VZCZCXYZ0001
RR RUEHWEB

DE RUEHVI #1382/01 3000936
ZNR UUUUU ZZH
R 270936Z OCT 09
FM AMEMBASSY VIENNA
TO SECSTATE WASHDC 3480

UNCLAS VIENNA 001382 
 
SIPDIS, SENSITIVE 
 
FOR PM/DTCC - BLUE LANTERN COORDINATOR AND EUR/CE 
 
E.O. 12958: N/A 
TAGS: KOMC ETTC AU
SUBJECT: Blue Lantern Broker Inquiry: Verifying Bona Fides Of 
Michael Feinig / Diamond Airborne Sensing / CASE NO. K-1992 
 
REF: STATE 94197 
 
Sensitive but Unclassified - Protect accordingly. 
 
¶1. (SBU) Per reftel, Embassy checked on the bona fides of the 
company Diamond Airborne Sensing and Managing Director Michael 
Feinig (registered with the USG as an arms broker).  We carried out 
an on-site visit, met at length with CEO/founder Christian Dries and 
a team of company staff, and consulted the business surveillance 
database of the "Kreditschutzverband" (KSV).  Diamond is a sizable 
company and a world leader in some general aviation markets 
(including twin-engine aircraft), but the company admits it has had 
serious recent problems in complying with U.S. export control 
regulations and is revamping its corporate governance as a result. 
 
 
Background on Diamond Airborne Sensing / Diamond Aircraft 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶2. (SBU) "Diamond Airborne Sensing" (DAS), founded in 2006, is a 
100% subsidiary of "Diamond Aircraft Industries" (DAI).  CEO 
Christian Dries and Managing Director Michael Feinig (the latter is 
named as "broker" in reftel) represent both companies.  DAS has only 
9 employees, but is embedded in its larger parent.  DAS' main 
business is developing sensor applications for aircraft, which they 
also market after construction by DAI.  In addition, DAS operates 
its own sensor-equipped aircraft on demand for customers such as 
police and television broadcasters.  Most of Diamond's leased 
aircraft are currently used for "geo-mapping", we were informed. 
Dries said that government clients account for only a small fraction 
of Diamond's business, and more than three-quarters of the company's 
sales are currently to China, Russia and Thailand. 
 
Aircraft Sale to Venezuela / Bangor Maine Interdiction 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶3. (SBU) As DTCC is aware, in November 2008 two Diamond DA-42 
surveillance aircraft were impounded by DHS/CBP agents in Bangor 
Maine as they attempted to transit the U.S. en route to Venezuela 
(where the planes were to be delivered to official customers).  Each 
plane had on board (for later mounting) a combined optical/infrared 
camera, the infrared component of which is an ITAR-controlled item 
but for which Diamond had no export license (nor is a U.S. license 
possible in the case of Venezuela).  Diamond officials' reaction to 
the incident is detailed below;  Post understands that DTCC issued a 
warning letter to Diamond (11 August 2009/Case 09-0000548) -- 
essentially closing the case for export control purposes -- but that 
DHS continues its investigation and will soon consider ultimate 
disposition of the impounded aircraft (DHS Office of Fines Penalties 
and Forfeitures /FPF). 
 
¶4. (SBU) During Post's site visit, we raised the Venezuela/Bangor 
aircraft case with Diamond leadership and asked for the company's 
reaction and any steps it had taken to overhaul corporate 
governance/implementation of export control regulations.  Diamond 
leadership maintained that the company leadership had acted in good 
faith in the Venezuela case, based on certification by a Swedish 
supplier (Polytech) that the dual camera did NOT contain 
ITAR-controlled items (NOTE: Diamond showed us a copy of Polytech's 
certification; Diamond's argument is that Polytech had issued an 
erroneous certification, since a French-made infra-red camera inside 
Polytech's assembly is apparently ITAR-controlled). 
 
¶5. (SBU) Supplier error notwithstanding, Diamond officials said the 
Venezuela/Bangor case had been a "wake up call" to the company's 
compliance shortcomings and that the company had recently fired the 
then-manager of Diamond Airborne Sensing for his faulty and 
irresponsible handling of the case.  (NOTE: a Diamond headquarters 
representative apparently denied to CBP that the aircraft were for 
sale to Venezuela; we do not know if this was the now-fired 
manager).  Dries and Feinig admitted that the company had 
"under-estimated" export control compliance requirements as it made 
the transition from being a light aircraft producer to an integrator 
of aircraft and sophisticated optics/electronics. 
 
¶6. (SBU) Besides firing its line manager, senior Diamond management 
said the company had restructured its overseas sales program to 
bring stronger regional partners on board.  For the U.S. market, 
Diamond has recently engaged U.S. company Aurora Flight Sciences 
(headquartered in Manassas, VA) to manage its compliance policy. 
 
Ownership / Business Database Information 
- - - - - - - - - - - - - - - - - - - - - 
 
¶7. (SBU) Despite its size, Diamond remains a "family company," 
wholly owned by Mr. Dries.  Like other aircraft manufacturers, the 
company is highly dependent on external financing.  According to the 
KSV database, DAI and DAS now depend entirely on external funds and 
the profit situation is negative; KSV assigns Diamond a "below 
average" rating compared to other Austrian companies in the aircraft 
industry.  Dries said aircraft sales are poor, given the current 
 
economic crisis, but that Diamond has a strong product portfolio and 
is well poised to take market share from bankrupt manufacturers. 
 
COMMENT 
- - - - 
 
¶8. (SBU) Diamond is a sizable and (until the current crisis) 
successful aircraft maker which has shown strong regulatory 
management in non-export control areas such as safety/registration 
(Diamond's aircraft are among the very few worldwide which are 
certified by both U.S. and European civil aviation authorities). 
The conduct of at least one key Diamond manager (now apparently 
fired) in the Venezuela/Bangor aircraft case was in clear violation 
of U.S. export control law and regulation (even if Diamond acted on 
an erroneous supplier certification).  Based on their own 
statements, Diamond's owner and senior management appear to have 
responded to this "wake-up call." 
 
HOH