Congressional outrage over the illegal sale of high-technology submarine propeller-milling equipment to the Soviet Navy has been aimed so far at Toshiba, the giant Japanese manufacturer of the machinery.
But now, quite rightly, there's a move afoot in Congress to spread the blame to two other Japanese co-conspirators: the major trading company C. Itoh and a smaller import-export firm, Wako Koeki. As we've reported, a secret CIA report warned in 1984 that Japanese manufacturers traditionally use trading companies as shields to take the fall if something goes wrong with a deal.
Toshiba, C. Itoh and Wako Koeki have all been identified as participants in the scandal by the Japanese Ministry of International Trade and Industry, known as MITI. But Toshiba has borne the brunt of the punitivemeasures to date. Two top executives have resigned in disgrace, and criminal prosecution may follow. MITI has forbidden Toshiba to sell anything to Soviet-bloc customers for a year. And Congress is considering a ban on the sale of Toshiba products at all U.S. military bases and a two-year embargo on Toshiba products in the United States.
Meanwhile, C. Itoh was let off with a slap on the wrist: a three-month prohibition on export of machine tools to the Soviet bloc. Wako Koeki received a mere ''admonishment'' from MITI.
How deeply involved were the two trading companies? A Defense Department chronology, reviewed by our reporter Gary Clouser, shows how crucial their role was from the very start. The chronology was prepared by Steve Bryen, the Pentagon's top expert on technology transfers.
According to the document, the illicit deal began in 1980: ''The Soviet foreign trade organization, Tekmashimport, contacted the Japanese trading firm, Wako Koeki. Tekmashimport wanted to purchase Western automated propeller-manufacturing equipment for one of its clients.''
Wako Koeki ''surveyed Japanese machine tool manufacturers to determine which produced such specialty equipment and would supply it to the Soviets,'' the chronology continues.
The items the Soviets wanted were high-tech milling machine tools, computer controlled to handle intricate cutting heads for the manufacture of submarine propellers. They have nine separate cutting axes that allow the cutting heads to carve in different planes.
The desired machinery was far more sophisticated than any the Soviets had, and would make their submarine propellers run so quietly they would be extremely difficult to detect. In fact, the Coordinating Committee for Export Control, the international agency that regulates Western trade with the Soviet bloc, prohibits the sale of machine tools with more than three axes. Japan is a member of COCOM.
Nevertheless, Wako Koeki's quiet search party settled on Toshiba for the illegal deal -- and was not disappointed. Toshiba ''agreed to provide the equipment and negotiations began,'' the Pentagon chronology states. It was clear that Toshiba knew it was embarking on an illicit venture. As the report points out: ''Toshiba insisted that its standard export broker, C. Itoh, be used to avoid raising the suspicions of Japanese licensing authorities.''
Earlier news accounts of the scandal said it was the Soviets who insisted on bringing a Norwegian company into the picture. The Pentagon chronology lays this on the Japanese instead, saying: ''To further disguise the true nature of the sale, the Japanese firms enlisted the (state-owned) Norwegian firm Kongsberg Trade, a division of Kongsberg Vaapenfabrikk.''
In 1981 five contracts were signed. The first two were signed in Moscow on April 24.
The first contract was between Tekmashimport and C. Itoh. Acting as agent for Toshiba, the trading company agreed to the illegal sale of four state-of-the-art MBP-110 propeller-milling machines. ''MBP-110 is capable of precision milling propellers up to 11 meters in diameter and is a COCOM-restricted commodity,'' the Pentagon report states.
The second contract signed that day in Moscow was a similar agreement between Tekmashimport and Kongsberg, in which the Norwegian firm promised to supply the computer brains that run the propeller-milling machines.
To mislead the export-licensing officials at MITI, a certificate was produced that falsely described the sophisticated milling machines as vastly inferior machinery. It also falsely identified the destination as a civilian plant in Leningrad. In fact, of course, the four machines and their computer software went to a Soviet Navy propeller-production facility in Leningrad.
The machinery was delivered and installed in 1983 and 1984. ''The companies serviced and updated the machines and software as late as June 1984,'' the Pentagon chronology states. It noted that the United States didn't learn about the illegal transaction until 1986.