Two brothers who operate a local military equipment export firm were indicted by a Los Angeles federal grand jury Wednesday for allegedly violating the U.S. Trading With the Enemy Act by agreeing to sell more than 100 Hughes helicopters to North Korea.
Eighty-seven of the helicopters and their spare parts actually reached North Korea between the spring of 1983 and January, 1985, U.S. Atty. Robert C. Bonner said, but the final 15 were prevented from leaving Los Angeles when federal investigators learned of the alleged scheme.
Indicted on 27 counts, which also includes conspiracy, illegal exportation and filing false income tax returns, were Ronald H. Semler, 43, of Malibu and Monte Barry Semler, 37, of Santa Barbara, who operate Associated Industries in North Hollywood. They allegedly transferred the helicopters as "machinery" to the unfriendly Asian country through a West German firm that they secretly controlled.
According to Bonner, the Semlers entered into a contract with the North Koreans worth more than $40 million and stood to make a profit of up to $10 million.
Involved were Hughes Model 500D and 500E helicopters, as well as one Model 300C, which was one of two "demonstrators" allegedly sold to the North Koreans initially. Bonner said they are civilian versions capable of being converted for military use. A spokesman for McDonnell Douglas, which took over the Hughes Helicopter business, said all three models are relatively small.
The U.S. attorney's office said there was nothing to indicate that Hughes ever knew that Delta Avia Fluggerate GmbH Sales & Services, the West German distributorship allegedly controlled by the Semlers, was actually selling the aircraft to North Korea.
Asked why the businessmen were being indicted when the Reagan Administration appears to have done more or less the same thing in Iran, Bonner noted that in the sale of the helicopters to North Korea "as alleged in the indictment, it was not approved by the President of the United States."
Also, he pointed out, "that other matter (the Iran- contra affair) is under investigation by an independent counsel."
In 1950, then-President Harry S. Truman added North Korea to the Trading With the Enemy Act, under which trade to designated nations is regulated by the secretaries of commerce and the treasury.
Attorney Vincent J. Marella said Wednesday that his clients, the Semlers, "have been fully cooperative" during the two-year investigation by the U.S. attorney's office, the Department of Commerce and the Internal Revenue Service.
He said it was "unfortunate" that the U.S. attorney sought criminal charges and that the grand jury decided to issue them. Both Semlers are long-time Southern California residents and Associated Industries has been in business for 40 years, he said.
"We feel quite confident that the Semlers will be vindicated and found not guilty of all charges when all the facts are brought forth," he added.
The defendants are expected to surrender within a day or two.
Assistant U.S. Atty. Jeffrey Modisett, deputy chief of the government fraud unit, said the Semlers created and secretly controlled the West German firm of Delta Avia, one-third owned by Kurt E. Behrens of West Germany. Delta Avia became the Western Europe distributor for Hughes Helicopters Inc.
Delta Avia sold the first two helicopters to North Korea "for demonstration purposes," according to the U.S. attorney's office, then entered into an agreement to sell 100 more for nearly $400,000 apiece, as well as several million dollars worth of tools and parts.
In April, 1984, the indictment said, two Delta Avia employees went to Pyongyang, North Korea, to assemble the two demonstrators and train North Korean mechanics and pilots.
Seven other shipments of helicopters and spare parts were made from Los Angeles-Long Beach harbors to Rotterdam in the Netherlands, supposedly destined for Nigeria, the grand jury was told. But the crated aircraft allegedly were transshipped as machinery to Hong Kong and then were carried on Soviet merchant ships to North Korea.
If convicted, the Semlers could face up to 10 years imprisonment and fines up to $100,000 for each violation.