James Guerin

James Guerin (died February 10, 2022, aged 91) founded International Signal and Control (ISC), a defense electronics company in Lancaster, Pennsylvania, in his basement in 1971. The company reported about 600 million dollars in annual revenue by 1987, when it merged into the British defense firm Ferranti. He was indicted in Philadelphia in 1991 for fraud and for illegal exports to South Africa, and in 1992 he was sentenced to 15 years in prison.¹²³

Lancaster and the basement company

Guerin worked for Lockheed as a missile program engineer in Sunnyvale, California, and came to Lancaster in 1969 as general manager of the newly established systems (military electronics) division of Hamilton Watch. The division lost money, he tried and failed to buy it from Hamilton, and in 1971 he left to found his own company in his basement.² The company opened its first assembly line in a converted chicken coop.⁴ It made space-vehicle rocket engines, electronic artillery fuzes, cluster bombs, electronic battlefield sensors and build-to-print circuit boards, and by the mid-1980s occupied a corporate campus off Donnerville Road in West Hempfield Township.² It employed 1,800 people in Lancaster County and 5,500 worldwide.² Guerin donated 4 million dollars toward a local sports center.⁴

United Chem-Con, another Lancaster arms maker in which Guerin held a 20 percent interest, was the subject of a federal fraud case in 1988. Its president, James B. Christian, pleaded guilty to defrauding the Pentagon of 12 million dollars and, at his sentencing in June 1989 to six years in prison, claimed Guerin had masterminded the scheme. Guerin denied the claim and said federal prosecutors had told him he was not a subject of their Chem-Con investigation.²⁴

The proxy board and Washington names

A special proxy board of Bobby Ray Inman, a former deputy director of the Central Intelligence Agency and director of the National Security Agency, retired Army general John Guthrie and former assistant secretary of the Navy Barry Shillito was set up so that ISC could handle classified American defense work although it was listed in London. The consulting firm of former secretary of state Alexander Haig, Worldwide Associates, did consulting work for ISC between 1985 and 1987, according to a filing Haig made when running for president in 1988.⁴ The same article reported that Inman and Haig had lent their names to Guerin's business activities over the years.⁴

The Ferranti merger and Guerin's departure

Guerin took the company public in London rather than on the New York Stock Exchange, and British investors did not warm to the stock. After it fell in 1987 he merged the company with Ferranti, becoming deputy chairman while Derek Alun-Jones remained chairman.⁴ The merger was announced in September 1987.⁵ In September 1989 the Ministry of Defence wrote to the Prime Minister's office that Ferranti's chairman had given an account of the merger that was "sufficiently unconvincing" for the ministry to order secret enquiries after its permanent secretary and the chief of defence procurement had sought an explanation. The enquiries showed that ISC and Guerin "had close contacts with the South African government," and that ISC had been involved in "a certain amount of two-way trade in missile equipment and technology." The ministry told the Department of Trade and Industry in May 1988 and told Alun-Jones of its concerns in July 1988. The letter states that ISC Technologies' divestment by Ferranti and Guerin's resignation were, in the ministry's belief, partly a result of that warning, and that Guerin had been unable to raise the funds to finance the acquisition. It also records an alleged connection between ISC and a British company in the European network supplying technology for the Condor missile programme.⁵

Guerin resigned in May 1989 after seeking unsuccessfully to buy back the company. Over the following months his 32 million shares of Ferranti were sold for about 40 million dollars. His lawyer's statement claimed the sale was not made by Guerin and that Citicorp had made "the sole and unilateral decision to sell those shares, which were pledged as collateral for a loan."⁴ In September 1989 Ferranti told shareholders that its board had come to "suspect significant irregularities" in overseas contracts of ISC Technologies, and appointed Coopers & Lybrand to investigate.⁶

Guerin left Lancaster in August 1989 for Naples, Florida, announcing the move in a six-page letter to the Lancaster New Era titled "Farewell Lancaster," which dealt mostly with Christian and with the newspaper's publisher.² His lawyer, Joseph A. Tate, issued statements in September 1989 acknowledging a federal grand jury investigation in Philadelphia, reportedly of illegal arms and weapons technology sales to Iran, Iraq and South Africa. The statements denied sales to Iran or Iraq during their war, denied the sale of cluster bombs to either, said "ISC has never manufactured or sold any chemicals or gases of any types," said Guerin "has cooperated with the grand jury investigation by providing documents and information requested," and said he "will fight vigorously against any charges leveled against him."⁴

The phantom contracts and the Parent plea

Ferranti alleged in September 1989 that Guerin had misled or defrauded it of 250 million dollars by making it appear that ISC held secret contracts with foreign governments. Ferranti pointed to a purported 200 million dollar missile contract with Pakistan. Pakistani officials were reported to say it never existed, and Guerin's longtime associate Clyde Ivy said it did. A former Pakistani official said ISC had held a contract with the Pakistani Air Force for cluster bombs or cluster-bomb technology in 1985 and 1986 that was completed.⁴ The Ministry of Defence letter of September 12, 1989 describes the contract as supposed to be with Pakistan for "missile know-how," with dealings through intermediaries and the work supposed to have been done in South Africa.⁵

Parent Industries, a company of which Guerin was then sole shareholder, was reported in September 1990 to have pleaded guilty to the fraudulent diversion of more than 700 million dollars from International Signal & Control Inc. It set up holding companies and bank accounts abroad, awarded the company non-existent Third World contracts, and had it pay money to subcontractors that was routed back as staged payments on the contracts. It agreed to pay 4.4 million dollars. The report said Guerin had allegedly used 67 million dollars of Ferranti shares as collateral to raise money to buy back the part of ISC holding the fictitious contracts.⁷

Prosecutors said the fraud rested on 42 front companies in Panama, 53 bank accounts in Switzerland and at least 10 in the United States, with warehouses rented and filled with crates of phony inventory for outside auditors. They said Guerin diverted 18.1 million dollars for his own use and gave 2.1 million of it to local charities.²

The 1991 indictment, plea and sentence

On October 31, 1991, the Securities and Exchange Commission and the United States Attorney for the Eastern District of Pennsylvania announced the indictment of Guerin and twenty others in "an international financial fraud, securities fraud and money laundering scheme involving a billion dollars in phony contracts," together with "smuggling of weapons and restricted commodities to South Africa and Iraq." The cases were docketed as United States v. James H. Guerin, Crim. No. 91-601, and United States v. Armaments Corporation of South Africa Ltd., et al., Crim. No. 91-602. The release credits the Serious Fraud Office, the Metropolitan Police, Belgium's national police and the Italian Intelligence Service with cooperation.¹

Guerin pleaded guilty before a federal judge in Philadelphia in December 1991, and a December 9, 1991 report said he admitted "inflating the value of the company by booking over $1,000m in fictitious weapons contracts with Pakistan, the United Arab Emirates and other countries," while denying that he diverted 18 million dollars for his own use.⁸ The plea covered eight counts: money laundering, conspiracy, mail fraud, securities fraud, two export violations and two tax evasion counts.²

At a two-day sentencing hearing in June 1992, a federal prosecutor said he had never seen so much criminal activity over such a long period in his career. Guerin blamed his downfall on his drive to succeed and on "misguided patriotism," and said selling weapons to South Africa would counter a communist threat. Judge Louis Bechtle told him: "It's difficult for the court to believe, Mr. Guerin, you could have felt you were doing the right thing," and sentenced him to 15 years.³ A report of June 23, 1992 recorded the 15-year sentence.⁹ A Knight-Ridder report of November 10, 1992 said he had "earlier this year" begun serving it.¹⁰

The South African shipments and the claims of Washington approval

The indicted South African firms were ARMSCOR, its subsidiary Kentron and Fuchs Electronics. The Wisconsin Project on Nuclear Arms Control reports that they were charged with cooperating with ISC to smuggle munitions, restricted commodities and technology to South Africa from 1978 to 1989, and that Armscor and Kentron acknowledged in their plea agreement that they had obtained shipments from ISC by routing them through front companies.¹¹ The State Department's 1997 debarment notice records that Fuchs pleaded guilty on February 27, 1997.¹²

Thomas P. Jasin, president of the subsidiary ISC Technologies from March 1986 to March 1987, was the first of the ISC defendants tried, in November and December 1992, on the Striker missile part of the conspiracy, a project to sell South African antitank missiles, partly made with American parts and technology, to China, for which ISC was to take a 35 percent commission on a sale valued at 300 to 500 million dollars.¹³ Jasin testified that Guerin told him ISC had "Washington approval" for the Striker dealings.¹⁴ His lawyer told the jury that Haig, officials of the CIA and the Army knew of the plans to import the missile components and none objected, and Assistant U.S. Attorney Robert E. Goldman answered: "Haig was never told they were bringing in missile parts from South Africa."¹⁰ Jasin also testified that he had met CIA agents and gained the impression that ISC acted covertly but legally, according to the National Registry of Exonerations.¹⁵ A defense witness, James Shinehouse, testified of conversations in which Guerin "would state that the CIA is knowledgeable about ISC's activities and that it backs certain activities that ISC had."¹⁶ A James Shinehouse is also identified by the Lancaster newspaper as having led Ferranti's internal investigation of ISC; the records found do not state whether the two are the same person.¹⁷

Guerin, who did not testify, had written a letter to the court before the trial that Jasin faxed to his lawyer on October 2, 1992. It stated: "I implied to Tom, as I did to several others, that we had Washington's 'blessings' on this activity. I interfaced a lot with Washington contacts and fed them a lot of information. But I did not have their approval for such shipments in writing. Jasin did not know this."¹⁶ The government told the jury in closing that almost every piece of incriminating evidence was blamed on Guerin's telling Jasin it was okayed by Washington. In 2001 it argued that Guerin had a long history of lying, and conceded that it had accepted at trial that Guerin told Jasin ISC had Washington approval, contending that Jasin could not reasonably rely on it.¹⁶

Ivy, whom the Third Circuit identifies as Robert Clyde Ivy, an ISC president and chairman of ISC Technologies from 1980 to 1989, invoked the Fifth Amendment when Jasin subpoenaed him, later pleaded guilty and served six months in 1997. In a December 7, 1999 affidavit he stated: "I informed Jasin of Guerin's statements to me that ISC's exports of defense components to South Africa had Washington's approval."¹⁸

Jasin was sentenced on July 16, 1998 to 24 months, a departure below the guideline range of 57 to 60 months, on the court's finding that he had a good faith belief his conduct was lawful.¹⁴ The Third Circuit affirmed in an unreported opinion of August 12, 1999, the Supreme Court denied certiorari on January 24, 2000, and the Third Circuit affirmed denial of a new trial based on Ivy's affidavit on February 5, 2002.¹⁸ On August 8, 2002 Judge Jan E. DuBois vacated the conviction and the 1998 judgment, holding that trial counsel had been ineffective in failing to interview and call witnesses, including Guerin, and stated that Guerin's testimony would have supported Jasin's reliance.¹⁶ According to the National Registry of Exonerations, prosecutors then dismissed the charges.¹⁵

Inman's letter

In an April 27, 1992 letter to Chief Judge Louis Bechtle of the Eastern District of Pennsylvania, Inman called Guerin a patriot and said he had worked in the mid-1970s with U.S. intelligence agencies. Inman had acknowledged working secretly with Guerin. In December 1993 the ties were expected to be raised at Inman's confirmation hearing as secretary of defense, and Inman told reporters he would not comment before the hearing.¹⁹ Inman withdrew his nomination on January 18, 1994, saying in a letter that he could not take the attacks on his reputation that had accompanied the nomination process.²⁰

Open Secrets, which published South African military intelligence documents in 2017, stated that "James Guerin himself used to be a CIA agent," listing it as circumstantial evidence that the CIA knew of the ISC shipments; the article cites no document for the claim.²¹ Kenneth R. Timmerman wrote that Guerin "knew how to ship American weaponry and technology anywhere in the world, claiming he had received quiet approval from the CIA."²²

Iraq and Cardoen

Allegations that Guerin improperly sold missile technology to Iraq were reported in 1989, and Tate denied them.⁴ Timmerman wrote that Carlos Cardoen bought fuzes for his cluster bombs, despite the United Nations arms embargo on Chile, from a Pentagon contractor in Lancaster called International Signals Corporation, managed by Guerin, which had developed the Rockeye cluster bomb fuze on a second-source contract for the U.S. Navy. He wrote that Guerin's biggest customers were Cardoen and the South African Armaments Corporation, and that the two men "were old friends" by 1984. Timmerman quoted Thomas L. Flannery, who investigated Guerin for the Lancaster Intelligencer Journal, as saying the two made a sweeping agreement "to split the world cluster bomb market in two," Cardoen taking Latin America and "special" countries such as Iraq, and Guerin the rest of the Gulf, Pakistan and South Africa.²² Timmerman also wrote that Cardoen was seized by U.S. customs officers in Miami on August 2, 1983 and indicted for attempting to smuggle night-vision goggles to Chile, and settled in a plea bargain costing his company 100,000 dollars in fines.²²

In January 1993 Representative Henry B. Gonzalez told the House that Terry Byrne, who had set up and run the British firm Allivane, had previously worked for ISC, and that "ISC was founded by James Guerin, who is serving time in jail after being convicted of, among other things, illegally shipping military technology to Iraq."²³ A 2022 retrospective states that federal officials said ISC did not necessarily know its South African components would reach Iraq and that there was no evidence ISC sold directly to Iraq.³

Release and death

Guerin's sentence was trimmed from 15 years to 13 for good conduct. He was scheduled for release from the federal prison in Coleman, Florida, on January 25, 2005, to serve the last six months in home confinement at his son's home in Mountville, Pennsylvania, with an electronic monitoring bracelet. His wife, Helen, had died in Florida in June 2004. Goldman said: "He served his time. I wish him and his family well."² Guerin died on February 10, 2022. He had remarried, and his obituary stated that "his greatest joy was in Christ and his beloved family."³