David Gauthier Villars, Steve Stecklow, and John Shiffman

(Reuters) – Ilias Sabirov was a Moscow-based businessman who had provided Russia with computer chips that were high-performance and made in America for many years.

In 2014, Russia seize the Crimean peninsula from Ukraine. The United States government then imposed a string of sanctions on Russia and began to restrict the sale of chips.

According to U.S. officials and a Reuters analysis of Russian customs records, Sabirov was able to obtain more.

In the spring of 2015, a parcel containing more than 100 memory chips specially hardened to resist radiation and extreme temperatures – critical components in missiles and military satellites – arrived at Sabirov’s business address in Moscow, according to the Russian customs records and a U.S. federal indictment. American authorities claim that the chip, known as Silicon Space Technology Corp (or SST) was sourced in Austin, Texas and shipped to Russia through a Bulgarian company to avoid U.S. export laws.

In response to Russia’s February invasion of Ukraine, more than 30 nations and the United States responded by issuing unprecedented sanctions and export bans. However, the 2015 story of how American chips traveled from Texas to Moscow shows that sensitive Western technology may still find its way into Russia in spite of strict U.S. Export Controls.

This updated account of Sabirov’s criminal trial against two Bulgarian businessmen still contains details from interviews conducted with U.S. officials, as well as many of the key players, including two fugitives. It also highlights the difficulties of having a strict export control regime in place, particularly for dual-use parts that could be used both to civilian and military ends.

The Texas scam and U.S. crimes involving sensitive technology ended up in Russia. Reuters reviewed the cases and found a number of front and shell companies as well false export claims. This was despite Western-specific components being intended for civilian and military purposes. The most sought-after parts include precision tooling and microelectronics for the Russian army.

Sue Gough spoke on behalf of the U.S. Department of Defense, saying that during war communications and intelligence play an important role.

Gough stated that Russia’s acquisition of radiation-hardening tech by other nuclear-capable states like Russia could strengthen them and increase international security instability. The U.S. National Security Council considers the protection of such chips extremely crucial.

U.S. officials say that Russia has been increasing their efforts to circumvent U.S. technology restrictions. Officials from Homeland Security Investigations. A specialized unit of 25 U.S. counter-proliferation analysts, whose objective is to spot suspicious shipments, shifted their sole focus from China to Russia in late February, the HSI officials said.

“China doesn’t dominate our attention like they used to, and it’s Russia where we’ve seen the biggest increase lately,” said Greg Slavens, who recently retired after 30 years as a HSI counter-proliferation supervisor. The Russians continue to increase their efforts at obtaining chips for satellite and missile technology.

To questions from U.S. about accusations it used deceptive methods to avoid Western sanctions and trade restraints, the Kremlin didn’t respond. Russia previously referred to Western sanctions as hostile acts.

Gina Raimondo of the United States, Secretary for Commerce, met with Denys Khmyhal from Ukraine on April 21 and stated that she department “is more focused on depriving Russia of the technologies and items it requires to maintain its war machine.”

The Russian ban on U.S. export control officers being able to inspect goods at the ground to verify that they are not used for official purposes has complicated matters for U.S. law enforcement, people who have been familiar with this matter say.

Although suspects can be identified quickly, it may take several years to resolve cases and decide on a verdict. Accused Russian nationals will remain outside the reach of U.S. laws. It took approximately five years for the U.S. to bring criminal charges against these individuals and punish them.

In 2020, Sabirov and two Bulgarian businessmen Dimitar, and Milan Dimitrov were both indicted on illegally exporting Russian rad-hard chip to Russia. They also face money laundering charges. SST, which was renamed Vorago Technologies, was penalized $497,000 by the U.S. Department of Commerce Bureau of Industry and Security last year in an additional enforcement action. It oversees the issuance of export licences for products that are suitable for military and civilian purposes.

After being repeatedly told by lawyers in Texas that they couldn’t send rad-hard chips without a license to Russia, the Texas company admitted it conspired to ship them to Russia from 2014 through 2019. Reuters was unable to determine whether or not the chips had been used for military purposes. The U.S. Attorney’s Office in Texas’ Western District declined to comment.

Vorago stated in a statement that it was “committed to zero tolerance compliance all U.S. laws including export control.” Vorago stated that it had been “fully cooperative” with U.S. investigators and has “implemented strengthened compliance procedures to avoid recurrence.”

Also, the company claimed that it had been “deliberately deceived into thinking that shipment were going to Bulgaria for European use – a legal import.” Vorago obtained a valid certificate of end use from the customers, certifying that Vorago products were not used in Russia.

In an interview with Reuters, Sabirov said that there was no wrongdoing and denied the rad hard chips went from Bulgaria to Moscow. This contradicts evidence gathered and reviewed by Reuters by U.S. prosecutors. According to him, he has always followed U.S. export regulations and not laundered any money. He stated that the sanctions imposed on him, my company and my friends were “absolutely unfair, fake, and completely wrong”.

Milan Dimitrov has also denied any wrongdoing. According to Dimitrov, the allegations of export violation are absurd. The whole thing is just a misinterpretation. He could not be reached by Dimitar Dimitrov his father for comment.

Sabirov (who is now in Russia) and the two Bulgarians continue to be fugitives in this criminal case.

ECHO FROM COLD WAR

A review done by Reuters on U.S. court documents and other federal records shows the Texas case is not unusual.

According to U.S. authorities, between 2008 and 2014, the father-son duo smuggled over $65 million in sensitive microchips, from New Jersey to Moscow. These microchips were directly linked to Russian intelligence, military and nuclear-warhead-design programs.

Alexander Brazhnikov Jr. from New Jersey was a naturalized U.S. citizen, born in Russia. In 2015, the son pleaded guilty to the charges of purchasing microelectronics within the United States and then repackaging, relabeling, and shipping them to Moscow apartments or vacant storefronts that were linked to his father who is a Russian citizen. According to court records, there were 1,923 shipped. The son also admitted that money was stolen from Russia via 50 shell companies registered in various countries, including Panama, Belize, Panama, and the Marshall Islands.

Peter Gaeta (one of the prosecutions in the case), stated that microchips went to the military-industrial compound because Russia produces nothing else that would require such a large number of chips.

His field of studies was “nuclear Physics” according to court records. He was sentenced for 70 months and released on December 2018. Alexander Brazhnikov Sr. was the father of an import-export company for microelectronics in Moscow. He was also charged with conspiracy. Russian security and military service contractors, as well as companies that were involved in nuclear weapon design, received components from the United States.

Gaeta said to Reuters that the scale of this case was “just staggering”. This was no one-man operation. It is happening all across Russia.”

Alexander Brazhnikov Jr. refused to speak on the matter. He was unable to reach his father.

Alexander Fishenko was a Russian dual citizen who ran an extensive scheme over many years to ship sensitive microelectronics, which were manufactured in the United States, to Russian governments customers.

According to federal prosecutors, Fishenko also owned an export company in Houston, Texas and was an executive at a Moscow procurement company. His export company sent goods via New York from 2002 to 2012 to people in Canada, Germany, Finland and Germany, who then shipped them onwards. Electronics with uses in radar, surveillance and weapons guidance systems as well as detonation triggers were some of the products.

Fishenko, along with 10 others were charged in 2012 with conspiring to export controlled technology to Russia. Later, he pleaded guilty, among others, to acting as an agent for the Russian government. Six others were also convicted, either by pleas or trial. Fishenko was behind bars for more than seven decades.

Richard Levitt from New York, who was representing Fishenko, declined to comment. Fishenko could not be reached.

Daniel Silver, who worked on the Fishenko case as a federal prosecutor in Brooklyn, stated that illegal exports of controlled technologies often go through middlemen offshore to conceal their destination. Global networks help protect U.S. Exporters, making it difficult for law enforcement agencies to find the right dots.

Russia tried to overcome Western export restrictions over the years by making parts more at home or moving to suppliers in other allied countries such as China. Russian firms still heavily depend on the West to obtain high-precision machinery as well as some high-performance semiconductors such the Sabirov-imported radiation-hardened ones.

An executive from a U.S. semiconductor manufacturer said that if a Russian satellite orbits the Earth with no glitches, it can be assumed that it has Western electronics. According to the source, China doesn’t produce such chips while Russia has made substantial investments.

Russia found high-tech suppliers to supply its military in America and the other Western nations. Almaz-Antey is a state-owned Russian manufacturer of advanced air-defense systems. In 2015, it was able to obtain nearly $10,000,000 worth of precision metalworking machines. This according to a source familiar with the matter. A Hamburg court also filed an official summary of the case. The export-license papers claimed that the machinery was being shipped to several Russian civil goods producers located in Yekaterinburg. Instead, it was delivered to an Almaz-Antey plant, according to someone familiar with this matter. Almaz-Antey failed to respond to my request for comment.

Suzette Grillot is a Professor of International Studies at the University of Oklahoma. She said that Western trade restrictions against Russia were effective during the Cold War, when the West dominated global trade. According to her, “When you moved from the U.S.A. to Russia in 1990s it was an entirely different world technologically.”

Grillot explained that it seems impossible to replicate Cold War sanctions today to cripple the Russian military and economy. This is because Russia, which has enjoyed almost unlimited access for 30 years to Western technology, can now also count on suppliers such as China or India. She said, “You cannot unring a bell.”

TOP SECRET

Wesley Morris was a trained chemist and physicist. He had created solutions that would harden semiconductors from heat and radiation. To monetize his inventions, he created SST (now Vorago Technologies). Morris explained to Reuters that the U.S. military was interested in his methods and SST received research grants of millions of dollars from the U.S. Department of Defense. This included top-secret missile program funding.

SST’s first commercial order was still being chased 10 years later. The company’s chief executive Morris said that the salesman he had just hired told him about a Russian businessman who was interested in purchasing rad-hard chips made by SST. The salesman stated that Sabirov was interested in purchasing them for Russia’s space agency. Russia is almost completely dependent on imports to meet its rad hard requirements.

Roscosmos said there was no information from Russia about Sabirov’s involvement in Russia’s purchase of electronic parts.

Sabirov and Dimitar Dimitrov, a Bulgarian friend, arrived in Austin to attend a meeting held at SST’s Austin office in May 2014. Morris said the men were an odd couple. He spoke fluent English and displayed the confidence of someone who has strong connections to his government bureaucracy. His scuffed shoes and brilliant science skills suggested that the Bulgarian was a talented scientist. Both men appeared to have strong technical backgrounds.

Morris claims Sabirov said that one his Russian businesses, Kosmos Komplekt had purchased rad-hard chips at SST’s larger U.S. competitor, Aeroflex since 2011. He was interested in switching to SST products.

Morris recalls thinking that Morris thought at the time, “I wanted the business.”

Aeroflex, acquired in September 2014 by Cobham Group was a spokesperson. He stated that Aeroflex had stopped shipping Russian rad-hard chip to Sabirov before the acquisition.

Morris was disappointed that SST had failed to secure a lucrative contract a week before the meeting with Sabirov in Austin, May 2014. Morris, along with other executives, was told by the lawyer that any transaction that involves Russia’s license would be subject to a presumption or denial. According to Commerce Department documents.

Morris stated to Reuters that he didn’t want to let go of what could have been the pivotal contract SST had hoped for. Morris shared with Sabirov that he believed the Russian would buy $10 million in goods from him. According to him, he believes that chips will be used in satellites rather than missiles.

Morris claimed that Sabirov and he discussed their options in July 2014 while they were meeting at the Paris conference on nuclear technology. Morris claimed that his thoughts were tied to obtaining an export license from the United States, which was still being granted as part Washington’s cooperation on Russian joint space program programs.

Morris was defeated by despair days later after the Paris summit. After a Malaysian plane flew through Ukrainian airspace, a Russian-made missile struck and destroyed the aircraft. 298 people were killed. Morris, after meeting with the lawyer of SST, concluded that Russia had no intention to export the license, even though Moscow has denied any involvement.

Sabirov was informed by an American CEO that “we can’t send anything to you.”

Morris suggested that Sabirov offer an alternative: How about using Bulgaria (a country which doesn’t require an export licence) as a point of transit? Chips could be attached to electronic boards in Sofia in order to change the product’s export document designation before it is shipped to Moscow. This would avoid the requirement for an American license.

Morris met with SST’s attorney again in August 2014. He said that the plan would not work. The lawyer informed Morris in an email that Sabirov would need to prove that he had “added substantial value to Bulgaria”, according to Commerce Department documents. These documents do not identify the lawyer.

Sabirov said that he set up a Bulgarian firm to sell parts to civilian European markets, after Russian sanctions had impacted his business. According former SST staff and documents from the Commerce Department, Sabirov made this disclosure in that same month. It was planned to build modules using chips, and then sell these to automakers for exhaust and engine systems. Because of their high cost, rad-hard chips don’t get used often in automobiles.

Sabirov’s Bulgarian business – Multi Technology Integration Group EOOD, or MTIG – was set up by a relative of a business partner in Sofia. Interviews and documents from federal courts show that MTIG placed an order for a silicon wafer containing rad hard memory chips by SST in September 2014. It paid $125,000. Interviews and documents from the Commerce Department show Sabirov telling SST that MTIG would examine the chips, and that additional orders would be placed.

Former SST employees claim that the wafer had been made using SST’s hardening process at a Texas Instruments Inc foundry. It was then shipped to MTIG around January 2015. After the wafer of eight inches had been cut into the 115 memory chips and four months later the semiconductors were shipped on May 25 to Sovtest Comp (Russian customs records, interviews, and documents from the Commerce Department).

Texas Instruments stated that it “complies” with all applicable laws in countries where Texas Instruments operates. We are currently not selling to Russia and Belarus.”

The management of the U.S. firm had changed by the time SST sent the wafers to MTIG. Morris was stripped of the title of CEO in January 2015. He had lost a fight for control with New Scientific Ventures, his main investor. NSV declined comment. Bernd Lienhard (the new CEO), learned that the shipment was to Bulgarian in March 2015 according to Commerce Department records. Vorago did not comment on Lienhard learning about the deal.

Although Vorago Technologies became Vorago Technologies in August, its fates still depended on Sabirov. Lienhard found out that the Russian had plans to order five more wafers during the fall 2015. Lienhard sent Sabirov an e-mail informing him that this was the “most important business opportunity of our year” and that we were very dedicated to helping you.

They exchanged more email messages in November 2015. Lienhard gave Sabirov a substantial discount if he ordered more wafers by the end of 2015.

What would your reaction be to the following situation? We would appreciate if you could only buy 3 wafers each quarter. This would bring down the wafer price from $125,000 to $100,000. Lienhard emailed Sabirov. We would appreciate your help.”

Sabirov was then asked, five days later, if “any barriers for direct shipment from Moscow?” Lienhard said that to conform to export regulations, the wafers must be sent to Bulgaria, as per the Commerce Department documents. These included excerpts of the communications.

Anne Joubert was a Vorago sales representative who met with Dimitar Dimitrov, Sabirov, and others in Munich, December 2015. They discussed additional wafer orders, according to Commerce Department documents. MTIG issued Vorago a purchase order for five additional wafers a few days later. Federal records show Vorago sent two more wafers to MTIG during December 2015.

Joubert visited Bulgaria with Sabirov in July 2016. Joubert, who was accompanied by Sabirov and the two Dimitrovs, asked Joubert if MTIG shipped Vorago’s rad hard chips to Russia. According to federal court records, interviews with Joubert were confirmed. “Maybe,” Sabirov replied. Joubert stated that it would break U.S. export rules. Dimitar Dimitrov assured Joubert that the chips Texas had previously shipped to MTIG remained in Bulgaria.

The federal indictment states that this claim is false as some chips were sent to Russia. Indictment states that the address marked “Ship to” on an MTIG invoice belonged to Sabirov’s Sovtest in Moscow. Joubert refused to comment.

According to documents from the Commerce Department, Sabirov discussed ordering more wafers during his meeting in Sofia with Lienhard on August 2018.

An export control officer of the Commerce Department visited Sofia that December in order to check that Vorago chip had been used to power MTIG’s operations in Bulgaria. Milan Dimitrov was the younger Dimitrov who claimed that the semiconductors were not sent to Russia. According to the Federal Indictment, the officer also met Milan.

According to interviews, Vorago Sabirov, Sabirov, and the Dimitrovs had been under investigation for suspected export violations by both Commerce Department and Federal Bureau of Investigation.

Morris, founder of the company in 2016, informed FBI about what he saw as possible irregularities at his firm. These included the sale of Sabirov’s products, according to those familiar with the matter.

According to people who were familiar with the matter, FBI agents searched Vorago’s Austin headquarters in April 2016. They also searched the staff rooms. One former employee said that it was “very disruptive”

People familiar with the case say that federal investigators made very slow progress. The FBI searched Vorago’s Austin home on the third floor, and made arrest warrants for him. In the same month, Sabirov was arrested along with Dimitrovs.

17 months later in December 2020 the U.S. Justice Department announced that the three men were indicted on illegally procuring rad hard chips and money laundering.

Then, last September – six years after the Texas company first began shipping the specialized chips to Bulgaria – the Commerce Department announced a settlement in which Vorago agreed to pay a penalty: $497,000, the proceeds of its sales. In the criminal case, Vorago and its officers were not charged.

((David Gauthier­Villars reported out of Istanbul. Steve Stecklow was from London. John Shiffman is from Washington. Karen Freifeld reported from New York, and Tsvetelia Tsolova from Sofia. Janet McBride edited