Lucrative lawbreaking

BRUCE WALLACE July 28 1986

Lucrative lawbreaking

BRUCE WALLACE July 28 1986

Lucrative lawbreaking


The cargo was sensitive—11 pulsed twystron microwave tubes, valued at $32,000 each, for use in radar air defences. The transfer had been meticulously planned: trucked to Montreal from an American wholesaler in Newark, N.J., shipped to Turkey and smuggled across the border into Iran. But even as the conspiracy began, the RCMP and the U.S. Customs Service had made Montreal businessman Metin Tanir, 51, the target of an undercover investigation. The Turkish-born owner of Black Gold International Communication Inc., an electronics import-export firm, Tanir was what law enforcement officials call a “10-percenter,” the suspected middleman in an operation to ship the tubes to Iran. His motive: to share in an estimated $350,000 profit from the sale. But last Dec. 2, Tanir was arrested by U.S. Customs agents near Newark, after meeting customs operatives to finalize the deal. Said special agent * Arthur Stiffel, who co-ordinated the investigation: 3 “Tanir had no ties at all to | any political factions. It was | strictly a dollars-and-cents z arrangement.”

Tanir’s arrest and subsequent conviction on July 3 to two years in prison focused attention on how enterprising middlemen use Canada to circumvent American law. Said David Adam, director of Canada’s export controls division of the external affairs department: “Our concern is that because of our open border, Canada is being used as a back door to move American technology to unfriendly countries.” Officials on both sides of the border say there are many middlemen willing to risk fines and jail sentences to reap the lucrative profits available by diverting strategic parts and weapons to embargoed countries like Iran and Iraq.

Those profits are growing, say U.S. Customs officials, largely because clandestine purchasers are willing to pay huge markups to acquire Western technology. While the Soviet Union

and its East Bloc allies are the main markets for sophisticated electronics and computer parts, other countries have added to the recent demand. Among them is Pakistan, which is alleged to be seeking parts for an embryonic nuclear weapons program. Iran has also been trying to obtain spare

parts for its American-made military equipment since a U.S. trade embargo was imposed in 1980. In response, Canadian and U.S. police and customs officers have tightened export-control operations and are using new tactics, such as so-called sting operations in which undercover agents pretend to be dealers to gather evidence.

In addition to Tanir’s arrest and conviction, recent cases include:

• The arraignment in a Montreal court last month of Joseph Lousky, 38, a French citizen charged with five counts of illegally shipping computer parts to the Soviet Union via Belgium. At a bail hearing, an RCMP officer testified that Lousky admitted to making 10 shipments of Digital Equipment Corp. computer equipment, used in the production of missile guidance systems.

• The Jan. 28 arrest in a Toronto hotel of Heinz Golitschek, an Austrian later convicted in the United States of conspiracy to export $110 million worth of TOW missiles and Cobra military helicopters to Iran via Belgium. Golitschek, the target of a sting operation by U.S. Customs agents operating

out of Buffalo, was recorded on videotape discussing the possibility of exporting the weapons through Canada.

• The acquittal in a Boston court in March of Leslie Klein, an Ottawa businessman charged along with 11 other Canadian, Swiss and West German defendants with 23 counts of conspiracy to divert American-made computer systems to the Soviet Union through Canada between 1979 and 1982. Klein insisted that he was unaware of the destination.

The illicit arms trade is a major concern for Canadian officials. In January, 1985, Ottawa set up the Enhanced Export Control Program, requiring more stringent application of Canadian export laws by customs officers. Since the program began operating last August, the number of detentions has soared to

almost 1,400 from fewer than 100 in the same period the year before. “For 30 years the controls were applied in a half-assed way, relying on the exporter to voluntarily disclose what he was shipping and where,” said export control chief Adam. “Now, we are finally putting some teeth into our bite.”

The campaign to toughen Canadian controls was partly a response to pressure from the U.S. government. Pentagon reports issued in 1982 and 1985 contended that Soviet espionage agents have established an extensive network of contacts and ghost companies in the United States aimed at acquiring sophisticated technology, particularly computer and digital electronics systems. In 1981 President Ronald Reagan

created Operation Exodus, a special branch of the Customs Service, to combat what he called “the massive hemorrhage of American technology to the Soviet Union.” But some diverters, aware that there were few restrictions on shipping U.S. high-technology goods to Canada, circumvented the crackdown by using Canadian middlemen to import the parts and forward them to the embargoed countries.

The Canadian connection gained notoriety in 1978 when U.S. Customs officers arrested Gerald Bull, a brilliant aeronautics engineer and artillery specialist who was later convicted of illegally selling arms to South Africa. But although Bull operated his Space Research Corp. from an 8,000-acre compound near Highwater, Que., close to the U.S. border, he was never charged

under Canadian law. Said a U.S. Customs agent who worked on the case: “Bull opened our eyes to the problem north of the border.”

Since then, Canadian officials have shown an increased willingness to assist in the American crackdown. When Golitschek flew to Toronto to finalize the purchase of missiles and helicopters, American agents were able to arrange extradition papers in 24 hours. Said Walter Kiniry, a U.S. Customs agent who worked on the case: “The co-operation from Canada was unbelievable.”

Despite tighter controls, the operations are continuing. Said Jack Waissman, a Montreal lawyer who prepared the unsuccessful 1984 case against

three Canadians charged with export*ing parts to Pakistan for its nuclear weapons program: “The political will to stop proliferation is undercut by the thousands of businessmen willing to fill orders to make a buck.”

The rewards for illicit sales to Iran are particularly large. That country’s six-year war with Iraq has made its leaders so desperate for replacement parts for its U.S.-designed military equipment that it pays up to four times the market value for some strategic components.

According to U.S. Customs sources, most deals are paid for by letters of credit drawn on Swiss bank accounts. As well, the offer to purchase usually includes the production of fraudulent end-user certificates. Both Canadian and U.S. export laws require that doc-

umentation be produced to demonstrate the final destination of goods. Because the material is often shuttled among several companies, leaving a complicated trail of paperwork, police have sometimes found it difficult to prove conspiracy charges in court.

It has been even more difficult to get convictions in Canada. In the most celebrated case of its kind, in 1984 Ottawa charged two Montreal businessmen and an engineer with conspiracy to export high-speed electrical inverters— used in the production of nuclear weapons-grade uranium—to Pakistan. When the Crown failed to prove that the accused men knew that the inverters were destined for Pakistan’s atomic program, one man was acquit-

ted and the two others convicted on the minor technical charge of failing to acquire an export permit.

Those legal setbacks have led customs agents to launch more aggressive sting operations, which attempt to record the middleman’s overtures to buy restricted goods. For that, police and customs officers rely on the manufacturers themselves to alert them to suspicious purchases. In the case of Tanir, whose $10-million shopping list also included jet aircraft ejection seats and radar for the F-14 fighters used by Iran’s air force, agents were alerted by a small wholesaler after Tanir approached him to buy the tubes. Undercover U.S. agents posing as suppliers then contacted Tanir. Over the next five months they videotaped Tanir discussing his plan to divert the parts to Iran.

In the Klein case, the Ottawa businessman was charged with violating U.S.

law even though the Canadian government had provided him with an export licence to ship Digital’s computer equipment to West Germany. “I did not do anything illegal,” Klein told Maclean's. “Why do I need to get a Canadian government permit if I can still be prosecuted in the United States? They are violating the sovereignty of this country, and the government lets them do it.”

But Canadian officials maintain that it is in the country’s national interest to assist in the American crackdown. Said Adam: “If we are to enjoy the benefits of unimpeded access to U.S. technology, we must make sure it is denied to countries where the United States does not want it to go.”