Fishy Order From Iraq Put Sting in Operation : Smuggling: The electronics firm chief knew the devices had but one use: triggering a bomb.

CSI Technologies of San Marcos had been selling its highly specialized voltage capacitors to the Iraqi government for years, mainly for use in radar and radio transmitters, when company President Jerold Kowalsky sensed something fishy in late summer of 1988.

The Iraqis had placed a new order for capacitors, devices that store and concentrate large amounts of electrical power. But now they wanted the devices built along specifications that fit only one product: a nuclear bomb detonator, probably for a missile warhead.

Kowalsky had every reason to know. CSI had been selling nuclear warhead detonators to the U.S. defense industry since the company was formed in 1969. And he knew that the export of those devices is illegal.

Kowalsky immediately notified U.S. Customs and the CIA that a potentially illegal purchase of nuclear technology had been attempted. His phone calls set in motion an elaborate 18-month sting operation that ended Wednesday with the arrest of six members of an Iraqi-sponsored smuggling ring as they tried to ship 40 of the detonators to Iraq from London’s Heathrow Airport.

An ex-Navy submarine officer and U.S. Naval Academy graduate, Kowalsky, 57, was persuaded by U.S. investigators “to play along with” the Iraqis and to assume a central part in the sting.

He was thoroughly coached in his cloak-and-dagger role by U.S. Customs agents. And although he played down the element of intrigue in an interview Thursday, he said that the experience was comparable to the time several decades ago when a submarine on which he was serving as a Navy officer closely skirted the coast of the Soviet Union on a reconnaissance mission.

During the sting’s operation, Kowalsky met with the would-be Iraqi buyers twice, in London in February, 1989, and again last September. The second time, he was accompanied by Customs undercover agent Daniel Supnick, who was wired for sound and posed as a CSI executive named Daniel Saunders.

Kowalsky admitted to feeling like a character in a James Bond spy novel but said the meetings generally were businesslike. He never felt physically threatened because the London meeting sites were well covered by British intelligence agents.

“It didn’t really bother me because the bulk (of his role in the sting) was what I did in everyday work, so I wasn’t out of character,” Kowalsky said.

He said his motive for participating in the sting was his strong opposition to nuclear proliferation. He would never permit his company to ship a nuclear weapon component to a foreign government or customer, he said.

“I don’t read spy novels. . . . I’ve never been an actor,” Kowalsky said. “With the Cold War winding down, I regard nuclear proliferation as a major threat to world peace and (believe) that foreign countries building nuclear bombs is a major hazard.”

CSI makes a range of high-powered capacitors. Only about 25% of its business comes from selling weapon detonators to defense contractors. Its capacitors are also used in commercial products such as heart defibrillators and lasers.

U.S. Customs generally regards high-powered voltage capacitors as a sensitive area of technology and often prohibits their export because of their potential use in a variety of weapons and communications systems, said Monson Hayes, president of Maxwell Laboratories, a San Diego company that also makes the devices.

An indictment unsealed Thursday in federal court in San Diego describes, in lengthy detail, how CSI came to fill order number 1K/20/3, a contract for 85 military electrical capacitors, 40 of which were for nuclear warheads. The entire contract was for $10,490, the indictment said.

According to the indictment, the negotiations and shipment of the capacitors involved a flurry of telex and fax communications and telephone calls between Baghdad, London and San Marcos, which is about 35 miles north of downtown San Diego.

At a press conference Thursday in San Diego, Assistant U.S. Atty. Maria T. Arroyo-Tabin, the prosecutor supervising the case, said that all San Diego activity connected to the case occurred at CSI’s San Marcos offices. There were no clandestine meetings between Supnick and any of the five indicted individual co-conspirators in San Diego, she said.

Although bargaining began in September, 1988, it wasn’t until last Sept. 11 that the deal’s specifications and price were agreed upon, after a meeting of officials from CSI, an Iraqi agency and the British go-between at the Cavendish Hotel in central London, according to the indictment.

Among those at that meeting were two agents of Al Qaqaa State Establishment, described in the indictment as a division of the Iraqi Ministry of Industry and Military Industrialization.

Asked why they needed nuclear warhead capacitors, the two agents initially said they were for “laser applications,” the indictment states. Later, the two men said the devices were for “aerospace” use.

Ali Ashour Daghir, an Iraqi, the managing director of the British middleman, Euromac (London) Ltd., also was at that meeting. According to the indictment, he told Supnick that his company sought no commission on the deal, not even “a single dollar.”

“I am an English company, but I am an Iraqi. . . . If I profit my country, it is for me a profit,” Daghir said.

At the meeting, Supnick told Daghir that an American export license would be needed but probably would not be available for a shipment to Iraq. Jeanine Speckman, a French citizen living in England who was Euromac’s export director, suggested mislabeling the shipping carton so that it “wouldn’t create any problems,” according to the indictment.

The next day, Speckman suggested to Supnick that the capacitors be mislabeled on the packing carton as “computer room air-conditioning units,” according to the indictment.

The contract was confirmed on Sept. 14. A week later, Euromac transferred $2,625, a down-payment, from an unnamed bank in England to CSI’s account at a Bank of America branch in Escondido, the indictment states.

Another $2,625 was transferred by wire last Dec. 19, the indictment says. On Jan. 11, 1990, the balance, $5,240, followed.

During last November and December, while CSI built the capacitors, a second order--for high-speed switches called krytrons that are essential to the detonation of a nuclear bomb--was discussed. That order never went through, Kenneth W. Ingleby, the special agent in charge of Customs’ San Diego office, said Thursday.

On March 19, the capacitors were shipped out of San Diego, according to the indictment. They were labeled “electrical components for air conditioning equipment,” it says. Flown from Los Angeles to Heathrow on a TWA jet, they were stored there in a cargo hangar until Wednesday when police and Customs agents seized them as they were being loaded onto a plane destined for Baghdad.