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Encounter With Global Con Artist Left Reston Firm Reeling

By David S. Hilzenrath
The Washington Post
Saturday, January 23, 1999

In the murky realm where business and espionage converge, the Iranian-born arms merchant went by many names.

As Jamshid Hashemi, he made headlines in 1991 claiming to have helped Ronald Reagan's 1980 presidential campaign negotiate to delay the release of U.S. hostages in Iran until after the election.

A few years later, calling himself James Khan, he brokered a deal in which Octagon Inc. of Reston would supply Iran with $72.6 million of satellite phones. To Octagon's humiliation and near ruin, the deal evaporated, along with about $1.3 million of the company's money.

In 1997, traveling under the name Signor Mario Cabrini, and carrying a stolen Italian passport, he was stopped at the Dublin airport trying to flee British prosecutors.

But it was by the name Jamshid Hashemi Naini that the ailing man in his sixties appeared last month in London's Old Bailey and pleaded guilty to swindling Octagon and other businesses in Europe, Asia and the United States out of millions of dollars through a series of elaborate scams.

A British judge denounced the former McLean resident as "an accomplished international con man," adding, "Ruthless is a correct word to describe your attitude to your victims."

It was a dramatic day of judgment for a man who helped launch two congressional investigations of the Reagan-Bush campaign.

In a burst of publicity in 1991, Hashemi claimed to have attended meetings in Madrid in the summer of 1980 between Reagan-Bush campaign manager William Casey, who would later become CIA director, and an Iranian delegation. Hashemi alleged that Casey asked the Iranians to hold the U.S. hostages until after the 1980 election, promising that an incoming Reagan administration would reward Iran by releasing military equipment and frozen assets. The investigations concluded that the conspiracy theory was unsupported.

For students of the so-called October Surprise, the December guilty plea offered one more reason to doubt Hashemi's word.

For the former Octagon executives who fell victim to his fraud, the plea was a measure of vindication.

"If you think Octagon was stupid for doing the deal, there were a lot of other companies just as stupid," former Octagon chief executive John Thomas Royall said in a recent interview.

Through his defense lawyer in London, Hashemi declined to comment. "He has told me that he doesn't want to speak to anyone nor will he authorize me to speak to anyone until he has been released from custody and has returned home to the U.S.A.," Brian Spiro said.

Hashemi's prison sentence of three years and two months would have been much longer if not for unspecified help he had given British and U.S. security agencies, among other mitigating factors, England's Serious Fraud Office quoted the judge as saying.

According to British authorities, Hashemi was the image of wealth and respectability. He impressed his victims with conspicuous displays -- a Rolex watch, gold jewelry, a chauffeur-driven Rolls Royce.

As the Serious Fraud Office described them, the swindles followed a pattern. Posing as a middleman, Hashemi enticed his victims with offers to purchase commodities as varied as German gas masks and Vietnamese rice. He told them he was representing an agency of the Iranian government.

The key to the fraud was that Hashemi demanded that the suppliers put up performance bonds or deposits -- large sums of money that they would forfeit if they failed to fulfill their end of the bargain. The guarantees were written to favor the buyer, and the wording was nonnegotiable.

Once Hashemi had the money in hand, he accused the supplier of failing to live up to its obligations and diverted the funds into a global network of more than 50 bank accounts.

Investigators eventually discovered that letters and contracts supposedly sent from Iran were created on his computers in London.

By the British government's account, targets of Hashemi's deceit included Victorimex, a government-owned agricultural firm in Vietnam; Dragerwerk AG, a German maker of medical and industrial goods; Hagenuk Telecom GmbH, a German firm that was to supply satellite and cordless phones; and W.L. Gore & Associates Inc. of Delaware, maker of the waterproof fabric Gore-Tex, which discussed the possibility of furnishing the Iranian military with suits to protect against nuclear, chemical and biological attack.

Hagenuk and W.L. Gore paid thousands of dollars of Hashemi's alleged expenses but averted the potentially costlier loss of performance bonds. W.L. Gore discovered a week before its guarantee was due that Hashemi had been arrested.

An early victim was a close friend of Hashemi's family for many years who ran a jewelry business that he patronized, the prosecution said.

"I trusted Hashemi and I was pleased and eager to learn about commodity trading from an expert and successful businessman," Dau Joseph, owner of the Mondia Jewelry store in Tysons Corner Center, told British authorities. "[H]e had two Rolls Royces and a yacht and was very wealthy so I thought that he would have no reason to trick me."

In 1992, Hashemi allegedly proposed that she supply rice to feed the Iranian army. The intermediary was Alpha Enterprises and Trading Co., a business Hashemi incorporated in Panama.

Joseph eventually transferred $278,000 of guarantee money -- most of it put up by an Asian rice supplier -- from her Swiss bank account to Alpha's Swiss bank account. That was the last she saw of the money.

Hashemi later accused her of "trading with the enemy" and told her not to contact him anymore, according to the prosecution.

Royall, the former Octagon chief executive, remembers "James Khan" as "charming, gracious, polite, courteous" when they met in 1994. Khan sent a chauffeur-driven Mercedes-Benz to whisk him from his London hotel to an office elegantly furnished with antiques and Oriental rugs. Khan was wearing a large gold medallion around his neck, over his suit and tie. The two discovered they had something in common: Both belonged to the Tower Club in Tysons Corner.

Octagon was one of the year's hottest new stocks. Its business included clearing Army bases of unexploded ordnance and providing classified telecommunications services at a Navy weapons testing facility.

But Octagon, which didn't produce satellite phones, was merely acting as middleman to the middleman in the deal with Khan. Octagon was to purchase the phones, which fit in a briefcase, and deliver them for use by Iran's national oil company as it built a pipeline through desert and mountains. If the deal went as planned, Octagon could have profited by more than $10 million, Royall said.

At dinner in London, Octagon President Steven W. Koinis was introduced to an Iranian general whose high-level contacts were supposed to make things happen. Octagon hired a London law firm to investigate Khan's background, and the firm turned up nothing suspicious, Royall and Koinis said. In April 1994, Octagon signed the contract with Khan's firm, James MacKenzie International Trading PLC.

Octagon then had 10 days to produce a $3.63 million performance bond, but no bank would touch it, the prosecution said. One hitch was the requirement that any dispute be settled in Iran, under Islamic law. Octagon proposed that both sides put up their money at the same time, but Khan rejected that idea, saying his hands were tied by the buyer in Iran. Soon, Khan was threatening Octagon with a lawsuit for breach of contract.

In July 1994, Octagon and Khan agreed to split the contract into two more manageable pieces, and Octagon put up a deposit of $1,265,000. Octagon issued a press release, and its stock soared by more than 70 percent.

But the financing Khan was to provide never materialized.

Octagon's Koinis met with a private investigator from Vance International Consulting Inc. in London. In short order, Stuart Page, a former Scotland Yard detective, linked James Khan with Jamshid Hashemi of October Surprise fame.

Eventually, Vance's probe helped point the way for British authorities.

The Iranian general whose influence Hashemi had touted turned out to be another prop in the deception. Through an interpreter, he told Page that he had fled Iran's fundamentalist revolution and occasionally accepted invitations to join Hashemi for dinner. He spoke no English and enjoyed the dinners without understanding the conversation, Page said.

Following the September 1994 revelation that it had been duped, Octagon cratered. Its stock plunged, employees were laid off, shareholders sued, credit dried up, and in February 1995, the company and its insurer agreed to pay $1.75 million to settle investors' complaints that it misrepresented the deal. In April 1995, Octagon was dropped from the Nasdaq Stock Market. By late 1997, shares that once topped $14 were trading for 3 cents, and the company was sold. Octagon won a civil judgment against Khan, but it was hardly worth the trouble. The funds it managed to locate and seize covered only a fraction of the loss.

Royall was dismissed in February 1995, though he said he was being cast as a scapegoat. The company later settled a lawsuit by acknowledging that Royall was improperly fired. Without admitting or denying wrongdoing, he and Koinis each agreed to pay penalties of $35,000 to settle Securities and Exchange Commission complaints.

Koinis said the SEC didn't seem to realize that "we're the guys that caught him."

"[U]nfortunately, we were too smart," Koinis said. "We figured it out."

Even after Octagon announced that it had uncovered a "worldwide scheme to defraud," Hashemi set new traps using new corporate identities, the British government said. For anyone who knew where to look for information on Hashemi in 1994, the public record would have provided ample warning.

A House task force completed its investigation of the October Surprise theory in January 1993, and its report said the CIA had concluded years before that Hashemi was a "trafficker in intelligence to whomever would buy it" and "dishonest and untrustworthy beyond belief." By early 1980, the CIA "had uncovered substantial information about fraudulent business dealings" by Hashemi, the report added.

The report said Hashemi was indicted for selling arms to Iran in the 1980s and cooperated with U.S. Customs in a sting operation to get the charges dropped.

When he met with House investigators, the man also known as Mohamed Balanian, Abdula Hashemi and Jamshid Khalaj was going by the name he gave Octagon: James Khan.

But using so many identities could lead to an identity crisis. At the Tower Club, scene of power lunches, Hashemi instructed the staff never to greet him by name, Royall and Koinis later learned. Even as he was negotiating with Octagon, James Khan filed papers in Fairfax County Circuit Court to change his name again, stating as his reason "similarity of my name to an actor."

Apparently, he didn't want to be confused with James Caan.

By the time he entered his guilty plea several weeks ago, Hashemi had rendered sufficiently valuable service to the British and U.S. governments to win a measure of leniency, British Judge Andrew Collins declared. But the nature of that assistance isn't clear.

In a 1997 interview with London's Sunday Times, Hashemi claimed that MI6, the British spy service, asked him to arrange weapons sales to Iran in the 1980s and then monitored his every move to ferret out Iran's suppliers. He also claimed that MI6 asked him to procure Chinese Silkworm missiles.

Was he telling the truth?

"We wouldn't want to get into that," said Peter Reid, a spokesman for the British Embassy.

Hashemi was arrested in the fraud case in 1996 and released on bond. In July 1997, he was stopped at Dublin Airport trying to board a flight for New York. The Italian passport he was carrying was one of thousands of blanks stolen in an armed robbery in Naples. Hashemi returned to London, where he underwent heart surgery and then was jailed. With credit for time already served, he could be released in February.

To Koinis, who has built a new life as an investment banker in the Middle East, and Royall, now a consultant to technology companies, that would be "a great injustice."

In sentencing Hashemi, the judge cited his poor health. But wealth is another matter.

Most of the money Hashemi is accused of stealing -- at least $4.9 million -- has never been recovered.


Copyright © 1997 Abadan Publishing Co. All Rights Reserved. May not be duplicated or distributed in any form