1. Executive Summary:

I. Summary

In October 1999, a series of events began which resulted in the illegal diversion of 3000 AK47s and 2.5 million rounds of ammunition from Nicaraguan government stocks to the Autodefensas Unidas de Colombia (AUC), a terrorist organization in Colombia. The diversion was made possible by negligent actions on the part of various government officials and private companies, and the willful and criminal actions of several private arms merchants.

The original, legitimate, transaction was to be a trade between the Nicaraguan National Police and a private Guatemalan arms dealership, Grupo de Representaciones Internationales (GIR S.A.). The Nicaraguan Army introduced GIR S.A. to the police. GIR S.A. offered the police a quantity of new Israeli manufactured pistols and mini-uzis in return for five thousand surplus AK47s and 2.5 million rounds of ammunition. This was an attractive arrangement for the police since it was a cashless transaction and would provide the police with arms more suitable for police work.

GIR S.A. shopped for a buyer for the police arms and settled on Shimon Yelinek, an Israeli arms merchant based in Panama. Yelinek claimed to be representing the Panamanian National Police, and during the negotiations presented GIR S.A. and Nicaraguan officials with a Panamanian Police purchase order, which has been proven to be a forgery. Neither GIR S.A. nor any Nicaraguan official ever questioned the purchase order or attempted to verify that Panama had in fact offered to buy the weapons.

Yelinek inspected the police weapons some months after the deal was made, and after Nicaraguan authorities had given permission for the transaction. He declared them to be unserviceable and unsatisfactory. This threatened the transaction. GIR S.A. and the Nicaraguan Army solved the problem by arranging a swap of 5000 surplus police AK47s for 3117 serviceable weapons in the Nicaraguan Army inventory. GIR S.A. delivered the Israeli arms to the police and the Nicaraguan Army took over responsibility for delivering the AK47s. Although the parameters of the transaction changed, no new authority was requested from responsible Nicaraguan agencies.

Yelinek identified a Panamanian maritime company, Trafalgar Maritime Inc., to pick up the arms in Nicaragua and take them to Panama. The arms were transported by the army to the port of El Rama, Nicaragua, and were loaded aboard the company’s only ship, the Otterloo, which declared for Panama. Instead, the Otterloo sailed directly to Turbo, Colombia where the arms were delivered to the AUC. The Captain of the ship disappeared shortly thereafter, and the maritime company was dissolved several months later. The Otterloo was sold to a Colombian citizen.

Immediately after the shipment left Nicaragua, GIR S.A. began to organize another sale to Yelinek from the Nicaraguan Army, using the same purchase order, this time for an additional five thousand AK47s and 17 million rounds of ammunition. Prices were exchanged between the three, Yelinek made a down payment, and the deal was under way.

When the diversion of the initial shipment became known, the intelligence services of Colombia, Nicaragua and Panama agreed to organize a “sting” operation, ostensibly to track this second shipment and identify those responsible for the first diversion. This plan fell apart fairly quickly when GIR S.A. found out that it was in play and canceled the shipment.

The OAS investigative team believes that:

1. Shimon Yelinek is likely guilty of fraud and of violating Colombian anti-terrorism laws, and possibly Panamanian anti-terrorism laws, among others. An associate Marco Shrem, appears complicit in these activities, but to an unknown degree.

2. The owner of the Otterloo, the ship which transported the arms to Colombia, is apparently guilty of conspiring with Yelinek to provide the AUC with arms and of violating Colombian, and possibly Panamanian, anti-terrorism and other laws.

3. The captain of the ship which transported the arms to Colombia, along with his first mate, may have been cognizant of, and a participant in, the arms diversion organized by Yelinek.

4. Although the Investigative Team found no evidence that Ori Zoller and Uzi Kissilevich, the owner and general manager of of GIR S.A., respectively, were co-conspirators in the arms diversion, their failure to make any attempt to verify the actual destination for the arms contributed to the diversion.

5. The Government of Nicaragua failed to comply with a number of provisions of the Inter-American Convention Against the Illicit Manufacture and Trafficking in Weapons, Munitions, Explosives and Related Materials (CIFTA), to which it is a party. Nicaraguan authorities are guilty of professional negligence with their failure to verify whether the Panamanian National Police was indeed the true end-user in the arms exchange.

6. There appears to be no involvement of Panamanian authorities in the exchange of arms, or their diversion.

7. Colombia is the victim of the arms diversion. However several Colombian customs agents were likely accomplices of, or were bribed by, the AUC in order to allow the Otterloo to land its cargo of arms and ammunition in the port of Turbo.

II. Recommendations:

The OAS Investigative Team presents below a number of recommendations to strengthen the existing Inter-American arms control regime and prevent diversions of this type from occurring in the future.

Recommendation 1: The governments of Colombia, Nicaragua, and Panama should vigorously pursue investigations into possible criminal conduct on the part of any and all persons involved in this case, and should seek the collaboration of other governments including Canada, Guatemala, Israel, Mexico, and the United States of America in the investigation and prosecution of these possible crimes. These efforts should include attempts to resolve the unanswered questions presented in section VII of this report.

Recommendation 2: The Inter-American Convention Against the Illicit Manufacturing of and Trafficking in Firearms, Ammunition, Explosives, and other Related Materials, (CIFTA), is, and should remain, the primary multilateral hemispheric tool to prevent the illicit manufacturing and trafficking in arms and ammunition. All member states of the Organization who have not done so should sign and ratify the Convention. The Consultative Committee of CIFTA should spearhead an effort to ensure full implementation of the Convention and to promote its full adoption.

Recommendation 3: With regard to full implementation of the Convention, particular emphasis should be placed on the provisions of paragraph 3 of Article IX of the Convention, requiring evidence of the pre-issuance of the necessary import licenses or authorizations before any shipments of firearms are released for export. Articles VIII, and X, should also be paid particular attention. Member states should consider applying the CICAD Model Regulations to facilitate implementation of the CIFTA Convention.

Recommendation 4: OAS member states should consider establishing surplus arms destruction programs. OAS member and observer states should provide financial and technical assistance for such surplus arms destruction.

Recommendation 5: Persons engaged in the import, export and in-transit movement of firearms, or as dealers, or carriers and/or shippers of firearms, should be registered by national governments in order to do business in each country in which they have an office, and in each country in which a transaction takes place. Member states should not engage in business activities with any non-registered broker.

Recommendation 6: All member states should review their national legislation and administrative practices for the exportation of firearms and establish a legal regime sufficient to exert meaningful control over the inventory and export of firearms.

Recommendation 7: Harmonized import certificates should be used by all member countries. Electronic formats of the certificates should be developed so that the information can be readily shared with other countries involved in a transaction.[1] Additionally, harmonized export and in-transit documents should be developed and used by all member states to regulate the importation, export and transit of arms and ammunition and related materials.

The OAS Investigative Team limited its work to the specific mandate it was given. However the investigation revealed serious issues which the Team strongly recommends be investigated by governments (see page 34).

2. Report of the General Secretariat of the Organization of American States on the Diversion of Nicaraguan Arms to the United Self Defense Forces of Colombia

I. Background:

A. Request for an Investigation:

On May 8, 2002, the Ministers of Foreign Affairs of Colombia, Nicaragua and Panama, Guillermo Fernandez de Soto, Norman Caldera C. and José Miguel Alemán, respectively, wrote to OAS Secretary General César Gaviria. The Ministers requested that the General Secretariat of the Organization conduct an investigation into the circumstances surrounding the export of an official shipment of arms and ammunition which originated in Nicaragua in November 2001, and was subsequently diverted to the United Self Defense Forces of Colombia (Autodefensas Unidas de Colombia, AUC). The letter is contained in Annex V of this report, as document No. 17, for reference.

The Ministers requested that the Secretary General investigate the events and report to their respective governments setting out the facts drawn from the investigation, together with conclusions and recommendations for suggested mechanisms and procedures designed to prevent the recurrence of similar situations in the future.

Given the importance of this joint request in the post-September 11, 2001 environment, the Secretary General responded by appointing Ambassador Morris D. Busby as his Special Representative to lead the investigation[2].

B. Investigative Task:

The general task of the investigation was to determine how an official arms transfer between the Nicaraguan National Police (NNP) and a firearms brokerage company located in Guatemala, Grupo de Representaciones Internacionales, (GIR S.A.), led to the diversion of the Nicaraguan arms to the port of Turbo, Colombia, where the arms subsequently came into the hands of the United Self Defense Forces of Colombia (Autodefensas Unidas de Colombia, AUC), a paramilitary group considered a terrorist organization. It had been represented to the responsible Nicaraguan authorities that the arms were being sold and shipped to the Panamanian National Police.

The Investigative Team undertook the following specific tasks:

1. To determine the actual facts of the case and prepare a complete chronology of all events pertinent to the diversion;

2. To develop information on possible violations of national law and make appropriate recommendations to the governments for follow-on investigation and/or action;

3. To ascertain whether any of the governments involved failed to adhere to their relevant international obligations, and;

4. To make appropriate recommendations to avoid a recurrence of similar situations in the future.

C. Methodology:

On May 28 and 29, 2002, the three governments requesting the investigation each submitted to the General Secretariat a report on their findings related to the arms diversion. These reports contained facts of the case developed during their internal investigations, and also copies of original documentation. Based on an extensive review of this documentation, the investigating team requested additional information from the three governments on July 15, 2002, which the governments provided in late July.

Members of the Investigative Team traveled to Nicaragua, Guatemala and Panama, to obtain additional information and documentation, and to interview government officials and private individuals with direct knowledge of the case.

In Guatemala, the team met with the owner and the general manager of the firm Grupo de Representaciones Internacionales, (GIR S.A.), Messrs. Ori Zoller and Uzi Kissilevich. GIR S.A. was the broker that put together the deal.

In Nicaragua, the team met with the Foreign Minister, the Minister of Defense, the current and former Ministers of Government (Ministro de Gobernación), the current and former Chiefs of Police, the Contralor General de la República, the Chief of the Nicaraguan Army, the Inspector General of the army, several other civilian, police and military officials, and with representatives of the Nicaraguan shipping company, Agencia Vassali which handled the loading of the arms onto the Otterloo for ultimate transport to Colombia.

In Panama, the team met with the Foreign Minister; the Minister of Government and Justice (Ministro de Gobierno y Justicia); the Vice-Minister of Foreign Affairs; the Executive Secretary of the Security Council (Secretario Ejecutivo del Consejo de Seguridad); the Chief of the Panamanian National Police; the prosecutor (Fiscal) responsible for the case in Panama; Marco Shrem, one of two private individuals located in Panama who were involved in the transaction; Gustavo Padilla, a Panamanian lawyer who incorporated Trafalgar Maritime Inc.; Yariela Brown, the Secretary of Trafalgar Maritime Inc.; Carlos Aguilar, the first mate of the ship Otterloo, whose registered owner is Trafalgar Inc., and other people with knowledge of the case. The Investigative Team made several unsuccessful attempts to interview the other private individual located in Panama who was involved in the arms diversion, Shimon Yelinek. These attempts were made through Yelinek's lawyers following his arrest by Panamanian authorities in November, 2002. Table 1 (below) contains a complete list of individuals interviewed or contacted by the Investigative Team.

The Investigative Team did not travel to Colombia, rather, requests for information from the Government of Colombia were made through that country’s Ambassador, Permanent Representative to the OAS, Humberto de la Calle Lombana, and through contacts with knowledgeable individuals.

The Investigative Team was able to reconstruct the facts surrounding the transfer of arms from Nicaragua to Colombia based on information provided by the countries, and other information collected during meetings with government officials and others. The investigation also sought, and received, information from the governments of Belize, Guatemala, Israel, Mexico, and the United States of America.

Table1: Persons Contacted or Interviewed by the Investigative Team

Belize:

Lisa Shoman, Ambassador, Permanent Representative of Belize to the Organization of American States.

Colombia:

Humberto de la Calle, Ambassador, Permanent Representative of Colombia to the Organization of American States.
Brigadier General Jose Leonardo Gallego-Castrillon, Commander, Colombian National Police, Valle de Aburra.

United States of America:

Oliver P. Garza, Ambassador of the United States of America in Nicaragua.
Roger Noriega, Ambassador, Permanent Representative of the United States of America to the Organization of American States.
Christopher McMullen, Chargé, Embassy of the United States of America in Panama.

Guatemala:

Ori Zoller, Owner of Grupo de Representaciones Internacionales, GIR S.A.
Uzi Kissilevich, Director General of Grupo de Representaciones Internacionales, GIR S.A.
Arturo Duarte, Ambassador, Permanent Representative of Guatemala to the Organization of American States.

Israel:

Rafael Barak, Chargé, Embassy of Israel in the United States of America.
Jacob Dayan, Alternate Permanent Observer of Israel to the Organization of American States.

México:

Miguel Ruiz Cabañas, Ambassador, Permanent Representative of Mexico to the Organization of American States.

Nicaragua:

H.E., Enrique Bolaños Geyer, President of the Republic.
Norman Caldera, Minister of Foreign Affairs.
Arturo Harding, Minister of Gobernación.
René Herrera, former Minister of Gobernación.
José Adan Guerra, Minister of Defense.
Carlos Ulvert, Ambassador of Nicaragua to the United States of America.
Leandro Marín Abaunza, Ambassador, Permanent Representative of Nicaragua to the Organization of American States.
General Javier Alonso Carrión McDonough, Commander in Chief of the Nicaraguan Army.
General Roberto Calderón, Inspector General of the Nicaraguan Army.
Edwin Cordero, First Commissioner, NNP.
Francisco Bautista Lara, Commissioner of Police, NNP.
Melby Gonzalez, Commissioner of Police, NNP.
Francisco Montealegre, former First Commissioner of Police, NNP
Julio César Solis, General Manager, Naval Operations, Agencia Vassali.
Augusto Canales Aguilar, Owner, Agencia Canales Aguilar.
Members of the Superior Council of the Comptroller General of the Republic of Nicaragua (Consejo Superior de la Contraloría General de la Republica de Nicaragua), including the Council's former President, Guillermo Arguello Poessy, and its current President, Francisco Ramírez Torres.

Panamá:

José Miguel Aleman, Minister of Foreign Affairs.
Anibal Salas, Minister of Government and Justice (Ministro de Gobierno y Justicia).
Harmodio Arias Cerjack, Deputy Foreign Minister.
Ramiro Jarvice, Executive Secretary of the Security Council.
Carlos Barés, Chief of the PNP.
Juan Manuel Castulovich, Ambassador, Permanent Representative of Panama to the Organization of American States..
José Isaza, Chief of the Maritime Service (Jefe del Servicio Marítimo).
Gustavo Leonardo Padilla Martinez, Trafalgar Maritime Inc.'s lawyer.
Yariela Brown, Trafalgar Maritime Inc.'s secretary.
Fredison Carvajal, PNP
Alexis Vergara, PNP
Patricio Candanedo, Second Prosecutor Specializing in Crimes Related to Drugs, Public Ministry (Fiscal Segundo Especializado en Delitos Relacionados con Drogas, Ministerio Publico).
Marco Shrem, owner/partner, Marksman Latin America S.A, y Marksman Panamá, commercial enterprises located in Panama.
Carlos Aguilar, merchant marine captain, first mate aboard the Otterloo.

II. Principal Actors in the Arms Diversion:

The following persons had substantive roles in the arms transaction:

In Guatemala:

§ Ori Zoller: An Israeli citizen and owner of GIR S.A., a firearms dealership and

brokerage agency established in Guatemala in 1996, and a representative of Israeli Military Industries (IMI). Zoller was formerly a member of the Israeli Army’s special forces, and an intelligence officer. He was the broker who organized and managed the transfer of the NNP firearms.

§ Uzi Kissilevich: An Israeli citizen and partner of Zoller’s in GIR S.A., also formerly a member of the Israeli military. He serves as GIR S.A.’s general manager and was also involved in the NNP firearms transfer.

In Nicaragua:

§ General Roberto Calderón Meza: Inspector General of the Nicaraguan Army and formerly its Chief of Logistics. Over the years, General Calderón allegedly had a number of business dealings with Zoller. Calderón became involved in the present case through his relationship with Zoller. He was instrumental in providing Nicaraguan Army firearms to the NNP when the firearms that the NNP was planning to transfer were found to be unsatisfactory to the ultimate buyer.

§ Major Alvaro Rivas Castillo: Major of the Nicaraguan Army, and Aide de Camp of General Calderón. He took responsibility for logistics and the actual export of the firearms that are the subject of the investigation.

§ René Herrera: Nicaraguan Minister of Government (Gobernación) until September 30, 2000. Ex-Minister Herrera approved the terms of the transfer of the NNP firearms to GIR S.A. Herrera also requested Nicaragua’s Comptroller General (Contraloría General) to exempt this firearms transaction from Nicaragua’s Law governing State Contracts (Ley de Contrataciones del Estado). Herrera personally briefed the then United States Ambassador to Nicaragua on the terms of the original arms deal – describing it as a sale of antiquated arms to a broker for re-sale to collectors in the United States.

§ Commissioner Francisco Montealegre: Chief of Police from September 1996 to September 6, 2001. Montealegre concluded the initial arms exchange contract with Zoller.

§ Edwin Cordero Ardilla: Present Chief of the NNP. He became involved in the firearms transfer following Montealgre’s retirement and saw it through to final completion.

In Panama :

§ Shimon Yelinek: Actual purchaser of the Nicaraguan firearms, through GIR S.A., purportedly for the PNP. He is an Israeli citizen.

§ Marco Shrem: A business associate of Yelinek. Shrem put Yelinek in contact with Zoller, collaborated with Yelinek in the purchase of the Nicaraguan firearms through Zoller, and attempted to buy/sell additional arms though Zoller. He is a Peruvian citizen.

§ Miguel Onattopp Ferriz: General Manager and owner of Trafalgar Martime Inc., the company identified as the registered owner of the Otterloo. The Otterloo loaded the arms in El Rama, Nicaragua, and transported them to Colombia. Miguel Onattopp Ferriz is a Mexican citizen.

§ Jesús Iturrios Maciel: Captain of the Otterloo at the time of the diversion, employed by Trafalgar Maritime Inc. He is a Mexican citizen.

Annex II contains a complete listing of all of the natural and legal persons and other entities involved in the case.

III. The Chain of Events:

The chain of events of the case can be broken down into the following four phases:

§ The first phase, from October 1999 to June 2000, begins when the Chief of the NNP, Commissioner Francisco Montealegre, aware that his police force has insufficient and inappropriate firearms and a lack of financial resources to acquire new ones, is introduced to Ori Zoller of GIR S.A. by the Inspector General of Nicaragua’s army, General Roberto Calderón. A proposed arms transfer was conceived whereby the NNP would provide a quantity of AK47 firearms to the broker Zoller, and in exchange, Zoller would provide the NNP with more suitable firearms (pistols and mini-Uzis). During this stage, the necessary approvals within the Nicaraguan Government were sought and obtained, and a formal contract to effect the exchange was entered into between the NNP and Zoller’s GIR S.A.

§ The second phase occurred between July 2000 and July 2001, when Zoller identified a buyer for the Nicaraguan arms, Shimon Yelinek and his associates. A shipping company was established in Panama, Trafalgar Maritime Inc., apparently for the purpose of transporting the arms to the AUC in Colombia. It was during this stage that the arms diversion appears to have been planned.

§ During the third phase, between July 4, 2001 and November 3, 2001, there was a flurry of activity, beginning when Yelinek inspected the NNP arms being offered for sale by Zoller and determined that their condition was not adequate for the transaction to proceed. In an attempt to salvage the transaction, Zoller and General Calderón entered into an agreement whereby the Nicaraguan Army offered to exchange the unacceptable NNP arms for better quality ones in the army’s possession. This was also the period when the final logistical arrangements and customs and export procedures were executed, and culminated with the arms and ammunition being exported from Nicaragua and diverted to Colombia.

§ The fourth and final phase took place from late November 2001 to February 2002, when preparations were made to purchase a second shipment of arms from Nicaragua, again ostensibly for the Panamanian Police. The intelligence services of Colombia, Panama, and Nicaragua, through a tri-national operation, proposed by the Nicaraguan Armny, attempted to put together a “sting”, supposedly to uncover those responsible for the diversion.

Narrative Summary of the Chain of Events:

The narrative presented below was reconstructed from interviews and documents obtained by the Investigative Team. A documented chronology of events is presented in Annex I which provides additional details regarding the events surrounding the diversion, and the persons, institutions, and businesses involved.

Phase I:

The Nicaraguan National Police, a force consisting of approximately 7000 police officers, has only about half the number of side-arms necessary to equip every officer. This has forced the police to issue AK47 assault rifles to many officers, these arms being plentiful as they were left over from Nicaragua’s civil war. The Police leadership recognizes that AK47s are not appropriate for a police force.

In 1999, General Roberto Calderón, the Inspector General of the Nicaraguan Army, introduced the Chief of the NNP, Commissioner Francisco Montealegre, to Ori Zoller, the owner of GIR S.A. Zoller and Calderón had a prior business relationship, as GIR S.A. had sold arms and equipment to the Nicaraguan military in the past. In the fall of 1999, Zoller presented Montealegre with a proposal to obtain suitable side arms which would not require the NNP to pay cash for the arms.

Zoller and Montealegre worked out an exchange, whereby GIR S.A. would provide the NNP with new side arms (465 Jericho pistols and 100 Uzi-submachineguns) in exchange for aging surplus police AK47s, ammunition and bayonets (initially, 5000 AK47s, 2.5 million rounds of ammunition, and 6000 bayonets).

Between February and the end of May, 2000, various bureaucratic procedures were undertaken within the Nicaraguan Government to obtain approval for the exchange of arms. The exchange was approved by the Minister of Gobernación, who has responsibility for the NNP; it was also approved by the President of the Republic (as mentioned in a February 3, 2000 letter from the Minister of Gobernación, see document No. 156 in Annex V). An exemption to the state purchases Law, to allow for a “sole source” transaction of the arms, was approved by the Comptroller General on May 22. The Minister of Gobernación also informed the United States Embassy in Managua of the possible exchange, as Zoller originally indicated he would sell the AK47s as collectors items to a broker in the United States, Century International Arms.

While these internal procedures were being followed, Montealegre and Zoller formalized the agreement by jointly signing a letter of intent, outlining the terms under which the exchange was to be made. Once the various approvals were obtained for the exchange, Zoller and Montealegre signed a formal contract on