ATLANTA — Two of five Californians charged in a $50-million scheme to illegally sell two U.S. transport planes to Libya have been arrested and the other three have agreed to surrender to federal authorities by today, U.S. Atty. Stephen S. Cowen said Wednesday.
The five Californians were indicted along with two Libyans by a federal grand jury late Tuesday in what U.S. Customs Service officials described as "the largest diversion of military equipment" to Libya ever uncovered.
Cowen, the U.S. attorney for the Northern District of Georgia, said the defendants allegedly purchased the two L-100-30 transport planes from Lockheed-Georgia Co. on the pretext that the aircraft would be used for oil exploration in the tiny West African nation of Benin.
However, the planes, civilian versions of Lockheed's C-130 Hercules military transport, were instead diverted to Libya to be converted to aerial refueling craft that could be used to extend the range of Libyan fighter jets, according to the indictment.
Named as defendants in the seven-count indictment were Edward J. Elkins, David E. Baskett and Thomas J. Burnham, all of Santa Maria; Franklin D.R. Corcoran, Santa Barbara; Carl D. Lilly, Visalia, and Abdulraheem M. Badir and Abdurrahmen M. Badi, both Libyan nationals who were last known to be in West Germany.
Cowen said Corcoran was arrested in Pismo Beach, Calif., and Lilly in Honolulu on Tuesday. Corcoran was being held on a $1-million cash bond, while Lilly was to appear before a federal magistrate in Honolulu on Wednesday to have his bond set.
Under an agreement with the Justice Department, Elkins, Baskett and Burnham were to turn themselves in to federal marshals in Atlanta by this morning, Cowen said. He added that he expected all five will be formally charged at arraignment proceedings in Atlanta in about a week.
Federal prosecutors were seeking bonds of $1 million for Elkins and Lilly and $250,000 for Baskett and Burnham.
Cowen said the exact whereabouts of the Libyan defendants is unknown but they are thought to be "somewhere in Europe," and attempts will be made to have them extradited.
Also named as an unindicted co-conspirator was Abu Bakr Yunnis Jaabir, chief of staff of the Libyan armed forces. However, Cowen said there was "no direct evidence" that Libyan leader Moammar Kadafi was personally involved in the scheme to purchase the planes.
U.S. policy prohibits commercial sales of American aircraft to Libya. Eight C-130s purchased by Libya for $60 million in 1972 are still in storage at the Lockheed-Georgia facility in Marietta, just northwest of Atlanta, because the State Department has denied an export license for the planes.
According to the indictment, the defendants obtained an export license for the planes from the Commerce Department by making false representations as to the purpose and destination of the aircraft.
At a news conference, Cowen said the yearlong investigation into the scheme was prompted by information from Lockheed-Georgia officials that the planes had been spotted in Libya, not long after company crews had delivered them to Benin.
"At the time this diversion was discovered, the defendants were in the process of purchasing two additional aircraft and parts from Lockheed valued at over $60 million," he said. "They had also executed contracts with a California firm to provide aerial refueling systems for the first (two) aircraft."
The refueling equipment was never shipped, he said.
Cowen said federal investigators also "took a hard look" at whether Lockheed-Georgia officials were involved in the alleged violations but concluded that there was insufficient evidence to press charges against any company officers.
In a statement issued Wednesday afternoon, Lockheed-Georgia said the company "complied with all U.S. government regulations in the original sale of the aircraft involved in this matter and has cooperated fully with U.S. authorities, since first being notified that the aircraft . . . had been reported seen in Libya."
Also named as defendants in the indictment were the Santa Maria firms of Armoflex Inc., AFI International Ltd. and Quicksilver Systems, and two West German companies, Top Technologie of Munich and Contrust of Karlsruhe.
Elkins, Baskett and Burnham are all officials of Armoflex and AFI. Lilly is the owner of Quicksilver Systems. Corcoran, who is Lilly's father-in-law, was employed by the National Oil Co. of Libya in Tripoli.
Cowen said the West German firms were most likely fronts set up by the Libyan defendants.
The individual defendants face a maximum penalty of five years imprisonment on each of the seven counts and are subject to fines of up to $500,000, or twice the gross gain each derived, whichever is greater. The corporations are also subject to the same fines.