Burlington County Times
By Tim Kelly
BCT business writer
December 11, 1987
WESTAMPTON - Consarc Corporation officials yesterday denied any wrongdoing connected with the firm's sale of potentially sensitive equipment to the Soviet Union, a deal investigated last week by a congressional subcommittee.
The equipment can be modified to produce carbon-carbon, a material used in the manufacture of nuclear warheads.
Consarc President Raymond Roberts and Henry Rowan, the board chairman of Inductotherm, its parent company, lashed out against media accounts of the sale issue yesterday.
"For some reason - probably because it sells newspapers - you want to portray us as a bunch of bad guys selling secrets to the Russians," Roberts told a reporter at his office on Woodlane Road in the Inductotherm complex. "Nothing could be farther from the truth. We followed the letter of the law on this and the spirit of the law."
Consarc's British subsidiary, Consarc Engineering Ltd. of Scotland, began selling vacuum melting furnaces and presses to the Soviet Union in 1983, under the terms of an $11 million contract.
The firm did so with the complete approval of the United States Commerce Department and the British Ministry of Foreign trade, and without knowing the equipment could be used to produce sensitive technology, Roberts said.
It wasn't until two years later that Roberts said he became aware the equipment could be used to manufacture carbon-carbon, a crucial material in the nosecones of Trident and Minuteman nuclear missiles, as well as the space shuttle.
The woven fibrous material is stronger than steel and is able to withstand the intense heat of a missile or spacecraft's re-entry into the earth's atmosphere. Carbon-carbon is considered to have strategic value to the national security because it enables nuclear missiles to achieve greater accuracy.
Although the material was developed domestically in the 1950s, the Soviets have yet to duplicate carbon-carbon. They targeted the technology for acquisition during the mid-'70s.
The congressional subcommittee, headed by John Dingell, D-Mich., and Thomas Bliley, R-Va., contend the sale of the equipment may have cut the Soviets' research and development on carbon -carbon by as much as five years.
A spokesperson for Dingell's subcommittee said the sale was stopped "by the highest levels of American and British government" in 1985, after 95 percent of the materials had already been shipped.
"We have been told we only caught the tip of the rat's tail," Dingell said of the halted shipments. However, a Pentagon source was quoted in a published report as saying the missing five percent was a "key" component.
According to Roberts, nothing appeared out of the ordinary in 1982, when Soviet representatives first approached then-Consarc vice president, Jim Metcalf at an international trade show. The Russians expressed interest in buying the furnaces and presses, supposedly for industrial use.
"We discussed it thoroughly at a Board of Directors meeting," Roberts recalled, "and we asked ourselves, 'Is this the kind of thing we want to sell to the Russians?' They're secretive and don't tell you what they are going to use it for."
Roberts said the furnace and presses were checked against the Commerce Department's commodity-control list, which outlines items that require an export license. A similar list maintained by British commerce officials also was checked, and none of the items to be sold appeared on either list, he said.
The decision to build the furnace and presses in Scotland and ship from the United Kingdom was strictly an economic consideration, Roberts added.
"Again, the press is jumping to conclusions when they intimate we went through Scotland to avoid regulations in the United States," Roberts said. "It made sense to do it in Scotland. The costs are lower and it isn't as far to ship to the Soviet Union.
"We're furnace makers, not suppliers of military secrets," Roberts said. "It's ludicrous to blame us because you could make carbon-carbon in your oven at home.
"This deal didn't involve leading-edge technology. The designs for this furnace were 20 years old," he said.
Roberts said the Soviets made a $1 million down payment on the equipment, with the remainder to be paid when it was installed and passed a series of tests. Consarc took out insurance with the British Economic Credit Guarantee Department to protect its capital investment in the event the deal soured.
And sour it did.
"Exporting is risky business," said Roberts, whose firm exports about half its work.
"Your buyer can go bankrupt, as he can in the United States, but the credit checks and other controls are much better here. With exports you don't always have an accurate picture of who you're doing business with. You also have banking risks and currency crises to contend with," he said.
Nevertheless, Consarc began shipping the materials during the spring of 1983. In November of 1984, British customs authorities seized Consarc's files on the Russian deal and examined all the documents.
"That was our first indication something was very wrong," Roberts said. "We decided this was something we didn't want to be involved with, but the Russians threatened to sue us in international court, claiming they had a valid contract."
Roberts said he then called the U.S. Commerce Department for a clarification, and was told no information was available.
"We had three of our people in Moscow assisting with the start-up, and we began to take steps to get them out of there," Roberts said. "To our amazement, the Commerce Department told us not to withdraw. Talk about mixed signals...."
The Dingell-Bliley subcommittee chose to characterize the situation as bureaucratic bungling.
"Despite a longstanding appreciation of its strategic importance and knowledge of the Eastern bloc's desire to obtain carbon-carbon capability, the sale of the equipment couldn't be controlled by the U.S. or our allies until after the transfer took place," Dingell and Bliley said in a joint statement.
"This extraordinary episode highlights the weaknesses in our control and the inconsistencies in East-West trade policies," they said in their statement.
The mystery figure in the Consarc affair is Metcalf, who headed the firm's international trade division. Roberts said Metcalf left Consarc around the time the shipments were stopped, and had formed his own exporting company while still employed by Consarc. Roberts said Metcalf strongly favored continuing the Soviet deal.
"That was the direction it was headed, and I told him his actions constituted a conflict of interest," Roberts said.
Metcalf, who is now living in the United Kingdom and is reportedly married to a Russian woman, could not be reached for comment yesterday.
The newspaper made no attempt to find me. Even a cub reporter would have found my telephone number. It was listed in my name and I was at home or in the Consarc UK office during the period.
Roberts declined to discuss the circumstances of Metcalf's departure, saying only, "It was an internal matter we don't wish to discuss, but it was Mr. Metcalf's decision to leave."
Officials of the Commerce Department also declined to discuss the Consarc matter when reached late yesterday by the Burlington County Times.
Meanwhile, life goes on at Consarc.
"We still have a good reputation with our suppliers and employees, but the publicity has been very damaging in other circles," Roberts conceded. "It seems as though everyone who talks to me these days wants to know about this Russian deal."
The Burlington County Times continued the next day. The editor assumed that the Soviets had tricked Consarc into supplying vital equipment and therefore should be watched in any treaty. He also assumed that I was sent away into hiding with my Russian wife. The boldface print of the editorial on page two read:
SOVIET TREND IN TRADE OR TREATIES
December 12, 1987.
The summit meeting between Ronald Reagan and Mikhail Gorbachev sparked a renewed and intense interest in the Soviets.
And so it was only natural that when the story about a sale of high-tech machinery by a local firm to the Soviet Union resurfaced recently, it caught the spotlight of public attention once again.
Consarc Corporation, a subsidiary of Inductotherm of Westampton, has been caught in the light-and the heat-of a congressional investigation into a trade deal it signed with the Soviets. Company officials are distressed to say the least. According to Raymond Roberts, Consarc president, all anyone ever wants to talk about is the "Russian deal."
Briefly, the firm was approached by Soviet representatives seeking to purchase Consarc furnaces for use in heavy industry. The complicated arrangements were finally made and the firm's plant in Scotland was designated to produce vacuum melting furnaces and presses. Shipments to the Soviet Union began in 1983.
But along the way it was learned that the Soviets could, with some modification, use the equipment to produce a material known as carbon-carbon. Carbon-carbon is used by the U.S. on the nose cones of missiles and space vehicles to stabilize re-entry. It had been America's secret, and while the Soviets would probably have figured it out eventually, congressional investigators contend that the furnaces purchased here helped them cut years off their research time.
Consarc officials, in an interview with Burlington County Times business writer Tim Kelly, said the firm had followed the letter of the law. And that is true. Consarc wended its way through the maze of bureaucratic paperwork both here and in Britain, got all the approvals and closed a legitimate business deal, not unlike thousands carried on with the Soviet Union by American companies.
But something went wrong. Congressional investigators called it bureaucratic bungling. They cited "weaknesses in our control and inconsistencies in East-West trade policies" that allowed the sale of potentially sensitive technology to pass through all the channels and not be red-flagged.
The company has been stung-badly-by the failure of government agencies here and abroad to fully analyze the sale before approving it and by its own lack of insight into Soviet motives.
But the firm could help heal its wounds by going public with the details surrounding the departure from the firm of Jim Metcalf, who had headed Consarc's international trade division. Metcalf, now living in Britain and married to a Russian, strongly favored the deal. But officials won't discuss his role or the reason for his leaving. That's unfortunate.
They need to lay out the whole Metcalf story, if there is one, to avoid any further speculation.
The story is not yet concluded. The congressional probe could generate legislation to change the way American companies trade with the Soviet bloc. And once bitten, twice shy, the firm will be cautious about taking any Soviet trade representatives word at face value.
The Consarc episode in one way is like the summit: People tend to over simplify it and thus run the risk of misjudging its complexities.
And like an arms reduction treaty, a trade agreement is only as good as the word of both parties. And whether that involves missiles or furnaces, it's a very sobering thought to ponder in the post-summit euphoria.
I called the reporter from Miami on January 5,1988. The conversation lasted less than five minutes. Once again the media twisted the story.
MYSTERY MAN IN SOVIET SALES:
I'M NO MONSTER
By Tim Kelly
BCT business writer
January 6, 1988
Jim Metcalf, the mysterious figure in Consarc Corporation's controversial sale of equipment to the Soviet Union, has surfaced.
A former vice president of the Westampton-based firm, Metcalf initiated the sale of vacuum melting furnaces to the Soviets in 1982.
The deal became the focus of a congressional subcommittee investigation last month after it was learned the equipment could be used in the manufacture of carbon-carbon, a component in the manufacture of nuclear warheads.
Metcalf contacted the Burlington County Times by phone yesterday from the Miami area, to respond to media accounts of the deal.
"I was going to ignore this because I've done nothing wrong and the company (Consarc) has suffered enough," Metcalf said. "I lived in Willingboro for years, and still have family in the area. I had to speak up to say I'm not the monster these stories have made me out to be."
Metcalf said he first discussed the sale with Soviet officials at a U.S. Commerce Department-sponsored trade seminar in 1982, and the deal was a purely business decision.
Russian trade officials said the furnace and presses would be used for an industrial application, Metcalf said, and Consarc was interested in expanding its market base.
"Russia is an untapped market. We were bringing jobs to South Jersey and contributing to the (gross national product)," he said. We never sought the sale of military secrets. Everything was straight forward."
In 1983, Consarc's British subsidiary began shipping components of the equipment under the terms of an $11 million contract. The shipments were made with the complete knowledge and approval of the U.S. Commerce Department and British trade officials, Consarc president Raymond Roberts said during a December 2 interview.
"The furnace can be used to melt steel or to melt uranium," said Metcalf. "It doesn't make sense to assume it's being used in the research of nuclear warfare. That's like saying you're a chef just because you own cotton pickin' skillet."
In 1984, the shipments were briefly halted by British customs officials, but they resumed after the Russians threatened to take Consarc to international court for failure to comply with a legal contract.
Roberts said Consarc sought a clarification on the deal from the Commerce Department, and was eventually told to continue making the shipments.
By the time the sale was stopped, "by the highest levels of American and British governments," according to a spokesperson for the Congressional subcommittee, about 95 per cent of the furnace components were already shipped.
"We only caught the tip of the rat's tail," said Congressman John Dingell, D-Mich., who headed the committee.
Carbon-carbon is considered to be of strategic value to the national security, Dingell said, because it improves the accuracy of nuclear warheads. The fibrous material is able to withstand the intense heat of re-entry to the earth's atmosphere, making it a critical component of missile nosecones and the space shuttle, according to Dingell.
Metcalf disputed the strategic importance of carbon-carbon and blamed the entire episode on media over-reaction. He said he offered to appear before the congressional subcommittee, but they never responded to his written requests.
"They (Congress) didn't truly want to find the tempest in the teapot," Metcalf said. "I have the documents to back up what I'm saying and it's a helluva story. But you'll have to come to Florida for it."
I learned a KEY fact about the modern media. They want their pages filled at minimum costs. One reporter told me that the last thing they wanted was a "Mack Truck" fill of documents. The reporter did not want to see me when I visited New Jersey and was less than one mile away.
Metcalf said he made a complete report of his activities with the Russians during a recent interview with FBI officials. The meeting lasted several hours, he said, and covered every single aspect of the transaction.
Still, the FBI declined to pursue the matter further, he said.
While uncertainty swirled around the deal, Metcalf accused the media of running with a half-baked story.
"I think they just wanted something negative to write about during the recent summit," he added, referring to the story which first broke in the Long Island, N.Y. newspaper Newsday, and was followed up the next week by Time magazine.
"Time put my picture in their international edition and called me a 'techno-bandit'. I'd find that comical, except it has had a negative impact on my business and has caused pain to my family," he said.
The story also was reported nationally by several of the major networks and wire services.
Consarc officials denied any wrongdoing in the affair, as Roberts painted a picture of a company acting within the letter of the export laws but still becoming entangled in a web of bureaucratic bungling by American and British authorities.
Unanswered questions concerning the deal continued to linger, though. Consarc refused to discuss the circumstances of Metcalf's departure from the company and further intrigue came from the revelation that Metcalf had married a Russian woman in 1979 during earlier business dealings with the Soviets.
"When it came out that I married a Russian woman, the hysteria really took off," said Metcalf. "But I'm not worried about it, because I have a thick skin."
Speculation concerning Metcalf's involvement heightened after the Newsday and Time stories because he couldn't be located for comment and didn't come forward until yesterday.
He said he remained overseas because of a tax law that enabled him to deduct $70,000 in earned income from his federal tax bill if he remained out of the country for 330 days in 1987. "Wouldn't you do the same thing?" he asked.
"Your editorial was fair and the story line was fair, but everyone is overblowing the importance of this deal from a national security standpoint," Metcalf added. "The fact of the matter is, we sold a furnace. It will not give Russia any strategic advantage."