Henry B. Gonzalez, (TX-20)
(House of Representatives - July 25, 1992)

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The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Texas [Mr. Gonzalez] is recognized for 60 minutes.

Mr. GONZALEZ. Mr. Speaker, on November 5, 1990, the President signed into law the Iraq Sanctions Act of 1990 which required him to conduct a study and report to the Congress on `sale, export, and third-party transfer or development of nuclear, biological, chemical, and ballistic missile technology to or with Iraq.' In September 1991 that report was sent to the Congress.

September 1991 was several months after the cessation of the hot shooting phase of that war. So many of my colleagues, and I am sure my fellow Americans, had believed that that war was over with. What I said was that it was just beginning, as the continuing instability and dangerous situation, not only in that area but now over into the Balkans and connected with the developments that happened as a result of the so-called gulf war, would be unpredictable and only the Lord will know where it will end. It is not seen that way, nevertheless.

But outside of our shores and in other countries, that is the perspective that has been written about, in Europe and Asia and in Latin America.

As I say, in September of 1991, the report that was mandated by the study that the President signed in 1990, before the war, was given to the Congress, but like almost all of this administration's declarations about United States policies toward Saddam Hussein, the report is misleading, I am sorry to say.

The President's report claims:

* * * United States suppliers did not contribute directly to lraq's conventional or nonconventional weapons capability.

Last July the President made similar and likewise inaccurate statements. The Banking Committee's BNL investigation has shown that in fact numerous U.S. companies sold equipment to various Iraqi weapons programs, conventional and nonconventional. One U.S. firm among these is a firm called Servaas Inc. In Indianapolis, IN.

This firm supplied Iraq with a $40 million BNL, that is the Atlanta agency bank of the Italian Banca Nazionale del Lavoro, owned by the Italian Government and headquartered in Rome, it supplied $40 million through BNL financing for this brass factory.

Documents obtained from the Iraqi front company, Matrix-Churchill Corp., indicated that the Iraqis planned to use the brass produced at this factory to double the production of brass discs used to make artillery shells and gun cartridges. Other brass from the plant was scheduled for use in military applications such as making components for artillery fuses. The plant was also scheduled to produce brass for commercial uses for the Iraq market, and if possible, for export to other Middle East countries and Asia as well.

When Iraq invaded Kuwait in August 1990, all the equipment for the brass factory had been shipped, but due to construction delays, the factory was not yet operational.

In testimony before the Banking Committee on April 1991, Mr. Servaas of Servaas Co. of Indianapolis, incorrectly said the brass scheduled to be produced at his factory, was solely for commercial uses. Documents obtained from Matrix-Churchill indicate most of the bass was scheduled for military use.

Brass, as you know, is an alloy composed of copper and zinc. Various combinations of these metals produces brasses with different melting properties. For example, a mixture of 70 percent copper and 30 percent zinc produces a malleable type of brass called cartridge brass or 70/30 brass.

A March 31, 1989 memo to Matrix-Churchill's Sam Naman, the gentleman that I referred to here in the prior special order this last Monday, from Iraq and who, in effect, had been the Iraqi agent sent to handle the Matrix-Churchill business in Ohio after the Iraqis obtained a proprietary right of the corporation.

This is what is troubling, because I think that when it is fully established and all the facts are brought out of a huge movement of money today that the BNL will turn out to be sort of a Boy Scout troop Code of Honor compared to what is still going on by way of the investment and acquisition indirectly of American assets in factories, in industrial activities and in banks, for that matter, financial institutions.

Of course, banks and financial institutions, I have been speaking out on that since the 1970's. And particularly after the fall of the Continental-Illinois Bank out of Chicago, in which the immediate cause of the failure of that bank was the removal of, unbelievably, $8.3 billion of mostly Japanese, German and other European countries' deposits. That was the immediate cause.

The underlying cause is a little bit more complicated, but one which should have been clear notice to the Committee on Banking, Finance and Urban Affairs then, as I tried to no avail to do so, and, therefore, to the Congress and the people that we were headed for a very, very turbulent period in our financial environs in our country.

So that this Sam Naman, in a memo that we obtained from Matrix--Churchill, indicates that 80 percent of the 70/30 cartridge brass is used in four major markets: automobile radiator cores, electrical components, coins and army ordnance.

It is common knowledge that brass is a critical military raw material.

The Al Shaheed Factory at Ameria-Falluja contained Iraq's sole brass production and fabrication facility. The brass facilities at Al Shaheed were originally constructed by an Austrian firm starting in 1984. The original Austrian built facility produced all different types of brass.

[TIME: 1610]

The Servass brass factory was located in close proximity to the existing Austrian facility.

The Al Shaheed factory was part of an Iraqi military complex. Besides brass, Al Shaheed produced other metals of all kinds of military production.

Some of its production was for civilian use, but Al Shaheed was under the control of an Iraqi military entity called the State Armament and Administration Directorate or SAAD. SAAD ran numerous military production complexes throughout Iraq. In 1989 the SAAD name was later renamed the AL FAO Organization, but its function remained the same.

A book by the Simon Wiesenthal Center's Kenneth Timmerman called The BNL Blunder states that Al Shaheed Factor was:

* * * Part of a huge weapons facility protected by numerous antiaircraft guns and earth shields at either end to protect it from skip bombing.

In a recent interview with a committee investigator, a former Servass employee verified that the Al Shaheed complex was heavily guarded.

An intelligence report entitled, `Iraq's Growing Arsenal: Programs and Facilities' dated July 1990 states that Al Shaheed was a major conventional weapons facility. Another report of a later date also states that Al Shaheed was engaged in munitions production.

Iraq's military industrialization program called for a major expansion of ammunition production. Mr. Steven Bryen, a former high ranking official at Department of Defense (DOD), who was responsible for export licensing at DOD in the middle part of the 1980's wrote April 15, 1991 to Mr. Servaas raising the following point about Iraq's ammunition production plans:

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Iraq was completing a huge ammunition facility at Taji * * * It was this very large capacity to make ammunition that was of concern to the U.S. * * *.

Now, Mr. Bryen was one of the witnesses we had in the initial hearings that we had in this committee just abut 2 years ago, and which, of course, had no kind of reportage or press coverage all these months until this last year, this year.

A February 1990 intelligence report states:

Al Shaheed is responsible for an industrial sector obviously critical for military production * * *.

Given Iraq's ambitious drive to produce its own complete array of shells and cartridges expanding brass production at Al Shaheed was a necessity. Iraq picked Servaas as the means to expand production at Al Shaheed.

On November 21, 1988, BNL issued Servass, Inc., a letter of credit for $40,602,000. The letter of credit states that the money will be used for a `Copper scrap refining machines, tools, parts and technical documents' for the account of the Al Shaheed factory, Baghdad, Iraq. What the letter of credit does not state is that Al Shaheed factory complex is run by the Iraqi military and that much of the brass produced at the factory was intended for making artillery shells and gun cartridges for the Iraqi military.

Servass, Inc., was the owner of a brass mill in Indianapolis called Bridgeport Brass. It was through this firm that Servaas first made contact with Iraq. Records obtained by the committee indicate that Matrix-Churchill approached Bridgeport Brass in early 1988 looking for the submission of offers to build a brass refining plant at Al Shaheed. Bridgeport was interested in building the plant and it submitted a rough offer of $115 million to build a greenfield plant in Iraq.

As negotiations progressed, Bridgeport sent two of its employees to Al Shaheed to meet the Iraqis and to get a better understanding of their needs. A May 11, 1988 Servaas memo states that Iraq had about 70,000 tons of spent shell casings from the Iran-Iraq war worth several hundred million dollars.

In testimony before the Banking Committee on April 9, 1991, Mr. Servaas stated:

We were informed that the shell casings had either been made in the Soviet Union or had been made in Iraq to Soviet specifications and that they contained silicon.

The shells containing silicon were based on a technology used exclusively by the Soviet Union and other Eastern bloc nations. Western nations used 70/30 brass to make artillery shells and gun cartridges.

Iraq's goal was twofold. First Iraq wanted to recycle the spent silicon shells to make new Soviet-style artillery shells. The Austrian factory at Al Shaheed was already engaged in this activity, but Iraq wanted to expand production. Second, Iraq wanted to remove the silicon from some of the spent shells in order to produce 70/30 brass.

Naturally some or most of the 70/30 brass was scheduled for use in munitions applications. A July 31, 1998, memo to Mr. Servaas from the planning department of Al Shaheed states that the 70/30 brass is to be used for the production of light caliber cartridges. The memo goes on to say that brass rods produced at the Servaas factory are `for military purposes such as--artillery--fuze parts.'

The May 11, 1998, Servaas memo I mentioned earlier clearly shows the assertion that Al Shaheed was both military and commercial and that Servaas employees were aware of this fact. The memo states:

We were led to believe that this was a shell manufacturing plant, however, it turned out to be a complete casting facility, sheet mill, rod mill, tube mill, of very modern design with the latest state of the art.

A July 11, 1988, Matrix-Churchill memo to Servaas indicates that the 70/30 brass was to be cut into 155mm and 210mm diameters--this just happens to be the size of the Gerald Bull designed self-propelled howitzers being produced in Iraq by Carlos Cardoen under a contract granted by the South African firm ARMSCOR.

As we go into the future, Lord willing, it is our hope that we will bring out in more detail the doings of Carlos Cardoen.

The original proposal for the brass plan submitted by Servaas on June 28, 1988, did not mention the silicon removal process. The original proposal was for Servaas to build a plant that would double the disc producing capability of existing plant and utilize available shell casings to produce brass that contained silicon.

[TIME: 1620]

After a July 16, 1988, meeting in Pittsburgh with Safa Al Habobi and Sam Naman, Servaas revised his proposal on July 25 to contain the transfer of silicon removal technology to Iraq in order to convert the shells into 70/30 brass.

After further negotiations, the contract for the plant was eventually signed in September 1988 by Mr. Servaas and Al Shaheed. The contract states:

Plant Objective: Means that the * * * site shall be able to; (a) use customer's available scrap of approximately 70,000 tons of shell cases to produce slabs which shall be used as incoming materials for the further production of accepted silicon brass discs in the existing facility of Al-Shaheed factory; (b) remove the silicon from the silicon brass scrap to a zero percentage to produce ingots to be used * * * to produce 70/30 brass slabs which shall be used as incoming materials for the further production of accepted brass 70/30 sheets in the existing facility of Al-Shaheed factory.

Plant objective (a) indicates that the Servaas factory will produce brass containing silicon. The only use for brass with silicon is to make Soviet-style artillery shells. Mr. Servaas' own experts verified that fact. On April 9, 1991, Servaas told the Banking Committee:

It was obvious to our experts that brass scrap containing silicon could not be utilized in the production of commercial brass production * * *'


Mr. DERRICK, from the Committee on Rules, submitted a privilege report (Rept. No. 102-915) on the resolution (H. Res. 581) waiving points of order against the conference report to accompany, and providing for corrections in the enrollment of, the bill (H.R. 5503) making appropriations for the Department of the Interior and related agencies for the fiscal year ending September 30, 1993, and for other purposes, which was referred to the House Calendar and ordered to be printed.

Mr. GONZALEZ. Plant objective (b) indicates that the Servaas factory would change the spent shells into 70/30 brass. As the July 31, 1988 memo I introduced earlier showed, Al Shaheed was going to use this 70/30 brass to make ammunition.

In testimony before the Banking Committee Mr. Servaas refused to admit that the production of the brass factory was intended for military use. On April 9, 1991 Servaas misled the committee when he stated:

It was explained to us that Iraq was looking to a long-term project of utilizing this substantial amount of scrap, estimated to be worth several hundred million, for the purpose of supplementing its oil revenues through the sale of commercial products in the peacetime economy that was anticipated following the termination of the war with Iran.

But on August 8, 1992 Mr. Servaas, in talking about the brass factory project, told the Indianapolis Star:

Probably the only thing they are doing is melting the brass down. But if they do, they can't do anything with it except make more shells. But if they are getting ready for another artillery war, they just might want to melt the old shells down and make shells, but that is all they can do.

There is no doubt that the 70/30 brass scheduled to be produced by the Servaas factory could have been used for commercial purposes; 70/30 brass is a prime grade used in numerous commercial applications. Some memo's obtained from the files of Matrix-Churchill indicate that Iraq wanted to use some of the 70/30 brass produced by the Servaas factory to sell in the Middle East or wherever else it could be sold to generate hard currency. Mr. Servaas even offered to sell the Iraqi brass through distributors used by his Bridgeport Brass factory in Indianapolis. But the fact remains that the 70/30 brass and other brass produced at the plant shows that the factory's production was primarily intended for military use.

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With information gathered during the BNL raid in August 1989, the Defense Intelligence Agency called on Mr. Servaas in the fall of 1989. Shortly thereafter, Mr. Servaas and his son Paul, who also worked on the brass factory, attended the meeting with officials from the FBI, Treasury Department, DIA, and CIA. Mr. Servaas stated that he briefed the agents and gave them all the information they asked for on the brass factory.

The CIA and other parts of the administration clearly knew that the Al Shaheed factory was a munitions facility, yet they did not stop the Servaas contract from being completed. They even met with Mr. Servaas after the invasion of Kuwait to get more information on the factory.

The administration also allowed Mr. Servaas to collect about $16 million in frozen Iraqi assets in order to complete payments under the contract with BNL. When Iraq invaded Kuwait, Servaas was still owed $16 million for work related to the brass factory. He recently stated that he eventually was paid in full for the factory. The Treasury Department's Office of Foreign Assets Control [OFAC] approved the release of the remaining funds to pay for the factory.

Mr. Servaas also received approval from the U.S. Government to ship the equipment and technology needed to build the brass plant in Iraq. In testimony before the committee he stated:

We carefully investigated and assured ourselves that all of the services and products we provided were well within the existing U.S. export restrictions and rules.

On July 29, 1988 Servaas offered to sell Bridgeport Brass to Safa Al Habobi, one of the heads of Iraq's procurement network in Europe and the United States and his `client' for $36 million.

Mr. Servaas also established a foreign company in order to avoid potential sanctions against Iraq.

The President issued his sanctions edict, and why would Mr. Servaas then establish a front company other than for the avowed purpose of circumventing the sanctions?

The foreign firm, called Izane, was registered in the Isle of Man. We have known in banking that the Isle of Man was one of the original offshore hideaways for all of these corporations and banking activities that wanted to hide their true financial condition. And then of course later we have had jillions of offshore facilities all the way from the Bahamas to the Indian Ocean, and that is part of this huge trillion-dollar operation that I am telling you about that makes our whole financial structure teetering and tottering, vulnerable, and a great amount of it in the illicit laundering of drug money.

[TIME: 1630]

And no corporation ever gets what they call a brass-plate location in these areas of offshore islands or over in Luxembourg except as in BCCI, to hide, to hide the insidiousness or the lack of integrity of their activities and their capitalization structure. It is going on, and I say worse than anything we happened to have tripped upon like BCCI and BNL.

But who cares? You know, by golly, the idea is to win in November, `Do not rock the boat,' like in 1988. My gosh, we tried mightily to warn about what the cost was going to be of what eventually became the S&L bailout, and nobody, the Congress, the committee, the administration and, of course, why, our recipients of so much of the taxpayers' benefits, the S&L's, and now the banking industry, why, they are the biggest reliefers we have ever in the history of the world, not just this country, and, oh, but power and wealth never yields, never has, never will, except as Frederick Douglass said, on demand, and there ain't no demand.

So it will follow its inexorable, almost Greek tragedy-like outcome and fate, but at the expense and the sacrifice of our defenseless citizens and constituents, the most helpless to be able to do anything, but trusting in us, their elected, duly elected agents and representatives, to at least give them the knowledge to formulate their judgments as free citizens, which we no longer are.

As I said last Monday and last week and since the 1960's, as a matter of fact, we are not citizens anymore. We are subjects, like the subjects of the Crown of England, and Great Britain, and Spain, and France. We used to be, and that is what they called, during the Revolution, Citizen Tom Paine, Citizen Tom Jefferson, but not any longer. We are now back as subjects. Presidents, instead of kings, make wars nowadays.

So when a free people become corrupted, there are no worse slaves than a corrupted free person. These are just glimmerings. They may sound like some minor horror story to some. That is what has agitated me for almost 30 years I have been a Member.

What has agitated me is that the very, very heritage and institutions and freedom that our predecessors enabled to hand down and for us to be beneficiaries of would have been so traduced, and I swore as a recipient of these benefits, for no person such as I in any other country would have had the privileges of being elected by his peer citizens to represent them first on the local legislative body, then in the State legislative body, and now for about 31 years on the national legislative body. That never would have been possible had it not been for constitutional, institutional life that I swore a blood oath that I would do nothing to diminish one iota for those who will follow me.

But I am sure that my colleagues and many others have the same motives, the same ideals, the same desires, and I do not want to claim exclusiveness.

But I do want to point out that those who find puzzlement and eccentricity are those who have not bothered to read what it is I have actually done through deed and fact as well as word in the 39 years and 4 months and 24 days that I have had the honor to serve as a freely elected and duly elected representative and public official with a public trust of the highest order. That is what frightens me that little by little and relentlessly and inexorably we have lost our moorings.

In fact, we even had a boast by those who had been in power, some time ago, not too long ago on a national level, scoffing constitutional restrictions, and even wrote a publication saying, `What is the Constitution between friends?'

Well, our history of man is replete with examples. Where is Ninevah? Where is the pomp, where is the glory of Rome, and in between other nations? It is not an egregious error not to profit from experience, not to read even our own history? I think so.

These examples I am giving would have been thought impossible just 30-35 years ago, but now it is a different era, and I am afraid a most dangerous one for the preservation of the basic mold and framework of institutional life as we have been privileged to inherit.

Well, Mr. Servaas offered the Bridgeport operations to Safa Al Habobi, and he gave a price of $36 million. He also, likewise, established this foreign front, mostly to evade the force and effect of the President's decree on the seizure of assets or the freezing of assets.

So that under this scheme, Servaas sold the brass factory contract to Izane, that is, he went through the motions of selling the Bridgeport operation, an Indianapolis corporation, to this front in the Isle of Man.

Thus, the contract for the brass factory was between the Isle of Man firm, Izane, and an Iraq entity, Al Shaheed. Contracts between two such foreign firms are not subject to economic sanctions imposed by the U.S. Congress.

A June 1, 1990, letter from Servaas explaining the Izane relationship to Matrix-Churchill states, and I quote:

Izane has the responsibility to direct the performance of the contract outside the U.S. due to the risk of sanctions by the U.S. Government at some future date.

The Banking Committee's investigation of BNL shows that much of the $2.155 billion in loans provided to the Ministry of Industry and Military Industrialization, known otherwise by the acronym of MIMI, were utilized to purchase military useful technology from the United States and Europe.

BNL funds were used to purchase equipment for the Condor II ballistic missile, the Scud missile modifications, the short-range Ababel rocket, the 210mm and the 155mm howitzer, Gerald Bull's supercannon, which was really a very fiendishly designed operation, and my colleagues may or may not remember, or might not remember reading that Mr. Bull was done away with. He was assassinated in Belgium, and there are all kinds of claims as to who did it.

But there is no question it was those that knew that he was in a position in Iraq for the use of something that could be used that would really give a tremendous invincibility, almost, to Iraq.

Gerald Bull's supercannon, sophisticated night vision equipment, and an artillery fuze factory to name a few of the known uses of BNL funds.

Contrary to President Bush's assertions that no United States firms contributed directly to Iraq's military capability, many of the firms supplying military technology to Iraq, like Servaas Inc., were based in the United States. In previous reports I identified about a dozen United States firms that sold equipment to Iraq's Condor II ballistic missile, again, contrary to the President's assertions. But you don't have to rely solely on my word alone to prove that United States firms helped to arm Iraq.

In addition to the Banking Committee's inquiry, investigations conducted by the U.N. Special Commission and the International Atomic Energy Agency have identified dozens of U.S. firms that contributed directly to Iraq's military capability.

In fact, investigations by agencies within the President's own administration, including the Department of Defense, the Commerce Department, and the U.S. Customs Service, have concluded that United States firms contributed directly to Iraq's conventional and nonconventional weapons programs.

Several Bush administration officials in a position to know the truth have testified before Congress about the United States role in enhancing Iraq's military capability. For example there is an April 18, 1991 hearing by the Subcommittee on Oversight of the Ways and Means Committee, chaired by my fellow Texan J.J. Pickle.

The hearing examined the administration and enforcement of U.S. export control laws with the main focus being the United States experience with Iraq. One of Department of Defense experts on proliferation stated at various times during the hearing:

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* * * A number of military useful technologies and pieces of U.S. equipment made their way into Iraqi hands.

There's no question that there were U.S. exports in support of military systems.

I don't think we exported weapons. What clearly is the case * * * is that U.S. technology did makes its way to programs that had important military applications.

Steve Bryen, a former top DOD proliferation expert testified at the same hearing. Regarding the U.S. role in arming Iraq, Dr. Bryen stated:

During this time and still today Commerce is classifying millions if not billions of dollars of sensitive goods as general destination (G-DEST)--telling American companies that export license are not needed to ship to Iraq, even to clearly identified military endusers. In this way a great deal of the infrastructure Saddam Hussein needed to support his military build-up came from the U.S.

On April 8, 1991, Dennis Kloske, the former Under Secretary for the Department of Commerce's Bureau of Export Administration, testified that:

By 1990 U.S. exports of dual-use equipment to Iraq were subject to review for reasons of national security, nuclear nonproliferation, missile technology, chemical and biological weapons, human rights and regional stability. Under these circumstances, the Commerce Department still approved license applications destined for the Iraqi government agencies, military and research activities.

The most concrete proof that it was official Bush administration policy to arm Iraq is contained in a State Department memo dated November 21, 1989. The memo states:

* * * Although U.S. precludes approval of Munitions Control licenses for Iraq, exports of dual use commodities for conventional military use may be approved.

The President is clearly, whether willingly or unwillingly misleading the Congress and the American public about the U.S. role in arming Iraq. But it is clear that the policy was to tolerate Iraq's military buildup effort. BNL was critical to that operation, as the Servaas example shows. The administration tolerated the effort long after the BNL raid, and followed its policy of supporting Saddam Hussein right up to the start of the Gulf War. Only then, when the fat was in the fire, did the Administration reverse course. Since then, of course, they have tried to hide the facts and evade responsibility for their folly, and intimidate the likes of myself and others with awesome charges of violations of national security. It is sad, in fact tragic, because history cannot be rewritten now. As I have said on repeated occasions, everything that I have provided to my colleagues, as I will today with the documentation I have appended in these memos and things I have referred to, there was not one at any time that had not been revealed or published in some manner, shape, or form, not in the United States, unfortunately, but almost every other country, whether it was in Europe or even in the Middle East or, for that matter, Asia.

It is tragic, as I have said, about this tremendous era of security; we have spent more money on new weapons and whatnot and we are more insecure than ever before.

[TIME: 1650]

It is the same thing with secrecy. I brought out last week that this administration is restricting, that is, it is classifying 7,117,007 documents a year, which amounts to more than 19,000 a day.

The recent announcement that the North American so-called free trade agreement, and I want to alert my colleagues, the real name of it is free trade and finance, and there are a lot of hookers in that baby that have to do with the most intimate exposure of our financial institutions again; but in the so-called free trade agreement, it was securitized. It was classified. Members could not see it until just about 10 days ago they declassified it.

Now, that is absolutely abhorrent. Distinguished colleagues of mine who sit on the Armed Services Committee tell me that if they want to inquire as to the cost of the B-2, they cannot find out because that information is classified.

Here is the Congress that under the Constitution must raise and provide for armies and appropriate therefore have an administration say, `Sorry, we can't tell you the cost of this.'

Oh, way back, I began, I believe it were not so long ago that many of the Members probably are so young they do not remember, in the sixties and particularly the early seventies I began to see the folly that we were beginning to tax the American people tremendous sums for defense; but a defense of Europe that was a Europe of 1948 where Russia would come overland somewhere. We had 650,000 troops at the time just in Germany.

Now, how many did the British have, and where did they have them? Well, they never had even 10,000, but they had them over in the Saar, the steel- and coal-producing area. That is the way the competition to their industries could be controlled.

Where were the French? Well, the French were over in their traditional economic Alsace-Lorraine near the Saar.

The British were in the Ruhr where you have the steel producers.

And Patsy, Uncle Sam, or as they called us even after World War I, Uncle Sap, had 650,000 troops who were the main mass--to do what? To forestall a possible, maybe even imminent invasion across the Czech border and across the mainland--to do what?

I would get up and I would say, I would ask the Appropriations chairman, who was a very fine Texas colleague, Mr. Mahon, and he would get angry with me.

I would say, `How much of this is for the defense of Europe?'

`Well, what do you want to know?'

But always there was somebody like the chairman of the subcommittee, the gentleman from Florida, Mr. Sikes, who would get up and say, well, if the gentleman will yield, and I would say, `Look, I have looked over this and I have come to the conclusion that about 50 percent of this is for what I would say is the defense of Europe.'

But what Europe? The 1948 Europe. This is 20 years later and more. The world has changed.

Then I would take a special order after that. Mr. Sikes would say, `Well, yes.'

And I would say, `All I want to know is, am I in the ballpark range?'

And he would say yes, and I would say, `Well, that is all I want.'

Well, unfortunately, our country has had to pay a price for what I call the cold war culture, which has led us to completely misjudge what has happened even in the former Soviet Union.

I have not seen a real assessment, or in what the Germans have called the Outer German, or Mittel Europa, or East Europe. It is tragic, because for ignorance, we always must pay a price.

Mr. Speaker, I include the following material, which has been alluded to in my special order:

SerVaas, Inc.,
June 1, 1990.
To: Sam Naman.
From: Clarence Ormsby.

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Attached is the write-up we discussed on the phone today:

Izane was activated on behalf of a third-party beneficiary to buy the contract between SerVaas, Inc. and the Al-Shaheed Factory which provides for the purchase of certain equipment and the provision of services for a new refining brass plant in Iraq.

Izane has the responsibility to direct the performance of this contract outside of the United States of America due to risk of sanctions by the U.S. Government at some future date. Izane is a Proprietary Trust situated in the Isle of Man and is entitled to profits made by the sub-contractor. No profits of the trust accrue to SerVaas, Inc. SerVaas, Inc. is being paid a purchase price in installments for the sale of the contract. The beneficiary shall insure against delays and events that would impede the completion of the contract.

As fiduciary agent for the Al-Shaheed Factory, SerVaas, Inc. has agreed to work closely with Izane and to constantly monitor the contract until its completion. SerVaas, Inc. was obligated to sell the contract to meet the requirements of its covenant-not-to-compete with Olin Metals which purchased Bridgeport Brass from them; however, at this juncture SerVass, Inc. has paid Olin $175,000 to be released from the covenant in order to insure that it can perform its duties as fiduciary.


June 7, 1989.

Mr. Sam Naman,
Matrix-Churchill Corp., Solon, OH.

Dear Sam: This will confirm our conversation of June 7, regarding the payment schedule:

Payment No. Date             Amount Explanation                                                                                                      
1                           $70,000 At time of signing of agreement on the sale of the contract with Izane estimated to be in ten days to two weeks. 
2           July 31, 1989   130,000                                                                                                                  
3           Oct. 31, 1989   100,000                                                                                                                  
4           Dec. 31, 1989   200,000                                                                                                                  
5           Mar. 31, 1990   300,000                                                                                                                  
6                           200,000 Completion of Certificate of Commissioning and Taking Over Certificate for complete contract.                    
7                         1,030,000 Final Acceptance Certificate.                                                                                    
Total:                    2,030,100                                                                                                                  

These payments shall be made to you by Izane Engineering, Ltd. (London Bank) to your London office.

Best Regards,

Clarence C. Ormsby,
Vice President.


Matrix-Churchill Corp.



To: Mr. Sam Naman.
From: Mr. Gordon Cooper.
Date: January 10, 1989.
Subject: Commissions--XYZ and Bridgeport Brass.

I have to estimate our year end financial results. Currently we have two commission contracts secured by L/C's:

(1) XYZ: $14,072,625.00 Contract Value; $1,400,000.00 Commission to MCC of which 80% is committed to Al-Arabi. The 20% MCC portion is $280,000.00

(2) Bridgeport Brass: $42,000,000.00 Contract Value; $2,100,000.00 Commission to MCC of which 80% is committed to Al-Arabi. The 20% MCC portion is $420,000.00.

Total Commissions to MCC: $700,000.00.

For MCC consolidated operations to show a profit we need at least $410,000.00 of this $700,000.00 by March 31, 1989. For the Procurement dept. to operate in profit I estimate we need $436,000.00 of the $700,000.00.

Could you please advise me prior to our next weekly meeting of where we stand on this.


Gordon Cooper,
Vice President.



Matrix-Churchill Corp.,
Cleveland, OH April 14, 1989.
To: Dr. Safa.
Subject: Bridgeport Brass.

In reference to my telecon with Dr. Servass, the project value has increased from $40,602,000 to $41,136,000 due to changed in billit casting molds, cranes system changes, changes in metal preparation department, supplying main equipment in laboratory.

Servass has received down payment against bank guarantee for the sum of $4,060,200.

Bridgeport Brass proposed the following payment to Matrix-Churchill:

Payment No. and Date:

1--July 1989


2--Dec. 1989


3--March 1990


4--July 1990


5--July 1991


I think we should be paid now $100,000 and in July 1989 $100,000 in order to help our cash flow for Matrix-Churchill.

Although Dr. Servass mentioned they have received the down payment of 4 million but they have spent until now 7 million on project and have ordered 92% of equipment with down payments up to 30%.


After speaking to Dr. Servass and his meetings with Bank DeLavoro, he has the following solution to finance the project:

Servass Inc. have started to conduct a market survey and study for locating markets to sell brass product in the Middle East and abroad and are determining which products are in demand most, what sizes etc. This feasibility study will be completed shortly and Servass will have all necessary information to market Iraqi brass products at highest world prices.

In order to finance this project the Ministry of Industry makes arrangements with DeLavoro and Servass to propose a portion of scrap to be refined as collateral in the form of a certificate of conveyance to third party in order to have working capital. Eventually the product manufactured and solid will pay back for the working capital.

Dr. Safa, would you please give your opinion regarding this matter. Awaiting to hear from you.

Best Regards,
S. Naman.



To: Bridgeport Brass.
Attn: Dr. Servaas.
Our Ref: U043.
Subject: Brass Project.

Dear Dr. Servaas: In reference to our telecon of the 12th of April regarding payment schedule to MCC and financing step two of the Iraqi project, please note that after may discussions with Dr. Safa, please find the following amendment:

(A). Payment Schedule to MCC is as follows:

Payment No. and date:

1--10 days from receipt of this letter


2--July 1989


3--Oct. 1989


4--Dec. 1989


5--March 1990


6--July 1990


7--July 1991


[Page: H9507]

The above payment has been constructed according to our discussions and letter of agreement on pro-rata basis.

(B). Dr. Servaas, your idea of financing step two of the project by obtaining working capital from the bank using the scrap brassis a feasible and very encouraging project. However, we need a proposal from Servaas Inc. with this idea in order for us to present something in writing from you.

We also look forward to you completing the Market Survey for the Brass Product and sending us your result and recommendations.

I would be pleased to hear from you as soon as possible regarding this matter. I might have a source who is interested in lining up some funds for working capital for this project. Finally, I would like to discuss this opportunity with you and thank you for your efforts and interest.

Best Regards.
Sam Naman.


March 31, 1989.
To: Sam.
Subject: Brass--Flat Rolled Sheet.

Alloy made of 70% copper and 30% zinc and very malleable.

80% of brass flat rolled product is consumed by four major markets:

(1). Automotive (radiators).

(2). Electrical Components.

(3). Army Ordianance (shell casing).

(4). Coins.

Other smaller uses would include such items as tubing, household goods, hardware locksets.




Banca Nazionale del Lavoro,
Atlanta, GA, November 21, 1988.
Issuing Bank's Credit No. 88/3/3712.
Our Advice No. 11755.

Beneficiary: Servaas Incorporated, 1000 Waterway Boulevard, Indianapolis, Indiana 46202.

Instructions Received From: Central Bank of Iraq, New Bank Street, Baghdad, Iraq.

For Account Of: Al Shaheed Factory, Baghdad, Iraq.

Gentleman: We are pleased to advise you that the above mentioned correspondent has issued their Irrevocable Letter of Credit in your favor for account as shown above for a sum not exceeding Forty Million Six Hundred Two Thousand Dollars United States Currency ($40,602,000.00 USC) available by your draft(s) drawn at sight on The Central Bank of Iraq.

The amount of this letter of credit covers 100% of the invoice value of:

Copper Scrap refining machines, tools, parts and technical documents C & F Baghdad.

A. 10% of the credit value is payable as advanced payment. However, payment will only be made upon our receipt of tested telex from The Central Bank of Iraq stating that bank guarantee issued by Rafidain Bank has been issued and approved by the buyers.

B. Up to 50% of the credit value is payable as against your draft(s) as described above accompanied by:

1. Your signed commercial invoice in original and 7 copies in the name of the above mentioned accountee stating the merchandise description, quantity, price value, gross and net weight, freight charges, shipping marks, country of origin, country of manufacturer, trade discount (if any) and certifying its correctness and that the goods are of U.S.A. origin. Original must be attested by Iraqi Consulate (see * below for attestation and legalization).



May 11, 1988.
To: C. Ormsby.
From: R. Euser.
Subject: Visit to SAAD, Baghdad, Iraq.

This report mainly covers the technical details, since Mr. Robert Davies will be covering the legal and commercial details in his report.

Summary: It appears that our previously submitted proposals were to establish our knowledge as well as answer the need for additional production capacity.

The main problem is utilizing scrap metal available as well as improving production volume.

They requested a new proposal to accomplish this and we are in the process of preparing it.

[Page: H9508]


Mr. Adnan Fawzi did not want to discuss the commercial and financial aspects of the proposal. He was only interested in technical details.

(1) How did we arrive at the casting requirements for circles? I told him that this was a combination of casting yield (95%), Sheet Mill yield (85%, heavy gauge) and blanking yield (60%), for a total overall yield of 48% reduced to 45% for our calculations. He fully agreed with this to arrive at casting requirements. This apparently broke the ice and from that period forward they accepted the rest of our proposal.

I gave them a lay-out drawing that was forwarded to them by Sam Naman in Cleveland.

After the above, the real problem they have was brought up. They have available approximately 60,000-70,000 metric tons of cartridge cases and scrap copper wire cable (10,000-15,000 tons) and do not know what to do with it. They wanted to know how they could utilize this in their process.

The cartridge cases contain .45-.75% SI, 74-77% CU, remainder ZN with total impurities of .15% max. They would like to use this material for the following:


I told them that would be no problem with slight zinc additions and proper preparation of the shells.

(2) High Conductivity Copper Strip--Told them that it would not be possible to use SI brass shell cases for this product.

(3) Profiles 95% CU, 5% NI--Told them that it would not be possible to use SI brass shell cases for this product.

(4) Profiles (70-71.5% CU, remainder ZN) (70-72.5% CU, remainder ZN)--Told them that SI brass shell cases could possible be used with zinc additions depending on allowable SI level in this product.

(5) Copper Tubing--Told them that it would not be possible to use SI brass shell cases for this product.

The copper cable, after proper preparation, removal of insulation and iron could possible be used in some of their products after receiving analysis of the copper scrap from these cables.

In general they need a fully integrated scrap preparation system and to make this successful for their desired products, considerable process engineering work needs to be performed. I also indicated to them that substantial amounts of virgin metals would be required with the available scrap to produce a quality product.


In the morning we discussed general details:

(1) Building design, construction and installation of foundations will be done by SAAD Est. We need to furnish all requirements.

(2) All utilities (water, gas, electrical power, and compressed air) will be furnished by SAAD Est. up to connection of the equipment. We need to furnish all requirements.

(3) Transportation of equipment to plant site is our responsibility. Insurance will be handled by SAAD Est., i.e. we pay freight, they buy insurance.

(4) All cooling requirements (outside temperature range 0-55C, 32-131F) will be furnished by SAAD Est. We need to furnish requirements.

(5) Lodging and transportation for equipment installation labor and supervision is described in Mr. Robert Davies report.

(6) They will bring their top people to the U.S.A. for maintenance training at vendor sites.

Mr. Robert Davies was given a sample contract for his review and I was given detail information on alloy composition.

After this meeting we left for the plant, located west of Fallujah, approximately 65 miles from Baghdad in the desert. We met with Chief Engineer F.B. Yacoub who is also Factory Director.

We were led to believe that this was a shell manufacturing plant, however, it turned out to be a complete casting facility, Sheet Mill, Rod Mill, Tube Mill, of very modern design (3 years old) with the latest state of the art. The only part missing was a metal room.

The Casting Shop was equipped with two (2) each 500kw channel type melting furnaces and one (1) each 500kw coreless type melting furnace, as well as two (2) each gas fired starter furnaces. Each of the induction furnaces feed metal to a 200 kw holding furnace (3 each), D.C. Casters (3 each). Two furnaces were used to cast bars (26 3/8 x 5.7 x 10 long) one at a time with a production rate of 2 bars/hr. for both lines. The other furnace with DC caster was used for billets (8.268, 7.086 and 6.102 x 10 long), 2 each per pour.

The casting and associated sawing equipment with automated handling equipment was provided by Wellman in England under license from Loma-Mann.

The Sheet Mill consisted of cake heater (33,000 lbs./hr.), reversing Hot Mill (2 Hi), slab cooling facility, Slab Mill with edge milling, single stand cold reversing mill (4 Hi) to run slab to slab or slab to coil, feed conveyor to produce circles from slabs on two (2) each hydraulic punch presses, shear to cut webbing and automatic unloading and stacking of circles.

They also have narrow (13' wide) reversing Cluster Mill capable of producing strip to minimum gauge of .004' brass and .0025' copper.

All annealing furnaces were supplied by Wellman except Ebner bell type bright anneal. They have 2 each excellent slitters (.080"-250") and (.0025"-.080") as well as cut to length and leveler line for flat strip.

It is quite obvious that the rolling capacity far exceeds the casting capacity. We feel that by adding casting capacity we can increase the disc capacity at least 2 times present capacity and possibly 3 times with our process engineering help. All rolling and slitting equipment was manufactured by Andritz, Austria.

The Rod and Tube Mills consist of a modern, automatic 2500 Extrusion Press equipped with Junker induction heaters (2 each) capable of heating billets 8.268", 7.086" and 6.102 x 23 5/8 long. The press was made in England by Loewy-Robertson.

Coils (1 coiler) and straight lengths on automatic runout table can be produced on this press as well as small tube (1 3/4 OD x .150-200 wall). A number of draw benches (6) were available as well as associated pointing, sawing, annealing (bright) and pickling equipment. One (1) eddy current testing line was also used as well as a vapor degreaser.

All melting, heat treating (annealing), bar heating, billet heating was done electrically and gas was only used in the two gas fired starter furnaces for the casting shop.

The complete plant was air conditioned by 4 each enormous units and elaborate duct system in the roof of the building.

Housekeeping and maintenance appeared to be excellent. They work 2 shifts, 12 hrs. each, 6 days/week or a total of 72 hrs/wk./shift/man.

The general impression is that they have excellent, modern equipment.


On 4-28-88 we returned to Amsterdam and I discussed freight handling on 4-29-88 with Mr. J. Gaanderse, Director of Copex IGS B.V. in Rotterdam. His company, who has U.S. representatives has been in business of overseas shipments for 60 years and has recently handled a shipment of a complete paper mill to India and was very familiar with the logistics of shipments into Iraq.

I returned on 5-1-88 to Indianapolis.

Rokus Euser,
Plant Engineer.