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Dual-use exports, or a twilight business versus systemic failures of export controls

by Michael Rietz

December 10, 1999

Talk prepared By Michael Rietz
Delivered at a luncheon sponsored by the
Institute for Science and International Security
Washington, DC

Introduction

I am very pleased to have been given the opportunity to speak to this expert gathering. First, I have to apologize for my limitations in this language. I hope that you can follow my talk; if not, please do not hesitate to interrupt me. I will speak as slowly and clearly as possible. In the beginning, it was quite difficult for me to decide whether it would be wise to describe my point of view. I am not an arms expert, technician, or expert in the field of intelligence or counter-intelligence, and so I thought I should perhaps not get involved in a matter where even the experts of UNSCOM and the IAEA Action Team have differing opinions. I understand that there is no consensus about the question of whether the UN and other arms experts can certify that Iraq has destroyed its long-range missiles and chemical, biological and nuclear weapons and that this question still remains unanswered. And especially regarding the question of whether the nuclear file on Iraq is still open or not, there is a heavy dispute amongst the experts. There are also differing claims concerning the size and results of the Iraqi nuclear program. I will not and cannot judge the question of whether these different claims could be regarded as credible. I am unable to judge the matter of whether unanswered questions remain about Iraq's nuclear program and whether it is right to shift from disarmament inspections to a monitoring control system. I am unable to judge whether the United States underestimated Iraq's nuclear weapons program in the past. And last but not least, I cannot add any significant information to answer whether Iraq is ten years or only several weeks away from building a simple nuclear implosion device. For all these reasons, your expectations about what I am going to say should not be too high. I cannot present any new evidence from my clients concerning the missile and nuclear projects in Iraq. Or to put it a little more metaphorically: I have to excuse myself a second time for not being able to pull any rabbits out of hats. Furthermore, I will not reveal any secrets, confidential data or classified information; and therefore have to leave out some technical details concerning the missile or nuclear knowledge I have gained, and that sometimes played an important role in the trials in which I was involved. But what I am able to say of any importance without violating my duties, I will say here. Nevertheless, what finally led me to my decision to speak here was the fact that I learned very much about all the efforts and struggles of UNSCOM, the IAEA Action Team, and of the international community to discover in particular the missile and nuclear-related items in Iraq under the UN Security Council Resolution 687. However, I feel confirmed that it is not merely a historical artifacts discussion on a "past program," but that it is of vital concern for the present and future. Quite obviously, key-technology was handed over to Iraq and my clients were involved in that issue. I was the defense attorney of German exporters who sold key-technology for the missile and nuclear programs of Iraq. These people were Mr. Hinze and Mr. Schaab. What they delivered was important technical information, some of it secret and highly classified. That is why there was such an outcry and the inspectors in Iraq were so astonished at the deep knowledge of Iraq in the fields of missile and nuclear technology. I understand how angry and furious many of your experts probably are. To them, this difficult mission in Iraq seems to be simply the result of thoughtless support in the form of know-how transfer and illegal exports by some apparently unscrupulous German entrepreneurs. Yes, this could be one side of the coin. But there are always two sides to a coin, and you cannot finally judge a matter unless you have heard the other side. Audiatur et altera pars. Latin philosophers of Law, the so-called Digists, formulated this fundamental axiom of justice. That is the main reason why I have decided to come here and not to stand aside and stay silent. And for this reason I am going to try to show what the motivation and drive for those men was to support the regime in Baghdad. You must not overestimate the outcome of my lecture. I am no devil's advocate. My clients are still my clients and, as being still their lawyer I have to stick to diverse professional duties. I am sure, that you will respect this. Nevertheless, I want to anticipate the main thesis of my lecture straight away; at the end, I will come to a dialectical conclusion, namely that the proportionality between the support given by my clients and the results it produced is diametrical. In other words: little support was given to Iraq by my clients, with obviously very big effects in Iraq and the world. Ultimately, even my clients were shocked by this outcome. Or, once again to put it another way: if my clients had known in the beginning what the true aims of the regime in Baghdad were, and to what results their assistance would finally lead, they would have refused any collaboration. Believe it or not, I have not come to continue a defense campaign on these grounds; the courtroom battles are long since over. And I do not want to justify any criminal action. But if I can convince at least some of you that the Iraqis had an easy game to play with my clients, and that this was the way it worked, I have achieved a lot. And if I can accordingly show how the Iraqi technicians succeeded in convincing my clients to cooperate and the methods of how experts were contacted in Germany, I may perhaps indicate a pattern, that will allow experts like you to be more sensitive in the future, and teach exporters how to behave and how to beware of the "bad guys" in the world. Germany is without any doubt one of the world's leading countries for high tech and know-how. This is well known throughout the world. And this is the reason why international enterprises and foreign countries like to purchase high tech components from Germany. This is even more true regarding the proliferant ambitions of foreign countries. And of course those countries know the export laws of Germany (i.e. for example the Dual Use Law of the European Union or the national German AWG/AWV). They know perfectly well that a German company won't get an export license for a strictly military-related item. Therefore those buyers of high-technology products do not reveal their true intentions but instead invent end-user purposes, which are quite plausible. Some years ago, I followed the case of Alfred Hempel, a German supplier for nuclear items to many countries, including Pakistan, India and South Africa. He sold hundreds of tons of heavy water, an item that is used in natural-uranium driven reactors as a moderator for triggering the neutron-flow, thereby gaining plutonium directly from the natural uranium, without the difficult process of enrichment. In all correspondences that were later found, Hempel declared this heavy water to be "Coca-Cola." By the way, the Pakistanis learned about Mr. Hempel through the German Embassy in Islamabad. The German ambassador was contacted by the Pakistani Government, asking for suppliers in Germany for heavy water. The German ambassador passed this request through to the Foreign Ministry, who passed it to the nuclear research plant in Karlsruhe. They gave the name of Hempel, from whom they had purchased heavy water for years. Mr. Hempel, himself, hired scientists from well known institutions and highly reputable companies. These men did not even guess they were working indirectly for the nuclear plants of Pakistan, India and South Africa. And Hempel founded a sister company in the United States called Scientific International. He participated through this cover company in U.S. tenders and thereby gained important information, and even blueprints, that he sold later to Pakistan, India and South Africa.

Dietrich Hinze's Story

But let me now start with the story of Mr. Hinze, the first client I defended. Today Mr. Hinze is 61 years old. He is an engineer with an extraordinary technical background in the field of making metal products. He worked for over twenty years in the tool making and mechanical engineering firm of Leifeld and Co. in Germany, a company that later was also accused of having made forbidden exports to Iraq and having been the key figure in helping Iraq to contact other suppliers of high-tech items in Germany. Hinze decided to set up his own business together with his partner Htten, who had formerly been sales-manager at Leifeld, and they founded the company H+H in 1983. At Leifeld they were responsible, among other things, for the world-wide sale of sometimes clearly weapon-related items and materials. They therefore had contacts to weapons manufacturers throughout the whole world (for example in Brazil). The name of the new firm, H+H, stands for "Herstellung" and "Handel" i.e. "production" and "trade." One of the main activities of H+H was the production and sale of vertical-flow-forming machines, developed by Mr. Hinze. This process allows flow-forming, i.e. non-cutting machining of thick-walled, high-tensile steel tubes in order to make them thinner and lighter to be viable for high-precision purposes. These techniques are especially needed in the field of rocketry and for other military purposes. At the end of a flow-forming process you gain a light-weight cylinder, which is then able to withstand even the very high inner-pressures and temperatures that arise in the combustion-chamber of liquid-fueled rockets. Such flow-formed metal tubes can also be used as the steel-rotor in a centrifuge for uranium enrichment. The flow-forming machines are therefore of strategic importance, and are subject to export controls in Germany and in many other countries. However, the components produced by flow-forming also have many civilian applications, for example pressure tanks, gas-cylinders and even pressure cookers. And this is why they are so called dual-use machines. Dual-use items are subject to special export control. Under German export law, products for strictly civilian purposes need no export license. Dual-use products, on the other hand, are systematically controlled by the authorities. In Germany, we have an export law that lists all kinds of machines, tools and items in order to define them as dual-use. This list is permanently extended. Flow-forming machines have always been named in that list. A license for export to certain countries like Iraq and many other Middle Eastern or Far Eastern countries will only be granted when a military use can be excluded. I want to explain how Hinze got into first contact with Iraq. In April 1987 H+H was contacted by a company in London, Meed International. This company belonged to an Iraqi network of companies responsible for the purchase of military equipment, especially in the field of rocket technology. The parent company was called Nassr Establishment for Mechanical Industry Ltd., located in Taji near Baghdad. During the following contract negotiations between Hinze and Nassr, it soon became quite clear that they wanted to produce artillery with diameters of 122-262 mm. And therefore the Iraqis needed flow-forming equipment. However, this was never openly stated by the Iraqis. Hinze was in Baghdad several times to supervise the installation of his machines and other equipment. He gave further assistance in technical problems regarding the production of flow forming parts, that later turned out to be items of the Scud missile. Hinze later told me that he did stop his assistance because he was convinced that the Iraqis were unable to meet the high standards of maintaining such a sophisticated technique as flow-forming. He gave a vivid example: The metal tubes need sufficient cooling while flow-forming them. This is a basic need for accuracy. But when Hinze was in Iraq to check the flow-forming machines, the climate control was not installed, and Hinze realized that they planned to install it in the office of the director instead of attaching it to the machine. The contract was subsequently concluded for the supply of nine flow-forming machines (each worth between $1-2 million). To produce these expensive machines, the young company H+H needed additional capital. The banks approached by Mr. Hinze refused to give credit because the company could not offer sufficient security. Therefore they had no other option than to accept an offer from the Iraqis to acquire a 50 percent stake in H+H. This is how another subsidiary of Nassr, Al-Arabien Co Ltd., came to have a share holding in H+H. Over about the next three years (until the invasion of Kuwait in August 1990) H+H supplied machines, tools and equipment for the production of rockets and ballistic missiles worth altogether around $ 25 million. In nearly all cases, export permits were issued by the authorities (BAW). In the applications, the machines were always declared as being for civilian use, like gas-cylinders, hydraulic-cylinders, lamp-posts, etc. Later the court wrote in its verdict that these were cover descriptions, invented only to gain the export permits. However, the contracts provided not only for machines and equipment, but also for technical assistance. In the Scud program for example the Iraqis had difficulties with the combustion chambers that needed a double-walled design. The cavity between the two walls was only 2 mm and the Iraqis had problems achieving this precision. However, this level of precision was essential in order to realize an effective cooling of the engine in these rockets. Hinze invented some new design-aspects that were later experimentally verified and applied in a modified version of the Scud-rocket by Iraqi engineers. (Later, during UNSCOM-inspections it came to light that the Iraqis had a project, called no. 144, that aimed to extend the range of the Scud-rockets bought from the former USSR). These modified rockets were called Al Hussein (range of approx. 650 km) and Al Abbas (range 900 km). Later Iraq was alleged to have had a program for an intercontinental missile, called "Al Abid," a three stage rocket with the booster stage made up of three Scud rockets together. Hinze and Htten were arrested in 1992 for violation of the export laws. Their trial began in 1993. Hinze's Trial. This is the background of the whole story. And you may be asking: how could a young German lawyer step into such a big job. I will give some explanations, so that you can understand how the defense story began. It was in 1993, when I was a lawyer for trade and industry in the former Eastern Germany in Leipzig. On behalf of a department of the Federal Republic of Germany called Treuhandanstalt, I worked as a liquidator in many former East German companies, with the aim of privatizing them or making them viable in the market economy. The knowledge of business law I thereby gained led me to another field, namely business criminal law. At that time, the state accusation against the responsible managers of the H+H company in Germany was launched by the state prosecutor. The media coverage was immense. I knew that the Higher Court in Mnster was looking for an additional co-defense attorney, paid by the state, to assure the uninterrupted performance of that mega-trial. I heard that they were looking for a regional defense attorney who had a certain technical and business background to meet the challenges of such a trial. Only a few lawyers had that qualification or were willing to defend a client for such little payment (only $300 per day in the courtroom ) as is given by the Federal Republic of Germany for such a huge and long-term task. Others even feared the bad reputation that may arise when defending such "guys." I could not understand this, and so I immediately recognized the chance that such a highly visible and widely covered trial could bring for me. Mr. Hinze's main defense attorneys were well known lawyers with a great reputation. So I hoped to learn a lot from them. Finally, the main judge selected me, particularly because of my technical background (I studied Electronics and Technology for one year at the Technical University in Munich) and my business knowledge. The trial then began in summer 1993 in Mnster. Mr. Hinze, who was my client, Mr. Htten and Mr. Beumer, the two other responsible managers of the H+H company, were charged with having supported the missile and nuclear project in Iraq. The charge filled over 50 pages. It concentrated mainly on the sales of flow-forming machines and related technology. Mr. Hinze himself was one of very few experts in the world who knew this technology. But the charge of assisting Iraq's nuclear program was later dropped. It was part of a deal that could be achieved at the end of the trial. Originally, it was part of the accusation file. But even without the nuclear charge, the files for the trial were very complex, consisting of more than five thousand sheets of paper, mostly filled with technical and contractual details. Hundreds of pages of evidence were part of the file. Hinze's main attorneys concentrated only on a few points and tried to get Mr. Hinze, who still was in jail when the trial began, off the hook by pleading not guilty. They claimed, that Hinze did not know the purposes of the machines and items. Therefore they pleaded not guilty in their opening statements. I was not convinced of their innocence. But I was "only" a second row defense attorney. So I remained mostly quiet during the first twenty days of the trial. I want to remind you that Germany has an "inquisitory judiciary." The three main judges indicated again and again that they did not believe in the innocence of our clients, but were convinced that all three were guilty and should be punished. More and more frequently I recognized contradictions in the claims and answers that my client, Mr. Hinze, gave to the questions of the prosecutors and judges. I tried to convince the senior lawyers that the chosen strategy did not seem to be working, and that it would ultimately hurt Mr. Hinze more than help him. However, I could not persuade the other co-defense attorneys of Mr. Hinze. These guys were veteran Cologne criminal defense lawyers (father and son) who were nicknamed for their past successes at steering clients through trouble. I share another general point of defense than those colleagues. As a defense lawyer, I firmly believe that I have to serve my client and justice at the same time! I am a part of the juridical system. Otherwise my task would be to hinder justice. I never understood that it could be a suitable approach to get a client off the hook, only because evidence is poor. If I am convinced that a client of mine is guilty, I try to convince him to plead guilty, even when evidence is weak or insufficient. I have many reasons for this attitude, but I cannot extend this point of view here and now. I wanted to convince Hinze that the whole trial story could be shortened if he would plead guilty. So one day, shortly before Christmas 1993, I visited Mr. Hinze alone in jail, very well prepared through the whole file, which I had studied carefully in order to present him with my conclusions. So I convinced him, that, if he did not plead at least partly guilty, he was going to be sentenced to five or six years and that he would not get out of jail until the end of 1995 at the earliest. At that time, he had already lost his company and virtually all his money. His family was suffering from the events, and his wife was very anxious about the outcome of the trial and the future prospects for the family. All this was a heavy responsibility for me. In view of all this, I proved to him that he had no chance of escaping the charges and that his main lawyers were doing a fruitless job that would not bring him his freedom. I convinced him that, in the end, it would only cost him a lot of money (they charged him more than $2,000 per day for the defense). I convinced him that the best way would be to make a deal with the prosecutors and the judges in order to achieve his immediate release from prison and a lenient punishment without serving any more time in jail. Hinze is an intelligent technician with a lot of political cleverness. He has the ambition and drive of a self-made man. He is super-critical and has long-term experience in international business. He has traveled the world, and it is difficult to get him to change his mind once he has taken a certain decision. So he was hesitant because he was not sure if I had the professional standing to make such a deal. Of course, he knew that his main lawyers could not do this, because they could not change their non-guilty strategy with any credibility. In the end, I convinced him during a nine-hour talk in jail (untill midnight, where a lawyer usually has to leave by 6:00 PM) to let me try. I was so nervous, that I caused a severe accident with my brand new Mercedes car at night. Early the next morning, I informed Hinze's main lawyers about this newest development. I had expected that they would be very angry about my solo initiative. But I had not expected them to immediately quit the job, which is what they did. All of a sudden, I was alone with this heavy task, and the burden and responsibility I now had to take was not easy. I negotiated with the judges and the prosecutors. At first they did not believe that Hinze would really change his defense strategy but promised me that if he did, they would plead for a very mild sentence. Also the judges were convinced that a man like Hinze is unable to change his mind. But, in the end, we made that deal and it worked. The outcome was exactly as I intended. The prosecutor and the judges kept their word. In Germany, plea bargaining is not very common and judges do not like it very much. There are no fixed rules for such a procedure and that is why all judges are very hesitant in applying such methods. It always carries a big risk. Mr. Hinze was then released from jail, some days before Christmas 1993, after he admitted for the first time in court that military implications and indications could be seen in all the contracts right from the beginning. He then explained during the other six months of the trial how the collaboration with Iraq began. All these new explanations were carefully prepared with me and even brought him some sympathy and understanding. In this way we succeeded in elaborating to the court about how and why he worked together with Iraq. Even the media now changed their opinion and covered the story of H+H more objectively. They no longer published headlines like "Unscrupulous Helpers of Death," and other exaggerations. And public opinion gradually changed, too. My defense strategy worked perfectly. In my closing arguments I emphasized that Hinze had not been guilty alone, and that he could not be held responsible for all of the developments and later catastrophe in Iraq, Kuwait and Israel. I argued that I understood perfectly well the search for someone to blame. But the system had failed, too. All over the world, Saddam Hussein had been dangerously underestimated. I pointed out that the German government and the international community were also to blame for the developments in Iraq. For years, the guiding rule of export controls had been laissez-faire, which created an environment where an individual exporter could feel endorsed and easy about lacking political sensitivity with regard to illegal exports. Especially in Germany there was an export policy that was driven by the aim of increasing export figures at any price. Even the BND, the German Secret Service, sold millions of dollars worth of high-tech arms material to Iraq through a cover company called Telemit in the early 1980s, and trained members of the Iraqi secret service in Augsburg and Munich in the latest espionage and other secret service techniques. And as far as I can see, even in other European countries, and in America, too, Iraqi scientists were educated in advanced high-tech techniques, for example in the nuclear field. So, who is to blame, if not the world community as a whole? And should, in view of this truth, a single exporter feel guilty for what he did? We looked the other way for far too long, and suddenly, after the invasion of Kuwait, we put the blame on the little exporters and expressed public shock and horror at what they had done. This kind of politics had no credibility. It was therefore the task of the defense to point out all these facts and to underline the hypocrisy of this world-wide export policy. And all of this had a strong impact on the view taken by the court. These days were the highlights of the defense. It was painful but useful to brand and stigmatize these failures of the system. I conceded that my client, Mr. Hinze, was a perpetrator, but pointed out that, on the other hand, he was a victim too. He was a victim of the circumstances of that time. He was a victim of the hidden true intentions of Iraq, which always covered its true end-use purposes, such as pretending to need the maraging steel tubes for the oil or fish industry or other purely civilian purposes (pressure tanks and so on). The Iraqis obviously never declared to Hinze that those dual-use machines were intended to produce the compartments of Scud missiles, for example. Of course, Hinze already suspected a military purpose, but he did not have any reliable knowledge that it was so. This also convinced the judges. In their verdict, they accepted this argument. The court could not prove that Hinze positively knew about the missile projects in Iraq, although, they said, he had enough experience to know that the specified diameters, together with other details, must clearly have pointed to a military use. I argued further that Hinze, as a very skilled technician, was flattered by the Iraqi approach to help them in the field of flow-forming and other technical areas. It generally makes a difference whether you are contacted by a simple client in Germany or by a foreign country. There is then always the element of "calling to adventure" involved. Pride is in the game then, too. One should not underestimate this psychological factor. And furthermore: for his young company, such an order was an important boost to the business. His reputation as a technician and businessman in a small town in Germany suddenly grew enormously. When the Iraqis sent the company $2.5 million, he was suddenly the star at the banks, which only a few weeks previously had refused to loan him any new money. Now they wanted to share in the company's tremendous success, too. The mayor of the village also gave his support and described H+H as an important factor for the local economy. Everybody knew what H+H produced and who the main partners were at that time. It finally even led to a memorial stone being placed in the town hall of Drensteinfurt. That was how public opinion stood in those days of success. And slowly but surely the company, once it had embarked on this adventure, became dependent on Iraqi money. Finally, in the year 1988, over 60 percent of the total sales turnover of the small company were done through the Iraqi contracts. Hinze and Htten felt responsible for their employees and the families, who would have no chance on the job market if the company had to close its doors. So Hinze became less critical. He reassured himself by convincing himself that Iraq might be making a bathtub, but what would be the use of a bath tub in the desert without a waterpipe? And this standpoint was also shared by some much more prominent people whom I am not at liberty to name, who knew better and were precisely aware of what was going on in Iraq. When the verdict was pronounced in the summer of 1994, the Higher Court in Mnster was not afraid to clearly speak some more words of truth: the judges expressed their conviction that the German export control department (BAW, today BaFa) had done a poor job and only checked the end-user purposes very superficially. The court took into consideration that the control regime, created to avoid disturbances in foreign-policy relations, obviously did not work efficiently and was quite lax. Even if it was allowed that the export control department was not well qualified and suffered from a lack of information, under staffing and money (i.e. there were only 70 staff to deal with eighty thousand applications for export permits a year), it did not even check whether the purposes stated by H+H were at least plausible. This meant that it was made very easy for the accused to skirt the export controls. Closer scrutiny and examination of the export papers would have prevented these exports. Nobody ever asked whether the exporters might be the victims of false declarations of the Iraqis. They did not compare these exports with other files. Perhaps, the court concluded, the department did not intend at all to look too closely at those exports - out of economic interests, and despite all the declarations of official and public policy. If they had looked more closely, they would have found that only a few years previously such flow-forming machines had been exported by H+H to Brazil, with a clearly declared military purpose. And even the department and other authorities knew that Iraq was working on a long-range missile program. In view of this kind of practice, it was quite feasible that Hinze and the others could gain the impression that the executive was willing to close its eyes towards doubtful exports (even to Iraq). This willingness was due, maybe, because of economic and political reasons, as long as the outward forms were maintained (i.e. civilian purposes were quoted) and the approval file was "clean." This impression may even have been reinforced when officials stated to Hinze that he did not need his own CIA to check the end-user's purpose, or when the department even indicated to him that the company should split the items, so that a single assessment of the exports could be avoided. All these phrases are quoted directly from the verdict.

Leifield Case and Neue Magdeburger Decision

Later, I defended another company's director, Mr. Reichwald, from the former firm of Leifeld and Co. in Germany, the company where, as I already have mentioned, Mr. Hinze worked for over 20 years. Three directors were also accused of having sold flow-forming machines to Iraq. Also in this case, another chamber of the High Court in Mnster again repeated the view, saying that the export control regime of Germany pursued a very generous and uncritical authorization practice. This obvious state of affairs was the main reason why the administration later decided to very much improve the efficiency of the export control department by boosting its finances and other resources (personnel, computers, database and so on). And the department really is working much more efficiently today. Let me quote from another export-trial, i.e. from the latest verdict in the field of export-crime. This is the 1999 verdict of the Higher Court in Mannheim against the responsible managers of Neue Magdeburger, another German company accused of having delivered thirteen lathes for machining metal tubes and other missile related metal-equipment (where Hinze was the initiator of the project). They were given suspended jail sentences of two years. In this case, the judges stated that a mild verdict may come to the public's surprise, but the most important precondition for punishment was guilt. Determining the amount of guilt was the task of the court; it had to apply the public opinion of those former days - even if, after the 2nd Gulf War with the missile launches against Israel and the present knowledge about Saddam Hussein and his efforts to hinder the work of the UNSCOM inspectors, that opinion had turned out to be false and was no longer to be today's viewpoint. In other words, the Court indicated quite clearly what I had always underlined in my defense strategies, namely that the accused could not foresee the later developments in Iraq, and therefore could not be blamed or punished for them. The fact was, the Court then continued, that at the end of the 1980s, the Western world did not regard the Saddam Hussein's regime as an enemy. Rather the ayatollahs in Iran were regarded to be the source of all evil. In contrast, Iraq was seen as a guarantee for stability in that critical political region. The reprehensible support through the delivery of dual-use, arms-related equipment did not take place in such a negative atmosphere. So the court had to leave all those later developments out of account. Nothing had occurred to prove the opinion that the accused had calculated such an outcome. Nevertheless, Justitia in Germany is blind. The Higher Court in Mnster therefore wrote in its verdict that the foreign relations and the reputation of the Federal Republic of Germany had - without any doubt - been damaged by these exports. It had become difficult for Germany, since the knowledge of those illegal exports, to convince the world community, and especially Israel, that it had a serious export control regime. It had also cost a lot of German political capital to prove its credibility in the field of export controls. And this circumstance was not changed by the fact that other exporters, even in America, also violated export rules. The German government had earned a great deal of international criticism for not preventing these exports. The accused did not intend such a result, but they were responsible in a second degree, because they knew that Iraq was a belligerent and unpredictable country. So they were at least to be punished because of negligent violation of export laws.

Karl Heinz Schaab's Story

What you are probably the most interested in is the story of Schaab. Schaab worked for many years as a specialist at MAN New Technology in Munich, a contract company that developed many confidential components of the gas-ultracentrifuge, a sophisticated technique for the enrichment of uranium. The enriched uranium is the source of energy in modern light-water reactors. This enrichment-technique was initially invented in Europe to ensure fuel production to the supply of modern western nuclear reactors. In the beginning of the 1970s, Europe wanted to become more independent from fossil energies. This is why European countries generally promoted nuclear energy. But, the same separation-technology can also be applied for the enrichment of weapon-grade uranium. Therefore all work on this field was strictly classified. Schaab was responsible for the heart of the centrifuge, the so-called rotor. Some rotors run at 60,000 rpm, i.e. over 1000 Hertz, which places extremely high demands on the structure of the materials used. The rotor bodies are either made of flow-formed maraging (alloy)-steel or carbon fiber or composite materials. Steel rotors have a physical limit, and no further progress can be achieved. Beginning in 1980 Schaab became a key figure at MAN New Technology in developing the brand-new carbon fiber technology to make it suitable for the nuclear centrifuge. The carbon fiber rotor is much more effective than the steel rotor. Schaab developed the first working prototype of such a rotor. This took a couple of years of research and development and cost some $10 - $100 million. Although he had a key-role and invented many improvements, he was not fully accepted by his higher colleagues. So he was unsatisfied. Schaab left MAN in the mid-1980s, because his work was not given the recognition that he felt it deserved. After the UNSCOM inspectors in Iraq detected the true extent of Schaab's assistance in the Iraqi nuclear program in 1995, he fled first to Austria and ultimately to Brazil, which refused to extradite him. In 1998 Mr. Schaab's relatives entrusted me with his defense because they had heard about my defense work in similar Iraqi-cases. I replied, that I would first have to speak to Mr. Schaab himself, and then would decide whether I could defend him or not. So I visited Mr. Schaab in Brazil, where he then lived, after the Supreme Court of Brazil rejected his extradition request. But he could not leave the country, because of an international world-wide warrant of arrest. Schaab's basic wish was to return to Germany and to face a fair trial. He intended to terminate the whole story. But his first lawyers failed to arrange a tolerable deal with the prosecution. He was still risking a life long sentence. Schaab would not have accepted such an outcome. So there was a stand-still. We discussed every detail of his case during night and day in his small apartment in San Jos dos Compellos, a city in between Rio de Janeiro and Sao Paulo. Schaab was impressed by my technical background and the fact, that I, being "only a lawyer," could follow all the technical details of the ultracentrifuge etc. He explained his contribution and collaboration to me. He was content that he found somebody who understood exactly what he did. I then painted a picture of the results that I thought were possible to achieve. I argued, that the most difficult point would be to convince the prosecutors with regard to the real extent of his cooperation. I knew that they were not experts and relied on the information that they were given by experts. My most optimistic assumption was that he need not serve any further time in prison, except during the examination phase of the prosecution. Schaab accepted these conditions and returned together with his wife to Germany a couple of days after I left Brazil. Of course I could not guarantee the outcome. But we liked each other very much: and that was the basis for the deep confidence he put in me. When Schaab returned to Germany, he was immediately arrested at the airport in Frankfurt by the Federal Police and the Federal Prosecutor. Then followed a ten-day long examination through the proliferant department of the Federal Republic of Germany in jail. I assisted him during these talks. He was promised to be released when he fully declared the extent of his cooperation with Iraq. Schaab finally admitted that he sold classified MAN-blueprints of a subcritical centrifuge for $40 thousand. He also sold 36 carbon fiber rotors, which he produced himself. The Iraqi gained the rotors directly from him in Kaufbeuren. The export was done by the Iraqis themselves, most probably through diplomatic channels. He sold equipment and items for the total amount of approximately $1 million. He further admitted technical assistance in Baghdad. He helped to install a prototype of a test-rotor in laboratory scale. He denied that this rotor ever succeeded in uranium separation. This way I could bring Schaab in the unusual position of being out on bond ($10 thousand) while awaiting trial. In Brazil, Schaab told me that he was brought together with the Iraqis by Dietrich Hinze and Bruno Stemmler, a former MAN employee who worked even longer for Iraq. Schaab trusted and admired Stemmler. Schaab is a much less worldly man than Mr. Hinze or Stemmler. Schaab has extraordinary skills in the field of carbon fibers, but he is lacking in all of the eloquence of men like Hinze and Stemmler. Whereas in Mr. Hinze the Iraqis had a partner who was aware of all the challenges and political implications of such a cooperation, Schaab was the exact opposite. He was an easy target for Hinze, Stemmler and the Iraqis. So it is true that Schaab really became a victim much more than anybody else in the field of export violations. Whoever has met Schaab himself will confirm my characterization of him. Even the Chief Prosecutor of the Federal Republic of Germany, who has prosecuted all the top-spies in Germany (like Markus Wolf for example, the former secret service chief of the old German Democratic Republic), could not believe that a simple man like Schaab actually did that job. In the proceedings before the actual treason trial, Schaab was thought of as a kind of master-mind in the Iraqi nuclear program. When I first started early negotiations talks with the Federal Prosecutors in mid-1998 it was difficult for me to convince them that this was not the case. They simply did not believe me. It took all my technical and personal knowledge to convince them of some hard facts they could not ignore. They were astonished about my competence in the carbon-fiber rotor field and the detailed explanations that I gave in other technical matters. So we managed to arrange a deal on the conditions for Schaab's return from Brazil to Germany to face prosecution and trial. My conclusion was simple: Schaab was a technician that worked for years beneath his true abilities. He was, through his development and experimental work, responsible for opening ways to much of MAN's success, but he himself gained little therefrom. So he was frustrated. During my talks with Schaab in Brazil I was widely briefed by my client concerning all that chronological and technical data I needed to develop an effective defense strategy. We were able to work perfectly together. And I had the job of my life. He gave me information that formed the picture of his cooperation. This led me to the appropriate defense strategy: Pleading guilty, but explaining what happened, why it happened and what kind of support had been given to Iraq. In his opening statement to the court, Schaab gave a detailed picture of his collaboration with Iraq, a picture that was carefully prepared by Schaab and myself. We did not leave out a single point. So the court and the prosecutors were satisfied. Only a few questions were left at the end, and the trial was over after three weeks. It ended in a relatively mild verdict (5 years, partly on probation, with the 15 months he had served in Brazil for extradition he left the court room as a free man). Initially, Schaab was confronted with a life-long sentence. Anyway, we achieved a verdict that was hopefully intended by the defense. The defense is still waiting for the written verdict, but the judges justified the verdict partly with arguments that I presented in my closing. It is neither the time nor the place to repeat these arguments, but I want to highlight some of them, to make you believe that Schaab's temperment is not that of a bad or criminal character. He was simply at the wrong place at the wrong time. In particular, I pointed out that Schaab was indirectly blamed for death and grief and that he could not stand this thinly veiled attack. Even if he felt at least morally guilty, he could not be punished for this. Schaab, himself, has suffered significant personal and family pain, especially with regard to the horrible conditions of imprisonment in Brazil. Today, he is an old man at the end of his physical and mental resources. How could a strong verdict, under these facts, punish him any further? Schaab left MAN New Technology because they did not promote him fairly. So he decided to establish his own small company. His firm was largely underemployed and he took every opportunity to survive. For example, he worked for Digital equipment, under the expectation of a more appropriate contract, where he cleaned prefabricated screws that did not meet the required technical standards for installation on computer motherboards. Sometimes he worked even day and night. He is a very quiet and unassuming man; he has no hobbies and does not spend money. He had no friends, except one, the late Dr. Bruno Stemmler, a retired former engineer at MAN New Technology, whom he admired, and who's methods he unquestionably followed. It was in early 1989, when Stemmler and Hinze visited Schaab in his small home in the little Bavarian village of Kaufbeuren, together with a small Iraqi group. They pretended to be interested in the carbon-fiber technology for non-military applications, namely to protect VIP's vehicles. Schaab did not realize that the approach was a cover story. This was the only possible time to bail out, but he grasped the chance for his little company to survive with such a strong financial partner. And they were shrewd; they convinced him that they needed his knowledge about carbon-fibers for non-military purposes. This was the first step that inexorably led to catastrophe. Schaab then followed Stemmler, whom he unquestioningly trusted in every regard. So he became a hanger-on, but not the initial traitor in nuclear-related carbon fiber knowledge. Stemmler told Schaab that the Iraqis were willing to install him (Stemmler) as a Professor at the University of Baghdad. Schaab was blind to the political implications of his collaboration. Today he is willing to accept that he lacked any powers of personal criticism; his blue-eyed behavior is his personal guilt. In this sense the biography of my client is a history of abuse with a bitter ending. We admire the treachery but not the traitor. At the end he felt banned and outlawed, a simple man, who could find no sense in what he did. Yes, it is true; this is the tragic dialectic of treason. At the end you will be betrayed by the partners you worked for. In this hopeless situation, Schaab was desperate and sometimes contemplated suicide. Once again: Schaab was not greedy or unscrupulous. This separates him from other spies, who intimately know the danger of the game. Schaab has suffered much more from his action than he ever profited from it. The German writer Guido Knopp notes in his book Top Spies: Traitor in the Secret War, that spies are the loneliest people in the world and they have to live in an isolated environment. Nobody can publicly praise what must, by definition, be secret successes. Claus Kuron, a high official in Federal Secret Service of West Germany who was a top double-agent for the former German Democratic Republic, said during his 1992 trial: treason is the business that deals with the need, the want and the weakness of human beings. That is perfectly true. And it is true for Schaab, too. If destroyed honor and frustrated ambitions are very often motives for treason, they worked particularly effectively inside my client, Mr. Schaab. This is the first part of the answer to the question of what led Mr. Schaab to do what he finally did. And what were the explanations of Schaab himself? He argued that the centrifuge-rotor prototype only had a laboratory scale and, in his estimation, the Iraqis were not capable in managing the complex technique of even a simple gas-rotor. The model itself never succeeded in separating the uranium gas, because it could not hold the necessary vacuum. This does not change his criminal action itself, but it shows the real content and the extent of this treason. It shows how absurd the assumption was that Schaab was the master-mind of the Iraqi nuclear program. My personal estimation is similar: the danger and possibility that Iraq could develop its own nuclear device had only been slightly enhanced by my client. The experts know that much better than I do, so I need not further elaborate. There are published sources that say that Iraq will need further intense foreign support to manage the initial explosion required to trigger the nuclear explosion of a simple implosion device. At the trial, I did not want to devolve further details, but I wanted to give a concrete hint to convince the court of the real extent of my client with regard to that goal. Iraq received tremendous support from elsewhere, all over the world. Even the big names and global players were involved in the nuclear support to Iraq. That is why I want, arriving slowly at the end of my talk, to quote Hinze, who bitterly said in his closing arguments: the small are hung, the big ones escape. Unfortunately this truism is clearly demonstrated here. The court largely followed the defense-line in Schaab's verdict. Particularly it came to the conviction that Schaab did not lie when describing the extent of his collaboration, because there were no contradictions in his explanations. They believed that Schaab does not have the psychological constitution to lie uninterruptedly. This was also the impression of the Federal Prosecutors, experts in the field of tough examination and experienced in the field of espionage. One could say that Schaab had to convince the master-minds of cover stories. Better evidence for that he was telling the truth during his trail cannot be found. So what is left: my client is no "technician of death." But something else is true: the nuclear threat has become mankind's nightmare. Schaab has not opened Pandora's box; he is not responsible for the ignition of the nuclear fire that has now become a permanent and ever increasing menace. But you can not see the violations of my clients in this context. Albert Einstein, physician and philosopher, who when asked as to which means would be employed to fight a third world war, sat back, thought a moment and answered by saying: "Young man, I cannot answer that directly, but the 4th World War will be inevitably fought again with sticks and stones."

Conclusion

I want to summarize; please give me ten more minutes to the end: collaboration or better assistance began because the Iraqis turned out not to be monsters. They were always very polite, friendly and well educated, with a perfect gentlemen's behavior. Schaab once said to me that during those few months of cooperation, he was treated better than he had ever been in his working life. This is one main reason, why people like Schaab did not have a bad conscience in helping them. And I think this has been a phenomena even the U.N. and IAEA Action Team inspectors could not always withdraw from during their inspections in Iraq. Additionally, as you know best, they are the masters of deception and seduction. Schaab did not act, like others spies, for ideological or patriotic loyalties, like spies during the cold war. He acted out of other motivations, particularly for recognition in the first instance and money in the second, and because he has been hurt by MAN. He became weak and lacked efficient barriers to resist the efforts of the Iraqis in approaching him. And he knew that he didn't have to start the nuclear fire in Iraq, because that had already been done by Dr. Busse and Stemmler, who had co-operated with Iraq for a longer time. Maybe, subconsciously, he wanted to stand in the spotlight one time in his modest life. Schaab is an uncomplicated man. He lacks everything that makes a modern and successful businessman. Stemmler and Busse were much more competent in these areas than Schaab. My client, Mr. Schaab, did not significantly accelerate, in the short term, the capability of Iraq to produce more than a few grams of weapon-grade nuclear material. Once again and finally: highly skilled experts of UNSCOM and other professionals were not able to beat Iraq in its divisive methods of disinformation. Therefore, how should Schaab or even Hinze, simple-minded technicians from provincial towns, who did not have any wide political background, be able to understand the global strategies of a regime like Iraq at that time? With regard to Iraq, I want to emphasize: when even the experts of the CIA and others did not foresee the true intentions of Iraq, how could anybody seriously ask why people like Schaab did not refuse to collaborate with the Iraqi regime right from the start? To pose that question would have been asking them to do the impossible. I do not want to be misunderstood: it is not my intention to downplay the criminal behavior of my clients. They quite obviously avoided law enforcement detection by making false declarations (pretending, for example, non-weapon's purposes). But I hope to have shown that the forbidden exports were only partly the result of ill-considered exports and the help of German entrepreneurs; another 50 percent of the responsibility must be borne by the failings of a totally inadequate export control regime. My clients did not evade the export laws out of some strong criminal motivation and with the unscrupulous intent of pursuing an evil goal - namely of supporting a criminal regime in Baghdad. I also want to destroy the illusion that export control risks are a solely German question relating only to the efficiency of the rule of law in our country. Even stricter national laws cannot totally prevent illegal exports, either in Germany or anywhere else in the world. One can generally say that criminal law, like export violation law, usually steps in too late. Criminal law mainly serves as a repressive reaction of society, when the damage (i.e., forbidden exports) is already done. Prevention is much more the key to the solution of export violations. However, this is not so much a juridical problem but a political and global problem. Today there are black lists, for example the U.S. "Entity List" or a list issued by the German government, which name critical countries and advise companies to be very careful when exporting to those countries. These lists play an increasingly important role in the internationally sensitive export business, but they did not exist in the late 1980s, where they could have helped a lot. I cannot understand why we have not succeeded in putting up an UN-law, for example, that forces all member states to report about all activities in the field of arms related item-supply and to put it in a U.N.-registration board. This board should be openly published-for example on the internet. So we brandmark those companies that are involved in the field of supplying sensitive technology. This could have a strong impact on the other clients of such a company. I know from my cases, that some clients had big difficulties when their support for Iraq came to light. For example, even bigger and important clients cancelled their cooperation with Leifeld, and no longer purchased goods from the company. This stigmatization can be very helpful in many regards. If firms run the risk of losing their main clients, then this fear could create a very effective barrier for such exports. The risk of a huge damage would be so high, when compared to the profit of that single forbidden export-deal, it would deter that entrepreneur from taking the risk (even if a large sum of money is being offered). But there still remains a lot of work to be done. Sometimes, no direct approach is made; instead, front companies based in third countries that seem unsuspicious are involved. I have already explicated this fact. And the contracts are additionally divided and placed with many different companies anywhere in the world. That makes the authorities' task of detection even more difficult. And in this context I will give another example: In Germany, a retired, highly skilled expert official from the federal export agency BWA named Dr. Welzien later advised companies how to find the loopholes of Germany's complex export law. He charged extraordinary fees in exchange for his knowledge. It is not forbidden for him to do so; it is only disloyal of him to his former department. I suggest the need to implement a law that prevents former governmental officials from using their knowledge to help companies circumvent export control regulations. I am going to make a last comment: our export law is too complicated. The U.S. Declaration of Independence consisted of only some few hundred words. In contrast, the import agreement of caramel sweets into the European Community consists of over 20,000 words. Export law in Germany is very complex, too. Even the experts do not always overlook it. It is changing permanently, and additional comments and advisories are published by the government. That leads to the facts that its application and knowledge for small, high-tech companies is sometimes impossible. They have to apply these laws in practice. Bigger companies have employed law-experts in the field of export-issues, but a small company can not afford this. Finally I believe that export controls cannot hinder illegal exports but they can delay them and make them more expensive and difficult for the purchaser of those items. John Friedman and Eric Nadler published an article in the October, 1999, issue of The Nation under the title "Nuclear Black Market," in which they state that it is difficult to control a multi-billion dollar trade. I agree with that. And David Albright, the President of the Institute for Science and International Security, suggests that one way could be to require those people and companies who work in sensitive nuclear areas to contact their governments whenever they are approached by other nations. Others suggest that the atomic powers should set up new, international monitoring systems for the export of sensitive nuclear technology and enforce effective controls on multinational corporations. At the very least, politicians should publicly shame those who are involved in black market nuclear weapons commerce. As far as I can see, these corporations have not been shamed publicly and their image has not been damaged at all. So this problem has still not been completely solved. This could be a task for the United Nations, namely to find a global transnational code that could be accepted by all member states of the free and peace-loving world community. And one last suggestion from the viewpoint of a defense lawyer: we should establish procedural incentives for those exporters who are willing to inform about their past cooperation by guaranteeing an amnesty or waiver of criminal proceedings if they assist in uncovering hidden programs to fabricate weapons of mass destruction, even when they have been part of such a collaboration. In the drugs field, such procedures have long since been established and are working quite effectively. In long-term thinking, the menace of weapons of mass destruction is a much bigger problem than drugs. So I do not understand why national and international legislation does not incorporate such regulations in the export laws. Another idea, that I can only outline here very roughly, would be to allow regulators to periodically check the activities of high-tech suppliers, even if no purchaser of the sensitive technology has been identified. In this way, companies that do not permit such checking might fall under some suspicion. In the tax field for example, these controls are quite common. Every owner of a bar or restaurant in Germany is periodically checked by the authorities with regard to his food quality and other safety standards. German authorities should apply this principle to export-orientated companies too. We should, through education, publishing, and warnings, make exporters aware that they carry a high responsibility. We should enforce our theoretical approaches into practice. We need more money, human resources and the firm will to succeed. This is a never-ending process of convincing and discussion: this is one of the reasons why I appreciate the opportunity to appear at an event like this. Sure, the "to-do list" is never ending. But this should not cause us to resign. We must fight. When you fight, you might lose, but if you do not fight, you have already lost. It is much like in the general field of criminality: we cannot prevent all criminal acts, but we can and we have to try to minimize them. That is the task of the future. Please allow me to close with a last quotation: Johan Wolfgang von Goethe, the famous German poet, apologized in a letter to his friend to being so long, but he did not have the time to write a shorter one. I hope at least to have pointed to some possible guidelines that might help to prevent that most terrible nightmare of mankind, a nuclear device in the hands of a dictator or terrorists, from coming true. I thank you for your attention!