MONEY worries after Australia canned a contract led the father of the B-2 to sell expertise to China.
One of the biggest espionage trials in US history has laid bare how the self-proclaimed father of the top-secret American B-2 stealth bomber allegedly sold his soul to China after the Australian Defence Force scrapped a contract with his Canberra company.
Noshir Gowadia, 65, is facing the rest of his life in prison with a jury deliberating overnight on charges -- including tax evasion over his $1 million-plus earnings from Australian taxpayers -- that he developed a stealth cruise missile for China.
US prosecutors alleged Gowadia had been courted for years by Chinese agents, with prostitutes and money.
But the three-month trial was told the Indian-born US design engineer only succumbed because of his "desperate financial" situation after building a Hawaiian mansion in the belief the proposed $3m contract in Australia was a done deal.
Successive Australian governments have consistently refused to release the findings of an inquiry, headed by former inspector-general of intelligence and security Ron McLeod, into whether the ADF tried illegally to buy the radar suppression technology secrets from its ally.
Gowadia has pleaded not guilty to 17 charges, including conspiracy, violating the arms control act and money laundering. His home is on the market for $US5.5m ($6m), with US authorities moving to seize the sale's proceeds.
US authorities will not comment on speculation that a political decision was made not to lay espionage charges against Gowadia over his work with the ADF because of the relationship between the two countries.
The McLeod report was among documents supplied to US authorities ahead of the trial, which also included charges the former defence contractor sent classified B-2 information to the Swiss government and businesses in Israel and Germany.
In 2005, then attorney-general Philip Ruddock ordered the probe after The Australian newspaper revealed Gowadia co-owned a Canberra-based company, NTech Australia, with Defence Department employee and former navy lieutenant-commander Arthur Lazarou.
A preliminary Defence investigation found more than $1m had been paid to NTech to test Gowadia's Advanced Infra-Red Suppression System for the RAAF's Hercules C-130 transport aircraft.
At the time, the Defence Department said: "Defence purchased around $1m worth of services [for studies and training relating to defence projects] from NTech Australia between 1999-2003."
Since then, successive federal governments have refused to release any details of the subsequent investigation into the case.
Lazarou later wrote in a thesis for a postgraduate degree at the University of South Australia that it was Gowadia's work on the B-2 that brought him to the attention of ADF officials.
"The Australian Defence Force, which is very interested in discovering ways through which it can manage the signature levels of its aircraft, invited this individual to provide a two-day course on design for stealth," he wrote.
"That course was so successful that Defence then, informally, invited that individual to establish a company within Australia to bring stealth technology to the ADF."
For months, testing of the technology was carried out on a 20:1 scale model of a C-130 in a government facility in Melbourne. Lazarou, 49, who still works for the Defence Materiel Organisation, wrote in his thesis that the trial produced "outstanding test results".
Australia's military brass were considering extending the tests to other aircraft, including "fast jets and helicopters".
Lazarou -- who declared his association with NTech to DMO officials before Gowadia's arrest -- yesterday declined to comment.
But negotiations over the planned expansion of the work broke down when Gowadia insisted on owning 100 per cent of the intellectual property that would flow from the venture. "The bottom line is he set up an Australian company and could not reach agreement on the contract," a Defence source tells Focus.
US Assistant Attorney Ken Sorenson this week said loss of the contract made Gowadia ripe for the advances of the Chinese.
"Noshir Gowadia expected to derive substantial funds from his involvement in Australia and those opportunities did not come to fruition as expected," Sorenson tells Focus.
"And based on the collapse of those hopes he came into a more desperate financial situation in respect to his obligations in the US."
On the back of the Australian work, Gowadia bought oceanfront land on the Hawaiian island of Maui in 1999 and had just finished building a five-bedroom mansion fitted with a mango wood staircase, stone baths and library when the contract was scrapped. At the time, the monthly mortgage bill was $US15,000 and mounting.
Within months, he was talking to an Indonesian-born "Chinese access agent", Henri Njoo, and then later a Chinese national, Tommy Wong.
In mid-2003, the then 59-year-old took his first secret trip to the city of Chengdu -- China's aviation research centre -- where he allegedly began developing designs for a cruise missile capable of evading heat-seeking air-to-air missiles.
Prosecutors quoted extensively from email messages Gowadia allegedly exchanged with his Chinese contacts to arrange meetings and seek payments of more than $US800,000 in exchange for his designs.
The charges alleged he made six trips to China until his arrest in 2005, conspiring to conceal some of his visits by getting border agents to leave immigration stamps off his passport.
When FBI agents raided his Maui home they were not even aware of his Chinese activities.
Until then, the FBI's year-long covert investigation had been looking at his activities in Canberra and Europe, with NTech Australia's parent company, NtechE (Equipment), based in the tax haven of Liechtenstein.
During the raid, agents allegedly discovered thousands of classified files and disguised secret documents.
Some allegedly had been gleaned from his decades of classified work, first at military contractor Northrop Corporation, which built the B-2, and later at the Los Alamos National laboratory, where the nuclear bomb was developed.
According to the original indictment, the documents had classifications ranging from secret to top secret.
"The reason I disclosed this classified information [was] to establish the technological credibility with the potential customers for future business," he told investigators, according to an FBI affidavit unsealed in 2005.
"I wanted to help this [sic] countries to further their self aircraft protection systems. My personal gain would be business."
But during the trial, Gowadia's lawyer David Klein said he offered the confession under investigators' threats they would arrest his wife and children. Klein told the jurors Gowadia did not give the Chinese government what it thought it was getting and only provided basic engineering work described in publications available to the public.
"No one is disputing Gowadia's trying to get money out of the Chinese," Klein told the court.
"The evidence is that Mr Gowadia purposely did not show the Chinese everything.
"If the Chinese thought they were getting more, he was OK with that. He was getting his money out of it."
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