Iran Got Water, Not Nerve Gas Ingredient : U.S. Customs ‘Sting’ Tracks Illegal Export of Deadly Chemical

BALTIMORE —  The trap was set in Pakistan. In the Custom House here, they waited. First one week. Then another. And another.

As the days dragged on, the investigators received reports from U. S. officials in Pakistan. No change. The shipment of 430 drums, tracked by Customs agents halfway around the world and through four other ports, still sat at the docks in Karachi.

On the fourth floor of the Custom House, they fretted. Would the drums be loaded onto trucks and disappear into the night without a trace? Would Pakistani government officials and shipping agents prove to be reliable informants? Had anyone suspected that this was, in fact, a trap, and were they resisting the bait?

Most significant, would the true purchasers of these solvents --potentially deadly ingredients of chemical weaponry--ultimately reveal themselves?

Twenty-four days after the shipment was unloaded in Karachi, the answers were waiting for U. S. Customs Agent Dennis Bass. A telex to his office here said that all 430 drums had been lifted onto the SS Iran Ekram, which was steaming toward the Iranian port of Bandar Abbas.

Mustard Gas Source

The gambit, played out last spring, had worked perfectly. Customs now had hard evidence in what would become an international scandal. For the first time, a U. S. manufacturer had been linked with an illegal shipment to the Persian Gulf of a chemical that is used to make mustard gas.

The operation would prove to be the wedge leading to the discovery of six other illegal shipments to Iran or Iraq, two countries at war until last August. It would also result in the prosecution of three men who brokered the deals as well as the Baltimore manufacturer Alcolac International Inc. Recently, federal prosecutors disclosed that the company had agreed to plead guilty to one count of violating the Export Administration Act, an offense punishable by a fine of $993,300.

Charges against others are expected to be made soon, prosecutors say.

“There was real joy in the office,” Robert Granico, head of Customs’ Strategic Investigations Group in Maryland, said of that June day the telex arrived from Pakistan.

The trap included a flourish particularly satisfying to the agents--a personal message to the Ayatollah Ruhollah Khomeini that said: “In your face.” When the Iranians opened the drums, they found not thiodiglycol, the chemical they had ordered, but plain old American water, surreptitiously substituted in Norfolk, Va., before the shipment left the United States.

Questions Unresolved

While the operation identified Alcolac and Iran as the beginning and ending points of the shipment, other questions remained. Who had been behind the shipment, and how it was arranged?

In the months that followed, investigators found the answers.

They discovered phony destinations and circuitous routings, fraudulent records and sham companies, all employed to disguise the true purpose of the shipments.

And, in Alcolac, they found an American company all too willing to allow itself to be used, despite warning signs that these were not innocuous sales, that these shipments of thiodiglycol were not intended for textile manufacturing or cosmetics, but something far more nefarious.

“Did Alcolac know the final destination of these shipments?” Donald G. Turnbaugh, head of the Baltimore Customs office, asked. “We can’t say that now, but I think you have to exercise a certain amount of judgment when you’re dealing with chemicals of this nature. We all know, these manufacturers know, what they can be used for.”

The investigation began as nothing more than initiative. In 1981, Customs bolstered its efforts to detect and prevent the illegal exporting of military hardware and sophisticated computer systems.

Maryland Firm Suspect

Under Turnbaugh, however, the Baltimore Customs office early last year began looking in a different direction. As evidence of the use of poison gas surfaced in the Persian Gulf war, Turnbaugh’s agents decided to see if any Maryland companies manufactured thiodiglycol, an ingredient of mustard gas. They found one--Alcolac.

The company had come to Customs’ attention once before. In 1984, U. S. diplomats had alerted Customs that Alcolac was sending a shipment of thiodiglycol through Jordan to Iran. Alcolac denied knowledge of such a sale, and because Customs could not substantiate it, the matter was dropped. Now Customs would reacquaint itself with Alcolac.

Last winter, Turnbaugh put his inspectors on alert for any Alcolac export. On April 19, Turnbaugh received word that Alcolac had delivered a huge shipment of thiodiglycol--120 tons, valued at $198,860--at the port of Baltimore.

Even as the shipment was being loaded onto a barge bound for Norfolk, agents saw that although the documents showed that it was destined for Singapore, the shipment did not have the special license needed to export thiodiglycol to that location.

Some Destinations Barred

The shipment had only a general export license, sufficient to send thiodiglycol to Canada or Western Europe. A special license is required to transport it to Singapore, and it is illegal to ship the chemical to Iran, Iraq or Syria.

There were other suspicious signs. Typically, when export companies send their own containers, they bear instructions that they should be returned after unloading.

The Alcolac shipment was designated “house to house,” meaning the drums should remain in the containers until they reached their ultimate destination. Sending the drums “house to house” meant that they would remain in Alcolac’s containers at the Singapore port. Thus the contents would get less scrutiny and it would be much easier to ship them elsewhere, in violation of American law.

“We were at a crossroads,” said Turnbaugh. Already, Alcolac appeared to be guilty of shipping the thiodiglycol to Singapore without a special license, but that was a minor infraction. Had Alcolac applied for one, it may well have received the proper license.

“We could have seized the shipment and gotten a technical violation,” Turnbaugh said.

So Customs let the barge depart for Norfolk.

Agents Switch Cargo

The next night, after the barge arrived in Norfolk, agents were ready to begin the subterfuge. The seven containers were taken into a warehouse and opened. Using a truck borrowed from the Chesapeake, Va., Fire Department, agents siphoned the thiodiglycol from the drums and refilled them with water. The next morning, the containers were loaded onto the Oriental Friendship and it departed for Nova Scotia and Singapore.

The shipment was tracked by satellite across the Atlantic Ocean, and Customs agents continued their investigation. The official documents filed in Baltimore requested that a small West German pharmaceutical company, Colimex GmbH & Co., be notified when the shipment arrived in Singapore. That seemed odd to the agents. Why would the purchaser bother with the expense of a wholly unnecessary broker in Europe?

The shipment’s Singapore consignee was identified as Hallet Enterprises, but informants told Customs that Hallet was not a chemical manufacturer. It was nothing more than an office in Singapore.

On May 19, the Oriental Friendship arrived in Singapore. The drums were loaded onto another ship, Ocean Sincerity, which left for Karachi on May 24. Customs thus had a second and much more serious violation: diversion of the shipment without explicit permission of the United States.

Word of Destination

On June 4, the shipment reached Karachi, and on June 28, Bass received the telex informing him of the worst violation yet, shipment of the chemicals to Iran.

Customs then obtained warrants for searches of the Alcolac plant that would help fill in many of the gaps. Search warrants were also executed at a Western Union warehouse in St. Louis, and, through the West German government, at Colimex’s offices in Cologne.

The searches identified Peter Walaschek, an export representative with Colimex, as the man who had arranged the shipment with Alcolac. And they identified Leslie Hinkleman as Alcolac’s dutiful export manager. Agents also learned that this shipment was the last of three that Walaschek had arranged with Alcolac in 1987 and 1988. They believed the other two had also ended up in Iran.

Several telexes between Walaschek and Hinkleman disclosed efforts to mask the chemical’s true destination. Through her attorney, Stephen J. Immelt, Hinkleman recently refused comment.

Others Are Suspect

Although the telexes identified Hinkleman as the only Alcolac employee directly involved with Walaschek, Turnbaugh believes other Alcolac executives were well aware of the shipment. “I don’t think you could have had a deal of this size without it going through the executives of the company,” he said.

On the other hand, Bass said, there is no indication that Alcolac or Hinkleman received any extraordinary compensation in the deal. Customs officials say that Alcolac’s eagerness to complete a lucrative transaction blunted its sense of responsibility.

Although he denied recently that Alcolac knew that the shipment was bound for the Persian Gulf, the company vice president, Jack I. Rubin, did acknowledge that “we should have known it must have gone somewhere else.”

In July, with Alcolac cooperating with Customs, the time had come to move against Walaschek. On July 7, Alcolac sent Walaschek a telex inviting him to Baltimore. In the early morning hours of July 27, after a long flight delay in New York, Walaschek arrived at Baltimore-Washington International Airport and was detained.

Chemist Caves In

In short order, Walaschek pleaded guilty and began talking. The Czech-born pharmacist admitted that he had arranged the three shipments--totaling 210 tons valued at more than $350,000--on behalf of an Iranian diplomat in West Germany, Seyed Kharim Ali Sobhani.

Records show that Customs had hoped to use Walaschek in future undercover operations, but Walaschek fled a Washington halfway house in December and returned to West Germany, forfeiting a $350,000 bond. American officials are negotiating with the Bonn government for his extradition.