Mr. CASPERSON. Yes.

Mr. SUNDQUIST. Almost all of it?

Mr. CASPERSON. What they don't have in cash they have in the equipment.

Mr. SUNDQUIST. I see. Where did you think that money came from?

Mr. CASPERSON. I thought it all originated from Mr. Mohan. I knew it was coming through banks in London and in New York. Mr. SUNDQUIST. Tell us about when the Commerce agents came to see you and showed you the smoking gun memo.

Mr. CASPERSON. Which memo?

Mr. SUNDQUIST. The memo that you had sent describing that you were going to have to be careful. Didn't Commerce show that to you when they came and in fact raided your company?

Mr. CASPERSON. They obtained that during the search warrant. They obtained that from my office.

Mr. SUNDQUIST. So they didn't have that when they—————

Mr. CASPERSON. No.

Mr. SUNDQUIST. What was your reaction when they confronted you with that?

Mr. CASPERSON. I knew they had it.

Mr. SUNDQUIST. You knew they had it.

Mr. CASPERSON. Oh, sure.

Mr. SUNDQUIST. Were you worried about them finding it?

Mr. CASPERSON. At that point, I knew I was in trouble.

Mr. SUNDQUIST. You knew you were in trouble.

Mr. CASPERSON. Worried-I was scared to death already. At that point it didn't make a big difference.

Mr. SUNDQUIST. At that point had you already agreed to cooperate? At that point had you already agreed to cooperate when they found that?

Mr. CASPERSON. Yes.

Mr. SUNDQUIST. What should we do to change our export laws, Mr. Casperson? What should we do to keep these things from happening? What should we do to put people like Mr. Mohan and others out of business? What should we do to keep equipment from going to the Soviet Union or countries that want to use it for other reasons?

Mr. CASPERSON. You have got a real paradox in that you have the Commerce Department on one side trying to control and regulate, and then you have other agencies on the other side wanting to open up free trade. Things are real difficult. I think, as I said in my statement, one of the major areas is to educate the business community in areas of what the penalties are. Put it right on the documents that falsifying these documents could result in a $50,000 fine and five years in prison.

It is a short statement. It would be easy to put on documents, put it on all the documents.

Mr. SUNDQUIST. You think that would have made a difference with you?

Mr. CASPERSON. Absolutely. I had no idea I could spend 5 years in jail. I knew it was wrong, but I didn't realize I could spend 5 years in jail for it.

[The prepared statement follows:]

51-840 - 92 - 10

STATEMENT OF ROBERT J CASPERSON

PRESIDENT of C-TEK COMPUTERS INC.

APRIL 18,1991

Mr. Chairman, and members of the Subcommittee.

My name is Robert Casperson and T am the president of C-Tek Computers, Inc. of Kirkland, Washington. We buy and sell computers and also do consulting work with corporations regarding exporting. I would like to share with you my experiences and observations of the U.S Department of Commerce office of Export Enforcement regarding the transshipment of goods through Canada.

As you know C-TEK Computers was involved in a case regarding the shipment of computers to Singapore without the proper export license or shipping documents. After having been served with a search warrant by agents of the Office of Export Enforcement of the U.S. Department of Commerce, I agreed to take part in an undercover operation that resulted in the arrests of three foreign nationals and one U.S. citizen who were involved in the case. There are also indictments outstanding for several other foreign nationals and foreign companies that were involved in this transaction and other transactions that occurred during the undercover operation.

One of the questions the agents asked me after the conclusion of this case was if we had it to do over again how would we do it. My response was first of all I would not do it again. Even though I stood to make in excess of $600,000 in a 6-8 month period, no amount of money is worth the impact that this has had on me or especially my family both emotionally and financially. If I were to do it again and had the knowledge that I have today as a result of my experiences in the undercover operation, I have found that it is very easy to ship and divert goods out of the U.S. to virtually any destination that you would choose. A lot of what I am going to share with you I just stumbled upon. Anyone who wanted to make a career of this and took the time to study the export regulations of both the U.S. and Canada could do this very easily with very little chance of being caught or if caught very little chance of being successfully prosecuted.

First of all we would find a nice small to medium sized broker located in Canada that sells the type of equipment that we would want to divert. I would tell them what I wanted to ship and to what destination and preferably I would let the Canadian broker purchase the equipment either in Canada or in the US. Actually it would not matter where he bought the equipment. If he could buy it in Canada that would make it even harder to detect. The Canadian Broker would then apply for a Canadian Export license or as they are called in Canada an Export Permit, and fill out the application truthfully. On the application form there is a block asking for the origin of the items to be exported. The Canadian broker would put in this block that the origin would be the U.S. In our particular case the Canadian broker involved applied for more than seven different export permits, all of which showed that the origin of the computers was the U.S. There was no question that all of the computers that would be exported to either Singapore or India would be transhipped from the U.S. through Canada on to either India or Singapore. The Canadians did not ask if a U.S. re export license

had been applied for in regards to any of the applications. Except for one application for graphics terminals that were to be shipped to India, all of the applications were approved in under

two weeks. At this same time it was taking two to three months to get a U.S. export license approved. The application to India took about 3 1/2 months for approval, but only because they requested letters from two companies in India regarding the application and Mr. Mohan, who was the purchaser of this equipment, was very slow in sending these. Had he responded faster the applications would have been approved a lot faster.

By shipping the goods in the fashion I have described there is very little chance of it coming to the attention of the US Commerce Department office of Export Enforcement. Just for arquments sake lets say that Commerce Department did happen to stumble upon one of these transactions. The Canadian broker would just say that he purchases equipment all the time in the U.S. and with free trade between the two countries it is his understanding that he did not need a U.S. export license to ship equipment to Canada and as a Canadian citizen he is not familiar with the U.S. Export Regulations. He is though very familiar with Canadian Export Regulations and has complied with all of their requirements and he told them that the origin of the equipment was the U.S. and they never informed him that he would need a re export license from the U.S. Department of Commerce. In this particular scenario there is nothing to tie the U.S. citizen involved, to the transaction. T am not a attorney, but I would think it would be very difficult to prosecute anyone in this

case.

It is my observation that this type of transaction is going to become easier to do in the coming years with the advent of free trade with the Common Market and the possibility of tree trade with Mexico.

The question then is how do you stop this type of transaction. I do not think the Commerce Department can get the type of budget that would be required to hire the number of agents that would be needed to check every shipment that would be leaving the U.S. Even If they had the help of Customs it would be an impossible task to check the final destination of every shipment going out of this country.

As I see it there are only a few things that can be done to slow it down. One is to educate the business community that there is an Office of Export Enforcement that is checking on goods that are being shipped out of the U.S. I did not realize that the Department of Commerce had an office of Export Enforcement until after they served their search warrant. In fact I thought that they were customs agents until the day after they did a search of my office. I would also educate the business community in regards to what the penalties would be if they were to be caught making illegal shipments. In my case I had no idea that I could spend up to five years in jail for this type of activity. I have to admit I did not go out and ask anyone either, but the point is there needs to be a campaign to notify business people what the penalties would be. In my case this would certainly have made me think twice about what T was about to do. Right now you need to be very familiar with the export requlations to know this.

I also think that the regulations as they pertain to shipments to Canada need to be revised and made easier to understand. During the undercover operation the agents gave me sections of the regulations to read that were highlighted in the areas that pertained to Canada. The agents interpretation was different from my interpretation and attor I gave a copy to my attorney to read, he had a third interpretation of the same regulations. What am trying to say is, that the way they are written is very confusing.

The U.S. Department of Commerce is also going to have to find ways to get better cooperation with their counterparts in Canada, the Common Market and in the future probably Mexico.

They need to get the help of the exporting agencies in these countries to make their citizens aware of what the re export requirements are with regard to goods that originate in the

United States.

One thing that I found dealing with other computer brokers during the undercover operation, who do extensive exporting was that it is common practice to avoid the licensing process it possible. They would do this not to divert goods to somewhere it should not go, but to avoid having to deal with the Commerce Department and expedite their shipments. One example was a computer broker in Minneapolis who had a customer in England who wanted to buy a large DEC VAX computer. The broker found one for sale in Australia. Rather than go through the hassle of dealing with the Washington office of the Commerce Department and waiting the 1-2 months it would take for approval of a re export license, he found an Australian computer broker who already had a license to ship this type of equipment to one of his customers in London. So the US broker had the Australian broker pick up the equipment and ship it to his customer in London on his Australian re export license. When the equipment arrived in London the U.S. broker had the equipment picked up and shipped to his customer elsewhere in England.

I think the department of commerce has made great strides in the last two years with regards to the handling of license applications and answering questions that exporters might have. You now have a pretty good idea within two weeks of where yout application is in the approval process. The best thing they did was open offices in Newport Beach, California and Portland, Oregon. The employees in these offices unlike the Washington D.C. office are friendly, knowledgeable and very responsive. If they do not know the answer to a question and cannot direct you to someone who can, they say they will find out and call you back. The best part is they actually do call back.

Over the eighteen month period that the undercover operation, and the following investigation took place, I worked very closely with the agents of the office of Export Enforcement from San Jose, California. I can honestly say that the agents that I worked with always acted in a very professional and courteous manner. There were times that they were insensitive as to how the undercover operation was effecting my family and as a result were effecting my performance, though I believe that as a result of this investigation that they have learned a great deal about how they should handle cooperating defendants in the future.

In the beginning of this operation the agents did have difficulty in understanding how our industry worked and the mechanics involved in this very complex case. By the end of the investigation, I would have to say they are probably the most knowledgeable agents in the country with regards to the exporting of any sophisticated high tech equipment. I think we all learned a great deal about how goods could and are being diverted out of this country.

I think that the Department of Commerce has a very valuable resource here, and one way that they could capitalize on this knowledge would be to give seminars for all of their field agents. The content of these seminars should focus not only on the techniques used to divert goods, but also on what to look for as signs that individuals or companies are taking part in this sort of activity. If these seminars were to be responsible for stopping just one shipment, it would be worth the cost of doing.

Once again I would like to thank you for the opportunity to address you, and I hope that my remarks will be of some value to you.

STATEMENT OF SHIV MOHAN MUKKAR, RAYBROOK, N.Y. Mr. SUNDQUIST. Mr. Do you prefer being called Mr. Mukkar? Mr. MUKKAR. Mukkar or Mohan, same thing. Mukkar.

Mr. SUNDQUIST. Mukkar, Mr. Mukkar.

Mr. MUKKAR. That is my family name, sir.

Mr. SUNDQUIST. Mr. Mukkar, where is your home?
Mr. MUKKAR. New Delhi, India, sir.

Mr. SUNDQUIST. New Delhi.

Mr. MUKKAR. Yes.

Mr. SUNDQUIST. When did you leave New Delhi last?
Mr. MUKKAR. The 17th of July 1989.

Mr. SUNDQUIST. For what purpose?

Mr. MUKKAR. I was coming to basically see my son in London who was at that time, and then also meet Mr. Townsend here and Casperson because I placed large orders and the equipment was not coming in.

Mr. SUNDQUIST. You came over here for the meeting in Buffalo?
Mr. MUKKAR. Yes, to settle the accounts.

Mr. SUNDQUIST. Are you the owner of Perfect Technologies?
Mr. MUKKAR. I am one of the directors, sir.

Mr. SUNDQUIST. Who were the other owners?

Mr. MUKKAR. There are two of them. One is, of course, my wife and there is one guy Sadewa.

Mr. SUNDQUIST. Pardon me?

Mr. MUKKAR. Mr. Sadewa. He was. He is no longer. After I was arrested, the company's almost closed, and he-you know, he left the company. He was a director at the time I left India.

Mr. SUNDQUIST. Where did you have offices at that time?

Mr. MUKKAR. At the time of my arrest, I had office in Bombay and Delhi.

Mr. SUNDQUIST. London?

Mr. MUKKAR. London is my agent where there is always he is my partner in-not Perfect Technologies. He is my partner in other activities. I was trying to make an amusement park in India. Mr. SUNDQUIST. But he was your partner, and you had an office there?

Mr. MUKKAR. No. He is my partner in India, in another venture. Perfect Technologies, he is the director and he owns the company 100 percent.

Mr. SUNDQUIST. Excuse me one second, Mr. Mukkar.

Ms. Moore, if you disagree, would you speak up at this point, or any point?

Ms. MOORE. Yes. I would just-I think that Mr. Mohan forgot to mention Sidhartha Bose as an officer of Perfect Technologies and also forgot to mention that Perfect Technologies maintains an office in Russia.

Mr. SUNDQUIST. I was just getting to that. What is Mr. Bose's role-was he not an officer?

Mr. MUKKAR. No, sir. He owned the company and all those documents are in—was given to me even in the discovery material that Sidhartha Bose owned the company.

Mr. SUNDQUIST. Owned what company?
Mr. MUKKAR. Perfect Technologies, Ltd.