South African Firms Settle Arms Smuggling Case

Three South African firms pleaded “no contest” in U.S. District Court in Philadelphia in February 1997 to violating the U.S. arms embargo and United Nations sanctions against South Africa’s former white-ruled government. The plea settles a long-standing legal dispute with the United States.

State-owned Armaments Corporation of South Africa (Armscor) was fined $1 million, while its subsidiary, Kentron, was fined $500,000. Privately-owned Fuchs Electronics pleaded guilty to 11 related charges and was fined $10 million.

In 1991, the three companies were indicted for cooperating with a U.S. firm, International Signal and Control (ISC) Corporation, to smuggle munitions, restricted commodities and technology to South Africa from 1978 to 1989. Seven American defendants, including the chief executive of ISC, entered guilty pleas related to the case. Under the plea agreement, Armscor and Kentron acknowledged that they had obtained shipments from ISC by routing them through front companies.

When Nelson Mandela assumed the Presidency of South Africa in 1994, many observers expected the United States to drop the charges, but Washington refused to do so. The United States argued that Armscor had broken U.S. arms export laws and violated an international arms embargo on South Africa and was still responsible for its actions, despite the changes in leadership. South Africa’s new government argued that it should not be responsible for the transgressions of its predecessors, and that a state-owned company was not subject to U.S. prosecution. The South African government even refused to forward U.S. court papers to Armscor, citing sovereignty. In response, the United States imposed an embargo on Armscor and banned it from doing business in the United States.

Mandela asked President Clinton personally to drop the case when they met at the United Nations in 1995, but Clinton declined, saying the matter was in the hands of the U.S. Department of Justice.

The two sides hammered out a compromise in July 1996, whereby Armscor would pay a fine and agree to accept some form of international supervision to ensure its adherence to international restrictions on arms sales to certain countries, while the United States would drop its embargo on Armscor, allowing the company to pursue sales with NATO countries and U.S. allies. “The resolution of this matter paves the way for increased defense industry cooperation and will further strengthen the evolving military cooperation between South Africa and the United States,” South Africa’s Deputy Foreign Minister was quoted as saying during a press briefing after the plea was announced.