Fraud haunts Clinton nominee: Aspin's possible successor linked to pounds 765m Ferranti scandal

ADMIRAL Bobby Ray Inman, nominated by President Bill Clinton yesterday to replace Les Aspin as US Defense Secretary, has had a long and close relationship with a US arms dealer convicted last year of smuggling South African weapons into the US and of defrauding Britain's Ferranti International of dollars 1.14bn ( pounds 765m).

The dealer, James Guerin, is serving a 15-year sentence in a Florida prison for crimes including smuggling, money laundering, fraud, embezzlement, tax evasion and securities fraud. He sold International Signal and Control (ISC) to Ferranti in 1987.

Admiral Inman served for many years on the 'proxy board' of ISC, lending his credibility to the company's dealings with the Pentagon and dozens of foreign customers. The board was a group of non-executive directors whose names gave weight to the company in its dealings in Washington and abroad. It was essential to ISC because it enabled the company to perform classified US defence contracts from which ISC, as a foreign listed company, would otherwise have been excluded.

Ferranti management discovered two years after the sale that Guerin had used a series of fake orders and customers to inflate grossly the value of ISC's contracts. Ferranti never recovered and was forced into receivership at the beginning of this month.

Admiral Inman, then director of the US National Security Agency, recruited Guerin in 1975 to provide intelligence about South Africa's military, particularly its nuclear programme. The agency picked ISC in 1976 to provide South Africa with a dollars 200m electronics jamming system, but the contract was cancelled in 1978 under the anti-apartheid sanctions imposed by the Carter administration.

In a character reference to a US court in April 1992, before Guerin's sentencing, Admiral Inman said he came to know and work with Guerin on classifed US government activities between 1975 and 1978, adding that his information was of 'substantial value' to the US intelligence community.

'In this period of direct observation on my part, Mr Guerin displayed patriotism toward our country and a willingness to provide useful information,' wrote the former deputy director of the CIA.

ISC's extensive dealings with South Africa included the smuggling of South African anti-tank weapons worth dollars 50m into the US in the early 1980s for testing.

These issues may be raised - to the embarrassment of Mr Clinton - when Admiral Inman appears for confirmation hearings before the Armed Services Committee of the Senate.

Clinton's patience runs out, page 12

Leading article, page 15