Customs accused over `arms to Iraq'

Scott report shocks staff

Customs and Excise officials fear they are to be made scapegoats for Whitehall's failings in the forthcoming Scott "arms to Iraq" report which severely criticises their department.

The strength of the attack in the draft report has shocked and dismayed senior Customs staff, who have seen extracts relating to their role in the affair. The criticisms centre on Customs' handling of the disastrous prosecution of Matrix Churchill executives. The report accuses them of failing to heed warning signals and not thinking through the implications.

Without knowing what is being said about other government departments, they believe that they are being asked to shoulder a disproportionate amount of the blame.

Customs' pursuit of Matrix Churchill through the courts followed what was widely seen as a Customs' triumph in stopping the export of pipes destined for an Iraqi supergun. Three executives of the machine-tool manufacturer were accused of evading export controls and sending weapon- making equipment to Iraq. The Department of Trade and Industry issues export licences and customs checks and enforces them.

However, the case collapsed at the Old Bailey in 1992 after evidence was produced showing the Government was aware all along that the tools were to be used in an arms factory in Iraq.

The officials point out that while it is true customs did instigate the Matrix Churchill prosecution, they took legal advice throughout.

The criticisms appear in the draft report of the Scott inquiry and could still be changed before its publication in June. In particular, Customs is accused of failing to take note of the ambiguous remarks made in January 1988 by Alan Clark, then Trade Minister, which could have been seen as giving a "nod and a wink" to Matrix Churchill to trade with Iraq. That interpretation subsequently proved to be crucial to the defence of Paul Henderson, director of Matrix Churchill, but Customs chose to discount it.

Even Customs' own barrister submitted advice well before the trial saying the prosecution hinged on what those listening to Mr Clark might reasonably infer from what he had said.

Customs also failed to understand properly the DTI's approach to the licensing of Matrix Churchill's tools.

As long ago as October 1989, Customs had been circulated with a secret GCHQ report saying that an unidentified British company was supplying machine tools to an Iraqi arms factory. That was further evidence that the Government was aware what was going on. Seven weeks later, a Whitehall committee named the company as Matrix Churchill. This showed the Government knew the firm was supplying machine tools to Iraq but Customs still brought the prosecution.

Having seen Scott's draft, Customs officials are aggrieved, maintaining that their motives were always proper.

The final Scott report is not due to be published until June. A spokesman refused to comment yesterday on the drafts but confirmed, though, that those criticised are still able to submit new written evidence.