(SBU) GoA Alleges Diversion of Glock Pistols to Philippines

UNCLAS VIENNA 001372 SIPDIS, SENSITIVE STATE FOR PM/DTCC (Ballard, Peartree) and EUR/CE E.O. 12958: N/A TAGS: ETTC AU SUBJECT: (SBU) GoA Alleges Diversion of Glock Pistols to Philippines and Inappropriate Re-Exports from US Market REF: Embassy-DTCC emails Sensitive But Unclassified / Law Enforcement Sensitive ¶1. (SBU) SUMMARY: Austria's Economic Ministry has contacted Post and the Department's Officeof Defense Trade Controls Compliance (DTCC) withinformation on possible mis-direction of Glock hanguns (produced in Austria and assembled in a U.S facility),including -- large-scale diversion of pistols nominally intended for the police marketin the Philippines, and -- inappropriate re-expot of pistols assembled in the United States withut prior approval of Austrian authorities (the GoAsays it authorized assembly of Glock firearms in he U.S. on the condition that they would be for omestic sale and not re-export to third countrie). Post understands that DHS/IE is actively pursuing the case through law enforcement channels. END SUMMARY. BACKGROUND - - - - - - ¶2. (U) Glock GmbH is an Austria-based firearms manufacturer with an assembly plant in Smyrna, Georgia which sells to U.S. law enforcement and domestic retail customers (the company is reputed to have a two-thirds share of the U.S. police market). The Austrian government considers that Glock pistols assembled in Georgia remain "Austrian" products, and re-export from the U.S. is not authorized. GoA Raises Issues with Glock Re-Exports from U.S. - - - - - - - - - - - - - - - - - - - - - - - - - ¶3. (SBU) On September 15, Austrian Ministry of Economic Affairs Director of Export Control Dr. Helmut Krehlik contacted Post regarding exports of Glock pistols from the U.S. GoA representative raised two serious issues: -- According to GoA information from a reliable insider, Glock's longtime distributor in the Philippines ("Trust Trade") has routinely falsified police certificates as the basis for importing large numbers of Glock handguns -- which it then diverts to the private market. The certificates appear authentic (i.e. they are obtained via collusion from police officials),but the stated end-users - Philippine police officers -- are not the real end market for the guns. The GoA now considers all export transactions to Trust Trade to be bogus. -- The GoA objects to any re-export of pistols assembled in the U.S. without prior approval of Austrian authorities. Based on a review of the Department's export licenses, in at least several recent cases, re-exports to the Philippines and other destinations have occurred. Though assembled in the U.S., Austria views these pistols as Austrian products; the GoA says it authorized U.S. assembly of Glock firearms on the condition that the company make its distributors agree to keep these products within the United States. ¶4. (SBU) GoA summarized this information in a September 15 letter (passed to DTCC; reproduced below in para 15). Krehlik proposed a bilateral meeting on the margins of the October 14-15 Wassenaar General Working Group in Vienna; after consulting with DTCC, Post and GoA agreed on a videoconference October 9. Readout of Oct. 9 Videoconference on Glock Issues - - - - - - - - - - - - - - - - - - - - - - - - - ¶5. (SBU) At an Oct. 9 Vienna-Washington videoconference with DTCC and DHS/ICE representatives, Krehlik reviewed the Glock case and statistics on Glock exports to the US, asserting that Glock appears to have intentionally circumvented GoA export controls. Krehlik recognized that small numbers of pistols would be resold on the private market without proper licensing; these were not his concern. ¶6. (SBU) In order to prevent systematic diversion of U.S.-assembled pistols, GoA export licenses for pistol components shipped to the U.S. impose two conditions: a) the GoA license specifies that exports are for use in the U.S. only. b) Glock U.S. sales contracts must include a provision requiring GoA authorization for any further distribution or re-export of the pistols. Wholesale Diversion from Philippines Police Market? - - - - - - - - - - - - - - - - - - - - - - - - - - ¶7. (SBU) The GoA suspended weapons exports from Austria to private persons in the Philippines years ago, but continued to approve exports for police/public security forces. Glock sought and received permission to export pistols to individual members of Philippine police forces (against copies of police IDs),and under that program has shipped thousands of pistols to "police" users in the Philippines. ¶8. (SBU) The Austrian government has the cooperation of at least one former Glock employee and a former representative of Trust Trade (Glock's principal distributor for the Philippines) who assert that Trust Trade routinely supplied faked police credentials while diverting the weapons into the private retail market. The GoA's principal source reported that a 2008 license for 1700 pistols designated for the Philippine National Police (via Trust Trade) was immediately re-routed into the retail market when, on arrival, the National Police advised Trust Trade that it could no longer pay for the pistols; the pistols also had their police marking removed. The source also told the GoA that Glock had obtained licenses for the export from the U.S. of about 2000 pistols to the Philippines, in violation of the GoA's no-reexport stipulation for U.S.-assembled Glock firearms. The sources say that other Philippine firearms importers (Urban and Twin Pines) are also diverting handguns to the retail markets (NOTE: it was unclear whether Urban and Twin Pines are distributors for Glock or other U.S./European gunmakers -END NOTE). Based on this information and a derogatory report from the Austrian Embassy in Manila on corruption in the Philippine government and police force, the GoA has stopped issuing any licenses for firearms exports to the Philippines. ¶9. (SBU) The Department's Office of Defense Trade Controls Compliance (DTCC) confirmed that Glock USA applied for and was granted several licenses to ship pistols to the Philippines. DTCC has since suspended all pending Trust Trade licenses pending the outcome of various investigations. DTCC also has ordered a series of "Blue Lantern" checks to ascertain the end-use of firearms exported by Glock USA to Trust Trade and several other recipients in the Philippines. Broader Implications - - - - - - - - - - - ¶10. (SBU) In approving prior Glock export licenses, DTCC said it was unaware of GOA conditions on re-export of U.S.- assembled Glock firearms. It considers the re-export of Glock USA firearms in violation of Austrian law a serious issue. Krehlik suggested that Glock knows some U.S. distributors sell overseas and uses them to plausibly deny knowledge that distributors are violating GoA restrictions on re-export. ¶11. (SBU) Krehlik opined that systematic diversion of Glock pistols may not be limited to the Philippines, citing the diversion of Glock pistols sold in the Middle East during the past several years. The GoA has heard that Glock is considering establishing full production facilities in the U.S. and/or Canada; the GoA does not object to Glock shifting its production, but would like to reestablish confidence that current production is not being diverted. ¶12. (SBU) Krehlik said the GoA had refused to issue licenses for Glock exports to Israel or Venezuela (the latter is a market where Glock appears very eager to sell, he said),and was restrictive about exports to Central America. Asked by DTCC's DHS/ ICE liaison officer, Krehlik provided information on Glocks exported from Austria to Mexico (45,000 pistols from 2004-09). Investigation and Possible Prosecution - - - - - - - - - - - - - - - - - - - - ¶13. (SBU) DTCC affirmed that it takes seriously allegations against Glock USA and would make the above referenced end-use checks on the pistols. DHS/ICE officer indicated that U.S. authorities are actively investigating possible criminal conduct by Glock distributors and Glock USA (but with no findings so far). U.S. investigators would be interested if the GoA has relevant correspondence in the case indicating intention to circumvent controls. DHS/ICE can check whether efforts to circumvent Austrian laws are prosecutable in the United States. ¶14. (SBU) Krehlik reported that the GOA's tools to prosecute the case are more limited: -- Austria's criminal code does not provide for action against companies(only against persons); -- the GoA cannot prosecute Glock Austria for actions by Glock USA (unless there is a clear evidentiary chain connecting the two organizations); -- punishment for export control violations is weak in Austria. For example, a dealer convicted of illegally exporting 1300 pistols was fined EUR960 and given 3 months probation. The GoA will hold off prosecuting the case, to allow U.S. authorities time to pursue it, and will continue to provide the USG any available information to help U.S. investigations. The GoA would prefer to keep the case low-key to avoid tipping off any lawbreakers; Krehlik asked that U.S. investigators keep the GoA apprised, and GoA authorities may ask for U.S. assistance in a future Austrian prosecution of the case. WRITTEN SUBMISSION BY AUSTRIAN GOVERNMENT - - - - - - - - - - - - - - - - - - - - - ¶15. (SBU) On September 15 (prior to the videoconference),Post received the following letter from the GoA (NOTE: provided electronically to DTCC): BEGIN TEXT OF LETTER FROM GoA EXPORT CONTROL HEAD: TO: Daniel Froats, Economic Unit Chief, U.S. Embassy Vienna, Boltzmanngasse 16, 1090 Wien FROM: Helmut Krehlik / tel 71100-8345 Business Number: BMWFJ-23.530/0138-C2/2/2009 TOPIC: Export Control; Weapon re-exports to the Philippines Dear Mr. Froats, Glock Austria is, as you may know, one of the largest producers of pistols in the world. The US market is by far the biggest export market for this company. There are two production facilities in Austria and an assembly (plant) in Smyrna, GA, USA. For the purpose of assembling pistols in the USA large amounts of pistol parts are being exported. Since the assembling does not change the origin of the pistols all pistols distributed in the US are "made in Austria". Let me now turn to a specific issue with regards to our export control on pistols to the Philippines: In the past years Austria granted export licenses to the Philippine Government and policemen only. No licenses where granted for the civil market due to the critical situation in the Philippines. For this purpose we asked for copies of the ID books of the policemen to which the pistols were sold. About a year ago we noted, however, that the general representative of Glock in the Philippines, the company TRUST TRADE, Manila, faked thousands of police IDs and sold the pistols on the private market. Due to this fact, and an extremely negative report of the Austrian Embassy, Manila on the corruption situation in the Philippines Austria completely stopped weapon shipments to the country and in particular to TRUST TRADE. In the recent past however, we got evidence of Glock-pistol export from the US to the Philippines. The exports were not performed by Glock Inc; Smyrna, US and were not shipped to Trust Trade. We know however, that the US Company, GT Trading, Half Moon Bay, CA and the Philippine company Caliber Trading, Manila have close contacts to both. These re-exports are currently subject to an investigation by the public prosecutor. In this respect I enclose the shipping documents as well as our Statement of Facts to the public prosecutor. Recently we got reliable information by a former employee of Glock that another 2000 pistols are on the way from the US to the Philippines. Allegedly an export application has been place in the State Department. We have no evidence on these allegations nor do we know who the US exporter is. Dear Mr. Froats, we want to inform you that all exports of pistol parts to the US are covered by an end use statement issued by Glock Inc. Smyrna, stating that the assembled pistols are for the US market only and that a re-export is definitely excluded. In addition, all export licenses of pistol parts to the US have been granted under the condition that Glock Inc. Smyrna incorporates a clause in its contracts with the US wholesalers that they do not re-export the pistols outside the US. Any direct or indirect involvement of Glock in the circumvention of our export control legislation would be a criminal offence and could be charged by up to 2 years imprisonment. Finally we want to inform you that Glock seems to intend to open a full scale production line in the US, since we recently received an application for the export or machines and tools to manufacture pistols as well as a technology transfer and technical assistance. We appreciate the good cooperation with your authorities and would be willing to share more information if desired. Such an I information exchange could take place in the margin of the Wassenaar General Working Group taking place 14 and 15 October 2009 in Vienna. Best regards, Vienna, 15.09.2009 For the Federal Minister: Ing.Mag.Dr.rer.soc.oec. Helmut Krehlik END TEXT OF LETTER FROM GoA EXPORT CONTROL HEAD. ¶16. (U) This cable was coordinated with PM/DTCC. HOH