Fight with British Press
The British press continued the old story about my trade with the Russians almost two years after the world press was finished with the story. The press coverage in late 1987 was flawed and about an event that had occurred in early 1985. I baited a new hook with factual information, leaked to the press, which I had sent to the British Department of Trade three months earlier. My letter to the editor of the Guardian was a small attack on the press.
To: Editor of the Guardian
From: James Metcalf
January 1, 1990
The article written by Paul Brown and Michael Duncan on July 1, 1989 on page 2 of your newspaper, under HOME NEWS, is sloppy journalism. Your paper reported on this matter in April 1985 and ran an article by Royce and Lane of Newsday in November 1987. The Mirror ran two articles written by Paul Foote in the spring of 1988 on this subject. The Private Eye also ran a small piece on the subject in the same style as the one written by Foote. The Telegraph printed a small story about my deportation on August 6, 1988. Hundreds of articles on this subject were in the world press, including British, since 1985. Royce of Hearst newspapers wrote the first article in the spring of 1985. This first newspaper story on the subject was almost correct.
The telephone interview with your reporter is on tape for my records. Copies of this letter have been sent to the United States and British government authorities to avoid confusion by my quotations in the free press. Your article will become the truth for the British government if left unchallenged.
Your news article contains terms and abbreviations that you may not understand, therefore the following:
Carbon is a key element of our planet's life cycle. We eat it, drink it, and breathe it out to the atmosphere. Nature produces diamonds with this element at high temperatures and pressures. Coal is carbon, and natural gas is seventy-five percent carbon. Charcoal is carbon. Most synthetic and natural fiber for fabrics is forty percent carbon. Industrial carbon is a mixture of finely cooked coal and tar which is again cooked in a very simple oven. Graphite is carbon which is heated to very high temperatures.
HIGH STRENGTH CARBON FIBER
When Mama left her hot flat iron set on the cotton pillowcase too long, black carbon fiber was the product. A famous fiber institute in England came up with a method to heat rayon thread while under tension to convert the material to carbon of high strength. The equipment my firm produced for the Soviets is not the type that produces fibers.
Ground up charcoal mixed with sugar fired in the charcoal furnaces in the Appalachian mountains was a carbon carbon product for filtration of corn whiskey. The charcoal is one form of carbon bonded with another form of carbon from the sugar. During the sixties the British first formed structures using high strength fibers and a starch-like material for the brake material for the Concorde. They named it carbon carbon.
The Department of Trade and Industry of Britain is in London. One of its functions is to control exports from the United Kingdom. The department has broad powers supported by the War Powers Act of 1939. The United States government provides the same function with the authority of trade legislation, and also has political objectives.
The Export Credit Guarantee Department operated by the DTI is fully funded by insurance premiums. The policy warns exporters not to tell their customers that such insurance exists. The United States does not have an equivalent for this state supported export service.
The European Economic Community has Germany, France, Italy, Belgium, Holland and others as members. The United Kingdom joined this group a few years ago. The plan is to make a common United States of Europe to compete with Japan and the USA.
CoCom is a group of countries including the USA, Japan, United Kingdom and other countries of the EEC. They have agreements to preclude shipment of certain items to certain countries without the specific approval of CoCom. This group, formed many years ago, did not function as a real control group until the later years of the Reagan administration.
Low level technical members of CoCom in Paris, leaders of nations, ministers of government, and civil servants read the press. Each time the Americans want to tighten the rules of CoCom, the Pentagon leaks the required information to the press. The press uses unnamed sources and confusing technical terms to tell their horror stories.
Richard Perle reportedly leaked the subject of the embargo by the British government to the press three weeks before it happened. He was the former Under Secretary of Defense that the British press named the Knight of Darkness due to his severe position on the USSR. This was the beginning of the big lie. The Pentagon stated that the furnaces could produce a durable lightweight carbon fiber. They calculated that this equipment would cost the Pentagon billions of dollars. The Pentagon informed the press that wonderful cooperation with a friendly country managed to stop the supply. This compounded lie caused the inquiry by the Congress of the United States nearly three years after the event. The Congressional Committee that held hearings on this matter did not want my testimony because they had no interest in the real facts for their inquiry.
The Pentagon again leaked information to Royce of Newsday to coincide with the pending visit of Gorbachev to the United States. The press release was timed for an important meeting of CoCom. The Pentagon worried about their loss of control of CoCom due to pending changes in the EEC. Please refer to an article by Winthrop that was in the Sunday Times in the spring of 1988 about technobandits and CoCom.
Time magazine first used the word "technobandit" in the cover story in the international issue of November 23, 1987. ABC News reported this story while Gorbachev was shaking hands with the people on the street in Washington. They ranked the loss as a major scandal, the worst we had ever sustained. Newsday ranked it in the top five losses based upon information supplied to the Congress by Perle and others in the Pentagon. It appears that Perle resigned from the Pentagon because he could not agree to the Arms Limitation Treaty.
This was not the first time Perle's Pentagon publicly accused business of improving the accuracy of Soviet rockets. In an interview with the Boston Globe in 1982 Perle stated that the sale of western technology had improved their accuracy to the point that America's whole MX missile system would have to be scrapped. He set the cost of this loss of technology at sixty billion dollars. All this effort by Perle was summarized in a document issued to the United States Congress in February 1985. The Pentagon released a document in October 1984 that listed some equipment supplied by Consarc as something they would like controlled by CoCom. The document for export control was classified secret by the Pentagon.
Your reporter understood that there was no way he could obtain the true story with a quick telephone interview. He was told that the full story was his if he visited Boston. Clearly newspapers have very limited budgets and as public entertainers, are not really interested in the truth.
Your article is the worst on this subject, because you had the prior file, documents from politicians, and the chance to interview me at length. I plan to quote your article in a book I am writing on this subject. Please give me your permission to use this letter, which quotes your newspaper, in my book.
Soviets offer Britain and US a cut-price deal on substance produced from furnaces exported by mistake, report Paul Brown and Michael Duncan. This is the small headline above BLUNDERS GIVE RUSSIA MISSILES SECRET.
The substance offered for sale was carbon insulation and carbon fibers produced by heating rayon. It is not produced by the furnaces that were exported from Scotland. I plan to offer the products at very attractive prices but not cut rate. The product has absolutely nothing to do with missile secrets. Other than these small errors, it is a fine start to a sensational news report.
You will be correct if you respond that headlines are the spice of the news media. Informed readers must look into the small print for the facts. A book by a former newspaper man with the title, "DWARF RAPES A NUN, FLEES IN UFO." He claims this was the headline of a story in some newspaper.
I was reading that book when ABC News called me in Scotland. They had an urgent request to put me in front of the camera to tell my side of the story. They had torn the pages out of the Newsday release and would have used the black and white stills with a statement that I refused to be interviewed. Photocopies of the book title were on all the files and on the wall behind my head. The camera man and the young woman sent from London understood what the words meant, but they had a deadline for the evening news that had already been written.
The headline was about a rock concert that was covered by two reporters. They filed a report that described an incident where a SHORT rock performer was chasing a nearly NUDE singer with the stage name SISTER. The security forces caught him in this act, so he left in his helicopter. When the news desk called the police to follow up on this story they asked what kind of helicopter. The answer was UNIDENTIFIED.
To be fair to your newspaper, let us read a little further. Furnaces worth £ 7 million to make a secret substance that can give ballistic missiles pinpoint accuracy have been exported free to the Soviet Union because of blunders by the CIA and the Department of Trade and Industry.
The "secret substance" had been published in the technical literature for several years using funds for research provided by the military. This is the path of most technical losses before steps were taken through technical data laws. Pinpoint accuracy is the selling point for the companies that sell this product at very high prices for use on rockets and the B-2 bomber. When new investigations are completed, the press reports about the cost of a little rayon string and cornstarch will make the price of toilet seats pale in comparison. "National Blunder" was Royce's Newsday quote of Congressman Dingell before the hearings were held. These hearings appear to have been scheduled based on information furnished to them by Royce.
You will be right when you say that it is necessary to continue the line of the headline so that readers will go deeper to find the facts. Let us continue.
The technology on which the process is based has been regarded as giving the US the edge in the cold war. The technology has now been mastered by the Russians who are producing a surplus of the secret material, known as carbon carbon. It has offered to sell the material to the Ministry of Defense for use in Trident missiles at less than the price Britain can produce it.
I wish some small truth could be found in the above paragraph. The first published use of carbon fibers was in the test of the Edison lamp. Other materials were selected. The British developed the material in its present form for one of their jet engines. The British carbon industry closed down when they learned that the engine would not work in moist air. Carbon-carbon burns, after all it is charcoal. This carbon-carbon decision added to the financial problems of Rolls Royce before its bailout by the government. American engineers told me that on a cloudy day our carbon covered missiles and space shuttle would burn up before they reached the ground. It is now my understanding that a secret coating allows carbon to be used. With time and effort this secret also can be found in the published literature. Sales to the Minister of Defense for the new Trident missile must be a joke invented by your reporter. The most important military use now is for aircraft brakes. This technology came from the Concorde, and its technology is published. The new Boeing 757 and 767 use the material for brakes.
The next paragraph might just have some truth. The furnaces were manufactured in Scotland- TRUE, but with sub-suppliers in England, Wales and other parts of the world. and subsidized by the taxpayer. -Not TRUE. There were subsidies for the carbon insulation company established in Bellshill, Scotland in 1983 paid after the embargo and in later years. The details of this would make interesting reading for the public and some members of the British government.
The next paragraph gets a little better, if one considers that governments wanted to stop these simple furnaces. The blunders by the CIA and the Department of Trade and Industry failed to stop the export and a regulation preventing completion of the contract was made after the order had been shipped. The truth is that an order by Thatcher herself, coming into effect at 1:40 PM on 8 February 1985, caused the last container to be illegally seized at the port of Hull. Royce told me that he thinks the Congressional report, if it is ever issued, may show that the authorities in the U. S. were aware of the details of this sale much earlier. They waited for the right moment before they pressed the British to stop the shipment in order to use this as a test case.
Thatcher met a trade representative from Russia with the unfamiliar name of Gorbachev in November 1984. She said this was " a man she could do business with." On the steps of John Brown Engineering, she proudly stated to him that a "contract is a contract." This was an obvious brag about her winning a fight with Reagan on the pipeline issue. The John Brown Engineering company had contracts to sell compressors for the new Soviet gas line to Germany. Reagan wanted the pipeline project stopped. He tried to use the long arm of the American government to stop British, German and French firms that traded with the Soviets and the States. Our Commerce department embargoed all the imports of products from these companies to the USA. Under pressure from European governments the restriction was lifted a few days after it went into effect.
After Thatcher gave in to Reagan on the furnace matter, she had to meet Gorbachev as the new First Secretary in Moscow four days later. The unprecedented embargo was surely discussed, because upon her return the British government took the unchanging position that Consarc could send engineers abroad and ship materials that in themselves were not restricted. In other words, the government gave my company informed permission to complete the contract, even considering the impact on national security that they claimed was real. For some reason the press does not want to play with this topic.
The next two paragraphs of your article are technical nonsense. The carbon-carbon is placed as a nose cone shield on inter-continental ballistic missiles to give them pinpoint accuracy, increasing first strike capacity to knock out enemy missile silos. Pinpoint accuracy depends on the electronic guidance system. Of course a good shield on the nose tip is required. The new carbon ones are lighter so a heavier load can be carried. The Russians have always been ahead in rocket lift capacity so weight of their noses is not so important. The carbon burns evenly on re-entry into the atmosphere, eliminating the wobble which causes inaccuracy in metal tipped warheads. Please give your readers a break with just a little truth. Metal shields made with beryllium metal were replaced with fiberglass in the early sixties. The word "wobble" in this story was penned by the Telegraph on March 30, 1985.
To put the accuracy question in focus, let us remember the test firing of the new Trident, a missile for America's and Britain's future political debate. On it's first test, this first strike missile spun like Fourth of July fireworks out of control. The second test was stopped by Greenpeace. The third test was carried out under the observation of a Soviet warship that was turned to the starboard under directions of the Navy. The fourth test also did not work, but it had nothing to do with carbon-carbon noses. Any fool could see on television that the missile was thrown out of the submarine as a cork would jump out of a bucket of water if you released it from the bottom.
Then the rocket part of the missile was fired. The first change in trajectory and further changes as it reaches sub-orbital flight are vital to its ability to reach its target. The real key to accuracy is the electronic guidance system and small rocket motors that make precise changes to its trajectory before its re-entry to the atmosphere. Connecting a simple heat treatment furnace to that accuracy is stupid. The press is so powerful that it can make the connection.
Actually the word is "wabble" from "wabbeln" as he describes the flight of manned rocket to the moon in his fiction, Zero to Eighty, published in 1937. A small biit as follows.
"Dr. B. Kad, we have often discussed this feature before, and I think you and I are pretty well in agreement that we have the problem solved--at least in theory. For the sake of clarity, and to uncover any hidden facts, suppose we hold a mock debate. You describe what now appears to be the best method for steering the moon-ship, and defend it. I shall be the objector.
Dr. P. Good. I will begin.
Suppose a cannon shoots a shell freighted with shrapnel. This shell has a definite point in its interior called its center of gravity. However much the projectile may rotate, turn over, or wabble, its center of gravity lies always in its line of flight, unless application is made of some force additional to the force which started it on its trajectorial flight. When the fuse burns to the charge, the shell is shattered into many bits, its content of bullets scatter in all directions; but--as you know--a fundamental law determines that in the first instant following the explosion the center of gravity of all the flying masses will continue to move in the original line of motion. The center of gravity must continue on its course until an external force, such as air friction, acts to change the course of the center of gravity of all the scattered pieces and bullets."
The press, in its quest for entertainment to sell its wares for a profit, can make the innocent guilty and the guilty innocent if it suits their purposes. Export of the technology to Moscow was described in a secret committee of Congress, which investigated it as one of the worst five security lapses since the second world war. The only technology that was observed by the Soviets was the production of carbon insulation that came from published technology of Union Carbide in 1971. Not a single item of nose cone technology was known by any Consarc person or its newly formed subsidiary, Calcarb. The Congressional hearing prompted by Royce was based upon leaks from the Pentagon. Congress not publish a report of this hearing. My last meeting with this Committee was held on May 11, 1989. They promised faithfully that Claudia Beville of their group would release the report in a couple of months.
I consider four other deals that my companies had with the Soviets more important. These contracts would not be allowed by present rules. Maybe I can claim the top billing on all five of the security lapses! The whole thing is a big bunch of crap.
The Russian offer to sell their surplus of the material to Britain came from Mr. James Metcalf, an American, who set up the factory in Strathclyde in 1982 to make the furnaces. After he exported them to Moscow the Home Office deported him because his presence was "not conducive to the public good and not in the interests of national security."
How many mistakes can a reporter make in one short paragraph? There was no offer to sell. I did not set up the factory. My company bought it in 1981 to save it from bankruptcy. I was offered to be deported but left of my free will almost three years after the embargo that the British failed, or wanted, to stop. I stopped my activities without an order from the British government or a simple request to stop. Other British persons continued the project without my assistance or detailed knowledge of what they were doing. The security services, customs agents and others in the U. S. and U. K. have full knowledge of these activities.
The reporter said I was talking at cross purposes when I tried to explain the real reason for the threatened deportation. The next small statement must be a pure lie or the result of a very stupid reporter who cannot understand hillbilly English. Mr. Metcalf now represents the factory north of Moscow that makes the carbon carbon. The reporter was told in simple English that I have not been at that factory or had contact with any of their people since my official withdrawal from the project on October 4, 1985. He told the Guardian he had done nothing illegal. Thanks a lot! Time magazine reported that "everything Metcalf did seems perfectly legal" after they reported that there was a new breed of (legal) technobandits.
Newsday found that no laws had been broken but inferred that companies must police their exports beyond the rules in the interests of patriotism. In other words, don't step on or burn American flags, even though the Supreme Court has ruled that it is legal to do so. I would not, even now, step on or burn a British flag. I feel strongly that my trade with the Soviets has been positive for the security of nations and people. I have no regrets.
He had received export clearance for the series of commercial transactions from the Department of Trade and Industry -officials had only changed their minds when it was too late. I was not in the United Kingdom when permission was obtained to export these furnaces. Officials may have changed their minds based upon pressure from the United States, but they refused to write a simple request that we stop the project. Their final word was that no body of law prevented us from sending engineers abroad or sending materials that were not regulated. This meant we could finish the task, including replacing the insulation that was destroyed in the seized container.
The next part of your article contains some very new news. He had received more than £ 2.5 million in subsidies from the Scottish Development Office to set up Consarc Engineering in Strathclyde in 1982 to make industrial furnaces. We bought a debt ridden company for $ 68,000 and other considerations. The pound was 2.4/1 at the time. Repayment of debt was at a much better exchange rate later, but the company continued to lose money and was recapitalized in 1982. Not a single pound of grant money was used. Just before the Soviet contract the staff had been cut to the bone and were on a three day schedule with the fourth day being paid by some government program. Consarc had to guarantee to repay the British government if the Scottish company went bankrupt.
The company in Scotland had a loss carry forward, so some additional cash was infused into the company that might not have not passed the strict rules of the IRS and your Inland Revenue.
The cash flow was a one way street from the States and NOT from the British grant system. Some grants were received after 1985 to set up the carbon insulation company. The accountant that finally approved the amounts said they were "legal but immoral." The total amount of the grant offered, not begged, was less than £2,000,000. Just how this was done is a story of the futility of grants from the government to aid business. The new tax rates and rules under the Thatcher government were much more useful to business. and £ 7 million compensation from the Export Credit Guarantee Department when the contract was canceled, even though he had already shipped the order. Where do you get this "he" stuff? There was a full fledged operation with a board and a managing director running the operation in Scotland. I was their star salesman and visiting director, with five percent ownership in the parent company.
Mr. Metcalf said he had only one major contract when he set up the factory and this was for £ 7 million worth of furnaces for the Soviet Union. Your reporter should remove the wax from his ear and listen to the tape again. I told him this was the first real order for the company in Scotland after Consarc bought it.
Mr. Metcalf says he set up the factory in Scotland because he feared the United States administration might block the order under the Department of Commerce rules about export of sensitive technology to the Eastern bloc. Your reporter was told that in 1981, when the factory was offered for sale, there was the fact of the embargo of the Olympics, hardly sensitive technology. We had a good business in Russia so it seemed to me that doing business from Britain would be a proper decision. Britain had historically been a nation of traders and would not use trade for political purposes.
Once he had obtained the grant he wrote to the Department of Trade and Industry giving details of the furnaces he proposed to export to the Soviet Union. How mixed up can a simple reporter be, when the facts are in the public record and most of the details already published in the open press? The grants had nothing to do with the Soviet order; they came much later. I did not write this letter. This information omitted any possible military use- It was not my letter, but it contained all the information to describe the equipment sale. We spend large sums of taxpayers' money to pay for experts to define the rules for export. They understood exactly what was on the list and did not answer for two months, so it was not a rushed answer. Royce also said we were sneaky with this letter. The British authorities wrote me a letter just before the Congressional hearing saying the information to which Newsday objected did not bear upon their approval.
and Mr. Metcalf insists he did not know to what use the Russians would put the furnaces, pointing out that the carbon products also have many civilian uses. Royce correctly quoted my answer to his question, "How long have you known that carbon can be used for rocket components?" My answer was, "perhaps always."
I have never denied that the furnaces can be used to heat treat carbon of many types, including military items. There was also no doubt that the equipment would be used to densify high strength carbon artifacts. I wish to confirm that these furnaces cannot make a gram of that high strength carbon fiber that is reportedly used to make excellent nose cones.
The department told Mr. Metcalf that the furnaces were outside the existing ban on advanced technology to the Eastern bloc.
But as a precaution against a change of heart, he insured the order with the department's own Export Credit Guarantee Department, paying a premium of £150,000. I did not want to buy the expensive insurance because it did not cover the loss in case the Americans blocked the project. American law defines a product as made in the USA if the foreign company is controlled by an American. It was unthinkable that this simple project would be embargoed by the British, based on their actions during the John Brown affair. The remaining cover was in case the Soviets went bankrupt. Banks insist on ECGD cover before they will loan money. It is my feeling that they have the most exposure through their third world debt and force industry to share their insurance burden. The ECGD insurance salesman changed my mind when he confirmed that partial shipments would be covered to 95% of the invoice price, regardless of the reason the shipment was blocked. He was demoted after the claim was paid. Time magazine reported that "he even managed to persuade the British government to insure the project."
Mr. Metcalf says he also told the US Department of Commerce about the deal but received no response and so signed the contract with Machinoimport of Moscow in March 1983, and began making the vacuum induction furnaces and isostatic presses. I was not a member of the Scottish team until after the contract was signed. They could not afford me until we had the contract. The American board of directors had reservations about the sale. After detailed discussions they decided that the company would design and produce the equipment for the Soviets in Scotland.
As it turned out, this contract strained the little Scottish group to the limit, both financially and technically. We had hoped to sub-contract the isopress to a French firm, but they did not have the desire or ability to give us a bid. No one at our firm had ever seen an isopress or had any real idea how much technical information was needed to produce the item.
In mid 1983 we added another burden with the decision to build our own carbon insulation for this project. The Scottish Development Agency and Locate in Scotland group enticed us with an offer of a 22% tax free grant and a 15% taxable grant on our investment.
The rules allowed the company to use selling prices, not costs, as the basis for calculations. This grant led us to start the carbon company in Scotland. The Soviet company's inspectors arrived in Scotland in January 1983 to find us immersed in hopeless technical problems.
The delivery date for the Soviet contract was scheduled for May, and it appeared we would be at least one year late. The contract provided for a 10% late delivery penalty, so some way around the problem had to be found.
FMI (Fiber Materials Inc.) of Billiford, Maine set up a carbon insulation operation in Scotland using the same SDA grants and was the natural supplier for the insulation. This company also had contracts with the Navy to produce rocket components in one of their other departments. Navy security people contacted this company in early 1984 to find out what Consarc was supplying to the Russians. They did not contact us at all.
Between July and December 1984 shipments of the furnaces were under way. By October the Pentagon had realized the nature of the shipments and on October 31, 1984 the CIA informed the US embassy in London that an entire plant for processing carbon carbon was being shipped to the Soviet Union. The CIA contacted me in the fall of 1984 requesting details. They were invited to make a site inspection but they declined. The Atomic Warhead Research Establishment had bought the same type of furnace from our firm in the early seventies. They have complained over the years that it did not work correctly. It appears that the Minister of Defense sent a team of experts, under cover, to Consarc to see firsthand what was being shipped in the fall of 1984.
You should examine the meaning of the word "plant." In British it means equipment, in American it means factory. Royce appears to have obtained the American Embassy information from a British source. When ABC News ran the story they used a detailed drawing of the furnaces which Consarc supplied to the British after the embargo. British authorities sent this drawing as a description of "plant" furnished to the Soviets. When the Pentagon gave the drawing to ABC they called it "a sketch of a, 'factory' smuggled out of Russia."
When they aired this drawing the law of the United States required a specific license to release that data. They broke the law but were not punished.
We were able to convince the reluctant customer to accept partial shipments before we completed the tests in our factory, based upon his construction requirements and because no invoice would be rendered until the last shipment.
It was clear in late 1984 that the Pentagon wanted to stop all trade with the Soviets. Perle and others were apparently feeding the press as many horror stories as they would swallow.
A surprise inspection was made by Special Customs agents from Glasgow and London in late November 1984. I told these inspectors to embargo the equipment if it was felt it was not in the best interests of national security to ship it. Three days later the DTI sent us a telex saying they had no objection to our completing the contract. By December it was clear, after a Customs visit to the plant, that 95 per cent of the order had been shipped. Not true! About 73 percent had been shipped.
Contract total: 7,674,220
Not shipped: ** 278,914
March 1984 shipment: 606,420
May 1984 shipment: 3,237,040
June 1984 shipment: 83,094
October 1984 shipment: 2,039,664
December 1984 shipment: * 1,002,004
Seized: *** 418,084
* after the customs inspection
** Most of this was shipped, after the embargo, from spare parts that remained at Consarc (paid for by a separate insurance claim). This shipment was free of invoice and used, in part, as liquidated damage. The facts are documented, and this is indeed an interesting story.
*** Most of these items were defective and would have been replaced under amendment five of the contract.
Despite this, on December 19 a team of Pentagon, CIA and Commerce Department staff visited London to try to get the rest of the shipment stopped. I was in Moscow from mid December until mid January 1985, attempting to solve our contractual problems. The banks had over-extended our credit line and would not lend us more money. The buyers forced me to give several extras to win the advance of £ 1.2 million that we desperately needed to keep our company afloat.
I allowed the Soviet customer to get as greedy as he wanted. The change order signed in January would require a license from the American government, and I knew they would not give me one.. This was not a covert act, on my part but the minimum the buyers would accept for the down payment. For me the Soviet job was over. Upon returning to Scotland, the Minister of Defense had scheduled a meeting on January 26, 1985 to find out what we could do for them and to find the reason for the embargo that appeared to have already been decided upon.
It was my feeling that the British government wanted us to make the last shipment before Thatcher made the order to please Reagan. It was not necessary to use the information in the change order.
Mr. Metcalf, who was aware of an imminent embargo, shipped the rest of the order but it was not until February 8, 1985, that Britain created emergency regulations blocking the sale of the equipment. I was not in the U. K. when Consarc made the final shipment, due to business commitments in the U.S. My plan was to report that the latest change order from the Soviets would require a license. When the last container was seized there was no reason to report my problems to the board of directors.
If the container had been returned to Consarc as items that required a license, the insurance company might have been saved its payment. The DTI informed me in a meeting on February 14, 1985 that the seizure was an improper act by an uninformed Customs agent. The insurance documents seem to define shipment as passing title to the shipping agent.
The effect of this was to prevent some insulation materials and spare parts being shipped. Because Mr. Metcalf was technically unable to complete the order the Soviet Union refused to pay. Mr. Metcalf, acting on advice of the DTI, claimed the £ 7 million cost of the contract from the Export Credit Guarantee Department. The Russians therefore received the furnaces but did not have to pay for them.
This reporter must think I am a one man army. Maybe he would be accurate if he used the name Consarc in the place of mine. A deported person would find it very difficult to sue in the British courts. In the embargo order cover letter the DTI noted that Consarc was covered by insurance. We withdrew our people from Russia when the law changed. The DTI told us this was not a required by British law.
The insurance group refused our claim because we had not rendered an invoice to the customer. The British government informed the Soviets that we could finish the project subject to some limitations. The Soviet customer asked Consarc to offer a change order within the limits set by the new regulations and to send people to finish the project.
Our legal counsel told us that we were manifestly bankrupt, and Queen's counsel agreed that the insurers were legally bound not to pay our claim. Queen's counsel noted in the government letter that a meeting had been scheduled and that ministers of government had been informed of our situation. Our only hope was a political solution. The next day the DTI accepted our argument that the insurance salesman had effectively extended the cover.
Text of statement by ECGD to Consarc at meeting in DTI.
28 February 1985
Having examined the company's note of the meeting they had with ECGD's Glasgow Office on 12 April 1983, as produced for the first time at this morning's discussion, and the telex from ECGD's Regional Office to the company on the same date following that meeting, ECGD is now prepared in the exceptional circumstances of this particular case to accept that the consequence of that discussion and the related correspondence was such to entitle you to believe that you would be covered for the circumstances that have now arisen and that it effectively amended the Department's guarantee.
Accordingly, the Department is now prepared to admit liability under the guarantee for 95% of the gross invoice value of the goods delivered and 90% for the costs incurred for the design and manufacture of the undelivered goods.
The Department will expect the company to comply fully with its obligations under the guarantee to minimize the loss. In that respect the 1.2 million pounds presently held by the company should not be returned to the buyer but Consarc should immediately contact the buyer to ascertain whether they are going to exercise their rights under clause 10 to cancel the contract and to claim return of the advance payment and to claim liquidated damages. Before they subsequently respond to the buyer Consarc should approach ECGD with a view to establishing what further steps should be taken with respect to an amicable settlement and/or arbitration.
Your reporter should note some facts: The claim was less than £ 1.2 million. He will also note that the insurance claim does not add up to the contract price. The contract was not complete, which was another reason for the ECGD's refusal to pay the claim. Another claim was for the cost of spare parts held in Scotland and for equipment to produce carbon insulation. The DTI later ruled that most of this equipment could be shipped. They also ruled that insulation in the seized container could be shipped in another form.
Some journalists in the U. K. are fully aware of this very interesting story, but have told me that the government has a gag on the press under the Official Secrets Act.
The requirement of the insurance group was at odds with some other departments of government. At our first meeting they corrected the illegal seizure.
Consarc Engineering Limited
Please treat this letter as a request pursuant to Article 23a iii of the Guarantee to deliver up and transfer to the Department all the items comprised in your contract with Machinoimport (the items) to which the Export of Goods (Control) (Amendment No 10) Order applies.
It is my understanding that the items are presently the subject of seizure by HM Customs and Excise and are held by them at the port of Hull. In order, therefore, to effect this transfer, I would be grateful if you could signify your agreement thereto by signing the acknowledgment contained on the attached copy of this letter which I will then present to HM Customs and Excise in Hull for them to acknowledge that thereafter they will hold the items to our order.
The bottom part of this letter was an agreement which Consarc had to sign in order to obtain the money offered that day.
We hereby agree to the aforementioned transfer of property to ECGD and acknowledge that from the date of presentation to HM Customs and Excise they will hold the items on behalf of ECGD.
The government decided to put the monkey on our back and gave us the equipment in Russia and the spare parts in Scotland. They wanted any money we collected, but it was okay if we gave it away. These unbelievable actions by British politicians are fully documented.
From: Chapman ECGD Executive group
14 March 1985
1 At the meeting last Friday you asked for advice about your contract with Machinoimport, and in particular ECGD's rights and your obligations to minimize loss under article 4 (B) of the guarantee, in light of the recent refusal of an import license for certain goods which were to have been exported to Machinoimport.
2 It is of course for you to decide what action should be taken by Consarc under its contract. But you will wish to know that so far as ECGD is concerned the position is as follows:
(I) ECGD will not be requiring you to take any specific action in connection with the contract to minimize loss.
(II) Should you not take such steps as might reasonably be expected to minimize loss, ECGD will not regard you as having failed to comply with your obligations under that article and so will not under article 23 (B) demand repayment of the claims payment made.
(III) ECGD reserves their rights under article 24 (A) of the guarantee with regard to recoveries in respect of goods and services supplied under this contract.
This advice, which reflects the views of the DTI and other government departments concerned, supersedes that given in the second paragraph of ECGD's letter to you dated 8 March which accompanied the interim claims payment.
We finally signed an agreement to cancel the Consarc contract after the British government refused to give us a written request to stop the activity. British Customs helped us pack the spare parts that were paid for by the insurance. They allowed us to return the £ 1.2 million of British money. They approved the contract that allowed shipment of carbon insulation that was in the seized container in another form.
The Soviets wanted people in the field, so as part of the final agreement I formed a firm in Scotland that was outside the control of Consarc to hire engineers for the project. The Americans changed the law again, so I was able to withdraw from the contract on October 4, 1985.
The newspapers are my only source of information after that date, because I had no further contact with that customer.
Despite a ban by Washington on Mr. Metcalf working in Moscow to make the plant work, a British company set up by one of Mr. Metcalf's former directors of Consarc agreed to send out British engineers to get the furnaces working. The Department of Trade and Industry gave permission for this, saying there was nothing in British legislation to prevent it. Mr. Tom Dick was the managing Director of Consarc before he retired. He was not one of my directors.
Mr. Metcalf, who has a Russian wife who wishes to settle in Britain, decided to stay and continue manufacturing in this country but was deported by the Home Office on the grounds of national security
As a responsible editor you should spend a few minutes listening to the tape of our interview. The reporter was told that a book is being written on the subject and that a wonderful ending would be to sell new products much cheaper to the Pentagon. The rest of the following paragraph was not confirmed by our interview and is not true in any way. The British engineers have now got the Moscow plant working and Mr. Metcalf, who now has an office in Boston, Massachusetts, has been invited by the Soviet Union to sell carbon carbon back to the Defense Department in Washington and the Ministry of Defense in London. They are able to undercut the British and US costs because energy and manpower are cheaper in the Soviet Union and most of the capital costs of the plant were paid for by Britain.
It would be most interesting to know who fed this story line to your reporter, but you will protect his sources. Could it be that some person in the Scottish carbon operation made those statements because of fear of competition? Did the British or American governments release my planned Soviet joint venture for the production of carbon insulation? Did Royce turn over a lead to your newspaper?
Mr. Metcalf said: "I feel very sore about being deported from Britain. If I had done something wrong then I would have been prosecuted over here (in the US) but I have not. It was a commercial transaction for which I got permission from the British administration." The sore part of the direct quotation came from your reporter, words that he wanted to put in my mouth. I told him I was pleased to have an excuse not to live in London.
Your reporter ignored the fact that three years had passed and the real reason for deporting me was to avoid giving a Russian a British passport.
Mr. David Steel, Democrat MP from Tweeddale, Etterick and Lauderdale, has written to Mr. Kenneth Warren, Chairman of the Select Committee for Trade and Industry asking him to investigate. This is the standard reply from politicians when asked a question. Mr. Steel was going to look into the matter for Paul Foote of the Mirror in March of 1988. MP Reid was going to look into the matter for the Telegraph in November 1987, and former MP James Hamilton was going to enquire for the Scotsman in April 1985. From the mother of Parliaments there will not be a sound.
The DTI refused to comment. I have the full story and am continuing to cause the events that will be written about, but no reporter wants the story, because it is too much work to uncover the truth. I no longer desire to visit England and am not afraid of being banned like "Spycatcher" as I am no longer subject to the Official Secrets Act.
The United States government is fully informed of my intent to enter into a joint venture with a Soviet company to produce and market simple carbon insulation, controlled by CoCom at British insistence, and simple carbon artifacts.
Management of the carbon company in Scotland refused to hire me as a consultant, or in any capacity, to assist in their sales or expansion. They even turned away a valued customer in June 1988 because they did not want me to see their operation again. Management of Consarc and Inductotherm also failed to support me in setting up a carbon densification company in the States. They took the position that even though they were not going to expand themselves, I had no right to set up a carbon company. Other carbon operations in the USA have stayed away from me because of the bad press.
The British embargoed this simple insulation in November 1986 to block a pending shipment to the subject project (produced in the USA). This order was filled by a direct shipment from the States by another company. The British used false and confusing technical terms to support their claim that the material was vital to the national security of the West. Commerce did not follow the law in agreeing with Britain on this fact.
The purity of the embargoed product was specified as 99.9 percent, so suppliers were able to make a 99.8 percent grade for free export.
The Soviets did not attempt to order more insulation, so it appears that they were meeting their own needs. Commerce told me that the item was on the list contrary to American law, but that strong voices had spoken and other countries had veto power over its removal from the lists. Politically the British cannot allow its removal for the same reason they will not allow me to enter Britain. This simple fact caused my new Soviet partners to place this material on the list of items they need to produce themselves for the home and export market.
The bottom line is: If this simple material is as claimed, a material vital to national security, then deporting me means that the operation I was planning for Scotland will now be located in the Ukraine. My early plans did not include the production of insulation, but since it is embargoed, no other option remains. Consarc's refusal to consider a position for me in their carbon operation has forced me to compete with them. The primary market of a proposed joint venture has nothing to do with items for the military.
Mr. Editor, it appears that the Legions of Her Majesty's Government acted unilaterally and vehemently in 1989 by refusing to allow the shipment of parts of equipment to the same customer to which they had willingly allowed shipment of British property free in 1985. It might be found that the ECGD has again paid a claim. It also will be found that this type of equipment can be freely exported from other countries.
My new joint venture will be competing with the customer that has again been frustrated by Thatcher, therefore my thanks are given for the third time to British actions.
Mr. Editor, there is news of the signing of a protocol between my firm, BEPA, and the electrode factory in Zaporozhye, Ukraine. This factory is one of many that have been converted to civilian uses by the Gorbachev administration. This factory has all the equipment and technology to produce that evil and secret substance named carbon-carbon. It has been in operation since 1973 producing carbon fabrics and artifacts. The furnaces dwarf those embargoed by the Thatcher government in 1985, and there is not a single item of American or British equipment in the whole factory.
The first item of production for sale to the world market will be carbon bonded carbon fiber for thermal insulation. This product will be densified to suit market requirements for many uses. There is no doubt that this venture will lead the world in this product with low costs, large quantities and the highest quality. As I told your reporter, it would be icing on the cake if I could sell some material to the Pentagon that would be resold to the British at very high prices for the Trident. My Soviet partners may not want me to sell material for military uses, but in this new politically changing world everything is possible. After all, business is business, as it always has been in man's history.