MY ADVICE TO THE PRIVILEGED ORDERS
Henry B. Gonzalez, (TX-20)
(House of Representatives - February 03, 1992)


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The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Texas [Mr. Gonzalez] is recognized for 60 minutes.

Mr. GONZALEZ. Mr. Speaker, since my election by the majority of the Democratic Caucus to the chairmanship of the Committee on Banking, Finance and Urban Affairs, before which, for some 10 years, I had been the ranking member of the committee, and over the span of my privileged service in this House, 30 years and some 4 to 5 months, I have belonged to the Banking Committee. So, when I assumed the chairmanship, I promised my colleagues that I would give them timely and consequential reports as to the activities of the committee's set agenda being under my direction. I said at the time though, `I think in a cynical world those words are lost,' and I have always felt that the power of a chairman is inherent only really one way, and that is the power to set the agenda, set the course; offer the leadership in other words. After that, the rest under the rules, if faithfully followed, as they are intended to be democratically. When a roll call is ordered, the chairman's vote is just one, and that is it.

Now in the 30 years I have observed several chairmen before me, and I observed very keenly, and I saw the consequences of trying to abort that procedure or divert from the democratic processes, and over those 30 years I look back and see what were the results. Sure, they exercise power.

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There are some lobbyists today and newspaper editors and trade press that say, `This chairman is too democratic,' astoundingly. This is what was used in a Washington Post story about my activities, and in several of the banking trade publications who have been more prone to say that I am bizarre, or that, they do not use the word `peculiar' or anything, but they use another word, a synonym, to describe behavior of a man that does not cut his hair in accordance with the traditions around this place or in many other legislative centers. That is that I do not have fundraisers in Washington.

I try to refrain from accepting or at least limiting any kind of contribution, even if it is back home, from any particular entity or association or individual who has any business or is likely to with any type of committee activity which I may have been assigned to. That is about it. It is just something that I resolved as a matter of policy long before I came to the Congress when I served in the State senate of Texas, and believe it or not, where it started, 3 years on the city council.

If anybody thinks, any of my colleagues think, because I have been privileged to serve on all three levels, that virtue is in close proximity to the locality, let me disabuse their minds. If the spotlight has been or has been or would be on those local doings and their intricate relationships with the power structure in those cities and other elements, why, you would have more scandalous reporting than anything you read about on the national level. That is the way it is.

Cynics thought that when I said the only real power that I think I have a right to exercise is the power to set the course and set the agenda, that of course has not pleased some. Some were dissatisfied last year because they felt I had been too active, and others because I had called the shots as I saw them, and it happened to be those shots I called were based on testimony that was freely given before the committee and it reflected in other sectors. So there was no way that I could avoid that and give the accounting that I have promised my colleagues.

Today I rise in order to continue. In fact, the last time, which was several months ago, it was in connection with this subject matter.

Mr. ROTH. Mr. Speaker, will the gentleman yield?

Mr. GONZALEZ. Yes; I will yield to the gentleman.

Mr. ROTH. I thank the gentleman for yielding. Allow me to tell him that while I belong to this side of the aisle, to the other party, and am of a different political persuasion, I would compliment the chairman of the Banking Committee, because of all of the Members he is probably the most fair chairman we have in the House. I serve on the Banking Committee with him.

What I like more than his conscientious job that he is doing, I wish the House had listened to the gentleman over the years and we would not have the S&L mess. The American taxpayer would have been saved billions, and I appreciate that.

I think the gentleman would agree with me that he does come under the heading of that time-honored term, that honored term of Texas, as a maverick. I would say the gentleman from Texas probably is a maverick.

We do have a lot of work on the Banking Committee. The question that I would have of the chairman is, of all of the issues, and there is no committee more important than the Banking Committee to this House, of all of the issues before the Banking Committee, what is the key issue we have to address? We have so many of them.

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Mr. GONZALEZ. Let me thank my colleague, the gentleman from Wisconsin [Mr. Roth] for his very kind and generous remarks, which he has always expressed, in all truthfulness, and for which I am very grateful.

We may belong to different sections of the political spectrum, and we may also have perhaps different views on some of the issues, but to answer that question at this point would give rise to a little difficulty inasmuch as we have what I would say are more immediate issues that are not even being discussed. There seems to be no perception as to the gravity, the extent, the depth, the spread of the complicated problem that faces us just in the financial world.

The very much unique American deposit insurance system, nobody even mentions it, but the need for reform there has been long overdue because it has been distorted. Certainly the congressional intent has long ago been corrupted. You cannot have $3 plus trillion of insured funds in the commercial banking system alone and have an insolvent insurance fund without saying that it would be quite difficult to tell the people the truth, and that is that the Government could keep its pledge as far as insuring at a given moment. To me that would be No. 1.

We tried, in all fairness, and I was able to work with the ranking minority member, the gentleman from Ohio [Mr. Wylie], in the three or four attempts we made during the markup on last year's banking bill to have a reform. It was a start. At least it would reduce the exposure of that fund as it has been allowed to improperly.

On top of that, we have reached a point of conjunction in our Nation's history where things have built up over 30 years that are not going to be resolved overnight. There is no quick push-bottom answer that I can find. It is complicated, just like the problem that built up over these three decades has been complicated.

Against that backdrop we have the economic situation of the country. The banking system cannot thrive if the economy is not, and vice versa, so that our challenge is great.

I want to thank the gentleman from Wisconsin [Mr. Roth] for his willingness to serve on the committee in these difficult times. I do not know how much political mileage there is in being constantly recorded as having to do what seems to be absolutely necessary, and that is to provide the necessary funds to ensure the at least temporary actuarial soundness of the banking and insurance fund.

Now, I do not follow Member's individual records, so I am not prepared to say how the gentleman voted, but I do know that he has been one of the better attending members of the committee, and that I appreciate.

If the gentleman will forgive me, I am going to divert to stick to the issue on hand, because it is a rather lengthy presentation.

In 1975 I was not anywhere near the top of the structure of the Committee on Banking, Finance and Urban Affairs, but back home I soon discovered a very disturbing and troubling pattern involving international flow of money that was not accounted for by anybody. That was beginning to filter into the safety and soundness of some of the financial institutions, such as a couple of S&L's and one or two banks.

I persuaded, with a lot of effort, to finally get the chairman of the subcommittee that had jurisdiction to come to San Antonio, my hometown, and hold 2 days of hearings. As a result of those hearings we did uncover some very disturbing facts. I got the compliments of the stable and long-time members of the financial community, because they also had been apprehensive.

It was not until 3 years later that we got, in 1978, the first international banking law enacted. It took 3 years. Then it was inadequate from the beginning. It was difficult. If it is difficult today, you can imagine how much more difficult it was in 1978. Anyway, it was a beginning.

With great distress I noticed through the years that some of the individuals that we had brought out in the course of those hearings, for instance, one from the State of Louisiana, were later involved in what we call now the S&L scandals, so that there is always cause and effect in these areas.

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What I wanted to say though is that the gentleman is quite correct. At the bottom of almost every event in human history and modern history, not only in our country but throughout the world, is finances.

It is interesting to note, my colleagues, that the day the hostages held in Iran so atrociously, an event that had not happened since before the Middle Ages, where you had that kind of hostage of diplomatic emissaries, when they were released on January 20, 1981, they were released after a Federal Reserve official in New York, in New York, in the New York bank, pressed a button and released several billion dollars in London to the folks in Iran.

It is interesting to note that this last release happened after a payment was made, which had been for some time disputed. We were supposed to have had an international commission adjudicating or presiding over these claims, but I think the cause and effect there is very obvious.

What I do not think our folks in the United States have ever gotten is a full and complete report of all of those financial dilemmas that led to the taking of the hostages. It involved about 10 billion dollars' worth of banking investments from the United States.

In any event, it is sad to think that at this moment that I speak we have somewhere around $800 billion in this country in foreign money, international money, and nobody really knows how to keep track of it right now, even after the amendments that we passed this last year out of the House on November 27, and then the conference report, and finally signed by the President sometime after that.

We are the only country of any size or industrial worth that does not have anything like a screening board. Even Canada has one. We do not have any monitoring or regulatory power to oversee this, or even a little chunk of it, and $800 billion is a lot of money. Not all of it is legitimate, but just a chunk of it is highly leverageable. It can be leveraged in a matter of minutes electronically to such things as drug money laundering.

I can assure you what I have been saying for over 20 years that the kind of crime, particularly drugs and all that goes with it, would not be possible in our country unless there was a tie-in between that particular criminal element, the otherwise political or officialdom, and the financial or business sector.

So today we have over 25 percent of our total financial or banking assets that are owned by foreign entities.

The difficulty here is to try to convey even to our regulators how different it is when any of these banks that are called international banks are headquartered in the United States, and then charter agencies in several of the other States, which agencies are chartered by State banking commissions.

What is not realized is that every one of those banks are State-owned. The one I am going to speak of, which I want to give this background for understanding on, is one that is owned by the Italian Government.

For a year and a half, in fact, it has been a year and a half that we first had hearings by the Committee on Banking, Finance and Urban Affairs, on the activities of the Banca Nazionale del Lavoro, or the BNL, in the United States.

In the course of that investigation we have learned that BNL provided over $4 billion in what appears to be illicit loans to the Government of Iraq. While about half of these loans went to purchase food commodities, it is less well-known that about half was used to finance Iraq's efforts to build a self-sufficient military industry, an industry that could build missiles, one that came close to developing nuclear arms, one that did produce chemical weapons, one that could build a super gun capable of unprecedented range, as well as produce conventional weapons.

I have taken this time to report, as I have promised and repeat that I promised, on these activities of the committee and its findings.

Last fall in a report to Congress the President reported

that no United States company contributed directly to Iraq's conventional or nonconventional weapons capability. In fact, however, Iraq operated an extensive clandestine procurement network that obtained critical financing through the BNL and that operated in this country to procure United States technology and know-how for Iraqi weapons programs.

I have written the President to advise him of this finding and to ask that he cooperate fully in our efforts to develop all of the facts. Unfortunately, the committee has met with many obstacles in its efforts to determine how Iraq used BNL and other sources in this country to develop important military technology.

Despite the unfortunate obstacles, we have learned a great deal. I hope that President Bush will now order complete cooperation as we seek to determine the full facts. I hope also that the President will issue a report of his own correcting the report sent to the Congress last year.

We know and have documentation and have had it since last year showing quite a number of American firms and corporations that did do business and did afford this kind of help.

Pending further study, I do want to describe what the committee knows about the Iraqi procurement network, how it operated, and how United States firms directly participated, wittingly or unwittingly, in the Iraqi effort to develop weapons of mass destruction.

But before this, let me say that it was not until 1983 when President Reagan removed Iraq from the list of terrorist nations that the green signal went out from the State Department, from the Commerce Department, and almost on every level, to have substantial commercial intercourse with Iraq. This was in 1983, and that started when Iraq was removed by President Reagan from the terrorist nation list.

I intend to produce a report on all of the committee's findings. But in the meanwhile, I will provide through this forum further information as warranted, beginning today.

Already the committee's work on BNL has resulted in major legislation to require more effective regulation and oversight of foreign banks operating here. That was because of last year's amendments to the Banking Act.

However, it is likely that more needs to be done. In fact, I will say categorically it needs to be done. I am in fact developing a new bill that would encourage multilateral lending institutions, the World Bank and others, to pay close attention to the need to prevent the further proliferation of sophisticated weaponry in countries like Iraq that depend on those institutions for basic economic health.

Therefore, this investigative effort has important legislative goals. The Government of Iraq, operating with BNL financing and using a secret procurement network, was able to obtain assistance through the Export-Import Bank.

This network obtained $2,155 million in loans from BNL alone for militarily useful products, specialized machinery, various kinds of steel, industrial equipment, chemicals, computers, and other items.

In addition, BNL financed $2 billion worth of agricultural goods through the Commodity Credit Corporation Program. Taxpayers are going to have to pick up that tab, and it amounts to somewhere around $2 billion, and that does not include over $200 million from the Export-Import Bank guarantees.

It was an early objective of Saddam Hussein to become an independent producer of arms, including nuclear weapons and the missiles necessary to deliver them.

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The world already knows that he used chemical weapons freely against his own people. It is likely that he would have used them in the gulf war had he not feared retaliation. In any case, he came close to many of his objectives--close to producing nuclear bombs, close to building a supergun, and close to producing sophisticated missiles. Indeed, he did build chemical weapons, he did build enhanced Scud missiles, and he did use them.

The war against Iran interrupted the indigenous Iraqi weapons program, since the money was needed to buy finished military goods to fight in that long and extremely bloody war. But once the war was over, Saddam immediately started his full-scale weapons development and production program.

The major United States source of credit for food and weaponry was BNL--a bank owned by the Italian Government, which had offices in this country, most notably in Atlanta, GA, but not exclusively there. A number of persons who operated that office, and others who dealt with it, have been indicted for their crimes. Some have been convicted. But to date, the American people know little about how Iraq operated in this country to attain its illicit goals.

Iraq could not achieve its aims without Western help. Saddam needed more than U.S. food. He needed technology, equipment, and supplies that were available only in the West. Despite the official obstacles, he found little difficulty in getting what he wanted.

The military procurement system of Iraq, like the rest of the Government, was tightly controlled. At the top was the Council of Revolutionary Leadership, headed by Saddam Hussein and close family members. This was the center of power.

Below the council, in what we might think of as a cabinet department, was the Military Industrialization Board [MIB], which planned and oversaw the effort. This board was in all likelihood headed by Hussain Kamil, who is Saddam's son-in-law.

Day-by-day operations of the Ministry of Industry and Military Industrialization, which I will refer to as MIMI.

MIMI in turn used a series of stated-owned organizations to buy and build the military power Saddam desired for Iraq. There were at least a dozen organizations operated by MIMI that bought Western technology and goods for the weapons program. It was MIMI and its affiliates that used the $2.1 billion of credit supplied by Banca Lavoro. As a matter of fact, employees of the bank met with Hussain Kamil on several occasions during visits to Iraq. Clearly, this is the man who called the shots on how BNL funds were used.

Hussain Kamil, let it be understood, had other functions. Besides heading the MIB and MIMI he was also head of the Secret Service Organization [SSO]. Through this organization, he set up the clandestine technology procurement network that was essential to Iraq's success. A key member of the Secret Service Organization was Safa Al-Habobi, who had direct responsibility for making the procurement scheme work. Safa Al-Habobi was the mastermind behind MIMI's procurement efforts.

Once a year, the MIB would set goals. The MIMI would ascertain what was needed to meet the targets, and then set out to obtain the necessary goods.

Here is an example of how the system operated:

A military plant in Iraq known as the Martyr's Factory needed a computer numerically controlled lathe to meet its production goal, which required production of complex machined metal parts. The MIB got the order from the factor and forwarded it to the Iraqi Embassy in Germany. The Iraqi Embassy in turn forwarded the order to front companies controlled by the SSO in the United States, United Kingdom, Germany, and Italy. The front companies obtained bids, which were communicated back to the arms plant. The plant in turn decided which, if any, bid to accept, went back up the ladder for approval and got the goods, the delivery of which often depended on BNL financing.

There are thousands of examples of this type of transaction.

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UNITED STATES ASSISTANCE TO IRAQ'S MISSILE PROGRAM

The MIMI used an organization known as the Technical Corps for Special Projects, or TECO, for its sophisticated missile and nuclear development efforts. Through TECO, Iraq was able to obtain important United States help in these programs, including the Condor II, which in Iraq code was referred to as project 395.

The Condor II apparently started in 1984 as part of an effort by Iraq, Egypt, and Argentina to jointly develop a missile that had a range of between 500 and 1,000 kilometers.

Argentina was to provide the development of the production site, Iraq was to put up the financing, and Egypt was to procure the technology. A consortium of mostly European firms handled various portions of the project. However, by 1987 or early 1988, Iraq became unhappy with the slow pace of the project and suspicious that is partners might be siphoning off some of the billions invested. In addition, in summer 1988, Abdel Kader Helmy was arrested in California for illegally transferring technology for the Condor II to Egypt. His role is more fully described in excerpts from trial-related documents that I will include in the record.

By 1988, Iraq was taking a much greater role in the Condor II project. Through TECO, which remember was a MIMI affiliate, agreements were signed with many of the original contractors who had worked in the consortium. At that time, TECO assigned the designation project 395 to the Condor II Program.

Project 395 had at least three sites in Iraq, each of which has a different function and its own project number. In addition, a missile R&D site was erected in northern Iraq. Despite all efforts, though, the Condor apparently was not mass produced in time

for the invasion of Kuwait in August 1990. However, it is clear that much was done, and that BNL loans were vital to the program, and that numerous Western sources, including companies from Europe and the United States took part.

As many Members know, a Cleveland company known as Matrix-Churchill was an Iraqi front company. TECO was the controller of that company.

To illustrate the role played by Matrix-Churchill, I offer for the record a telex from TECO to Matrix-Churchill detailing a visit from a Baghdad delegation. The purpose of the visit was to have TECO employees meet with over a dozen U.S. companies that were expected to supply goods to the Condor II Program, known also as project 395, but referred to for purposes of obtaining the goods as the Badush Dam or Badush project. The date of this telex is August 6, 1988.

There was in fact a dam being constructed in the general area, but there was also one or more missile-related facilities in the area of the dam. It is certain that goods supposedly bought for the dam were actually used in the missile program. The committee has many shipping documents that clearly show the buyer was TECO and project 395 was the destination.

Among other companies that shipped to the project were these:

Mack Truck, Pennsylvania, tractors, trucks and trailers;

Lincoln Electric, Ohio, welding machines and supplies;

Rotec Industries, Illinois, cement handling equipment;

Hewlett Packard, California, computer systems;

EMCO Engineering, Massachusetts, water treatment facility

IONICS, Massachusetts, water demineralization plants and water pumping systems;

Dresser Construction, Illinois, construction equipment;

Mundratech, Ltd., Illinois, dump trucks;

Caterpillar Tractor Co., Illinois, tractors/earth movers;

Grove Manufacturing, Pennsylvania, truck mounted cranes;

Ingersoll Rand Co., New Jersey, cement compacting machines;

Liebherr-America, Virginia, Liebherr cement mixers on Mack truck chassis; and

Mannesmann Demag, Illinois, heavy construction equipment.

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The foregoing is not a complete compilation, just a sample, since there are numerous documents yet that we have to finally review and precisely fix. However, it is an indication of how a foreign government can use secret methods to obtain important help for the development of military projects taking advantage of our open market.

Project 395 is not the only one involved. There are two other Iraqi missile programs known as Project 144 and Project 1728 that also obtained United States help. These were Scud related programs. It was a Scud that was launched against U.S. troops and numerous other targets during the gulf war. And as Members will recall, some of our American servicemen and women died during that attack.

The Iraqi network was also responsible for obtaining technology related to more conventional weapons such as artillery shells and artillery pieces as well as nuclear weapons related procurement. The Government has in its hands thousands of Matrix Churchill documents, but it has not yet reviewed them. The hard fact is there are not enough personnel assigned to do the job. But these are the documents that show clearly what the Iraqi network was and how it operated as well as the importance of the BNL financial support. Today there is no higher priority than to prevent the spread of sophisticated weapons to countries like Iraq, and yet there is not an adequate effort even to determine what went wrong in the case of Iraq so that the lessons can be learned. There are hundreds of cases in which the exports of Iraq required United States export licenses. The export licenses and documents show that the end user was often times an establishment engaged in military activity. Nevertheless, it is clear that Iraq had little trouble in getting the license from the Department of Commerce.

Moreover, in the case of TECO this occurred despite the fact that the Department of Commerce and the Department of State had clear knowledge of what CECO was and what its purposes were.

Why do I say this? You might ask, my colleagues, what about the CIA? We thought this was our vaunted intelligence gathering agency for which we appropriate untold and still publicly undetermined billions of dollars. They knew. And here is the pathetic thing. The intelligence agency served its purpose. It knew all about this. But whatever it brought forth was either ignored or canceled by the State Department level or the Department of Commerce level and by other individuals who had been involved in some of the commercial and financial backgrounds, including highly placed

individuals in the administration today, very high, specifically the National Security Adviser and the present Deputy Secretary of State. He was even on a Yugoslavian bank board.

Why should our committee have been refused so much of the documentation we have requested all up and down the line? First, we had the Justice Department under Attorney General Thornburgh not only stonewall us, and I put the letter in the Record some time ago in which he defied the committee to continue any kind of hearings and said, `You should not have any hearings, and we are shocked and disappointed that you insisted on having hearings.' It is all a matter of record.

All I have asked is here is the Congress and the Congress has abdicated enough in almost every other level, and this is a direct consequence of what we are now facing, a conjunction of vast, huge dimensions of deeply rooted problems that have to do with the continuing solvency of our country, our system of Government, our economic and financial independence. It is under great threat, and it pains me to see a person who has raised his voice every one of these 30 years, everyone here, to a silent Chamber, but it is on the record. It is not what I am saying now. That is why I came to the floor, so it would be on the record.

Today we are on the edge of a precipe. I would go into what trouble my mind and my soul more than anything else since 1979, and that is the fact that the United States, facing an almost debauched currency, the value of our dollar has declined 60 percent in 6 years. How can we continue that?

When my Members ask me what is the single thing that I feel if I could use one word that is the most direly needed thing for this country, I would answer with one word, `solvency,' `solvency.' We are bankrupt. We became a debtor nation for the first time since 1914 and 1985.

And what did we hear from these halls? Nothing. My voice, and I am not bragging about it. In fact, I reluctantly say this. It causes no end of frustration that I feel that it was the only voice since August 1979 that was discussing such things as the European currency unit, the ECU, and the European monetary system, the EMS.

Today when I say that the dollar, and maybe it is one man's opinion, but I have not heard anybody of serious consequent dispute me, that we are in imminent danger of the dollar being replaced as the international reserve currency. That sounds like a lot of words, but what it means is that for the first time in our history, and we are not the only nation that has had the great privilege to be able to pay its debts in own currency, and we are faced with the loss of that. It

means that this huge, monstrous debt we have piled up on the governmental level, on the corporate level which is as great as the governmental level, and private, you and I, will have to be paid back in somebody else's currency. Forget about economic freedom, forget about our vaunted standard of living. Yes, we are beginning to worry now. We are beginning to see the intractability of the so-called recession which we said over a year ago would be intractable.

The whole course since World War II could have been charted on a graph. But to what avail was it to raise a voice over those lonely years? It was like a coyote out in the brush world in the Southwest howling to the Moon at midnight, and that is what I have often pictured myself as doing. But by golly, no matter what criticism, then or now, I am a profoundly grateful man. We live in a cynical world and so many people want to know what is his angle, and that is the trouble today on almost every level. The so-called leaders or those who want to be leaders want to figure out the angle, not the problem. And we have to start getting to digging out the problems. We should have been doing that 30 ago years and anticipating. It was obvious from the statistics that show that as late as 1956 or 1955, but certainly since the early 1950's our country was producing over 80 percent of the world's goods. Today it is not even 16 percent. That was foreseeable. Certainly we would know that the day would come when there would be a recuperation and a resurgence of Europe and Japan. But we, willy-nilly, in our smugness and complacency, and as Shakespeare so aptly said, when a nation becomes arrogant in its folly it becomes a laughing stock. What do you think for so many years folks outside the United States called us, do you think they called us Uncle Sam? They did the same thing they did after World War I. We are Uncle Sap, we are patsy.

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So there is no higher priority I know of even in this fragmentary fashion than to prevent the spread of sophisticated weapons to countries like Iraq and others, but we have already gone out and embarked, and we have sold more weaponry in the Middle East since March 1991 than ever before, we ourselves.

But it is clear that Iraq had little trouble in getting those licenses. But if you have powerful voices, either industry voices enmeshed with the political or the governmental, who is going to resist that?

It is painfully clear that the export licensing system did little or nothing to prevent Iraq from getting the goods it needed for its weapons program even though the State and Commerce Departments were adequately informed of the real nature of the buyer.

The Iraq Sanctions Act required the President to submit a report to the Congress on the sale, export and third party transfer of nuclear, biological, chemical and ballistic missile technology to or with Iraq. The report submitted to the Congress is classed as secret. However, there is little information in the report that is not already published and in the public realm as always.

The American people, with all the secrecy, are the only ones that do not know. Everybody outside of the United States long ago has known.

But the significant fact is that the report was at the very least misleading in its conclusion that United States companies were not directly involved supplying Iraqi conventional and nonconventional weapons capability.

That is the question I always asked: If something is so good, why do you keep it secret? If the report has nothing there but shows a diligent job by those in power, why, you want to publicize it; you do not want to hold it a secret.

As in the case of every other occurrence I have ever witnessed as a public elected official since serving on the city council, and that is 38 years and 8 months ago, 9 months ago, I have never seen any reason for anything, anything not being shouted from the rooftops.

Now, I have not been a member of intelligence committees. I have not been a member of a military. Maybe there are some areas there. I do not know. But I doubt it.

I read the foreign press, and I have read articles about things that were in great detail outlined that we were told were sensitive, secret here.

Pursuant to Resolution 687, the United Nations mandates the `destruction, removal or rendering harmless' Iraqi weapons of mass destruction. This would include any missiles with a range of more than 150 kilometers, missile components and support facilities--for example the enhanced Scud and the Condor II.

Incidentally, some 6-7 months ago, maybe a little bit longer, Syria obtained 300 of the improved Scuds. Guess from whom and through whom. They were funneled through North Korea, right now, advanced, much improved so-called Scuds.

Resolution 687 of the United Nations, as I just said, and the task assigned to it is in charge of a United Nations special commission, and the International Atomic Energy Agency, or IAEA, which, as the world knows, has encountered harassment and obstruction from Iraq. Despite this, the United Nations has obtained information that confirms the committee's own findings about the procurement system and how U.S. firms were used.

The committee has asked for the relevant U.N. documents, but these are available only through the request of the State Department, and the State Department has already stonewalled us enough.

Strangely enough, the administration has been slow to ask for the information. Last November 13th, I asked Secretary Baker to obtain the documents and provide them to the committee. Thus far the Secretary has not responded--has not made the request and has not explained why there has been no action on the part of the administration. I include the November 13 letter in Record at this point:
COMMITTEE ON BANKING, FINANCE

and Urban Affairs,
Washington, DC, November 13, 1991.

Hon. James A. Baker III,
Secretary of State, Washington, DC.

Dear Secretary Baker: The Committee on Banking, Finance and Urban Affairs is conducting an investigation of Banca Nazionale del Lavoro (BNL) which provided Iraq with over $4 billion in loans during the latter half of the nineteen eighties. The Committee respectfully asks for your cooperation with this investigation.

Specifically, the Committee is investigating how BNL loans were used to provide Iraq with the technology and know-how necessary to produce weapons of mass destruction. To date, the Committee has identified over 200 beneficiaries of BNL loans to Iraq. Many of those companies have been identified as providing Iraq with technology or know-how to produce conventional or non-conventional weapons.

As you are aware, United Nations Security Council Resolution 687 mandates the `destruction, removal or rendering harmless' of Iraq's weapons of mass destruction. The Committee has been in contact with the organizations responsible for achieving that mandate, the International Atomic Energy Agency (IAEA) and the United Nations Special Commission (U.N. Special Commission).

The IAEA and the U.N. Special Commission have both informed the Committee that they have compiled a list of companies, including numerous U.S. firms, that may have supplied Iraq with the technology and know-how necessary to develop conventional and nonconventional weapons. Both have stated that they are not authorized to provide the Committee with the names of these companies.

While the IAEA and the U.N. Commission did state that the `lists' are available to U.N. member countries, they informed the Committee that the United States Mission to the U.N. has not formally requested copies of the lists.

Why has the State Department failed to formally request a copy of the IAEA and U.N. Special Commission lists of U.S. companies that may have provided Iraq with the technology and know-how to develop weapons of mass destruction? The Committee understands that the IAEA and the U.S. Special Commission have not completed their work, but both the IAEA and the U.N. Special Commission have lists available at this time.

So that the Committee may learn more about the implications of BNL loans to Iraq, especially those used to enhance Iraq's weapons capability, please request the IAEA and the U.N. Special Commission lists and forward a copy of them to the Banking Committee by the close of business, November 22, 1991.

Questions regarding this request should be directed to Mr. Dennis Kane. Mr. Kane has a `Top Secret' security clearance from the Department of Defense and the Committee has a CIA-approved secured safe to protect the confidentiality of this information.

Thank you for your consideration of this request. The Committee looks forward to your timely reply.

Sincerely,

Henry B. Gonzalez,
Chairman.

It is unacceptable that the administration will not obtain information that it needs to support its own policy. Neither has it assigned the personnel required to thoroughly evaluate its own documents concerning Iraq's weapons program and how it worked.

We know that Saddam Hussein came close to meeting his goals. We know that other nations are no doubt engaged in the same kind of activity, and that they must utilize sources of technology that are available only in this country. And yet there is no apparent aggressive effort underway to learn the lessons that the Iraq episode offers, and to take the steps necessary to see that it does not happen again.

The documents I am submitting are a fair start toward necessary understanding. There is far more to be told.

But today I simply want my colleagues to know how Iraq worked, and I support this with the evidentiary documentation we have obtained which I have asked permission to enclose, and I enclose, at the end of the Record.

In later reports, I will discuss other aspects of the Iraqi program, what our Government knew, and how it responded. But for today, these are the essential facts:

First, Iraq determined early in Saddam Hussein's rule to become independent of Russian and Western sources for sophisticated weapons;

Second, Iraq developed a carefully controlled system to develop and build chemical and nuclear weapons, and to build missiles capable of delivering those weapons;

Third, Iraq used a clandestine procurement network in its efforts;

Fourth, Iraq controlled companies in this country that supplied important support to the weapons program;

Fifth, Iraq used United States companies in that effort;

Sixth, the Commerce Department, with the acquiescence of other agencies, readily licensed the export of militarily useful goods to Iraq, even though it clearly knew or should have known what the real purpose was, and they did know, because not only the CIA but the military intelligence and the Defense Department advised them that these had potential military use;

Seventh, the President submitted an inaccurate report to the Congress concerning these matters; and that is why I rise here today, my colleagues; and

Eighth, the State Department has thus far refused to obtain relevant information from the United Nations on the Iraqi weapons program, and moreover, like other agencies, seems to put a low priority on learning from this episode.

Information referred to follows:
COMMITTEE ON BANKING, FINANCE

and Urban Affairs,
Washington, DC, January 31, 1992.

Hon. George Bush,
The President of the United States, Washington, DC.

[Page: H211]

Dear Mr. President: On November 5, 1990, you signed into law the `Iraq Sanctions Act of 1990' as part of Public Law 101-513. The Iraq Sanctions Act contained a provision requiring you to conduct a study and report on the sale, export, and third party transfer or development of nuclear, biological, chemical and ballistic missile technology to or with Iraq. Pursuant to that Act, you issued a report to Congress in the Fall of 1991 concluding that U.S. firms did not contribute directly to Iraq's conventional and nonconventional weapons capabilities. The report to Congress is clearly inaccurate. In fact, numerous U.S. companies provided critical support to Iraqi weapons programs, including missiles.

Over the past year, the Committee on Banking, Finance and Urban Affairs has been conducting an extensive investigation of the activities of the Atlanta branch of the Italian government-owned Banca Nazionale del Lavoro (BNL). The Atlanta branch of BNL loaned over $2 billion to an Iraqi military technology procurement network that was operating in the U.S. and Europe. The Committee has clear evidence showing that dozens of U.S. firms played a critical role in Iraqi weapons programs. The Committee has learned that responsible agencies have not thoroughly reviewed thousands of relevant documents because of inadequate resources.

For example, documents I am transmitting with this letter indicate that numerous BNL-financed U.S. firms were directly involved in the development of a ballistic missile known as the Condor II. The code name that the Iraqi government assigned to the Condor II missile program was `Project 395.' The Committee has evidence revealing that over a dozen U.S. firms were directly involved in Project 395. The equiment and technology suplied by U.S. firms involved in Project 395 were used to construct part of the infrastructure (e.g. buildings, utilities, fortification, etc.) necessary for Iraq to mass produce the Condor II missile.

The Committee also has evidence indicating that U.S. firms were involved in several other Iraqi missile programs code named Project 144 and Project 1728. These programs both involved the production of a modified Scud missile. Several U.S. companies supplied materials for these projects. These are the same Scud missiles used during the Gulf War to attack both American troops stationed in Saudi Arabia and civilians living in Israel.

The Iraqi organization responsible for Project 395 and the Scud modification projects is called the Technical Corps for Special Projects (TECO). The Commerce Department approved numerous export licenses for U.S. and foreign firms even though TECO was listed as the end-user. Moreover, these licenses were issued despite the fact that the Commerce and State Departments had ample knowledge of TECO and its activities at the time these licenses were approved. The Committee has grave concerns about the export licensing process and is investigating how the Commerce Department could have approved such licenses to Iraq.

Various agencies within the Administration unfortunately have hampered the Committee's investigation of BNL and its role in funding Iraqi weaposn of mass destruction. On November 13, 1991, I wrote to the Secretary of State, the Honorable James Baker, asking him to provide the Committee with information on American companies involved in Iraqi weapons programs which was compiled by the United Nations (U.N.) and the International Atomic Energy Agency (IAEA) after the cease fire with Iraq. To date, the Secretary of State has refused to supply the Committee with this data. In fact, Secretary Baker has refused to ask these organizations for this information.

In addition, the Iraqi technology procurement network in the United States has not been fully identified by the Treasury Department. At least one U.S. company, Tigris Trading, Inc., located in Pittsburgh, Pennsylvania, is owned by an Iraqi national, Safa Al-Habobi, who has been indicted for his role in financing the Iraqi war machine with the use of BNL loans. It is common knowledge that Al-Habobi was a major figure in the Iraqi military technology procurement network.

The Committee also has evidence indicating that there may be at least a half dozen additional Iraqi-controlled companies that have not been properly identified. These companies may still be operating as part of the secret Iraqi procurement network. At a minimum, these companies either wittingly, or unwittingly, offered the Iraqi government an ownership interest in their business.

Mr. President, in light of the findings of the Banking Committee, and the ever growing threat of countries like Iraq who are seeking to covertly develop weapons of mass destruction, I trust that you will do everything within your power to learn the full truth about the U.S. role in helping Iraq develop conventional and nonconventional weapons capability. The American people have a right to know the truth.

I also respectfully request that you instruct the appropriate agencies to be forthcoming in assisting the Committee with its investigation.

I feel certain that you will want to submit a new report to Congress that reflects the true role played by U.S. companies and Federal agencies in permitting the transfer of technology and know-how to Saddam Hussein's war machine.

Thank you for your time and consideration. I look forward to working with you to curb the international proliferation of technology and know-how necessary to build weapons of mass destruction.

With best wishes.

Sincerely,

Henry B. Gonzales,
Chairman.

Attached is a document from the Helmy trial giving a brief overview of the Condor missile. By 1989, Iraq had begun development of its own version of the missile referred to as Project 395.

Defense Intelligence Agency,
Washington, DC, September 19, 1989.
Subject: Assessment on the Activities of Abdel Kader Helmy, et al. and the Egyptian/Iraqi Condor Missile Program.

U.S. Attorney, Eastern District of California,
U.S. Courthouse, Sacramento, CA.

[Page: H212]

1. This office became aware of the activities of Dr. Abdel Kader Helmy and his associates in June 1988. Acting at the request of the U.S. Customs Service, DIA assisted U.S. investigators with technical and intelligence expertise in the area of missile technology and proliferation to the Middle East. As a result of the review of the documents provided to this office, DIA offers the following pertaining to the activities of Dr. Helmy's group.

2. The list of items/materials being sought by Dr. Helmy is entirely consistent with items necessary to support the manufacture of a ballistic missile. Specifically the chemicals, when combined into one list, are most likely to be found in a facility which manufactures composite solid propellant motors. The carbon based blocks and cones were most probably for use on the nose of the missile warhead. The carbon phenolic tape has numerous uses including the thermal wrap of rocket motor casings or nozzles, while the maraging steel is of the particular grade commonly used in rocket motor casings production. A review of the materials and the technical manuals which Dr. Helmy was obtaining can result in only one opinion, that Dr. Helmy was procuring materials to support the production of a ballistic missile.

3. The Egyptian Ministry of Defense, working with financiers from Iraq, have contracted with the Argentines to produce a ballistic missile capable of carrying a warhead of 500 kilograms up to 1,000 kilometers in range. This missile is most commonly referred to as the `Condor' missile. The Condor missile meets the minimum criteria set forth in the Category I of the Missile Technology Control Regime (MTCR). The Condor program has been closely monitored by the seven member nations of the MTCR (United States, Federal Republic of Germany, France, Canada, Great Britain, Italy and Japan) who are responsible for monitoring world wide missile proliferation activities. This specific missile would represent a significant improvement over currently assessed missile capabilities of Egypt. DIA believes Dr. Helmy was procuring these materials for the Condor missile.

4. The Condor missile program has been ongoing since at least 1984. The progress has been slow due in part to the lack of indigenous technology and the need to covertly acquire the technology/materials used in production of ballistic missiles abroad. The activities of Dr. Helmy are consistent with observed activities, sponsored by Egypt and Iraq, to facilitate the production of the Condor missile. Without the activities of Dr. Helmy, and his co-conspirators, in procuring restricted technology, completion of the Condor missile program is doubtful. Dr. Helmy's apparent willingness to provide critical materials necessary for the production of the Condor missile was important to the long term goals of establishing an indigenous ballistic missile production capability in Argentina, Egypt, and Iraq.

5. DIA believes that the introduction of a ballistic missile, capable of carrying conventional, chemical, or nuclear warheads, into either Egypt or Iraq would increase regional tensions and add further fuel to the regional arms race. Israel and Iran, the perceived adversaries of Egypt and Iraq, would most surely respond to these acquisitions in an escalating posture, by considering preemptive strikes, starting or accelerating anti-ballistic missile programs or acquiring an equal or greater number of ballistic missiles. The potential regional destabilization which might have been caused by Dr. Helmy's activities would be damaging to U.S. interests and peace efforts in the region.

Michael R. Higgins,
Technology Security Intelligence Analyst.

In the attached telex, the Technical Corps for Special Projects [TECO] informs the Iraqi front company in Cleveland, OH, called Matrix-Churchill Corp., that a TECO delegation from Baghdad will arrive in the United States on August 6, 1988.

The reason for the TECO visit that August was to meet with over a dozen U.S. companies to discuss their involvement in a phase of Project 395 referred to as the Badush project or the Badush Dam.

Project 395 is the Iraqi designation for the Condor II ballistic missile program.
August 6, 1988.
From: Technical Corps for Special Projects--Project 395.
To: Matrix--Churchill Corp: 5903 Harper Rd., Cleveland, Ohio.
Subject: Badush Project.

Ref: Our Tlx No. 3889 on 20.7.88.

Our delegation is arriving Washington on Aug. 6. 1988 by (PA) flight (107) from London. Commercial office of the Iraqi Embassy is arranging accommodation.

Pls contact all manufacturers mentioned in our A/M tlx. and inform them of the arrival of the delegation ask them pls to contact the delegation through the commercial office of the Iraqi Embassy. The following additional manufacturers are also to be contacted by you.

1. Manradtech Lltd, USA, 7147 Pebble Park Drive, West Bloomfield, MI 48033. Phone: (313) 851-2226. Time and date of discussion 9th-Aug. 1988 (4 pm).

2. Dresser Hallpak Division. P.O. Box 240, Peoria, Illinois, 61650-0240, 2300 N.E. Adams Street, Peoria, Illinois 61639. Phone: (309) 672-7000. Time and date of discussion 9th-Aug. 1988 (9 am).

3. Dresser Construction Eqpt. Divs., 755 S Milwaukee Avenue, Libertyville, Illinois 60048. Phone: (312) 367-2000. Time and date of discussion 9th-Aug. 1988 (10 am).

4. Dresser Leroi Divs., North Main Avenue and Russel Road, P.O. Box. 90, Sidney, Ohio 45365. Phone: (513) 492-1171. Time and date of discussion 9th-Aug. 1988 (9 am).

5. Lincoln Electric Company, 22801 St. Clair Avenue, Cleveland, Ohio 44117-1199. Phone: (216) 481-8100. Time and date of discussion 9th-Aug, 1988 (4 pm).

6. Mayfair Atrium Bldg. Suite 400, 10400 West North Avenue, Wau-Watosa, Wisconsin 53226. Phone: 414-256-7932. Time and date of discussion 9th-8-88 (3 PM).

7. Mannesmann Demag Corp., Construction Machinery Division, 476 Country Club Drive, Bensenville, Ill. 60106. Tel.: 312-7664-431, 312-7664-906. Tlx. 270452. Fax. 7667-549. Mr. R. Hammer. Time and date of discussion 12th-Aug. 1988 (4 pm).

8. Sumitomo Corporation of America, Head Office, 345 Park Ave., New York, N.Y. 10134, U.S.A. Tel. 212-207-0700. Tlx 12311 (12311 Sumitomo NYKA) (WUD), 420516 (Sumisho A 420516) (ITT). Fax 212-688-1579, 212-207-0456. Time and date of discussion 11th-Aug. 88 (4 pm).

9. Sumitomo Corporation of America, Washington Office, Suite 703, 1747 Pennsylvania Ave. NW., Washington DC, 20006 U.S.A. Tel.: 202-785-9210-3. Tlx 89587 (Sumitomo WSH) (WUD). Fax 202-861-0690. Time and date of discussion 11th Aug. 88 (4 pm).

10. Liebherr-Aemrical, Newport News, Virginia. Tel 804 245-5251. Mr. Starmans, Mr. Jacobsen. Tlx 6711744. Fax 804-245-5263. Time and date of discussion 10th-Aug. 88 (9 am).

11. Equiparts International Inc., P.O. Box 2, Elizaville, NY 12523. Tel. 914-756-2891. Fax 914-756-2979. Mr. J.P. Singh. Time and date of discussion 12th-Aug. 88 (4 pm).

12. Mack Trucks, Inc., 2100 Mack Blvd., P.O. Box M, Allentown, PA. 18105. Tel. 215-439-3411. Cable: World Side ATW. Time and date of discussion 12th-Aug. 99 (9 am).

13. Raccar International (Kenworth Division), P.O. Box 1518, Bellvue, Washington 98009, USA. Tel. 206-828-8872. Tlx 683-8005. Time and date of discussion 9th-Aug. 88 (3 pm).

14. Grove Manufacturing Co., 1000 Main St., P.O. Box 21, Shady Grove, PA 17256. Tel.: 717-597-8121. Telex 842308. Twx. 510-650-3580. Fax. 717-597-9082. Time and date of discussion 8th-Aug. 88 (3 pm).

15. Caterpillar Tractor Co., 100 N.E. Adams, Peoria, IL 61629. Tel.: 309-675-1000. Time and date of discussion 8th-Aug. 88 (9 am).

16. Ingersoll Rand Co. Tool Group, International, 200 Chestnut Ridge Rd., Wood Cliff Lake, NJ 07675. Tel.: 201-573-0123. Tlx. 134357. Time and date of discussion 11th-Aug. 88 (3pm).

17. Dynapac Manufacturing, Inc., P.O. Box 368E, Stanhope, NJ 07874. Tel.: 201-347-0700. Tlx 136481 DYNSTPE. Fax 201-347-7410. Time and date of discussion 12th-Aug. 88 (3 pm).

18. General Motors Co. Canada, Tlx 021-698-1424 GMMD OSH. Mr. La Sande, Director Marketing and Sales, Canadian Export Operation G.M. Canada. Tel.: 416-644-6158. Mr. G.D. Torntou, General Director (President). Tel. 416-644-3350. Time and date of discussion 10th-Aug. 88 (3 pm).

19. Terex Div., 5400 3 Darrow Rd., Hudson, OH 44236 USA. Tel.: 216-650-5000. Twx. 810-437-2353. Mr. Peter Basar, Director, Sales, 216-562-7542 home phone, 216-650-5903 office (direct line). Mr. Mike Hinshaw, Export Sales Mgr., 216-864-0939 home phone, 216-650-5918 office (direct line). Mr. Bob Armstrong, Exec. V.P., 216-650-6555 home phone, 216-650-5212 office (direct line). Time and date of discussion 11th-Aug. 88 (9 am).

Many Thanks. YR Cooperation.

Best Regards.
Comm. Manager.

Attached are Customs Service memos indicating BNL is suspected of having supplied financing for the Condor II ballistic missile:

U.S. Customs Service,
Atlanta, GA, September 21, 1989.

Hon. Robert L. Barr, Jr.
U.S. Attorney, Northern District of Georgia, Atlanta, GA.

[Page: H213]

Dear Mr. Barr: As you are aware, the U.S. Customs Service, Office of the Resident Agent in Charge, Atlanta, Georgia is involved in a joint investigation with the Federal Bureau of Investigation, Internal Revenue Service, Department of Agriculture, Defense Criminal Investigative Service and Examiners of the Federal Reserve Bank of Atlanta relative to the financial/banking and exporting activities of Banca Nazionale Del Lavoro (BNL-Atlanta), 235 Peachtree Street, N.E., Atlanta, Georgia. The crux of this investigation involves BNL-Atlanta's extension of unauthorized credit in excess of 2.6 billion dollars to American, British and German companies involved in trade with Iraq. The commodities involved are suspected to include shipments of agricultural products, industrial machinery, military-type technology and various controlled chemicals. In addition, BNL-Atlanta is suspected to have provided loans to various U.S. firms for the illegal export to Iraq of missile related technology to be used in the Condor II Project.

--

--

U.S. Customs Service,
October 20, 1989.
To: Assistant Commissioner Office of Enforcement.
From: Director, Strategic Investigations Division.
Subject: Banca Nazionale del Lavoro.

The above cited case, currently under investigation by the Office of the RAC/Atlanta, is a multi-agency task force operation involving several jurisdictions. The BANCA NAZIONALE del LAVORO. (BNL) is an Italian international banking firm with branch offices in numerous countries and cities to include Atlanta. BNL Atlanta's primary business, is the funding of export goods and commodity transactions. The case was opened as the result of allegations that two Atlanta based executives of the firm had provided 2.6 billion dollars in unauthorized and uncollateralized loans to American, British, and Italian firms involved in trade with Iraq and other countries. In addition. BNL is suspected to have provided loans to various firms for export to Iraq of missile related technology for use in the Condor II project.

At present, the agencies involved, in addition to Office of Enforcement, U.S. Customs Service, include Office of Foreign Assets Control, U.S. Treasury, The Federal Bureau of Investigation, The Internal Revenue Service, U.S. Department of Agriculture, Defense Criminal Investigative Service, and Examiners of the Federal Reserve Bank.

Coordination and control of the Task Force emanates from the Office of the U.S. Attorney, Atlanta. Present indications are that in addition to violations of laws within the jurisdictions of the agencies cited above, violations of The Export Administration Act, The Arms Export Control Act and Foreign Asset Control Regulations have taken place.

Attached are samples of documents showing U.S. firms involved in Project 395.

The first page is a BNL letter of Credit listing the Project 395 and the Technical Corps for Special Projects [TECO] as the beneficiary of the letter of credit.

The second page is a sample of a shipping document listing TECO--Project 395 as the purchaser of the water treatment equipment from the U.S. firm.

The third is a telex from a U.S. truck manufacturer in communication with TECO-Project 395/Badoosh Dam.

Banca Nazionale del Lavoro,
Atlanta, GA, December 23, 1988.
Beneficiary: Rotec Industries Inc., 333 Westlake Street, Elmhurst, IL.
Instructions Received From: Central Bank of Iraq, New Bank Street, Baghdad, Iraq.
For Account of: Technical Corps for Special, Projects, Project No. 395.

Gentlemen: We are pleased to advise you that the above mentioned correspondent has issued their Irrevocable Letter of Credit in your favor for account as shown above for a sum not exceeding Eighteen Million Seven Hundred Eight Thousand Three Hundred Sixtyfive Dollars United States Currency ($18,708,365.00 USC) available by your draft(s) drawn at sight on The Central Bank of Iraq.

The amount of this letter of credit covers 100 percent of the invoice value of:

Rotec tower beltsystems, Rotec certer cranes, Rotec hi-dumpers complete with ierex dumptruck chassis, Rotec convey or system for egrragates and vibration packages. C&F Moussel.

A. 10 percent of the credit value is payable as advanced payment. However, payment will only be made upon our receipt of tested telex from The Central Bank of Iraq stating that bank guarantee issued by Rafidain Bank has been issued and approved by the buyers.

B. Up to 80 percent of the credit value is payable as against your draft(s) as described above accompanied by:

1. Your signed commercial invoice in original and 7 copies in the name of the above mentioned accountee stating the merchandise description, quantity, price value, gross and net weight, freight charges, shipping marks, country of origin, country of manufacturer, trade discount (if any) and certifying its correctness and that the goods are of U.S.A. origin. Original must be attested by Iraqi Consulate.

--

--

EMCO Engineering Inc.,
Canton, MA, June 14, 1989.

Invoice No. 00560.

Ship to: Technical Corps. for Special Project--Project 395. P.O. Box 810 Baghdad, Iraq. P/Order No. Dam/82/88. Tel. 7720400+7720290.

Sold to: Technical Corps. for Special Project--Project 395. P.O. Box 810 Baghdad, Iraq. P/Order No. Dam 82/88. Tel. 7720400+7720290.

Customer's order No. DAM/82/88.

Terms: Central Bank of Iraq, Baghdad L/C 89/3/16. Shipped in 1 ˙0A 40 container from U.S.A. port to Turkish port, Mersin, by Sea Intransit to Mousl Iraq.

Item 1. Partial shipment of: Washe and water treatment equipment C&F Mousl. Amount: $588,718.70 C&F Mousl.

Shipped in accordance with Central Bank of Iraq; irrevocable letter of credit No: 89/3/16 & Banca Nazionale del Lavoro, Atlanta GA Advice No: 11862.

Shipped as follows: 1 ˙0A 40 container containing 172 pcs, pkgs bdls, skids water treatment equipment (complete breakdown & itemization on attached packing list).

Container No: OCLU 109150-2, Seal No: 5173, Bill of Lading No: TFEI INT017 034582, shipped via SL Integrity V 17E from Boston, Mass. to Mousl via Mersin. Transhipment via United Kingdom. Gross weight: 11,500 lbs (5216 Kgs). Net weight: 10,695 lbs (4851 Kgs).

Ocean freight charges included in above C&F value $4160.00.

Country of origin of merchandise: United States of America.

Country of manufacturer: United States of America (U.S.A.)

--

August 3, 1989.
Att: Abdul Raheem--Commercial Mgr., State Machinery Trading Co., TECO Project 395--Badoosh Dam, Baghdad, Iraq.

We are ready and prepared to ship the spare parts, spare tires and spare rims for the Badoosh Dam project in Mousl. We would like to ship them to you (C&F Mersin) as soon as possible.

In order for us to ship these spare parts to you, we need two things from you:

1. An extension of letter of credit No. 88-3-3201.

2. Your authorization for Mack trucks to ship the parts as quoted to you by Mike Feeney, C&F Mersin.

3. Your authorization for Mack trucks to ship the spare tires and spare rims with the spare parts.

Since there remains USD 384,477 in the letter of credit, there is more than enough money for these spare parts, rims, and tires.

We should be able to ship approximately 30 percent of the spare parts, tires, and rims within thirty days of your authorization to ship. Some parts. However, will require more time to obtain and ship for this reason. We kindly request you extend the letter of credit until 31 December 1989.

We recognize the importance of these parts to the success of the Badoosh Dam project. We will do all in our power to get them to you as soon as we can.
D. BOSCH

Stridt Supervisor--Middle East,
OK Trucks, Inc.

Attached is a telex from Hussain Kamil, son-in-law of Saddam Hussein, wishing to the employees of BNL-Atlanta a happy Eastern holiday.
March 26, 1989.

For the attention of Mr. C. Drougol. I would like to express my greetings and personal good wishes for you and your family and all your staff at Del Lavoro Bank-Atlanta on the occasion of the Easter festivities. Wishing you all happiness, good health and prosperity.
HUSSAIN KAMIL HASAN,

The Ministry of Industry
and Military Production.

Attached are some German press accounts of the Iraqi missile program including Project 395 and other programs:
NDR-ZEITGESCHICHTLICHES PANORAMA,

Rosmarin Prod.,
Bonn, January 4, 1990.

MEMORANDUM

The following items can be retained from the December 22, 1989 internal discussion at the Foreign Office, occasioned by the December 5, 1989 launching of the Iraqi space flight vehicle and concerning the Iraqi strategic arms program and involving Departments 311, 424, 425, and 431, as well as a representative of German Intelligence

I. Rockets:

The BND /i.e., German Intelligence Service/ had the following information about the space flight vehicle launched on December 5, 1989; The vehicle had a SCUD-based fluid drive. The initial stage consisted of four or five bundled, modified SCUD missiles. The second stage consisted also of a SCUD missile, while the third stage had an SA-2 drive. Only the first stage was able to function. Although the third stage got into orbit, it could not manage to stay there because of its insufficient thrust. The launching pad, located 230 km southwest of Baghdad, was discovered by the U.S. on December 6, 1989.

The BND reported further Iraq was working on a total of five rocket projects. One-by-one these are:

(a) Missile Project 395, corresponding to Project Condor II (Argentina) and BADR 2000 (Egypt). This missile was to be built first as a two-stage rocket (solid fuel technology). A three-stage version was being discussed as a variation on this, where the first and second stages were to be equipped with solid fuel engines and the third stage with a fluid drive.

The infrastructure for building these rockets was available, but production had not yet begun. Obviously, further technical support from the Consen Group was. . . ./remainder of text missing/

(b) Al-Hussein, range 650 km, maximum load 350 kg, drive life: 80-90 seconds, base: SCUD

(c) Al-Abbas, range 900 km, drive life: 150 seconds, base: SCUD

(d) and (e) Project 144 with Supplementary Project 1728: Iraq was planning additional ground-to-ground missiles which would have a range of 1200 to 2000 km, be based on SCUD
technology, and run on liquid fuel propellant as they had not yet had much experience with solid fuel propellants. The BND believes that, on the whole, because of their inadequate maximum loads, these missiles were probably incapable of carrying nuclear warheads.

The BND estimates that the Al-Abass missile, currently in development, poses the greatest threat. It could theoretically be provided with a nuclear warhead and has a target precision of 1.5 km (on Iraq's nuclear capability cf. below III).

II. Involvement of German companies:

The BND reported that it had been informed by the Israeli secret service about possible participation by German companies in Projects 144 and 1728. Both projects aimed at modifying SCUD technology. According to existing information the Havert Industrie Handelsgesellschaft GmbH (Neu-Isenburg) and the Heinrich-Mu˙AE4ller GmbH (Wendelstein) companies were participants in Projects 144 and 1728. In Iraq, both projects were assigned to the following companies:

Nassr State Enterprise, Research and Development Center, Project 1729, Taji-Baghdad/Iraq.

Al Qaya State Establishment Project 144 Baghdad/Iraq.

According to a report made by the Regional Office in Frankfurt am Main, these German companies has signed contracts valued at 2,607,500.00 DM for delivering 35 `High/Low Pressure Units' to Project 144. According to a BND statement on December 12, 1989, the federal government assumed a manufacturing risk guarantee for Project 144 amounting to 1,543,500.000 DM. The assumption of surety was done with the agreement of the Minister of Finance and with the understanding of the Minister for Economic Cooperation. No guarantees were assumed for Project 1728.

The BND further reported on the Consen Group's participation in Project 395. The contracts were negotiated through Taurus, an affiliate in Salzburg. The contract, no. 11-01, (documentation for the initial stage, value: 18 million DM), was fulfilled. Contract 11-10, worth 20 million DM referred to production of stage one. In addition, technical support amounting to 19 million DM during operations was planned.

(For information concerning the participation of the H+H Metallform GmbH company in Drensteinfurt, see enclosure #3).

III. Iraq's Nuclear Capability:

RL 431 gave an overview of the extent of Iraq's commitment in the nuclear sector. Iraq signed the Non-Proliferation Treaty and was subject to the IAEO's full-scope safeguards. As the Baghdad Embassy has expressed its suspicions that Iraq is not meeting its obligations, it must be stated that these suspicions do not suffice to prove an Iraqi violation of its international obligations. Caution should be exercised before accusing Iraq for failing in its commitment under the NPT because this could affect the administration of the treaty. A closed fuel cycle is quite beyond Iraq's present capabilities.

IV. Iraq's Chemical and Biological Weapons Capabilities:

Department 424 stated that the `Australian Group' had information Iraq was intent on producing biological weapons. No one could be certain as to the extent to which the Iraqis had succeeded, if at all. Production plants for the manufacture of biological weapons had been put on the German Export List, Section E No. 3001.

Department 424 also stated that it must be assumed that Iraq was capable of producing chemical weapons without foreign assistance. Precursor products not manufactured in the country.

Panorama No. 466, January 29, 1991.

[Page: H214]

SCUD MISSILES AGAINST ISRAEL

Commentary: Tel Aviv after a missile attack. Bloodhounds are searching for those who have been buried alive. There is a missile alert nearly every night. As of yesterday evening Iraqi troops had fired off 25 SCUD missiles at Israel; a total of four dead, 190 injured. Just as many missiles were fired on Riad and Dharhan. There, at present, one dead and 35 injured.

Even the American Patriot missiles--this is a deployment over Riad--can't offer complete protection in spite of their great precision.

Militarily, the SCUD attacks are worthless. The missiles carry no more than 350 kg of explosive--much too small to destroy any military target, such as an air base. Even its precision, with a scatter radius of one and a half kilometers is militarily useless. The missile attacks are aimed at only the civilian population.

A Soviet SCUD missile on maneuvers, actually a military fossil, medieval and complicated. It is not the Soviet SCUD which is being used to menace Israel, its 300 km range is much too limited. Israel is being menaced by a later model, the El Hussein.

Here are some pictures of the SCUD successor-missile taken secretly by refugees. Iraq is proudly showing the El Hussein, range 650 km, far enough to reach Israel, and another, the El Ahbas, with an even greater range of 900 km, at an armaments exhibition. But the Iraqi arms industry would never have been able, on its own, to increase its range.

Saddam's generals needed some partners. They found them in Germany. The Inwaco company, headquartered in Bonn, is currently under investigation. The company director is keeping quiet, not a word about any missile deals. The Harvert company in Neuisenburg near Frankfurt is also under investigation, but even this company is denying any connection with the missile deal. They claim that a freelance employee of theirs had acted without the company's knowledge. According to intelligence services, Harvert and Inwaco are supposed to have been two of Iraq's general contractors. As such they are said to have procured missile components from some 20 other companies, such as the Firma ABA in Stutense bei Karlsruhe, H&H-Metallform, Leifeldt & Co., Heinrich--Muller GmbH, and Graser GmbH. The items in questions were valves, injectors, and bottling tanks.

Darmstadt Attorney General, Georg Nauth: `The accused are suspected of having supplied Iraq from 1987 until 1989 with bomb hangers--Bombenhanger word not found elsewhere--there are components with which bombs can be stored under the wings--special components for fuel regulation, and guidance parts for missiles.'

Commentary: Large numbers of files were confiscated last week from the Harvert company. The Bureau of Customs Crime Investigation/reports/on the first results from the investigations concerning missile export:

Cologne Bureau of Customs Crime Investigation, Karl-Heinz Matthias: The documents that were confiscated are currently being studied. They are very comprehensive, filing more than 250 binders. At present it looks as if the suspicion is being confirmed that the suspected companies bought up components for missile drives here and then exported them without a license, although these things require a license.'

Commentary: The shipments were apparently made via the Frankfurt Airport--directly with Iraqi Airways. The companies are disclaiming that they shipped any missile components, only machine parts, they say, that is, for civilian, not military purposes. No complicity with Iraq's missile program?

This is the original plan from an Iraqi--remainder of sentence missing. But when you compare the Iraqi original with these maintenance manuals for the El Hussein precursor SCUD, which were found last year with the NVA [Nationale Volkarmee, i.e., the army/in East Germany, the similarities are more than apparent. This is a reduction valve for the rocket engine.

Even superimposing the images gives the same impression. The red is the industrial blueprint, the black is the NVA's blueprint. A preliminary view of the confiscated files would seem unequivocal: German companies not only supplied replacement parts for the SCUD, but played a decisive role in increasing its range.

Karl-Heinz Matthias: `Well, at the moment, I can't tell you just how much its range could be increased, but there is some indication that the missile drive system was modified according to Iraqi designs.'

Commentary: And here are the consequences--increasing the range of the Iraqi El Hussein to 650 kilometers and the El Abbas to 900 kilometers--the precondition for Saddam's missile attack on Israel.

And these are not just the effects of an Iraqi terrorist attack, but the direct consequences of German entrepreneurial activity, and the Israelis are very much aware of this.

Prof. Daniel Leschem, Dayan Institute, University of Tel Aviv is a military expert who believes that it was several German companies who put Iraq in a position to hit Israel, i.e., Israel's inhabited regions, with his missiles.

Prof. Leschem does not believe that it was only a few white collar criminals who knew about this. The German Government itself should have long since been aware of these transactions, he notes bitterly.

The German Government has known about missile technology exports since mid-1989 at the latest.

In a confidential report to the German Government last August concerning the participation of German companies in delivering arms to Iraq, this is called clearly by name. Participation by these companies was well-known as much as a year before the outbreak of the Gulf War. And even then, the same company names were cited in connection with the modernization of Russian SCUD missiles-quote: `These are mid-level German businesses, such as the Harvert Handelsgesellschaft, Inwaco, Muller, Graser GmbH, or Hartel.'

The Iraqi code names for this missile modernization were also well-known: Project 144 and Project 1728.

The Federal Bureau of Economics in Eschborn was informed of these code names, but, nonetheless, the companies involved continued to be issued so-called `negative certificates'--i.e. certificates of non-objection for exporting missile components. The examiners thought the components were just normal pumps. A bureaucratic mistake.

Arms companies like MBB are frequently reproached with making illegal exports, but sometimes they are really legal. In a paper written by the Ministry of Economics on the SAD 16 missile test project it says concerning MBB's participation: `The biggest German subcontractor was MBB, which had obtained electronic equipment from Hewlett Packard and electronic test instrumentation from Viltron, both U.S. companies, Even the U.S. had expressly approved shipments for this missile project.'

The paper continues laconically: The Federal Bureau of Economy granted export licenses for the SAD 16 from 1985 to 1987, because it was assumed at the time that it was a research project at the University of Mossul. . . .

Last page is a fragment. The stamp on the left, mostly illegible, is a copyright warning. The first part of the accompanying text on right is missing . . . would not have been able to reach Israel without the help of German companies . . . why, will be explained to you by Andreas Orth.

[Page: H215]

In the attached telex, Mannesmann Demag in Dusseldorf, Germany is informing Mannesmann, United States, in Illinois, that TECO is responsible for the Badush Dam Portion of Project 395. The telex identifies TECO as being in charge of the Iraqi Army working on the project. It also refers to Matrix-Churchill as the Cleveland, Ohio office of TECO and indicates that BNL is providing $100 million for the Badush project:
July 28, 1988.
Re Project in Iraq `Badush Dam.'
From: Mannesmann Demag Baumaschinen, Dusseldorf.
To: NDC Bensenville, U.S.A.
Attn. Mr. Soren Jansen.

Since appr. 1, 5 years, we are following up the A.M. project, the customer, in charge of the Iraqi army, is: Technical Corps for Special Projects, Project 395, P.O. Box A10, Baghdad/Iraq.

Our Mr. Nolle is still in Baghdad to discuss this project with TECO and he gave us today the following info about the latest development:

(1) There is a financing facility ex USA available (`Banco di Lavoro' or `Banco di Laroro' in Baltimore/USA) granting US-dollar 100 MIO especially for Badush project. Badush management gives preference to this facility.

(2) Upon directive of the `higher authorities' in Irak A Radosh delegation will travel to USA, Cleveland/Ohio and other cities on 01.08.88 and will discuss supplies with manufacturers. An office of TECO has been established these, TLX No. 980.471, Attn: Mr. Abulrahim/Commercial Manager). They are authorized to sign contract for excavators, cranes, compressors, drilling equipment, and low bed trailor.

(3) Liebherr offered TECO R 934 and R 942, manufactured in U.S.A.

(4) Our part for this project is: 3 X H 40 G, 6 X H 40 Backhoe, 5-8 X H 85 Bullclan, 9 X AC 125, 30 X AC 105, 2 X AC 265, S, 2 X AC 335, 2 X HC 190-4, 2 X HC 340.

We would appreciate it if you could let us know the following:

Is the credit only determined for purchase of U.S. origin equipment or is it possible that our portion or part of portion could be included in the credit.

Please send us the information if possible until tomorrow.

Thanks and kind regards.

D. Majer,
Export Department.

Attached is an excerpt from an April 5, 1990 West German Government intelligence agency [BND] report on Iraq. Note that Project No. 395 is called Condor II or Bader 2000:

2.2 Solid-Fuel Technology (Project 395)

Project 395 has been conducted under the general management of the Technical Corps for Special Projects (TCSP). This project involves an ambitious projectile development program based on the Argentinean CONDOR-II technology. The program is supposed to be realized in close cooperation with the special organization, the Arab League Industrial Development Organisation (ALIDO), with its headquarters in Baghdad.

2.2.1. PROJECTILES

The two-stage projectile is 10.30 meters in length and 0.80 meters in diameter; it weighs approximately 4,800 kilograms. Unlike the Argentinean Condor-II, which has a solid-fuel engine in the first stage and a liquid-fuel engine in the second stage, Iraq favors solid-fuel engines in both stages. With this configuration, the payload is supposedly 350 kilograms, and the range approximately 1,000 kilometers.

The further development and future production of the liquid-fuel engine of the second stage is being pursued in tandem with this, however. There is evidence that the two-stage projectile could be equipped with this engine as a third stage. Such a rocket would then be intended as a space delivery vehicle for limited payloads.

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from California [Mr. Dreier] is recognized for 60 minutes.

[Mr. DREIER of California addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Wisconsin [Mr. Obey] is recognized for 60 minutes.

[Mr. OBEY addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

END