Inside America’s Long, Tortured Pursuit of the ‘Merchant of Death’

As seen in VICE News:

In October 1979, Alaska International Air (AIA), a small cargo company in Fairbanks with connections to the CIA, put a Lockheed C-130 Hercules military transport plane up for sale. The asking price for the aircraft, production number 501, was $8.36 million. A man named Sarkis Soghanalian, who said he was inquiring about the plane on behalf of a Swiss buyer, eventually struck a deal.

Two years later, the FBI’s Fairbanks field office got a call from a former AIA employee. According to previously classified FBI documents obtained by the National Security Archive at George Washington University after a Freedom of Information Act (FOIA) request, the former employee said he had “become increasingly concerned with activities of AIA, which he believes border on treason.”

As detailed in an FBI teletype, the ex-employee walked agents through the Hercules deal. In October 1979, after AIA put the plane through a series of test flights, the C-130 was flown by an AIA crew to Miami, Soghanalian’s home base. There, a single Jeep was loaded onto the gargantuan aircraft before it left Miami on October 26, bound for Malta, where it was to be inspected by Soghanalian’s client.

AIA was charging Soghanalian $137,000 to fly the plane. The former AIA employee, whose name was redacted in the documents, told the FBI he thought it highly improbable “that anybody would charter a Hercules-type aircraft to fly one Jeep from Florida to Malta.”

The Jeep never made it. While the C-130 was en route, pilots were contacted by radio and told they must land in Libya. Immediately after they touched down, Libyan troops boarded the plane and hustled the pilot and co-pilot to a meeting with Colonel Muammar Qaddafi. He invited the pilots to stay as his guests for a couple of days, and at the end of the stay, he “gave the men approximately $1,000 to $2,000.” The pilots were then taken to the airport at gunpoint, from where they flew home commercial.

“Both men thought that the plane had been stolen by the Libyan Government,” the memo says.

Soghanalian refused to pay for the plane, telling AIA officials on November 28 that “it was confiscated by Libyan authorities.” AIA sent a crew to Tripoli in November to retrieve the aircraft, but the FBI report says they “were denied access to plane and told by Libyan authorities that aircraft purchased by Libyan company and aircraft registered there.”

They were correct. The C-130 had been sold by Soghanalian to United African Airlines, a company owned by the Libyan government, for $11.5 million. The bill of sale was signed by a suspected Libyan intelligence agent named Ali M. Hijazi. It’s dated November 17, 1980, almost three weeks after the plane landed in Tripoli.

On November 30, two days after Soghanalian said he wouldn’t pay for the “stolen” C-130, an FBI teletype shows that AIA president Neil Bergt “telephonically advised” the bureau that “[Soghanalian] had this date paid AIA for the Hercules aircraft. Bureau and Washington Field Office discontinue.”

While UN sanctions were not imposed upon Libya until the early 1990s, US sanctions prohibiting Libya from buying military aircraft had been in place since 1973. Hijazi, who presented himself publicly as a businessman, had his export privileges revoked by the United States Department of Commerce — an order that is still in effect today. As a May 15, 1981 FBI memorandum shows, the US government investigated Soghanalian for violations of the Neutrality Act, which forbids private citizens from exporting weapons to nations at war.

He never so much as received a reprimand.

* * *

The 2,500 pages of never-before-released FBI documents [pdf’s below] were made available exclusively to VICE News by the National Security Archive, and they add even more color to the bizarre legend of the Merchant of Death.

Soghanalian was an ethnic Armenian with Lebanese citizenship who was born in Turkey on February 6, 1929. (He died in 2011.) He was at one point one of the world’s most prolific international arms dealers, doing business with, among others, Saddam Hussein, Mobutu Sese Seko of Zaire, Argentine dictator General Leopoldo Galtieri, and Nicaraguan Contra leader Anastasio Somoza. Soghanalian, who was dubbed the “Merchant of Death,” was one of the real-life figures upon whom the fictitious arms dealer played by Nicolas Cage in the 2005 film Lord of War was based.

Soghanalian, who once ran a used car lot near Binghamton, New York, was described in 1992 by Assistant US Attorney Susan Tarbe as a “con man” and “master manipulator.” A declassified FBI teletype notes his “deliberate violations and/or circumventions of US laws” related to “a myriad of statutes and regulations under jurisdiction of numerous federal agencies.” Those agencies include — but are not at all limited to — Treasury, Customs, Commerce, the ATF, the Immigration and Naturalization Service, the FAA, and the State Department.

But Soghanalian’s intentions were always honest, says Gerald Richman, his longtime attorney.

“I represented Sarkis going all the way back to 1977, ’78,” Richman told VICE News. “The impression that I had was that he would never have done anything that went against the interests of the United States…. Everything he was doing was done under the watchful eye of our government. I was there when he called [President Ronald Reagan’s National Security Advisor] Robert McFarlane in the White House.

“I mean, his name was mentioned in Oliver North’s diary.”

In fact, Soghanalian was called “one of our most important intelligence assets” by his former control officer at the Defense Intelligence Agency. After Soghanalian sent 26 planes packed with relief supplies to an earthquake-stricken region of Armenia in 1988, President George H.W. Bush called him someone who “strengthened the ties that unite mankind.”

As Oliver “Buck” Revell, the former Associate Deputy Director of the FBI, told VICE News, private arms deals generally fall into three distinct categories.

“Some are classified covert operations which have been legitimately authorized by the president,” he said. “Others are activities the dealer may undertake independently. And frankly, some have been rogue operations undertaken within government by someone who acted without authority, as we saw with the Iran-Contra affair.”

Revell explained that Soghanalian’s work was, in fact, “tangled between legitimate activities, some covert, some overt.”

“This guy was on different sides of the fence so often,” Revell said, “that there was never any clear-cut idea as to exactly what was really happening.”

* * *

In 1977, the Islamic Republic of Mauritania was at war with Polisario Front guerrillas backed by Algeria. The conflict had been raging for two years, and the tiny former French colony found itself in dire need of new weaponry. So the Mauritanian government contacted English arms dealer John Edward Ralph to procure it.

According to the FBI documents, Ralph and his Channel Islands company Boca Investments, Ltd. agreed to deliver 200 heavy machine guns: Browning type, model HBM2, each with a maintenance accessory kit, cleaning equipment, spare barrel, and an M3-tripod. (Budget issues later reduced the order from 200 to 197.) Since the weapons were used by French armed forces, Mauritanian troops were already familiar with them.

Ralph formed Boca in 1974 after a six-year stint in the Royal Navy and several years as a banker in London. He was referred to Soghanalian by a business associate, and contacted him to see if his air freight company could handle the shipping. As a previously unseen deposition transcript now reveals, Soghanalian convinced Ralph to let him conduct the entire deal.

“[In] one of the conversations subsequent to the initial conversation, Mr. Soghanalian offered not only the freight services, but said that… he could supply that material,” Ralph said during questioning by Gerald Richman.

As Ralph later explained, he “had no objection to purchasing from him provided inspections were made and that such merchandise conformed to specification required.” One of Ralph’s business partners feared Soghanalian might go behind their backs and try to deal directly with the Mauritanians once introductions were made. Ralph said he assured him that “in commercial transactions of this type, there are certain codes of honor that one observes… and I always endeavor to give people the benefit of the doubt in a situation.” The deal moved forward.

On July 6, a Mauritanian military attaché went to Washington, DC to meet with Soghanalian. The next day, they flew on a private plane to check out a weapons factory in upstate New York, then visited facilities in Maine and Connecticut. The Mauritanians wouldn’t accept reconditioned weapons, which meant the guns had to be manufactured. They agreed delivery would be made within two months.

That didn’t happen. Still, in November, Soghnalian sent an invoice for $1,153,590. The Mauritanian government paid Ralph, who in turn wired the money to Soghanalian’s account in New York once he was satisfied, presumably by documentation, that the guns were on their way. Ralph expected a 20 percent commission, or about $200,000.

Five months later, however, the Mauritanians still hadn’t gotten their guns. When they asked Soghanalian what was going on, he said they would “definitely” be delivered during the first part of the week of December 5. The Mauritanians and Ralph pressed him for a specific date. Soghanalian said they’d be there on December 6.

That date passed with no guns. On January 26, Ralph showed up in Geneva, where he knew Soghanalian had an office. Ralph made a notation in his personal calendar, reading, “SGS is not pleased to see me arrive. I ask again about deliveries.” He didn’t get an answer, and returned to London the next day. As February rolled around, the Mauritanians were getting desperate.

According to an FBI interview report:

[Name redacted] emphasized that there were people being killed in his country every day and the need for these machine guns was an immediate one. Soghanalian would reply only that there were a thousand and one things to be done before these weapons could be delivered. [Name redacted] told Soghanalian in Portugal on February 16, 1978 that either he had the guns or he didn’t, and that if he had them, they should be delivered immediately. Soghanalian replied only that he had to go to Madrid to handle an administrative matter. Soghanalian did go on a trip after that conversation, but [name redacted] found out that Soghanalian did not go to Madrid, but instead returned to the United States.

Subsequently, the Mauritanians were advised by the Credit Commercial de France that Soghanalian had submitted fraudulent letters of transit indicating that a certain aircraft had the weapons on board. It was [name redacted]’s understanding that this letter of transit and other documents had been used by Soghanalian to obtain payment for the machine guns. He advised that his government had considered various ways to recoup the money it had lost on the gun deal, which amounted to approximately 1.6 million dollars. [Name redacted] stated that his government was told by the Credit Commercial de France that the only way he could get its money was to go to arbitration in Geneva. [Name redacted] stated that this was an expensive proposition for a government with few resources and a nation of starving people.

Seeking his money, Ralph filed a civil suit against Soghanalian in the US. According to Soghanalian’s invoice, the HBM2s cost $4,700 each, tripods cost $770, and the freight charge totaled $76,000. But an exchange between Ralph and Richman from the civil suit deposition suggests that neither Ralph nor the Mauritanians really knew what they were paying for.

Richman: Was this a situation where he just said, “Look, it’s $76,000. This is what we charge to do it,” and you simply accepted it without checking elsewhere, or was it a figure you sat down and calculated how much it was per mile and all the other particulars, cost of crew, the fuel, and things like that involved?

Ralph: It was impossible for me to do that because Mr. Soghanalian would not reveal the exact route. He said that would be the cost, that it wouldn’t exceed $76,000.

Richman: In your other experience in arms dealing, is that normally the kind of case on shipping arms, that you just do not inquire past a certain point?

Ralph: I think if it is acceptable by the purchasing country as a round figure, then I think too many inquiries may lead a supplier to suppose you are nagging them for other reasons.

Richman: In essence, this is a very delicate kind of business and there are some questions you ask and some questions you simply do not ask?

Ralph: I think in commerce, that is general, there are certain positions one respects.

Richman: When you say in commerce, you mean the commerce of arms? I am referring to this particular business as being more sensitive than most others. You certainly agree with that?

Ralph: Yes, yes.

In September 1980, the FBI opened an investigation after Ralph’s lawyer lodged a complaint with the US Attorney’s Office for the Southern District of Florida. The following August, Soghanalian was indicted on 18 counts of wire fraud, two counts of mail fraud, and nine counts of interstate transportation of stolen property. He was arrested, and a trial was set for May 10, 1982.

“It would please me greatly to see one particular fraud artist sitting in a correctional institution long enough to ponder ‘where he went wrong,'” Ralph’s lawyer wrote in a letter to the FBI.

However, a telex sent between FBI Headquarters; the bureau’s Alexandria, Virginia Records Complex; and the Miami Field Office reveals that Richman contacted the Justice Department in October 1980 — a month after the investigation officially began — with an offer. He said Soghanalian had been “in the past involved in arms deals with fugitives Terpil and Wilson.” Frank Terpil and Ed Wilson were rogue CIA operatives supplying Libya with weapons and training, and US authorities very much wanted to catch them. If the government would reconsider the indictment, Richman told them, Soghanalian would “document these transactions and lure [redacted] out of Libya and Syria respectively.”

On May 13, 1982, Soghanalian pleaded guilty to wire fraud, which carries a penalty of up to 20 years in prison. Prior to sentencing, a letter was sent from the office of Stanley S. Harris, the US Attorney for the District of Columbia, to the US Attorney’s Office in Miami, which had prosecuted the case.

“Obviously, any disposition reached in Mr. Soghanalian’s case is purely between you and he,” Harris wrote. “In determining what disposition and/or sentence may be appropriate, however, I felt it necessary to bring to your attention the nature and extent of Mr. Soghanalian’s cooperation thus far with this office. Because our efforts to recover these fugitives are ongoing, I would appreciate your handling the information in this letter on an extremely sensitive basis. If you find it necessary to provide the Court with this information, I would appreciate your attempting to do so in camera [in private]. If you need any further information about my contacts with Mr. Soghanalian or his attorney, please do not hesitate to contact me.”

In 1982, Wilson was lured to the Dominican Republic, where he was arrested by the FBI and flown to the United States to stand trial. Published reports make no mention of Soghanalian, instead crediting a CIA-linked con man named Ernest Keiser for convincing Wilson to travel to the Caribbean. Wilson served 22 years in federal prison before his release in 2004. (He died in 2012.) Terpil, now 74, eventually settled in Havana, where he remains.

Saying that the case “involved international affairs conducted by the State Department,” US District Court Judge Joe Eaton sentenced Soghanalian to no jail time. Instead, Soghanalian received five years’ probation and an order to pay back the Mauritanians.

* * *

In the early 1980s, Iraqi leaders, locked in a fierce war with neighboring Iran, attempted to make a deal with the Reagan administration to purchase American-made 175mm artillery. Since there was an arms embargo against both Iran and Iraq at the time, the answer was no — sort of. High-level officials within the US government suggested the Iraqis get their materiel through unofficial channels. Namely, from people like Soghanalian.

“Sarkis was supplying Saddam Hussein with heavy artillery during the Iraq-Iran War, so there’s no doubt in my mind that he was doing it with our government’s approval,” Richman said. “He got Hughes helicopters sold to [the Iraqis in 1983], which our government certainly knew about, and approved of them going to Iraq. We were basically supporting Iraq against the Ayatollah Khomeini. We were on Saddam’s side at that time.”

Documents confirm that the transaction was approved by the government — specifically, by the US Commerce Department. As a report sent to FBI headquarters by the Los Angeles field office said, “Hughes [Helicopter, Inc. (HHC)] employee [name redacted] advised that it was interesting in that this was the fastest sale of HHC helicopters ever approved for export to a foreign government by the United States Government.” Soghanalian did approximately $1.6 billion in business with Iraq; according to an undated FBI memo, on April 16, 1985, a source informed the bureau that he put Soghanalian in contact with Bell Helicopter, and that Soghanalian was providing Iraq with 45 Bell 214ST helicopters at a cost of $4 million each. The source also said that Soghanalian was “well protected and connected with the US government. His contacts are [redacted].” Iraq insisted that the helicopters would be used for “recreation.”

An August 1985 teletype sent by the FBI’s Miami field office to Washington at the close of a two-year investigation also appears to clear Soghanalian of giving intelligence support to Iraq.

“Miami closing its investigation of subject as FCI [Foreign Counterintelligence] matter based on lack of specific and actuable facts giving reason to believe that subject is or may be engaged in clandestine intelligence activities or activities in preparation therefore, pursuant to the direction of a foreign power, or knowingly aiding or abetting persons in the conduct of these activities.”

A stamp on the bottom declares the matter “RUC,” meaning “Referred Upon Completion.” In other words, case closed.

Still, the Justice Department went after Soghanalian anyway, along with his son Garabet and two Hughes employees, for arming and aiding Iraq. An FBI teletype from by the Miami field office explains: “On December 2, 1987, Sarkis Soghanalian [redacted] indicted by the federal grand jury in Miami, Florida, on charges that they conspired to smuggle 103 combat-ready Hughes helicopters, Model 500MD/TOW to Iraq in 1983 by falsely claiming they were bound for Kuwait and Italy in violation of the Arms Export Control Act. In addition, Soghanalian was charged with helping the Iraqi military figure out how to fly F-4 fighter jets it captured from Iran. Soghanalian and his company, Pan Aviation, used the same method to ship technical data for a laser TOW missile system to Iraq in September, 1983.”

On October 21, 1991, a Florida jury found Soghanalian guilty. He faced a possible sentence of 24 years in prison, along with a $240,000 fine. US District Judge Federico Moreno sentenced Soghanalian to just 6 1/2 years in prison and ordered him to pay a $20,000 fine. A year later, Soghanalian’s sentence was reduced to two years. Not long after that, he was set free.

Once again, Soghanalian had apparently made the government an offer they couldn’t refuse.

“The Iranians had a printing press so good, the US government couldn’t detect the counterfeit $100 bills they were making,” Richman told VICE News. “Sarkis helped them break up this counterfeiting ring. I had to get a top secret security clearance just to look at all sorts of documents that we couldn’t even take out of the courthouse. The Secret Service went to the jail every day, and actually took Sarkis out so he could work with them on the investigation. They let him out for good before we could even finish the appeal.”

* * *

When the Cold War ended, the arms-dealing business largely dried up. After Soghanalian was released from prison — Richman said it was the same facility where Panamanian dictator Manuel Noriega was doing time for drug trafficking, racketeering, and money laundering — he moved to Paris.

In January 1995, Soghanalian came to the US for the Russian New Year. According to the FBI’s Los Angeles field office, he met with a group of Armenian organized crime figures in Palm Springs, where they discussed various money-making schemes. One of the crew asked Soghanalian if he “had the ability to cash cashier’s checks within three days of receipt. [Name redacted] said the check would be approved by a bank official but that it had to be cashed within three days. [Name redacted] interpreted [redacted] statements to mean that the checks were stolen, but that they would be approved by a bank official who was in on the scheme.”

Soghanalian reportedly said he had millions of dollars in his European bank accounts, and that it would therefore be no problem for him to cash a check of any amount. And so Soghanalian began negotiating the percentage he would receive.

However, according to the FBI report, an “old friend” told agents that Soghanalian didn’t actually have any money in those accounts. “[Name redacted] knew that Soghanalian had recently been released from prison and that he had no money to complete such a deal. [Name redacted] had been loaning Soghanalian money to pay his everyday bills.”

Regardless, it was agreed that the bank employees who stole the check would get 40 percent, the Armenian in the Palm Springs meeting would get 15 percent, and Soghanalian would get the remaining 45 percent. When the meeting was over, Soghanalian went home to Paris.

The documents reveal that over the next two weeks, “Soghanalian called [name redacted] approximately twenty times to determine if [name redacted] had delivered the cashier’s check…. During one of these conversations, [name redacted] warned Soghanalian not to cash the check because [name redacted] was aware how banks operate and realized the check could be traced back to Soghanalian. Soghanalian told [name redacted] that he had it under control. [Name redacted] told Soghanalian that the check had to be stolen or fraudulent since Soghanalian was receiving such a high percentage. [Name redacted] asked Soghanalian how he could trust the individuals who were providing the check. Soghanalian indicated to [name redacted] that once he had the check, he might keep all of the money.”

After the two cashier’s checks were stolen from the bottom of a pile at a Great Western Bank branch in Los Angeles, one was made out for $300,000 and brought to the Mirage Hotel and Casino in Las Vegas, where it was exchanged for chips. The other was made out for $3 million and FedExed to Soghanalian, who said he was planning to pay off a French bank manager who would make sure everything went as planned.

But the Vegas operation was discovered by authorities, and members of the ring began taking turns ratting one another out. The investigation led to Soghanalian, who was questioned by the US Secret Service at the American Embassy in Paris. Soghanalian told them that it was news to him that the check was stolen; according to the FBI, he said he’d received it as part of a deal for “farmland in Lebanon and for the purchase of gold bullion.”

Soghanalian also said he had made a $150,000 withdrawal right after he deposited the check, but that “as soon as he repaid the amount the bank would forward to him the original check and it would be provided to [authorities]. Soghanalian stated that he would assist in any way possible prosecutive efforts against [name redacted].” He gave the check to the Secret Service on September 26.

Nevertheless, a federal grand jury in Los Angeles indicted Soghanalian in October 1999 on charges of bank fraud, money laundering, transportation of forged securities, and conspiracy. He was arrested in December as he stepped off an Air France flight in Miami. The following March, he pleaded guilty to one charge of illegal wire fraud, which called for a sentence of up to five years in prison.

But Soghanalian appears to have had one more card up his sleeve. “Sarkis Soghanalian has traveled to Washington DC to be interviewed regarding his involvement with the Peruvian arms deal issues,” a March FBI memo states. “The Peruvian government has made a formal request to interview Soghanalian through the Mutual Legal Assistance Treaty (MLAT).”

Soghanalian ended up exposing the CIA’s support of an illegal arms deal between Peruvian intelligence chief Vladimiro Montesinos and the Revolutionary Armed Forces of Colombia (FARC) — a US-designated terrorist organization — in which 10,000 AK-47s were airdropped to FARC guerrillas in the jungle.

At Soghanalian’s sentencing, prosecutors handed US District Judge Ronald S.W. Lew a document detailing his cooperation in an “unspecified investigation.” Lew then let Soghanalian walk, sentencing him to time served and three years’ probation, along with, as noted by an internal memo from the FBI’s Los Angeles Field Office, a $100 fine.

When reporters inquired further, Assistant US Attorney Terri Law told them, “It’s all under seal.”