Thatcher 'knew of Iraq arms sting': British executives trapped in covert US operation cleared of plotting to smuggle detonator equipment to Baghdad. David Connett reports

BARONESS Thatcher, the former prime minister, knew and approved of a US sting operation to entrap two British company executives, it was claimed yesterday.

The allegation was made after the two executives, who were jailed after an 'arms for Iraq' trial, were cleared by the Court of Appeal. Ali Daghir and Jeanine Speckman, directors of the Surrey-based Euromac company, were cleared of conspiring to smuggle detonator equipment for nuclear bombs to Baghdad.

Documents obtained from a US congressional committee by the defendants' legal team state clearly that US Customs were told 'the British Prime Minister (Mrs Thatcher) is very much interested' in the progress of the sting operation, seven months before both executives were arrested at Heathrow airport. The documents also show the US undercover operation had the support of 'British Military Intelligence'.

David Jane, the defendants' solicitor, said the US documents raised 'very serious questions about the high-level political involvement' in the entrapment of his clients, suggesting the publicity surrounding their arrest may have served 'political interests rather than justice'.

He said evidence in the case would be passed to the Scott inquiry. 'This is a further example of the Government's failure to disclose the full truth about matters relevant to the defence in criminal prosecutions,' he said.

The decision to clear both defendants came after hearing evidence that the jury had been misdirected by the trial judge.

Geoffrey Robertson QC, for the defence, said Judge Neil Denison gave jurors at the trial in June 1991 the impression they could still convict if they found the 40 electrical capacitors at the centre of the case were for other military, but non-nuclear use. This was a 'material defect' in the summing-up because the prosecution had 'nailed its case to the nuclear mast', he told Lord Justice Taylor, the Lord Chief Justice, Mr Justice Hutchison and Mr Justice Buxton. Their detailed ruling will be given tomorrow.

Mr Daghir, 52, of Esher, Surrey, managing director of Euromac, was jailed for five years but bailed pending appeal after serving 15 months; Mrs Speckman, 44, the export director, of Addlestone, Surrey, served her 18-month sentence.

The prosecution denied the judge gave the wrong impression but agreed that if he did, the pair should be cleared.

The jury had been told that Euromac specialised in exporting air-conditioning equipment and food to Iraq. The initial order for the capacitors, worth approximately pounds 3,000 came from an Iraqi government agency. Euromac placed an order with a Californian company which tipped off US Customs after suspecting they were for nuclear detonators.

At the trial, British and American officials insisted the capacitors could only be used in nuclear bombs. Both defendants insisted they were for civilian purposes.

The defence also claimed they were unlawfully 'entrapped' by the undercover US customs agent.