The Untouchables

WHEN CHARLES McVey ran afoul of U.S. Customs in 1982 for allegedly shipping multi-spectral scanners to the Soviet Union, he became one of the first targets of the Reagan Administration’s drive to stop the flow of sophisticated U.S. technology to East Bloc countries. In 1981, the U.S. Customs Service launched “Operation Exodus,” creating a special unit aimed at cracking down on high-technology smugglers, or technobandits. That same year, the U.S. Commerce Department expanded its own enforcement efforts to halt the export of “dual-use items”--technology that has both commercial and military applications. The prohibited equipment includes everything from mortars and radar for F16 jets, to software and some models of IBM personal computers.

In March, 1983, the U.S. Justice Department indicted McVey on numerous felony charges punishable by a maximum sentence of more than 100 years in prison and $500,000 in fines. At the same time, the Commerce Department levied a $1.24 million fine against him and denied him all export privileges for 30 years, citing 29 allegedly illegal shipments of U.S. computer equipment intended for the Soviet Union between 1979 and 1982.

How was McVey able to travel freely in Europe for the next few years, often using his own passport while, according to U.S. authorities, he allegedly continued to sell millions of dollars’ worth of sensitive high technology to the Soviet Union? The answer lies partly in the nature of the extradition treaties between the United States and most other countries, says William Fahey, chief of the public corruption and criminal fraud division of the U.S. Attorney’s office in Los Angeles, who has prosecuted more than 40 people charged with making illegal exports to illegal exporters to the Soviet Bloc since 1980.

The agreements, typically signed more than 80 years ago, “cover extradition for common-law crimes--such as murder, robbery and assault,” Fahey says. “Illegal exports is a recent phenomenon. The treaties don’t include it.”

Further complicating enforcement, technobandits can sometimes take advantage of loopholes in the law. For example, according to Kurt Hochner, legal counsel in the Swiss Embassy in Washington, McVey located his business in an International Import Free Zone in Switzerland, and goods arriving there were not technically considered to be on Swiss soil. Thus, laws that otherwise would have shut down his operation did not apply.

Such legal complexities can enable technobandits to operate around the world with impunity. For several years in the early 1980s, for instance, the U.S. government was stymied in its attempts to prosecute Werner Bruchhausen, a West German businessman whose international network, headquartered at his mansion near Munich, had procured under false pretenses millions of dollars’ worth of computer-testing systems and secret military communications equipment in California and illegally sold them to the Soviet Union. Even after arresting his associates in California in 1981, the United States couldn’t touch Bruchhausen as long as he remained in Germany, because the German government refused to extradite him to face U.S. export-violation charges.

Then, in the spring of 1985, Bruchhausen was detained at Heathrow Airport by British Customs, acting on a U.S. government request. U.S. attorneys succeeded in modifying the original indictment from “illegal export”--a non-extraditable act in England--to a related charge of wire fraud. Bruchhausen was turned over in 1986, and was subsequently convicted of wire fraud, sentenced to 15 years in prison and ordered to pay $15,000 in fines.

A similar delay might be in store in the case of McVey, who was picked up in Canada last August. The Canadian government does not recognize illegal export as an extraditable offense. Consequently, the U.S. government is seeking to have him handed over on charges of filing false statements. Those charges stemmed from his alleged falsification of export declarations between 1979 and 1982 to conceal the sale of restricted technology to the Soviet Union. No decision has yet been made on the request for McVey’s extradition. He remains in custody in Vancouver.