HOUSTON (AP) -- An FBI agent testified Friday that employees at a Houston company were coached to hide information about the cutting-edge microelectronics the firm was buying from U.S. manufacturers and later reselling to Russian military and intelligence agencies.
U.S. authorities have arrested Alexander Fishenko, owner of Arc Electronics Inc., and seven of his employees including Alexander Posobilov, who was the company's director of procurement, accusing them of being involved in a scheme to illicitly sell military technology to Russia.
At a detention hearing in federal court, FBI agent Crosby Houpt testified about email exchanges and phone conversations Posobilov had in which he discussed how to hide the equipment Arc Electronics was selling to Russia.
One email exchange from August 2011 showed Posobilov lying to a U.S. manufacturer, telling a representative of that company that equipment Arc Electronics was buying was for a fishing boat navigation system when in actually was going to be used by the Russian Navy, Crosby said.
The microelectronics sold by Arc Electronics could have a wide range of military uses, including radar and surveillance systems, weapons guidance systems and detonation triggers, U.S. authorities say.
Prosecutors are asking a judge to hold Posobilov without bond because they say he is a flight risk. Fishenko's court hearing to determine if bail would be granted was postponed until next week. Hearings for the other defendants were postponed until later Friday or to next week. One woman arrested was allowed to be released on $250,000 bail.
Fishenko is accused of scheming to purposely evade strict export controls for cutting-edge microelectronics, of operating inside the U.S. as an unregistered agent of the Russian government, and of money laundering. Fishenko's attorney, Eric Reed, said he plans to review the charges against his client with a critical eye.
"I think these are fairly dramatic allegations that we will certainly take a hard look at to determine whether there is any evidence to back that up," Reed said.
The Russian Foreign Ministry, in a statement, noted the defendants are not charged with espionage.
According to court documents, Fishenko was born in the former Soviet Republic of Kazakhstan and graduated from a technical institute in St. Petersburg before coming to America in 1994. In his initial asylum application, Fishenko stated he had no prior military experience, but elsewhere he claimed to have served in a Soviet military intelligence unit in Berlin in the 1980s, according to court records.
For the last four years, Fishenko lived with his family in a two-story, four-bedroom home and was a stranger to his neighbors and unknown to leaders in Houston's Russian community of more than 100,000 residents.
Fishenko filed paperwork with the Texas Secretary of State to form a for-profit corporation with his Houston business, Arc Electronics, in 2001. His company proved to be successful, earning him about $50 million in gross revenue since 2002.
But authorities say those profits came illegally as Fishenko sent hundreds of shipments to Russia containing thousands of electronics, lying to U.S. manufacturers and suppliers about who would be using this technology.