Customs warned by DTI of 'flaw'in Matrix case

A SENIOR trade official cast serious doubts yesterday on the very basis of the Customs prosecution of three directors from the Matrix Churchill machine tool company, which collapsed amid controversy last November leading to the Scott Inquiry being set up.

Customs maintained that the directors deliberately misled the Department of Trade and Industry by claiming the machine tool exports were for civil purposes in Iraq. Its investigators said they had found evidence after confiscating material during a raid on the factory, which showed the exports were 'specially designed' with performance characteristics that meant they were really for military uses.

But Eric Beston, a former head of the DTI's export controls and licensing branch, told the Scott Inquiry that he pointed out to Customs two years before the trial that its case was 'narrow and technical'.

Lord Justice Scott said that machine tools could equally be regarded as non-military, industrial goods and that export licence applications did not allow a company to state whether the exports were for military use. Mr Beston said he had never considered the point. 'That would have blown the Customs case . . . I wish I had thought about that at the time,' he added.

Earlier, Mr Beston had admitted to the inquiry that DTI officials always considered machine tools as dual-use equipment, which could have a civil use.

Mr Beston also described how he warned his superiors in 1991 that the prosecution could create difficulties for ministers and officials. He wrote in a memorandum: 'I can't claim the Government knew nothing but am not sure how this question could be answered honestly without causing some embarrassment at the very least.'

Documents read out during the hearing revealed that the DTI was anxious to keep detailed intelligence reports out of the case and did not want officials to refer to them in statements they made to Customs.

Discussions took place in November 1990 between the DTI, Sir Robin Butler, the Cabinet Secretary, and Sir Brian Unwin, head of the Customs Commissioners, as well as MI6, to establish the 'public interest aspects' of the prosecution.

Customs told Mr Beston that they believed they could keep out of any trial details of how earlier exports of machine tools were permitted, despite the fact that it was known the company directors were claiming that ministers approved the earlier and subsequent exports with a 'nod and a wink'.

The hearing resumes next week.