ing for shipment of a larger quantity of a chemical called thiodiglycol to Iran. Thiodiglycol is a precursor chemical in the manufacturing of mustard gas.

The Office of the Special Agent in Charge in Baltimore had previously investigated allegations that Alcolac had shipped thiodiglycol to Iran.

Mr. JENKINS. Mr. Chairman, there may be some question; I assume that the reason that Mr. Bass is not being identified is that he is involved in ongoing investigations, other investigations, and is being shielded from the TV camera. Is that the reason for that? Chairman PICKLE. Yes, sir.

Mr. JENKINS. That is correct. All right. I just wanted to make that comment.

Mr. BASS. The Office of the Special Agent in Charge in Baltimore, had previously investigated allegations that Alcolac had shipped thiodiglycol to Iran. However, the allegations were never substantiated.

Special agents from the Baltimore office, Strategic Investigations Group, began surveillance of the Alcolac plant and developed further information relating to a shipment of seven containers of thiodiglycol going from Alcolac to Singapore. The shipment was consigned to Hallet Enterprises in Singapore. The U.S. Customs attache, Bangkok, quickly ascertained that Hallet Enterprises was merely an office in Singapore and not a likely recipient of a shipment of chemicals.

Baltimore Customs inspectors were informed of this information and began a search for the shipment. The inspectors located the shipment and determined that it was being loaded on a barge in Baltimore and would shortly depart for Norfolk, Va., to be laden on a freighter enroute to Singapore.

The documentation indicated that the shipment was incorrectly being exported as "G-Dest, that is, general destination goods not requiring an export license, instead of with the required Commerce Department license. Since a validated Commerce license was needed to export thiodiglycol to Singapore the shipment was subject to seizure. A fast decision had to be made either to seize the shipment in Norfolk and overtly continue the investigation or to allow the chemicals to depart Baltimore without alerting the suspects so that we could try to ascertain the final destination of the shipment.

Compounding the problem was the fact that the shipment would be in Norfolk little more than 24 hours making any substitution almost impossible. We decided to confer with our Virginia Beach office which coordinated with the Customs District Director in Norfolk. The Regional Commissioner's staff in the Northeast Region, which covers Baltimore, also conferred with the staff of the Southeast Regional Commissioner, who covers Norfolk. Concurrently, the Strategic Investigations Division at headquarters obtained approval from the Department of Commerce allowing a substitute shipment to leave the country.

While all this coordination was occurring, Customs inspectors in Norfolk unearthed 430 drums identical to those used to ship the thiodiglycol. Working through the night they removed the original drums from the shipping containers and with the help of a local

fire department filled the new drums with water and then reloaded them into the original containers. The inspectors went so far as to remove the labels from the original drums and put them on the drums in the rear of the container so that if someone opened the doors they would see genuine Alcolac labels.

Arrangements had been made to track the movement of the goods once it reached Singapore. However, there was concern that the vessel might divert from its scheduled itinerary and unload the containers at another port. The Strategic Investigations Division at headquarters had lessened that concern by arranging to have the vessel tracked by satellite. Using a high tech series of electronic detective devices, the ship was located within hours.

As the shipment proceeded to its destination, Baltimore special agents pursued various leads. Several suspicious details were uncovered. For example, the paperwork indicated that a company in West Germany should be notified upon the arrival of the shipment in Singapore. The U.S. Customs Attache, Bonn, Germany, ascertained that the German company was a pharmaceutical company.

Also, 5 days after arriving in Singapore, the shipment was loaded on a vessel destined for Karachi, Pakistan. This alarmed us for two reasons. First, the shipment could be trucked from Karachi to Iran, making tracking difficult, if not impossible. Second, there was no U.S. representation in Pakistan.

Through the efforts of the U.S. Customs representative in Hong Kong, arrangements were made with the Drug Enforcement Administration representative in Karachi to assist in tracking the shipment. Twenty-four days after the shipment arrived in Karachi, I received a telex advising that the shipment was, in fact, enroute to Iran having been loaded aboard the Iranian ship, Iran-Ekram. Search warrants were then immediately executed at Alcolac's three locations in Maryland. Incriminating documents were discovered that indicated that officials of Alcolac should have been aware the chemicals were not really destined for Singapore. Also, it was learned that Leslie Hinkleman, the export manager at Alcolac, falsified documents to establish the company's innocence. The documents and further evidence revealed the German citizen, Peter Walaschek, was deeply involved in the illegal shipment, as well as three previous shipments that were also diverted to Iran. Attached to my statement is a shipping document where Alcolac indicated transshipping is allowed and a doctored telex, which was done by Leslie Hinkleman.

Officials at Alcolac began cooperating with Customs after the investigation substantiated the corporation's involvement in the illegal shipment. I requested officials of Alcolac to send Walaschek a telex inviting him to Baltimore for a meeting. Walaschek was stunned when he was greeted by Customs special agents instead of Alcolac officials and arrested upon his arrival at Baltimore-Washington International Airport.

Walaschek pled guilty to violating the Export Administration Act and admitted to arranging three previous shipments to Iran, all totaling 210 tons of thiodiglycol valued at more than $350,000. Before Walaschek could be sentenced, he fled the country, and is currently a fugitive.

The investigation also uncovered four shipments of thiodiglycol previously made by Alcolac on behalf of Nukraft Mercantile Corp. located in Brooklyn, N.Y. Search warrants executed by Customs special agents at Nukraft revealed that Nukraft officials Harold Greenberg and Nicolas De Fino, as well as a Dutch national, Franz Van Anraat, and Japanese national, Charles Tanaka, were responsible for making the purchases and exports of thiodiglycol on behalf of the Iraqi Government.

Documents seized by the Swiss Government on behalf of the U.S. Government at the residence and business location of Van Anraat further substantiated the violations. Both Harold Greenberg and Nicholas De Fino pled guilty to violations of the Export Administration Act.

With the assistance of Greenberg, Charles Tanaka was invited to the United States where he was arrested in Baltimore, Md. Tanaka subsequently pled guilty in U.S. district court to one count of money laundering and is currently incarcerated in the United States.

Franz Van Anraat was arrested in Milan, Italy, at the request of the U.S. Government, in January 1989, pending extradition to the United States. However, after 7 months of incarceration, a Milan court refused to extradite Van Anraat and he was set free. An Italian appeals court overruled the lower court and ordered Van Anraat extradited; however, by that time he had fled Italy. He is believed to be residing in the Netherlands at this time and is currently a fugitive.

Van Anraat successfully caused 538 tons of thiodiglycol to be exported by Alcolac International and illegally diverted to Iraq.

The Alcolac Corp. pleaded guilty to one count of violating the Export Administration Act and was fined $437,594. Leslie Hinkleman, the export manager at Alcolac, pleaded guilty to one count of making a false statement, and Peter Walaschek also pled guilty, but, as I have stated, later fled to West Germany and is currently a fugitive.

Harold Greenberg and Nicholas De Fino both pleaded guilty to violating the Export Administration Act. Greenberg was sentenced to two years' probation and a $27,000 fine. De Fino received a 2year sentence, with all but 6 months' home detention suspended, and a $15,000 fine.

Ali Sobani, an Iranian Government official, and Franz Van Anraat both remain fugitives.

Attached to my statement are two schematic drawings detailing the four Iranian and four Iraqi shipments.

That is my statement.

[The prepared statement and attachments follow:]

WRITTEN STATEMENT

SENIOR SPECIAL AGENT DENNIS J. BASS

U.S. CUSTOMS SERVICE

THE INVESTIGATION OF ALCOLAC INTERNATIONAL

ALTHOUGH THE UNITED STATES HAS STRONG EXPORT LAWS

CONTROLLING CERTAIN CHEMICAL PRECURSORS, THE U.S. CHEMICAL

INDUSTRY IS STILL TARGETED BECAUSE OF ITS QUALITY PRODUCTION AND

COMPETITIVE PRICING.

ONE SUCH U.S. FIRM WAS ALCOLAC INTERNATIONAL, LOCATED IN BALTIMORE, MARYLAND. DURING 1987 AND 1988, ALCOLAC BECAME INVOLVED IN A SERIES OF TRANSACTIONS INVOLVING THE SALE OF

THIODIGLYCOL, A PRECURSOR FOR MUSTARD GAS, TO TWO DIFFERENT

PURCHASERS FOR EXPORT. THE FIRST SERIES OF TRANSACTIONS INVOLVED SALES TO A GERMAN NATIONAL DOING BUSINESS AS COLIMEX GMBH AND

COMPANY KG. THE SECOND SERIES INVOLVED SALES TO NUKRAFT

MERCANTILE CORPORATION, A BROOKLYN, NEW YORK, COMPANY WHICH WAS
ACTING ON THE BEHALF OF A DUTCH NATIONAL. THE INVESTIGATION,
WHICH WAS CONDUCTED BY THE SPECIAL AGENT IN CHARGE, BALTIMORE
(SAC, BALTIMORE), REVEALED THAT THE GERMAN NATIONAL WAS ACTUALLY
A BROKER FOR AN IRANIAN DIPLOMAT FROM THE IRANIAN EMBASSY IN WEST

GERMANY AND THAT THE DUTCH NATIONAL WAS A PROCURING AGENT FOR THE

IRAQI GOVERNMENT. BOTH WERE RESPONSIBLE FOR SHIPMENTS BEING

ILLEGALLY DIVERTED TO THE PERSIAN GULF.

2

THE COLIMEX TRANSACTIONS BEGAN IN JANUARY, 1987, WHEN ALCOLAC WAS CONTACTED BY THE GERMAN NATIONAL. HE INQUIRED CONCERNING THE PURCHASE OF 15 TONS OF THIODIGLYCOL FOR DELIVERY

TO CY SAVAS OIKONOMIDIS E.E., A GREEK COMPANY. THE QUANTITY OF THE ORDER WAS LATER INCREASED TO 30 TONS. DURING FEBRUARY AND

MARCH, 1987, ALCOLAC SHIPPED A TOTAL OF 66,000 POUNDS TO THE GREEK COMPANY, FOR WHICH IT RECEIVED $54,000. WITHOUT ALCOLAC'S KNOWLEDGE, THE GREEK COMPANY, WORKING TOGETHER WITH THE GERMAN NATIONAL AND AN IRANIAN DIPLOMAT IN GERMANY, TRANSSHIPPED THE THIODIGLYCOL FROM GREECE TO IRAN.

IN LATE JUNE, 1987, THE GERMAN NATIONAL CONTACTED ALCOLAC AND ORDERED AN ADDITIONAL 60 TONS OF THIODIGLYCOL, THIS TIME FOR SHIPMENT TO A SINGAPORE COMPANY NAMED HALLET ENTERPRISES.

AFTER

SEVERAL MONTHS OF NEGOTIATIONS, THE TRANSACTIONS WERE CONSUMMATED; AND, ON SEPTEMBER 4, 1987, 128,700 POUNDS OF THIODIGLYCOL WAS SHIPPED TO HALLET IN SINGAPORE. ALCOLAC WAS PAID $105,960 FOR THIS SHIPMENT.

ALTHOUGH THE COMMERCE

DEPARTMENT REGULATIONS, REVISED A MONTH EARLIER, REQUIRED THAT A VALIDATED LICENSE BE OBTAINED FOR SHIPMENT, ALCOLAC WAS UNAWARE OF THE NEW REGULATIONS AND DID NOT APPLY FOR A LICENSE. THE

SHIPMENT WAS TRANSSHIPPED FROM SINGAPORE THROUGH HONG KONG TO

PAKISTAN AND, FINALLY, TO IRAN. AGAIN, ALCOLAC HAD NO KNOWLEDGE OF THE TRANSSHIPMENT.