Father and Son Accused of Helping to Arm Hussein Regime

A father and son with California ties have been arrested for allegedly brokering an $11-million deal to supply six armored patrol boats to the government of Saddam Hussein last year, U.S. officials said Wednesday.

The charges against Sabri Yakou, 69, and his son, Regard, 43, both of whom list addresses in San Diego, are the first stemming from an investigation by U.S. immigration and customs agents into possible involvement by U.S. residents in helping to arm Hussein’s Iraqi regime.

Each man is charged with a single count of violating State Department regulations covering foreign arms trafficking. The charge carries a potential penalty of 10 years in prison and a $1-million fine

The elder Yakou, an Iraqi native and legal U.S. resident, was arrested at Washington’s Reagan National Airport on Tuesday as he returned to the United States from Bangkok, Thailand.

Regard Yakou, a naturalized U.S. citizen, who also lists a residence in Walnut Creek, Calif., was arrested Saturday in Baghdad and is being brought back to the United States to face the charge, officials said.

Sabri Yakou pleaded not guilty at a hearing Wednesday in U.S. District Court in Washington. He was released after surrendering his passport and agreeing to court-ordered electronic monitoring.

John Moustakas, a Washington lawyer representing Sabri Yakou, said he had not had a chance to discuss the case in depth with his client. But he added, “I feel very confident that we will get to the bottom of this, and we will get a good result.”

U.S. officials said the grand jury indictments heralded a new front in the war on terrorism.

“The illegal brokering of arms and weapons to our enemies is a serious and deadly business,” Christopher Wray, chief of the Justice Department’s criminal division said in a prepared statement.

Agents from the Department of Homeland Security’s Immigration and Customs Enforcement bureau have been in Iraq since March, poring over old Iraqi military records to find possible suppliers in the United States.

An additional 30 cases involving Iraqi attempts to acquire U.S. technology are under investigation, the immigration and customs bureau said.

Dean Boyd, a bureau spokesman, said the boats that the Yakous allegedly procured “could have been, and may have been, used against U.S. forces.” But a former business partner of Regard Yakou -- alleged to have been his father’s “chief deputy” in the arms deal -- said he was stunned by the charges.

“They appeared to be very honest and straightforward, the all-American, red, white and blue family,” said J.C. Sutton, who hired Regard Yakou to work at his Encinitas, Calif., trading firm in the late 1990s because of his foreign contacts.

The firm brokered deals involving motor oil and transmission fluid with the former Soviet republics, and it once explored the possibility of getting a license to provide humanitarian aid to Iraq in the late 1990s. The firm suspended operations in 2000, and Regard Yakou left to pursue other interests.

Sutton said Sabri Yakou, who told investigators that he has done business in Iraq since 1955, never worked for his company.

“They were all severely opposed to the Saddam Hussein regime,” Sutton recalled. “They were successful businessmen prior to the Gulf War. I am in shock.”

Sutton added that several months ago, he discussed with Regard the idea of reopening the firm to explore business opportunities arising from the rebuilding of Iraq.

“We are trying to bring the company out of mothballs,” Sutton said. “The timing [of the indictment] could not be worse.”

The Yakou case began in July with a tip from a translator working for the U.S. occupation authority in Iraq. The translator and a Marine colonel had been out to inspect three 85-foot patrol boats in Baghdad.

According to court documents, the translator said an official of the state-run company that had handled the procurement of the boats had volunteered that the company that built them was American.

Another Iraqi official tried to downplay the information, saying the patrol boats were Malaysian, the documents said. But the Iraqis ultimately gave U.S. investigators the name and Baghdad phone number of Sabri Yakou. The Marine colonel, identified as James Frawley, was pressed into the investigation, taking part in meetings with the accused and with Iraqi officials.

U.S. agents and Frawley met with Sabri Yakou several times, and he showed them documents pertaining to the patrol boat deal, according to the indictment. Contract specifications called for “high-speed, collision-resistant craft for patrol and intervention in both coastal waters and the open sea,” and armaments including machine guns and heavier deck guns, according to court documents.

During a meeting Aug. 9, which was recorded, Sabri and Regard Yakou “clearly implicated themselves and demonstrated knowledge of the Iraqi embargo against trading with Iraq,” the indictment said.

Sabri Yakou told investigators that his firm, P.T. Gulf International, was to be paid about $11 million for overseeing the deal, which involved obtaining raw materials from Malaysia, electronics from Singapore and engines from Germany.

Three of the boats were completed and sent to Basra, according to the indictment, while the other three were awaiting completion in Baghdad when war broke out. Sabri Yakou told investigators that Hussein’s government owed him $3 million at the time of its collapse.

How much money the alleged deal netted the defendants was unclear.

The indictment cited an unidentified Iraqi government source who said that Sabri Yakou received a commission for doing the work. It also alleged that he charged the Iraqis “a million dollars for parts that are believed to have cost approximately $100,000.” Iraq was willing to absorb the cost, the indictment asserted, “to get around the embargo.”

According to the government, Sabri Yakou holds a British passport but has been a green-card holder and U.S. resident for 23 years. Both father and son list a business address in Danville, Calif.

Although Sutton said his company never did business in Iraq, both Yakous were listed on the Web site of his now-dormant firm, Intermarket Trading Co., as Baghdad representatives.

Sabri Yakou was described as “very well-known in the private business as well as the government sectors ... in Iraq.” He holds a doctorate in international business and has owned and managed companies in Europe, the Middle East and the U.S., the biographical note said.

Regard Yakou was described as a civil engineer with a PhD and experience in construction, design and management around the world. Regard Yakou “has acquired a lot of experience in oil field equipment and spare parts,” the company site said.