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Traders used SA as a springboard to peddle devices in nuclear race April 10, 2005 Mark Schapiro and Mads Ellese This story, which will appear in the May/June issue of Mother Jones magazine, comes out of an investigation jointly sponsored by Mother Jones, the Center for Investigative Reporting and the PBS series Frontline/World. On New Year's Day 2004, conditions in the Rocky Mountains seemed ideal for the ski holiday that Asher Karni had long anticipated. But Karni, a Hungarian-born Israeli and South African businessman, never made it to the slopes. As he stepped off the plane in Denver, US customs agents arrested him on charges of exporting, without the proper licence, quantities of a device known as a triggered spark gap. Karni, according to the justice department, was in the middle of a deal exporting 200 of the devices to a buyer who might use them for igniting a nuclear explosion. The buyer was Humayun Khan, an Islamabad businessman with close ties to Pakistan's military. He has been linked by US government officials to militant Islamic groups, some of which are suspected to be arming fighters in the Kashmiri conflict. A federal judge sealed records in the Karni case last September. But legal documents obtained before then indicate that his transactions reached, tentaclelike, in two directions from the headquarters of his company, Top-Cape Technologies. One tentacle extended from Cape Town through a broker in Secaucus, New Jersey, to the Massachusetts laboratories of PerkinElmer Optoelectronics, a hi-tech firm that is one of the world's few manufacturers of triggered spark gaps. The other tentacle extended from Cape Town through Dubai to Islamabad, into the recesses of one of the world's most dangerous black markets, the international traffic in "dual-use" nuclear technology. Dual-use items are those, like triggered spark gaps, that are under export restrictions because they have both peaceful and weapons applications. Aside from actual uranium and other radioactive material, triggered spark gaps are among the most tightly restricted items in the world. Producing countries like the US permit them to be shipped to non-nuclear countries like South Africa without a licence, but for countries like Pakistan and India, "rogue" nuclear powers outside the existing non-proliferation system, shippers must request an export licence. The global trade in parts for nuclear weapons is, for the most part, not conducted through secret espionage channels or along smugglers' routes. It's accomplished through straight-ahead business deals between companies operating in the open, trading in the vast commercial grey zone of dual use. The trade is hard to follow and harder still to regulate. Ultimately, Karni was tripped up not by the system, but by an odd bit of serendipity: a mysterious individual who, starting in the middle of 2003, guided investigators along Karni's labyrinthine trail. The government's complaint against Karni is peppered with references to the "anonymous source in South Africa", who clued them in to the "possible diversion of US origin equipment". Seema Gahlaut, a senior research associate at the Center for International Trade and Security at the University of Georgia, says: "I believe there's a 50:50 chance the Karni deals would never have been discovered if it had not been for that anonymous tipster." In other words, Top-Cape's blizzard of false end-user certificates, misleading shipping manifests and concocted usage rationales might have worked, and a shipment of weaponry-capable spark gap triggers might have proceeded unquestioned from Massachusetts all the way to Islamabad. And Karni might have become the latest middleman in the long-running nuclear arms race. The deal that allegedly put Karni's fingerprints on Pakistan's nuclear ambitions was pieced together in a mansion on Cape Town's Atlantic Seaboard. The mansion, rising three storeys behind a cream-coloured wall on Ocean View Drive, belongs to Karni. For almost two decades, Karni had thrived in Cape Town. In 1985, he resigned his major's commission with the Israeli army and emigrated to South Africa to work for a Jewish charity serving the Orthodox community in Cape Town. He became a respected member of the Beit Midrash congregation. In 1989, Karni left his official religious duties to take a job with Eagle Technology, a firm owned and run by one of Cape Town's leading families, Alan and Diana Bearman and their son, Nathan. With an MBA from an Israeli university and his military background, Karni was a good fit for the job. Eagle Technology has a storefront off Greenmarket Square in downtown Cape Town, where it sells to the public hi-tech spying devices like surveillance video systems and recording machines. But the real action goes on upstairs, where Eagle plies a more serious trade. It specialises in obtaining sophisticated electronic, optical and other sensitive equipment, originally for apartheid South Africa's military and now for a wide variety of clients in democratic South Africa. These items became Karni's speciality. When Karni joined the company, South Africa's apartheid government was operating under severe international sanctions, making the country a smugglers' paradise. Everything from bribes to ammunition to missile casings had to be obtained on the black market. Although Eagle had no connection to the country's illicit nuclear programme, importers learned the circumlocutions necessary to evade foreign prohibitions on exports to South Africa. "We had a government then of vipers," says Michael Bagraim, a Cape Town attorney who would play a large role in Karni's fate, "and companies did what they had to in order to obtain equipment for the military." Within the company, Karni was, according to his colleagues, a superior executive. He'd taught himself the basics of electrical engineering and developed a familiarity with the worldwide manufacturers of sophisticated electronic technology. He rose to be the company's top purchasing officer, bringing in as much as $100 000 (R600 000) a month in new orders. He, like the rest of the company's top executives, �ourished. His salary and commissions amounted to about $10 000 a month, according to his employment records. He mingled with the Cape Town elite and lived in Sea Point with his wife and daughters in a house provided by the company, rent free. Karni's extraordinary slide from those heights to a cell in the Metropolitan Detention Center in Brooklyn, where he is now incarcerated, began towards the end of 2001, when his co-workers at Eagle began to sense something was amiss. Karni seemed distracted, heading off for meetings without explanation and spending a lot of time apparently working but without the results the company was accustomed to. Given the sensitivity of Eagle's line of work, such behaviour elicited suspicion. The company hired a private detective. The detective's findings alarmed Eagle's managers: Karni was leaving work in the middle of the day to meet a recently fired executive secretary of the company, the 36-year-old, American-born Marisa Kirsh. Eagle discovered that Karni had helped Kirsh set up a trading company, which was importing from some of Eagle's own overseas clients and underbidding Eagle's prices. Furthermore, an independent company that Karni had created, Top-Cape Technologies, was contacting those clients and supplying assistance to Kirsh. By October 2002, the company had a dossier of Karni's outside deals, and had evidence he was competing with Eagle's import business. There were hints he was depositing some of the profits from his sales in offshore accounts. His deals had the potential to tarnish the company's good standing inside South Africa. Alan Bearman, Eagle's chief executive, confronted Karni, accused him of being in competition with his employer, and fired him. Karni did not seem unduly damaged by this professional setback, at least judging by his living conditions. He moved his family out of their Eagle-supplied house and into the much grander mansion on Ocean View Drive. Had the matter rested there, Karni very likely would have remained just one more ordinary (albeit self-employed) executive in Cape Town. But Karni challenged his firing. As attorney Bagraim explains: "Up to that point, nobody really cared what it was that Karni was actually selling. But rather than just packing up and moving on, he disputed the grounds for his dismissal. And that's where I got involved." The Commission for Conciliation, Mediation and Arbitration hearing began in late September 2003 and concluded in early October with a settlement in which Karni withdrew his demand for a year's back salary, and the company apologised for any distress his firing might have caused. His distress was just beginning. The labour dispute had forced open the portals to Karni's business deals through Top-Cape. Those dealings had been venturing into increasingly dangerous terrain since Karni's firing. Throughout the middle of 2003, as Karni prepared to face Eagle in the hearing room, he was simultaneously negotiating with Pakistani contacts to cement a deal to supply them with triggered spark gaps. The negotiations were not as private as Karni presumed. Even as Bagraim was amassing evidence of past misbehaviour, including reams of old e-mails pried from Karni's Eagle Technology computer, Karni's current e-mail correspondence to and from Top-Cape was being intercepted, and those e-mails spelled out an ongoing plot with sinister rami�cations. In July and August, some individual who was surveying Karni's every step - the "anonymous tipster" - began feeding the plot's details to the US commerce department. The source informed the agents that Karni was attempting to purchase "between 100 and 400 triggered spark gaps ... from PerkinElmer, with the intention of diverting those items to Pakistan". The tips kept coming, alerting the commerce department to Karni's every move until the end of 2003. Pakistan was about to capture the world's attention as the most rampantly metastasizing nuclear power. On October 4, 2003, a German freighter, the BBC China, was intercepted in the Mediterranean by US, Italian and British agents. In its hold they found uranium-enrichment facility parts destined for Libya. The deal had been arranged by AQ Khan, the creator of Pakistan's nuclear bomb. The discovery blew the lid off Khan's global enterprise, in which he was marketing sophisticated nuclear technology to Libya, Iran and other nations. The trail, as it happens, also led investigators to South Africa, where they discovered that Khan had ordered a turnkey enrichment facility, to be built on the outskirts of Johannesburg, for export directly to Libya. The South African businessmen involved, Gerhard Wisser and Daniel Geiges, are now awaiting trial in Johannesburg. The plot the Americans were uncovering through Karni's e-mail was operating through separate channels from Khan's nuclear arms bazaar; Karni's buyer was most likely part of Pakistan's own military procurement effort. The customer was Humayun Khan (no relation), the owner of an Islamabad-based firm called Pakland that has long been one of the suppliers to Pakistan's conventional and nuclear weapons programmes. As a Pakistani company, Pakland could purchase some products on the US control list after obtaining a proper export licence from the commerce department. A licence for 200 triggered spark gaps would almost certainly have been denied had it been requested. As Jacob Blackford, a research analyst at the Institute for Science and International Security in Washington, puts it: "In terms of dual-use technology, those triggers are very threatening because you can directly use them in a weapon. They're a component in a weapon, like enriched uranium, and Pakistan already has enriched uranium. At the end of the day, you need both to set off a bomb." For an international buyer shopping for spark gaps, South Africa is well positioned as a middleman, thanks to its unique nuclear history and thanks to its recent political ascendancy. It has progressed from a country so suspect that its military procurers were experts in avoiding export controls to one currently so clean it is not restricted from importing sensitive technologies. Triggered spark gaps can be exported to South Africa for medical use without the licence that would be required for nuclear powers like Pakistan. Karni's deal would illuminate a black hole in the non-proliferation regime: because South Africa does not itself produce triggers, there is no law prohibiting their export from that country. "While attention was focused on the vulnerabilities of Russian and other nuclear facilities, a nuclear black market in dual-use machinery was evolving in South Africa," says David Albright, the president of the Institute for Science and International Security. Wisser and Geiges, it turned out, had ties to South Africa's own illicit efforts to build an atomic bomb, just as Karni had experience in apartheid-era technology trading. In the middle of 2003, Karni, judging from his correspondence, was engaged in arranging an elaborate chain of transactions to move a large number of triggers to Pakistan. June 11: Karni, in Cape Town, receives a fax from a company called Polytec, the French subsidiary of PerkinElmer, stating that he will need an export licence from the US to fill his order for spark gaps. June 12: Karni e-mails Humayun Khan in Islamabad, forwarding the Polytec letter and declining to pursue the deal. June 17: Karni receives Khan's reply: "I know it is difficult but that's why we came to know each other, please help to renegotiate this from any other source. We can give you an end-user information as it is genuinely medical requirement." Nine hours later: Karni sends a two-word response: "WILL DO." Karni arranged the deal through a US intermediary in Secaucus, Giza Technologies, which placed the order from within the US and arranged to have the devices sent to South Africa in shipments of 66 or 67 triggers each. Karni's office informed Giza that the end user would be Chris Hani Baragwanath Hospital in Soweto, the biggest public hospital in Africa. But there was no correspondence indicating that the hospital had expressed the slightest interest in triggered spark gaps. In March, Lloyd Thompson, a urologist there, told me the hospital had only one lithotripter in its operating theater. That one, its first, was purchased in November 2004. Hospital authorities said they had no idea who Karni was, and had never purchased anything from him. On Giza's part, Zeki Bilman, the company's president, told me through a spokesperson: "We have been cleared, we have no comment." August 11: E-mail from Karni to Humayun Khan affirming that "all is in place" for the shipment of 200 triggered spark gaps. October 6: First shipment of 66 triggers arrives in Cape Town by DHL. October 21: Same triggers arrive in Islamabad via Dubai, by DHL, from Cape Town. What neither Karni nor Humayun Khan knew was that the triggers just received by Pakland were utterly useless for any purpose, peaceful or warlike. As part of a sting operation orchestrated out of the commerce department, they had been rendered inoperable by PerkinElmer, which agreed to go through with the transactions Karni requested, using disabled triggers. Karni's deal had been tracked every step of the way; now the authorities were ready to close the net. December 11: A team of investigators from the SA Police Service, accompanied by US investigators, descends on Karni's home office at Ocean View Drive. As Karni watched, the police went upstairs to his Top-Cape office and carted away more reams of computer records and files. He called his attorney, Kantor, and several days later paid him a visit. Kantor had no sense that his client felt he was in deep trouble or was anxious about his upcoming trip to Colorado. Karni, of course, was not a US citizen and he had not violated the laws of South Africa, where selling triggered spark gaps is no crime. Whatever his reasoning, he did not appear to be concerned that he might have done anything illegal. A week after the meeting between Kantor and Karni, the US attorney's office in Washington issued a warrant for Karni's arrest, for violating the Export Administration Act. Despite repeated requests to his lawyers, Karni himself was not made available to be interviewed for this article. But he did speak for himself publicly, in a US district court, the day after his arrest. Presented with a list of his alleged crimes and a description of the penalties, and after being apprised of his rights, he told the judge: "Your Honour ... I would like to make life easy ... I admit everything, there's no need ... to go for a long procedures of ..." Karni has reportedly since pleaded guilty and is assisting with the US government's investigation. On November 23 last year, after spending nearly a year in prison, Karni signed a consent decree that was sent to the SA Police Service in Pretoria. In it, he agreed to grant access to the financial records of Top-Cape Technologies, himself and his wife for 2002 and 2003. In the meantime, citing findings from the Karni case, the commerce department recently banned Pakland and Humayun Khan from purchasing any items on the export control list for six months. The Karni case raises questions about the use of third country conduits for nuclear proliferation, about loopholes in the reporting of the sales of dual-use items, and about the ability of middlemen to mask dangerous transactions in the cloak of ordinary business. A motion filed by the US government reads: "Karni was able to accomplish the export of the triggered spark gaps from the US to Pakistan through the use of little more than a computer, a modem and an overseas bank account." - Via Bloomberg # Mark Schapiro is editorial director of the Center for Investigative Reporting. Additional reporting by Center for Investigative Reporting correspondent Mads Ellese. Triggered spark gaps are unremarkable in appearance: each is a cylinder set atop a four-inch-square black box - and small enough to fit in the pocket of a raincoat. They emit an intense electrical pulse whose timing and duration are controlled to the microsecond. Hospitals use the devices to power lithotripters, which deliver an electrical punch that pounds kidney stones to dust so they can be expelled from the body. That, however, is not their only function. Installed into an enriched uranium casing, a triggered spark gap can ignite a nuclear explosion. ------------------------ Yahoo! Groups Sponsor --------------------~--> Take a look at donorschoose.org, an excellent charitable web site for anyone who cares about public education! http://us.click.yahoo.com/_OLuKD/8WnJAA/cUmLAA/TySplB/TM --------------------------------------------------------------------~-> -------------------------- Want to discuss this topic? Head on over to our discussion list, [EMAIL PROTECTED] -------------------------- Brooks Isoldi, editor [EMAIL PROTECTED] http://www.intellnet.org Post message: [email protected] Subscribe: [EMAIL PROTECTED] Unsubscribe: [EMAIL PROTECTED] *** FAIR USE NOTICE. 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