On the wall of Carlos Cardoen's factory are the photos of two men who have shaped his career. One is despised, the other deposed. One is Iraqi President Saddam Hussein, arguably the most dangerous man in the world. The other is Gen. Augusto Pinochet, the dethroned brutal dictator of Chile.

Pinochet gave Carlos Cardoen his start as an international arms merchant, and Hussein has been his best customer. Cardoen, a Chilean and the largest defense manufacturer in Latin America, not only keeps Iraq supplied with arms, but he has built factories there so Iraq can make its own bombs.

Cardoen's latest deal skates dangerously close to breaking a U.S. ban on sales of American arms to either Chile or Iraq. He is remodeling some old American helicopters into what could easily become an Iraqi combat fleet.

Both the State Department and the Federal Aviation Administration are quietly looking into the Cardoen deal to see who, if anyone, could be breaking the law if the deal is consummated.

Cardoen's ties to Iraq go way back. He built his business on the back of the Persian Gulf War, making cluster bombs for Iraq.

Iraq has few friends, especially among the industrialized nations with weapons to sell, so it counts on Cardoen to be the intermediary, buying weapons that Hussein can't get through the front door.

Cardoen, a millionaire many times over, is good at what he does. He captured the Third World market by designing an array of simple, inexpensive bombs, grenades, armored trucks and the like showcased in a slick catalogue.

But you won't find his latest offering in the catalogue. Cardoen is keeping a low profile on his plans to retrofit old American Bell 206 (nicknamed LongRanger) helicopters and sell them to as yet undisclosed clients. Publicly, Cardoen Industries calls the retrofitting a civilian job for crop-dusting, firefighting and fishery surveillance. At least that's what Cardoen's American representatives told the FAA when they applied for FAA certification of the retrofitted helicopter.

But a Cardoen brochure that our associate Melinda Maas obtained in Chile touts the military attack capabilities of the helicopter once Cardoen is finished with it. Considering Cardoen's reliance on Iraq as a regular customer, U.S. officials are concerned that either Iraq or Chile will end up with a lethal weapon made partially from U.S. technology.

Cardoen officials told us they are studying the military uses of the helicopter but would not confirm whether Iraq was a pending customer. ''We have designed a new version of the Bell helicopter which is entirely a civilian version, but could be developed at a later point to serve other purposes,'' Cardoen vice president Jorge Ochoa told us.

He denied reports that Iraq had put in an order for 50 of the retrofitted choppers. ''We do not know at this point who we will sell the helicopters to. Once we receive FAA certification, then we will look at the market,'' Ochoa said. He added, ''We are not doing anything that the United States has not been aware of all along.''

That remains to be proven. Cardoen's U.S. affiliate, Global Helicopter Technology Inc. of Hurst, Tex., applied to the FAA for certification of the remodeled Bell 206 as a civilian helicopter. Cardoen doesn't need the FAA's permission to sell the helicopters from his base in Santiago, Chile, to other foreign countries. But the FAA review is considered a seal of approval that aircraft buyers around the world -- even Iraq -- prefer to have on the merchandise they buy.

The U.S. government doesn't want to put that seal of approval on anything that might put U.S. technology in the wrong hands. FAA officials told us they were only looking at the modified LongRangers as a civilian helicopter, but they had heard rumors about a sale to Iraq and were concerned.

A law authored by Sen. Edward Kennedy (D-Mass.), called the Kennedy Amendment, bans sales of U.S. arms technology to Chile. It dates back to the abusive Pinochet regime in 1976. There is a separate ban on the sale of U.S. arms to Iraq. It remains to be seen who, if anyone, could violate those laws in the LongRanger deal.

Bell, the original manufacturer of the helicopters, is not involved. Cardoen is buying used LongRangers from other sources. Bell sources told us they are cautiously keeping an eye on what Cardoen is doing. Bell no longer makes the helicopter, but there are 1,200 of them around the world. Cardoen apparently has only one so far that he is using as a prototype.

Cardoen's U.S. representative, Global Helicopters, told us it merely was acting as a consultant to Cardoen to steer him through the FAA certification process.

Cardoen, as a Chilean, is not obliged to ask U.S. permission for any of the deals he cuts, but as an international businessman, he also wants to stay on good terms with the U.S. Commerce and State departments. And neither of them wants to make it easy for Cardoen to put any more weapons in the hands of the volatile Hussein.

1990, United Feature Syndicate, Inc.