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Subcontracting war

May 9, 2011

A legal drama involving three European gun dealers offers a rare look into the small arms trade. The case exposes a murky global supply chain that seeks to fill Defense Department demand for guns in Iraq and Afghanistan.

https://p.dw.com/p/10Ja4
Karl Kleber in orange jumpsuit
Karl Kleber exports weapons around the worldImage: Democrat and Chronicle Media Group, Jay Capers

The growing legal case against three European gun dealers accused of trafficking weapons parts into the United States has shed unique light on the morally and legally ambiguous international trade in small arms.

German national Karl Kleber and British nationals Gary Hyde and Paul Restorick have been indicted for selling 5,760 AK-47 drum magazines to an arms dealer in Chili, New York. The 75-round drum magazines are of Chinese origin, making them illegal under America's 20-year-old arms embargo against Beijing.

Kleber has since pleaded guilty to the smuggling charges and agreed to cooperate with law enforcement. According to his plea agreement, Kleber will share his knowledge of the illegal small arms trade as well as any information "related to terrorism, genocide or war crimes activity."

Although the illegal drum magazines landed in the inventory of a licensed arms importer in New York, they were originally destined to fulfill a subcontract indirectly tied to the Defense Department. The case reveals a murky global supply chain that seeks to supply the demand for small arms in Iraq and Afghanistan.

DoD contract

After the United States overthrew Saddam Hussein in 2003, Washington needed lots of weapons fast to rearm an Iraqi military that it had dissolved.

Nicholas Marsh, a small arms expert with the Peace Research Institute Oslo, told Deutsche Welle that the Department of Defense (DoD) often enlisted private contractors to procure supplies for the Iraqi military from old stockpiles in the former Eastern Block.

Gary Hyde in handcuffs
Gary Hyde allegedly works with Kleber through the shady company JAGO LtdImage: Democrat and Chronicle Media Group, Jay Capers

"The US and the Pentagon were going around Central Europe hoovering up surplus weapons," Marsh said. "They weren't doing it themselves. They employed contractors to do it and they were paying very large amounts of money."

One such contractor was TAOS Industries, which received an award from the Defense Department around 2006 to procure various military goods for Iraq. TAOS subcontracted the Florida-based General Defense Corporation (GDC) to help fill the DoD order. And in turn, GDC went into business with Paul Restorick of Mil Tec Marketing, located in Kent, England.

GDC asked Restorick to locate - among other items - over 5,000 AK-47 75-round drum magazines for the TAOS order. Restorick claimed to have found Bulgarian-made magazines. However, he failed to provide the required documentation proving their origin. As a result, GDC lost its TAOS subcontract and subsequently sued Restorick for damages.

The supply chain established to fulfill a market demand created by the Defense Department began reaching into murky waters through an opaque process of contracting and subcontracting.

"You'll get one company connected directly through the Pentagon and they have sub-contractors," Marsh said. "Which means in the past the US Government didn't know who exactly was providing the service because you had so many layers of people in the middle."

Supply chain to Beijing

GDC's suspicion of the magazines turned out to be justified. Restorick had enlisted the services of an English company called JAGO Ltd. Gary Hyde and Karl Kleber, directors of JAGO, used their contacts in Beijing to track down Chinese magazines. They then counterfeited the product to look Bulgarian.

After the GDC deal fell through, the three European gun dealers found a new customer in Chili, New York. The company American Tactical Imports bought the embargoed Chinese magazines under the impression that they were Bulgarian and thus legal.

When US authorities got wind of the scam, they arrested Hyde and Kleber, both of whom were in the US at the time to attend a gun show in Las Vegas. Court documents indicate that Hyde and Kleber are also under investigation by UK and German authorities respectively.

The district attorney in Mainz confirmed the investigation against Kleber. Hyde was allowed to return to his native England on bail, where he has subsequently been charged by UK authorities with illegally exporting millions of rounds of ammunition and tens of thousand of weapons.

Meanwhile, Restorick remains at large and may have to be extradited from England.

libyen rebels with ak 47s
York guns tried to sell 130,000 Kalashnikov rifles to LibyaImage: dapd

Hyde and Kleber's relationship with JAGO is just one facet of their complex involvement in the arms business.

Hyde was the managing director of York Guns in York, England before resigning as a consequence of the legal charges he faces. According to Karen Boldison, who has worked as Hyde’s personal assistant, the company has two fields of business. On the retail side, York Guns sells firearms to farmers and sportsmen. On the trade side, they have conducted business with the UK's Ministry of Defense.

York Guns appears in a diplomatic cable published by WikiLeaks. The company applied for a license to export 130,000 Kalashnikovs to the Libyan government. However, London rejected York Guns application out of concern that the weapons would ultimately be re-exported to rebel factions in Chad and the Sudan.

"What you have to understand is that if we applied for an export license that it is not illegal," Boldison told Deutsche Welle regarding the WikiLeaks cable.

Kleber owns a similar operation in Worms, Germany called Transarms. Jochen Wurster, the current managing director of Transarms, declined to comment on the Kleber case. However, he described Transarms as a company that - like York Guns – has both a retail and trade side.

Both Boldison and Wurster said their respective companies are not under any criminal investigation and that business would continue as normal.

Hugh Griffiths, an expert on the small arms trade with the Stockholm International Peace Research Institute, says such companies earn most of their money from the trade side of business.

"They look like small operations dealing in collector items," Griffiths told Deutsche Welle. "But what they really do, where they get their real money from, is massive arms deals in Eastern Europe."

Business in the Balkans

According to Griffiths, Hyde and Kleber orchestrated a particularly shady deal that began around 2004. Over 70,000 Kalashnikovs were exported from Bosnia to a former airbase in the UK at Faldingworth, once a storage site for nuclear weapons. The corporate network that moved the weapons included York Guns, Transarms, JAGO Ltd as well as a company by the name of Procurement Management Services.

german soldiers destroying weapons
Many surplus Bosnian arms still find their way to Iraq and AfghanistanImage: AP

Peter Korneck, former international prosecutor with the Office of the High Representative in Bosnia, also worked on the case. He told Deutsche Welle that many of the weapons were documented as "decommissioned," meaning they could be used only as collector pieces. And although many of them were listed for import to Germany, it could never be proven that they arrived at their stated destination.

"There are a lot of weapons in Southeast Europe left over from the war," Korneck said. "They are not secured. There's a great temptation among everyone who has access to the weapons to try to make money off of them."

Both Griffiths and Korneck said that the weapons were ultimately destined for Iraq and Afghanistan under contract from the US government. But given the post-invasion chaos, it remains unclear whether the weapons ultimately ended up in the hands of coalition forces or insurgent groups.

Lack of transparency

This lack of transparency is what concerns the small arms experts. It remains difficult to verify whether magazines truly come from Bulgaria or China, and if thousands of AK-47s actually go to coalition forces or Iraqi insurgents.

"The Bosnian government has the right to sell arms if it wants to," Marsh said. "There's nothing illegal about the US government paying for them, and there's nothing illegal about the Iraqi government buying them. There are ethical concerns of the arms ending up in the hands of bad people in Iraq. But in terms of seller and customer, it's within the laws and regulations."

Yet in this grey market for small arms, the line between legality and illegality is easily crossed. In the case of the Chinese drum magazines, the US Defense Department issued a legal contract to TAOS, which caused a subsequent chain of legal subcontracts that ultimately sourced an illegal product.

Griffiths believes that the arrests of Hyde and Kleber will lead to further revelations about who exactly is profiting from the grey market that fuels war.

"This is the opening of a book… the first revelation in many that are to come," he said.

Author: Spencer Kimball
Editor: Rob Mudge