Iranian Businessman Charged in Weapons Scheme

 A Rolls-Royce helicopter engine, similar to those Khoshnevisrad allegedly
attempted to smuggle into Iran. Photo © Rolls-Royce plc 2009

SOURCE DOCUMENTS:

• Download the affidavit filed by a Department of Commerce special agent and the resulting criminal complaint.

A Tehran businessman who allegedly helped run a major weapons-smuggling ring for Iran was charged yesterday with multiple export-related crimes, two days after he was arrested in San Francisco after stepping off a flight from Europe.

Hossein Ali Khoshnevisrad, 55, was described by U.S. officials as a key figure in Iran's vast network of businesses and front companies seeking Western technology for weapons ranging from ballistic missiles to improvised explosive devices. Documents and officials from the Justice and Commerce departments linked Khoshnevisrad's firm to a scheme to acquire millions of dollars worth of parts for military helicopters and jet fighters, using Malaysian and European companies as middlemen.

At least some of the parts were intended for an Iranian company that the State Department has linked to Iran's nuclear and ballistic missiles program, according to documents first obtained by the nonprofit Center for Investigative Reporting. The case was the latest in a series of attempts by the U.S. government to crack down on illicit procurement networks that feed Tehran's pursuit of high-tech weapons systems.

The arrest of Khoshnevisrad was an unexpected bonus in those efforts, U.S. officials said. After tracking the businessman and his import company, Ariasa, for months, investigators with U.S. Customs and Border Protection discovered that the entrepreneur was traveling from Iran to the United States for what was believed to be his first visit to this country.

A party of federal officers was waiting for him early Saturday as he arrived at San Francisco International Airport with his wife and teenage son after a stopover flight from Europe. Khoshnevisrad was confronted in the airport's customs area and detained without incident.

"It is rare that a guy of his stature in the procurement business comes to the United States," said a law enforcement official familiar with the case. The official, speaking on the condition of anonymity because of the ongoing probe, said the case "demonstrates the scope and reach of these procurement networks, and their global efforts to insulate themselves using trading companies around the world."

Ariasa, the official said, relied chiefly on Malaysian trading partners—including a phony "book trader"—to circumvent bans on direct exports of technology to Iran. The link is notable, he said, because Iran appears in recent months to have shifted the routing of many of its purchases through Asia, following a crackdown on several front companies in the United Arab Emirates.

A balding man with a thick mustache Khoshnevisrad wore a blue dress shirt and slacks for his first court appearance yesterday at an arraignment before a U.S. magistrate in San Francisco. Before the magistrate arrived Khoshnevisrad sat outside the courtroom handcuffed at the wrists.

"Do you know if my family is coming?" he asked the federal agents escorting him to court. He spoke fluent English.

Khoshnevisrad told the agents he was worried about whether his family would show up. He asked if he could make a phone call.

The law enforcement agents, some in plainclothes with badges dangling from their necks, others in suits, huddled. One asked Khoshnevisrad what number to call. Khoshnevisrad gave him a number, but before dialing the agent was reminded by one of his colleagues to dial *67 beforehand to block the recipient's caller ID. The agent handed his phone to the alleged weapons smuggler.

He stood and, still cuffed, held the phone, and listened. He never spoke; no one answered.

A few minutes later his family arrived.

Khoshnevisrad shared a long embrace with his wife and spoke with his family in Farsi, sharing an occasional laugh. His sister told him she was happy to hear him laughing, considering he had just spent two nights in a local county jail. Interrupted by federal agents when the courtroom doors opened, his handcuffs were taken off, and they were all led inside.

With his family members in the courtroom, he was formally charged with four counts of export-related charges, tied to a series of alleged deals to ship helicopter engines and military-grade surveillance cameras to Iran. A lawyer for the businessman declined to comment on the charges.

Assistant U.S. Attorney Candace Kelly requested that Khoshnevisrad be held without bail, saying he posed a "very serious national security risk." The magistrate agreed with that request.

The aircraft parts, valued at more than $4 million, were purchased from U.S. firms and routed through a network of front companies, according to documents obtained by the Berkeley, Calif.-based CIR.

Among the purchases were 17 Rolls-Royce helicopter engines, manufactured at a factory in Indiana and allegedly destined for Iran Aircraft Manufacturing Industrial Co., and 11 aerial-surveillance cameras sold by a Pennsylvania distributor and allegedly intended for mounting on Iran's F-4 fighter jets, according to an affidavit by investigators for Commerce's Office of Export Enforcement. The U.S. firms apparently were unaware that the parts were intended for Iran, federal officials said.

The documents, including an affidavit from the Commerce Department filed with the magistrate, indicate that Khoshnevisrad's network also allegedly involved trading companies in Ireland and the Netherlands and American freight carriers, one of which was described in court records as "the Irish trading company's designated freight forwarder from New York."

The investigation of Khoshnevisrad relied in part on intercepted emails between him and his business partners. Excerpts from the email exchanges appear to show Khoshnevisrad, while negotiating deals with Irish and Dutch trading partners, often acknowledging that the companies would have to circumvent U.S. export laws.

"We have your 'three engines' ready to ship/deliver in Kuala Lumpur," a representative of the Irish trading company wrote in a Jan. 15, 2007, email, one of several cited in the Commerce affidavit. "We are giving you ... top-quality service ... under extreme[ly] difficult conditions (embargo[es] ... export controls)."

In another email to Khoshnevisrad about three weeks later, the Irish trading company wrote, "Aviation/Equip[ment] ... embargo ... very, very 'strong' right now on 'Iran.' Extreme vigilance 'worldwide' in place."

In another case involving alleged front companies, the Justice Department indicted a number of Iranian businessmen and firms for illegally purchasing electronics used to make IEDs of the type used to kill U.S. and coalition troops in Iraq.

Khoshnevisrad's firm, Ariasa, describes itself on its website as a trading and engineering firm. The firm's website includes a section detailing its procurement network, which includes sources in Europe, Asia and the U.S. Its products from its "Europe-America" sources include "any kind of optical component, equipment"; "raw materials, alloys"; "electro motors, transformers, any kind of connector, relay"; "radio equipment and systems"; and "aviation equipment."

Calls to the Tehran telephone numbers listed on the site were not answered.

Joby Warrick is a reporter for the Washington Post. Shahien Nasiripour is a reporter at the Center for Investigative Reporting. Read the full story on Washingtonpost.com.

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