April 29, 2008

Vector Energy sold to Chinese spy?

ANY STORM IN A PORT

China's Trojan horse in NZ

[The following story initially ran in the April 06 edition of Investigate magazine, but is directly relevant to the purchase announced April 28, 2008 of Vector Energy's Wellington grid by the same businessman]

The Hong Kong business conglomerate trying to purchase a stake in some of New Zealand's biggest port companies [and now the purchaser of energy company Vector] has been named as a front for the People's Liberation Army of China, and some of its associates have been caught shipping weapons and alleged WMD technology. IAN WISHART has more

 

His name is Li Ka-shing, and if his name sounds like a cash register there's a very good reason: this 77 year old Chinese businessman has just been ranked by Forbes magazine as the tenth wealthiest person in the world, with a fortune estimated at nearly US$20 billion. His companies, including Hutchison Whampoa, account for 10% of the value of the Hong Kong stock exchange and have tentacles that reach across the globe – more than forty countries according to one estimate – and in industries as varied as mobile telephone networks, electricity grids, retailing, shipping and real estate.

Many New Zealanders may have become familiar with Li's work in the sixties and seventies, when his main business was making plastic toys with the infamous "Made in Hong Kong" imprimatur.

But there are two sides to the Li Ka-shing story. One is the traditional fodder of business magazines, lauding the rags to riches story of a billionaire whose father died after the Japanese invasion of China before World War 2, leaving a 12 year old boy with the task of earning enough money to feed his mother and siblings. It's a story of a man making wily business decisions, building an empire and showing aspiring MBA graduates how it's done.

And here's how one of those gushing business stories reads:

"The move by the richest man in Asia and one of the richest in the world to take a stake in the operation of the Port of Lyttelton is one that has potentially great benefits for Christchurch and Canterbury and ultimately the rest of the country," said the Christchurch Press in an editorial mid February.

"There is no need to be starry-eyed about the proposed venture. Li Ka-shing has risen from complete destitution as a refugee who fled the raping and pillaging of China by the Japanese in the 1930s to become a multi-billionaire.

"He did it by being an astute and hard-nosed businessman. He also did it, according to one account in a business journal, by 'remaining true to his internal moral compass' and operating with integrity."

Like we said, that's one side of the Li Ka-shing story.

The other side of Li Ka-shing is much darker, and less likely to be taught in graduate classes. It's the story of a man whose companies are regarded by Western intelligence agencies as nothing more than a money-making front for Chinese military intelligence as China prepares for what it sees as an "inevitable" conflict with the US.

As this 1996 diplomatic cable release by the US Government under a Freedom of Information request shows, Li Ka-shing's businesses didn't make money the hard way.

""Embassy Panama has received information to the effect that HIT (Hutchison International Terminals) is controlled by mainland Chinese, perhaps through a Macao front which allegedly recently invested $400 million in HIT," states the cable. "Such control would have security implications and might affect the Panamanian government's views on awarding the port concessions."

The "mainland Chinese" referred to in 1996 have turned out to be the Chinese Government itself, and more specifically its People's Liberation Army – more of which in a moment, but first some background.

Intelligence agencies have used what they call "arms length" front companies – genuine commercial operations whose owners are sympathetic to a particular cause. Back in the 1970s and 80s, for example, America's CIA set up a global freight airline, Air America, and a merchant banking operation, Nugan Hand Bank of Australia, to help launder money and assist with so-called "black operations" that the US government could not directly be involved in. Discretion, and plausible deniability, required "cut-outs" who could take the heat if discovered. One CIA front company, US accounting firm Bishop Baldwin Rewald Dillingham & Wong, even went so far as to open an office in Auckland in 1983.

But there's one difference between CIA front companies and Chinese ones. Ultimately, the US government takes a major PR-hit when dirty covert operations are uncovered. The Chinese government suffers no embarrassment when caught spying, because of its tight control of Chinese citizens and the lack of democratic accountability.

Investigate enjoyed a world exclusive in March 2000 when it reported that Chinese businessman James Riady, wanted for spying and illegal payments to the US president, Bill Clinton, had been in New Zealand as a guest of the National Government and introduced to Clinton at APEC.

Ever since Clinton was elected to the Whitehouse in 1992, China has bought influence in American politics by using businessmen like Riady and Li to donate to Presidential campaign funds, or the election campaigns of key senators and congress representatives. As a result, when America's lease fell due on the Panama canal in 1999, the Clinton administration let it slide, and Li Ka-shing's Hutchison Whampoa picked up control of the crucial ports at either end of the Panama canal. According to US reports, Hutchison also paid substantial bribes to Panamanian officials to secure the deal.

Amazingly, the deal also allows Hutchison to transfer its control of the Panama facilities to any other organization or country of its choosing, meaning it could – in the lead up to a conflict – effectively place the canal directly and officially in the control of China, allowing Chinese military and naval forces to legally occupy and defend their beachhead in the Americas. Because of the immense strategic importance of the Panama canal, any military attack on it could cause damage making the canal impassable regardless of who controls it, thus limiting US options.

Newssite WorldNetDaily reported a 1995 diplomatic cable from the US Embassy in the Bahamas revealing Hutchison had just been given the go ahead to build a US$88 million container port there. The embassy copied its cable to the Drug Enforcement Agency and US Customs, noting the possibility of a major increase in smuggling through the Hutchison facility.

They were right to be concerned. There are growing reports of a strong Chinese organized crime presence in Panama.

Some analysts fear the US is becoming more vulnerable to "Trojan horses", in the form of cargo or container ships that dock containing weapons of mass destruction and/or short to medium range ballistic missiles, leaving America vulnerable to a surprise attack with no possibility of missile intercept because of the short ranges involved. Indeed, this has been one of the security fears over the past month because of a bid by a Dubai-based company to take control of major US ports – the possibility that weapons of mass destruction could be smuggled in through civilian ports controlled by foreign interests.

Al Qa'ida has already been implicated in smuggling Islamic extremists into the US across the Mexican border, but China is equally active in shipping the ingredients of terror through commercial operators. Li Ka-shing, for example, sits on the board of CITIC, the China International Trust Investment Company, which has also been active in New Zealand business circles and still has a presence here. But US investigations have determined CITIC is also a People's Liberation Army front company, and during the Operation Sidewinder investigations in Canada recently authorities discovered quantities of weapons had been supplied by a CITIC company and stored on Mohawk Indian reservations.

CITIC was also in the news at Christmas after signing a US$900 million contract to build an aluminium smelter in Iran. Aluminium tubing is used in the production of missile technology and nuclear weapons.

China's state owned national shipping company COSCO, again a 50% joint venture partner in some of Li Ka-shing's operations, has been implicated in the sort of activities that would make the CIA blush.

"Both U.S. Senate and Canadian intelligence sources have described COSCO as "the merchant marine for China's military"," reported Canada Free Press last year.

"According to U.S. intelligence reports, COSCO vessels do not just transport Oriental bric-a-brac. COSCO vessels have been caught carrying [two thousand AK-47] assault rifles into California and biological-chemical weapons components into North Korea, Pakistan, Iraq and Iran. Add to these disturbing events that Canadian law enforcement agencies have kicked in with hard-line information that Chinese Triad criminal elements are active in and around Canadian ports."

But it isn't just smuggling items in, there is also the question of Chinese spies operating through front companies to smuggle information and technology out of countries like Canada, the US, Australia and New Zealand – all of which have been named internationally as prime targets for Chinese intelligence.

According to the Canada Free Press report:

"Conspiracy theories were tossed out the window when U.S. Congressman Dana Rohrabacher revealed that the U.S. Bureau of Export Affairs, the U.S. Embassy in Beijing and the Rand Corporation had identified Li Ka-Shing and Hutchison Whampoa (Li's primary business) as financing or serving as a conduit for Communist China's military in order for them to acquire sensitive technologies and other equipment."

But again, Chinese intelligence is one step ahead of the West. Just as Bill Clinton had been paid off in the US in order for China to gain access at the highest levels, so too was the-then Canadian Prime Minister Jean Chretien:

"Former Prime Minister Jean Chretien's connections to the burgeoning CITIC conglomerate served as his entrée into the private sector," says Canada Free Press. "While John Turner was leader of the federal Liberals, Chretien was working for Gordon Securities, one of the many Li-controlled companies on Canadian soil."

According to Canada Free Press, Operation Sidewinder was "sideswiped" after political pressure from Chretien.

With the Chinese military currently embarking on the most rapid rearmament in world history, the involvement of Chinese commercial entities should come as no surprise.

An American Defense Council report published two years ago paints an extremely disturbing picture for the West.

"Li Ka-Shing, the leader of Hutchison Port Holdings (China's primary shipping line), has close ties to the Chinese Communist Party and to the CITIC. The CITIC is believed to serve as a funding umbrella for the Chinese military, supporting the acquisition of military-related technologies. Hutchison Port Holdings manages, operates and is in possession of significant portions of three of the world's top five ports as measured by both the number of containers shipped and total tonnage shipped.

"China's other two huge shipping lines are directly controlled by the Communist Party. One, the China Ocean Shipping Co (COSCO) was described in the Cox Report issued by the US Congress as follows: 'Although presented as a commercial entity, COSCO is actually an arm of the Chinese military establishment'."

According to the Defense Council report, there are 10 strategic global shipping "choke points" that are crucial to US oil and trade lifelines.

"In the last decade, China has succeeded in building, managing or operating strategic ports adjacent to, or, as in the case of the Panama canal, at the entrance and exit of seven of these 10 global shipping choke points."

What has not been widely reported is another paragraph in the Congressional investigation into Chinese spying:

"The Clinton administration has determined that additional information concerning COSCO that appears in the Select Committee's classified final report cannot be made public," concluded the watered down version released by the House Task Force on Terrorism and Unconventional Warfare.

COSCO already has a strong presence in New Zealand, with offices in Auckland and Christchurch and a container line service that runs into Auckland, Tauranga, Napier, Wellington, Nelson, Lyttelton and Port Chalmers. Four of its vessels here, including the Aotea, are Panamanian registered.

While there is no doubt that COSCO routinely ships ordinary freight, every day, as any other commercial business does, there are also days when it ships the extraordinary, as this American news report notes.

"At least three arms shipments were traced from China to the Cuban port of Mariel during the past several months, according to an article Tuesday in the Washington Times. All the arms were aboard vessels belonging to the state-owned China Ocean Shipping Co., or Cosco, U.S. intelligence officials told the newspaper. The explosives were said to be "military-grade" material, the newspaper said.

"U.S. officials said Tuesday that the subject of arms trafficking between China and Cuba is a worrisome one, though they stopped short of confirming the Washington Times account. "We are very much concerned with this PLA [People's Liberation Army] cooperation and movement of military equipment in Cuba," said James Kelly, assistant secretary of state for East Asian affairs, when questioned during a hearing of the House International Relations subcommittee."

Questioning of Li Ka-shing is something Canadian government security advisor Scott Newark would like to do. He told the respected online journal NewsMax.com that a request by Li's Hutchison group to purchase ports in the US be given full congressional scrutiny.

"I'd like to suggest that the appropriate congressional committee hold hearings and that they call Li Ka-shing as the first witness. I volunteer to be second, but frankly there are people far more knowledgeable than me in this regard, including for example the International Association of Airport and Seaport Police, which just held their conference in NYC. As a speaker at that conference I urged ridding ports of such crime and rogue government-connected companies, not making them the local constabulary."

According to NewsMax, Newark identified five critical port security issues: "preventing smuggling of drugs, guns and people; preventing export of stolen products; providing site security as a result of 9/11; preventing terrorism related smuggling; and preventing attacks on ships leaving ports."

To that end, Newark sounds a warning that is relevant for New Zealand authorities as they consider whether to approve a buy-in by Hutchison into Lyttelton and possibly the Auckland or Tauranga ports.

"We need full scrutiny of the principals of Hutchison Whampoa and all of their business or government-related associations, and any history of any activity of them or their associates – including links to organized crime and terrorist groups, activities or states supporting the same – that would raise concerns to any of the above.

"We should give full scrutiny to any relationship of Hutchison Whampoa, its partners, directors or officers with any foreign government that would raise concerns to any or all of the above issues."

If that isn't ringing warning bells at the Christchurch City Council and in the Beehive, it should be, especially as the Li's business partner – the Chinese military's "merchant marine arm" COSCO - is already a big player in New Zealand ports.

Both COSCO and Hutchison have faced this negative publicity overseas. In COSCO's case, it hired one of America's leading public relations companies to spin the strong business and economic benefits of trade with China to the news media and key politicians, while playing down the "unfounded and negative" stories we've just highlighted. According to commentators the PR ploy has worked, with coverage of the company in the US largely restricted to positive business and trade stories in the media.

Nor is Li Ka-shing a stranger to New Zealand business. In Australia, he's the majority owner of Hutchison 3G Mobile, but you might be surprised to learn Theresa Gattung's Telecom New Zealand holds the remaining 19.9% in a joint venture.

Ironically, it was only a decision by US telecommunications regulators to threaten a veto that stopped Li Ka-shing's Hutchison from buying the giant international phone network Global Crossing three years ago. The purchase would have given Hutchison the possible option of eavesdropping on phone and data calls being made on Global Crossing's planet-wide network of undersea phone cables linking all the continents. Global was also bidding for US Defence contracts at the time.

Li's business ventures with the Chinese military include the Guangzhou Aircraft Maintenance Engineering Company, a Chinese air force company 25% owned by Li; and a one-third stake in AsiaSat, also part owned by the People's Liberation Army.

The move by Hutchison Port Holdings Ltd (HPHL) to purchase the Lyttelton Port Company in Christchurch raises some more questions for Helen Clark's Labour Government to answer. HPHL is registered in the British Virgin Islands, the same Caribbean tax haven at the centre of our February story about the New Zealand Labour Party's biggest campaign donor, Owen Glenn. Coincidentally, Glenn is also a shipping handler who's managed to get a rare Class A business licence in China and is said to have influence in Beijing, but whose operations don't appear to stack up based on what Investigate was able to discover. Glenn funneled $500,000 into Labour's election coffers last year.

Is the New Zealand Labour Party receiving money from the Chinese Government through a complex web of shady business figures and front companies? At this point Investigate doesn't have enough information to answer one way or the other, but the magazine's investigations are continuing.

In the meantime, we have discovered Li Ka-shing has reserved the name Hutchison Ports New Zealand Ltd with the Companies Office. The deal relies at this stage on Christchurch City Holdings Ltd acquiring the 31% of Lyttelton port shares that it doesn't already own, and that purchase offer closes on April 8. If CCHL gets the shares it needs, it plans to sell down 49.9% of the port to Hutchison. But Hutchison would get majority control of the company actually running the port on a daily basis, effectively putting the Chinese Government in command of imports and exports out of Christchurch.

The Christchurch Press reports the deal was driven initially by Lyttelton Port Company management, but picked up by Hutchison Port Holdings executive directors Mark Jack and Richard Pearson – both apparently ex-pat kiwis. A search of Companies Office records lists a Mark David Jack, resident in Hong Kong, as sole director of Ardmore Hangars Ltd – set up last year – and Ardmore Aviation Services Ltd, set up in 2003.

We have been unable to confirm any New Zealand directorships for Richard Pearson.

Christchurch mayor Gary Moore has dismissed reported links between Hutchison and the Chinese military as the work of "conspiracy theorists" who'd been listening to a sole US congressman, and Mark Jack has told critics to ignore the bad media and concentrate on the company's economic performance – a carbon copy of the PR stance Hutchison has taken in the US.

But Gary Moore – as provincial local body mayors often are – suffers from not being privy to intelligence. If it was only "conspiracy theory", why was Hutchison forced to back away from Global Crossing? And if Moore is correct about only one congressman raising concerns about Hutchison, why did the South China Morning Post report that Hutchison's paid lobbyists in the US were targeting three, including the then Senate Majority leader Trent Lott and former US Defence Secretary Caspar Weinberger who testified Hutchison's takeover of the Panama canal would pose a security threat to the US?

And if Gary Moore is correct, how does he explain the now-released 1999 intelligence briefing from the US military Southern Command which states: ""Hutchison's containerized shipping facilities in the Panama Canal, as well as the Bahamas, could provide a conduit for illegal shipments of technology or prohibited items from the west to the PRC, or facilitate the movement of arms and other prohibited items into the Americas."?

We put similar questions to a spokesman for Christchurch City Holdings Ltd, the current majority owner of Lyttelton Port Company, and ended up in a slanging match where the response to the allegations was "so what if he is?". The spokesman pointed out that national security issues were something for the Prime Minister to sort out, and Christchurch was only interested in the commercial deal.

The spokesman referred to a statement by a US Clinton administration official in 1999 to the senate hearing that Hutchison Whampoa's operation of the Panama ports would have no impact on shipping movements, and that the company had no known ties to the Chinese government.

However, those claims have already been tackled by the Washington Times' Insight magazine:

"Western policymakers and business leaders have little or no idea of China's grand strategy and how Beijing's leaders want to situate their country for the next century. When, in 1999, Sen. Trent Lott (R-Miss.) sent Insight's report, "China's Beachhead at Panama Canal," to then defense secretary William Cohen, he called for a full national-security appraisal of the problem. Lott told Cohen, "U.S. naval ships will be at the mercy of Chinese-controlled pilots and could even be denied passage. It appears we have given away the farm."

"At Lott's request, the Senate Armed Services Committee held a hearing in which four Clinton-administration witnesses testified that Hutchison Whampoa posed no security challenges to the United States [see "PC Answers on Panama Canal," Nov. 22, 1999]. But not one of the witnesses could answer the fundamental question, posed by Sen. Robert Smith (R-N.H.): "Do you believe the People's Republic of China uses commercial enterprises to advance their military interests?"

"Bill Clinton's assistant secretary of defense, Brian E. Sheridan, who had issued a defense of Hutchison Whampoa, confessed, "I don't know." Alberto Aleman Zubieta, whom Clinton had appointed to run the Panama Canal until 2005, didn't answer either. Neither did Joseph W. Cornelison, the deputy administrator of the Panama Canal Commission, nor Lino Gutierrez [the official referred to by Christchurch City Holdings Ltd's PR man], then principal deputy assistant secretary of state for Western Hemisphere Affairs. All had contradicted their testimony. Only Marine Gen. Charles E. Wilhelm, then chief of the U.S. Southern Command, answered affirmatively to whether Beijing uses commercial enterprises to advance its military interests, saying only: "I think so."

"That was it. And apparently the government has learned little since. "Many of those who are engaged in China policy or who invest there remain blithely ignorant of Chinese goals to replace the United States as the reigning world power," says Thomas Woodrow, a former senior China analyst at the Defense Intelligence Agency."

Lino Gutierrez is the Clinton official whose testimony was used to rubbish suggestions of Chinese government investment. He told the senate hearing:

"Through publicly available information, we have been able to ascertain that neither

Hutchison-Whampoa, nor its subsidiaries Hutchison Port Holdings (HPH) and the Panama Ports Company (PPC), have any significant investment from mainland China."

What isn't clear is how Gutierrez determined that, when many key companies in the group including Hutchison Port Holdings are registered in tax havens so their true ownership cannot be searched.

Investigate did finally get to put a series of questions to CCHL Chief Executive Bob Lineham. The questions, and his answers, are as follows:

  1. How is CCHL satisfied that, even if Hutchison is a front company for the People's Liberation Army of China, that its majority stake in the operating company for the Port of Lyttelton remains a good idea?

Answer from Bob Lineham:

"In the event that Christchurch City Holdings Limited's (CCHL) Takeover Offer for Lyttelton Port Company Ltd (LPC) succeeded, and Hutchison Port Holdings Ltd was introduced into the Port of Lyttelton, the Christchurch City Council would retain control of the Lyttelton Port Company with a 50.1% voting majority (through CCHL) of the shares in LPC.

"The purpose of the new port operating company in which HPH would have a 50.1% share is to operate the Port of Lyttelton. It does not and cannot control the Lyttelton Port Company. With HPH as a port partner, the Port of Lyttelton would be controlled, as it is today, by the people of Christchurch through CCHL and the Christchurch City Council.

  1. How is CCHL satisfied that Li Ka-shing is a legitimate businessman, in the face not only of his vast personal fortune in a socialist country, but also his well-documented ties to communist China and its ruling politburo long before the 1997 handover of Hong Kong? No answer received.
  2. Why is it not strange that a communist state can be home to the world's tenth richest man, without corruption being a factor? No answer received.
  3. In what way has CCHL consulted with the New Zealand government or its officials over the proposed buy in?

Answer from Bob Lineham:

"The introduction of Hutchison Port Holdings to the Port of Lyttelton would be subject to the usual regulatory consents that are required when an overseas company is involved."

  1. Li Ka Shing or companies and individuals associated with him have been implicated in smuggling 2,000 AK 47 fully automatic military rifles into California, and shipping componentry for nuclear weapons to Iran. CITIC, a Chinese Government company that Li helped found and sits on the board of directors of, is building an aluminium smelter in Iran the product of which can be used in missile technology and the production of nuclear weapons. Why are the reputational issues surrounding Li Ka Shing not a concern to CCHL? No answer received.
  2. Why is CCHL not concerned about the fact that Hutchison was prevented from purchasing telecommunications provider Global Crossing in 2003 because of concerns that he was a security threat to the US? No answer received.

And if the Christchurch port administrators are relying on assurances by Clinton administration officials that Li Ka-shing is not a security threat, they could be backing the wrong horse. Sadly, Investigate has reported before on how badly briefed New Zealand officials are on international intrigue. Former National Government Prime Minister Jenny Shipley was given a briefing by Foreign Affairs and Trade on visiting businessman James Riady in 1999 that read like this:

"The Lippo Group is one of Indonesia's largest conglomerates in terms of market capitalisation with estimates of value putting it at having US$11 billion in assets.

"The vision of its founder Mochtar Riady is to transcend the institutional limitations placed upon organisations run in the traditional overseas Chinese pattern and adopt a modern publicly owned and professionally managed pattern of business.

"Mochtar has formed alliances and joint venture partnerships with world class multinational corporations and has high calibre professional management staff working for him.

"The Lippo empire rose out of the success of the Lippo Bank. Unlike just about all other banks in Indonesia its founder Mochtar Riady tended to shun the Suharto connections that for other conglomerates in Indonesia were the keys to success.

"He avoided lending to politically connected groups or to state enterprises and instead built his business on legitimate retail and trade finance."

Yes, well. That's the New Zealand intelligence briefing, but while our diplomats were talking about how politically-neutral and non-crony like the Riadys were, the businessmen themselves were on the run from US justice for illegally laundering $4 million of illegal Chinese government donations to President Clinton's re-election fund.

The saddest part of that story was the information about the Riadys was in the public domain, just as the information on Li Ka-shing is, but New Zealand trade officials chose to ignore it or write it off as "conspiracy theory".

Interestingly, one report from a US Congressional team that visited Panama says "Li Ka-Shing is an investor in the Riady family's Hong Kong China Bank." It is this international game of join the dots that seems too hard for New Zealand officials to understand.

The Riadys were heavily involved with a company called China Resources Ltd, which is also a joint venture partner with Hutchison in the Panama canal. China Resources has long been known as a front for Chinese intelligence, but this too was completely missing from the intelligence briefing given to Shipley. Indeed, judging from their innocuous contents one would have to suspect the briefing was in fact prepared by Chinese intelligence!

"The Lippo Group has a strategic position in China and Hong Kong with substantial investments and relationships with powerful business and government people and organisations.

"It owns 49% of the Hong Kong Chinese Bank with the remaining 51% held by China Resources (Holdings) which is a wholly-owned enterprise of China's Ministry of Foreign Trade and Economic Cooperation."

So despite Christchurch's insistence that New Zealand authorities have it all in hand and that citizens can rest easy in their beds, Investigate is reminded of this news release about the previous Asian-investor golden boy James Riady, issued by the US Department of Justice in 2001:

JAMES RIADY PLEADS GUILTY WILL PAY LARGEST FINE IN CAMPAIGN FINANCE HISTORY FOR VIOLATING FEDERAL ELECTION LAW

WASHINGTON, D.C. - James Tjahaja Riady will pay a record $8.6 million in criminal fines and plead guilty to a felony charge of conspiring to defraud the United States by unlawfully reimbursing campaign donors with foreign corporate funds in violation of federal election law, the Justice Department's Campaign Financing Task Force and the United States Attorney in Los Angeles announced today.

In addition, LippoBank California, a California state-chartered bank affiliated with Lippo Group, will plead guilty to 86 misdemeanor counts charging its agents, Riady and John Huang, with making illegal foreign campaign contributions from 1988 through 1994.

As the world's largest port operator, there are sound economic reasons for Hutchison to operate New Zealand ports. But there appear to be equally sound political and strategic reasons as to why they should not. If the deals proceed, it could turn into yet another political bombshell for the Labour Government to work through, a government that is, itself, close to China.

Posted by Ian Wishart at 12:57 AM | Comments (0)

October 17, 2007

Day of the Jackals: Terror in NZ?: August 00

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There is a scene in the musical Les Miserables, where Marius and his colleagues meet in a crowded café to plot the downfall of the French Government in 1832. Earnest youths with no experience of life believe they can harness public discontent: "Students, workers, everyone, there's a river on the run; Like the flowing of the tide, Paris coming to our side."

Tens of thousands of New Zealanders saw the stage production, and thousands more purchased the CD sound recording. The musical was so popular that Sue Bradford's Unemployed Workers' Rights group cunningly hijacked the premiere of Les Mis at Auckland's Aotea Centre in the early 90s by dressing up in period costume as pitiful French peasants seeking justice and belting out verses of the musical's haunting anthem, Do You Hear The People Sing?

The story behind the book, behind the musical, may have captured the public imagination but it was a heroic, desperate revolution. And it failed. The people never sang, and the revolutionaries were left to the mercy of a merciless French Army.

One is reminded of this while walking into a tightly cosy South Auckland living room on a cold winter night to discover coup-plotters crouched around a table. The room, dimly-lit but a pleasingly-warm cocoon from the season's bite, has barely enough room to swing a cat — yet I note there are several of those there as well.

It could be easy to draw comparisons between the people responsible for the New Zealand Armed Intervention Force, and the students in Victor Hugo's novel, but it would be dangerous to assume their stories might end the same way.

For the first time in modern history, New Zealand's much-vaunted political stability is facing its most serious threat ever — in the opinion of the New Zealand military — but not from a group of angry students, nor from traditional protest movements: instead, this threat is from a group of highly-trained soldiers.

And there's another worrying first in this as well: for the first time ever, a group suspected by police and intelligence agencies of planning terrorist activity has not shied away from police attention, but instead has actively eyeballed the police and threatened them.
One of its leaders has met police commanders in South Auckland and warned them, face to face, that any police attempt to hinder the group or its aims will be met with deadly force: "We will go through you like a dose of salts".

Instead of being arrested and charged with threatening to kill, the New Zealand Armed Intervention Force's only public front, Lieutenant-Commander Kelvyn Alp, remains free to walk the streets. What is so different about the NZAIF that even police, the SIS and the Special Air Service are sitting up and taking careful notice.

And how could it have come to this in Godzone? NZAIF received little media attention last month when one of its members, Jason Thompson, appeared in Court on firearms charges. Its stated aim is "to return power to New Zealanders", and it first came to public attention in February this year when it placed advertisements in the New Zealand Herald calling for military personnel to join it.

Among the many replies it received were two letters from Herald reporters posing as potential recruits and describing themselves as "outstanding" candidates for the private army. Unlike the Daily Mirror's sting operation against Mark Todd, the Herald's was much less sophisticated: after boasting about their combat prowess, the journalists gave the Herald's own PO Box as the return address. The same address the NZAIF was to send its advertising payment to. NZAIF leaders smiled, shook their heads sadly and never bothered to call the eager"recruits" back.

While the news media have largely treated them as "nutters", it's a different story at Police National Head¬quarters, the Ministry of Defence and the Security Intelligence Service. And for good reason: NZAIF's members are mainly ex-Territorial Force and Regular Force soldiers, with the added edge of former Special Air Service troops.

"The Armed Intervention Force is the biggest threat to New Zealand's security since World War 2," says one defence official contacted by Investigate. "As threats go, it beats the s**t out of Indonesia."

Jason Thompson, a Maori, was picked up in what police describe as a "routine traffic stop". When police checked his vehicle they found a sawn-off shotgun inside with military ammunition. At his
subsequent court appearances, Thompson was flanked by up to 10 heavily armed police amid fears that his NZAIF colleagues may attempt to set him free.

"We know they have semi-automatic, and fully auto¬matic military firearms," concedes one top-ranking police officer, "so we are forced to take them seriously, but we tend to believe the threats they're making will turn out to be hot air."

It may not be that simple. The group claims to have just taken delivery of more than a hundred automatic mili¬tary assault rifles and MP5 sub machine guns, A2 gre¬nade launchers and five rocket launchers — to add to an already significant arsenal.

"They get first dibs on weapons on the black market, through their gang connections," says a military intelli¬gence operative. "They are really, really, scary, and they're hard to keep track of because they're nationwide, and half of them act as paid mercenaries overseas so they disappear on foreign tours of duty then resurface months later.

"So many soldiers sort of fall out of the Army and get into the Armed Intervention Force."

And if police anti-terrorist experts regard the group's claims as "hot air", then a litmus test of that theory may be on the horizon. The public spokesman for the NZAIF, Lieutenant-Commander Kelvyn Alp, says his group is planning a show of force in the near future, hitting what he calls "strategic" targets.

"The way we're doing it is perfect. There should be zero casualties, but it'll be a Mexican standoff.

"We have multiple targets. We'll be taking out the en¬forcement arm of the settler Government down in Wellington."

By "enforcement arm" read police and military installations.

The NZAIF claims to be a legitimate army representing a legitimate Government — the 1835 Maori Parliament that provided for a 50/50 power sharing deal between the Con¬federation of Maori Tribes and the British. Although many Maori chiefs later signed the Treaty of Waitangi — which was used by the British to proclaim sovereignty over New Zealand in the name of Queen Victoria — the tribes that refused to sign continued to hold the 1835 document as being the supreme agreement.

But although the Confederation of Tribes is staunch in its claim that Maori still own New Zealand, its army has a more diverse political outlook. Alp, a self-confessed "Maori basher from way back" says the NZ Armed Intervention Force "is for all New Zealanders. We're fighting for the Maori Government because we believe they are the law¬ful Government, but we're not about to let Maori go around killing Pakeha or anything like that.

"Because people want a change. We're not solely for the Maori, we're sort of for everyone. The system is corrupt as hell."

The unit was born in 1996, when Alp left the Army after a run-in with his bosses while training for SAS selection. "There were three of us planning to apply for the SAS. Two of them are in the SAS now, me — I went a different way. But when I got out I was approached by certain individuals who indicated their need for a specific type of unit, hence the AIF was formed.

"They told me they'd been following my progress in the military, and that I had the 'psychological profile' they needed for their unit."

After months of specialised training at the hands of former SAS and Special Forces instructors, the mercenary unit was like a coiled spring.

There were twelve men in the first intake, who found themselves suddenly thrown into combat in a Pacific rim country in the sort of operation they make Rambo movies about:

"We were sent in against this little GI-Joe outfit. Geographically, it wasn't here, but you won't see it on our passports because no one uses passports on special ops. I can't tell you which country it was because that would identify the operation, but it was like a hit and run job.

"We had to attack this unit in this hick town of nowhere — a unit pretty similar to ours — and we'd been briefed that `their presence is a hindrance to the direction the country should be going' — I think I've got the words right — and from that we figured out that these guys were trying to shake that country. On reflection, I suspect those guys were trying to do there what we're doing here and that's why we're really wary now, because those people might have actually been the ones trying to save that country rather than let it go the way of the power boys.

"There was a little bit of resistance, we lost one person."

The NZAIF was dropped in by inflatables to their target, swimming in to take them by surprise in the middle of the night. They left no survivors.

The businessmen who had hired, trained and paid them vast sums of money sent the NZAIF on one other mission, a military target. Alp and his men choppered in to the jungle and marched the last few kilometres, again taking their opponents entirely by surprise. This time there was no resistance.

"They had no idea we were coming. We neutralised everyone and cleared out."

Alp says he and the others were "pissed off" that they weren't allowed to keep the weaponry, but accepted the need for untraceable 'plausible deniability' of the missions.

Having successfully completed two combat operations with only one casualty, the men of the NZAIF believed they would continue to be sent into Pacific troublespots. Instead, they received a final cheque and a "Don't Come Monday" notice, thanking them for their work and informing them they'd no longer be needed.

"We found ourselves thinking 'well, here we are, a well- trained unit, what do we do?' We considered all the options: going to Third World countries, fighting for money, or actually doing something proper, and that's when we decided to start putting this Government in check."

For all Alp knows, his paymasters may have merely been 'fronts' for New Zealand authorities needing mercenaries to carry out some dirty work in our backyard. If that is the case, then it would be ironic that in doing so Dr Jekyll inadvertently created a military Mr Hyde: a bunch of hired guns with a conscience.

"The fight is in this country," Alp remembers the discussion amongst his men. "This country is the one that needs the help. And we started really looking into this country and where it was going. Because being in that world, and understanding what went on and how the things we did changed the way of doing things and changed directions, we thought `F*"", it's going on here!' and then we started realising who was taking over here, what was going on and what it was being fitted for.

"And we've got something the Government can't control: none of us can be bought. If we can put a spoke in the wheel, even if it only stops the machine for a year or two, then I think we'll have done a bloody good job."

The Lieutenant-Commander is passionate about "saving" New Zealand. Like hundreds of thousands of other New Zealanders he is vehemently opposed to the new photo drivers licences, saying that from a military or policing point of view it just makes it easier for "Big Government" to coerce the population into submission.

When you listen to his dismay at the sale of billions of dollars in taxpayer-owned assets without a public mandate, the Government's willingness to hound private individuals to their deaths whilst refusing to accept liability for disasters like Cave Creek or the Hepatitis C bad blood scandal, and the poor treatment of the elderly and infirm, you realise that Alp holds views pretty similar to many New Zealanders. The only difference: he and the rest of the NZAIF have state of the art weaponry that makes the Government take his opinions a lot more seriously than those of the average disgruntled punter.

"They have stripped New Zealand of its assets. All that was left to do was stick an apple in its mouth and serve it up on a plate with garnish. We're on a downward spiral that we have to arrest, and bring New Zealand back up again. But it's not going to happen with these scungy politicians who sit there and say 'we can't'."

Despite freely admitting his own racist attitudes of the past (and police still describe the NZAIF as "an odd mix of white supremacists and Maori radicals"), Alp claims to have received a wakeup call:

"We started seeing a race war — the direction being taken was to create a race war with one ethnic back¬ground pitted against another ethnic background, and while they're at each other's throats concentrating on that, the wankers perpetrating it all are back here carving it all up.

"If you take out the lunatic fringe on each side, like Maori who want to toss out every Pakeha, what you've got left is a whole lot of people who get along just fine when they're not being stirred up."

Alp has plunged tens of thousands of dollars of his own money into the unit, and it earns extra cash to finance its planned revolution by sending some of its conscripts off overseas as mercenaries with armies like the French Foreign Legion or Britain's Sandline, which was active in Bougainville and Sierra Leone.

Alp confirms the NZ Defence Force analysis of the AIF's armament purchasing ability.

"Remember, a lot of our guys are ex-SAS and ex-Army, and they can get things anywhere. But we fund it ourselves — we've never had a penny from the Maori Government. It has all been from our own pockets and private funding — people have helped us out and that."

It is possible that NZAIF members may also be behind the disappearance of large numbers of military weapons from defence bases around the country. Gun dealers have told Investigate of "panic" within the military at the disappearance of machine guns in a break-in at the Devonport Naval Base armoury.

"Whenever the subject is brought up with Navy personnel," remarks one dealer, "I receive a 'knowing look' and no denials — their lips are sealed!"

According to Alp, Jason Thompson was carrying live ammunition and a gun when he was picked up because he was returning from a training exercise. "Almost all of our training is live-fire, because if you train with blanks you get too much of a comfort zone and when the real thing comes along you lose it. If there's a chance you're going to die on a training mission, then you'll be on top of it at all times.

"So it was his turn to play the 'bad guy' for us to stalk and kill, so he was in Hamilton and got pulled up. His son was playing with an imitation gun, so the police - when they saw that - decided to keep searching the car and of course they found the weapon and the military rounds."

Unlike other revolutionary groups, the NZAIF seem sufficiently confident of their firepower that they are not intimidated by the attention they're getting from the police.

"I rang the police as soon as I found out [about Thompson's arrest] and I said 'It's a jurisdictional matter: he's not under your jurisdiction he's under mine. He's quite within his rights to carry that gun and if he could fit a tank in his pocket he'd be quite within his rights to do that.' The Senior Sergeant got a bit smart with me, so I told him which way was up and told him I'd be down in the morning, which I duly did and bawled out the detective in charge of it. I said 'You either hand him back or we're coming to get him back'."

And perhaps that's why police with anti-terrorist training have been appointed to guard Thompson at every Court appearance. Courtrooms are sealed, and security staff with electronic body scanners frisk people entering the courtroom. In the public gallery, undercover operatives from the police Criminal Intelligence Section, CIS, mingle with supporters of the accused, hoping to overhear valuable information but also preparing to leap into action if violence breaks out. All of this, caused by an organisation whose public front — so far — has been limited to two people. One of whom is the vocal, baseball cap wearing, Kelvyn Alp.

"Ah yes," chuckles one CIS officer, "the loquacious Mr Alp".

So why didn't NZAIF bust out their man?

"We were ready to go in the early hours of Monday morning [July 17] to extract him from Waikeria Prison where they were holding him. We got asked by the Maori Government if we would hold, and try and do it legally first. We weren't that happy about it but we agreed.

"Anyway, when it came up in Hamilton District Court the judge said he didn't have the jurisdiction to hear it because it was 'a diplomatic matter' — and that's exactly what he said, in Court. It'll be on the Court record. 'A diplomatic matter'. Which is precisely right. There are two jurisdictions working in this country, only one refuses to recognise the other. Now the Queen recognises it, United Nations, the Hague and Geneva recognise it, it's all down on paper, there's treaties throughout the South Pacific signed with them already — everyone recognises it except these clowns down in Wellington."

Nor does the NZAIF claim to be anti-police or anti-law and-order. "We know there's a need for the police force, but my men are under my jurisdiction, not the police."

The fact that Alp is able to openly boast to police that his group has fully automatic military weapons and is prepared to use them — and is still free to walk the streets — indicates that police are not willing to provoke the NZAIF. Indeed, at one interim court hearing on the Jason Thompson case, the police prosecutor told the Court that the police would have no objection to bail — a concession rejected by the judge.

Waikeria prison had refused to take him back because of the security risk, so Thompson was remanded in custody to the maximum security wing at Paremoremo pending a High Court hearing on the "diplomatic" nature of the case.

Thompson was described in court as "of no fixed abode", because he repeatedly answered police questions with merely his name, rank and NZAIF serial number. He has a home, but Alp claims police still don't know where Th¬ompson was living at the time of his arrest.

"I've told the police that if they move against us they had better be ready," Alp says, "because there's weapons caches all over the place and if they pop one the rest of us will come down on them like a tonne of bricks. We still haven't ruled out going into Paremoremo to get him."

And perhaps that is the reason Alp is still a free man,and the only official word from police is that they are "keeping a watching brief' on the group.

The house is under constant surveillance, the phone is bugged, and CIS officers and regular police have been approaching people in locations as diverse as shopping malls and airports to ask about their connection to Kelvyn Alp and the NZAIF.

The situation is knife-edge sensitive, to the point that one police officer, Brad White, was suspended earlier this year after a CIS/SIS raid on Alp's home in a fruitless search for weapons instead turned up the police officer's wallet. Alp insists White is just "a family friend" who has no involvement with NZAIF. Understandably however, police were taking no chances at the time. It is understood White was cleared and is back on duty. Manukau District police superintendent Ted Cox has since warned his of¬ficers of the dangers of associating with the group.

It was after that raid that Alp gave South Auckland police their first "talking to" and warned them that if they pulled "a stunt like that" again it may have tragic consequences.

"The reason they're s**t-scared and have high security is a: because they know nothing about us — there's no talk on the street about us and their little spies and electronic listening devices will only find out what we want them to know, and b: because we know a hell of a lot about them, their operations, their response times, how they do things, how they enter buildings, who they'll send through first — we know all that.

"I told Ted Cox at the table, 'If you're on one side, and we're on the other, and we come head to head, we'll go through you like a dose of salts. Make no mistake about it.' And I told him that to his face so he was under no illusions. So then they started talking about 'co-existing' and that sort of stuff."

Police, and some "men from the Minister's office" in Wellington, were told in a frank and open discussion that the NZAIF was "not a threat to New Zealand's security, but definitely a threat to the Government's security. A huge threat!"

"So you're anti-Government then?" one official asked.

"Damn right. We want to return New Zealand to New Zealanders. And by that we mean everybody — brown, white, Asian — not you people down in Wellington who are governing illegally."

"What pisses them off about us," claims Alp, "is that they know that we know what's really going on in this country."

"They're afraid of you," another police officer who knows Alp allegedly told him privately. "You know that. We're not used to people who openly state to our faces that they're prepared to use force against the police."

Senior police have told Investigate they have "pretty good" intelligence on NZAIF, but that statement begs further analysis. It wasn't until a suburban newspaper ran a front page story on the existence of the NZAIF on Febru¬ary 15 this year that police suddenly swooped on Alp in the aforementioned raid on February 18.

And NZAIF has taken extra precautions since.

"We've relocated our armouries because the police were getting too close. Once we strap them [the weapons] on to go, it doesn't matter how many Armed Offenders are called or how many police are called, it'll be too late for them to make a difference."

It will be the strength of the NZAIF that determines what happens if it ever comes into conflict with the police or the New Zealand Army.

In a face-to-face interview, away from prying eyes, Alp claims the AIF has more than 1,500 troops loyal to it, both inside and outside the Army. In a later phone call, he is much more circumspect:

"This is for the SIS, who are listening of course," he explains before continuing, "we have elite forces, and we have two sections of 12 — SG1 and SG2 — these are shadow groups, and SG3 and SG4 which are 'green role', jungle, open spaces, that sort of thing. SG1 and 2 are city-trained, so whichever operation you're doing requires different units with different skills.

"Now these break down into 'six and six', so SG1 and SG2 make up one section of 12 and SG3 and SG4 make up another. They never operate as 24 unless it's a really big thing. And then you've got your regulars who are defi¬nitely not as well trained, but they know what they're doing.

"All up, we'd have about a hundred and twenty odd, but they're scattered. As far as weapons are concerned, they're either supplied to us or some of the business people we know buy them for us. But the support in the last three or four months has really grown — just a groundswell of people who've been shafted and who've had enough and they're saying 'just do it'.

"There are going to be people bad-mouthing us on the radio, calling us terrorists — we don't give a s**t! If we took over the country tomorrow, most New Zealanders are so apathetic that they'd grizzle briefly and then get on with their lives."

Alp is adamant the NZAIF has no intention of targeting civilians in any coup attempt.

"Everything we may or may not do in this country, the one thing that is stressed above everything else is zero civilian casualties.

Although we wouldn't put it past them to slip up and blame it on us."

"Our motto is that withdrawal is not an option, we'll do the job or we don't come home from it."

There is always a danger for soldiers for hire that they may die in a doublecross: they raise money by serving as mercenaries overseas, and there is nothing to prevent New Zealand intelligence services from using a front organisation of their own to lure the NZAIF into a job they'll never return home from, wiping out the armed resistance unit in one fell swoop.

On the other hand, it may be too late for that: the NZAIF are claiming they're preparing to launch a military strike in New Zealand shortly. What that may do to the country's international reputation and financial markets, let alone the families of all those affected, God alone knows.

In 1993, a prominent business forecasting group gave TVNZ executives a private briefing on the state of the economy, warning them that conditions were being cre¬ated as a result of economic restructuring that could lead to a civil war in New Zealand within ten years.

Naturally, the well-paid TVNZ executives scoffed at such suggestions: the idea of Sue Bradford leading a revolution clearly didn't seem a goer. But it appears nobody paid enough attention to one of the oldest catalysts for revolution in the history books: if you don't look after your army and pay them well, you end up with highly-trained military personnel with time on their hands, a chip on the shoulder, and nothing to do.

As we pointed out earlier in the article, it would be extremely foolish of readers to underestimate the danger facing the country — especially as the security forces are taking it extremely seriously.

How many SAS crack troops would it take to blow up a New Zealand power station or oil depot? Then ask the question: how many SAS crack troops have joined NZAIF? That's one New Zealand's se¬curity forces still can't answer.

Ask Alp whether history will judge them as extremist terrorists or freedom fighters, and his answer is simple: "I guess that all depends on who wins."

Perhaps the last word should be left to the Prime Minister's Office, which has declined an Official Information Act re¬quest to provide information on the group, on the grounds that doing so "could prejudice national security".


SIDEBAR STORY

A defence intelligence analyst and former New Zealand soldier-turned-author believes an attack by the NZAIF on police or military targets in New Zealand could set off a powderkeg.

Ben Vidgen, whose bestselling book State Secrets was released last year, says NZAIF is not the only heavily- armed group in the country.

His book documents the involvement of the Black Power gang in procuring military weapons from overseas for individuals and groups within New Zealand:

"In 1989 I found myself drawn into the investigation of arms smuggling. I was young and naive, and certainly didn't expect to find myself looking at Maori activists let alone the New Zealand security forces.

"Operation Golden Fleece was the largest low-level intensity warfare exercise that the Defence Department had ever run. My post was the central command post of the exercise's primary support base. My neighbours included Army Intelligence, Army Signals and Air Intelligence.

"I discovered that, as a public relations exercise, the Royal New Zealand Army had invited local North Island chapters of the Black Power gang to play the role of ter¬rorists. It was an exercise that would turn to a disaster - one of the reasons being that the Black Power participants turned out to be too successful in their role.

"When the Army conducts exercises like this, the security forces are expected to 'kill' ten terrorists for every member of the security forces killed or injured in action.

"In Golden Fleece, the ratio of Army KIAs and enemy KIAs worked out at 1:1. In terms of POWs the rebels had won hands down. At the end of the three week exercise the security forces had lost a staggering 200 men which,by Low Level Intensity Warfare standards, is more than double expected levels. The figure would have been even higher except in a number of cases umpires had not been present so the kills were not included in official figures.

"The Black Power made devastating terrorists.

"One such attack landed by the fun-loving lads of Black Power, a simulated bombing, would have - if the umpires had been present - taken out the entire Australian contin¬gent of, if I remember correctly, 70 men.

"The same attack was later inspected by Royal Army engineers and according to an officer speaking from the Army Intelligence corner of the tent the wiring of the device was considered an "extremely professional" job.

"This little piece of information left me viewing the Black Power in a new light. This was not a hotch potch outfit of bikers and misfits, but a highly organised outfit that had demonstrated a high level of military expertise. Where the hell did they get it?

"Black Power was into weapons smuggling. It was also, as I discovered, the common practice to use an assault weapon (such as an AK-47) in gang hits. Such weapons were then passed to fishermen and within 48 hours the weapons in question were leaving New Zealand via Invercargill.

"In 1991 during Operation Ivanhoe this and other reports caused me to ask an Army Intelligence officer if the secu¬rity forces were aware of this situation. The officer in ques¬tion confirmed that this was the case. In fact, he told me one of his friends was an SIS agent who'd been ordered to investigate Black Power's ties to the illicit weapons trade.

"The investigation, however, was abandoned shortly af¬ter the agent stumbled on significant new evidence, and plans to officially notify the police were shelved."

Vidgen discovered first-hand more evidence of criminals having military firepower, soon after he left the army.

"While returning from Christchurch I was stunned to hear the sound of automatic gunfire within the suburb of Addington, located near the headquarters of Highway 61. Within half an hour, the same incident was reported on a Christchurch radio station, where it was described as an incident involving 'an air pistol'.


"The police don't want a public panic on their hands, and they rely on the fact that most eyewitnesses wouldn't be able to distinguish between an automatic and a plastic toy. A gun's a gun's a gun."

Vidgen also reports an interview with an SAS soldier who inadvertently stumbled across a massive weapons cache controlled by cannabis growers in the King Coun¬try:

"There were crates upon crates upon crates of weapons," the soldier confirmed. "They were Uzis, grenades, AK-47s and American stuff."

The soldier defused the situation with the cannabis growers by using his tribal affiliation: they were all Tuhoi.

Vidgen alleges a radical Maori group calling themselves "Te Ahi Kaa", also Tuhoi, disrupted a hui several years ago by telling the gathering they had "large caches of weapons buried all over the country."

Leading criminologist Greg Newbold also backs up Vidgen's allegations, saying "I've talked to people who've gone to big Auckland gangs and found literally a whole house of weapons: rocket launchers, automatics, semiautomatics, rifles, pistols."

From Vidgen's perspective, there is a clear and present danger of all out civil war, if NZAIF begin firing shots in anger at the Government.

"New Zealand is sitting on dynamite at the moment. It's been brewing for years and it's coming to a head. Potentially, if one group with solid military experience successfully takes out a Government unit, you can expect thousands of gang members and others to be on the streets, heavily armed, pretty bloody quickly after that.

"They didn't get to be explosives experts, capable of beating the New Zealand and Australian Armies, by taking patchwork quilt classes. Somebody's been training them."


Posted by Ian Wishart at 08:10 PM | Comments (0)

March 09, 2007

PACIFIC JIHAD: TERRORISTS IN NZ INVESTIGATE: OCT 00

Is the tide of Islamic fundamentalism now washing at our own door? One of the world’s most-wanted terrorists has visited New Zealand without being arrested by security authorities here, despite his involvement in attacks that have killed or injured more than 900 people. BEN VIDGEN and IAN WISHART report:

New Zealand security agencies were placed on high alert prior to the 1990 Commonwealth Games in Auckland after the discovery that Palestinian terrorist leader Abu Nidal was in the country. Security sources spoken to by Investigate confirm the terrorist was "sprung" by a former Israeli security official who was part of a group of Israeli tourists in Queenstown.

And direct confirmation has also come from a Nelson doctor, Neal McCullum, whose Israeli friend was directly involved.

"Our friend, who speaks fluent Arabic, had been in the cafeteria [in Queenstown] when she had overheard some men talking in Arabic and had been disturbed at the nature of their conversation.

"She then approached a member of the tour she was with, a man who’d previously worked in security for El Al [the Israeli national airline], and described what she’d heard."

The security expert observed the group of men for a moment, and then identified one of them as Abu Nidal, the reputed head of the Abu Nidal Organisation. However, the former El Al guard had no desire to become involved in any international intrigue in New Zealand and was reluctant to report it. Dr McCullum says he strongly urged the female Israeli tourist to at least contact New Zealand security agencies, and report the Abu Nidal sighting to the Security Intelligence Service.

The SIS quickly picked up on Nidal’s trail, as he hadn’t yet left New Zealand, and "I was told it was the biggest joint operation involving the SIS, the police and the Army," says McCullum, now living in the lower North Island.

So what happened next? Nothing. Nidal was placed under extensive surveillance but wasn’t touched, "apparently because he was travelling on a diplomatic passport."

But there may be another reason why one of the world’s most-wanted terrorists went unmolested in New Zealand: some intelligence sources claim Nidal was secretly working for the Israelis, stirring up trouble in certain areas that Israel could then use as an excuse for a military strike on Palestine targets.

Before dismissing the idea that Israel’s Mossad intelligence agency could be so devious as to deliberately help an Arab terrorist group in order to further its own agenda, consider this: when investigators probed the collapse of the notorious Bank of Credit and Commerce International in 1991, they found not only evidence that Mossad was banking with BCCI, but also that payments had been made from the Mossad accounts to Sri Lanka’s Tamil Tigers rebels and the Abu Nidal Organisation.

Of course, it is not beyond the realms of probability that Nidal, whose real name is Sabri al-Banna, was being played for a sucker by Mossad.

In an interview with British author David Yallop, Nidal professes a hatred for Israel that seems entirely plausible:

"My family was the richest in Palestine. My father was the richest man. He owned over six thousand acres. His lands reached from south of Jaffa to the Gaza Strip. All that land.

"And all that land was confiscated by the Jews. You tell me. How much of my own land should I accept from the thieving Israeli government in return for giving them this peace?

"Where our orchards were, immigrant Jews now live. The home that I grew up in is now a District Court for the Israeli Army. What should I accept in return for giving these people peace? The ground floor?"

And yet, even Yallop floats the possibility that Nidal was working for Israel.

He recounts an interview with Abu Iyad, the Palestinian terrorist responsible for planning the attack on the Munich Olympic Games in 1972.

"Our discussion moved to how Abu Nidal’s organisation had been penetrated for many years by Mossad," writes Yallop. "Penetrated to such a degree that Abu Iyad, the head of the PLO intelligence and counter-intelligence, with all that implies, told me of his conviction that frequently the targets selected by Abu Nidal have been chosen by Mossad.

"He cited an example of Mossad targeting: Arafat’s PLO representative in London, Said Hammami. ‘At the time of Said Hammami’s murder in January 1978 he was in the middle of very secret negotiations with members of the Israeli government’."

The negotiations, the PLO intelligence chief told Yallop, would have seen a ceasefire in the Palestinian conflict and a recognition of Israel’s right to exist. This scenario was anathema to extremists on both sides who wanted no compromise.

" ‘A long time before Said’s murder he was warned by British Special Branch that he was on Mossad’s hit list. They told him their information came from the CIA. Said was also told by British security that the British Government had warned the Israeli Embassy that all known Mossad agents would be kicked out of Britain if the Israelis started getting the guns out’," Abu Iyad told Yallop.

"The implication was clear," Yallop reports: "Prevented by the British from doing the job themselves, Mossad had whistled up Abu Nidal."

Indeed, despite its public hatred for Israel, most of the Abu Nidal organisation’s attacks have been on the PLO and other Arab terror groups. Some time after his interview with Yallop, Abu Iyad was himself murdered in Tunis - by the Abu Nidal group. In the shifting world of intelligence and Maxwell Smart, enemies today may be friends tomorrow and enemies again by Friday.

An example of Israel’s duplicity is found in testimony by former Mossad agent Ari Ben-Menashe, who reports that Israel, not the Palestinians, was really behind the 1985 hijacking of the cruise liner Achille Lauro.

"That was, in fact, an Israeli ‘black’ propaganda operation to show what a deadly, cutthroat bunch the Palestinians were," he says.

A Palestinian working as a double-agent for Mossad was ordered to suggest "that it was time for the Palestinians to make an attack and do something cruel, although no specifics were laid out.

"Radi [the double agent] passed orders on to [terrorist leader] Abu’l Abbas, who, to follow such orders, was receiving millions from Israeli intelligence officers posing as Sicilian dons.

"Abbas then gathered a team to attack the cruise ship. The team was told to make it bad, to show the world what lay in store for other unsuspecting citizens if Palestinian demands were not met.

"As the world knows," says Ben-Menashe, "the group picked on an elderly American Jewish man in a wheelchair, killed him, and threw his body overboard. They made their point, but for Israel it was the best kind of anti-Palestinian propaganda."

Nor should such skulduggery come as a surprise if you recall the Iran/Contra scandal.

But New Zealand’s decision not to apprehend Abu Nidal may have been pragmatic as well as diplomatic: the repercussions of arresting a leading terrorist would be horrendous for a country not militarily or psychologically prepared for dealing with attacks on its interests overseas.

The fact that one of the world’s leading guerilla commanders could slip into New Zealand, apparently unnoticed by our security teams until a chance tip-off, speaks volumes about our ability to defend ourselves against the wrath of Islamic extremists: it is simply not something New Zealand is ready for.

Nor would it have been easy for New Zealand authorities to arrest Abu Nidal: unless Arabic-speaking witnesses could testify that they heard him planning a crime, whilst in New Zealand, it might still have been difficult capture him even with the legal support of extradition treaties.

Which raises questions over last month’s New
Zealand Herald exposé on an alleged plot
by somebody to blow up Sydney’s Lucas
Heights nuclear reactor during the Olympic Games. "The plot may have been hatched by Afghani sympathisers of Osama bin Laden, the Western world’s most wanted terrorist - a suggestion that is believed to have raised alarm in official circles," reported the Herald in a frontpage "world exclusive" later picked up by major news outlets around the world. "Weekend Herald sources revealed that members of what appears to be a clandestine cell of Afghan refugees in Auckland continue to maintain direct telephone links with suspected terrorist organisations in their strife-torn homeland, including the Mujahadeen, a fundamentalist Muslim volunteer group.

"Detectives in Auckland stumbled on the apparent reactor conspiracy during an investigation into people smuggling by organised crime syndicates. They conducted a series of house raids in March and found evidence suggesting a conspiracy to attack Lucas Heights:

"The lounge of a Mt Albert home was converted into a virtual command centre, complete with conference table and maps.

"A Sydney street map was found with the site of the 1950s era reactor and access routes to it highlighted.

"Entries in a notebook outlined police security tactics, standards and chains of command for the Auckland Commonwealth Games in 1990.

"[There were] signs of a clandestine cell of refugees granted New Zealand residency."

Although four people have been charged with immigration offences, there is not enough evidence to charge anyone with anything more serious - not because the plot itself is not serious but because information on who might be involved is extremely scant.

The paper’s report, by investigative journalist John Andrews, was instantly downplayed by New Zealand’s Deputy Prime Minister Jim Anderton.

Anderton, who sits on the security, intelligence and external relations Cabinet committee, conveniently didn’t bother to explain how a group of Islamic freedom fighters had come into possession of highly restricted New Zealand Police security material, telling the media the story was a beat-up and if there was a real security threat "I would know about it".

While other news media presumed Anderton and the Labour Government’s dismissal of the story was more aimed at avoiding any backlash against the Afghani community in this country, it is also possible that the Government was mindful of New Zealand’s trade interests in the Middle East and anxious not to publicly offend Islamic trading partners by appearing to pay too much attention to the issue.

But despite having little money, police records indicate the 20 or so Afghanis under investigation had recently travelled through Thailand, Malaysia, Indonesia and the Philippines - the latter two countries are both currently dealing with outbreaks of Islamic fundamentalist violence aimed at overthrowing the incumbent governments.

New Zealand intelligence also indicates some of the "cell" members have been photographed carrying AK-47 assault rifles, and that some of the refugees given residency in New Zealand have fought in world hotspots such as Chechyna, Somalia, Bosnia, Iraq, Afghanistan and Sri Lanka.

And what of Osama bin Laden? Officially, he is the most-wanted terrorist on the face of the planet, and it probably isn’t totally a US overreaction. Some of the pictures in this article come from an anonymous website run by Osama bin Laden supporters in London.

Both there, and in published news reports in the mainstream media, bin Laden calls for a new crusade against Western infidels.

"This war will not only be between the people of the two sacred mosques and the Americans," bin Laden told a British TV crew in 1997, "but it will be between the Islamic world and the Americans and their allies, because this war is a new crusade."

In 1998, the Washington Post reported bin Laden’s issuance of a "fatwa", or religious decree, which states: "These crimes and sins committed by the Americans are a clear declaration of war on God, his messenger and Muslims."

Of all of the fundamentalists, bin Laden has shown the greatest propensity for causing maximum loss of life. In short, he has a yen for the spectacular.

In February of 1993 the World Trade Centre in New York was torn apart by a massive explosion. Several Muslim extremists linked to Osama bin Laden were later convicted.

But although the blast caused massive damage, it would have been much worse if it had gone according to plan. The US Court heard that the group had prepared cyanide nerve gas that was supposed to detonate with the bomb and spread across central New York, killing some fifty thousand nearby residents and workers within minutes. Fortunately, the heat generated in the blast was so intense that it incinerated the cyanide gas before it left the building.

Two years later, US investigators caught wind of a plot by bin Laden supporters to plant bombs on 12 airliners over the Pacific Ocean, set to explode almost simultaneously.

Although the plan was foiled, those responsible remain at large.

In 1998, bin Laden’s most devastating strike to date was made against the US embassies in Kenya and Tanzania - more than 5,000 people were killed or injured.

What makes bin Laden difficult to deal with is the fact that he is an extremely wealthy Arab businessman who is choosing to put his money into efforts that previously required financing from Governments like Iraq or Libya.

Although the US has imposed sanctions on Afghanistan and launched retaliatory missile strikes on suspected bin Laden bases there, it is more difficult for Western intelligence to infiltrate an organisation with few ties to any state.

The FBI is also aware that bin Laden’s organisation, al Qaeda, may now have access to nuclear weapons, stating that the group has "made efforts to obtain the components of chemical [and] nuclear weapons.]

To make matters worse, that nuclear weaponry is reportedly less than ten centimetres in length, but capable of generating a blast equivalent to ten tonnes of TNT. Explosive sniffer dogs at airports are not trained to sniff Plutonium.

Earlier this year - predating the NZ Police discovery of the Sydney reactor plot - the FBI issued a worldwide security alert that bin Laden was planning a possible attack on the Olympic Games. Which makes Deputy Prime Minister Anderton and Australian Prime Minister John Howard’s rush to dismiss the signficance of the threat even more inexplicable. What were they expecting, a signed note from bin Laden saying "I’m coming to get you"?

The move to play it down may have far more to do with maintaining public confidence in the safety of major events like the Games, and not creating panic, than simple naivete on the parts of either Anderton or Howard.

As previously reported by Investigate, a massive explosive device was discovered at Auckland’s Sheraton Hotel during the 1995 Commonwealth Heads of Government Conference, apparently aimed at British Prime Minister John Major.

The device was defused without any public reference by Police or the New Zealand Government to its existence. Nor were the news media aware of it.

Despite John Howard’s public utterances however, and refusal to close down the Lucas Heights reactor for the duration of the Games, Australia is beefing up security around it, which they wouldn’t do if they weren’t taking the issue much more seriously than they have indicated to the news media.

Four Blackhawk helicopter gunships are being stationed in proximity to the reactor.

The United States meanwhile is continuing to post a NZ$10 million reward for information leading to the capture and conviction "in any country" of Osama bin Laden or any of his associates pictured above, all of whom are wanted on charges relating to the embassy and World Trade Centre bombings. Full details of the fugitives and the rewards have been posted on a US Government website by the Diplomatic Security Service, at www.heroes.net, which could make for a lucrative payday for somebody.

Given that it is possible that some of bin Laden’s men have been in New Zealand this year, it highlights the fact that the world is getting smaller everyday.

Intriguingly, the FBI reports that a notebook belonging to one of the wanted men contains the names and addresses of three Fijians, and the FBI is warning that bin Laden has built up an "extensive" South Pacific network.

Nor should the emergence of international terrorism on our doorstep come as a genuine surprise to thinking New Zealanders. The Security Intelligence Service is, after all, on record as saying it has twice thwarted attempts by foreign buyers to obtain nuclear weapons material from New Zealanders acting as "middlemen" in the deals.

The country’s "sleepy hollow" image provides a perfect cover for those involved in international intrigue, who want to discuss their global plans as far away from the CIA as possible.

Former NZ Special Air Service commander Alan Brosnan, now an instructor for the US State Department’s Anti-terrorism Programme, says the FBI warning’s about bin Laden’s Pacific plans should be taken seriously.

"He certainly has the motive, and the means, to pull off such an operation."

The New Zealand Special Air Service has already had a taste of what we could be in for - NZ troopers were deployed in a secret mission against the Abu Sayyaf rebels in the Philippines, who also have ties to Osama bin Laden.

One of the SAS soldiers reminded Investigate that NZ and Australia are not far away from the action any more.

References to Islamic extremists in this article do not refer to members of New Zealand’s Muslim community


Posted by Ian Wishart at 02:16 AM | Comments (1)

WILD GEESE: THE WMD HUNT INVESTIGATE: AUG 03

Did the Weapons of Mass Destruction ever exist, or was it just a ruse? JIM LANDERS, IAN WISHART & WILLIAM SHERMAN examine the evidence, the allegations and the fallout from Gulf War 2

In the months before the war with Iraq, the Bush administration argued a rationale for toppling Saddam Hussein that was compelling to a majority in Con-gress and with the American people. Iraq had defied the will of the United Nations for 12 years. Iraq had biological and chemical weapons. It was seeking nuclear weapons. Mr. Hussein was a supporter of terrorism, and – after Sept. 11, 2001 – the United States could not "wait for a mushroom cloud" to appear before acting to eliminate a threat to American security.

Some of those assumptions now are being challenged. Searchers have found no stockpiles of weapons of mass destruction in Iraq. At least some of the intelligence used to justify war has proved false.

The most compelling evidence to come forward regarding Iraq’s nuclear ambitions is from an Iraqi scientist who says the program was dormant but ready to re-emerge once U.N. sanctions against Iraq were lifted.

White House spokesman Scott McClellan has again defended the administration’s rationale for war. He cites Bush’s Oct. 7 speech in Cincinnati, where the president said Iraq possessed biological and chemical weapons and was seeking nuclear weapons.

"The case was very solid about the threat that was presented, particularly in light of Sept. 11," McClellan says.

Gregory Treverton, a former vice chairman of the National Intelligence Council during the Clinton administration, says Bush came up with "a quite stunning doctrine" by mixing two rationales: the need to disarm Iraq and to pre-empt the possibility that it might attack U.S. interests or allies.

"For all its technical wizardry, the U.S. intelligence community still lacks the ability to locate, target and take out some opponents’ weapons of mass destruction capability with any precision.

"Taking out a foe’s WMD [weapons of mass destruction] means, as it did in Iraq, taking out the foe."

Vice President Dick Cheney led the Bush administration’s efforts to explain the doctrine of hitting your enemy before he hits you. In a speech last August in Nashville, he emphasized Iraq’s nuclear weapons program to argue that Iraq posed a threat to U.S. national security.

Cheney said using U.N. inspectors to block Iraq’s weapons programs "would provide no assurance whatsoever," and he argued instead for regime change to stop Hussein from giving such weapons to al-Qa’ida.

"Deliverable weapons of mass destruction in the hands of a terror network or a murderous dictator or the two working together constitutes as grave a threat as can be imagined," said Cheney. "The risks of inaction are far greater than the risk of action."

Less than a week before the war, Cheney added: "We know he’s out trying once again to produce nuclear weapons, and we know that he has a long-standing relationship with various terrorist groups, including the al-Qaeda organization."

WEAK INTELLIGENCE

The key to a decision to go to war was intelligence. So far, critics maintain, the record of intelligence used by both Mr. Bush and British Prime Minister Tony Blair to justify war is not good.

Greg Thielmann, a retired State Department official who evaluated weapons intelligence for Secretary of State Colin Powell until last September, said "Iraq posed no imminent threat to either its neighbours or to the United States."

"Cheney’s argument was basically for pre-emptive war and regime change rather than for disarmament," Thielmann wrote in an e-mail response to questions. "If the U.N. would have been able to resolve the open WMD questions – and it was making progress – Cheney would have still favored pre-emption and regime change.

"But the American people wouldn’t accept that as justification for war, so he needed to scare them with a bogus nuclear weapons charge and anger them with a spurious al-Qaeda link. It worked."

Needless to say, Cheney’s spokeswoman dismisses Thielmann’s remarks as "nonsense."

"We’re confident that Saddam Hussein had weapons of mass destruction," says Jennifer Millerwise, the vice president’s press secretary. "He even has a history of using them."

The intelligence on Iraq’s nuclear weapons program includes several strands of information. President Bush cited Hussein’s published exhortations to scientists he called his "nuclear mujaheddin" to get on with the mission.

NUCLEAR QUESTIONS

Before going back into Iraq this year, the International Atomic Energy Agency was concerned about satellite photos showing new construction at sites used in the past for nuclear weapons programs.

In 1998 and 1999, Iraq attempted to purchase from Germany 120 highly sophisticated electrical switches as spares for six lithotriptor machines used to treat kidney stones with ultrasonic waves.

Kelly Motz of Iraq Watch, a nonproliferation group, said the switches also could be used to trigger the precise detonations needed to initiate the explosion of a nuclear bomb.

The two incidents most often cited by the Bush administration and the British in arguing Iraq was still pursuing a bomb concerned Iraqi efforts to acquire uranium in Africa, and its purchase of sophisticated aluminium tubing to use in uranium enrichmnt centrifuges.

Powell stressed the acquisition of such tubes as evidence of Iraq’s nuclear ambitions in his address to the U.N. Security Council last February.

Thielmann and the IAEA have said the tubes were most likely for Iraq’s artillery rockets and were not well-suited for uranium enrichment.

Powell noted the disagreement at the United Nations but would not let Iraq off the hook, saying the tubes could be adapted for centrifuge use and were banned by U.N. sanctions.

CIA Director George Tenet last month said the agency got fragmentary reports late in 2001 and early in 2002 that Mr. Hussein was trying to acquire raw uranium in Africa.

At the CIA’s request, former U.S. Ambassador to Gabon Joseph Wilson traveled to Niger to investigate. He found nothing to confirm the reports.

The British government, meanwhile, also received reports that Iraq was trying to acquire uranium in Africa. It has not divulged its source for this information.

Bush referred to the British finding in his State of the Union address. Last month, Bush conceded the reference to Niger should not have been in the speech, and Tenet has taken responsibility for not having the reference removed.

FORGED DOCUMENTS

Last March, the International Atomic Energy Agency said documents it received from the CIA detailing Iraqi efforts to acquire uranium in Niger were forgeries.

Britain is standing by its report. National Security Adviser Condoleezza Rice has noted that the CIA had received other reports of Iraqi efforts to acquire uranium involving Somalia and the Congo.

Tenet said the CIA’s belief that Iraq had reconstituted its nuclear weapons program rested on six assumptions that did not include the reports concerning efforts to acquire uranium in Africa.

The most compelling evidence that Iraq was still interested in acquiring nuclear weapons emerged last month, when Dr. Mahdi Shukur Ubaydi, a top Iraqi nuclear scientist, came forward with blueprints and components for uranium enrichment he had buried in his yard.

The CIA says Dr. Ubaydi had kept his information from International Atomic Energy Agency inspectors when they questioned him. He said the items were part of "a secret, high-level plan to reconstitute the nuclear weapons program once sanctions ended."

Bush, Cheney, Tenet, Defense Secretary Donald Rumsfeld and other senior administration officials argued before the war that Iraq had already reconstituted its nuclear weapons program and had stockpiles of chemical and biological weapons.

The Army and Marine Corps assumed in their battle plans that Iraq would use such weapons against U.S. troops. It was one of the reasons speed of attack had such a high premium in Gen. Tommy Franks’ war plan.

PLANS, NOT STOCKPILES

Rep. Jane Harman, D-Calif., the ranking minority member on the House Intelligence Committee, was in Baghdad last month with other panel members and met with David Kay, head of the U.S. military’s weapons search effort.

"They are confident that they will find the WMD programs, and I believe them," she says. "But they’re less confident that they will find stockpiles."

Harman says it now appears that Hussein kept intact cadres of scientists who had worked on weapons’ programs and limited production capabilities but perhaps no stocks of the weapons themselves.

That would undermine some of the assumptions of Western intelligence agencies.

Tony Blair, in the forward to a British white paper on Iraq’s weapons programs, declared Hussein’s military planning "allows for some of the WMD to be ready within 45 minutes of an order to use them."

Bush argued his case for action on Oct. 7 in Cincinnati.

"Some ask how urgent this danger is to America and the world. The danger is already significant, and it only grows worse with time. If we know Saddam Hussein has dangerous weapons today – and we do – does it make any sense for the world to wait to confront him as he grows even stronger and develops even more dangerous weapons?" - JIM LANDERS

There is a saying in the Arab world that Saddam Hussein was reportedly fond of quoting: "My en-emy’s enemy is my friend." During the first Gulf War back in 91, Saddam made it clear - firstly - that he had no friends, and secondly that given that particular twist of fate he had a wide range of enemies he could manipulate to suit his purposes on any given occasion.

Saddam’s shifting allegiances during his political career are legendary, and testimony to his willingness to use anyone or any organisation that he feels could assist his interests.

That background is worth bearing in mind as investigators try to sift through the wreckage of Iraq, looking for what appear to be non-existent weapons of mass destruction.

As the United States first prepared for conflict with Iraq a year ago, it gave three main reasons in support of a pre-emptive strike against Baghdad. Firstly, claimed President George W. Bush, Iraq possessed chemical and biological weapons of mass destruction. Secondly, claimed Vice President Dick Cheney as recently as March 16, Iraq was "trying once again to produce nuclear weapons", and further that Iraq had "reconstituted nuclear weapons."

Thirdly, the US and Britain both warned that Saddam Hussein’s regime posed a clear and present danger to world security because of its links to terrorist organisations like al Qa’ida and its ability to provide weapons of mass destruction to such groups.

So how accurate were those claims?

IRAQ’S BIOCHEMICAL WEAPONS

Leaving aside the daily media fixation with the lack of evidence discovered post-war, the real question isn’t so much "Did WMD ever exist?", as it is "What happened to Iraq’s WMD?".

As previously reported, Iraq’s WMD programme goes back prior to Saddam Hussein’s takeover in 1979, with the purchase of billions of dollars in weapons systems and technology from France and Germany. Hussein also converted the country’s civilian nuclear programme to a military one, and hired former Nazi scientists who’d designed the poison gas systems for Auschwitz to work on chemical weapons for use against Israel.

Iraq manufactured and deployed nerve gas agents against invading Iranian troops in the Iran/Iraq war of the 1980s, and against Iraqi civilians in the Kurdistan province, killing thousands.

Despite continuing criticism of the lack of evidence, Iraq’s possession of biological or chemical weapons still appears highly likely if not certain. The reasoning for such a claim is simple:

The chemicals are simple to make, using ordinary agricultural products. Additionally, US forces and media discovered hundreds of brand new chemical warfare protection suits that had been issued to Iraqi troops - suits that would not have been necessary unless the possibility existed of chemical warfare.

While a strong argument can be made that no weapons have been found and therefore they cannot exist, at the time of going to print the US still hasn’t found Osama bin Laden after two years of searching, but that does not prove that he doesn’t exist.

IRAQ’S NUCLEAR AMBITIONS

The second claim centred on Iraq’s alleged nuclear weapons programme. Iraq had been working on atomic bombs right up to the end of the 1991 Gulf War. The real question was not whether Iraq had lost the urge to obtain "the bomb", but whether it had lost the ability.

Hans Blix, the Swede placed in charge of the UN Weapons Inspection process last year, had previously been in charge of the International Atomic Energy Agency throughout the period that Iraq had been using its IAEA-inspected facilities to secretly manufacture nuclear weapons. In other words, say critics, Blix was a hopeless inspector first time around and unlikely to have improved this time.

But Anglo-American claims about Iraq’s nuclear capabilities this year appear to have been based on forged documentation suggesting Iraq had tried to purchase uranium from the African country, Niger.

While anti-war protestors immediately tried to pin the forgeries on the Bush administration, it now appears Britain and the US were the victims of a French practical joke.

Niger, a former French colony, runs its uranium mining operations in association with a French Government agency. According to UK press reports, the original tip-off about Niger and Iraq came to Britain’s MI6 directly from the French secret service, the DGSE.

Was it a deliberate attempt by the French to mislead the British about Iraq? As previously reported in Investigate, Iraq’s initial nuclear weapons programme was based entirely on French military and nuclear technology and assistance.

Reeling from the backlash over the Niger claims, the White House has released portions of a classified document in attempt to show why speechwriters included a now-disputed line in President Bush's State of the Union address relating to weapons of mass destruction in Iraq.

The line reads: "The British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa."

In the latest round of intelligence agency backside-covering that’s followed this controversy, the CIA has admitted it didn’t want the reference to Niger included in presidential briefings because it wasn’t convinced of the veracity of the reports. The agency has however maintained that evidence does exist about Iraqi efforts to obtain uranium elsewhere in Africa.

To that end, the US has released portions of the previously classified document summarizing six intelligence agencies' views and findings, called the October 2002 National Intelligence Estimate [NIE], concluded there was "compelling evidence that Saddam is reconstituting a uranium enrichment effort for Baghdad's nuclear weapons program."

Questions remain unanswered however about how much the White House knew and when. US national security adviser Condaleeza Rice denies concerns were raised about the uranium reference.

"If there was a concern about the underlying intelligence there, the president was unaware of that concern and as was I," she said in a July 11 press briefing.

But, as WorldNetDaily.com reports, documents emerged last week that cast doubt on her explanation.

"According to a memo sent to Rice on Oct. 6, the CIA warned her the uranium charge suffered from a "weakness in evidence." CIA Director George Tenet also tried to wave Rice's deputy Steve Hadley off the charge in several phone calls. On Oct. 7, Bush dropped the allegation from a speech he delivered on Iraq in Cincinnati. Three months later, it reappeared in his State of the Union speech.

"Rice has yet to explain the inconsistency presented by the memo," reports WorldNetDaily.

"She also has maintained that the U.S. National Intelligence Estimate, or NIE, on Iraq – a 90-page Top Secret report prepared by the U.S. intelligence community, and sent to the White House on Oct. 2 – did not raise doubts about the uranium evidence.

"If there were doubts about the underlying intelligence to that NIE, those doubts were not communicated to the president, the vice president or to me," Rice said on July 11.

"And in a June 8 ABC News interview, she said, "The intelligence community did not know at that time or at levels that got to us that there were serious questions about this report."

"But her remarks are at odds with the facts. The six intelligence agencies that prepared the NIE, which was sent to Rice's office, had so little faith in the veracity of the uranium reports that they voted unanimously to leave it out of the NIE's conclusions, or "key judgments," which were recently declassified. WorldNetDaily obtained a copy of them from the NSC.

"In fact, they are conspicuously absent from the list of evidence supporting the key judgment that "Saddam [Hussein] is reconstituting a uranium enrichment effort for Baghdad's nuclear weapons program."

The NIE report in fact says:

"Most agencies believe that Saddam's personal interest in and Iraq's aggressive attempts to obtain high-strength aluminum tubes for centrifuge rotors – as well as Iraq's attempts to acquire magnets, high-speed balancing machines, and machine tools – provide compelling evidence that Saddam is reconstituting a uranium enrichment effort for Baghdad's nuclear weapons program. (DOE agrees that reconstitution of the nuclear program is under way, but assesses that the tubes probably are not part of the program.)"

In other words, although Iraq had clear intent to develop nuclear weapons, it probably had not done so by the time war was declared.

It should be noted however that with nuclear material readily available - as both Iran and North Korea have illustrated - it may well only have been a matter of time before Baghdad re-entered the atomic arms race.

IRAQ’S LINKS TO AL QA’IDA

Another purported justification for war was on the alleged links between Iraq and al Qa’ida.

When the World Trade Centre was blown up in 2001, the Bush administration initially rubbished suggestions of a link to Iraq.

For a start, most of those responsible were Saudi Arabian, and there was little evidence linking Saddam Hussein with Islamic extremists like al Qa’ida.

Some, however, are not so sure. Gilbert Merritt, a US federal judge working to help establish a new justice system in Iraq, claims to have been given documents indicating a direct relationship between Baghdad and Osama bin Laden. Nor is Merritt a Bush-nominated "hawk" - he is in fact a "Democrat and a man of unimpeachable integrity", according to US media reports. Merritt told of one document he was given in June:

"The document shows that an Iraqi intelligence officer, Abid Al-Karim Muhamed Aswod, assigned to the Iraq embassy in Pakistan, is "responsible for the coordination of activities with the Osama bin Laden group.’’

"The document shows that it was written over the signature of Uday Saddam Hussein, the son of Saddam Hussein. The story of how the document came about is as follows.

"Saddam gave Uday authority to control all press and media outlets in Iraq. Uday was the publisher of the Babylon Daily Political Newspaper.

"On the front page of the paper’s four-page edition for Nov. 14, 2002, there was a picture of Osama bin Laden speaking, next to which was a picture of Saddam and his ‘’Revolutionary Council,’’ together with stories about Israeli tanks attacking a group of Palestinians.

"On the back page was a story headlined ‘’List of Honor.’’ In a box below the headline was ‘’A list of men we publish for the public.’’ The lead sentence refers to a list of ‘’regime persons’’ with their names and positions.

"The list has 600 names and titles in three columns. It contains, for example, the names of the important officials who are members of Saddam’s family, such as Uday, and then other high officials, including the 55 American ‘’deck of cards’’ Iraqi officials, some of whom have been apprehended.

"Halfway down the middle column is written: "Abid Al-Karim Muhamed Aswod, intelligence officer responsible for the coordination of activities with the Osama bin Laden group at the Iraqi embassy in Pakistan.’’

Circumstantial evidence, yes. Smoking Gun? Not quite, but it should be a warning to doubters that the burden of proof for both sides is significant.

Some investigations have previously tied Iraqi intelligence agents to the 1993 attempt by Ramsi Yousef to blow up the World Trade Centre (also in collusion with al Qa’ida) and the 1995 plot to hijack 11 aircraft over the Pacific - that plot coming to light after Yousef’s arrest in the Philippines.

But where the anti-war movement may yet gain the strongest traction is over the status of Iraq’s oilfields. US journalist Paul Sperry, in a new book called Crude Politics: How Bush’s Oil Cronies Hijacked the War on Terrorism, argues that although not the overarching motivation, the oil lobby has manipulated events to take maximum advantage of the situation.

Sperry cites a report to a White House energy task force back in April 2001, which ‘recommended considering a "military" option in dealing with Iraq, which the report charged was using oil exports as a "weapon" by turning its spigot on and off to "manipulate oil markets".’

As if such price fluctuations and speculations are not already inherently part of the global oil market, fuelled in a large part by Western financial markets trading in oil futures.

"The report advised the Bush administration," says Sperry in a WorldNetDaily report last month, "to - at a minimum - bring UN weapons inspectors back to Iraq and then, ‘once an arms control program is in place, the United States could consider reducing restrictions on oil investment inside Iraq’ to gain greater control over the reserves and ‘inject’ more stability into world oil markets."

JudicialWatch, an organisation dedicated to acting as a public watchdog on major issues in the US, has also recently obtained pertinent documents in the case, including a map of the Iraqi oil fields presented to the Energy task force. - IAN WISHART

In the hunt for Saddam Hussein’s billions, investigators have identi-fied five networks of more than 100 companies used to launder money skimmed from Iraqi oil sales. Saddam’s gangster regime set up shell companies in Switzerland, Jordan, Lichtenstein, Luxembourg and Panama, according to investigators.

Those company networks and their banking affiliations were used to enrich the former Iraqi strongman, his sons Uday and Qusay, and other family members.

"Ultimately, the money was stolen from the Iraqi people," says Taylor Griffin, spokesman for the Treasury Department, which is heading the government’s laundering probe along with U.S. Customs, the Secret Service and various intelligence agencies.

Last month, investigators isolated US$1.2 billion in previously unknown assets outside Iraq. The assets include cash, real estate and diamonds held in the names of the companies controlled by Saddam.

With names like Jaraco SA and Dynatrade SA, the companies used major banks in Switzerland, France, Russia, Egypt and the United Arab Emirates to conduct transactions, according to investigators.

The intricate web was managed at the top by about 20 of Saddam’s relatives and friends, who spent most of their time outside Iraq.

The mastermind of this vast criminal enterprise was believed to be Saddam’s half-brother, Barzan Ibrahim Hasan al-Tikriti. Now in American custody, he could provide a road map to Saddam’s hidden wealth.

Hasan, the Five of Clubs in the U.S. deck of most-wanted Iraqis, was Iraq’s ambassador to the United Nations in Geneva for 10 years, ending in 1998.

During that time, he helped set up and manage a money-laundering network that was among the most sophisticated in the world, say investigators.

A second manager was Tariq Aziz, Iraq’s Foreign Minister, according to a Treasury Department source. Aziz, also in U.S. custody, traveled widely under diplomatic immunity.

Estimates of the hidden loot range as high as US$40 billion, but Saddam’s personal trove "is in the single-digit billions, not more than 10," according to investigator John Fawcett.

"I’m kind of conservative in calculating his wealth," says Fawcett, who has focused on Saddam’s finances for more than three years, most recently on behalf of Kreindler & Kreindler, a Park Avenue law firm.

The firm is trying pinpoint the links between Saddam’s assets and financing of al-Qaida. Once identified, those assets could be seized, recovered in court proceedings and distributed to families of those who died in the Sept. 11 terrorist attacks.

"We think Saddam’s laundered money was used in part to provide financial support to al-Qaida, and we’re looking at billions of dollars hidden in financial institutions and companies," says lawyer James Kreindler.

One clue as to the size of Saddam’s laundered legacy was found last month - US$780 million in makeshift vaults in a palace compound and another cache of $112 million found in dog kennels on the grounds.

The cash was in $100 bills, and in the dog kennels there were 200 aluminum boxes with $4 million in each box, all sealed with tags reading Bank of Jordan.

Customs and Secret Service agents in Baghdad are tracing the serial numbers to learn the origin of the bulk cash shipments, said Customs spokesman Dean Boyd.

The serial numbers on the bills will reveal which U.S. bank first received the cash from the Federal Reserve. From there, it may be possible to trace how the money got to Saddam’s palace.

"We’ve also uncovered a lot of documents on Saddam’s financial apparatus," Boyd says. For more than 20 years, Saddam skimmed 5 percent of just about everything that moved in and out of Iraq.

"Kickbacks were everywhere," claims Fawcett.

Sulfur and fertilizer exports and imports of tobacco and alcoholic beverages were among the items subject to the rakeoff, according to the British Foreign Office and the Coalition for International Justice.

The rakeoff in 2000 alone included monthly imports of 300 million cigarettes, 38,000 bottles of whiskey, 230,000 cans of beer, 120,000 bottles of vodka and almost 19,000 bottles of wine, according to Peter Hain, a British foreign office official.

Saddam also fleeced pilgrims to Iraqi Shiite shrines in the holy cities of Najaf and Karbala, making them travel in buses owned by the Al-Hoda company, controlled by Uday Hussein, and stay in designated hotels.

A nine-day pilgrimage costs at least $900, much of which went to Saddam’s family, according to the coalition.

But the principal source of the regime’s skimmed revenue was oil exports, including more than US$6.6 billion from the United Nations-sponsored oil-for-food program, General Accounting Office investigators found.

That program involved a direct exchange of exported Iraqi oil for food and medicine. It was part of U.N. sanctions imposed on Iraq after the 1991 Gulf War to prevent the diversion of oil proceeds to weapons.

In the last five years, the regime managed to duck the U.N. sanctions with a large-scale smuggling operation involving shipments through Jordan, Syria, Turkey and Persian Gulf countries.

During March 2002, Iraq smuggled out between 325,000 and 480,000 barrels a day, according to the General Accounting Office.

Barges, tankers, pipelines and trucks were used to get the oil out past U.N. inspectors’ scrutiny, and at one point, an estimated 45,000 Turkish truckers were on the roads, loaded up with oil, the agency said.

Until the sanctions were imposed, Iraqi oil exports were not monitored, and all were subject to the 5 percent kickback. In the early years of Saddam’s 25-year reign, Iraq exported as much as 3.2 million barrels per day.

The kickback-laundering system is essentially quite simple. Oil buyers, whether companies or countries, bought Iraqi oil from Saddam-controlled trading companies located outside the country.

The trading companies would forward 95 percent of the money to the Iraqi oil ministry and send Saddam’s 5 percent to shell companies outside Iraq, investigators said.

Directors of those shell companies would deposit the 5 percent in company bank accounts, and the money was effectively laundered. Swiss and French lawyers did the paperwork.

Gold, artworks, hotels, construction and metal fabrication concerns, money market accounts, commodity trading companies and publishing are among Saddam’s laundered investments.

Kroll Associates, a private investigative company, and the International Campaign to Indict Iraqi War Criminals, a U.S.-funded organization based in England, have identified other key figures in the financial network.

Hussam Rassam, a 67-year-old Iraqi businessman who established residency in Switzerland in 1987, was the administrator of the Saddam family pension fund, valued at $41.6 billion in 1990, according to a Kroll report.

Hussam "was appointed (administrator) in 1989 after the execution of his predecessor for skimming funds," said the report.

A telephone call to Hussam’s home in the Swiss Canton of Vaud was answered by a French-speaking woman who told a reporter, "Mr. Hussam isn’t here."

Whether Saddam and his sons are alive remains an open question, but it’s unlikely they could ever again enjoy their over-the-top opulent lifestyles.

Previously frozen Iraqi assets include $20 million in the Cayman Islands, $85 million in the Bahamas and $14 million in Japan.

"What’s the total, and where is it all?" asks Griffin. "I wish I knew." - WILLIAM SHERMAN


Posted by Ian Wishart at 12:54 AM | Comments (0)

ALL THE PRESIDENT'S MEN INVESTIGATE: MARCH 00

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A major weakness has been discovered in New Zealand’s foreign intelligence analysis: trade officials invited a rich Asian businessman to invest here and meet the Prime Minister and top business leaders - apparently unaware that he has been publicly named by US intelligence agencies as a Chinese spy with organised crime connections. Now a photo of him meeting President Clinton at the APEC conference in Auckland is causing uproar in the US. IAN WISHART reports on the so-called "Bamboo Network":

It is a postage-stamp sized photo – a moment in time
captured on videotape at the APEC conference in
Auckland, beamed via satellite to the Fox TV news centre in Los Angeles, broadcast on Fox News across America, recorded on someone’s VCR, photographed off the screen, scanned into a computer and uploaded onto the Internet. What’s so special about the photo? Well, for a start it features Bill Clinton pressing the flesh of someone in the crowd at the APEC conference in Auckland last September, only this time it isn’t a cigar-lovin’ intern. Instead, the other face in the photo belongs to someone much more interesting: an Indonesian businessman with links to New Zealand, organised crime and Chinese Intelligence.

What’s also special about the photo? Well, the same week that Investigate began making inquiries to locate the original APEC video footage taken in New Zealand, the raw footage disappeared from TVNZ’s tape library and has not been seen since.

But it’s the man in the photo that this story is about. His name is James Riady, and to those in the know he currently heads the list of America’s Most Wanted – an alleged criminal on the run from US Justice. And that’s why the photo is at the centre of a political furore in the United States: why is President Clinton exchanging pleasantries in Auckland with a wanted man?

Funnily enough, it’s the same question asked in New Zealand back in June 1999, when Riady first turned up for a special meeting with Prime Minister Jenny Shipley.

It should have been just another unnoticed thread in the rich tapestry of New Zealand politics, but the Indonesian’s fleeting appearance in our corridors of power had all the subtle discretion of a glow-in-the-dark cat collar.

Riady heads the Lippo Group, one of Indonesia’s largest companies - but a company with heavy organised crime connections.

The New Zealand Government agency Tradenz extended the invitation for the June visit with a little-publicised announcement that Riady would receive a "red carpet" welcome in New Zealand. That welcome included a special meeting with Prime Minister Shipley, and a series of meetings with leading New Zealand business executives.

What’s extremely significant is that Riady, and his company, are at the centre of a major spying and bribery scandal that’s blown up around US President Bill Clinton.

Amazingly, New Zealand’s intelligence agencies had failed to brief Prime Minister Shipley on this point, despite a claim by to the contrary in Parliament. The closest the intelligence briefings – released to Investigate under the Official Information Act - get to the real Riady is this:

"Most important of all to the Riady family in business are relationships and networks."

As you’re about see, that comment is a dramatic understatement, and we’ll examine shortly how Lippo Group’s incursions into New Zealand and Australia could have security implications.

The latest twist in the Riady scandal comes in a letter from US Congressional investigator Dan Burton to Beth Nolan, legal Counsel to the President.

"Upon President Clinton’s return from his trip to New Zealand for the annual meeting of the Asian Pacific Economic Cooperation (APEC)," writes Congressman Burton, "I was dismayed to read the following report from the Wall Street Journal on September 24, 1999:

" ‘TOGETHER AGAIN: James Riady, the Indonesian businessman central to Donorgate, used an economic summit in New Zealand last week to chat with Clinton. The White House won’t talk about it, but Indonesians say Riady didn’t discuss anything "sensitive" with the President.’

"If the report is true," continues Burton, "I am concerned that the President would meet with an individual who has continued to evade questioning by the Congress and the Department of Justice about his pivotal role in the campaign finance scandal that came to light just prior to the President’s re-election in 1996.

"As you are aware, Mr Riady was recently named by John Huang as the architect of a massive scheme of illegal conduit political contributions in the United States.

"I cannot understand what purpose would be served by the President meeting with Mr Riady except to urge him to cooperate with Federal investigators.

"From his home in Indonesia, Mr Riady appears to have orchestrated a complex scheme to launder over $4 million (NZ$8 million) in illegal political contributions to Clinton/Gore ’92, the Democratic National Committee (DNC), the Democratic Senatorial Campaign Committee, state Democratic parties, individual candidates, and non-profit groups in 1992 and 1996."

We’ll return to Burton’s letter shortly, but first a little background context. Here’s the story the New Zealand press gallery didn’t tell you about Riady, and the story the Government didn’t know either.

To put what follows in its proper context, it pays to
first examine James Riady, and his father Mochtar,
the way New Zealand officials see them.

"The Lippo Group is one of Indonesia’s largest conglomerates in terms of market capitalisation with estimates of value putting it at having US$11 billion in assets.

"The vision of its founder Mochtar Riady is to transcend the institutional limitations placed upon organisations run in the traditional overseas Chinese pattern and adopt a modern publicly owned and professionally managed pattern of business.

"Mochtar has formed alliances and joint venture partnerships with world class multinational corporations and has high calibre professional management staff working for him.

"The Lippo empire rose out of the success of the Lippo Bank. Unlike just about all other banks in Indonesia its founder Mochtar Riady tended to shun the Suharto connections that for other conglomerates in Indonesia were the keys to success.

"He avoided lending to politically connected groups or to state enterprises and instead built his business on legitimate retail and trade finance."

Yes. Well.

The real story, shorn of its diplomatic awe, begins 22 years ago with a 1978 move by the Bank of Credit and Commerce International, BCCI, to become established in the United States.

BCCI subsequently crashed in 1991 when a multi-territorial investigation revealed its connections to organised crime, arms smugglers and intelligence agencies. Investigators have since dubbed it "the Bank of Cocaine and Conmen International".

Formed by a Pakistani businessman and marketed as "an Arab bank", BCCI used a group of American investors as a front to purchase two US banking institutions - the National Bank of Georgia, and Financial General Bank in Washington DC. Because of foreign ownership restrictions, BCCI could not appear to be the real owner of the banks.

Assisting BCCI in this subterfuge was Jackson Stephens, an Arkansas stockbroker based in Little Rock. Stephens brought in three lawyers from Little Rock’s Rose Lawfirm: Hillary Rodham Clinton, Vince Foster and Joseph Giroir.

The Clinton connection - as you’ll see - continued to grow, but in the meantime Hillary Clinton and her two law partners helped Stephens, via his company Systematics Inc, to transfer control of Financial General to BCCI.

Financial General’s Washington location meant many politicians and civil servants on Capitol Hill were account holders. The intelligence benefit to BCCI and those associated with the crime bank was enormous.

In 1983, Lippo Group began its own US invasion, choosing to do so in the apparent backwater of Little Rock, Arkansas, where Bill Clinton was Governor. Lippo Finance & Investment in Little Rock brought in a former aide to President Jimmy Carter, Vernon Weaver, to chair the company and Governor Clinton acted as a character reference for Lippo boss Mochtar Riady.

In 1984, Jackson Stephens joined forces with Lippo Group to purchase stock in Arkansas’ Worthen Bank, based in Little Rock. Their buy-in coincided with the establishment of a major cocaine importation operation at nearby Mena, Arkansas, and the laundering of US$100 million a month in drug money through the local banking system and ultimately BCCI.

BCCI investor Abdullah Taha Bakhish joined Riady as a co-owner of Worthen.

By 1985, things began to get hot for Bill Clinton, but Worthen Bank came to the rescue. Clinton had authorised Arkansas state pension funds to be deposited with Worthen by a brokerage firm, but the funds lost 15% of their value as a result of bad short-term investment decisions. Although Jack Stephens wrote out a $52 million Worthen cheque and saved Clinton’s hide, it paved the way for Lippo Group to take a larger role in Worthen. Over the next few months, the Riadys increased their holding to 40% of the bank.

James Riady was appointed to the board of directors, and helped engineer a buyout of the First National Bank of Mena, a town of 5,000 people whose only claim to fame was a secret CIA supply base for the Nicaraguan Contra rebels and the aforementioned cocaine-smuggling operation.

Worthen Bank became politically close to the future US President, and Hillary Clinton’s Rose Lawfirm. Bill Clinton banked with Worthen and steered much of Arkansas’ state business its way. Much of Mena’s billion-dollar-a-year drug money went through Worthen accounts, then on to BCCI branches in Florida and Washington DC as part of the money laundering loop.

It is around this time that another character becomes integral to the plot: Lippo Group executive John Huang. Huang travelled to Arkansas to take up a role as James Riady’s right-hand man in Little Rock.

Mochtar Riady, meanwhile, also formed a joint venture operation with Jack Stephens in Asia. Together, they purchased the Seng Heng Bank in Macau – the former Portuguese island colony close to Hong Kong that’s controlled by Triad organised crime syndicates. Macau is effectively an Oriental Las Vegas, and gambling is a primary source of government revenue. Even the recent Chinese takeover of the territory seems unlikely to dent the criminal powerbase.

Systematics Inc, the Stephens-owned software company, supplied software to Macau’s Banco Nacional Ultramarino - the state bank of the colony.

Over the next five years, the Riadys consolidated their empire. Selling out of Worthen Bank in 1987 they moved from Little Rock to Los Angeles to establish Lippo Bank LA.

The Worthen experience bit them hard: the bank had lent $80 million to entities associated with either the Riadys or Stephens. In the end, an investment firm collapsed owing Worthen $100 million, and a subsequent investigation criticised Worthen for all the inside loans to its owners.

Lippo LA came unstuck as well, and investigators there launched a criminal investigation in 1990 after discovering that a 21 year old teller had made more than 900 suspicious wire transfers to the Lippo-owned Hong Kong Chinese Bank. Each transaction totalled just under the magic US$10,000 limit which had to be reported to money-laundering investigators.

Nearly all the transfers involved false names, and were initialled by a supervisor. Despite that, investigators could find no documents indicating Lippo Bank LA’s top management knew of the practice.

US banking regulators issued three "cease and desist" orders against Lippo LA up until 1997, on the basis of sloppy management and suspicious funds transfers.

In another joint venture with Jack Stephens, the Riadys purchased the Hong Kong branch of BCCI, with James Riady and Johnny Huang relocating to run Lippo Bank Hong Kong. When Senator Al Gore visited Asia in 1989, accompanied by Huang, the trip was paid for by a Buddhist organisation, Fo Kwang Shan.

In 1991, an entity known as China Resources Company Limited began purchasing shares in Lippo’s Hong Kong Chinese Bank. The price paid for the shares was fifteen percent below the market value. US intelligence agencies have since claimed China Resources Co is a front for Chinese military intelligence.

During his relationship with Worthen bank, Arkansas Governor Bill Clinton passed several pieces of legislation favourable to Lippo’s US interests. The payoff? In 1992, with the Clinton/Gore presidential campaign on the ropes over the Gennifer Flowers affair and donations drying up, Lippo Group organised for Worthen Bank to pay the Clinton campaign fund a massive US$3.5 million bailout.

But that wasn’t the worst of it.

In addition to the money channelled via the bank, James Riady and the Lippo Group were personally funding Clinton’s presidential campaign – a move that’s illegal under US laws restricting foreigners from making political donations.

In August, 1992, James Riady flew from Indonesia to Los Angeles to take part in a fundraiser for Clinton. Federal investigators piecing the jigsaw together allege Riady took a limousine ride with Governor Clinton, handing over US$100,000 and promising a further US$1 million.

So far, it appears Riady and Huang funnelled US$700,000 in illegal donations to the Clinton campaign, via Lippo Group employees and subsidiaries. Most did not live in the US.

One of the questions posed by US congressional investigators is "Why?". What did the Riadys hope to gain by funding Bill Clinton? They now believe James Riady and the Lippo Group were engineering a major espionage operation on behalf of the Chinese government, a deliberate attempt to bribe an American President, compromise US security and steal US secrets.

The operation, involving more than a hundred people, many of them Chinese, has been dubbed "the Bamboo Network" by investigators.

By January of 1993, with Clinton now President-elect, Huang and Riady arranged for another $100,000 to drop into the President’s coffers and, in February, Huang organised a meeting between Mochtar Riady and the President.

The elder Riady, whose business philosophy is quoted in New Zealand Government briefing papers as "Every network has to have its foundation laid on special, personal, human connections…what I am looking for is what my partners can offer in personal contacts and business connections", urged the new US President to reinstate China’s "most favoured nation" status. He also told Clinton to relax economic sanctions against China, imposed after the Tiananmen Square massacre.

Clinton, whose election campaign was significantly funded by the Riadys, obeyed. In June of 1993, China was given "most favoured nation" status. A week or two later, purely coincidentally, the Riadys make US$163 million in profit when China Resources Company Ltd increases its share price offer for Lippo’s Hong Kong Chinese Bank to a figure 50% above market value.

James Riady’s influence with Clinton was so great that on April 19, 1993, at the very moment the FBI was raiding the Branch Davidian religious complex at Waco Texas, killing scores of men, women and children in the process, Bill Clinton was chatting with James Riady in the Oval Office while a TV set in the background was carrying footage of the tragedy.

Clinton even had time during this national disaster to give Riady a tour of "the Situation Room" - a kind of "Bill fiddled while Waco burned" scene.

It is the beginning of a scandal that is seeing President Clinton dubbed "China’s first US President" by some commentators.

And despite the briefing papers from New Zealand trade officials who told Prime Minister Shipley that James Riady and the Lippo group shunned the cronyism surrounding Indonesia’s President Suharto, a US Congressional Investigation paints a very different picture.

"The Riady family was able to show off its close ties to President Clinton during the 1993 APEC summit in Seattle, Washington. Lippo organised a group of Indonesian businessmen to visit Little Rock, Arkansas, before the summit.

"A sister-state agreement between Arkansas and Indonesia was to be signed at a ceremony during the APEC summit, and James Riady planned to have President Clinton and President Suharto attend."

Despite reservations from White House staff, who told Riady that "the human rights controversy surrounding East Temor (sic) may be an impediment," the Congressional report notes that "Ultimately, during the 1993 APEC, President Clinton did meet with President Suharto, along with James Riady, over the objections of his staff."

Clinton met Suharto again during the G-7 summit in Tokyo in July 1993, and then sent a handwritten note to James Riady saying he’d enjoyed his visit with Suharto.

The briefing to New Zealand’s then-Prime Minister, Jenny Shipley, says "The [Lippo] group is seen as not having ties with President Suharto’s family, hence it is regarded as clean and fits in with the spirit of reform."

At the full APEC summit in 1994, hosted by Indonesia, Clinton spent more time with the Riadys, stopping only to pose in a batik shirt alongside the New Zealand Prime Minister at the time, Jim Bolger.

In 1994, US Secretary for Commerce Ron Brown visited China carrying an "unprecedented" US$5.5 billion dollars worth of trade deals. Included in the package is a $1 billion deal for an Arkansas firm, politically linked to Clinton, to expand and manage Lippo’s 725 megawatt coal-burning power plant in China’s Fujian province.

In April 1994, Clinton’s appointee to the US Justice Department, Associate Attorney-General Web Hubbell, resigned from his post amid allegations of fraud relating to his involvement with the Rose Lawfirm and the Whitewater scandal.

After meeting Hillary Clinton in mid-June, Hubbell held further discussions with Indonesian businessmen James Riady and John Huang. White House records show the two Lippo executives visited the White House every day from June 21 to June 25, 1994.

Hubbell spent much of June 23 with Riady, and four days later the disgraced politician was paid US$100,000 by the Hong Kong Chinese Bank, ostensibly to put him on the Lippo Group payroll. The bank, as investigators now know, is majority-owned by Chinese military intelligence.

The payoff didn’t save Hubbell, who was subsequently jailed.

Asked at a news conference if it wasn’t more than a little suspicious that Hubbell ended up working for Lippo, President Clinton told reporters "To the best of my recollection, I didn’t know anything about his having that job until I read about it in the press. And I can’t imagine who could have ever arranged to do something improper like that and no one around here know about it."

But less than two weeks after Lippo’s payoff to Hubbell, the Clinton administration decided to appoint John Huang as the new Assistant Secretary of the US Commerce Department. Huang’s resignation from the official payroll of the Lippo Group was marked with a US$800,000 golden parachute.

Under US law it is illegal to export high-technology material from the US. This was to enable America to maintain a military and/or commercial edge over possibly hostile nations.

But armed with an interim top-secret security clearance, courtesy of Commerce Secretary Ron Brown, Huang found himself suddenly in a position to authorise technology transfers to places like Indonesia and China. Incredibly, Huang’s security clearance was issued without the routine FBI and foreign security checks.

Investigators have discovered that, on 37 separate occasions, after attending CIA briefings on encryption technology, Johnny Huang left the building a short time later and went to Lippo’s offices, where he then made long distance phone and fax calls to overseas locations.

The New York Daily News has reported that US intelligence services subsequently determined that Huang was passing classified trade information to Lippo Group headquarters in Jakarta – his former bosses.

How did Huang end up as an Assistant Secretary with a top secret clearance in the US Commerce Department? The London Times quotes one source as saying it was Hillary Clinton’s idea.

"He was not Ron Brown’s guy, and his presence caused intense conflict. Huang was carrying water for the White House."

Huang made around 70 "water deliveries" to the White House. And all the time, China’s influence in Washington was growing too. During 1994 and 1995, the Clinton administration allowed AT&T to sell its secure communications system to the Chinese Army, in a deal known as "Hua Mei". In a dramatic backfire, the Chinese reconfigured the encryption technology and re-exported it to Iraq for use in air defence systems.

President Clinton also approved the sale of surveillance system technology to China, under the aegis of a cooperation agreement between Chinese police and the US Justice Department.

Which is where Congressman Dan Burton and his
letter come in. Burton heads the powerful Com
mittee on Government Reform in the US House of Representatives, and it’s his committee that’s investigating the Donorgate/Chinagate/Riady spying scandal.

Far bigger than Monica Lewinsky or other Clintonesque diversions, there is now real evidence that China, and subsequently Iraq, have gained access to US defence, industrial and commercial secrets as a result of Riady’s allegedly corrupting influence on Clinton.

"John Huang, Mr Riady’s political point-man in the US, kept in frequent contact with his former boss and his companies during his tenure at the Department of Commerce," writes Burton in his letter to the White House spelling out the evidence and demanding more answers.

"Mr Riady’s Oval Office meeting with President Clinton on September 13, 1995, led to Mr Huang’s hiring by the DNC where he promptly raised over US$3 million in illegal political contributions.

"After a week of meetings in the White House, James Riady paid former Justice Department official Webster Hubbell $100,000 at a time when Mr Hubbell’s cooperation in the Whitewater scandal was being sought by the Independent Counsel [Kenneth Starr]. Mr Hubbell has refused to reveal why Mr Riady paid him this money.

"Finally and most importantly, US intelligence agencies report that one of Mr Riady’s chief business partners, China Resources, is an intelligence gathering agency of the communist Chinese Government."

It is this revelation that poses a grave problem for the New Zealand Government. Intelligence briefings prepared for the then Prime Minister Jenny Shipley and released to Investigate do not reveal any link between China Resources and Chinese Intelligence. Indeed, the New Zealand briefing reads as though it could have been prepared by Chinese Intelligence, judging by its innocuous contents:

"The Lippo Group has a strategic position in China and Hong Kong with substantial investments and relationships with powerful business and government people and organisations.

"It owns 49% of the Hong Kong Chinese Bank with the remaining 51% held by China Resources (Holdings) which is a wholly-owned enterprise of China’s Ministry of Foreign Trade and Economic Cooperation."

Which raises the question: was the New Zealand Government sucked in to beginning a relationship with James Riady on the basis of flawed intelligence?

What is the ongoing implication of that if such flaws are not corrected?

And just how bad was the NZ intelligence?

While our Embassy in Jakarta waxed lyrical about
the sound business base of Lippo Group and
the Riadys, the Washington Post was more critical, pointing out that Lippo Group had to be bailed out of bankruptcy by Indonesia’s President Suharto in 1995 and there was a further $700 million restructuring in 1996.

The Post quotes an investment analyst at Deutsche Morgan Grenfell’s Jakarta branch, Lin Che Wei, as describing Lippo Group as a "carefully balanced house of cards, held up partly by the Riadys’ practice of gobbling up shares of Lippo stock to drive up the price."

"Riady is a master of this kind of game," says Lin, "He understands what investors want - a rising share price."

And what about the briefing given to Prime Minister Shipley which, if you missed it earlier, we’ll repeat:

"Mochtar has formed alliances and joint venture partnerships with world class multinational corporations and has high calibre professional management staff working for him.

"The Lippo empire rose out of the success of the Lippo Bank. Unlike just about all other banks in Indonesia its founder Mochtar Riady tended to shun the Suharto connections that for other conglomerates in Indonesia were the keys to success.

"He avoided lending to politically connected groups or to state enterprises and instead built his business on legitimate retail and trade finance."

Contrast that with these excerpts from the Washington Post investigation:

"Mochtar Riady sent the President a four page letter, urging him...to support Suharto..."

"Clinton recalls that James Riady also tried to persuade him to meet Suharto..."

"James Riady arranged for...a Little Rock lawyer and longtime friend of Clinton to spend one and a half hours with Suharto in Jakarta...An official with Indonesia’s Foreign Ministry said Riady insisted that [the lawyer] ‘had the ear of President Clinton. He said the meeting would give us special access to the White House’."

"The Riadys also promoted Hubbell at Suharto’s presidential palace as someone ‘influential with Bill Clinton’.

"After Hubbell resigned from the Justice Department amid allegations of fraud, James Riady arranged for him to tour Indonesia...Riady made sure that Hubbell, like [the lawyer] visited the former Portuguese colony of East Timor, where Indonesian security forces have been accused of widespread human rights abuses.

"Riady ‘said letting a friend of Clinton’s see Timor might help change US policy. So naturally we thought it was a good idea,’ the official said."

"In April 1993 James Riady escorted the Governor of Jakarta to the East Wing [of the White House] for a meeting on which the White House can provide no details..."

"And Riady accompanies...one of Suharto’s most influential advisers to the White House...joining them was John Huang...two months later the Indonesian Government arranged for a group of private companies to rescue Lippo during a financial crunch."

" ‘These trips helped Lippo improve their ties to the Suharto regime,’ said a former Lippo executive. ‘As a result, Suharto helped rescue them when they needed help’."

"In Jakarta, Lippo has approached the Suharto regime for almost everything from critical building permits to outright financial bailouts."

The Post reports that Riady is also involved in a string of joint ventures with Suharto’s half-brother.

We could go on, and on, about Riady’s close ties to the former Indonesian dictator, but you’ve probably absorbed the point that the message reaching our Government was a very different one from the reality.

Instead, Riady was welcomed to New Zealand with open arms by the National Government – a gesture in sharp contrast with the sentiments in the United States.

"From the above list of activities," writes Burton, " I find it inconceivable that the President of the United States would meet with James Riady for any reason. Mr Riady has thumbed his nose at the laws of the United States and Mr Clinton appears to have rewarded him.

"Doubtless, this meeting with the President will be used to personal advantage in Indonesia and China by Mr Riady. Therefore, I would like to request that the White House provide the following information and documents in regard to this matter:

A. Did President Clinton meet James Riady in New Zealand

B. Identify all individuals present during any contacts between President Clinton and James Riady in connection with the President’s travel to New Zealand.

C. Describe the substance of all contacts between President Clinton and James Riady in connection with the President’s travel to New Zealand.

D. Describe the substance of all contacts between White House officials and James Riady or his associates in connection with the President’s travel to New Zealand.

E. When did the White House first learn that James Riady would be in New Zealand during President Clinton’s trip for the APEC meeting?

1. How did the White House learn that James Riady would be in New Zealand during President Clinton’s travel there?

2. Identify all individuals involved in the request that President Clinton meet with James Riady during the President’s trip to New Zealand.

3. Was the fact that James Riady would be in New Zealand during President Clinton’s trip conveyed to the President? If so, when was this information conveyed to the President? Who conveyed this information to the President? Please describe the substance of all such communications.

4. Identify any White House officials who expressed concern over President Clinton meeting with James Riady. Please describe the substance of all such communications.

F. Provide all documents relating to James Riady, his companies, his employees, or his associates in connection with the President’s recent trip to New Zealand for the APEC meeting, including all documents relating to any meetings between President Clinton and James Riady.

G. Provide all recordings, either video or audio, of any contacts between President Clinton and James Riady, his associates, or his employees relating to the President’s trip to New Zealand for the APEC meeting.

"It is my sincere hope that if indeed President Clinton met with James Riady during his trip, that the President used the prestige of his office and his long term friendship with Mr Riady to convince Mr Riady to return to the United States and answer all of the questions posed by Congress and the Justice Department so the American public can finally learn the entire truth about Mr Riady’s role in tampering with our presidential elections.

"I am concerned, however, that the President would socialise with an individual who has mocked the laws of this country."

Intriguingly, the New Zealand media largely missed the unfolding scandal arising out of Clinton’s APEC visit. While local TV crews made much of Clinton’s meeting with the Chinese leader, Jiang Zemin, and the apparent thaw in the US/China relationship, few in the New Zealand press gallery had any idea of the real issues at the heart of the problem.

The scandal over China’s spying became so bad that some in the US publicly accused China of deliberately blowing up a rocket carrying two US commercial satellites, purely to get access to the technology.

And what of James Riady: what can he want in New
Zealand? For a start, he owns property in
Auckland, which TradeNZ identified as the Port Tower hotel. We can find no evidence of such a hotel, but there is a Park Tower Hotel which was owned by "Asian interests" up until December. But apart from his personal business interests, Riady is taking a regional political perspective as well. He was appointed as a "Roving Presidential Envoy for Australasia" by former Indonesian President Habibie, is a member of Parliament, and is a member of Indonesia’s APEC Business Advisory Council.

He also clearly knows of a number of influential New Zealand business leaders.

Government briefing documents obtained by Investigate paint a picture of what Riady wanted to achieve on his June 1999 NZ visit, prior to his later controversial appearance at APEC.

For a start, New Zealand trade officials were told to play down his connection to Lippo Group and boost his diplomatic status, despite the fact that most of his delegation were either Lippo staff or Lippo customers. Indeed, the briefing supplied by the New Zealand Embassy in Jakarta refers to Riady wanting to visit NZ "for private business purposes," and goes on to say:

"The headings to the [official] programme currently put at the forefront Riady’s position as Deputy Head of Lippo Group. We and Torry [Parantoro, Riady’s executive assistant] agreed that the emphasis should instead be given to his role as Special Envoy; this title should be transposed, upper-cased and put in bold to reflect that this is the primary hat under which he is visiting New Zealand.

"This is also the title that should be used in the first instance for formal introductions, except for his business meetings where he dons his Lippo Group hat.

"Parantoro showed us a fax he had received from the Indonesian Embassy in Wellington. This provided details of Sunday evening’s programme, including a list of journalists for the media interview and a guest list for the dinner hosted by the Indonesian Ambassador; we noted that [National MP] Pansy Wong was included, a pleasant surprise. Parantoro was pleased with the arrangements confirmed to date for the Monday [June 21], especially the call on the Prime Minister. We clarified that whereas Riady’s entourage would be able to participate in most of these calls, the meeting with the PM would be more restricted …Parantoro clearly expected this to be the case.

"We noted that we were waiting for confirmation for calls on Don McKinnon, Bill English, and Don Brash.

"Parantoro commented favourably on the agenda for Tuesday (we noted the likely addition of a call on Sir Selwyn Cushing, Brierley Investments.)

"We discussed with Parantoro opportunities to meet with the Business Roundtable and the ASEAN-NZ Business Council.

"Riady made a specific request that Doug Myers be informed of his visit and be included in his programme. However…Myers is currently in London and will not be returning to NZ until July."

The cost of Riady’s June visit was to have been met by New Zealand taxpayers, according to the documents.

"We suggested that it would be appropriate to fund all Riady’s expenses (including offering a first class airfare)."

Ultimately, however, the Indonesian businessman and alleged Chinese spy paid his own way.

The unanswered question remains open: are Riady’s activities in New Zealand and Australia purely commercial, or are they motivated also by espionage?

"In his role as the Special Presidential Envoy for Australasia," write NZ diplomats, "James Riady has been busy. On February 25 1999, Lippo Bank signed an MOU [Memorandum of Understanding] with the Australian Trade Commission to promote the economic development of eastern Indonesia.

"Under the MOU, cooperation programmes between Indonesian and Australian businessmen will be conducted using the Bank Lippo’s networks. Australia will provide training and guidance for Bank Lippo employees.

"In October 1998 James made a visit to Australia to promote relations and dialogue between the two nations. There he met with Victorian chief minister Jeff Kennett, New South Wales Premier Bob Carr and addressed an Austrade seminar. He was also scheduled to meet with the Prime Minister, John Howard."

Nowhere in the intelligence briefing for the New Zealand Prime Minister is James Riady’s relationship with Bill Clinton, or alleged activity as a Chinese spy, disclosed.

Nick Arathimos, the TradeNZ official who organised the June 1999 visit, told Investigate he was aware of Riady’s background. When questioned over his involvement with BCCI and with a bank that was laundering drug cartel money through Arkansas, however, Arathimos was clearly taken by surprise, saying he was not aware of these allegations.

Yet, in answer to a question in Parliament on July 21, Deputy Prime Minister Wyatt Creech said "The Ministry of Foreign Affairs and Trade was fully aware of the issues surrounding his relationship with President Clinton. Furthermore the Ministry did not, and does not, consider that a visit by the President of Indonesia’s special envoy raised any issues of a security nature."

The then Opposition leader, Helen Clark, asked a follow-up question:

"Before the Prime Minister met Mr Riady, was she also aware of a draft report submitted by Republicans on a Senate committee in America that alleges Mr Riady and his father both have "a long term relationship with a Chinese intelligence agency". If so, would that have made a difference?"

"Obviously I do not know the answer to the detail in the question," replied Creech, "but what I can say is that this person visited New Zealand as a special envoy of the President of Indonesia, and it was in that capacity that the special envoy visited the Prime Minister."

"How big was the cheque?" interjected one Labour MP, implying Riady’s political donation largesse may have rubbed off on National prior to the election.

Is it possible that Lippo Group may be trying to place itself in a position to steal New Zealand trade secrets or technology on behalf of the Chinese or Indonesia? There is no evidence one way or the other, but given the company’s involvement with Chinese intelligence it would be naïve to assume Lippo would not be interested if an opportunity arose.

After news of Lippo’s Chinese espionage first broke in a Los Angeles Times story three years ago, ongoing investigations have revealed Chinese interests associated with the Riadys have allegedly stolen not only trade, but also critical defence information including nuclear secrets.

Chinese spies have also been uncovered in Canada.

Arrested and questioned by federal and congressional investigators, Riady’s right-hand-man Johnny Huang has coughed to his boss’ involvement, but pleaded the 5th Amendment – the right not to self-incriminate – nearly two thousand times since interrogation began.

Riady has refused to return to the US for questioning or to clear his name. Instead, he remains based at his Jakarta estate where he lives in a southern-US style plantation manor, three stories tall with massive "Greco-Roman columns", sited amidst a Lippo golf course. The home also has a helipad and a lake, and the entire property is ringed by a moat.

Is James Riady an appropriate person for the New Zealand Government to be promoting as someone to do business with? Despite the revelations, TradeNZ official Nick Arathimos claims yes, effectively saying he’s the best of a bad bunch in Indonesia.

"You can come up with a lot worse. His companies in Indonesia are among the better organised, relying less on cronyism with Suharto. James Riady will continue to be a key player in Indonesia because of his existing interests.

"If he were to invest in New Zealand, he would have to abide by our laws and regulations."

Which is just as well, because as many critics of our investment regime have pointed out, New Zealand is the laughing stock of the Western world for having some of the most lax controls on money-laundering and inside trading on the planet.

At the end of the day, however, one could question why we bothered to invite someone of Riady’s background to New Zealand in the first place. The argument that ‘he’s the best of a bad bunch’ could equally apply to one of the less violent members of Colombia’s Cali drug cartel.

If the intelligence briefing provided to Shipley was drawn only from trade diplomats, then somebody should probably be caned for not calling in the External Assessment Bureau, and if our foreign spy agency was consulted then the Government could probably save a few million dollars by sacking the spooks and simply purchasing a subscription to the Washington Post or the Los Angeles Times.

As for the Riadys, Indonesians wouldn’t be surprised if it was a quest for world domination that they were really undertaking. The Lippo logo is everywhere in the troubled Asian powerhouse, with its interests in banks, factories and shops, hospitals and housing developments.

"In Jakarta," wrote the Washington Post, "locals joke that Lippo stands for Lama-Lama Indonesia Pun Punya Oe, meaning: In the long run, even Indonesia will be mine."

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ABOVE: BCCI frontman Jackson Stephens has close ties to both Clinton and US Presidential hopeful George W Bush


Posted by Ian Wishart at 12:32 AM | Comments (0)

ALL THE PRESIDENT'S MEN INVESTIGATE: MARCH 00

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A major weakness has been discovered in New Zealand’s foreign intelligence analysis: trade officials invited a rich Asian businessman to invest here and meet the Prime Minister and top business leaders - apparently unaware that he has been publicly named by US intelligence agencies as a Chinese spy with organised crime connections. Now a photo of him meeting President Clinton at the APEC conference in Auckland is causing uproar in the US. IAN WISHART reports on the so-called "Bamboo Network":

It is a postage-stamp sized photo – a moment in time
captured on videotape at the APEC conference in
Auckland, beamed via satellite to the Fox TV news centre in Los Angeles, broadcast on Fox News across America, recorded on someone’s VCR, photographed off the screen, scanned into a computer and uploaded onto the Internet. What’s so special about the photo? Well, for a start it features Bill Clinton pressing the flesh of someone in the crowd at the APEC conference in Auckland last September, only this time it isn’t a cigar-lovin’ intern. Instead, the other face in the photo belongs to someone much more interesting: an Indonesian businessman with links to New Zealand, organised crime and Chinese Intelligence.

What’s also special about the photo? Well, the same week that Investigate began making inquiries to locate the original APEC video footage taken in New Zealand, the raw footage disappeared from TVNZ’s tape library and has not been seen since.

But it’s the man in the photo that this story is about. His name is James Riady, and to those in the know he currently heads the list of America’s Most Wanted – an alleged criminal on the run from US Justice. And that’s why the photo is at the centre of a political furore in the United States: why is President Clinton exchanging pleasantries in Auckland with a wanted man?

Funnily enough, it’s the same question asked in New Zealand back in June 1999, when Riady first turned up for a special meeting with Prime Minister Jenny Shipley.

It should have been just another unnoticed thread in the rich tapestry of New Zealand politics, but the Indonesian’s fleeting appearance in our corridors of power had all the subtle discretion of a glow-in-the-dark cat collar.

Riady heads the Lippo Group, one of Indonesia’s largest companies - but a company with heavy organised crime connections.

The New Zealand Government agency Tradenz extended the invitation for the June visit with a little-publicised announcement that Riady would receive a "red carpet" welcome in New Zealand. That welcome included a special meeting with Prime Minister Shipley, and a series of meetings with leading New Zealand business executives.

What’s extremely significant is that Riady, and his company, are at the centre of a major spying and bribery scandal that’s blown up around US President Bill Clinton.

Amazingly, New Zealand’s intelligence agencies had failed to brief Prime Minister Shipley on this point, despite a claim by to the contrary in Parliament. The closest the intelligence briefings – released to Investigate under the Official Information Act - get to the real Riady is this:

"Most important of all to the Riady family in business are relationships and networks."

As you’re about see, that comment is a dramatic understatement, and we’ll examine shortly how Lippo Group’s incursions into New Zealand and Australia could have security implications.

The latest twist in the Riady scandal comes in a letter from US Congressional investigator Dan Burton to Beth Nolan, legal Counsel to the President.

"Upon President Clinton’s return from his trip to New Zealand for the annual meeting of the Asian Pacific Economic Cooperation (APEC)," writes Congressman Burton, "I was dismayed to read the following report from the Wall Street Journal on September 24, 1999:

" ‘TOGETHER AGAIN: James Riady, the Indonesian businessman central to Donorgate, used an economic summit in New Zealand last week to chat with Clinton. The White House won’t talk about it, but Indonesians say Riady didn’t discuss anything "sensitive" with the President.’

"If the report is true," continues Burton, "I am concerned that the President would meet with an individual who has continued to evade questioning by the Congress and the Department of Justice about his pivotal role in the campaign finance scandal that came to light just prior to the President’s re-election in 1996.

"As you are aware, Mr Riady was recently named by John Huang as the architect of a massive scheme of illegal conduit political contributions in the United States.

"I cannot understand what purpose would be served by the President meeting with Mr Riady except to urge him to cooperate with Federal investigators.

"From his home in Indonesia, Mr Riady appears to have orchestrated a complex scheme to launder over $4 million (NZ$8 million) in illegal political contributions to Clinton/Gore ’92, the Democratic National Committee (DNC), the Democratic Senatorial Campaign Committee, state Democratic parties, individual candidates, and non-profit groups in 1992 and 1996."

We’ll return to Burton’s letter shortly, but first a little background context. Here’s the story the New Zealand press gallery didn’t tell you about Riady, and the story the Government didn’t know either.

To put what follows in its proper context, it pays to
first examine James Riady, and his father Mochtar,
the way New Zealand officials see them.

"The Lippo Group is one of Indonesia’s largest conglomerates in terms of market capitalisation with estimates of value putting it at having US$11 billion in assets.

"The vision of its founder Mochtar Riady is to transcend the institutional limitations placed upon organisations run in the traditional overseas Chinese pattern and adopt a modern publicly owned and professionally managed pattern of business.

"Mochtar has formed alliances and joint venture partnerships with world class multinational corporations and has high calibre professional management staff working for him.

"The Lippo empire rose out of the success of the Lippo Bank. Unlike just about all other banks in Indonesia its founder Mochtar Riady tended to shun the Suharto connections that for other conglomerates in Indonesia were the keys to success.

"He avoided lending to politically connected groups or to state enterprises and instead built his business on legitimate retail and trade finance."

Yes. Well.

The real story, shorn of its diplomatic awe, begins 22 years ago with a 1978 move by the Bank of Credit and Commerce International, BCCI, to become established in the United States.

BCCI subsequently crashed in 1991 when a multi-territorial investigation revealed its connections to organised crime, arms smugglers and intelligence agencies. Investigators have since dubbed it "the Bank of Cocaine and Conmen International".

Formed by a Pakistani businessman and marketed as "an Arab bank", BCCI used a group of American investors as a front to purchase two US banking institutions - the National Bank of Georgia, and Financial General Bank in Washington DC. Because of foreign ownership restrictions, BCCI could not appear to be the real owner of the banks.

Assisting BCCI in this subterfuge was Jackson Stephens, an Arkansas stockbroker based in Little Rock. Stephens brought in three lawyers from Little Rock’s Rose Lawfirm: Hillary Rodham Clinton, Vince Foster and Joseph Giroir.

The Clinton connection - as you’ll see - continued to grow, but in the meantime Hillary Clinton and her two law partners helped Stephens, via his company Systematics Inc, to transfer control of Financial General to BCCI.

Financial General’s Washington location meant many politicians and civil servants on Capitol Hill were account holders. The intelligence benefit to BCCI and those associated with the crime bank was enormous.

In 1983, Lippo Group began its own US invasion, choosing to do so in the apparent backwater of Little Rock, Arkansas, where Bill Clinton was Governor. Lippo Finance & Investment in Little Rock brought in a former aide to President Jimmy Carter, Vernon Weaver, to chair the company and Governor Clinton acted as a character reference for Lippo boss Mochtar Riady.

In 1984, Jackson Stephens joined forces with Lippo Group to purchase stock in Arkansas’ Worthen Bank, based in Little Rock. Their buy-in coincided with the establishment of a major cocaine importation operation at nearby Mena, Arkansas, and the laundering of US$100 million a month in drug money through the local banking system and ultimately BCCI.

BCCI investor Abdullah Taha Bakhish joined Riady as a co-owner of Worthen.

By 1985, things began to get hot for Bill Clinton, but Worthen Bank came to the rescue. Clinton had authorised Arkansas state pension funds to be deposited with Worthen by a brokerage firm, but the funds lost 15% of their value as a result of bad short-term investment decisions. Although Jack Stephens wrote out a $52 million Worthen cheque and saved Clinton’s hide, it paved the way for Lippo Group to take a larger role in Worthen. Over the next few months, the Riadys increased their holding to 40% of the bank.

James Riady was appointed to the board of directors, and helped engineer a buyout of the First National Bank of Mena, a town of 5,000 people whose only claim to fame was a secret CIA supply base for the Nicaraguan Contra rebels and the aforementioned cocaine-smuggling operation.

Worthen Bank became politically close to the future US President, and Hillary Clinton’s Rose Lawfirm. Bill Clinton banked with Worthen and steered much of Arkansas’ state business its way. Much of Mena’s billion-dollar-a-year drug money went through Worthen accounts, then on to BCCI branches in Florida and Washington DC as part of the money laundering loop.

It is around this time that another character becomes integral to the plot: Lippo Group executive John Huang. Huang travelled to Arkansas to take up a role as James Riady’s right-hand man in Little Rock.

Mochtar Riady, meanwhile, also formed a joint venture operation with Jack Stephens in Asia. Together, they purchased the Seng Heng Bank in Macau – the former Portuguese island colony close to Hong Kong that’s controlled by Triad organised crime syndicates. Macau is effectively an Oriental Las Vegas, and gambling is a primary source of government revenue. Even the recent Chinese takeover of the territory seems unlikely to dent the criminal powerbase.

Systematics Inc, the Stephens-owned software company, supplied software to Macau’s Banco Nacional Ultramarino - the state bank of the colony.

Over the next five years, the Riadys consolidated their empire. Selling out of Worthen Bank in 1987 they moved from Little Rock to Los Angeles to establish Lippo Bank LA.

The Worthen experience bit them hard: the bank had lent $80 million to entities associated with either the Riadys or Stephens. In the end, an investment firm collapsed owing Worthen $100 million, and a subsequent investigation criticised Worthen for all the inside loans to its owners.

Lippo LA came unstuck as well, and investigators there launched a criminal investigation in 1990 after discovering that a 21 year old teller had made more than 900 suspicious wire transfers to the Lippo-owned Hong Kong Chinese Bank. Each transaction totalled just under the magic US$10,000 limit which had to be reported to money-laundering investigators.

Nearly all the transfers involved false names, and were initialled by a supervisor. Despite that, investigators could find no documents indicating Lippo Bank LA’s top management knew of the practice.

US banking regulators issued three "cease and desist" orders against Lippo LA up until 1997, on the basis of sloppy management and suspicious funds transfers.

In another joint venture with Jack Stephens, the Riadys purchased the Hong Kong branch of BCCI, with James Riady and Johnny Huang relocating to run Lippo Bank Hong Kong. When Senator Al Gore visited Asia in 1989, accompanied by Huang, the trip was paid for by a Buddhist organisation, Fo Kwang Shan.

In 1991, an entity known as China Resources Company Limited began purchasing shares in Lippo’s Hong Kong Chinese Bank. The price paid for the shares was fifteen percent below the market value. US intelligence agencies have since claimed China Resources Co is a front for Chinese military intelligence.

During his relationship with Worthen bank, Arkansas Governor Bill Clinton passed several pieces of legislation favourable to Lippo’s US interests. The payoff? In 1992, with the Clinton/Gore presidential campaign on the ropes over the Gennifer Flowers affair and donations drying up, Lippo Group organised for Worthen Bank to pay the Clinton campaign fund a massive US$3.5 million bailout.

But that wasn’t the worst of it.

In addition to the money channelled via the bank, James Riady and the Lippo Group were personally funding Clinton’s presidential campaign – a move that’s illegal under US laws restricting foreigners from making political donations.

In August, 1992, James Riady flew from Indonesia to Los Angeles to take part in a fundraiser for Clinton. Federal investigators piecing the jigsaw together allege Riady took a limousine ride with Governor Clinton, handing over US$100,000 and promising a further US$1 million.

So far, it appears Riady and Huang funnelled US$700,000 in illegal donations to the Clinton campaign, via Lippo Group employees and subsidiaries. Most did not live in the US.

One of the questions posed by US congressional investigators is "Why?". What did the Riadys hope to gain by funding Bill Clinton? They now believe James Riady and the Lippo Group were engineering a major espionage operation on behalf of the Chinese government, a deliberate attempt to bribe an American President, compromise US security and steal US secrets.

The operation, involving more than a hundred people, many of them Chinese, has been dubbed "the Bamboo Network" by investigators.

By January of 1993, with Clinton now President-elect, Huang and Riady arranged for another $100,000 to drop into the President’s coffers and, in February, Huang organised a meeting between Mochtar Riady and the President.

The elder Riady, whose business philosophy is quoted in New Zealand Government briefing papers as "Every network has to have its foundation laid on special, personal, human connections…what I am looking for is what my partners can offer in personal contacts and business connections", urged the new US President to reinstate China’s "most favoured nation" status. He also told Clinton to relax economic sanctions against China, imposed after the Tiananmen Square massacre.

Clinton, whose election campaign was significantly funded by the Riadys, obeyed. In June of 1993, China was given "most favoured nation" status. A week or two later, purely coincidentally, the Riadys make US$163 million in profit when China Resources Company Ltd increases its share price offer for Lippo’s Hong Kong Chinese Bank to a figure 50% above market value.

James Riady’s influence with Clinton was so great that on April 19, 1993, at the very moment the FBI was raiding the Branch Davidian religious complex at Waco Texas, killing scores of men, women and children in the process, Bill Clinton was chatting with James Riady in the Oval Office while a TV set in the background was carrying footage of the tragedy.

Clinton even had time during this national disaster to give Riady a tour of "the Situation Room" - a kind of "Bill fiddled while Waco burned" scene.

It is the beginning of a scandal that is seeing President Clinton dubbed "China’s first US President" by some commentators.

And despite the briefing papers from New Zealand trade officials who told Prime Minister Shipley that James Riady and the Lippo group shunned the cronyism surrounding Indonesia’s President Suharto, a US Congressional Investigation paints a very different picture.

"The Riady family was able to show off its close ties to President Clinton during the 1993 APEC summit in Seattle, Washington. Lippo organised a group of Indonesian businessmen to visit Little Rock, Arkansas, before the summit.

"A sister-state agreement between Arkansas and Indonesia was to be signed at a ceremony during the APEC summit, and James Riady planned to have President Clinton and President Suharto attend."

Despite reservations from White House staff, who told Riady that "the human rights controversy surrounding East Temor (sic) may be an impediment," the Congressional report notes that "Ultimately, during the 1993 APEC, President Clinton did meet with President Suharto, along with James Riady, over the objections of his staff."

Clinton met Suharto again during the G-7 summit in Tokyo in July 1993, and then sent a handwritten note to James Riady saying he’d enjoyed his visit with Suharto.

The briefing to New Zealand’s then-Prime Minister, Jenny Shipley, says "The [Lippo] group is seen as not having ties with President Suharto’s family, hence it is regarded as clean and fits in with the spirit of reform."

At the full APEC summit in 1994, hosted by Indonesia, Clinton spent more time with the Riadys, stopping only to pose in a batik shirt alongside the New Zealand Prime Minister at the time, Jim Bolger.

In 1994, US Secretary for Commerce Ron Brown visited China carrying an "unprecedented" US$5.5 billion dollars worth of trade deals. Included in the package is a $1 billion deal for an Arkansas firm, politically linked to Clinton, to expand and manage Lippo’s 725 megawatt coal-burning power plant in China’s Fujian province.

In April 1994, Clinton’s appointee to the US Justice Department, Associate Attorney-General Web Hubbell, resigned from his post amid allegations of fraud relating to his involvement with the Rose Lawfirm and the Whitewater scandal.

After meeting Hillary Clinton in mid-June, Hubbell held further discussions with Indonesian businessmen James Riady and John Huang. White House records show the two Lippo executives visited the White House every day from June 21 to June 25, 1994.

Hubbell spent much of June 23 with Riady, and four days later the disgraced politician was paid US$100,000 by the Hong Kong Chinese Bank, ostensibly to put him on the Lippo Group payroll. The bank, as investigators now know, is majority-owned by Chinese military intelligence.

The payoff didn’t save Hubbell, who was subsequently jailed.

Asked at a news conference if it wasn’t more than a little suspicious that Hubbell ended up working for Lippo, President Clinton told reporters "To the best of my recollection, I didn’t know anything about his having that job until I read about it in the press. And I can’t imagine who could have ever arranged to do something improper like that and no one around here know about it."

But less than two weeks after Lippo’s payoff to Hubbell, the Clinton administration decided to appoint John Huang as the new Assistant Secretary of the US Commerce Department. Huang’s resignation from the official payroll of the Lippo Group was marked with a US$800,000 golden parachute.

Under US law it is illegal to export high-technology material from the US. This was to enable America to maintain a military and/or commercial edge over possibly hostile nations.

But armed with an interim top-secret security clearance, courtesy of Commerce Secretary Ron Brown, Huang found himself suddenly in a position to authorise technology transfers to places like Indonesia and China. Incredibly, Huang’s security clearance was issued without the routine FBI and foreign security checks.

Investigators have discovered that, on 37 separate occasions, after attending CIA briefings on encryption technology, Johnny Huang left the building a short time later and went to Lippo’s offices, where he then made long distance phone and fax calls to overseas locations.

The New York Daily News has reported that US intelligence services subsequently determined that Huang was passing classified trade information to Lippo Group headquarters in Jakarta – his former bosses.

How did Huang end up as an Assistant Secretary with a top secret clearance in the US Commerce Department? The London Times quotes one source as saying it was Hillary Clinton’s idea.

"He was not Ron Brown’s guy, and his presence caused intense conflict. Huang was carrying water for the White House."

Huang made around 70 "water deliveries" to the White House. And all the time, China’s influence in Washington was growing too. During 1994 and 1995, the Clinton administration allowed AT&T to sell its secure communications system to the Chinese Army, in a deal known as "Hua Mei". In a dramatic backfire, the Chinese reconfigured the encryption technology and re-exported it to Iraq for use in air defence systems.

President Clinton also approved the sale of surveillance system technology to China, under the aegis of a cooperation agreement between Chinese police and the US Justice Department.

Which is where Congressman Dan Burton and his
letter come in. Burton heads the powerful Com
mittee on Government Reform in the US House of Representatives, and it’s his committee that’s investigating the Donorgate/Chinagate/Riady spying scandal.

Far bigger than Monica Lewinsky or other Clintonesque diversions, there is now real evidence that China, and subsequently Iraq, have gained access to US defence, industrial and commercial secrets as a result of Riady’s allegedly corrupting influence on Clinton.

"John Huang, Mr Riady’s political point-man in the US, kept in frequent contact with his former boss and his companies during his tenure at the Department of Commerce," writes Burton in his letter to the White House spelling out the evidence and demanding more answers.

"Mr Riady’s Oval Office meeting with President Clinton on September 13, 1995, led to Mr Huang’s hiring by the DNC where he promptly raised over US$3 million in illegal political contributions.

"After a week of meetings in the White House, James Riady paid former Justice Department official Webster Hubbell $100,000 at a time when Mr Hubbell’s cooperation in the Whitewater scandal was being sought by the Independent Counsel [Kenneth Starr]. Mr Hubbell has refused to reveal why Mr Riady paid him this money.

"Finally and most importantly, US intelligence agencies report that one of Mr Riady’s chief business partners, China Resources, is an intelligence gathering agency of the communist Chinese Government."

It is this revelation that poses a grave problem for the New Zealand Government. Intelligence briefings prepared for the then Prime Minister Jenny Shipley and released to Investigate do not reveal any link between China Resources and Chinese Intelligence. Indeed, the New Zealand briefing reads as though it could have been prepared by Chinese Intelligence, judging by its innocuous contents:

"The Lippo Group has a strategic position in China and Hong Kong with substantial investments and relationships with powerful business and government people and organisations.

"It owns 49% of the Hong Kong Chinese Bank with the remaining 51% held by China Resources (Holdings) which is a wholly-owned enterprise of China’s Ministry of Foreign Trade and Economic Cooperation."

Which raises the question: was the New Zealand Government sucked in to beginning a relationship with James Riady on the basis of flawed intelligence?

What is the ongoing implication of that if such flaws are not corrected?

And just how bad was the NZ intelligence?

While our Embassy in Jakarta waxed lyrical about
the sound business base of Lippo Group and
the Riadys, the Washington Post was more critical, pointing out that Lippo Group had to be bailed out of bankruptcy by Indonesia’s President Suharto in 1995 and there was a further $700 million restructuring in 1996.

The Post quotes an investment analyst at Deutsche Morgan Grenfell’s Jakarta branch, Lin Che Wei, as describing Lippo Group as a "carefully balanced house of cards, held up partly by the Riadys’ practice of gobbling up shares of Lippo stock to drive up the price."

"Riady is a master of this kind of game," says Lin, "He understands what investors want - a rising share price."

And what about the briefing given to Prime Minister Shipley which, if you missed it earlier, we’ll repeat:

"Mochtar has formed alliances and joint venture partnerships with world class multinational corporations and has high calibre professional management staff working for him.

"The Lippo empire rose out of the success of the Lippo Bank. Unlike just about all other banks in Indonesia its founder Mochtar Riady tended to shun the Suharto connections that for other conglomerates in Indonesia were the keys to success.

"He avoided lending to politically connected groups or to state enterprises and instead built his business on legitimate retail and trade finance."

Contrast that with these excerpts from the Washington Post investigation:

"Mochtar Riady sent the President a four page letter, urging him...to support Suharto..."

"Clinton recalls that James Riady also tried to persuade him to meet Suharto..."

"James Riady arranged for...a Little Rock lawyer and longtime friend of Clinton to spend one and a half hours with Suharto in Jakarta...An official with Indonesia’s Foreign Ministry said Riady insisted that [the lawyer] ‘had the ear of President Clinton. He said the meeting would give us special access to the White House’."

"The Riadys also promoted Hubbell at Suharto’s presidential palace as someone ‘influential with Bill Clinton’.

"After Hubbell resigned from the Justice Department amid allegations of fraud, James Riady arranged for him to tour Indonesia...Riady made sure that Hubbell, like [the lawyer] visited the former Portuguese colony of East Timor, where Indonesian security forces have been accused of widespread human rights abuses.

"Riady ‘said letting a friend of Clinton’s see Timor might help change US policy. So naturally we thought it was a good idea,’ the official said."

"In April 1993 James Riady escorted the Governor of Jakarta to the East Wing [of the White House] for a meeting on which the White House can provide no details..."

"And Riady accompanies...one of Suharto’s most influential advisers to the White House...joining them was John Huang...two months later the Indonesian Government arranged for a group of private companies to rescue Lippo during a financial crunch."

" ‘These trips helped Lippo improve their ties to the Suharto regime,’ said a former Lippo executive. ‘As a result, Suharto helped rescue them when they needed help’."

"In Jakarta, Lippo has approached the Suharto regime for almost everything from critical building permits to outright financial bailouts."

The Post reports that Riady is also involved in a string of joint ventures with Suharto’s half-brother.

We could go on, and on, about Riady’s close ties to the former Indonesian dictator, but you’ve probably absorbed the point that the message reaching our Government was a very different one from the reality.

Instead, Riady was welcomed to New Zealand with open arms by the National Government – a gesture in sharp contrast with the sentiments in the United States.

"From the above list of activities," writes Burton, " I find it inconceivable that the President of the United States would meet with James Riady for any reason. Mr Riady has thumbed his nose at the laws of the United States and Mr Clinton appears to have rewarded him.

"Doubtless, this meeting with the President will be used to personal advantage in Indonesia and China by Mr Riady. Therefore, I would like to request that the White House provide the following information and documents in regard to this matter:

A. Did President Clinton meet James Riady in New Zealand

B. Identify all individuals present during any contacts between President Clinton and James Riady in connection with the President’s travel to New Zealand.

C. Describe the substance of all contacts between President Clinton and James Riady in connection with the President’s travel to New Zealand.

D. Describe the substance of all contacts between White House officials and James Riady or his associates in connection with the President’s travel to New Zealand.

E. When did the White House first learn that James Riady would be in New Zealand during President Clinton’s trip for the APEC meeting?

1. How did the White House learn that James Riady would be in New Zealand during President Clinton’s travel there?

2. Identify all individuals involved in the request that President Clinton meet with James Riady during the President’s trip to New Zealand.

3. Was the fact that James Riady would be in New Zealand during President Clinton’s trip conveyed to the President? If so, when was this information conveyed to the President? Who conveyed this information to the President? Please describe the substance of all such communications.

4. Identify any White House officials who expressed concern over President Clinton meeting with James Riady. Please describe the substance of all such communications.

F. Provide all documents relating to James Riady, his companies, his employees, or his associates in connection with the President’s recent trip to New Zealand for the APEC meeting, including all documents relating to any meetings between President Clinton and James Riady.

G. Provide all recordings, either video or audio, of any contacts between President Clinton and James Riady, his associates, or his employees relating to the President’s trip to New Zealand for the APEC meeting.

"It is my sincere hope that if indeed President Clinton met with James Riady during his trip, that the President used the prestige of his office and his long term friendship with Mr Riady to convince Mr Riady to return to the United States and answer all of the questions posed by Congress and the Justice Department so the American public can finally learn the entire truth about Mr Riady’s role in tampering with our presidential elections.

"I am concerned, however, that the President would socialise with an individual who has mocked the laws of this country."

Intriguingly, the New Zealand media largely missed the unfolding scandal arising out of Clinton’s APEC visit. While local TV crews made much of Clinton’s meeting with the Chinese leader, Jiang Zemin, and the apparent thaw in the US/China relationship, few in the New Zealand press gallery had any idea of the real issues at the heart of the problem.

The scandal over China’s spying became so bad that some in the US publicly accused China of deliberately blowing up a rocket carrying two US commercial satellites, purely to get access to the technology.

And what of James Riady: what can he want in New
Zealand? For a start, he owns property in
Auckland, which TradeNZ identified as the Port Tower hotel. We can find no evidence of such a hotel, but there is a Park Tower Hotel which was owned by "Asian interests" up until December. But apart from his personal business interests, Riady is taking a regional political perspective as well. He was appointed as a "Roving Presidential Envoy for Australasia" by former Indonesian President Habibie, is a member of Parliament, and is a member of Indonesia’s APEC Business Advisory Council.

He also clearly knows of a number of influential New Zealand business leaders.

Government briefing documents obtained by Investigate paint a picture of what Riady wanted to achieve on his June 1999 NZ visit, prior to his later controversial appearance at APEC.

For a start, New Zealand trade officials were told to play down his connection to Lippo Group and boost his diplomatic status, despite the fact that most of his delegation were either Lippo staff or Lippo customers. Indeed, the briefing supplied by the New Zealand Embassy in Jakarta refers to Riady wanting to visit NZ "for private business purposes," and goes on to say:

"The headings to the [official] programme currently put at the forefront Riady’s position as Deputy Head of Lippo Group. We and Torry [Parantoro, Riady’s executive assistant] agreed that the emphasis should instead be given to his role as Special Envoy; this title should be transposed, upper-cased and put in bold to reflect that this is the primary hat under which he is visiting New Zealand.

"This is also the title that should be used in the first instance for formal introductions, except for his business meetings where he dons his Lippo Group hat.

"Parantoro showed us a fax he had received from the Indonesian Embassy in Wellington. This provided details of Sunday evening’s programme, including a list of journalists for the media interview and a guest list for the dinner hosted by the Indonesian Ambassador; we noted that [National MP] Pansy Wong was included, a pleasant surprise. Parantoro was pleased with the arrangements confirmed to date for the Monday [June 21], especially the call on the Prime Minister. We clarified that whereas Riady’s entourage would be able to participate in most of these calls, the meeting with the PM would be more restricted …Parantoro clearly expected this to be the case.

"We noted that we were waiting for confirmation for calls on Don McKinnon, Bill English, and Don Brash.

"Parantoro commented favourably on the agenda for Tuesday (we noted the likely addition of a call on Sir Selwyn Cushing, Brierley Investments.)

"We discussed with Parantoro opportunities to meet with the Business Roundtable and the ASEAN-NZ Business Council.

"Riady made a specific request that Doug Myers be informed of his visit and be included in his programme. However…Myers is currently in London and will not be returning to NZ until July."

The cost of Riady’s June visit was to have been met by New Zealand taxpayers, according to the documents.

"We suggested that it would be appropriate to fund all Riady’s expenses (including offering a first class airfare)."

Ultimately, however, the Indonesian businessman and alleged Chinese spy paid his own way.

The unanswered question remains open: are Riady’s activities in New Zealand and Australia purely commercial, or are they motivated also by espionage?

"In his role as the Special Presidential Envoy for Australasia," write NZ diplomats, "James Riady has been busy. On February 25 1999, Lippo Bank signed an MOU [Memorandum of Understanding] with the Australian Trade Commission to promote the economic development of eastern Indonesia.

"Under the MOU, cooperation programmes between Indonesian and Australian businessmen will be conducted using the Bank Lippo’s networks. Australia will provide training and guidance for Bank Lippo employees.

"In October 1998 James made a visit to Australia to promote relations and dialogue between the two nations. There he met with Victorian chief minister Jeff Kennett, New South Wales Premier Bob Carr and addressed an Austrade seminar. He was also scheduled to meet with the Prime Minister, John Howard."

Nowhere in the intelligence briefing for the New Zealand Prime Minister is James Riady’s relationship with Bill Clinton, or alleged activity as a Chinese spy, disclosed.

Nick Arathimos, the TradeNZ official who organised the June 1999 visit, told Investigate he was aware of Riady’s background. When questioned over his involvement with BCCI and with a bank that was laundering drug cartel money through Arkansas, however, Arathimos was clearly taken by surprise, saying he was not aware of these allegations.

Yet, in answer to a question in Parliament on July 21, Deputy Prime Minister Wyatt Creech said "The Ministry of Foreign Affairs and Trade was fully aware of the issues surrounding his relationship with President Clinton. Furthermore the Ministry did not, and does not, consider that a visit by the President of Indonesia’s special envoy raised any issues of a security nature."

The then Opposition leader, Helen Clark, asked a follow-up question:

"Before the Prime Minister met Mr Riady, was she also aware of a draft report submitted by Republicans on a Senate committee in America that alleges Mr Riady and his father both have "a long term relationship with a Chinese intelligence agency". If so, would that have made a difference?"

"Obviously I do not know the answer to the detail in the question," replied Creech, "but what I can say is that this person visited New Zealand as a special envoy of the President of Indonesia, and it was in that capacity that the special envoy visited the Prime Minister."

"How big was the cheque?" interjected one Labour MP, implying Riady’s political donation largesse may have rubbed off on National prior to the election.

Is it possible that Lippo Group may be trying to place itself in a position to steal New Zealand trade secrets or technology on behalf of the Chinese or Indonesia? There is no evidence one way or the other, but given the company’s involvement with Chinese intelligence it would be naïve to assume Lippo would not be interested if an opportunity arose.

After news of Lippo’s Chinese espionage first broke in a Los Angeles Times story three years ago, ongoing investigations have revealed Chinese interests associated with the Riadys have allegedly stolen not only trade, but also critical defence information including nuclear secrets.

Chinese spies have also been uncovered in Canada.

Arrested and questioned by federal and congressional investigators, Riady’s right-hand-man Johnny Huang has coughed to his boss’ involvement, but pleaded the 5th Amendment – the right not to self-incriminate – nearly two thousand times since interrogation began.

Riady has refused to return to the US for questioning or to clear his name. Instead, he remains based at his Jakarta estate where he lives in a southern-US style plantation manor, three stories tall with massive "Greco-Roman columns", sited amidst a Lippo golf course. The home also has a helipad and a lake, and the entire property is ringed by a moat.

Is James Riady an appropriate person for the New Zealand Government to be promoting as someone to do business with? Despite the revelations, TradeNZ official Nick Arathimos claims yes, effectively saying he’s the best of a bad bunch in Indonesia.

"You can come up with a lot worse. His companies in Indonesia are among the better organised, relying less on cronyism with Suharto. James Riady will continue to be a key player in Indonesia because of his existing interests.

"If he were to invest in New Zealand, he would have to abide by our laws and regulations."

Which is just as well, because as many critics of our investment regime have pointed out, New Zealand is the laughing stock of the Western world for having some of the most lax controls on money-laundering and inside trading on the planet.

At the end of the day, however, one could question why we bothered to invite someone of Riady’s background to New Zealand in the first place. The argument that ‘he’s the best of a bad bunch’ could equally apply to one of the less violent members of Colombia’s Cali drug cartel.

If the intelligence briefing provided to Shipley was drawn only from trade diplomats, then somebody should probably be caned for not calling in the External Assessment Bureau, and if our foreign spy agency was consulted then the Government could probably save a few million dollars by sacking the spooks and simply purchasing a subscription to the Washington Post or the Los Angeles Times.

As for the Riadys, Indonesians wouldn’t be surprised if it was a quest for world domination that they were really undertaking. The Lippo logo is everywhere in the troubled Asian powerhouse, with its interests in banks, factories and shops, hospitals and housing developments.

"In Jakarta," wrote the Washington Post, "locals joke that Lippo stands for Lama-Lama Indonesia Pun Punya Oe, meaning: In the long run, even Indonesia will be mine."

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ABOVE: BCCI frontman Jackson Stephens has close ties to both Clinton and US Presidential hopeful George W Bush


Posted by Ian Wishart at 12:32 AM | Comments (0)