Re: Re: Re: Arthur Andersen: charter revocation?

["Ian Murray" <seamus2001@xxxxxxxxx>]

----- Original Message -----
From: "Justin Schwartz" <jkschw@xxxxxxxxxxx>
To: <pen-l@xxxxxxxxxxxxxxxxxxx>
Sent: Friday, January 18, 2002 10:02 PM
>Subject: [PEN-L:21630] Re: Re: Arthur Andersen: charter revocation?





>Enron losers sue Andersen
>
>Connecticut to consider revoking accountant's licence to practise
>
>==================
>
>Forgot to add that CR should be a goal. AA is incorporated in Justin's home
>town....
>
>Ian
>

You Seattleites are just jealous that Boeing came here. jks (in Chicago)

==================
Speaking of Boeing.......Someone ought to ask Phil Condit about this.....

China Finds Bugs on Jet Refitted in U.S.


By John Pomfret
Washington Post Foreign Service
Saturday, January 19, 2002; Page A1


BEIJING, Jan. 18 - Somewhere on a military airfield north of Beijing, China's presidential aircraft,
a new Boeing 767-300ER with all the trimmings, sits unused with parts of its innards torn out.

Last October, days before its planned maiden voyage, Chinese military communications experts
discovered numerous high-tech listening devices planted inside the plane, according to Chinese and
Western sources, who said they had been told of this by Chinese military officers and aviation
officials. The plane was grounded and has not been flown since it was delivered.

Chinese aviation officials and military officers have charged that U.S. intelligence agencies
planted the bugs aboard the plane while it was being refitted in the United States, the sources
said. The U.S. Embassy declined to comment on the allegations. Analysts said the devices were highly
sophisticated.

A CIA spokesman, Bill Harlow, declined to comment on the report, saying, "We never comment on
allegations like these, as a matter of policy."

The story behind the immobile Boeing jet offers a tantalizing glimpse of modern spycraft. A Chinese
source, with close ties to China's military intelligence services, said members of the Third
Department of the General Staff Department of the People's Liberation Army discovered the devices.
The Third Department deals in signals intelligence.

The Chinese source said that, to date, 27 listening devices had been found, including devices in the
presidential bathroom and in the headboard of the presidential bed.

A Western executive and a Western diplomat said they had been told by Chinese aviation sources that
the devices were highly sophisticated. The diplomat said they "had to be triggered by a satellite
communication. In that sense, they were very advanced."

U.S. sources have said the controversy over the plane is emerging as an issue in the summit meeting
between President Bush and President Jiang Zemin scheduled for Feb. 21 in Beijing. Chinese analysts
said the incident confirms their fears that the United States is an untrustworthy partner and
continues to treat China as an enemy.

After the listening devices were discovered, Western sources said, 20 Chinese air force officers and
two officials from China Air Supply Import & Export Corp., which was involved in negotiations for
the jet, were detained. Chinese sources said they were being investigated for negligence and for
corruption - the American firms were paid about $10 million for the refitting job but China doled
out $30 million.

In addition, a senior air force officer is under a form of house arrest for his role in the affair.
The officer has previously purchased planes for government officials through the auspices of China
United Airlines, owned by the Chinese air force, which also had a piece of the transaction in
question. A top officer of the Bodyguards Bureau of the General Staff Department of the People's
Liberation Army, has also been criticized for tolerating the lax security, the sources said.

The China Air Supply Import & Export Corp. and China United Airlines declined to comment on the
situation.

It is unclear how the episode could affect Boeing, which in September signed a $2 billion deal to
sell planes to China.

More broadly, Western diplomats said they believed Washington and Beijing would weather the dispute.
"This kind of thing is to be expected," said a Chinese security expert, who noted that relations
between Washington and Moscow were not seriously disrupted by disclosures in the 1980s that the
Soviets had bugged the new U.S. Embassy. The expert added, "Even if our relations were excellent, we
would still spy on each other."

China purchased the Boeing 767-300ER in June 2000 for $120 million, a Chinese source said. An
executive at Delta Airlines said the Chinese were so eager to obtain a top-of-the-line 767 that
Delta allowed China to assume its contractual responsibilities for one plane about to come off
Boeing's assembly line in Seattle.

China's state-run media, which dubbed the plane Air Force One, reported the sale in August of that
year. Several reports, including one that appeared in the Guangzhou Daily, a mass circulation
newspaper in that southern metropolis, said the plane had already been brought to China for
refitting.

In fact, the plane had been sent to the San Antonio International Airport for refitting by several
aircraft maintenance firms, including Dee Howard Aircraft Maintenance Lp, Gore Design Completions
Ltd., Rockwell Collins Inc. and Avitra Aviation Services Ltd., a Singapore firm, according to
companies that worked on the contract. The job was worth less than $10 million, an industry source
said, and work continued during a very tense period in U.S.-Chinese relations following the April 1,
2001, collision between a U.S. reconnaissance aircraft and a Chinese jet off the coast of southern
China.

In a report about the refitting work published last September, the San Antonio Express-News quoted
Earl Parker, a project manager for Avitra, as saying the plane was not a "plain Jane, like [U.S.]
Air Force One." Parker told the newspaper the plane was refitted to accommodate about 100 people in
beige leather chairs that could be converted into beds. Larger, one-hour oxygen canisters replaced
the 20-minute type used on most aircraft. And the new presidential suite consisted of a bedroom,
sitting room and a bath with a shower. The firms also added a 48-inch television set, satellite
communications, anti-missile defense systems and advanced avionics.

Chinese security guards provided round-the-clock security for the plane while it was being refitted,
the newspaper said.

How the listening devices got on board the plane is a mystery. Phil O'Connor, a vice president at
Dee Howard Aircraft Maintenance of San Antonio, said today was the first time he he had heard of the
allegations.

Robert Sanchez, chief operations officer at Gore Design Completions, also of San Antonio, said he
did not believe the allegations.

"We had an excellent relationship with every Chinese official who worked on this project," he said.
"We're not in the business of doing things like this." A Rockwell Collins spokeswoman said the
company would have no comment.

Work was completed on the plane in August and it was flown to China on Aug. 10, stopping in
Honolulu. A group of American workers and their families accompanied the plane as guests of the
Chinese government, Sanchez said.

"The Chinese were very happy with the aircraft and with the work we did. They took the workers to
the Great Wall and showed them around," said Sanchez. "Why would any of these corporations or
workers consider that, if they knew anything about this?"

Western diplomats and executives learned of the case in mid-October when Chinese officials they
normally did business with did not appear for meetings. Chinese friends and colleagues informed them
that the officials had been arrested, they said.

The arrests occurred in China about the time that Jiang was supposed to take his maiden voyage in
the jet to attend the summit of the Asia-Pacific Economic Cooperation forum in Shanghai. Jiang flew
to the meeting on another airplane.

Sanchez said Chinese government officials have not contacted his firm about the problems. He also
said that Chinese aviation officials said they wanted Gore to work on three additional VIP aircraft.

"We're technical, not political," Sanchez said. "This incident is not going to hurt the U.S.
government; it's not going to hurt the government of China. It's only going to hurt the firms. "

For years, China has worried that Western governments, using Western companies, would use high-tech
products to compromise China's security. China spent millions of dollars protecting the new
headquarters of the Foreign Affairs Ministry from listening devices that could potentially be
mounted in office buildings nearby, a Chinese security source said.

Last year, the People's Daily, the official Communist Party newspaper, carried an editorial in which
it SAID the import of high-tech products from the West constituted a security risk because Western
governments would place secret codes or technical Trojan horses inside the products to collect
intelligence.

Staff writer Thomas E. Ricks in Washington contributed to this report.