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Subject: Old Bailey Takes Up Iraqi Arms Network;Britain, U.S. Reportedly Stayed
Date: Wed, 28 Oct 92 04:28:31 EST
Message-ID: <49.1992Oct28.042831@AmeriCast.com>

Old Bailey Takes Up Iraqi Arms Network;Britain, U.S. Reportedly
Stayed ActionAgainst Illicit Shipments to Baghdad<By Eugene Ro-
binson and R. Jeffrey Smith=Washington Post Foreign Service=

LONDON, Oct. 27 - The U.S. government had evidence that an
Iraqi-owned machine tool firm in England was involved in illicit
exports to Iraq long before U.S. and British authorities took any
action against it, according to U.S. documents.

The company, Matrix Churchill, has been at the center of a trial
here at which British officials have acknowledged delaying any
action against the firm to avoid cutting off a flow of intelli-
gence from two company officials to the British secret service.
The Coventry-based company, which was bought by an Iraqi-
controlled holding company in 1987, was one of the main vehicles
for Iraq's massive military buildup that culminated in the inva-
sion of Kuwait in August 1990.

Three former officials of Matrix Churchill are on trial in
London's Old Bailey criminal courthouse on charges of violating
Britain's export laws. Company officials contend that the govern-
ment knew that the equipment sent to Iraq was being used in
weapons manufacture, and that British intelligence was receiving
information on the arms buildup in return.

"They knew because I told them," defendant Paul Henderson, former
managing director of Matrix Churchill, said today after court had
adjourned.

The case raises questions about the extent to which Western in-
telligence services knew about, and perhaps abetted through inac-
tion, Iraq's program to build up its arsenal following the end of
the Iran-Iraq war - possibly because of their desire to keep an
eye on the Iraqi activities at the expense of actually halting
the leakage of Western technology.

British and U.S. intelligence agencies share information exten-
sively, and defense attorneys say they will demonstrate that U.S.
intelligence was aware of Matrix Churchill's dealings as well.

Evidence of extensive U.S. familiarity with Matrix Churchill's
operations on behalf of Iraq in the late 1980s can be found in
classified U.S. intelligence documents about the covert Iraqi
procurement network, some of which came to light in the U.S.
congressional probe of Washington's ties to Iraq before the war.

U.S.  intelligence reports "as far back as June 1989 reveal that
Matrix Churchill Corp. was part of Iraq's military technology
procurement network, yet the Bush administration allowed it to
operate despite knowing that the network was responsible for . .
. Iraq's covert nuclear, biological, and chemical weapons pro-
grams," said U.S. Rep. Henry B. Gonzalez (D-Tex.), who has been
investigating what U.S. intelligence agencies knew.

U.S. officials said he was referring to a CIA report that out-
lined Matrix Churchill's role in Iraq's Al Arabi procurement net-
work under the control of Safa Habobi, the company's president
and a director of the Nassr State Enterprise weapons complex in
Iraq.

Additional evidence of U.S. suspicions about Matrix Churchill's
activities can be found in Justice Department documents. Accord-
ing to the documents and U.S. officials, the U.S. Customs Service
had evidence in late 1989 suggesting Matrix Churchill was con-
nected to an Iraqi effort to buy U.S.  electronic equipment that
could be used to trigger nuclear explosives.  Customs officials,
who conducted a joint investigation with the British, said they
never proved any direct connection between the company and Iraq's
attempted purchase of the nuclear triggers.

According to the documents, the Justice Department in late 1989
The Coventry-based company, which was bought by an Iraqi-
controlled holding company in 1987, was one of the main vehicles
for Iraq's massive military buildup.<



delayed seizing export records at a subsidiary of the London-
based firm in Cleveland because U.S. and British customs authori-
ties were conducting a joint investigation of an Iraqi effort to
buy electronic equipment that could be used to trigger nuclear
explosives.  The subpoenas eventually were issued when Matrix
Churchill attorneys, who had anticipated the probe, volunteered
to receive them, the documents show.  Henderson, former Matrix
Churchill commercial director Trevor Abraham and former sales
director Peter Allen have pleaded not guilty to charges of
violating export regulations by pretending that the machine tools
and other items they sent to Iraq were for civilian, not mili-
tary, use.

The defense has been granted extensive access to classified docu-
ments, some of which appear to bolster their case that the Brit-
ish government was more concerned with maintaining its intelli-
gence sources within the company than enforcing the letter of
Britain's export laws.

The British government has declined to comment on the case while
it is pending in court.

Henderson and another Matrix Churchill official who has not been
charged, Mark Gutteridge, have been named in court as the two
sources who were passing information on Iraq's arms program to
the intelligence service MI6.

Eric Beston, an assistant secretary at the Department of Trade
and Industry - which had to approve export licenses - testified
Monday and today that one reason the government approved a
license for Matrix Churchill in early 1989 was to ensure contin-
ued access to Iraqi installations for in intelligence source
within the company.

That concern was spelled out in a February 1989 memo, written by
an official in the Middle East department of the Foreign Office,
that defense attorney Geoffrey Robertson read in court.

The final decision on that license application was made weeks
later following a high-level discussion involving ministers from
the Foreign Office and the departments responsible for trade and
defense procurement, according to Beston and documents read in
court.

Beston acknowledged under cross-examination today that he con-
sidered this a case that required a "political decision" at the
ministerial level.

Asked whether continued access for the intelligence sources
within Matrix Churchill was a factor in deciding to approve the
license, Beston replied, "That was one of the considerations."

The government maintains that it had no firm proof that the Ma-
trix Churchill equipment was being used to make arms. But Beston
has acknowledged that he and others argued to continue granting
export permission even after receiving intelligence reports indi-
cating that the machine tools were destined for installations
that were being used, at least in part, as weapons factories.

Despite the intelligence reports, Beston testified, he believed
it was "credible" that Iraq was merely seeking to build up its
civilian industrial base following nearly a decade of war with
neighboring Iran.

His department's view, Beston said, was that even if it were do-
cumented that some of the equipment were being used for military
purposes, this was "a matter of less concern" because the war had
ended.

Matrix Churchill, headquartered in England's industrial heart-
land, was a well-established manufacturer of lathes, magnets and
other heavy equipment before it was bought by Iraqi-owned TMG En-
gineering Co. in 1987. Both firms were shut down by the British
government after the Iraqi invasion of Kuwait in August 1990.

The jury in the case has also heard testimony concerning a 1988
Matrix Churchill sale to Industrias Cardoen, a Chilean arms
manufacturer believed to have acted as a conduit for Iraq's mili-
tary buildup.Smith contributed to this story from Washing-
ton.<02:37 10-28C9999-----

Copyright 1992, The Washington Post.  This story is from the
Washington Post's Capitol Edition On-Line and is not to be ar-
chived or redistributed.

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