Matrix Churchill

Matrix Churchill Ltd was a British machine tool manufacturer with an American affiliate, Matrix-Churchill Corporation, in Cleveland. In 1987 it was bought by a holding company controlled from Baghdad by Iraq's Ministry of Industry and Military Industrialization. Its American arm bought for Iraqi projects with money from the Atlanta branch of Banca Nazionale del Lavoro. Three directors were tried at the Old Bailey in 1992 for deceiving the export licensing authorities. The trial collapsed, and the collapse produced the Scott Inquiry.¹²

The Al-Arabi Network

The purchaser was Al-Arabi Trading Company, nominally a private Baghdad firm and in practice the instrument through which the ministry of Hussein Kamel acquired companies in the West. Representative Henry Gonzalez told the House on August 10, 1992, that "the day-to-day operations of the Al-Arabi network were under the control of one of Hussein Kamil's former Secret Security Organization cronies, Dr. Safa Al Habobi." Al-Arabi set up two holding companies in London, the Technology Development Group and the Technology Engineering Group, which held more than a dozen British firms, among them TMG Engineering, Matrix Churchill, AWA Engineering, Admincheck, Investacast Precision Casting, and the Atlas equipment companies. The French arm was Babil International in Paris, of which Habobi was the listed owner. The German arm, TDG-SEG, was in Krefeld. Neither was on the American blacklist in 1992. Habobi was a defendant in the Atlanta bank indictment of 1991.¹³

In the United States the network comprised Matrix-Churchill Corporation, Bay Industries of Santa Monica, and, by Gonzalez's account, METECH of Torrance and the Tigris Trading Company of Pittsburgh. The government blocked the American assets of the first two. The head of procurement in Cleveland was an Iraqi, Saalim Naman, who took calls from Baghdad at home and spoke Arabic in front of his American colleagues. The chief executive, Gordon Cooper, signed commission agreements with Al-Arabi, including one of June 14, 1989, for a brass plant, project U043, with an American customer, SerVaas Incorporated.¹

Secretary of State James Baker signed the documents authenticating the Ohio company on March 14, 1989, so that it could open a Baghdad office, and Lawrence Eagleburger, as acting secretary, signed a further set on May 10. Eagleburger had until that year been an officer of Kissinger Associates, which advised Banca Nazionale del Lavoro. Joseph D. Whitley, who became acting United States attorney in Atlanta on June 1, 1990, withdrew from the bank prosecution the same day because his former law firm had represented Matrix Churchill.¹⁴

The Trial

HM Customs and Excise charged the managing director, Paul Henderson, and two colleagues, Trevor Abraham and Peter Allen, with misdescribing machine tools to obtain export licences. Four ministers, Michael Heseltine, Malcolm Rifkind, Kenneth Clarke, and Tristan Garel-Jones, signed public interest immunity certificates to withhold government documents from the defense. In November 1992 the former trade minister Alan Clark gave evidence under cross-examination by Geoffrey Robertson that undid the prosecution's case, and the trial was abandoned.²

Prime Minister John Major announced a judicial inquiry on November 10 and told the Commons that ministers who failed to cooperate "can expect to lose their jobs." Robin Cook said for the Labour Party: "This is a political scandal, not a legal failure. The deception went right to the top." The writer Anthony Sampson said the affair showed "a deeper dishonesty and irresponsibility than is normal, even in the arms trade." In a parallel case, Paul Grecian of the fuse maker Ordtec, had been convicted at Reading Crown Court and lost his appeal on February 25, 1992, after ministers withheld documents in the same way.²⁵

Credit

The report of Sir Richard Scott found that the Export Credits Guarantee Department had created an undisclosed defence allocation within its Iraqi credit line in September 1985 and enlarged it that December, that Parliament first learned of it through an oblique reference in a departmental memorandum of November 6, 1991, and that Prime Minister Margaret Thatcher initialed a Secret Intelligence Service report on the trade dated November 30, 1987. Scott also recorded that in June 1988 a British company told officials it believed it was making missile parts for Iraq, and that no action followed until late 1989.⁶