A Connecticut company agreed yesterday to pay fines of $750,000 for violating U.S. export law by smuggling equipment and technology to Israel for manufacture of tank cannon barrels.
The guilty plea by NAPCO Inc. of Tarryville, Conn., ended a two-year Customs Service-Justice Department investigation and the penalty was one of the largest for export violations involving a friendly country.
In papers filed in the case yesterday, the Justice Department said that an Israeli government agency persuaded the Pentagon to pay $1.9 million to build a plant in Israel to use the smuggled U.S. technology. According to the papers, the Israelis told the Pentagon the plant would manufacture "hydraulic tubes and cylinders, and failed to disclose that the facility would be used to chrome-plate 120mm cannon barrels."
In effect, the Justice Department documents said, the U.S. foreign aid program financed construction of a facility in Israel that is now using smuggled American technology.
Moreover, the government filing pointed out that a provision of U.S. law prohibits use of Pentagon funds to transfer technology or equipment, like that involved in the chrome-plating operation in the overseas manufacturing plant.
An Israeli Embassy official said last night that he is sure that Pentagon officials knew that the plant would be used in making tank cannon barrels. "No one was trying to hide anything," he said.
A Justice Department official said last night the papers filed yesterday make it clear that Israel did try to hide the purpose of the plant when seeking U.S. government financing for the project.
Israel is the largest recipient of U.S. foreign aid, receiving $3 billion a year.
Embassy spokesman Yossi Gal said in statement that his government's review of the case "has not discovered any basis to assume faulty conduct on the part of government of Israel employes involved in this matter. We are confident that any review will establish that the government of Israel and its employes had acted in full compliance with U.S. laws and regulations."
The investigation focused on the development of new chrome-plating equipment at the Watervliet Arsenal in upstate New York starting in 1981. The government's "offer of proof," signed by U.S. Attorney Frederick J. Scullin Jr. and assistant David R. Homer, gave this description of the smuggling of the "state-of-the-art" process:
The new Watervliet method can chrome-plate the inside of the 17-foot-long, 120mm cannon barrel faster, at less cost, and produce "a cannon with greater range, more accuracy and a life expectancy" of up to 1,500 rounds.
Though neither classified nor marked "proprietary," the equipment and technology were "considered the property of the United States, similar to a trade secret." Israel obtained a 120mm cannon in 1984 and made plans for building a chrome-plating facility through Israel Military Industries (IMI), a government agency.
IMI contracted with NAPCO to build the plant in late 1984, and required that NAPCO obtain any needed licenses. At the time, NAPCO was working at Watervliet on a chrome-plating facility for smaller cannon. That facility was near the 120mm chrome-plating section of the arsenal.
Because IMI's development of the 120mm cannon was secret, the court papers said, its officials required that NAPCO refer to the gun barrel as a "hydraulic cylinder." That is what NAPCO called the barrels when in May 1985 it told a Commerce Department official what it was shipping to Israel for the chrome-plating plant.
"Based on this misleading presentation, the Department of Commerce determined that no export license was required," the court document said. In fact, the document added, anodes used in the electrolytic process to chrome-plate barrels of 120mm cannons require a license for export to any country except Canada.
Four anodes were shipped to Israel by NAPCO in October 1985. In December of that year, acting on a complaint by a Watervliet official, Customs Service agents raided NAPCO and two shipping agents, seizing documents and several more anodes.
The law barring use of Pentagon funds to transfer technology or equipment developed at Watervliet was sponsored by Rep. Samuel S. Stratton (D-N.Y.), whose district includes the arsenal.
There are several other pending Customs-Justice investigations of alleged smuggling of American technology to Israel.
NAPCO said in a statement yesterday that former "lower-echelon employes" failed to obtain the required export licenses for the shipments to Israel. It added that the company "has cooperated fully with the U.S. attorney and apologizes for these unfortunate mistakes."