The dark quadrant: Oliver North and the international arms underworld By Jonathan Marshall City Paper, November

13-19, 1987 "Wherever I looked I ran into old Nazis, arms dealers, East European agents, and various secret services. I appointed a police team to investigate this, and the politicians emasculated it." -- French magistrate Germain Sangelin, 1984, commenting on his four-year investigation of contraband smuggling. "Substantial evidence links drugs, money and arms networks in Central America. The fact is, if you want to go into the subversion business, collect intelligence and move arms, you deal with the drug movers." --General Paul F. Gorman, head of US Southern Command, 1984. What do a Polish state munitions firm, a Mideast heroin trafficker, a gang of private American covert operators, a collector of Nazi daggers and a mysterious German arms broker have in common? Ask Oliver North. Through his agents Richard Secord and Albert Hakim, North tapped into the seamy underworld of arms profiteers who survive at or beyond the law's edge, protected by the powerful intelligence agencies they serve. None of these individuals made a public appearance before the Iran-contra committee. But they did the dirty work for North's pro-contra "Project Democracy. In this small and discreet community, ideology takes second place to money. Everybody knows and does business with everybody else. Trace any of their deals far enough, and you'll get a tour through the whole milieu. One incident in particular lifts the veil on this dark quadrant: the last contra-supply voyage of the tramp steamer Erria. The Erria: Delivering the goods A 300-ton Danish freighter, the Erria was the workhorse of the contra operation. In the spring of 1985 and again in 1986, it crisscrossed the Atlantic, picking up arms in Poland and Portugal with phony papers listing Guatemala as the official destination. It then delivered them instead to Honduras where the anti-Sandinista rebels took possession. In April 1985, for example, it picked up more than 100 tons of AK-47 submachine guns and ammunition in Gdansk, loaded up another 461 tons of ammunition at the Portuguese port of Setubal that May, and finally delivered it all to Puerto Cortes in Honduras in June. The voyages were overseen by three of North's private agents: the Iranian-American arms dealer Albert Hakim; Hakim's business partner, the retired Air Force General Richard Secord; and the ex-CIA officer Thomas Clines, who left the agency in the late 1970s when his friend and former CIA subordinate Ed Wilson was caught smuggling explosives and terrorist devices to Libya. Wilson later accused both Clines (who eventually paid a corporate fine) and Secord (who resigned from the Pentagon under a cloud in 1983) of joining him in a plot to defraud the US government on a contract to ship arms to Egypt. In April 1986, their ship was called into duty again. This time the CIA wanted a floating radio station to beam propaganda at Libya after the bombing raid on Tripoli. "We couldn't find a ship in the entire CIA inventory or the United States Navy that was able to do it," North testified this summer with pride. "The director of central intelligence came to me and within, I think, 72 hours we had a ship." That ship was the Erria. North turned to Hakim to accomplish what the CIA couldn't. Hakim and Tom Clines bought the Erria, which they had previously leased to carry arms to Central America, from its Danish captain and owner Arne Herup. It cost Hakim, or at least the Swiss bank accounts he controlled, $312,500. Always ready to turn a buck,

Secord and Hakim offered to lease the ship back to the CIA for a cool $200,000 a month, according to North's testimony and documents released during the hearings. But the Agency liked neither the price tag nor Clines's involvement and turned them down. North and his agents thus inherited a ship. He became its dispatcher and mission planner. In May, for example, he sent it (and Clines) to Cyprus on a scheme to ransom American hostages in Lebanon with $1 million put up by Texas billionaire H. Ross Perot (see City Paper, ). According to reports by a team of Los Angeles Times correspondents, the ship soon returned to its original mission: arming the contras. On July 10, 1986, the Erria loaded 158 tons of assault rifles and ammunition in Poland. The arms were supplied by the state munitions firm CENZIN. The Erria continued on its way to Portugal, where it picked up another 200 tons of land mines, grenades and machine guns. This time the supplier was Defex, a private munitions firm whose ads promise "swiftness, efficiency and service in navy, land and air forces.'' North's group turned naturally to Defex for supplies: The Portuguese press has reported that one of its executives is a friend of Clines. The ship then loitered about, returning twice to Portugal for repairs. Finally, instead of continuing on to Central America, it dumped its load that September in the French port of Cherbourg. So ended the Erria's last mission for the contras. In months to come, it would again journey to Cyprus to take part in its second, failed hostage-ransom attempt. In its last known mission for North, it ventured that October to Oman, where it waited for another cargo that never came, as part of a scheme to swap Israeli machine guns with Iran for two Soviet T-72 tanks. Last February, a Danish shipping broker won a court order and seized the Erria, claiming that Hakim still owed him $200,000 in unpaid operating expenses for its period of service to the National Security Council. But the arms the Erria unloaded that fall in Cherbourg did not rust on the docks. The 358 ton load was transferred to another Danish ship bound for Central America, the Iceland Saga. It never made the full journey, either. For reasons not yet clear, Hakim and Secord decided to deliver the war materiel not to the contras, but to the CIA and Pentagon. By October 1986, the administration was free from the Boland Amendment and could substitute "clean" arms in order to avoid exposure of North's illicit operation. The CIA bought the last shipment for $1.2 million after Poindexter asked North to pressure CIA director William Casey to "make things right for Secord.'' The Iceland Saga offloaded its cargo at Wilmington, North Carolina, the port through which the Pentagon imports its stocks of East-bloc arms. The shippers told Customs that the crates contained oil drilling equipment--the same cover story used to disguise Israel's arms shipment to Iran in November 1985. Manzer al-Kassar: The arms broker North's crew didn't just pick up the phone and call Portugal or Poland direct when they wanted a boatload of arms. They went through an experienced and trusted middleman: a Syrian arms dealer, drug trafficker and terrorist supplier named Manzer al-Kassar. Hakim paid him $500,000 for the final shipment, on top of a $1 million payment the previous year for similar cargo, according to a story first reported by Newsday's Knut Royce. Al-Kassar is, to say the least, a colorful character. A multi-millionaire in his 40s, he owns a palatial mansion in the resort of Marbella, Spain. In August 1986, before his role on behalf of the contras became public, Readers Digest reported that al-Kassar supplied arms and explosives ``for terrorist operations in France, Spain and Holland'' and sold ``silencer-equipped assassination pistols, rockets and other weapons'' to Libya, Iran, South Yemen and Lebanon. (His company, Alkastronic, had a $45 million arms contract with Iran in 1984-85.) According to the London Observer, British authorities want to question al-Kassar in connection with an English businessman convicted of manufacturing and selling timers ``for use in terrorist bombs.''

The ultimate irony is that al-Kassar's terrorist comrades included some of the leading targets of North's counterterror operations. Thus the Syrian reportedly supplies arms to Abu Abbas, head of the PLO faction that organized the Achille Lauro hijacking. (North's proudest moment was organizing the mid-air capture of the Egyptian plane carrying the hijackers, forcing them to land in Italy. North was bitterly disappointed when Italian authorities let Abbas flee; the respected Italian newspaper Corriere della Sera reports that Abbas left on al-Kassar's private plane.) And some US intelligence officials claim al-Kassar has ``clearly established'' business links with Abu Nidal, the terrorist mastermind whose alleged threats prompted North to install his notorious home security system at Secord's expense. Nidal planned the December 1985 airport massacres in Rome and Vienna, and the 1982 assassination attempt against Israel's ambassador to London that triggered Israel's invasion of Lebanon. Al-Kassar doesn't limit his business to arms. In 1977 he was sentenced in England to two-and-a-half years in prison for smuggling hashish. (His brother was convicted on drug charges in France in 1979.) According to Readers Digest, he ``has been connected to major deals involving up to 100 kilos (220 pounds) of heroin.'' Yet while fulminating against international terrorism and drug trafficking, the White House turned to alKassar for at least three shipments of arms to the contras in 1985 and 1986, including two carried by the Erria. A man of some scruples, he told the London Observer that his Vienna office arranged the sales without his knowledge. ``I wouldn't do business with the Americans,'' he said. ``I don't accept money from my enemies.'' He has only scorn for those who accuse him of arming terrorists. ``Maybe I've done business with people the Americans disapprove of. Who are they to talk? Aren't the contras terrorists?'' Merex, Mertins and Atwood: Taking delivery Al-Kassar's final load came via the Erria and the Iceland Saga to Wilmington. But the Pentagon didn't haul the full shipment off to its warehouses. According to the Los Angeles Times, [March 31 and May 9, Michael Wines and William Rempel], much of the ammunition was transferred to Merex Corp. in Savannah, Georgia. But a spokesperson for the Bureau of Alcohol, Tobacco and Firearms says no arms dealer of that name is registered in Georgia. A Pakistani named Arif Durrani operated a Merex, Inc. out of Newbury Park, California, until he was arrested and convicted this year of conspiring to ship Hawk missile parts to Iran in the summer of 1986. Durrani claimed to have arranged the deal on behalf of North and Secord, but a Connecticut jury didn't believe him. There is a Merex Corporation in Alexandria, Virginia, licensed by the federal government as a firearms dealer. But its employees claim no knowledge of the shipment and are reluctant to discuss anything having to do with arms. The Merex known to every international arms dealer is the West German firm Merex AG, founded by Gerhard Mertins. He served as a paratroop Major in World War II under the daring SS commando leader Otto Skorzeny, famed for such exploits as rescuing Mussolini from capture by the Allies and leading troops in American uniforms to create havoc behind Allied lines. After the war, Skorzeny escaped from a prisoner of war camp and made his way to Spain, where he oversaw the formation of such SS mutual-aid networks as Odessa and Die Spinne. According to biographer Glenn Infield, Skorzeny's ``name was linked with a series of mercenary and undercover operations rangking from illegal arms traffic to Africa and the Middle East to an assassination plot against Fidel Castro.'' In the early 1950s, Skorzeny and Mertins turned up as advisers to the Egyptian military. Both entered the international arms business, Skorzeny as an agent for Krupp, Mertins as the German representative for the famous expatriate American dealer Sam Cummings. In 1963, with Skorzeny's help, Mertins founded Merex. Fronting for German intelligence, it made undercover sales of surplus weapons to a wide variety of clients that Bonn could not sell arms to directly, including several Arab states. He sold jet fighters to Iran, Venezuela and Pakistan. In 1966, according to author George Thayer, Mertins purchased ``a large and handsome house in Bethesda, Maryland, and installed one Gerhard Bauch as his US agent.'' (Bauch had been arrested the year before by Egyptian police

on espionage charges, but was secretly released.) Based in Chevy Chase, this American branch was authorized by the State Department munitions office as late as 1975 to sell "ordnance and law enforcement equipment and materials. Two fugitive Nazi war criminals, Klaus Barbie and Friedrich Schwend, represented Merex in Latin America. They arranged deals with the governments of Bolivia, Chile, Paraguay and Peru. They also handled Merex business with Skorzeny, who made a fortune selling arms to the Middle East from his base in Spain. When West German intelligence shifted brokers in the late 1960s, Merex went into decline. The business was further damaged when the German government prosecuted Mertins (unsuccessfully) for tax evasion in the mid-1970s. Nonetheless, he still gets around. In the late 1970s, the Italian press reported that Merex guns were turning up in the hands of notorious neofascist terrorists in Europe. And in early 1985, a prominent Mexican newspaper columnist accused Mertins of dealing arms illegally in Mexico. Mertins was expelled from the country two months before the columnist was killed; Mexico's attorney general stated last May that he now entertains the ``hypothesis'' that Mertins could have had something to do with the murder. Whichever Merex had its base in Savannah shared a private address with Combat Military Ordnance Ltd. The latter firm's owner, the American arms dealer James Atwood, was the real recipient of the ammunition diverted from the final contra arms shipment of the Erria and the Iceland Saga, according to both Newsday and the Los Angeles Times. As a prominent international weapons dealer, manufacturer of replica Nazi daggers and self-proclaimed owner of ``probably the largest collection...in existence'' of German knives and swords, Atwood probably had friendly ties to the German Merex. (A former federal agent who knows Atwood says his German wife comes from ``a wealthy arms family, maybe related to the Krupps.'') A retired Army colonel in his mid-fifties, Atwood was a logical recipient for arms the Pentagon, CIA and National Security Council wanted to dispose of discreetly. For example, Atwood apparently had close business relations with the man who set up the arms shipment, Richard Secord. The Los Angeles Times reports that Atwood's longstanding ambition was to manufacture and sell a light submachine gun, the SM90, a model coincidentally favored by some drug smugglers. Secord and Hakim teamed up with several other investors to revive a bankrupt arms firm to produce the guns. According to documents and testimony before the Iran-contra committee, the consortium aimed to sell the guns to ``special police units,'' Saudi Arabia and the Gulf states, and the contras. One business assessment indicated that "At 2500 units per month in sales the overview of the financials are as follows: sales dlrs 45 million; expenses dlrs 23 million; profits dlrs 22 million. The venture is an exceedingly profitable one.'' But the project came too late; by November 1986 the Iran scandal was about to break on Secord and Hakim. The government's decision to trust Atwood with the munitions further strengthens his reputation for doing business with the intelligence community. A former federal agent says, "He's always been shadowy with the CIA. He likes people to think he's a CIA operative." Asked about such speculation, Atwood told one reporter in 1980 with a smile, ``I've been in government employ for many years.'' A former Marine, FBI agent and Army intelligence officer, Atwood has sold arms in Latin America and pursued various other, non-lethal business ventures in Guatemala, where he had oustanding military and political connections. Wilson and Terpil: Closing the circle Atwood plugs into a vast network of wheeler-dealers and intriguers. According to an FBI memo cited in a Lexington, Kentucky television report in 1981, one of his Guatemala ventures involved building a gambling casino. And among Atwood's partners in that project was Bradley Bryant, a mastermind of one of the largest drug-and-gun trafficking networks ever busted in the United States. Atwood knew Bryant well enough to rent his Savannah estate to him for a year. The two had a falling out when Bryant carted off Atwood's furniture. When Bryant and several associates were arrested on weapons charges in Philadelphia in 1981, according to one federal agent, "he had a map of Atwood's place, silenced weapons, scuba gear. I think they were planning to "hit' Atwood.''

Bryant told police after his arrest that he was involved in a top secret CIA project. But federal prosecutors soon indicted him in Fresno, California for conspiring to import and distribute tons of marijuana in the United States. (He was convicted and is serving a 15 year sentence.) According to the same 1981 indictment, Bryant also organized the theft of top-secret military devices from the China Lake Naval Weapons Center in California. One of his indicted co-conspirators testified that the group planned to exchange some of the equipment in Libya for a Russian radar, and to use other of the stolen goods in a plot to assassinate the Ayatollah Khomeini. One reporter who followed the Bryant case closely, Frank Geary of the late Philadelphia Bulletin, found evidence that Atwood and at least one key member of Bryant's drug circle shared a common associate in the arms trade: Frank Terpil. [Note to Jack: another connection, probably too much to get into, is with WerBell, a bosom buddy of Atwood's and a MAC-10 supplier to Terpil.] Terpil, a former CIA officer now believed to be living as a fugitive in Eastern Europe, was implicated with Ed Wilson--the friend of Secord and Clines-in the sale of explosives and weapons to Libya. With Wilson he recruited CIA-trained Cuban exiles to assassinate one of Gadhafy's enemies; Terpil also amassed a fortune selling weapons, torture devices and bugging equipment with Idi Amin's Uganda. And now to close the circle: Both Terpil and Wilson did business with Libya out of Albert Hakim's office in Switzerland in the mid-1970s. It was Wilson who introduced Hakim to Secord in Iran back then, when Hakim was bribing members of the shah's military to buy American arms and Secord was head of an Air Force military mission that oversaw all US arms sales to the regime. Anywhere you turn in this story, the same character types emerge: arms dealers, drug traffickers, terrorist suppliers, corrupt middlemen. As one State Department counterterrorism expert observes, ``It's a whole seamy side of international affairs. The scummy ones are all involved in drugs. They are all scumbags. But you can't go to the First Baptist Church if you want arms. It's a fraternity of these people. They are all close to drug dealers who want arms to protect their trade.'' The intelligence officials who make use of this network say they can't afford to be sentimental when it comes to national security. After reports of Manzer al-Kassar's deals with North's agents surfaced earlier this year in Newsday and the Los Angeles Times, a member of the Iran-contra committee, Rep. Jack Brooks, asked Adm. Poindexter how he defended the Syrian's role in Project Democracy. Poindexter's reply: ``When you're buying arms on the third world market--I haven't been in the business myself, but I understand that you often have to deal with people that you might not want to go to dinner with....It doesn't particularly surprise me.'' But the cost of purchasing the services of these private agents is protection for their crimes and the risk that the public will glimpse the hypocrisy of arresting some dealers in arms and drugs while bankrollling others. So it was when the public learned of arms-for-hostage deals with Iran. And so it may be when the public learns the full story of North's underground arms network.