Tags: Globalstar | Satellite | Scam

Globalstar Satellite Scam

Wednesday, 20 February 2002 12:00 AM

The failure of two companies, Enron and Global Crossing, has brought out the political spinmeisters in force. As DNC chair Terry McAuliffe and DNC propaganda artist James Carville try to turn Enron into a Republican scandal, the corporate failures have overshadowed another major collapse. Last week Globalstar, the satellite phone company, declared bankruptcy.

"It took Globalstar longer than originally expected to commercially roll out its service. We do not expect this to have any adverse consequences for Loral," noted Loral CEO Bernard Schwartz.

The real story behind the rise and fall of Globalstar remains untold. The space telephone company started as the brainchild of Loral CEO Schwartz in an effort to compete with Motorola's Iridium satellite phone system.

In order to succeed, Schwartz needed the direct intervention of President Clinton. Loral, unlike Motorola, did have a political advantage. CEO Schwartz was a major financial donor to Bill Clinton and the DNC.

The recent passage of campaign finance reform would have had no effect on the millions in hard cash given by Schwartz directly to Bill Clinton, Hillary Clinton and the DNC.

In June 1994, Schwartz sought Bill Clinton's direct intervention with Russia and the U.S. Federal Communications Commission (FCC) in order to obtain radio frequencies intended for Globalstar satellite phones.

In a memo addressed to Clinton's special assistant Mark Middleton, Schwartz thanked Middleton for a 1994 meeting at the White House with another top Clinton aide, "Mr. McLarty."

The meeting, according to a Loral attachment, was to ask Russia to change its "GLONASS" navigation satellite system to another radio frequency. According to Loral, the intended radio frequencies used by Globalstar "could interfere with the receipt of Glonass signals used by aircraft for precision landings.

"The solution," according to Loral, was that "the Executive Branch should encourage the Russians to commit to move Glonass operations."

"Russia has stated it is willing to consider such a frequency shift over the next few years. It is critical that the Russians make a commitment that the frequency shift will occur, and provide a timetable for implementation of this change," states the Loral memo for Middleton.

Schwartz also wanted President Clinton to press the FCC so Loral could start building the Globalstar satellites.

"On one other point concerning the LEO (Globalstar) project, the applicants for the FCC license are awaiting construction permits to allow us to begin construction of the satellites. Loral and others in the industry are prepared to invest our own funds, at our own risk, to begin construction even before the permanent licenses are granted. And, therefore, I am hopeful that the FCC will consider granting early construction permits," wrote Schwartz.

"In any event, these are issues that have important implications for American industry and I hope the FCC will be encouraged to consider taking action soon," concluded Schwartz.

Loral attorneys asserted to the House space subcommittee that the millions of dollars Schwartz gave to the DNC bought no special favors, and that Loral passed no military technology to China. Yet Loral's own documentation clearly shows these statements to be false.

A 1994 Loral briefing memo given to then Commerce Secretary Ron Brown, which states that satellites such as Globalstar were "commercial applications of DoD technology," disputes the claim that no military technology was exported.

In fact, the Loral documents given to Secretary Brown contain a list of high-tech weapons that Schwartz wanted to export. Some of the Loral equipment that Schwartz suggested should be made available includes "Airborne Reconnaissance Cameras," "Weapon Delivery," "Target Acquisition," "Missile Guidance," "IR" and "RF Jamming" devices.

Schwartz's 1994 export wish list also included missiles then manufactured by Loral, such as the MLRS, AIM-9 Sidewinder and Chaparral surface-to-air missile.

Yet the key portion of Loral's Globalstar plan was a requirement to launch its satellites from Chinese and Russian rockets. According to the Loral brief for Secretary Brown, "Continued U.S. leadership in satellites may depend on occasional use of Russian or Chinese rockets."

In August 1994, Loral accompanied Commerce Secretary Ron Brown on a trade trip to China. At Loral's request, Schwartz met with Liu Ju-Yuan, the minister of China Aerospace Corporation, in order to cut deals for Chinese satellite launches.

China Aerospace makes both the civilian Long March rocket and the nuclear-tipped CSS missile for the second artillery corps of the Chinese army.

Minister Liu is also the official boss of Chinese army colonel Liu Chao Ying, who contributed thousands of dollars to the DNC through convicted Chinagate figure Johnny Chung. In fact, Col. Liu's real boss turned out to be Gen. Ji, the military intelligence director of the People's Liberation Army. Col. Liu also managed to make it inside the White House to meet Bill Clinton.

Bill Clinton was not the only one to meet with Chinese army officers. In 1994, Schwartz met directly with a Chinese general at his own request. In August 1994, Lt. Gen. Shen met with the Loral CEO in Beijing and consummated a series of satellite deals.

The Beijing meeting was requested by Schwartz, arranged by President Clinton, and included Commerce Secretary Ron Brown. The technology obtained by the Chinese army from Loral included advanced rocket guidance and encrypted satellite telemetry systems.

In 1994, Chinese army lieutenant general Shen Rougjun was second in command at COSTIND – the Chinese Commission for Science, Technology and Industry for National Defense.

During a 1999 hearing before federal judge Robert Payne, Clinton administration lawyers claimed that COSTIND was not a Chinese military unit but a "civilian" agency. Judge Payne did not believe the Clinton lawyers and ordered them to release over 1,000 pages of documents.

One such document was a 1997 report, written for the Commerce Department by "think tank" company SAIC. According to the SAIC report, COSTIND was neither civilian nor engaged in purely commercial activities:

Shen Jun was hired at Hughes in August of 1994 at the same time Loral CEO Bernard Schwartz was visiting with his father, Gen. Shen, in Beijing. It was no coincidence that a division of Space Systems/Loral also tried to hire Shen for a position that would have allowed him access to classified information.

According to 1995 Commerce Department documentation, Bill Reinsch – then head of the Bureau of Export Administration – exchanged a series of highly classified memos with Commerce lawyer Bettie Baca on the export of Loral Globalstar satellites to be launched by Russia.

Reinsch would later publicly deny that he had anything to do with satellite exports prior to 1996 because the technology was then under State Department control. Yet, according to Reinsch's 1995 memos, Loral sought Commerce Department help in obtaining a presidential waiver from Bill Clinton in order to get permission to orbit Globalstar satellites from Russian rockets.

In early 1996, a Loral-built satellite crashed in China after a failed Long March rocket launch. The accident investigation failed to find a critical part of the U.S. satellite, a board of encryption control chips manufactured to withstand the intense radiation of outer space. These special computer chips are also invaluable for modern nuclear combat. The fact that they were missing from the wreckage leads one to believe that the Chinese removed them prior to the launch.

Further investigation into the crash showed that Loral had not sought specific permission to include the encrypted satellite telemetry control chips. The export of these special computer chips to China was clearly a violation of the export control laws.

Immediately following the crash, Loral requested that President Clinton hold up his signature on the Globalstar export waiver. At the same time Loral requested a hold on Clinton's signature, the FBI was investigating Loral for the radiation-hardened control chip export to China. The delay allowed Loral to modify the proposed presidential waiver to include an encrypted satellite telemetry control station for China.

According to a White House memo, Loral was ready for Clinton's signature in early July 1996. Only then did President Clinton sign the waiver for Loral to launch from the former Soviet Union. Clinton's waiver included the transfer of encrypted telemetry control systems to China for the Globalstar satellites.

Yet all the best planning could not ensure that the Russian space rocket would work properly. The Russian launch failed, destroying eight Globalstar satellites in a single stroke. The company would never regain its initial momentum after the massive rocket failure. Despite all the efforts and questionable dealings, the market for Globalstar satellite phones never materialized.

Globalstar floundered as customers balked at huge phones, poor service and incredible rates. Finally in 2002, with only a fraction of its intended customer base, Globalstar gave up and sought protection under Chapter 11.

The failure rocked Globalstar's biggest backer, Loral CEO Bernard Schwartz. Loral reportedly wrote off all of its multibillion-dollar investment in Globalstar as of Dec. 31, 2000. Despite all the millions given to Bill and Hillary Clinton, Schwartz has lost much and gained little. Loral's stock, once valued at $72 a share, now struggles to remain above $2.

In 2002, Loral also agreed to pay the U.S. government a multimillion-dollar fine involving investigations into the illegal export of advanced missile technology to China. The agreement made with the Department of Justice allowed Loral to admit no guilt in the case and there will be no criminal prosecution of Bernard Schwartz.

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The failure of two companies, Enron and Global Crossing, has brought out the political spinmeisters in force.As DNC chair Terry McAuliffe and DNC propaganda artist James Carville try to turn Enron into a Republican scandal, the corporate failures have overshadowed another...
Wednesday, 20 February 2002 12:00 AM
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