Appendix I:

U.S. Weapons Technology Sold To Soviets
From San Jose Mercury News - Sept. 6, 1985

Spanish company pleads guilty to illegal exports

WASHINGTON The Soviet Union illegally has obtained "state-of-the-art" American equipment that could help it close the gap between its weapons and highly sophisticated U.S. weaponry, and additionally highly sensitive equipment has reached Cuba, according to a Department of Commerce official and an indictment made public Thursday.

Details of the case, which involves efforts by the Soviet bloc to obtain equipment crucial to the production of highly sought computer semiconductors and integrated circuits, emerged when a Spanish company that maintains offices in Illinois agreed to pay a criminal fine of $1 million for illegally exporting high-technology equipment between 1979 and 1982.

U.S. Attorney Joseph E. diGenova issued a statement saying the violation, by Piher Semiconductores, S.A., of Barcelona, was "one of the most significant in the area of United States high-technology transfer."

Under an agreement between the Department of Justice and Piher, the company pleaded guilty to two felony counts, waived indictment by a grand jury and agreed to pay the fine. In addition, the company, which already has been barred for two and a half years from exporting U.S.-made products, will remain barred for an additional nine months.

Equipment valued at $2.4 million was shipped to the Soviet Union and Cuba, and other highly sensitive items did not get through, according to Pentagon and Department of Commerce officials familiar with the case.

Those officials described the lot as items at the top of the Soviets' list of material needed to help them move into the age of highly sophisticated, computer-dependent weapons.

"They have a major need for it in the military," said one Pentagon official, speaking on the condition he not be identified. "It would probably narrow the gap considerably in weapons systems, lending a qualitative edge to their quantitative edge."

Officials said the Soviet Union, which in the past has tried to obtain semiconductors and integrated circuits produced in the West, recently had shifted its emphasis to obtaining the equipment needed to manufacture the circuitry the miniature wires that carry electronic data in such common gadgets as pocket calculators and digital watches, as well as in the most sophisticated space weapons.

"Such equipment is among the Soviet bloc's most highly sought American high-technology goods needed for expanding and improving the bloc's lagging microprocessor and semiconductor production capability," said Donald Creed, a Department of Commerce spokesman.

He said departmental documents confirm that $2.4 million of these goods were illegally re-exported to Cuba and Russia... The most sensitive, state-of-the-art semiconductor manufacturing equipment went to the Soviet Union," after first being shipped to Switzerland.

Creed said the material shipped to Cuba, and additional equipment the Cubans were unable to obtain, "would have given them the capability to produce semiconductors and integrated circuits."

"As far as we know, the plant didn't get into production," he said. "They didn't get everything they needed." However, according to the agreement accepted by Piher, Cuba already has a semiconductor manufacturing facility in Pinar del Rio.

The indictment said two senior officers of the Spanish company, Jose Puig Alabern and Francesc Sole I Planas, reached agreements with Soviet and Cuban trade organizations to obtain the equipment from U.S. manufacturers. The two are believed to be in Spain and out of reach of U.S. law enforcement officials.

Piher itself apparently does not make semiconductor manufacturing equipment, according to a spokesman for a Silicon Valley market research firm.

"To my knowledge, they don't make equipment," said Jerry Hutcheson, president of VLSI Research Inc., a San Jose company that does market research on the semiconductor industry.

The indictment states that Puig reached an agreement with Imexin, a Cuban foreign trade organization, "to provide and erect a complete integrated circuit manufacturing facility" valued at $19 million.

It said Puig and Sole, who eventually quit the company, negotiated with Technoproimport, a Soviet foreign trade organization, to sell the Soviets "two highly sophisticated U.S.-origin integrated circuit manufacturing systems."

U.S. officials and information in the indictment said U.S. officials in Spain, checking at Piher facilities to determine whether the falsely completed export license documents were being adhered to, were shown fake equipment intended to resemble that exported by Piher.