Question 16: What information does the Defense Department have on the Iraqi organization Badr General Establishment?

Answer

D)

OCT : 0 1991

[The subcommittee did not receive written responses to questions 8, 9, 10, 11, 13, and 14.]

Chairman PICKLE. Now, the Chair will call up the first panel which consists of Mr. Steve Davis and Mr. David Burns. I am going to ask those two gentlemen, representing U.S. Customs Service to come forward to make a statement and then we will have a third witness sworn in to be a part of that panel.

Mr. Burns, and Mr. Davis, please take your seat at the witness table.

The first witness we will have today will be Mr. Steve Davis, senior special agent from the Sacramento, California office.

Mr. Davis.

STATEMENT OF STEVEN C. DAVIS, SENIOR SPECIAL AGENT, U.S. CUSTOMS SERVICE, SACRAMENTO, CALIF.

Mr. DAVIS. Thank you, Mr. Chairman.

Today, I would like to outline the investigation that we conducted of Dr. Helmy, that involved the conspiracy to export missile technology and components for the Condor II ballistic missile project.

It began on March 19, 1988, when Customs agents in Sacramento were advised by their counterparts in Chicago that a Mr. Fouad Mohamed was en route to Sacramento from Cairo, Egypt, via Chicago. The Chicago agents advised that Mohamed was suspected of being involved in the illegal diversion of licensable materials. Upon arrival in Sacramento, Mohamed was placed under surveillance by Customs agents who observed him being met by a family who drove him to a hotel.

The vehicle, when the registration was checked was determined to be registered to Dr. Helmy. It was learned that Mr. Mohamed registered at the hotel under the name of F. Algamal. On March 20, Dr. Helmy drove Mohamed to a second hotel where Mohamed registered under the name of Foud Elgmal.

On the 22nd of March, Dr. Helmy met with Mohamed at his hotel, where Helmy was observed to sign over approximately 10,000 dollars' worth of traveler's checks to Mohamed. It was later determined that this money was used to facilitate approximately 27,000 pounds of various components of solid rocket fuels.

It was also learned later that Helmy had five K-Karb blocks and carbon cloth. Mohamed agreed to smuggle them out of the country on his return to Cairo. Because of their ability to withstand high temperatures, these K-Karb blocks and the carbon cloth are used in the production of nozzles for rocket engines, and missile nose

cones.

On the morning of March 23, Customs agents who were conducting a surveillance of Helmy's home observed him loading two cardboard boxes into one of his cars. At approximately 6 p.m. that evening Dr. Helmy was observed departing his residence in the car containing the two cardboard boxes.

He was followed to Mohamed's hotel. Customs agents then followed Dr. Helmy and Mohamed to the Sacramento airport where the two purchased airline tickets to Washington, D.C. The boxes from Helmy's car were checked as baggage and in the baggage

check area, Customs agents were able to examine the exterior of the two cartons which were addressed to 23-8 Tracy Place, Washington, D.C., under the name of Foud Moha.

Customs agents from Reston, Va., were able to determine that the address on the cartons was that of the Egyptian Military Attache in Washington, D.C. Upon arrival in Washington, D.C., Dr. Helmy and Mohamed were observed by Customs agents getting into an Egyptian diplomatic vehicle which drove to the Vista International Hotel where Dr. Helmy stayed. Mohamed and the boxes were driven to a house at 1821 T St., Washington, D.C., and it was later learned that this building was owned by the Egyptian Embassy.

Mohamed and the boxes went into the house on T Street and the boxes were never seen again.

On March 25, Dr. Helmy returned to Sacramento and Mohamed left the United States for Egypt. On March 30, Customs agents in Sacramento interviewed the head of security for Aerojet General and determined that Dr. Helmy was a staff scientist working for the Aerojet Solid Propulsion Co. Dr. Helmy held a secret security clearance and had access to many classified documents and projects. The projects underway in Dr. Helmy's area involved missile propellants and gun projectiles.

It was also learned that Dr. Helmy was a naturalized American citizen who had been naturalized in October of 1987. The same day Customs agents retrieved the trash from in front of Dr. Helmy's house and discovered two pages of handwritten notes describing in nonscientific terms how to work with carbon-carbon materials. These handwritten notes were identified by Aerojet as instructions on how an exhaust nozzle for a rocket would be constructed from carbon composite material, including a brief instruction on where to obtain the required materials.

It was determined that carbon composite materials and technology are controlled items and require Department of State export licenses. It was also verified that neither Dr. Helmy, nor Mohamed had applied for or received any export licenses from the Department of State.

During additional meetings with Aerojet it was learned that Dr. Helmy was a recognized expert in solid rocket propulsion and had an extended background in carbon composite technology. The Customs case agent then began to pick up the trash from in front of Dr. Helmy's residence on a weekly basis.

These trash runs resulted in the recovery of an envelope from the Fiberite Corp. which was addressed to Science and Technology Applications, at Dr. Helmy's address and marked to the attention of A. Helmy. The Customs agent also determined that Science and Technology Applications had not received an export license from the Department of State.

The case agent contacted the head of security for Fiberite Corp. who stated that the description of the large box, taken into the residence owned by the Egyptian Embassy, was similar to the boxes used by Fiberite to ship some of their carbon composite materials. Through trash runs and telephone toll analysis, the case agent began to collect sufficient probable cause to obtain a court order for a wire tap of Dr. Helmy's residence and office telephones. The

trash runs revealed a handwritten list of chemical compounds and other materials; it appeared to be a shopping list.

Shipping documents were also recovered that indicated some materials had already been shipped to Egypt. Those companies identified through the trash runs which appeared to be legitimate businesses were contacted concerning their business dealings with Dr. Helmy. It was learned that all of the chemical compounds on this shopping list could be used as components for solid rocket fuel.

It was also learned that not all of these items required export licenses from the Departments of State or Commerce for export to Egypt. During late May 1988, Customs received a court order authorizing a wiretap of Dr. Helmy's residence and office telephones. One of the first intercepted phone calls was between Dr. Helmy and James Huffman, who in effect, was Helmy's front man for purchasing the chemicals and other materials. Huffman would make the purchases in the name of his company, Mesa Associates. During this conversation, Dr. Helmy and Huffman reviewed the status of their efforts to purchase the items on the list recovered during the previous trash run.

Huffman also summarized difficulties he was encountering with several of the manufacturers. During early June, a conversation was intercepted between Dr. Helmy and Admiral Elgohary, who was in charge of the Egyptian procurement office in Washington, D.C. During the conversation, Dr. Helmy explained how they were having the manufacturer ship the materials to one location in the United States, and they would then transship the materials to a second location where it would be turned over to the Egyptian procurement office for export. The same day a conversation between Dr. Helmy and Ahmed Khairat, also known as Dr. Yossef was intercepted in which Dr. Helmy reiterated the purpose of transshiping the materials within the United States, that it was to conceal the fact that they would be exported to Egypt.

Also during late May, Huffman told Dr. Helmy that he had run into problems attempting to purchase one of the rocket fuel components, because it was a restricted item. Huffman stated, "I don't want to make anybody nervous and make them suspicious so that they start sending somebody around to investigate We have to be very careful about that."

During another conversation Huffman told Dr. Helmy that he had directed that seven barrels of rocket fuel components be listed as seven drums fatty acid of animal oil.

Huffman's telephone conversations with Dr. Helmy repeatedly referred to conversations with Admiral Elgohary and Sousha. At the beginning of June, Huffman called Dr. Helmy from Admiral Elgohary's office. Huffman explained that Elgohary had a problem with the lack of export licenses for the items that they were delivering to the Egyptian C-130s and he asked Helmy to deal with Elgohary.

Dr. Helmy reminded Elgohary that the items he and Huffman were shipping could not legally be exported. Following this call, Dr. Helmy contacted Khairat in Austria and explained the problem he had just encountered with Elgohary. Helmy explained that Admiral Elgohary had tried to insist on providing export documents. He also told Khairat, "I told him these items are controlled and

cannot be exported outside the United States. I told him that if they knew I was buying it to export it, I will be thrown in jail." Helmy went on to ask Khairat to call Admiral Elgohary and ask him to behave himself. Dr. Helmy warned that "if Elgohary did not behave, not only will I be in trouble, but also those who are helping me." "They also will be in great, great trouble. I have Americans here who are covering my trails and I do not want the problems to be caused by you.'

Later that same day Khairat called Dr. Helmy and told him that he had explained to Elgohary the need to give Dr. Helmy as much assistance as possible. As part of the conspiracy the Customs investigation had also determined that Dr. Helmy had special ordered two ceramic nose cones from a company named Greenleaf Technologies.

We have one of those nose cones here that is very small and there were two of these types of items. On June 10, 1988, Customs agents acting in an undercover capacity delivered one of these devices to Dr. Helmy. In addition, Huffman ordered two antennas that are used on sounding rockets and he had also received a quantity of R-45-HT which is a component of solid rocket fuel. These three items and carbon composite material all required Department of State export licenses.

During the same time period, Huffman ordered 400 pounds of carbon composite material from the Fiberite Corp. Customs agents, acting in an undercover capacity, delivered the carbon composite material to Huffman's freight forwarder in Ohio and this was in early June. Because the carbon composite material must be stored at temperatures no greater than 40 degrees, Huffman's freight forwarder made arrangements to have the material stored at a local beer dock.

Between June 14 and 22, Helmy and Huffman had several conversations about how the carbon composite material would be smuggled out of the United States, past Customs and their fears about it being detected.

The four boxes of carbon composite material were put into a wooden box and then marked "AF Club, attention Sousha". Huffman commented to Dr. Helmy, "Well, wish us luck, haven't gone to jail yet."

On June 25, the carbon composite material and two drums of R45-HT were seized at the Baltimore/Washington Airport, as the carbon composite material was being loaded onto an Egyptian C130 aircraft. The manifest did not list these four boxes of carbon composite material. Colonel Sousha was arrested at that time; however, he was released a short time later after his diplomatic immunity had been confirmed.

An arrest warrant had also been obtained for Admiral Elgohary; however, shortly before it was to be served, it was learned that he had diplomatic immunity and the arrest warrant was not served on him.

Dr. Helmy and James Huffman were both arrested and approximately $810,000 that Helmy had received to purchase the materials and technology was seized and forfeited to the Government. Dr. Helmy and Huffman both pled guilty and each was sentenced to approximately 4 years in prison.