Iran General NewsAmerican Iran embargo thwarted when smugglers ship made-in-USA

American Iran embargo thwarted when smugglers ship made-in-USA


Bloomberg: In its search for American-built F-5 fighter jet parts, Iran turned to a father-son company operating out of a yellow stucco cottage on a country road on Ireland’s northwest coast.

By Justin Blum

Oct. 22 (Bloomberg) — In its search for American-built F-5 fighter jet parts, Iran turned to a father-son company operating out of a yellow stucco cottage on a country road on Ireland’s northwest coast.

Tom and Sean McGuinn are accused in a U.S. indictment of conspiracy, trade violations and making false statements to illegally export items with military uses beginning in 2005. Over the past decade, the McGuinns shipped more than $120 million in U.S.-made equipment to the Islamic Republic, Clark Settles, a U.S. Immigration and Customs Enforcement official, said in an interview.

They succeeded through simple deceptions and persistence, according to court and government documents and interviews with U.S. officials and people who did business with their company, Mac Aviation Ltd. They are still free in Ireland.

Their tale illustrates how Iran is leaning on a network of people often operating out of houses or storefronts to evade a U.S. embargo and obtain parts with military uses, American officials said. More than 100 defendants have been charged with illegally exporting such items to the Middle Eastern country since the U.S. began a crackdown in 2007, according to the Justice Department.

Even though the U.S. doesn’t know the total dollar value of illegal shipments to Iran, the smugglers are critical to the country’s military and threaten American security, officials said.

“What Mac Aviation did represents a typical scenario, something that we see on a regular basis,” said Settles, who oversees Immigration and Customs Enforcement’s counter- proliferation investigations unit. “Middlemen such as the McGuinns pose a clear threat to national security.”

1970s Aircraft

Iran depends on the supplies to maintain its American-made 1970s military aircraft, remnants from an era of good relations between the countries. The U.S. restricted trade with Iran and imposed other sanctions, saying the country is sponsoring terrorism, pursuing a nuclear arms capability and violating human rights.

The country could exploit a network of traders operating in similar ways to ratchet up its military threat, said Gary Milhollin, director of the Wisconsin Project on Nuclear Arms Control in Washington, which works to stem the spread of unconventional weapons.

‘100 Percent False’

“Today they may be trying to get military parts,” he said. “Tomorrow they may be trying to get parts that are very consequential for nuclear weapons or long range missiles.”

Tom McGuinn, 73, said the U.S. allegations against him are “100 percent false” and that his business does not deal in military gear.

“We’re not involved and never have been,” he said, reached by phone. “We’re only involved in civil air and aviation.” He declined to answer additional questions.

Approached outside Mac Aviation’s office in Ireland, Sean McGuinn, a trim 42-year-old man driving a BMW sport utility vehicle, declined to comment on the allegations.

Mac Aviation may have earned as much as 100 percent profit on some transactions, according to law enforcement officials who spoke on condition of anonymity because the case is continuing. There’s no indication the company supplied terrorist groups directly, they said.

Attracted by Profit

Alleged middlemen such as the McGuinns number in the “dozens and dozens” and often are attracted by profits far greater than what they could earn legally, said Steven Pelak, principal deputy chief of the Justice Department’s counterespionage section.

In July, a man in southern California, Jirair Avanessian, pleaded guilty to conspiring to export equipment with nuclear applications to Iran. In June, Omid Khalili, an Iranian national, pleaded guilty in Alabama to trying to illegally export fighter jet parts from the U.S. to Iran.

U.S. convictions show that suppliers managed to continue shipping restricted products to countries, including Iran, even with the U.S.’s war on terror in the aftermath of the Sept. 11, 2001, attacks in the U.S.

In the case of Tom McGuinn, the U.S. failed to take steps that might have restricted future shipments after an earlier conviction.

McGuinn, who law enforcement officials said served in the Irish military, was indicted in 1994 on charges of conspiracy and trying to send night vision goggles to Iran. He pleaded guilty in Miami to a single export violation two years later.

Supplying Helicopter Engines

His company supplied Iran with equipment, including helicopter engines and jet engine parts, according to a 2008 indictment of the company and the McGuinns in U.S. District Court in Washington. Two new counts were added to those charges in July.

Mac Aviation lied about the contents and destinations of packages and concealed the identities of buyers, the indictment said. When any one company started asking too many questions, Mac Aviation shifted tactics. It shipped goods through at least six countries, including Belgium, Malaysia and the United Arab Emirates, according to court records.

The McGuinns face 27 criminal counts of providing to Iran both military and “dual use” items, which have both military and commercial applications. American regulations ban even those operating overseas from arranging shipments from the U.S. to Iran without approval.

Request to Extradite

The U.S. is trying to extradite the McGuinns from Ireland, according to law enforcement officials who spoke on condition of anonymity. If convicted, they could spend the rest of their lives in prison. Justice officials in the U.S. and Ireland would not comment on the status of the extradition request.

Irish authorities this year settled a civil case against Mac Aviation, according to law enforcement officials who spoke on condition of anonymity. The company agreed to pay more than 4 million euros ($5.6 million) in penalties and back taxes. An Irish high court justice determined that a “substantial portion” of Mac Aviation’s business involved deals with Iran, according to a judgment. An Irish police spokesman declined to comment.

The company’s shipments were “extremely important components for the Iranian military’s operational readiness,” Settles said. Mac Aviation’s sales of military and dual-use items rank among the largest uncovered by his department, he said.

Laser Cutting Machines

While the Irish company dealt mostly in aviation parts, it also attempted to obtain for Iran laser cutting machines, which can be used for missile development, and chemical weapon detection kits, according to a U.S. law enforcement official familiar with the case who spoke on condition of anonymity because the case is continuing.

Iran says its nuclear program is for civilian use only. Mohammad Reza Bak Sahraei, a spokesman for Iran’s mission to the United Nations, didn’t respond to requests for comment.

In County Sligo’s village of Drumcliffe, Mac Aviation has operated for years from the red-shuttered cottage tucked into an iconic Irish landscape: tree-covered slopes and fields of grazing sheep, not far from the gravesite of poet William Butler Yeats.

There is no company sign on the sliding glass entryway or in the gravel parking area out front. Despite this seemingly low profile, Mac Aviation has attracted interest from U.S. investigators off-and-on since at least the early 1990s.

U.S. Customs agents began investigating Tom McGuinn in mid- 1992 after getting a tip about his efforts to buy 200 night vision goggles and parts for F-4 fighter planes and Bell helicopters, according to Customs investigative records obtained under the Freedom of Information Act.

Posing as Brokers

Over the next four years, agents pursued McGuinn. After Mac Aviation arranged a shipment to Tehran of four U.S.-made goggles from a Canadian supplier, authorities intercepted the package in London, according to court papers.

Undercover agents working as import-export brokers lured McGuinn to a meeting in Miami in March 1994, where he acknowledged the seized goggles had been destined for Iran, according to the 1994 indictment. He was carrying a $1.93 million letter of credit for Mac Aviation from a bank controlled by Iran, according to court records.

Authorities arrested him, and a search of his hotel room turned up currency from six countries, including Iran, Libya and Singapore, according to court records. After the indictment on charges of conspiracy and attempted illegal exports of goggles, he spent almost three months in jail.

Reaching a Deal

After McGuinn reached a deal with the government and pleaded guilty in 1996 to an export violation, he was sentenced to time served — far less than the five-year minimum the prosecutor had predicted early on, according to court records. Wilfredo Fernandez, the prosecutor, said he could not recall what led to the deal.

It would be 2005 before immigration and customs investigated Mac Aviation anew, according to law enforcement officials who spoke on condition of anonymity. Investigators now believe Tom McGuinn resumed shipping items to Iran soon after pleading guilty in 1996, according to the officials.

With the guilty plea, the U.S. State Department and Commerce Department each could have taken steps to help prevent future shipments by Mac Aviation, said Robert Clifton Burns, an international trade lawyer with Bryan Cave LLP in Washington, who isn’t involved in the case.

‘A Screw Up’

“It was a screw up,” said David Albright, president of the Institute for Science and International Security in Washington, which tracks nuclear proliferation. “It’s frustrating. You’d expect the government to coordinate.”

The State Department in 1998 added Tom McGuinn to a list of those barred from shipping military items. It never added his company. Jason Greer, a department spokesman, said officials left it off the list because the company wasn’t convicted. Mac Aviation was placed on a non-public State Department watch list and any license application involving the company likely would have been denied, Greer said.

The Commerce Department, which regulates dual-use items, was never informed that McGuinn entered a guilty plea, so it put neither Mac Aviation nor McGuinn on its roll of those banned from exports of any items originating from the U.S., according to Kevin Griffis, a spokesman for the department.

The department now receives regular accounts of convictions, he said.

Revamping Oversight

The administration of President Barack Obama plans to streamline communications among agencies through a coordination center. A new, tiered system for licensing items would tighten controls on items critical to defense interests, and loosen controls on less sensitive goods.

Stopping international arms dealing will take more than tougher enforcement and more government resources and coordination, said Milhollin of the Wisconsin Project. Businesses must be more proactive in reporting suspicious buyers and forego sales to suspect clients, he said.

Mac Aviation was relentless in getting around hurdles that might have blocked its shipments and it often left unpaid bills, according to people who did business with the company.

Tom Brizes, at the time a vice president of Commerce Overseas Corp., an aviation supplier then-based in Tustin, California, said he tried to block a 2005 order by Mac Aviation for three F-5 canopy panels, essentially the windshields for fighter jets.

Shifting Explanations

First Mac Aviation wouldn’t disclose the panels’ destination, Brizes said. Then it claimed they were going to Nigeria, which Brizes knew didn’t use F-5s, he said.

“He talked in circles and made stuff up,” Brizes said of his conversations with Tom McGuinn. “If you’re having a conversation saying the weather was 60 degrees, he would explain how his boat works.”

Then Mac Aviation insisted that the parts be shipped overseas without the required export license for military goods. Brizes said he sent several dozen e-mails over six months and repeatedly refused the company’s request.

“Some of my e-mails said what you’re doing is breaking the law and we’re not going to do it,” Brizes said. “I put it in bold red and underlined it.”

So Mac Aviation devised a new plan to get the equipment out of the U.S. At the company’s direction, ABL Freight, in Compton, California, arranged to pick up the panels, said Maria Free, a former Commerce Oversees employee who oversaw shipping documents. Sending them domestically eliminated the need for a license.

Releasing Panels

Commerce Overseas employees agreed to release the panels only after an ABL manager, Eddie Garcia, promised in writing to obey export laws governing military items, Free said.

“Finally they did something that covered our butts,” said Free. “We let go of the reins.”

At ABL, someone at Mac Aviation’s request removed the Commerce Overseas invoices and replaced them with paperwork identifying the contents simply as “plastic panels,” and the destination as Malaysia, according to the recent indictment. A code listed for the shipment indicated it required no license, further reducing its chances of being caught by inspectors, according to the U.S. law enforcement officials who spoke on condition of anonymity.

Garcia said he didn’t know the package contained F-5 parts and just included the documents Mac Aviation provided.

“We’re just simple people trying to do the business and that’s it,” he said.

ABL shipped the panels to Kuala Lumpur in February 2006, and from there they were sent to Tehran, according to the indictment. McGuinn quoted his contacts in Iran a price of $86,400, about double what he paid, the indictment said.

Finding Electronics

In another instance, Pyka Aerospace Inc., of San Antonio, had eliminated dozens of jobs in 2006 when Tom McGuinn called. He negotiated for $785,000 in electronics equipment for six Boeing 707s, said Stu Perl, then the company’s president.

The dual-use equipment included wiring for flight data and cockpit voice recorders, emergency locator transmitters, in-air traffic collision avoidance and long-range navigation systems, he said.

Perl said he asked the usual questions: Who were the electronics for? Where would the planes operate? What were the plane tail numbers? At first, McGuinn wouldn’t answer, Perl said. Then McGuinn told them the planes would operate in Europe, or the Far East, Perl recalled. Still later, the answer was Pakistan.

“What went through my mind is: Can I trust this guy?” Perl said.

Shipped to Iran

Yet the shipment met all U.S. requirements, and Perl had no reason to think the items would be illegally diverted from Malaysia, where he sent them, he said.

The Pyka goods ultimately went to Iran, according to U.S. law enforcement officials who spoke on condition of anonymity. Perl said he had no inkling until he was contacted much later about the Mac Aviation investigation.

“I’m going ‘holy crap,’” Perl said. “What have we done?”

Ultimately Mac Aviation didn’t pay the full bill, helping push Pyka into bankruptcy and closure, Perl said. A bankruptcy judge in San Antonio ordered Mac Aviation to pay $404,085 plus interest and attorney fees. No check has arrived, Perl said.

Mac Aviation also targeted larger military contractors directly, using the same tactics on London-based Rolls-Royce Group Plc, Europe’s largest jet-engine maker.

Engines to Iran

In 2006 and 2007, McGuinn’s company was negotiating deals worth more than $4 million to purchase 17 helicopter engines from Rolls-Royce in the U.S., according to the indictment. All but two of the dual-use engines reached Iran, according to the Justice Department, and some went to a company the U.S. says is controlled by Iran’s defense ministry.

Rolls-Royce for months tried to get answers about Mac Aviation’s plans for the engines after shipping the first six, according to the indictment. In e-mails to Rolls-Royce described in the indictment, Mac Aviation gave vague information and said details would be unavailable for months.

At an airshow in Paris, a Rolls-Royce representative challenged Tom and Sean McGuinn, telling them the manufacturer wouldn’t sell them more until it got answers.

When Mac Aviation finally answered, it said in one e-mail that engines would be sold or rented in countries including Malaysia, Indonesia and Nigeria; another e-mail said some might be sold in Singapore and Libya, but wouldn’t go to a military organization or government, the indictment said.

Resuming Sales

Rolls-Royce eventually resumed sales and McGuinn’s company crossed another hurdle, according to the indictment. The U.S. blocked shipment of the final two engines.

Mia K. Walton, a spokeswoman for Rolls-Royce, said the company has been cooperating with the government since 2007 and is not a target of the investigation. She declined to comment further, citing the continuing case.

Rolls-Royce should have been more suspicious, said Albright, of the Institute for Science and International Security.

“There were numerous red flags,” he said. “They were careless.”

Even with U.S. trade restrictions, and global pressure applied by the United Nations, McGuinn found avenues through other countries that did little to impede him. As laws in countries became stricter, he would once again shift strategy.

Shipping Through Brussels

Jozef Ransbeek, an owner of Red\Line International Forwarders in Brussels, inherited Mac Aviation as a customer in 2006 after taking over another shipping company and its warehouse by the Belgian capital’s airport.

Early on, Tom McGuinn told him he was shipping civilian aircraft parts to Iran, Ransbeek said. Ransbeek handled at least 11 Iran shipments for the company, with most going first to Dubai or Malaysia.

Ransbeek wasn’t suspicious or concerned at first. “As long as the Customs say this is OK, then we are clean,” he said.

Shipping to Belgium may have triggered fewer suspicions from U.S. officials than packages going to the U.A.E. or Malaysia, said Michael Swangard, a London-based international trade lawyer at Clyde & Co., who isn’t involved in the case.

In 2007, the U.A.E. approved an export control law that helped crack down on middlemen using the country as a shipping point to Iran. Malaysia approved a law earlier this year giving it powers to limit exports of arms and other sensitive items.

Switching to Malaysia

Around the time of the U.A.E. crackdown, McGuinn told Ransbeek to stop shipping through Dubai and send directly to Malaysia, Ransbeek said. That gave Ransbeek pause.

“You start thinking a little deeper and you say this is not normal anymore,” he said.

When Ransbeek questioned the arrangement, he said McGuinn threatened to pull his business. Customs in Brussels later told him to ship no more items for Mac Aviation, he said.

In Malaysia, in Southeast Asia, the shipping process at the time involved even fewer hurdles.

KS Global Logistics in the capital of Kuala Lumpur just followed Mac Aviation’s shipping instructions, said company manager Samantha Chow Poh Kuan. “We’re just the forwarders,” she said.

The Irish company’s shipments were labeled as spare parts or documents, Chow said.

Soon after they began working together, Tom McGuinn proposed a different arrangement that may have further obscured his tracks. Over coffee at Kuala Lumpur’s luxury Hotel Nikko, McGuinn said he wanted her to help him take over a Malaysian company and make it his shipping destination, Chow said.

They settled on Penerbit Kemas Sdn., a book distributor sandwiched amid a row of mom-and-pop storefront shops in a residential area southwest of Kuala Lumpur’s bustling streets.

Chow said she suspected no wrongdoing until she received a call from a U.S. Homeland Security Department investigator in 2007 or 2008. Chow agreed to provide information, and she also alerted McGuinn, she said.

Then, she said, she cut ties to Mac Aviation. Chow said the company still owes her money.

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