Supply System Easily Penetrated : Theft of Navy Parts: Tale With a Disturbing Moral

For Pedro Quito, a partly deaf, 60-year-old retired sailor who worked as a civilian in the Fleet Avionics Logistics Support Center at San Diego’s North Island Naval Air Station, it began when he stopped by a travel agency in the Filipino business area of National City to buy round-trip tickets to the Philippines for himself and his wife.

The travel agent, Julie Francia, introduced him to her fiance, an insurance salesman named Frank Agustin, whom she later married. In the months that followed, Agustin began taking Quito to lunch and out for dinner. He sold Quito some car insurance, and he also tried to interest him in one of the hard-working Agustin’s sidelines--government surplus airplane parts.

Hardly the fodder for spy thrillers. But out of this casual relationship, federal officials now allege, grew a conspiracy to steal parts for some the nation’s most sophisticated jet fighters, missiles and other equipment--for clandestine delivery to Iran.

The group assembled by Agustin, including Quito and at least two others, had access to Navy inventory computers and parts intended for at least four Navy ships and two supply centers, court documents say, and before their arrest in July, equipment worth millions of dollars was stolen.

The story of how they allegedly exploited weaknesses in the military supply system to feed vital spare parts to Ayatollah Ruhollah Khomeini’s forces in defiance of a U.S. embargo is a tale with a disturbing moral: Far from requiring highly skilled agents or elaborate espionage techniques, a foreign power apparently penetrated this country’s surprisingly porous military supply system with startlingly simple and unsophisticated methods.

Indeed, with the United States counting on advanced technology to give it a vital edge in national security and Administration officials from President Reagan on down warning against letting this country’s defense technology fall into unfriendly hands, the potential magnitude of the loss in such a case stands in stark contrast with the mundane, almost trivial methods used.

In the words of Peter K. Nunez, the U.S. attorney in San Diego whose staff is now prosecuting the case: “If these guys could do what they did, what is to prevent someone else from doing it?”

‘Not KGB Agents’

“This is not James Bond. These are not KGB agents stealing defense secrets. These are little people motivated by dollars who I don’t think care about where the parts are going. If the Ayotollah had said we needed galvanized garbage pails they would have stolen that,” Nunez said.

Arrested in the case were Agustin, who moved into San Diego’s close-knit Filipino-American community from Canada in 1979; his wife, Julie, a longtime socially active member of the Filipino community; Frank’s brother Edgardo from New York; Quito, and two sailors, Primitivo Cayabyab and Antonio Gatdula Rodriguez. A seventh man living in London, an Iranian national named Saeid Asefi Inanlou, was taken into custody by British agents.

All seven persons were charged on at least 61 counts each of conspiring to steal, transport and illegally export U.S. military aircraft parts. Each has pleaded not guilty in federal court, except for Inanlou, who has not been served with the U.S. charges in Britain. He is free on $150,000 bail after being charged with violating British export laws.

Lonn E. Berney of New York, who is representing the Agustin brothers, said that at most the government’s case is about two men engaged in an import-export business who were “mistaken” about what they were permitted to send out of the country.

‘Two Legitimate Guys’

“You’ve got two legitimate guys who in the worst scenario, the worst, they were a little careless and mistaken . . . that some of the things, that maybe some of these things shouldn’t be shipped,” Berney said.

But recently released court records show that investigators believe Agustin may have headed a ring that included as many as 20 persons, many of whom were in the Navy. Prosecutors say their investigation is continuing.

In the view of federal officials, the unswerving loyalty and allegiance to family and close friends that exists in many parts of the Filipino community--a quality known as pakikisama --played an important role in the case. It enabled Agustin, working through his wife’s long-established ties in the community, to develop the kind of relationships with people like Quito and Cayabyab in which he could make unusual demands.

Successful and Generous

The Agustins were known as one of the Filipino community’s more successful and generous professional couples. She ran a well-known travel business, and he sold insurance. He had married Julie in 1982 after a brief courtship, making him a relative newcomer. But Julie had lived in San Diego since 1959, and had helped found the Pampangueno Assn., a social group for Filipinos from the province of Pampango outside Manila. They were regular guests at dinners, picnics, awards banquets and other important social functions.

Meanwhile, Agustin’s brother Edgardo had settled as a naturalized citizen in New York and had become acquainted with Inanlou. Inanlou ran a business in London which, among other things, shipped fighter aircraft ejector seats to his homeland during 1980, after Khomeini seized power, court documents say.

According to a government affidavit, Inanlou persuaded Edgardo to form a New York corporation called Merit Communications Inc. By 1982, the new company had sold Inanlou $1.5 million in quasi-military equipment and supplies, such items as maps of Iran-Iraq airspace, radar tubes and radio equipment.

‘Brother’s Representative’

The business came to include Frank Agustin in San Diego.

“According to him (Frank), he worked for his brother, as his brother’s representative,” Julie Agustin said in the recent interview in the Metropolitan Correctional Center here. “He (Frank) just told me he (Frank) has some shops he goes to, like he buys surplus. That’s all I know.”

According to a source close to the case who refused to be identified, when Quito stopped in to visit Julie’s travel agency after returning from his 1982 visit with relatives in the Philippines, he found Agustin engrossed in a catalogue published by Grumman Corp., the company that builds the F-14 Tomcat fighter.

“Listen, can you get me the price list and let me know when there will be some bidding for parts, aircraft parts?” Agustin said, according to the source. Quito refused the offer, though it was legitimate because it pertained to selling equipment to the Navy through public bidding.

Agustin Undeterred

Undeterred, Agustin pursued the relationship with Quito, the source said. At some point, authorities believe, their relationship extended into illegal trafficking in military parts.

Exactly when the ring allegedly began to take equipment from the Navy supply system is still unknown to federal agents, but the first shipment they have traced was in February, 1983. It was a 37-pound carton labeled: “Automotive Parts (starter).” Investigators believe it contained Navy parts prohibited from export.

The February, 1983, shipment was the first in a stream that averaged about one a month, documents say. As the alleged ring expanded its operations, the shipments stepped up in frequency to an average of once every two weeks around October, 1984, agents say.

In October, 1983, Agustin met Cayabyab, the Navy storekeeper assigned to the Kitty Hawk.

An Unglamorous Request

Cayabyab came to Agustin’s office looking for car insurance. According to FBI reports released to defense attorneys, Cayabyab said Agustin asked him to provide “old scrap parts lying around” that were “destined for disposal,” an unglamorous request Cayabyab complied with by returning with an old T-bracket and “two empty steel drums.”

Eventually, it is charged, Cayabyab turned over more valuable items. When he was arrested in July, Cayabyab told FBI agents that “he had stolen F-14 parts for Frank Agustin,” FBI reports say.

How long the ring might have gone undetected is anybody’s guess. It was not Navy vigilance that sounded the alarm. Instead, early in 1983, federal investigators received two anonymous letters that tipped them to a possible conspiracy.

The Customs Service subsequently launched an investigation.

Agents Take a Peek

Federal agents took their first peek into one of the ring’s shipments in December, 1984, when a Customs official opened two cartons marked “auto parts.” Inside, he found a $77,320 gimbal assembly--an F-14 navigational device--and a $64,600 F-14 gas turbine fuel control.

A month later, agents intercepted another shipment and found more sophisticated F-14 equipment, including two parametric amplifiers for the Phoenix missile worth $23,500 each--both known to have been stored at the North Island Air Station.

Just how these parts found their way from Navy shelves into the boxes marked “auto parts” points out the vulnerability of the military supply system, a source close to the case said. One source close to the investigation said that Agustin had been able to recruit some people who had access to Navy computers that could change records to show a certain F-14 part had been received by, say, an aircraft carrier.

Meanwhile, the parts actually were sitting in a land-based warehouse, where it was a simple matter for Navy employees to put them in their car trunks and drive off base at the end of the day as guards waved them through the gate, the source said.

Car Searches Rare

The military system is predicated on trust. Searches of cars driving off-base are rare if the vehicles have permits, which means that the supply system can be breached easily, said Phillip Halpern, an assistant U.S. attorney prosecuting the case.

“If a person is in a position of trust, it’s very difficult to control access to parts if that position of trust is abused,” he said. “It’s one thing keeping your parts safe from outsiders. It’s another thing when the outsiders are using military personnel for obtaining parts.”

For the Agustins and other members of the alleged ring, the theft and smuggling of parts was handled in an almost routine way, according to court documents. Agents watched as Frank once drove to a swap meet in the parking lot of San Diego’s Jack Murphy Stadium, talked to a man and allegedly walked away with photographic negatives of a military aircraft.

They followed Julie Agustin as she took boxes filled with stolen military equipment from the couple’s rented storage locker and delivered them to a Federal Express office in San Diego for shipment.

Agustin and Inanlou, the ring’s supposed contact with Iran, called each other more than 130 times from the beginning of 1983, court records show.

When agents began to listen in through wiretaps in April of this year, they heard Inanlou ask Agustin about the “video 14,” which investigators understood to be a code for a camera for the F-14. Then, the Iranian dictated a short shopping list to Agustin that included a Teledyne engine, radar receivers and pneumatic tires.

Over the next few months, investigators heard the two men talk about merchandise damaged in the shipments and the transfer of money, including a reference that the agents believe revealed a $10,000 payment from Inanlou to Agustin for the delivery of equipment.

As the government’s investigation kicked into full gear, Frank’s financial and social fortunes appeared to be improving. He was now the business manager of the Pampangueno Assn., the social organization Julie had founded.

After the first of the year, the couple moved from their offices in an old house on Roosevelt Street in National City to a nicer, glass-front office nearby. Frank began driving a gold Mercedes Benz, complete with mobile phone, which state records show was registered to him on April 8, 1985.

$196,000 Payment

Prosecutors say they believe Frank, Julie and Edgardo Agustin made “hundreds of thousands of dollars.” As proof, they say the Iranian Air Force paid $196,000 for one of the shipments that originated in San Diego.

Court records show that Agustin paid $2,000 to sailor Rodriguez as early as January, 1983. On May 15 of this year agents opened a shipment from Agustin’s fictitious company and discovered 16 F-14 torque actuator rings. Prosecutors say they are the same ones ordered by Rodriguez on a Navy supply computer.

This spring, members of the alleged ring may have sensed trouble. On May 20, only two months before they were arrested, Cayabyab called Agustin to say: “I was worried about you. . . . I thought they got you,” according to transcripts of the wiretapped conversations.

After federal agents arrested Frank, but before they apprehended Julie, the Agustins continued to talk on the telephone about their alleged smuggling activities. On July 14, Agustin called his wife from the federal jail and the government listened in:

“I’m afraid because, you know, they might get me too,” Julie said, according to transcripts of the conversation.

“What now?” Agustin asked.

“I don’t know, love,” Julie responded. “My heart is pounding. I don’t know.”

Times Staff Writers Gaylord Shaw in Washington and Glenn F. Bunting and H.G. Reza in San Diego contributed to this story.