Indictment Says Banned Materials Sold to Iran
Prosecutors in New York have charged a Chinese businessman and his company with a conspiracy relating to the sale of sensitive materials to Iran, covert transactions that prosecutors say violated United Nations bans aimed at restraining Tehran's rocket and nuclear ambitions.
According to an indictment unsealed in Manhattan on Tuesday, the Chinese company sold tungsten, high-strength steels and exotic metals to the Defense Industries Organization, an arm of the Iranian military, from 2006 to 2008, often using shell companies to hide the transactions. Both Defense Industries and the Chinese parent company, the Limmt Economic and Trade Company, are banned by the Treasury Department from doing business in the United States.
The materials have many uses in long-range missiles and nuclear arms, including making engine nozzles that can withstand fiery temperatures and centrifuges that can enrich uranium into atomic fuel. The materials can be used for weapons as well as civilian purposes.
Many of the raw materials are specifically banned by the United Nations for sale to Iran, and the Iranian recipient is a recognized leader of the military's efforts to make advanced arms. The diversity and quantity of the sales are seen as significant, involving thousands of tons of some of the world's most sensitive raw materials.
Iran's missile and nuclear programs are a central global worry. Tehran is speeding ahead to enrich uranium in defiance of the United Nations Security Council and recently launched a satellite in what analysts see as an important step toward a long-range missile that can hurl warheads.
President Obama is walking a middle path. He has struck a conciliatory tone toward Iran while asking the Russian president, Dmitri A. Medvedev, for help in halting Iran's efforts to unlock the atom and build long-range missiles.
The 118-count indictment charges the Chinese businessman, Li Fang Wei, a Limmt executive, and the company with conspiring to conceal its transactions and with entering false information on bank transactions that went through Manhattan. The Manhattan district attorney, Robert M. Morgenthau, announced the indictment at a news conference Tuesday.
All the false records involved sales between Limmt and customers not affiliated with the Iranian military. Those transactions were done with United States dollars.
The sales to Defense Industries are mentioned under the conspiracy charge. Although they were done in euros and did not involve United States banks, they were used in the indictment to illustrate Mr. Li's efforts to conceal his activities.
In a memo in September 2007, Mr. Li informed Defense Industries that he would refer to the company by the name Rwiot Steel Services in shipping paperwork. That was "not a real company name, but a false name," according to an excerpt of the memo provided by prosecutors. Mr. Li explained that he would use the fake name because he was "worried that the shipment might be blocked by U.S.A.," according to the excerpt.
Although the charges carry relatively light sentences - up to a year in jail for fifth-degree conspiracy and a maximum of four years for falsifying business records - Mr. Morgenthau said the main purpose of the indictment was to expose Iran's nuclear-proliferation efforts.
"What we're trying to do and what we are doing is to make every effort to prosecute the company, which is perhaps the largest supplier of weapons of mass destruction to the Iranian government," Mr. Morgenthau said at the news conference, "and also to let people know that the Iranians are deadly serious about acquiring materials for long-range missiles and for atom bombs.
"They're making every effort to do this through deceit. We want to have transparency in these dealings so that everybody understands what the Iranians are up to."
Defense Industries, according to its Iranian Web site, diomil.ir, is a state-owned organization and "one of the main affiliated subsidiaries" of the Defense Ministry, its duties including production for and supply of Iran's armed forces. It has repeatedly been the object of United Nations sanctions.
China has long supplied Iran with nuclear goods. It was a major atomic partner from 1985 to 1997, when intense pressure from the Clinton administration curtailed the relationship. Even so, the two countries did a lot of business.
In 2003, 2004 and 2005, the Bush administration announced sanctions against Chinese companies it accused of aiding Iran's missile and weapons programs.
As for Limmt and its subsidiaries, the State Department placed restrictions on the company in 2004 and 2005, and the Treasury did so in 2006, seeking to isolate it financially. Limmt is a private company with no ties to the Chinese government, Mr. Morgenthau said.
Limmt circumvented restrictions from 2006 to 2008 by operating through its front companies, according to the indictment.
In one instance, in February 2007, a Limmt subsidiary billed a Defense Industries shell company 89,000 euros, or about $115,700 (dollars in 2007), for 200 graphite cylinders, Mr. Morgenthau said. And in another case, Mr. Morgenthau said, in June 2008, Limmt used the letterhead of a front company to send a Defense Industries subsidiary an invoice for 1.4 million euros, or about $1.8 million, for 24,500 kilograms of high-strength maraging steel rods.
Mr. Morgenthau said his investigators relied on several weapons experts to assess what the companies were doing. One of those experts, Gary Milhollin, director of the Wisconsin Project on Nuclear Arms Control, a research organization in Washington, said the results of the investigation were a cause for concern.
"If exports of this magnitude are routinely going from China to Iran," Mr. Milhollin said in an interview, "then it's clear that the United States has failed in its efforts to curb this kind of proliferation."
No one answered the phone on Tuesday at the Chinese Embassy in Washington or the Chinese Consulate in New York, and the International Atomic Energy Agency in Vienna declined to comment.
The investigation resulting in Tuesday's announcement sprouted from a separate inquiry into the illegal channeling of Iranian money through United States banks. During the course of that investigation, some of the transactions between Defense Industries and Limmt came to light, Mr. Morgenthau said.
According to the indictment, Mr. Li used his shell companies to funnel money through several United States banks, including the Bank of New York Mellon Corporation, the Bank of America, JPMorgan Chase and the American Express Bank. No United States banks committed any wrongdoing, Mr. Morgenthau said, because they had no way of knowing about Limmt's involvement.
Prosecutors said they were still investigating two Chinese banks and several foreign banks for their possible roles in Mr. Li's scheme.
Mr. Li is at large in China, Mr. Morgenthau said, adding that he planned to meet with the Chinese Consulate to discuss the situation. Mr. Li and his company are based in Dalian, in Liaoning province in northeastern China.
"We know where he is," said Adam Kaufmann, an assistant district attorney who oversaw the investigation. "We will see what the impact of this indictment and announcement will be on his operations. One of the goals is to hopefully seek the assistance of the Chinese government in making sure he is shut down."
Mr. Kaufmann said Mr. Li also violated Chinese law by filing fraudulent shipping documents.
While Mr. Morgenthau was announcing the indictment on Tuesday, the Office of Foreign Asset Control, a division of the Treasury Department, was blacklisting eight of Limmt's aliases and six Iranian entities uncovered in the investigation. Blacklisted companies are not allowed to do business with United States entities, and any assets they have in the United States may be frozen.
This indictment was not the first time Mr. Morgenthau has stretched his jurisdiction across oceans. His office led a fraud investigation against the Bank of Credit and Commerce International that involved billions of dollars, and he once prosecuted a wealthy Venezuelan financier, along with his son and grandson, for defrauding Venezuelans of millions of dollars. He has chased money to locations like the Cayman Islands, Paraguay and Russia.