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Cablegate: Blue Lantern Level 3: Post Shipment End-Use Check

VZCZCXYZ0004
RR RUEHWEB

DE RUEHPG #0609 2890842
ZNR UUUUU ZZH
R 160842Z OCT 09
FM AMEMBASSY PRAGUE
TO RUEHC/SECSTATE WASHDC 1829
INFO RUEHRL/AMEMBASSY BERLIN 0536
RUEAIIA/CIA WASHDC
RHMFIUU/FBI WASHINGTON DC
RUEKJCS/SECDEF WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS PRAGUE 000609

SENSITIVE
SIPDIS

PM/DTCC - BLUE LANTERN COORDINATOR

E.O. 12958: N/A
TAGS: ETTC EZ GM KOMC
SUBJECT: BLUE LANTERN LEVEL 3: POST SHIPMENT END-USE CHECK
ON LICENSE 050171972

REF: STATE 67206

1. (SBU) In response to reftel, POLOFF conducted multiple
interviews regarding the Czech firm Glomex MS to establish
the bona fides of the firm in relation to its participation
in the export of aviation equipment to the Czech Republic.
In addition to an interview with the President of Glomex MS,
Stepan Odvody, POLOFF also conducted interviews with
representatives of the Czech Ministry of Defense and Ministry
of Industry and Trade per reftel instructions.

2. (SBU) On 21 August 2009, POLOFF met with Stepan Odvody,
the President of Glomex MS. Glomex was originally
established in 1998. A separate military supply branch was
created in 2002 and, in August 2008, Glomex MS was created as
a separate entity from Glomex dealing exclusively with
defense related materials. Mr Odvody started the company
with his partner, Martin Vyhnalek, who currently manages
Glomex, handling non-defense related transactions.

3. (SBU) Until recently, Glomex MS's sole customer was the
Czech Ministry of Defense. This changed when the firm
recently completed a transaction with the Slovak Ministry of
Defense. Glomex MS has no direct relationship with the U.S.
firm Transaero, but does act as Transaero's representative in
the Czech Republic. Glomex MS cooperates with the German
firm BHV in marketing Transaero's products and all purchases
of Transaero products go through BHV. All Transaero products
are aviation related. According to Mr. Odvody, BHV purchases
directly from Transaero and resells to Glomex MS directly and
without commission. All parties in such transactions act
individually. Any profit is built into the cost of the
transaction and there are no additional fees or commissions.
Upon receipt of the products from suppliers or
subcontractors, Glomex MS maintains possession until final
transfer to the MOD. Glomex MS is currently in the process
of relocating its offices and warehouse. Both the existing
and future storage facility have a 24-hour security guard on
duty as well as a series of four locks with Mr. Odvody being
only person with the key to the fourth lock. All items are
inventoried by serial number. Mr. Odvody was familiar with
regulations governing the import of U.S.-origin defense
articles as well as the restrictions on re-transfer or
re-export.

3. (SBU) On 28 August 2009, POLOFF met with the director of
the Ministry of Defense's National Armaments Division, Jiri
Stanek and members of his staff. Mr Stanek confirmed the
order for all defense related articles contained in reftel
and added that the materials were expected to be received by
the MOD within the next several days. According to Mr.
Stanek, Glomex MS's role in this transaction was to negotiate
the purchase of aviation breathing equipment. In accordance
with Czech law, the MOD put out a public tender for this
transaction and accepted Glomex MS's bid. The MOD did not
pay any fee or commission to Glomex MS and Mr Stanek assumed
that any profit for Glomex MS was likely derived from costs
built into the final price of the transaction. The MOD had
no direct contact with the German firm BHV but was aware that
they acted as a subcontractor to Glomex MS and were mostly
involved in the installation of microphones into the
breathing system. The MOD has dealt with Glomex MS on
multiple occasions in the past and had no reasons to suspect
that Glomex MS was involved in any illegal dealings or
engaged in any sort of behavior that would cause the MOD to
stop doing business with Glomex MS.


4. (SBU) On 1 October 2009, POLOFF met with Petr Gilka, the
Deputy Director of the Licensing Department at the Ministry
of Industry and Trade and his assistant, Lenka Hrachovocova.
According to Mr. Gilka, Glomex MS has a five-year
authorization to act as a broker for the import of defense
related materials to the Czech Republic. Mr. Gilka added
that he was unaware of any problems involving Glomex MS and
noted that, to his knowledge, Glomex MS did not deal with
countries prohibited from receiving defense related materials
in accordance with Czech Republic law 3894 which governs such
matters.
Thompson-Jones

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