FBI investigates MILCO nuclear trigger smuggling to Israel

"...also met Benyamin Netanyahu while Netanyahu worked at Heli Trading..."

Documents

California-based MILCO International Inc. shipped 15 orders totaling 800 krytrons to the Israeli Ministry of Defense between 1979 and 1983. Israeli movie producer Arnon Milchan's Heli Trading Company brokered the transactions. A krytron is a gas-filled tube used as a high speed switch.  Export from the US requires a US State Department munitions license because krytrons can be used as triggers for nuclear weapons.  The US rejected several requests for krytron export licenses to Israel.  MILCO obtained the krytrons from EG&G Inc.

A US Attorney tried to get MILCO President Richard Kelly Smyth to implicate Milchan in the illegal krytron export during plea bargaining. The negotiation failed, and in May, 1984, Smyth was indicted on 30 counts of smuggling and making false statements.  Smyth and his wife fled the US and remained at large until captured in Malaga, Spain in July of 2001 after he applied for Social Security benefits.  Smyth pled guilty to violating the US Arms Export Control Act.  In November, Smyth was sentenced to 40 years in prison and a $20,000 fine, though he was free within four years. In 1985 a Federal Grand Jury was convened in Los Angeles to investigate potential Atomic Energy Act and Arms Export Control Act violations, but no charges were ever filed against Milchan or those who helped Smyth flee the US and covered his expenses abroad.

A 2011 biography called "Confidential: The Life of Secret Agent Turned Hollywood Tycoon Arnon Milchan" claims Milchan was recruited into Israel's LAKAM economic espionage unit in his 20's and became a key operative for Benjamin Blumberg (head of LAKAM), and Rafi Eitan (who ran Jonathan Pollard and infiltrated NUMEC).  Milchan is the confidant of Shimon Peres and Benjamin Netanyahu. According to the book, Blumberg taught Milchan how to establish front companies and secret bank accounts to launder millions in commissions obtained during LAKAM and Mossad transactions.  Milchan encouraged Smyth in 1972 to incorporate MILCO to share profits on export sales with his Tel Aviv-based Milchan Brothers company.  Milchan Brothers received purchase orders from Blumberg and sent them via secure telex to Smyth.  MILCO did 80 percent of its business with Milchan, including transfers of other US technologies useful to Israel's clandestine nuclear weapons programs. (Gyroscopes, neutron generators, high-speed oscilloscopes, computerized flight control systems.)  According to the book, after Smyth was ordered to appear before a federal prosecutor in Los Angeles, Milchan claimed "I felt bad, but I was ordered to cut all contact with Smyth." Milchan officially denies any knowledge of MILCO or Milchan Brothers roles in krytron smuggling

The following FBI files reveal the FBI's interest in Milchan after a confidential informant revealed his ties to Smyth in 1992.  The declassified but heavily redacted "secret" communications detail the bureau's fascination with Milchan, from his entry in "Who's Who" to star-studded associates such as Robert Di Niro and an Iran-Contra operative.  The final page of the FBI file is a clipping of Thomas Friedman's May, 1985 New York Times interview with Milchan who had quickly left the US for Jerusalem.  Milchan told Friedman "that a krytron was a small little gizmo which anyone can go buy freely in the United States.  You can use them or all kinds of things, including, incidentally, making cholent."  Friedman clarified that "Cholent is a stew of beans, carrots, potatoes and beef that is a traditional Jewish dish prepared on Friday night for eating on the Sabbath.  Mr. Milchan said that with a krytron timer a stove could be set to turn on automatically to heat up cholent on the Sabbath without anyone working to light the fire."

Document/PDF	Contents
04/2002 New	Counterintelligence debriefing of Richard Kelly Smyth.  After he is arrested in Malaga, Spain and extradited to the United States, Smyth is debriefed by FBI special agents at the Los Angeles US attorney office.   Smyth details his recruitment by Arnon Milchan, meetings with Benjamin Netanyahu who then worked at smuggling front Heli Trading (Milchan Brothers Trading Company) in Israel, and how the "Project Pinto" smuggling operation was rolled up after his arrest for smuggling 800 nuclear triggers and subsequent flight from the U.S.
06/05/1996	Open source news database information and "Who's Who in America 1996" entry on smuggling case.  "Case Agent [redacted] has requested that this matter be placed in a closed status at this time."[Redacted pages] News clipping, The New York Times, Saturday, May 18, 1985 "Israelis Deny Knowing of Export Bar for Device Usable in A-Bomb" by Thomas Friedman News clipping The Washington Post, May 15, 1985 "US Asks Israel to Account for Nuclear Timing Devices" by John M Goshko
12/28/2011	FOIA release letter
11/30/1993	Message distribution to national an international offices.  "The enclosed is for your information.  If used in a future report, conceal all sources of paraphrase contents...This entire communication is classified SECRET.  LA is advised to provide an appropriate UCFN for captioned matter." (Universal Case File Number)
04/23/1993	Message to FBI Director.  "Enclosed for Los Angeles is one videotaped copy of two installments of NBC Nightly News that highlights some of the information that was provided to the Bureau and Los Angeles..." [Redacted] "Inasmuch as Los Angeles has not initiated any investigative activity re subject, Portland will no longer query mentioned source re subject."
03/29/1993	Message distribution to national an international offices.  "The enclosed is for your information.  If used in a future report, conceal all sources of paraphrase contents...This entire communication is classified SECRET.  LA is requested to furnish a communication regarding the status of this pending matter to CI-2F Unit." (Confidential Informant)
02/25/1993	Priority message to the FBI Director and Los Angeles office that "...during the later part of next week, during an NBC Nightly News broadcast, Tom Brokaw would reveal the background story of...MILCO"
08/17/1992	Record of a routine search on 8/17/1992. [Redacted]
08/14/1992	Secret record of a secure telephone call from special agent in charge of Los Angeles field office to a special agent in Portland on 7/16/1992. [Redacted]
07/15/1992 Section 4	[Redacted]
07/15/1992 Section 3	..."At the time of [Smyth's] disappearance, the U.S., did not have any reliable information that the Israelis were enriching uranium via uranium hexafluoride.  That information did not surface for another year until an individual named [Mordecai Vanunu] detailed drawings and photographs of Dimona, Israel's nuclear research center, to the London Times." "When they repeatedly asked if proper licenses had been obtained and, on 7/24/1982, they resigned. During January, 1983, MILCO's Huntington Beach Offices were burglarized and [redacted] filed a report with the FBI.  The FBI advised the U.S. Customs Service of these activities, and during May, 1983, Customs realized that the 'tubes' were actually the mentioned highly-restricted krytrons." During December, 1984, AUSA [redacted] began plea bargaining negotiations with [Smyth] regarding the illegal sales in efforts to get [Smyth] to provide the government with information regarding [Milchan's] illegal activities. These negotiations failed, and in May, 1984, Smyth was indicted on 30 counts of smuggling and making false statements, based on 15 shipments of krytrons to Israel." Notes on individuals involved in Iran-Contra affair, disruption of Iraqi nuclear reactor through sabotage.
07/15/1992 Section 2	Phone call record continues. "On 8/9/1985, two weeks from the trial date of [Richard Kelly Smyth] the U.S. Department of Justice requested Israel to obtain a sworn statement from [redacted] on same date, U.S. Customs served a subpoena on [redacted] seeking all records of business dealings...On this same date [Smyth] disappeared and a few days later he failed to appear for a motion hearing.  As a result his bail was revoked and a warrant was issued for his arrest.  He is still a fugitive." Details on how an Air Force Scientific Advisory Board member steered contracts to MILCO.  SAB members that invested in and joined MILCO's board of directors.  SAB member that worked as an atomic bomb designer at Lawrence Livermore and Los Alamos during the Manhattan Project. "Large volume of the Israeli business at MILCO and whether some of the equipment being sold was sensitive and related to nuclear weapons field."
07/15/1992 Section 1	Record of a phone call between a supervisory special agent in Los Angeles and a special agent in Portland classified as "secret." The special agent notifies LA of impending news media coverage of "an extremely successful movie producer in Hollywood" [Arnon Milchan] noting his ties to "Oliver Stone, Sidney Pollack, Barbara Streisand, Tom Cruise, Richar Dreyfuss and Robert DeNiro.  The subject's likely location and wealth "close to $1 billion" and close ties to "Labor Party officials in Israel" is noted. Milchan's arms dealing through MILCO and ties to another American are explored in the heavily redacted file.