Weapons Bazaar
This Cobra attack helicopter was built from surplus parts. The Pentagon sells millions of them a year. Many fall into the wrong hands.
In one case, records show, 28 boxes of tank and howitzer parts, valued at $800,000, were found buried inside a container beneath automotive parts. In another, bound for Shanghai, agents found 37 separate inertial guidance devices for the F-117A Stealth fighter and F-111 bomber. New, the devices had cost the government $21,759,400. The two Pentagon employees who were identified as responsible said they could not explain how the devices had been sold intact.
Of the many countries pursuing Pentagon surplus weapons, China is clearly running hardest. "China is the most aggressive country worldwide in the acquisition of military hardware," says customs agent Hensley. "Anything that seems to us to be mid-tech, or slightly out of date, is high tech to them. They can leapfrog R&D costs. They either reverse-engineer this stuff, or if they get enough, they just use them."
Operations. Customs agents are now convinced that a Chinese surplus-smuggling operation began as many as 15 years ago, when a flood of Chinese men and women entered the United States, established themselves as residents and then set up shop. Operating with little more than a fax machine and a bank account, they apparently form the lowest tier of the Chinese espionage network, agents say.
The buyers hunt surplus sales outlets for military electronic parts. When they find what they want, they bid high enough to be sure they get it. Bids of $50,000 or $100,000 for scrap are not unusual. Sometimes they buy huge piles of scrap knowing that valuable pieces of electronics equipment are included, or they share purchases with legitimate scrap dealers. One dealer with Chinese affiliations, says investigator Barrington, "was the high bidder on every piece of scrap electronic equipment on the East Coast."
In a year and a half of intense investigation of these buyers, the Customs Service has never found a smoking gun--a written shopping list from overseas, or anything that could link particular Chinese scrap buyers to Beijing or its defense agencies. "I think the reason for that, besides good intelligence tradecraft, is that they don't need to communicate directly," says a customs agent. "These people have been doing this for 15 years. They know exactly what their country wants."
Last March, after 16 months of dogging leads, the Customs Service abandoned Operation Overrun. The agency had run out of time and money; the investigation had not been a spectacular success. Besides the $157 million in seizures, only two criminal cases had been brought. A man named Richard Li had been intercepted smuggling sensitive electronic gear to Hong Kong and pleaded guilty to smuggling. A second man is currently under arrest, and his partner is on the run. Customs Agent Hensley says the investigation clearly put pressure on the network of Chinese traffickers. But he also is certain that once the pressure is off, the smugglers will resume their operations. "We definitely think they'll spring up again," he says. "The Chinese can get up to speed to buy the stuff again, and the U.S. is the biggest warehouse in the world."
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