.83 ( 20%) USS 23,301.77**
1B03836 -~C 67,332.331~ 1.83 ( 20%) US$ 24,643.63*1
IB03836.~~61,oo3.5~)~ 1.83 (100%) US$111,636.So
1B03593 - 8332,518.99 ( 20%) US$ 66,503.80*
1B03911 - $ 53,709.75 (100%) = US$ 53,709.75
1BO3593 - $1,438,002.93 ( 20%) US$287,600.59*
* Documents presented under collection to BCCI, Bombay.
**Documents under collection paid, entries to be passed.
US$2, 473,737.49
Total LIC Liability
Total L/C Margin
~ Total Security Remaining
.(1~US$159,g87.o3 remittance received
draft drawn Lloyds Bank, London. Both
account.
PROPOSED
TT for US$490,00.oo
Favouring C-Tek Computers Inc.
USS 490,000.00.
EOL US$ 238,369.08.
~44~
In view of the track record, previous very satisfactory dealings
and control of goods under collection, we recomrned.
~3c~
PAGENO="0931"
* TO: BANK OF CREDIT AND COMMERCE INTERNATIONAL
SOCIETE ANOrIyME LICENSED DEPOSIT TAKER
N o~-~z- BRANCH
ioLDm~aNcPl
REQUEST FOR TELEGRAPHIC TRANSFER
AMOUNT/PAY
VALUE DATE
In Figures: In Words and C rrency f ,4" ~ ~ / /c_i'~i
~~COO::O~ ~
13 (1- ~)3 a-a~ (1
BENEFiCIARY
BANK
.:.
Ac/c. N'~
Deduct all charges
APPLICANT(S)
Enter Full Name(s)
~i ~
DEBIT
ACCOUNT NUMBER~ /ls°7 J'«=" CURRENCY: (J,( 1~
Please transmit the above instructions entirely at my/our risk and coat in cipher or otherwise. It is understood that the relative
remittance is to be sent by you or your correspondents or agents at my/our risk and that no responnibility is to attach to you or
your correspondents or agents for any loss caused by errors, ommission, interruptions, delays in transmission or at destination
or due to you or your correspondents' failure to identify the beneficiaries mentioned in the text of the message or retaining the
remittance, if deemed expedient, pending satisfactory identification of the beneficiaries or for any event beyond your control. It is
also understood that the applicable rate of eochange un the case of foreign currency) will be that ruling on the tate of processing.
SIGNATU~E(S) OF APPUCANT(S)
For Branch UsoOnty
TO: REMITTANCES DEPARTMENT
LEADENHALL STREET BRANCH
DATF~
Deal booked - Deal Confirmation EXCH-F-49 (UK) attached VALUE
fn reimbursement please debit our Branch S~~rtg/Dolfar Account No. [»=`l ~ >~ 9H~ I
Lp~quoth9 above Reference Number
the amount from our customer.
~wm~wehav(cov~,~ ___
927
______19~
BENEFICIARY
F~r~ ~ &~
~ ~rq~%~
~±~.:LF~~LF 4~hQJ ~ E;~k~I~1~ tdA,~
Entetrfr~MRe~rf~ Fuif Name and Address:
~ce~ ~ ~niputô~c~ThC' _____
@~b4) ~n~3 ~j-j~ ACCOUNTNO.~7~73 7-"
BY ORDER OF
REFERENCE!
DETAILS
fre~'-{Ae~ ~ ~io/o~/~
CHARGES
QJ Debit me/us with alf charges
FROM: ~ frs'~~'L~ BRAt~CH
BRANCH REFERENCE NOiJ~"/'fi/) ~~Ji ~
PAGENO="0932"
928
Cha&«=~
PERFECT TECHNOLOGIES lIMiTED
Tèl:(01) 455 1342. (01)2091273.
Te!~: 918093 PTLLDN. Fax: (094588973. ___________
12th Nov~mb~r 19813
Our- ref: F/112
Mr Natars~an
Mart 1313£? r-
Sank of Or-adit and Ccmmc~rcs Intl
M~rbi~ Arch
cc Mrs Taruna Wisthy
F1s~ss tra.nsfsr US S 49O~OQO.OO (four hundrsd and rin~ty
US do11~r~) to;
Ssattlo First National E4ank
Tot~am Laks Branch
12424 Kingagats Way, NE
Klrkland, WA. 9S034
Tc~l: (21Th) 823 ~8~S
~ccc~unt Na~ 7i737-~13
4cccunt Name: C-TE)~ COMPUTERS Inc.
Raqards
Ltd
PAGENO="0933"
929
KOHTPaHT N~ 98-270/2/16-88
r. MOCKBA 2 ______________l9~
~ T 1 ~ L-r~
"nE~QEKt TEXHOI1O~11114C J1Tfl." /BEJIHKO6PIITAHII1I/
iDupMa
a .i3.1iIICñIUCM aIIpUiaEICU'. C o.tiio0 CTO~OIlU ii BceCoIo3IIoe oóbe~iu~e1flIe ~Cos~
pb16c~JIOT" r. .\1cKna. li~icuyeMoe a .ia.1bIICUWCM ~floI~ynaTc.1b~. c ~pyroi~ crrpoHu. 3aK.lio
`111.111 taCroanwu K!ITf)31'T t' iii +ccc.ie.ayicuae'i:
§ I. flpeai'ier KonTpaIcra
Foi~ ~
I lpwianeit up'~w.i. a floi~yliaTC:ii kylliw 111 ha ~C.1flflhIhIX c~pahiKfl cieiu nanH~1bOH
!I~h hhLICTahhkC~ "HAYKA - 88 B r. MOCKBA SC ~ C~4y ~_~c~.CC
O60PY~OBAHHE B COOTBETCTBHII C flPI1fl01'~EHHEM 1 K HACT0~l1EMy
KOHl PAKTY
___________________ - (ha i~teuouau te (h(~upva()hJahhhta
ii hihieMe. ui ueeee hI UI cnetan((huicauuu c'r.~aciio flpII.IOiKChUIhO .N~ 1. eoropoe HOJ1RCTCO neomeM
~heMh' `IUCTbIO KoeITpaKTa. -
Ue,,a TOCPa3O ii h~MCIIChhlhhO ire hIOLaeuUIT. jIç J~'C(((~ h-~
OGuta,r C~MM3 KcruTp3Kra cocran:urer AMEPIIKAHCKIIX ~OJ1J1APOB 70.92~,0Y
/CEMb~ECRT TbICA4 LIEB~TbC0T ~BA~UATb 4ETE1PE AM. ~OJiJL/
AMEPHKAHCKHX ~OJ1J1APAX
!teira ycraiwhh.leUa II ________________________________________________________________________________
a rnrwIrraercri ~pahhao-creira flODIMbOH BEICTA3KH "HAYKA - 88" ` ~ ~ ~ ~(
________________ ia aL4craBKe a r. MOCKBA i'~
n~:itn'ha~e CTt'IhMh'CTl.. yUaKi'hhkhh II r.lapKhIpouKhr.
§ 2. Cpoe nacrari~w.
0~iy:eee yriabaeeiioe a 1? HflO~EH (11.1 ie' 1 ~ IICTOOIILC4V ~nTpa~ry
(`y:icr. icpc.rauo TlOaYrraTciIo ia TC(~IIT~IIU UIICTaIII~II 1 ___[_i__MOCKB~
tie upucuIh'cJh.lTo4IioMy aKTy, hi. :!iihiCiihhhhbMy UpC.1CTZIUIITC..IIIMII tGciix croputh. .ilaru~i tocras
a ciiiiaercu ~oTa I~hehcrIeeC.aaTh)ehh(hihb asra. .....:.-:.. - . . -
§ 3. Iapaurnn
Ip.itai'tu iapzhhhi hh()yei a.ee. ~ ;h;...;c.~.::y:~ p~~ory o6 py~'ur'-e"'e ~
..i,hte,i C ~aTha ;no;ra Octpyii"rhaihiin ii ,kc!!.1yaT~IuiiO, i~j;ae~o ~ ~ ~ ~ ~
.hphhhMe-e.iaTh'ehhh'I'e :e~ra. Ee.iii ii rc,c,ii,c Cp.hCO rapahirirri h)()opylohhahhhie oicaieerca e~earHtiM
i-en we," riiercroyioutnn yci~ii,iiii~ Khe.hTpaKTa. flp'.~aiien oi5hh3yercri io uuóopy floeynare.10
iICiipalhiiTb h(eiiapY)KCiihhIi .tc~ .rbecizih,4. annapar~ ~aciii 10
PAGENO="0934"
930
§ 1. Ycionun 1.13 rc.~t
- . - AM~PHKAHCKH.~ ~OJ1J1APAX
Z1.13rcii~ 13 Kvltleune )I)npy3orhltIlle )Y~ 113 I -
O1HAKU HE PAHEE `4EH 4EPE3 120 ~HE~ C flArE! fl0flflHCAH~ KOHTpAKT,~
____ ---V.-.-
H
B TC4E1II!C .~O .11C1
c 1113 l1l;Iy1c!III1I 1311cu1rnprlllIlKrP1 CCCP, \!c,na c.lelyloII[1fx .l;yMeIITln:
1) Cnc tii ui;pniitiu.iil c~c-r - 4 .~i.
2) ~~kT liC'j1t~l341 I(II)~ py. )IIZIIIIIB* iu'initea~jut.th lpe.lcTaHITe ~ni flp 3nit3 it
3) CCp1II)IUK3T C' Kaqccrnc
*n K ~ flp:ci~1cu3 11 Tnep.K.i;uoujc.r) oTnparu~y fl yU3Te.i~-n TCX.1.NyMciiraiiuii
IcuoTHercTnitiI C § 3 131 rnslI,Lcr ~~`~7~D
con~Q~g, - ~~-- e-:--~ ~ ~
~
~
~
cr For Oep.rtrnent Used Ocly - A `usage do rid stOre seuiencerct -
942
Apofouct (0 cdfe- ?&c see-otec)
Coo-Otto si £5 ~.i5 recoce- &iai
COoftOy ci ta eec-ace-c
Pays cc casotuoco Mee SINGApow~
Occia,cecca:y .ccecc* of hhe
CeetOsOdo )tyts-tcecocd c.
pci Ce-tOcsfeiEAp Us. Elsie.
I~1 - Ut O00iri.t o-a.'-t-t
Yeats deoucioc :Ce-c~ 0(-:-~-
The .eeet ci goes. deocted ece ~ pysag~ 5~Lee- ~ ~.3~.iee-e-cg~ g~g ~e-ce-~~g ciorce ds.g~ ~e- . -
cscfe-e dase-ted £~OS~ se-b ~e i~i ~e- ~?. :_oue c.~ce dee o~ oe~e- 9 0 1. 1 3 0 7 5
Pests. Ac ae- e~ e-e-~e'. sate ss.eoue - - -.- --.. aaua .,te~acco as ~e e.~-~t at ___________________________
a. .Qda5,.5,55~. eat se/ase. - ~ asdeasceco face-cee.,teseeie tess ~ 5 ..t~9 01 13 - - --
- FAST TRACK. ~-_Q S ~`~-~-
e-~e by Ceace C uL~t-e ~ ~cC Pale- roe. s~ ea.asou - - --
- ~e-~"e-°~ j °~*- *f°~ ~ ~fc~ Pae-a~ - .-; -
~ -5;~77 ~
PAGENO="0947"
943
(ranabian ~an~u1atz ~nerzit ~oa~sF? ~ansu1nt ~S~n~rsi bu (~anubs
3mmigrnlisn & ~cxtsu1sr Aftxirs
412 ~1a~ 525
&ixtII A &tewsrt
`rsttlt. ~a~ingtsn 551211255
3mmirsttan TeL: (2fl5) 4431372 ar 1377
TaseuIar Tel: (anN 4431777
22 June 1990
i hereby certify that Pierre J Gossel~.n is known
to me to hold the office of Director General,
Export Controls Division, Special Trade Relations
Bureau of the Department of External Affai.rs
and that the signature appearing on the attached
document is the signature of the said Pierre J
Doss e un.
- ~ ~ ..-~
~5IGEL: THOMSON `~
CONS IL
CANADIAN CONSULATE GENERAL
SEATTLE
U.S. v. SHIV MOHAN
CAUSE _C2po_2Ltlwre
PLAINTIFF
EXHIBiT 700
NO._____________________
ADMITTED___________________
PAGENO="0948"
944
ea:c~s ~:-~e'; les
/~UTECN (CAI:ADA) INC. APPLICATION FOR PERMIT DEMANDE DE LICENCE POUR
VAN DE~U1TER COURT LI9.~~!ORT GOODS EXPORTER DES MARCHAHDISE~
NISSISSAUGA, ONT2~.RIO *
LST lbl ~ IThv~e 4-67-373~ T~ ~
VIRTUAL COIIPUTERS PVT LTD.
C-121-122 ANSA IND. ESTATE
SAKI VIHAR ROAD
~~TYfl!T~flT~ 4OfltI7~
LJ~ ~ ~ ~
Pfl~TC~
__________________________________ ~`~°`~3" INDIA
~ ro
ru. corr.ct. ***3C~~~ ~ ~ por Ccat~~ 53. Srar.-
I 2. Th. ooouwn *.rrr or 2. 1, ~ouOrvrr *3 ~e3da*t O~ ~.ot; o **~OrO* °*3!NOO ~
Car.o.. Cao*oa. _______________________________________________________
L__.~ Sç3.~. rosur
Oo~~ ECL ~ ~.
.3'. 3.
Cot.1 Co&2 C*L3
p 3 I TEXTRONICS 4225 BASE ONIT
SECTION with $MB Z~MORY OPG~E
3565 TEXTRONICS 4225 19' DISPLAE UNI
TEICTRONICS 4957 DIGITIZERS
TEKTRONICS 4200F4N DIGITIZERS
I COMPUTECE ELECTRICAL 220 to
110 VOLT CONVERTER
L~ir:E t~r~ft~e I________
For Dspartm.ng-~eod-On --Aio~v~umrm,rsr, ~iuIsm.r1 ~ £2 c5~)
-.
Cu. 5.r. ~or~ r.-.,~
Cot. Cot. 5 Cot. 0
8.~ Z5~1OOO lbs 466,724
~25~ 1000 lbs 92,250
~5Y1 2501bs 22,447
125 lbs 9,225
2-5 ~) 250 lbs 2,075
9u_ 1s5 L~
i9 02 15
ç3 O~ :8
PAGENO="0949"
945
LIST OF EQUI PMENT ORDERED.
S.No.
Qty.
Description.
1.
25
Tektronics 4225 base unit with
4 MB Memory Upgrade 4957
Digitizers and 19' display
unit instead of 16" complete
2.
25
Tektronics 42OOF~4 Digitizers
3.
25
Cornputech Electrical conversion kits.
-.~--~
.-`,.~....*....
/ -
PAGENO="0950"
946
~E ~x~trnzt! _~1E:tr~ ~ ~ FF2: j-~'~ 1'.~tr2-~
P.O. Box 481
Station `A
0TTA~A, CKTARIQ
KiN 9KG
April 13, 1989
ESE-5l 18/SB
File No. 32979
Mr. Dave Whyte
Computech (Canada) Inc.
6470 Van Deerater Court
Mississauga, Ontario
L5T 151
Dear Mr. Whyte:
Re: Export Permit $90216514 issued February 16, 1989
I refer to your letter of March 21, 1988. I advise you
that export permit #90216514 has been amended to add the
following:
Col. 3 ` Col. 4 Col. 5 Col. 6
(remains the same) now reads now reads now reads
TEKTRO~i~S 4225 Base Unit
with 8Mb Memory Upgrade 50 2000 $933,448.00 Cdn.
TEKTRO~ICS 4225 19~ Display
Unit so 2000 $184,500.00 Can.
TEKTRONICS 4957 Digitizers 50 500 $ 44,894.00 Cdn.
TEKTRONICS 4200F4M Digitizers 50 250 $ 18,450.00 Cdn.
COMPUTECH ELECTRICAL 220 to
110 Volt Converter 50 500 $ 4,150.00 Cdn.
I recommend that you present this letter, along with the
original export permit, to Canada Customs as your authority to
export these products.
Yours sincerely,
. . ` .~...,t". Director
..~ ~ Export Controls Divis~ori
L~I Special Trade Relations
Bureau
c.c. Mr. V. Castonguay
Customs Command Centre
PAGENO="0951"
947
,)I"~~ VI RTUAL
~ COMPUTERS PVL~1TD.
~ Mfgrs. of virtual-computer & communication products.
fir. Qavio 4hyce,
CCriPuT~CH (CANAO~) INC.
6470 Van 0e~mter Caurt,
flisaissauga, Ontario,
1.51 ~51.
Oear fir. tJhyta,
Kindly be in~orrned that we are Computer brokers
and 0~M and the order placed by us on us ror the
equipment as per attached sheet is ror fl/s.
Kohinoor Impex Private Limited, who is the
ultimate end user.
You are kindly requested to get your export
licence amended and inrorm us as to enable our
customer to open the Letter or Credit on you,
so that you can ship the material.
Thanking You,
Yours raithrully,
?or VIRTUAL C~IPIJT~ PVT. LTD.
PAGENO="0952"
948
VIRTUAL
/ ~ COMPUTERS PVT. LTD.
~ Mfgrs. of virtual-Computer & communiCation products.
25 TEXTBCNICS 4225 t3ASE UNIT WITh
4MB M~ORY UPGRADE
2. 25 TEKTR~IC5 4225 l9~ DI5PL?IY UNIT
3. 25 TZKTR~ICS 4957 DIGITIZES
4. 25 TEKTR~ICB 4200 P4M DIITI~as
5. 25 COMPUTECH ELECTEICAL C~VSI~ ~(ITS.
IT~24.
1.
PAGENO="0953"
949
~F E~h~ntzi1 ~tir~ ~t'~ ~:urt~ ~x~rut:ri~
P.O. Box 481
(,t.nI1flL'~U Station `A'
OTTAWA, ONTARIO
KiN 9K6
April 5, 1989
ESE-5O1 3/SB
File No. 32979
Mr. Dave W'hyte
Computech (Canada) Inc.
6470 Van Deemter Court
Mississauga, Ontario
L5T 151
Dear Mr. Whyte:
Re: Export Permit $90216514 issued February 16, 1989
I refer to your telecopy of March 21, 1989. I advise
you that export permit $90216514 has been amended to add the
following changes in Col. 4, 5 and 6.
CDL. 3 CDL. 4 CDL. 5 CDL. 6
Tektronics 4225 Base Unit ~5~0 2000 $933,448.00 Cdn.
with 8MB Memory Upgrade
Tektronics 4225 19" Display Unit 50 2000 $184,500.00 Cdn.
Tektronics 4957 Digitizers 50 500 $ 44,894.00 Cdn.
Tektronics 4200F4M Digitizers 50 250 $ 18,450.00 Cdn.
Computech Electrical 220 to 110
Volt Converter 50 500 $ 4,150.00 Cdn.
I recommend that you present this letter, along with the
original export permit, to Canada Customs as your authority to
export these products.
Yours sincerely,
~ /~Dav~d Ryan
~ ~ ~O~ontrois Division
______ Special Trade Relations
/ Bureau
c.c. Mr. V. Castonguay
Customs Command Centre
PAGENO="0954"
If you have any further
at 416--671-3736.
Yours very truly.
Judy Gibson
Cornputech (Canada) Inc.
950
/Ø//
ICANAOAI INC.
COMPUTER PERIPHERAL SALES & SERVICE
(.470 Van Oe.mt,, Ccwn. Us ss.ança. Ornz~ LOT SI
T.L (416) 671-373.6 F*x (416)471.4416
December 6. 1988
Mr. Marcel Saucier
EXTERNAl.. AFFAIRS
Export Controls Division
125 Sussex Drive
Ottawa. Canada
K1A 002
Dear Mr. Saucier:
RE: EXPORT PERMIT *116045
As per your request regarding the above mentioned export
permit, I have enclosed the original documents for your
perusal.
questions please call David Whyte
jag
Enc 1 osure
C~r
PAGENO="0955"
Mr. Marcel Saucier
EXTERNAL AFFAIRS
Export Controls Division
125 Sussex Drive
Ottawa. Canada
KIA 0G2
Dear Mr. Saucier:
RE: EXPOP.T PERMIT ~116O45
As per your reguest regarding the above mentioned export
permit. I have enclosed the original documents for your
perusal.
If you have any further questions please call David Whyte
at 416-671-3736.
Yours very truly.
~
951
~pJech
(CANADA, INC.
COMPUTER PERIPHERAL SALES A SERVICE
6470 Van Desnuer Court. Mss~seauQs. Ontar,o LET 101
Tel. (416) 671.3738 Fax: (416)471-4416
October 25. 1988
judy ~son
Computsch i'.xr~a) 2nc.
PAGENO="0956"
c~ns~çc.. sl'~U Us~~Ufl 25I~lst.Im. I I~s~I c.sw~ss~
VIRTUAL COMPUTERS PVT LTD.
C-121-122 ?~NSA IND. ESTATE
SARI VIH.AR ~.OAD
~M~V~TNflT~ 400077
A~.s~s V QCW l~l SRU~W) R~p~~u ls~ ~Ps ~ ..~wI's;
S~ac.ai Tr~~ø Oiec:cn ;ere-ra~e ceo
Ratatior,a Bureai reLaUon~ c .erca~ao ~c.c;e~
APPUCATION FOR PERMIT DEMANDE CE UCENCE POu
TO EXPORT GOODS EXPORTER DES MARCHANC
1 116045 lc*~_-~/
CUCTE TIoS ouc~8zR FCC A~i ~
CCEC CE NUIJF.PO POUR rctjr~ CE~Al.CE :~c~er~
PsP~.l P J.I.~U 01 OS 5*01 E~ E.,1.Cp~w Ao~p~
Uc*~a. 51 ys I~. I ~ Pc E.~w LX. P~.e.
141*141C~*~
*451 1411fl15*. Es G~141 ~
Ml
Ptyi ~ Ua.*s141 4515
CERTOF)CATIOI4 AITESTATION
TP* ct8Sts~5* lwsCy cwE~ P4Pc La Ulçpl carIEs Es1 OoEso.,tvv 5*4*45 oP Ml
1. U I,~ms~ po*~ 51, *M I. Coca *s nsmen~ dococas 05551*55* 14*00514 p~ IS ~
4 oos 000 C5Y~. 0515 dOS 5Thc4 15115145. psI CarPclc.oxscEnd 0*1 SOs. ~r7 ~
2. Th. aascsu *5 ~ss~wu ~ 2. La pscsrsru sos ca :ssoarn s~ s.~fl a sc~s0 L.i *4iNoc~ ~c01a.&~ M&sc icc-
ROad psccaroa~s oP Es 551 ~ *c~~
./~` ~ ~ l15SoPEISo14llSQ*414 5.14 5151015115*I5*U 5*~
,E' ~," U~*arr14oss~4 ~) P.511 051 £015414. is
_______________________________________________ lOS. 0001 oP 14L14IC*07s cool 51
1.11.1? ~ ***x~l
952
j~~aaa C~occa
ISSSU. *4 0.141*50114.5*514. lIosp14)
COMPUTECH (CANADA) INC.
6470 VAN DEEMTER COURT
MISSISSAUGA, ONTARIO
L5T 151~ .viA Whv~~ 416-671-3736 -
P151'sl 11 0* - UcWc5 Reoci lou
E~ E:~~5*55. ~
INDIA
Ccl. 3
TEXTRONICS 4225 BASE UNIT
with 4MB MEMORY UPGRADE
TEKTRONICS 4225 19~ DISPLAY UNI
TEKTRONICS 4957 DIGITIZERS
TEKTRONICS 4200P4M DIGITIZERS
COMPUTECH ELECTRICAL 220 to
110 VOLT CONVERTER
8Z 25
25
25
25
25
1000 lbs
1000 lbs
2501bs
125 lbs
250 lbs
cl. 0
466,7
92,2
22,4
9,2
3,C
it
LI
USA GROUP 3
SECTION
3565
I. 01* ..~ ~ ~. 554555 55*55* 5 4 1. L..ssslsIS 555 555515555555 5*5*555 5*5551514 51*4*5
455551514555.1 *45550.55514 ~5 545 ~
P.555. .15 .w'ss~o I I 1.5 55S~*OP55 15*4~5*5~ -
2. 01*. ~ .sl 5*~ 45 4 o~ .~s.srs a~socs 2. Cccl. 15~ Is 5*4 555 5*455 45 545 4
Ls~s 0*5*4555*4 ~5O*4 5555*551. 3 ~ ~ ... ~
PAGENO="0957"
953
L~ vc~.\ ~1R~\.~'T'1 LI~i ~TED
~.: o. ~/`~`J:-t
5:.-.
= Jwr:~ ~Jhwzc,
(~;.:-.~:.) i:.c.
5470 ien D=tz~r Co'~,
i~u:a, 0nz~r:r,
LSt' 151
De:r ~ir ~;hyze,
..~er our conversotion on Se~te.eber 15, 1935, in
which ycu recuesced inf~rnat:on to helo you obte~n
Sxnort P~r~'its from the Government of Can~da, we
are enclosing the inforoation you re~ueszed.
1. The e~i~men: lioted (see attached sheet) is
to be used in In~a and no: to be rc-emn:c-ed.
2. In the event that at a later daze we would
consider re-exporning any e~ of the ote.
We would do co afzer seehing the pe~ies:or.
from the Canadian Gove~ment.
3. The e~i~ment `~dll no: be uced by the ~it~~i
or in conjunction m~th any mnilita~r ~rojec:s.
5 hone that this letter will helm, in obt~in:n: en
(?;:port nermit. In t.e event any othor infomnetorn
is needed ~,lew~e fs~ml froe to cont.~ct ~e.
PAGENO="0958"
954
EXHIBITiI
PAGENO="0959"
955
E~JI~
The attached Shipper's Export Declarations (SED5) relate to
C-TEK's illegal exportation of a single Digital Equipment
Corporation (DEC) VAX 8700 computer valued at approximately
$650,000, and required a Department of Commerce individual
validated license.
The VAX 8700 system had been broken down into two crates and*
nine separate cartons, for shipment to Singapore. The serial
numbers and other identifying information was removed from the
computer and the boxes were falsely labeled. To avoid detection,
Casperson filed false SED with freight forwarders directing the
export of the commodities. One of the attached documents shows a
shipment of the commodities to be an "expansion cabinet", valued
at $4200 with the export license designation blank. Another
document shows a DEC PC compatible computer valued at $2,000 with
the license designation as "G-Dest".
The broken down components were grossly undervalued --
purposely valued under the $5,000 threshold for a license (items
under $5,000 did not require a license).
Townsend instructed Casperson to list the VAX 8700 unit as a
DEC expansion cabinet because the two cabinets are roughly the
same size.
PAGENO="0960"
FORM 752~'i~.~ - SH~PPERSEAPCRTOEC..~s~T;cN
~I-~~Z2' cc~ ~ v' i~CC
11411 N.E. 124TH ST., STE 145 1E~QE~LC*TEOFEXPOgTAT1ON ~
RIBRL&ND, WA 98034 L~ARCE 14. 1989 ~I (~ (4U0 -
5. ~PORT~E~N(tRS~NO. s. PAR1IESTO TRANSACTION -
V 37-1164765 0 Relited Uon-~elated - -- - - - --
11) (lfl 51055
D18471.10.0060 1 -*
DEC PC 380 PC cO~AIA~SZ C0~UTEa
- !su 0303193 V -
38.6
- - -
/ x 3~&"..~7'
x~-711
.
R
,. coi~oojoee~e~.ucv
19
V V scco
I / -I~EST~ 15454
U.S. v. SHIV
MOHAN
CAUSE CR89-24
PLA~FF
7W0
~H18~T
NO.
20
I -
D~U1~ED -~
956
1.. UI MATECO SUNS!
V V *V W.E. AGENCIES PEE. LTD.
V 18 .IAL&N ~~IL ~706-22 EASIEBZt HANSI0~
V
-NONE
- 5. FCRW050INGAGI1NT
V V V~ V V PROFIT FREIGHT SYSTEMS, INC.
- V ,~ LOAOINGPIEN(VSUNUSI')
9. MO0EOFTRANSPCOT(S~es~j
Al?.
10. EXPORTINGCARIUS! V ll* P5.IRTOF5.XPORT
VV:VNORTHWEST AIR L_VSEAm.E
& POINT(STATEI cFoR1U1NoeFTzN~ 7 CC1OFL5.1~Mt7~rAT1C1,
WASEENCTON USA SThCAPO~ V V V
15 ~NTOFL54L0At11NGb~6AUUNy) 10 CCSTAREO7NN.SoNy)
0 Yes 0 No
$2,000.00
PAGENO="0961"
957
-- -- - SH~E~ ST `2L~R~TC:~
F~ _____________
~jvYr T'n T~4~ 5' ../15/89 SE~ - -
~5 1~3~Q. ..?.R'T:s~orCA)-cN
0 ~ MaC--sEed
4.~UATE COM~Qet1
~0~WDTE~ 70C~ PIE. LID.
535 Cecil S~rc.e 02-413 L~»=I ~1aIg.
5.FOCWACCC4Q AGV.1
lilt t 1~ Sl~T CT S~C~
__________________________ WA
~~QPdd~V&Ee Cv -~-~T CC ~~~7S' -- -~
~ ~~XPCCT.
S~0
12.POC! mI.ca3r4~. am, 3.CNNET~Z~~ r~. am, -
0~ 0~
4. 6~MC~t.aEI Cd5C4CTCM~FC~4M~C,CIL ~
- ~ (Ulecciwre's 7-IC)
4 AACaS.NC$..aHQ -`03CC ~A~.A4E3 J ____________
~? £ C ~ 50C01. C d~dI
2 LT~ 34/i 30 3003 x
Spare Parr.~ fo~ a Dig3~c*1. Iq~.tp.ttn
Corp. 11/750
* ~AI10 ~EsdC MC-.CV-iRAa..0Ve~j~ 5o 22.CCO.am.s eea,ej
-~
CM v't2~-s~* `MC 5-0 ~CM'Ma5 0~4 C~M~Ms ~o C'.wsoo,oT Tel d'Ma'MC~ Sit
Ca,,ot Ee, a, PC Cu C, 1al~w. tesot; 0.cSs,.uot- IOiT,~~
`C T0!O*it TTeM4CJ OP5tMC 5~0 sit.*:TCs MmM504
us. `-~a~o s:aaaot.i ~sot.. `. 0 004,, 4, ola.sos `oj~e
~ 3C&23)J.4~3,...4,; `au-s.c
3s-z ~ -
\F~aaaot - [~WSd.M1M. (it io~Catao
rio
ZOuT TCA 40 ,~,,
3/
U.S. v. SH V IIQHAN
CAUSE_~.~247WD
PLAINTIFF
EXHIBIT
NO._.~ 21
ADMITrED__~
~
ro Cuu..-t ala-~ ~ to. 3h)~pot'o £x~ot ~caaratIcn as ~habe from os Eur,,~ m a-o Cen,as. --u,'--.':, :c.
PAGENO="0962"
FCRM7~25.V11.l..~)
CQlPUT~E AcQuIsrrIoIj SPEKIALISTS, INC.
11411 NE 124I~ ST., SUITE 145 lii~IE
rr~LAN1J, ~A 98034
~ ~(PORT~E~N(IRS)NO. 1 PAR11ESTQTR&NSACTIOP4
37-1090467 DRelaled ~Non-ieii1,d
~~4t Ut.T1UATECONSIGHEE
IJ.E. AIENCIES PTE, ~D.
18 JALAN ~IL 106-22 EASTZ~i MANSION
.::NONE.
_~~;l ~
TATE)CFOPIGZNOA FTZHO. 7.
958
SHIPPERO EXPCRT OECL_SRATTCN
L
!4AE~T ic
PROFIT FREIGHT SYSTEMS, INC.
* .. SEATTE WA
* & ~OAO7GPt~(V.s~.i~y) . & MOOEOFTAfl$P~RT(5~~yj
~A ~kC_L1-P,P0RT AIR
* 13. £XPORflNGCARR1ER 11. POR1OF SPORT
.1~'OTr'~'~EST AIRLINE SE~
13. PORTOFUNLOAOINIS(v., 4~.ee~y) 3. CON ERl(~*eey,
Dyes DNa
(UCaR~es17-l11
15. RARK&NOS. ANOX15O5OFPACp~&73E3
~ SEHEDNUMW ~ ~Resif.re;lR
D473.3O.O0Oo,~ .J s.j . *1
DEC 11/70 SPSTEM CAhINET
CO
~4,2OO.0O
U.S. v. SHIV MORAN
CAUSE.ç~~89-247wD
PLAIN11FF
EcHIerr
22
ADMITTED_________________
S15~~ ~ LOOSe e.,e.,,.~e)
~3.m
* `
-. r~1 ~
PAGENO="0963"
959
T~)
jj4lL N.E. 124rA ST., STE r L0~TE~7A/~
OSEXPORTERZ LINIIRSIN ~.PR9TlES TO TRANSACTION
37-1164765 0 R.iatsd Non-~Nat,d
LLTIMATE CONSIGNEE
COMPUTER FOCUS PEE. LTD.
135 CECIL STREET O2-O3L1D~ BLDG.
* SINGAPORE 0106
R!GHT-O-WAY, INC. ________________________________
1912 S. 146th STREET ,.pomr (STAn) OR 000RIOR FTZNa 7. CCL 551105
SEATfl.E, WA 98168
SEATTLE AIR
THAI SEATTLE
12.RART0FUM.OACRIGA~ Roy) 13.COHDJNERIZES (5~ xoy.~
SINGAPORE Dv~~ * Drso
S0A)EQU1.EB CESCRIP1TON0FCOMM0O(TTE~ ~
~` (Use ~rTra 17-19)
15LIARIIG.NOS..ANO KEGS OFROCI(ASES
~__SOKEOU NURSER__~
RAn Ri. `00050 50y SI Ri. 00 5i~S touR O.ousOe,.'
A~150eo005SI s00.~ ou.~ 005550 RA
/ N lou s.sensoull3 U~C. SIt 3SE nAtO. 5.e.xOI; IS ALtO.
~
~RE~IDE~ T / l2LNlREGeoesol
D 8473.30.oaoO 5 2 BOXES 47.7 k
2~ IL) UCEN0ENOJGGN55,s,uC5~55~) CL 22.ECCN(
2i~~ssone ~
(Sae'q p~
251
$4,030.00
U.S. v. _HIV iIOHAN
CAUSE CR89-247ND
PLAINTiFF
EXHI8~T
NO. 23
AOMIT~ED
MARCH 13. 1989
The ~Correct Way to Fill Out the Shippers Export Declaration' Is available from the Bureau of the Census, WastAnqton. D.C. 20233.
PAGENO="0964"
11411 NE 124TH ST., STE 11459~âoa 2~Ar T~ç~c? ~. Z~-..,
KIBKLAIW, WA 98034 ~ I ~3iuuuZOu
bEXPO~T1R3E1N(lfl3NO. 9.~RT1ES TO TR~&cr.r~j~
37-1164765 DR.a1.~ ~Non-~1at.d
T~MT9CONS1G1~1
CONPIJTER FOCUS PTE. LTD.
135 CECIL STREET 02-03 LEN BLDG.
SINGAPORE 0106 -
ERMEO~&TECOKS1GNEE
N0!E
RfGH1~-O-WAY, TNC. -~
1912 S. 146th STREET ,.Po~rot*~oc, o~o~oqrrz~ 7.cCj~T1 ~
SE~flLE.WA9816a _W.A.~ S1~IP
8.LCAO~NGP~ER~~. ~.yj 9. 900E CF TRAl~SPCRT (C9,6CF,
1OE~.~:R lt.PGRT CF EXPORT
TI-IA?
I2POR~1tA~IGM.. a~ ~ 13.CONOJ?E~D~~ ~
SOMGAPORE D~. * D~
-~: } (I-u c~m 17-19)
SO~O I ~AT
3
8473.30.0000 5
DEC H9652 UNIBUS E~P4NSI
1
N CABINET
-n
~
to ~ E.g to. tooo~,s ~i o~~-
~
~
(S~q~
$2,350.00
960
24.~e*Wp ~ *to%aaaE*
U.S. v. FillY ?IOHAN
CAUSE CRS9-247W0
PLAINTIFF
EXHIO~T
24
AOMIT~ED________
Th. Conect Way to Fill Out Wa Sh)pp.r's Expo.t Oclaratlon is ava~tabIs tram Wa Bureau oil Wa Cattsus. WasArglor. D.C. 20233.
PAGENO="0965"
961
~ EAT/all LLIANIX UN
COMPUTER ACQUISITION SPECLALISTS, INC. _______________________
11411 NE 124!li S!., SUIE 145- [DIP CODE ~. DATE OF EXPORTATION 3. OIL~. OF LAO/C GA/H IIA
KIRXE.A~, IDA }9~p34 .._.~V~1ARCM89 180 1527 1q10
N. EXPORTER ElM NO. 3.PARTIES TO TRANSACTION
37-1090467 011.1.1.1 ~NHl1,I$R,d HAWB: 134028
W.IC AGENCIES PTE. LTD. Mu 18 i~ j ~i
18 JALAN ERONIL i~06-22 EASTERN MANSION ~ 334~
~TI~~TECN
MSAS Cargo International Inc (206) 244.4122
18920 13th Place South POINT STAT OF RI INORFTZNO. 7.CDUNTR'T OF 0/1/SATE DESTINATION
Seattle, WA 98148 WASHf~G'F08? SINGAPOHE
8. LOADING PIER/TERMINAL 9. MO OF TRANSPORT(Da.E1y/
SEATAC INT'L
°BLAINE
~ 0 Y*s No
14. SCHEDULES DESCRIPTION OF COMMODITIES. IUME*Io,,oo 15- 191
M 5c.s SC ME ~ 1/ 10./oH,
2 BOXES D 8473.30.0000
I
SPARE PAR1~~ P~3R DEC MODEL 1
---____
*
/730
l22Lbs.
55 KGS
2~A/GL/ ATED LIC...SL ..DJGEIME.RAL UCENSE ..
~
INOL 22. ECCO .01..,
o~.oo01I
/20/
$4,300.00
U.S. v. SHIV IIOHAN
CAUSE CR89-247ND
PLAINTIFF
EXHIBIT 25
NO.
ADMITTED_______________
o t D11011!101001886T114 0,081.11.0.1 p~40tIss /01104.11. I8,1$/E01 old
IS PIIESIthT 1r ~ I'~ . Ig~
°~`°3/10/d9 1 2S.AUTHENTICATIONIRE..H,#H/ooI ~2\I
\$~t19~
Tholo,,,, 1. p~/o~~dbp pA,~1*p~,1/,o~o,.d.d 1 ~.oloo'lo 1I1.Oll'.$ 10.~". Ps, ~40b~ 10 SIOOIHIIRRO.IOOI
0oo.o,1.~s. Go.~I,~o'11lo P,ll1Rq01110.. W..E..q1~o. D.C. 20402. 0,0 sod CUs1,011~ O/.,,~, Oo~s18'l. 1l~s CDI'.sI
P081,~ Fill Do* H~. SR.so~'~ 5op~,, 004.0.10. .. ~ool.01. 1101111111 8010.. DI 1111 CIRoH. W0.oIç180. D.C. 20233.
0
51-840 (968)
PAGENO="0966"