U.S. Probes Company's Covert Operations
Washington Post Staff Writer
Wednesday, December 30, 1998; Page A1
The federal agents who burst into the Alexandria office of Vector Microwave Research Corp. one morning late last year got right to the point. "This is a court-authorized search," an agent announced. "Stand up, don't turn off your computers. We'll take care of that."
The raid, which netted U.S. Customs Service and Navy investigators boxes of records and computer disks, came as a shock to a firm that made a business of eluding attention. For years, Vector had performed secret tasks for the CIA and the U.S. military, using guile, experience and connections, including those of its president, retired Lt. Gen. Leonard Perroots, a former director of the Defense Intelligence Agency.
Vector was a leading entrepreneur in a classified or "black" specialty with high stakes and few rules: covertly acquiring foreign missiles, radar, artillery and other weapons for U.S. intelligence agencies. Its work was seen as crucial by some U.S. officials who study innovations in foreign weaponry as part of efforts to protect Americans from the global spread of ballistic missiles and other arms.
But the rise and fall of Vector illustrates the awkward bargain that can result when agencies such as the CIA and the DIA privatize covert operations. When Vector went out of business earlier this year, it left a trail of mysterious dealings, some that may have run counter to U.S. policy, according to government officials, former Vector employees and the firm's competitors.
Today, investigators are trying to determine at whose behest the firm bid for a batch of North Korean missiles. Also unresolved is whether the firm, trying to sweeten a deal for the purchase of Chinese missiles, provided China sensitive technical specifications on the U.S. Stinger antiaircraft missile.
So complex was the web of connections surrounding Vector that its founder, Donald Mayes, became a business partner with China's state-owned missile manufacturer while secretly buying Chinese weapons for the U.S. government.
Government officials admit they may never know the scope of Vector's activities. "Where's the reality?" said a U.S. official who has pursued Vector for years. "We'll never untangle some of this."
No charges have been brought in the federal inquiry, and attorneys for Vector and its executives deny wrongdoing. The agents who led the Nov. 20, 1997, raid are looking into a number of Vector projects, as well as a private side deal in which Mayes sold Russian helicopters to the Mexican navy.
Guidelines for Bribes
The ongoing investigation had not been made public previously, and, besides scant references in the business press, Vector itself has hardly been mentioned in print. The firm quietly went out of business recently after spinning off parts of the company to competitors. Perroots, 65, did not respond to messages left at his Virginia home. Mayes, 60, who is living in Mexico, responded through his Washington attorney, Thomas Green.
"It's hard for me to get into Mr. Mayes' activities, but they were appropriate and didn't violate any laws," Green said. Green also read a statement issued by Mayes, which said: "Anything we've done for the U.S. government was completely approved." Vector's allies said any prosecution would fail because of Vector's intelligence ties.
Executives of Vector and its competitors in the "foreign materiel acquisition" business, such as BDM International of McLean and Electronic Warfare Associates of Dulles, stride the marble halls of defense ministries from Moscow to Minsk to Beijing competing for weaponry on secret CIA and DIA wish lists. Because they can deny any direct tie to the U.S. government, they can buy from people who wouldn't deal with Washington, or require deniability to do so. The contractors, in turn, are held to secrecy by the U.S. government.
Operating largely on their own in this shadowy world, people who scour the globe for arms on the government's behalf acknowledge that they could face legal trouble if U.S. investigators questioned them about their methods. U.S. officials say people who bribe foreign officials while on authorized U.S. government assignment won't be prosecuted under statutes that prohibit such corrupt practices. But people who bribe seeking foreign arms "on speculation" – in the hopes of finding a government buyer – may be in legal jeopardy, officials said.
"If you say what you do, you can go to jail" because of U.S. anti-bribery laws, said a Vector competitor, who acknowledged that people in his industry commonly retain middlemen to bribe foreign officials. "The U.S. is paying us to go to a foreign country and find somebody to do an illegal thing for us. ... Do you want a Boy Scout doing it, or somebody who can get the job done to save U.S. lives?"
'Name and Access'
Mayes, who was described by an employee as "one of the most cunning individuals I've ever met," learned the arms acquisition trade at a cluster of firms in Virginia's Tidewater area in the 1970s. He founded Vector in 1984, and it was soon acquiring missiles, electronics and ships from China, France and elsewhere. Many of Vector's 150 employees tested the materiel at a California Navy base, or designed classified computer networks for the government. Other employees worked on purely commercial projects, such as a plan to bury waste from South Korean nuclear reactors in the Mongolian desert, and a plan to build a Russian casino – until Moscow mobsters seized their slot machines.
In 1989 Mayes hired retiring Air Force Lt. Gen. Perroots, who had spent three years as DIA director. A favorite of former CIA director William J. Casey, Perroots had superb intelligence connections. "Mayes told people, 'We got Len for his name and access,' " a former Vector executive said. "Len did what he was told" by Mayes, who often left Perroots in the dark, former employees said.
Several people who worked at Vector's headquarters on South Washington Street in Alexandria said freewheeling foreign missions brought out a swagger in Mayes, who cultivated a disdain for law enforcement officials who wanted to question him about his activities. They said the hulking 6-foot-4 Oklahoman boasted that federal agents were too stupid to nail him.
"He bragged about how his phone was tapped, and he was outsmarting them, and they'd never get him," a Vector consultant said of Mayes. Green, Mayes' lawyer, denied Mayes ever said that.
"Mayes compartmented everything from his own employees," a firm official said. "We called him 'prince of darkness.' He'd go overseas on a trip, and no one would know what he was doing." His wife, a former CIA employee, "would call and say, 'Where's Don?' "
Former Vector associates said the firm performed a variety of "little tasks" for the government, nearly all of them secret. The company maintained contact with people the government wanted to keep tabs on, including a businessman from Bahrain with ties in Iran, a former company executive said. U.S. officials unsuccessfully used Mayes to try to lure the man to this country in connection with a Customs investigation, the former executive said.
Government officials also used Vector to pry information from an Iraqi official with whom it had grown close: the flamboyant, Rolls Royce-driving Iraqi Brig. Gen. Nabil Said, military attache» at Baghdad's embassy here in the years before the Persian Gulf War.
Vector also informed intelligence officials about its dealings with Moscow. In 1990, while trying to buy a supersonic Soviet antiship missile, officials of the firm met a Soviet general who was defense attache» at the embassy in Washington. The attache», Grigoriy Yakovlev, ended up working with Vector on numerous deals. "The relationship was prejudged [by U.S. officials] and guidance was provided" by U.S. agencies, said Patrick Sweet, who worked with Vector. What guidance did U.S. officials give? "Our policy is not to get into that," Sweet replied. Yakovlev later became a paid Vector deal-spotter in Moscow.
In addition, U.S. officials asked traveling Vector executives to make specific inquiries of Russian space officials about production methods on new electronic and optical technologies, a former company executive said.
Vector's practices have earned some enemies within the U.S. government. In the late 1980s, naval intelligence officials accused the firm of overcharging for Chinese missiles and delivering Chinese missile electronics that were different from what the firm had promised. The Navy refused to pay the firm's $390,000 fee, but after Vector's sustained lobbying, Navy officials ultimately paid in full, industry executives said.
In 1993 Navy officials launched a criminal probe of the firm for alleged fraud, which was later dropped. Mayes wrote an eight-page, single-spaced letter to Congress complaining that Navy intelligence was out to destroy Vector by leaking its proprietary proposals to competitors in "a war of innuendo, investigations and outright abuse."
The resentment flared again last year, when Perroots persuaded the Pentagon inspector general to investigate Perroots's old agency, the DIA, for allegedly giving a competitor details of Vector's plan to acquire Russian missiles. Vector's allies say the current probe of Vector was engineered by enemies of the firm in DIA and Customs, which has simmered at the unregulated importing of arms into this country by firms such as Vector. DIA and Customs declined comment.
Customs is investigating Mayes for a private deal that apparently had no links to the government. Mayes allegedly lacked a State Department license when his employees repaired Russian helicopters for the Mexican Navy and trained its pilots to fly them. Mayes sold the Mi-8 copters to the Mexicans for search-and-rescue work. While the copters lacked military equipment, Mayes' associates allegedly advised Mexico on how to outfit them with guns, an industry executive said. Maintaining or upgrading aircraft without a license could violate U.S. arms exports law.
"What the Mexican government does with the copters is its business," said Green, Mayes' lawyer.
North Korean Missiles
Another investigation by Customs agents has examined Vector's efforts to acquire a North Korean missile. Vector officials said they had U.S. approval for a deal, according to industry executives and the National Security News Service, an independent investigative group that conducted research on Vector. U.S. officials asked The Washington Post not to identify the type of missile to avoid jeopardizing future covert operations.
Industry executives familiar with Vector's work said Perroots arranged for a South Korean consultant to approach a Seoul company to broker a $33 million deal to buy four missiles and a launcher from Pyongyang. They said Vector also had a U.S. consultant pay a Venezuelan military official $50,000 for a phony "end-user certificate," a document used in import-export work to indicate an item's destination. In this case, the North Koreans were meant to think the missiles were headed to Pakistan and then Venezuela.
Vector never got the missiles. Customs has reviewed the indirect dealings between Vector and North Korean officials, which took place in Beijing, since any financial transactions with North Korea would be a violation of U.S. laws banning commercial ties to the country. Agents are also looking into whether Vector had approval to seek the missiles, since some U.S. agencies had said such a mission could be illegal, in part because it would threaten weapons agreements to which the United States is a signatory. A U.S. government official said that Vector's efforts were "amateurish," and that it stumbled into the deal without U.S. authorization.
"I thought we were doing everything by the book," said a former Vector executive. "DIA said they needed it."
Perhaps the most baffling and sensitive area of Vector's enterprise has been in China, which also has sparked the Customs Service's interest. Chiefly, investigators are exploring whether, in efforts to secure Chinese missiles in about 1991, Mayes gave Chinese engineers technical advice that could help them pirate the design of the U.S. Stinger antiaircraft missile.
Through his attorney, Mayes denied giving China any data; the lawyer, Green, said "it's a canard circulating for several years." Former Vector officials said that when Beijing's officials tried to barter sensitive U.S. data from Mayes as a condition for deals, he play-acted, disclosing material that already was public. Industry officials said the government at times allows contractors to give away such "trading material."
Whatever his tactics, sources said, Mayes scored many acquisition successes in China, at times by telling the Chinese that the weapons were destined not for this country but for Peru. He obtained the C-801 antiship missile for the CIA around 1987, when Iran was threatening to fire those weapons at U.S. Navy ships in the Persian Gulf. He also landed the similar C-601 missile in 1991 for $9.9 million, according to industry executives and an internal company report.
Over the same period, Mayes had developed close ties to China Precision Machinery Import & Export Corp. (CPMIEC), Beijing's missile builder. A Vector affiliate, Mayes & Co., became CPMIEC's official, global marketer of a number of its missiles, including the HN-5A, a crude forerunner of the shoulder-fired Stinger.
For the Chinese, Mayes' traceable ties to U.S. intelligence made him an odd choice of a partner. In any case, piles of CPMIEC promotional materials were stacked inside Vector's offices, and Mayes tried to sell CPMIEC arms to Saudi Arabia and other nations. At the same time, Mayes was informing U.S. intelligence about China's missile sales, industry officials said.
But now investigators are asking whether Mayes, to ingratiate himself with the Chinese, helped them figure out how to place the Stinger's electronics in the nose cone of China's primitive shoulder-fired missile. An industry executive said that around 1991 Mayes boasted that, with the CIA's approval, he gave the Chinese some of the Stinger's technical specifications to deepen his relationship with them. The agency declined comment, but U.S. officials expressed doubt that Mayes had CIA approval to do so.
A joint promotional brochure of CPMIEC and Mayes & Co., aimed at marketing China's HN-5As, said the Chinese agency "utilizes the research, design, marketing and tactical capabilities of Mayes & Co. to evaluate and improve" Chinese missile designs. "Mayes & Co. is a small group of highly specialized engineers and technicians that have a unique understanding of the problems associated with electronic and missile systems."
The Chinese appear to have incorporated Stinger technology in a new missile that entered Chinese military service in 1996, called the QW-1 Vanguard, the CIA told a Senate committee two years ago. But it is impossible to know where the Chinese got the technology because China is thought to have secured some of the 1,000 or so Stingers the CIA gave Afghan rebels to repel Soviet troops in the 1980s.
The Pentagon is now concerned the Vanguard could be fired at U.S. aircraft. CPMIEC, which is notorious for violating global agreements by distributing Chinese missiles around the world, has sold Vanguards to Iran and Pakistan.
The Chinese Agent
U.S. aviation officials are "increasingly concerned" for the traveling public's safety because of the proliferation of such mobile antiaircraft missiles, said a 1994 State Department report. It noted that rebel militias around the world have shot down 25 commercial airliners using these missiles, killing 536 people.
Perhaps the most puzzling aspect of this story, though, is the role played by a Chinese military intelligence agent stationed at Beijing's embassy here in the 1980s. The FBI spotted Hou Desheng early on as a bumbler; there was his odd talkativeness, for example. He complained of his difficulty surviving on the $75 a month he was paid as assistant military attache», said a reporter who used to take him to lunch.
Hou showed up weekly at Vector's offices mounting clumsy efforts to learn classified secrets about a Navy electronics program it worked on, a Vector official said. U.S. agents urged Vector to play along, and the firm once left a sensitive-looking file for him, so he would become even more reckless and blunder into a trap, the official said.
In 1987 Hou was arrested for espionage in a Washington restaurant after he received what he thought were classified National Security Agency documents from an FBI agent posing as a U.S. traitor. Days later the U.S. government expelled Hou as a spy.
Soon after, working out of an office in a Beijing hotel, Hou became Mayes & Co.'s representative in Beijing. He helped Mayes line up the missile deals he swung with China's military, industry executives said.
Hou "was a conduit to other people" and remained a Chinese government employee while working for Mayes, a former Vector executive said. Did Mayes and Vector employ a Chinese spy as part of a U.S. intelligence operation? "I can't get into that," he replied.
Green, Mayes' lawyer, declined comment on Hou. "It's too sensitive," he said.
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