San Marcos Firm Details Its Role in Intrigue

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, until president Jerold Kowalsky sensed something fishy in late summer of 1988.

That’s when the Iraqis placed a new order that requested capacitors built along specifications that suspiciously fit only one product: a nuclear bomb detonator, probably for a missile.

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.

He also knew that the export of those devices is illegal.

Kowalsky immediately notified U.S. Customs and the Central Intelligence Agency that a potentially illegal purchase of nuclear technology had been attempted. His calls set in motion an elaborate 18-month sting that ended Wednesday with the arrest of six alleged members of an Iraqi-sponsored smuggling ring as they purportedly tried to ship detonators to Iraq from a London airport.

An ex-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.

Kowalsky was thoroughly coached in his cloak-and-dagger role by U.S. Customs agents. And, although he downplayed the intrigue involved in the sting, he said the experience was comparable to the time several decades ago when, as a Navy lieutenant, his submarine closely skirted the coast of the Soviet Union on a reconnaissance mission.

Over the sting’s 18 months, Kowalsky met with the Iraqis in London in February 1989 and again last September. The second time, he was accompanied by Customs undercover agent Daniel Supnick who, wired for sound, posed as a CSI executive named Daniel Saunders.

Kowalsky acknowledged 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 sites where they met were filled with British undercover 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 less his fascination with intrigue than his strong opposition to nuclear proliferation, saying he would never permit his company to ship a nuclear weapon component to a foreign government or customer.

“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 that foreign countries building nuclear bombs is a major hazard.”

CSI makes a range of high-powered capacitors, devices that store and concentrate large amounts of electrical power. Only about 25% of CSI’s business is selling weapon detonators to defense contractors. Its capacitors are also used in commercial products such as heart defibrillators and lasers.

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 deal ended up being for $10,490, the indictment said.

According to the indictment, the negotiations and shipment of the capacitors involved a flurry of telexes, faxes and phone calls between Baghdad, London and San Marcos.

At a press conference Thursday in San Diego, Assistant U. S. Atty. Maria T. Arroyo-Tabin, who supervised the case, said 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.

Though 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 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 said. Later, the two men said they 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 for us.”

“I am an English company, but I am 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 executive, 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 said.

Another $2,625 was wire-transferred last Dec. 19, the indictment said. 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.

During that period, there were a number of discussions about visits to Iraq by CSI personnel and tests of the capacitors, the indictment said. Because of logistic, neither the visits nor the tests were ever carried out, it said.

Also during the same time frame, Daghir vacillated on the issue of where to ship the capacitors, the indictment said.

Last November, he wanted them delivered to a “contact,” never named, in the United States, the indictment said. In December, he acknowledged that exporting the capacitors from the U.S. to Iraq would be illegal but said that, because the order was “so small” it would not arouse concern, according to the court document.

On Jan. 10 of this year, Daghir said that Al-Qaqaa contacts were not available in the U.S. and that, if the capacitors were to be shipped to England, they would have to be mislabeled as “air conditioning equipment,” the indictment said.

Daghir also said in a phone call that day to Supnick that the capacitors would be left in England for Al-Qaqaa agents, who would then decide “what is the best way” to move them to Iraq, the indictment said.

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 said.

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 president Monson Hayes of Maxwell Laboratories, a San Diego company that also makes capacitors.

Hayes said that about 10% of Maxwell’s export deals involving high-powered capacitors end up being disallowed by Customs. “We usually are surprised because we request only (deals) that we believe (involve the sale) of old state-of-the-art products that are readily available from other suppliers in Europe,” he said.

Founded in 1969 by ex-Maxwell Laboratories employees, CSI has generated its share of headlines. In 1983, CSI employee Leslie Landersman, a 22-year-old newlywed, was abducted by a bank robber from the company’s plant--then located in Escondido--and killed in a shoot-out by an Escondido policeman.

In 1985, CSI was fined $30,000 after pleading guilty to illegal importation and selling of capacitors containing PCBs, or polychlorinated biphenyls, a toxic substance linked with cancer and birth defects.

The company has 35 employees at its 25,000-square-foot plant on Rancheros Boulevard in San Marcos.