Volume Four
Section J Other Prosecutions
Chapter 2 Contractor 600

Excerpt:
CONTRACTORS 600

 J2.1 The investigation of Contractors 600’s exports to Iraq, that began with the removal on 9 April 1991 of files for perusal, was originally directed at the company’s exports of machine tools. *1 Customs’ inspection of the documents led, however, to an investigation into, and eventual prosecution of the company for, the export of certain “castings”.

J2.2 The Customs ID Case Officer in respect of the investigation was Mrs Heather Cameron. Her Interim Report dated 4 March 1992 described the progress of the investigation and the position that had been reached. Following perusal of the documents removed on 9 April 1991, further visits to the company’s premises had been made in September and a number of directors and employees had been interviewed. She reported:

“....It has been established that between the end of March and the middle of May 1989, Contractors 600 Ltd exported Precision Investment Castings to Iraq without an export licence. These castings were specially designed for the manufacture of a grenade launcher. No application for a licence was made. The end user was the Al Kadesiah Establishment....” *2

J2.3 The “special design” of the castings had been confirmed by Mr Fletcher of the MOD. In a witness statement dated 13 February 1992, he said:

“Having seen all the relevant documentation and statements in connection with this case, I am left in no doubt that these Precision Investment Castings were for the manufacture of a Grenade Launcher. I can therefore say that these specially designed items, which form part of the Grenade Launcher, would fall to be caught under ML4/ML16(4) of Group 1 of Part II of the Export of Goods (Control) Order 1987.” *3

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Volume Two
Section D Arms and Defence-Related Exports to Iraq
Chapter 7 Other Allegations of Illegal Arms Exports to Iraq

Excerpt:
CUSTOMS INVESTIGATION

 D7.35 During the course of the investigation initiated as a result of the VAT Control Officer’s visit to Oceano in August 1989, Customs ID prepared a number of briefs and Interim Reports. *48 In response to the VAT Control Officer’s report Mr I Graham, a Customs investigation officer, made enquiries of DTI Export Licensing Branch. On 25 August 1989 he reported that he had been told that during 1989 no applications for export licences had been received by the DTI from Global. On 21 December 1989 Mr B Fletcher, an MOD equipment expert, wrote to Customs and gave his opinion that explosive detonator transponders would be licensable under ML4(2) of the 1987 EG(C)O. He said also that “If MOD were asked its advice on whether an export licence would be granted for this device to be supplied to Iraq, I am advised by DOR (Sea)/RST [an AWP member] that it would be opposed under the present Ministerial Guidelines as being lethal.” *49

Volume Four
Section H The Other Machine Tool Prosecutions
Chapter 1 The BSA Tools Case

Excerpt:
THE INVESTIGATION

H1.7 Mr Dunn’s Interim Report contained, also, the following paragraph:

“Bailey’s statement in the Panorama programme that the machines were standard machines which could be used for any purpose is simply not true. There was a great deal of special fixturing required for the machines in order that they may perform the various operations in the production of each of the components.”

 This paragraph contains a hint of the “special design” theory that was evolved between Mr Fletcher of the MOD and Customs ID in the course of the Matrix Churchill investigation. Nonetheless, the main thrust of the Report was that Mr Bailey had deceived the DTI by concealing his knowledge of the intended end-use of the machines

H1.12 An internal Customs meeting was convened on 28 May 1991, in order to discuss the progress of the BSA investigation. *14 Mr Bailey was due to answer his bail on 3 June. The note of the meeting recorded that Customs ID were still in the process of gathering further evidence of special design but that nonetheless the present intention was “to prosecute on CEMA section 68(2) offences.” *15 As to the “special design” case, Mr Wiltshire, in a note in early July 1991 to Mr Andrew said:

“It is worth noting that in the Matrix and Wickman cases, both of which are further advanced (proceedings commenced), Barry Fletcher MOD SPTO of the Security (Scientific & Technical) Section, who advises DTI on the licensability of ML items, has given statements to say that in those cases the whole project, in his opinion, is specially designed. This goes against previous DTI opinion that the machine tools cannot be considered as anything other than an IL item.” *16

Volume Four
Section H The Other Machine Tool Prosecutions
Chapter 2 The Wickman Bennett Case

Excerpt:
INSTITUTION OF PROCEEDINGS

H2.23 The informations were drafted by Mr Biker. *27 The advice from the Solicitor’s office to which Mr Byrne referred in his minute to the Chairman had been given orally by Mr Biker and Mr Fotherby during the 10 May telephone conversation with Mr Fisher. In written evidence to the Inquiry Mr Biker said:

“On 10 May 1991 Mr Fotherby and I agreed that I advise the Commissioners’ administrators orally that the evidence should be sufficient to support proceedings under Section 68(1) of the 1979 Act against Mr Simon, Mr McLellan and the Limited Company with reasonable prospects of success. I did so advise them. This decision was based on all the evidence which had been obtained by that date.” *28

He said that the evidence on which he and Mr Fotherby had relied included the witness statements of some forty three witnesses, and the exhibits produced by those witnesses. This was careless evidence. In fact only twenty eight witnesses, excluding Mr Fletcher and Mr Coolican, had given statements by 11 May. *29 Eighteen witnesses gave witness statements after that date. Mr Biker’s advice to the Commissioners that there was sufficient evidence could not have relied on the post-10 May witness statements. As to what information had been received additional to that which, on 9 May, had been judged insufficient to justify the institution of proceedings, Mr Biker said this:

“The additional information that had been obtained since 9 May 1991 had been two significant witness statements. One was from Mr Fletcher of the Ministry of Defence dated 10 May 1991 in which he stated that the items to be manufactured by the Wickman machines fell within the terms of the 1987 [EG(C)O]. The other statement was that of Mr Coolican of the [DTI] also dated 10 May 1991. He spoke to DTI licensing policy at the time and said - in effect - that no DTI licence would have been granted had the full and true nature of the goods to be exported been known to his Department. Once these statements had been received, Mr Fotherby and I considered that we had all the necessary information to be able to form a view and to give considered but urgent advice to the Commissioners upon the strength of the evidence.” *30

H2.24 Mr Fletcher’s witness statement dated 10 May 1991 said that “any equipment specially designed for the development, production or manufacture of a military projectile and the software to control that equipment would fall to be caught under ML18 of [the 1987 EG(C)O]” and continued:

“...having seen the statements of Albert Arthur Wilkins and David Annan Hannah I can say that some of the equipment manufactured by and for Wickman Bennett Machine Tool Company, namely, MD8211 hard top jaws, MD8212 set of pick up jaws and specially designed rotary transfer tables WB98779 and WB98785 manufactured by Alpha Automation Ltd would meet the above criteria and therefore fall to be caught under ML18....” *31

J4.8 On 10 April 1990 Mr Fletcher signed a witness statement in which he said:

“.... I have been shown a letter dated 15 November 1989 and nine pages of specifications attached from [the American company] relating to a capacitor  part....plus a copy hand written sheet of specifications headed....EUROMAC CAPACITOR CONTRACT/ORDER, plus a further hand written sheet of specifications headed High voltage Low inductance Capacitors having the following specifications. I believe that this capacitor has been specially designed for military use, and as such would fall to be caught under heading ML11 of Group 1 of Part II of the Export of Goods (Control) Order 1989 as amended.” *10

J4.9 On 20 July 1990 Counsel, Mr Gibson Grenfell, advised in writing “in relation to the desirability of obtaining further expert scientific evidence and evidence of prohibition.” *12 Mr Grenfell referred to Mr Fletcher’s evidence (cited above) but advised that it was “of paramount importance to know whether or not Mr Fletcher has reached this view on the basis of his own experience or whether, as may well be the case, he has consulted others and has reflected their view in what he says.” *13

J4.10 On 28 August Mr Fletcher signed a second witness statement in which he said:

“Further to my witness statement dated 10th April 1990 the specifications for the capacitors.... specify that the capacitors were to meet military specifications for humidity, shock and vibration.

I can say that any electronic component, which an electrical capacitor is, which has been designed to a military specification falls to be caught under heading ML11 of the Export of Goods (Control) Order 1989, as amended.

I can further say that electrical capacitors specially designed for use in an item covered by head ML4 - Bombs, torpedoes, rockets and missiles.... fall to be caught under the same head, ML4 of the Export of Goods (Control) Order 1989, as amended.” *14

Volume Two
Section D Arms and Defence-Related Exports to Iraq
Chapter 6 Specific Export Licence Applications After the Cease-Fire

Excerpt:
(XV) PMK ELECTRONIC CONSULTANTS LTD

D6.374 Mr Mayne, DTI, telephoned PMK on 20 March 1990 to inform them that the ELA had been refused. PMK requested that a meeting should be held to discuss the application. *704 A meeting was held on 4 April 1990 with PMK and Qudos. According to a note of the meeting made by Mr Mayne and dated 5 April 1990, Mr Steadman and Mr Mayne of the DTI and Mr Barrett and Mr Fletcher, a technical expert in the MOD, (MOD Sy (S&T)1d), were amongst those who attended. *705 The note records that Mr Fletcher and the representatives from Qudos discussed the level of technology in relation to the Qudos Q-Beam System for the “direct pattern writing on the premetallised wafers and quantity of items proposed for export”. *706 They agreed that Qudos would fax to the DTI “their understanding in respect of the guidelines for exports to Iraq together with a confirmation on the levels of technology on the Qudos Q-Beam machine and performance of the wavers [wafers] produced”. The request for Qudos’s “understanding of the guidelines” was in effect a request for Qudos to put forward its arguments as to why the application of the guidelines should not result in refusal of their ELA. Qudos and PMK duly sent a letter to Mr Steadman by fax on 5 April 1990. *707 Details of the fax letter were incorporated into the note of the meeting of 4 April 1990. In their fax letter PMK and Qudos confirmed that (i) “chip manufacturing technology [was] not specifically embargoed” and (ii) “the equipment and devices produced in themselves [were] not lethal.” It was further explained in the fax letter that the Q-Beam system that Qudos wished to supply “[could not] be used for military applications without modifications and process control” and that it was “most definitely not a production tool but a prototype facility producing a very low quantity [quality] of chips suitable only for short term use and in an academic environment”. The note of the meeting recorded that Mr Barrett and Mr Fletcher concluded the meeting by telling PMK and Qudos that they would “speak to their adviser(s) who were unable to attend the meeting before putting their appeal to Ministers”.

Submission to Minister (DP)

D6.375 On 6 April 1990 a written submission from Mr Barrett was put up to the Minister (DP), Mr Clark. Lieut-Colonel Glazebrook said to the Inquiry that he had assisted Mr Barrett in producing the submission. *708 A meeting had also been held on 6 April 1990 attended by members of the MODWG (including Mr Fletcher (MOD SY (S&T) and Lieut-Colonel Glazebrook), Mr Steadman, DTI, and Mr Sherrington, FCO, in order to discuss the wording of the submission to Mr Clark. Mr Peter Gall (DTI) made a contemporaneous manuscript note recording that the meeting had been held to “discuss HMG line on this export” and that the “Recommendation [was] refusal”. *709

Volume Four
Section H The Other Machine Tool Prosecutions
Chapter 1 The BSA Tools Case

Excerpt:
SUMMARY AND POST MORTEM

H1.44

(iii) If it was thought that the deception in respect of the ELA warranted a prosecution and it was desired to base the prosecution on “special design”, the charges should have been confined to the accessories which Mr Fletcher regarded as “specially designed”.

And Mr Fletcher signed a witness statement on 19 August 1991 in which, after referring to ML18 of the 1987 EG(C)O, he expressed the opinion that six specific items of equipment, each a part of the equipment to be used in conjunction with the BSA 3000 lathes, were specially designed for the manufacture of a “military projectile”. It is to be noted that Mr Fletcher did not in this statement suggest that the lathes themselves had become, by association with these specially designed accessories, part of a specially designed package. *22 That was a suggestion that he had expressly made in one of his Matrix Churchill witness statements and in a Wickman Bennett witness statement.

Volume Four
Section J Other Prosecutions
Chapter 6 The Ordtec Prosecution and Appeal

Excerpt:
THE INVESTIGATION: 1990

J6.15 If the “package” construction of ML18, evolved in discussions between Mr Fletcher (MOD) and Mr Wiltshire (Customs ID) in the context of the Matrix Churchill case *41, is correct, there can be no doubt but that the fuse assembly line was, as a whole, “specially designed” for ML18 purposes. The two executives of the sub-contractor from whom statements were taken by Customs ID said in their statements:

“The assembly line we designed was specially designed for the sole purpose of assembling the M7379A1 fuse from component parts into completed fuse assemblies.”

Mr Fletcher also provided a statement, dated 26 September 1990, for the purposes of the Ordtec prosecution. In the statement Mr Fletcher said that he had considered the witness statements of the sub-contractors’ executives and continued:

“The .... statements refer to an assembly line specially designed for the production of the M739A1 artillery fuse. I can say that such an assembly line which is specially designed production equipment for an item which falls to be caught under ML3/ML4 of Group 1, Part II of the Export of Goods (Control) Order as amended (1987), would fall to be caught under heading ML18 of Group 1, Part II of the [EGCO].” *42

The statement does not espouse the package theory in terms, but the witness statements to which Mr Fletcher referred make it clear that a number of the components of the fuse assembly line were standard, off-the-shelf items. Ordtec exported the various components of the fuse assembly line as separate, unassembled, items; assembly of the components so as to constitute a fuse assembly line was to take place on site in Iraq. At the point of export, therefore, the standard, off-the-shelf items remained exactly that. They could have been used for a number of different purposes on arrival in Iraq although the intention clearly was that they would form part of the fuse assembly line.

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