Aussie in US spy scandal

Aussie in US spy scandal
Michael McKenna and Patrick Walters
17nov05

AN Australian Defence employee has become embroiled in an international espionage
scandal involving the alleged sale of top-secret US B-2 Stealth bomber technology to
foreign powers.

Defence Materiel Organisation officer Arthur Lazarou, a retired Royal Australian
Navy lieutenant-commander, is the subject of an internal Defence investigation over
his links to US engineer Noshir Gowadia, who was charged last month with disclosing
military secrets - which could be "used to cause injury" to the US - to
representatives of eight foreign governments and corporations.

Although prosecutors have not disclosed the identity of foreign interests involved,
US press reports named China as among countries that acquired the Stealth secrets.

Indian-born Mr Gowadia, 61, is described as having played a crucial role in
developing the B-2 Stealth bomber while a design engineer at Northrop Corporation,
where he worked for 18 years. He was instrumental in creating a secret defence
system that makes aircraft "virtually invulnerable to attack" by making them
invisible to infra-red heat-seeking missiles.

Deadly blow delivered by 'invisible' strike force
THE B-2 Stealth bomber is one of the most potent weapons in the arsenal of the US
military.

The long-range strategic bomber is designed to avoid detection and elude heat-
seeking missiles as it delivers a 18,000kg payload of conventional or nuclear
weapons.

The US's 21 aircraft, which each cost $US2.2 billion, can fly more than 9600km
without refuelling. If they refuel just once they can fly further than 16,000km,
giving them the capacity to strike almost anywhere in the world within 24 hours.

How the B-2 achieves "stealth" is a closely guarded secret, but its component
materials, special coating and wing design all contribute to its "low
observability".

The B-2 is coated with a radar-absorbing paint on its leading edge and has a unique
engine system that hides the heat coming from the jet exhaust.

This exhaust-cooling technology protects the plane from heat-seeking missiles.

The B-2's first combat missions were in Kosovo - Operation Allied Force - in 1999.

Since then it has been used in Operation Enduring Freedom (Afghanistan, 2001) and
Operation Iraqi Freedom, the US-led invasion of Iraq in March and April of 2003.

Numerous websites testify to the effectiveness of the B-2 in combat.

In Kosovo the aircraft was responsible for destroying 33 per cent of all Serbian
targets in the first eight weeks by flying non-stop to the eastern European country
from its home base at Whiteman air force base in Missouri.

Supporting Operation Enduring Freedom, the B-2 flew one of its longest missions:
from Missouri to Afghanistan and back again.

Its first full-scale combat deployment was in the second Gulf War, where it flew 22
sorties from Diego Garcia as well as 27 sorties from Whiteman. B-2s released more
than 680,000kg of munitions during that campaign.

The design of the B-2 can be traced back to the flying wing of the 1940s but the
development program began during the early 1980s in California.
David King
THE B-2 Stealth bomber is one of the most potent weapons in the arsenal of the US
military.

Mr Lazarou, 44, was hired a fortnight ago by the DMO to work as a project management
coach at Defence Department headquarters - just days after Mr Gowadia was arrested
by FBI agents at his Hawaiian mansion.

Company records show Mr Gowadia and Mr Lazarou are listed as joint directors and
shareholders in the Canberra-based company, NTech Australia Pty Ltd.

The company, registered to Mr Lazarou's home address and set up in mid-2001, is one
of two companies US prosecutors allege were used to launder the proceeds of the sale
of the military secrets that funded Mr Gowadia's lavish lifestyle.

US Assistant Attorney Ken Sorenson told The Australian yesterday the Canberra shelf
company and another related entity in the tax haven of Liechtenstein were central to
the espionage case.

"There are two corporations that are involved in the case, NTech A (Australia) is,
of course, Australian, and NTech E (Equipment), which is based in Europe," he said.
"It (NTech Australia) was a corporate identity that Gowadia worked through for
reasons that we suspect are not altogether legitimate."

A US federal grand jury returned a six-count indictment against Mr Gowadia last
week. Three counts allege he broke federal law by "wilfully communicating national
defence information to persons not entitled to receive it" from three countries. The
remaining three counts accuse him of violating the Arms Export Control Act. He faces
up to 10 years' jail on each count.

DMO deputy chief executive Norm Gray said he did not know if there were any links
between NTech Australia and the FBI's allegations against Mr Gowadia.

He said Mr Lazarou had been upfront about his link to NTech. "He has offered full
assistance to the Defence Security Authority. When he applied for the job, he
declared his association with NTech before Gowadia was arrested."

It is understood that Mr Lazarou, a qualified aeronautical engineer, has handed over
all relevant company documents to the DSA and maintains the company has not traded
since it was set up by Mr Gowadia four years ago in a failed attempt to win Defence
funding for a hi-tech electronic warfare project.

Under the plan, funding of $2 million to $3 million under Defence's concept
technology demonstrator program would have allowed NTech to develop technology with
the aim of commercial production.

"We could not reach agreement with him in the intellectual property or on price," Mr
Gray said.

While Defence insisted on owning the intellectual property generated by the project,
Mr Gowadia wanted total control, he said. Contract negotiations were terminated in
late 2002.

At least eight foreign governments and corporations are alleged to have received top-
secret documents and briefings involving the Stealth technology, as well as
classified information Mr Gowadia got from his work at the Los Alamos National
Laboratory in New Mexico - home of the US nuclear development program.

A US Federal Court hearing last week rejected Mr Gowadia's bid to be released on
bail, ruling he was a "flight risk" because of a history of secret overseas trips
and numerous foreign connections.

After initially denying the allegations, Mr Gowadia has since allegedly admitted he
passed on classified information "verbally, in papers, computer presentations,
letters and other methods to individuals in foreign countries".

"Gowadia admitted he provided classified information to approximately eight named
countries," according to US Federal Court documents obtained by The Australian. "At
that time, I knew it was wrong and I did it for the money," Mr Gowadia allegedly
said in an October 14 statement to the FBI. It is alleged he may have been selling
military secrets from as far back as 1999.

Mr Sorenson declined to disclose Australia's possible involvement in the scandal
because "it is an ongoing investigation" or whether Mr Gowadia had travelled to
Australia.

According to the documents, Mr Gowadia admitted he knew the information he was
selling was classified. "The reason I disclosed this classified information was to
establish technological credibility with potential customers for future business,"
he allegedly told investigators. Mr Lazarou could not be reached for comment.