Gun dealer Karl Kleber, a German national who had been living in Portugal, pleaded guilty Wednesday in a U.S. district courtroom, admitting to violating federal arms laws in a scheme to import banned Chinese assault rifle parts. On Thursday, a second suspect, British arms dealer Gary Hyde, pleaded innocent to the charges, nearly two weeks after he, Kleber and a third suspect were each indicted on two arms trafficking counts.
Kleber agreed to provide information to prosecutors and testify. His cooperation, along with tapes investigators culled out of more than 21,000 conversations from his wiretapped phones in Germany, threatens to expose the inner workings of a group of companies whose collaboration in gray-area weapons deals around the world has long frustrated authorities and arms trade experts.
Kleber appeared before U.S. District Judge Charles Siragusa in an orange prison jumpsuit with his hands manacled. Asked by Siragusa whether he would be willing to point a finger at the other suspects, Kleber said, "I'm prepared to do that." When the judge pressed him on why he committed the crimes, Kleber replied, "Money."
The investigation stretches from China to Portugal and involves authorities in Britain, Germany and other countries, but prosecuting the case in the U.S. signals that tough American arms-trafficking laws provide the strongest venue to pursue illicit weapons charges. Arms traffickers often skirt detection by operating in countries that have weak oversight and laws regulating weapons transactions.
"These guys have been under the radar for years in the Balkans, Eastern Europe and other places that are major sources of guns that destabilize nations and prop up dictators," said Hugh Griffiths, an arms trafficking expert with the Stockholm International Peace Institute. "But to go after them legally, you need strong laws and enforcement, and the U.S. remains the best place to find that."
Kleber pleaded guilty to one count of aiding in a scheme to disguise the banned Chinese assault rifle parts as Bulgarian-made. Prosecutors said he faces up to five years in prison. Hyde, 41, of York, England, posted $50,000 cash bond Thursday, a condition allowing him to be released locally on electronic monitoring. Paul Restorick, 61, of Kent, England, is not yet in U.S. custody. Hyde and Restorick each face a maximum penalty of 20 years in prison and a $250,000 fine.
Authorities are rarely able to counter a questionable arms deal on the front end, but arms trade experts cited a recent WikiLeaks release of a 2008 U.S. diplomatic cable that showed the British government blocking a major arms sale to Libya by a company owned by Hyde. York Guns, where Hyde is managing director, tried in October 2008 to persuade British authorities to license the company to ship 130,000 Ukranian-built Kalashnikov rifles to Libya.
The sale was blocked, according to U.S. diplomats in Tripoli, because British officials feared the guns might wind up with hostile governments or armed rebels inside neighboring Chad or Sudan. "It shows you how clueless some of these dealers are," said Oliver Sprague, Amnesty International's London-based Arms Program director.
York Guns was not cited in the U.S. indictment against Hyde in New York. "Although Gary Hyde is managing director of York Guns Ltd., no allegations have been directed towards York Guns Ltd. and no inquiries have been made of the company by the U.S. authorities," the company said in a statement from Karen Boldison, Hyde's assistant.
Instead, the U.S. case against the three men revolves around two other British companies that allegedly conspired in the August 2008 importing of a shipment of 5,000 Chinese AK-47 assault rifle drum magazines that were disguised as Bulgarian-made.
According to a plea agreement between Kleber and prosecutors in the western district of New York, the AK-47 parts shipment originally had been intended to be sold in 2007 for a "subcontractor in connection with a United States Department of Defense contract to supply military goods for delivery and use in Iraq."
According to Kleber's plea agreement, Restorick, who headed British-based Mil Tec Marketing, approached Kleber and Hyde, who shared in ownership of a British-based company called Jago Ltd., in February 2007 to supply 5,000 AK-47 drum magazines as part of an Iraq weapons contract. Their deal was initially with Florida-based General Defense Corp., a subcontractor providing weapons and other munitions to Iraq.
Kleber and Hyde then arranged with a Chinese weapons manufacturer to supply the parts, disguising them as Bulgarian-made to slip past a U.S. ban on importing Chinese weapons.
The routing of tons of AK-47s by American defense contractors to government forces in Iraq was cause for alarm in the late 2000s when arms trafficking experts and U.S. government investigators warned that thousands of guns in the massive shipments were not being properly documented and could be going missing.
Slipshod monitoring and record-keeping by U.S. defense officials led the government investigators and other critics to warn that thousands of weapons had been unaccounted for, prompting worries that some shipments were being diverted to insurgent militias and other warring factions.
A July 2007 General Accounting Office investigation revealed that some 190,000 rifles and handguns shipped to Iraqi forces in the mid-2000s could not be documented. An independent investigation a year earlier by Amnesty International also had raised questions about the possibility of thousands of missing guns.
The Amnesty report cited York Guns as among a shadowy group of weapons dealers involved in a byzantine transaction of hundreds of thousands of weapons that was clouded by shell companies and poor record-keeping, making it difficult to determine who provided the weapons, who shipped them and where they ultimately ended up.
"We could never nail down that the missing weapons went to insurgents, but some likely went astray because it appeared to us nobody was checking and monitoring them properly," Sprague said.
But in the case of the Chinese AK-47 parts that originally were ordered as part of the Iraq contract, federal authorities were able to trace where they went - to a warehouse in Rochester.
An affidavit filed with the case shows that the trio apparently was unable to fulfill its side of an $800,000 Iraq weapons contract with General Defense Corp., leading to a breach-of-contract lawsuit against Restorick's company that later was settled out of court.
The suspects then cut a deal, the documents show, with American Tactical Imports, a company based near Rochester, to sell the AK-47 parts. The assault rifle parts were delivered to the Rochester company in September 2008, but federal investigators began hearing reports from other gun industry import figures that the drum magazines were prohibited items from China.
U.S. prosecutors first filed a complaint against Kleber seven months ago, arresting him when he flew to Newark, N.J., on Jan. 12. He began cooperating then, according to documents, leading to the indictments on Jan. 28.
Hyde's Washington lawyer, Peter Zeidenberg, called the U.S. case "weak" in a motion filed late Wednesday and said "there's a disconnect between what they say happened and what Hyde did." Zeidenberg asked at a Thursday hearing for Hyde to be allowed to return under supervision to Britain until his trial. The judge said he would rule on the request next week.
Federal prosecutors indicated in a hearing last week that in addition to the U.S. charges, Hyde faces criminal allegations in England stemming from a separate transaction involving 40,000 AK-47s.
Braun reported from Washington.