The attempt to blow up two chemical storage tanks in Norfolk with pipe bombs Monday was part of an insurance scam, not a terrorist act, federal officials said yesterday as they announced the arrests of a Howard County businessman and two Arizona men in connection with the incident.
The discovery of six pipe bombs Monday at the Allied Terminals facility had prompted fears that terrorists had chosen Norfolk -- home of the Navy's largest base and thousands of military families -- to strike at an American public anxious over the Persian Gulf War.
But according to FBI officials, the incident was a simple case of a business deal gone sour, and an attempt to rescue it with a scheme to collect on a $2.7 million insurance policy.
FBI agents arrested Charles Edward Gresham, 67, at his Ellicott City home yesterday morning. The two other men, identified as Joseph Wayne Openshaw, 36, of St. Johns, Ariz., and Cecil Howard Ross, 31, of Glendale, Ariz., a Phoenix suburb, were arrested Friday night.
The three were being held yesterday on charges of conspiring to use explosive devices to commit arson, mail fraud and wire fraud. Gresham, who operated a chemical company called Applied Technology out of his Maryland home, was in custody in Baltimore, according to FBI officials, who said a bond hearing probably will be held tomorrow. Openshaw and Ross were being held in Phoenix.
FBI officials in Norfolk said that their investigation was continuing and that more arrests were possible.
According to FBI officials, the case against Gresham began building within hours of the incident. While news reports were raising the specter of terrorism, FBI agents received a call from a confidential informant who said Gresham had approached him about blowing up the tanks.
Officials said the scheme grew out of a failed investment by Gresham. FBI officials said Gresham had obtained 2.2 million gallons of sodium hydrosulfide, a substance used in paper manufacturing and tanning and bleaching. According to an FBI source, the chemical proved to have virtually no commercial value, and Gresham stored it in a rented tank at the Norfolk terminal while he tried to find a buyer.
Authorities said Gresham owed more than $66,000 in back rent to Allied Terminals, which is located across the Elizabeth River from downtown Norfolk, and was facing a lawsuit over the debt. "He had had trouble getting the payments to us," said W. Bruce Law, executive vice president of Allied Marine Industries.
When Gresham was unsuccessful in trying to sell the chemical, authorities said, he falsified a $4 million sales contract with a Hong Kong firm, then used that contract to secure a $2.7 million insurance policy with a Norfolk insurance company, Burroughs & Watson. The policy was to expire on or about Feb. 20, FBI officials said.
According to an FBI affidavit made public yesterday, Openshaw told federal agents that he, Gresham and Ross agreed in early January to blow up the two storage tanks, collect the insurance, pay off some expenses and then share what was left -- with Gresham taking $500,000, and Openshaw and Ross getting $250,000 each.
A spokesman for Burroughs & Watson said yesterday that he had talked with Gresham, but declined to comment further.
Joseph V. Corless, special agent in charge of the FBI's Baltimore office, said the men were not sure the tank of sodium hydrosulfide would explode, so they decided to first blow up an adjacent tank, which contained 500,000 gallons of highly volatile methanol owned by someone else.
Around 7:45 Monday morning, an Allied employee making a routine check found two pipe bombs, linked by a detonator-timer, on the tank of methanol. Several hours later, four similar bombs with a single timer were found on the tank that Gresham had rented.
The first set of bombs was disarmed at the Allied site. The second was taken to a cemetery, buried and detonated. The bombs did not detonate on the storage tanks because of faulty mechanisms, FBI officials said.
According to the FBI affidavit, the informant said Gresham, whom he described as a business associate he had known for three or four years, provided him with a map of the storage facility.
The document said Gresham initially told the informant that he was considering transporting the chemicals out to sea by barge and dumping them.
Gresham said that the tank was "heavily" insured, and that the informant stood to benefit financially by carrying out the bombing plan, the informant told the FBI. In their last conversation, on Jan. 27, Gresham no longer mentioned the bomb plan to the informant, the affidavit said.
A few weeks earlier, Gresham had met with Openshaw and Ross in Tempe, Ariz., to discuss the scheme to destroy the chemicals, the affidavit says, and Gresham showed the two men photos and a diagram of the tank farm.
Ross, interviewed by federal agents, said that he was at the Jan. 2 meeting and that he faxed a diagram of the proposed pipe bomb to Gresham about a week later, according to the affidavit. Ross also told FBI agents that Gresham "admitted in this meeting to a prior failed attempt to bomb these tanks," the affidavit said.
According to federal agents and the affidavit, Gresham obtained the sodium hydrosulfide as an investment, only to find that he could not unload it. He then falsified a $4 million sales contract with a Hong Kong firm called Jin Dou. According to the FBI affidavit, Henry Wong, president of Jin Dou, later said that there was no contract to sell the chemicals.
When FBI officials interviewed Openshaw last week, he acknowledged that there had been no contract, according to the affidavit.
Gresham lives in a neighborhood of mostly two-story homes, many of them on grassy hills. Yesterday, two large American flags hung from the awning of his home in the 3800 block of Spring Meadow Drive, and a blue four-wheel-drive vehicle with "FBI" painted on the side was parked in the driveway.
Neighbors said Gresham and his wife have lived in the house for about 20 years and have three grown children.
One woman who has known Gresham for years said, "You've got to be kidding," when told Gresham had been arrested by the FBI. "I'm stunned," the woman said. "They're considered outstanding citizens in this neighborhood. There must be some mistake."
Another neighbor said, "I'm surprised. He seemed like a nice guy, a very intelligent guy. He seemed like the kind of guy that you would trust."
A third person described Gresham as a "very popular, very religious man. Everybody around here knew him. He was very friendly, very nice."
The reaction was the same in St. Johns, where Openshaw lives. Alice Stack, a bookkeeper at the Double M Hardware store in the town of about 5,000, described Openshaw, who has a wife and several children, as a "great guy."
"If he's involved, I'm sure it's not him," she said.
Staff writers John F. Harris in Norfolk, Paul Valentine in Baltimore and Stephen Buckley in Ellicott City contributed to this report.