Dream turns to nightmare as two men try to cash in on Iraq's wartime debris. Innocents suffer in web of deceit and greed as Britons chase Baghdad gold

repercussions for almost everyone involved . . .

IT was the height of the Iran/Iraq war. Basra was being bombarded. The

screaming crash of exploding shells surrounded the bomb shelter wherein

sat the Commander-in-Chief of the Iraqi forces and a gold-bedecked

Englishman, discussing the next tactical move in the bloody conflict.

That, at least, is the story as Mel Blackburn likes to tell it.

The salesman with a penchant for medallions and heavy gold rings had

become a good friend to the Iraqis during their eight-year war with

Iran. He was a Mr Fixit for the regime, setting up contracts with

European companies for Iraq, earning his 10% and the gratitude and trust

of the coterie who surround President Saddam Hussain.

His mentor was a member of one of the small group of influential

families within the Presidential palace.

In May, 1985, Mr Blackburn set up a general trading company, called

Serene Investment and Marketing Ltd., from his home at Lawson Close,

Woolstone, Warrington, Cheshire.

A year later he became a director and shareholder of a company called

Global Technical and Management Services Ltd., the UK subsidiary of a

major Finnish company called Mancon which provided technical services to

the gas, oil, and chemical processing industries in the Gulf. He

resigned as a director in May, 1988.

When the war ended in August 1988 the Iraqi regime was anxious to

encourage international shipping back to its ports. It wanted to rebuild

its oil terminals which had been badly damaged in the war.

More than 200 kilometres of its waterways were littered with war

debris, including wrecks of military vessels and Iranian mines. Iraq was

also keen that its own naval personnel should be trained in the latest

techniques of hydrographic surveying, sonic systems and clearance

diving.

The contract for surveying, clearance and training would be worth

#3.4m. Mr Blackburn saw his chance, but instead of finding a major

contractor and taking his 10% cut, he took on the contract.

Mr Blackburn needed someone with know-how about shipping for the

contract. He also needed someone with money. He believed he had found

just the partner when he was introduced by a mutual acquaintance to

Allan Mellor, who owned a company based in Edinburgh called Viscount

Offshore Services Ltd. A former master mariner, he described himself as

a marine consultant.

A flamboyant figure, his previous ventures had included setting up a

scheme, called the San Jose project, to raise gold, silver, and precious

stones from four sunken wrecks off the coast of Colombia in South

America.

The pair set up a Scottish company called Global Technical and

Management Services (International) Ltd. specifically for the contract,

buying an off-the shelf company in Edinburgh on January 9, 1989.

In the meantime, they had set about finding major backers. Approaches

were made to the Cheshire-based civil engineering company of Alfred

McAlpine, which works in the Gulf on oil-related contracts. A specialist

company, Oceaneering of Aberdeen, was asked to bid to supply a diving

system, survey systems, and underwater remote robots.

The size of the contract appeared to make it an attractive

proposition. But first McAlpine dropped out for commercial reasons,

followed by Oceaneering which was concerned that a small company with no

substantial backing was too much of a financial risk.

Mr Blackburn and Mr Mellor then approached the Resource Group, a newly

formed Portsmouth company which specialised in land and hydrographic

surveying using advanced computer software techniques and had turned

over #1.2m in its first year.

The Resource Group, to its later cost, decided to take part. It was to

invest heavily in the contract by providing men and equipment for

surveying and training. The #300,000 due to the Resource Group by Global

was never paid and the company was forced into receivership last month.

With Oceaneering out of the picture, Mr Mellor and Mr Blackburn had to

find a company which would supply a remote-operated vehicle (ROV) with a

camera attached which would take pictures of seabed obstacles and

transmit them to the mother ship nearby.

Mr Mellor knew just whom to contact for an underwater robot. A former

skipper with Vickers based at Barrow in Cumbria and Leith, he had

captained submarine support vessels and oil supply boats during the

height of the oil development in the North Sea.

He had contacts with two former Vickers employees who had worked on

nuclear submarines at Barrow. The pair, Terry Sharpe and Frank Hayes,

were now operating a company in Cockermouth, Cumbria, called Deep Ocean

Robotics. It had been set up in 1985 with the aid of grants from the

Government through the local development corporation and the European

Community.

Mr Sharpe and Mr Hayes did not have a good reputation within the

offshore industry: various previous ventures and companies they had set

up had crashed. Many ROV operators and divers who had worked for them

over the years were still owed thousands of pounds in unpaid wages.

Companies from which they had leased equipment, including sonar systems

and underwater surveillance equipment, were never paid.

But Global brought Deep Ocean into the Iraqi deal. It was agreed Deep

Ocean would manufacture a prototype underwater camera-carrying robot

specifically for the contract.

It was sub-contracted to find a senior ROV supervisor and instructor

to train Iraqi naval personnel in underwater techniques. For this, a

company in the south-west of England, Manta, which supplies personnel to

the offshore industry worldwide, was approached.

Like many other creditors, Manta was never to receive the money --

#10,000 -- it was due for its part in the project.

Deep Ocean also provided for Global's use leased underwater

surveillance equipment and, it is understood, a hull-mounted sonar

system to help relocate debris.

The Iraqi contract had specified the particular type of system that

was needed. The Scottish company -- which did not want to be identified

-- that owned it, and had leased it originally to Deep Ocean in 1986,

was never told of its use in the Iraqi contract and would not have given

permission for its use because of the defence implications.

The leasing company, although it managed to recover its badly damaged

gear from Global's premises, has yet to receive about #100,000 due for

the long-term lease.

Deep Ocean went into liquidation in August last year. Creditors have

been told their chances of recovering debts are virtually nil.

In the event, the sonar system and the ROV prototype used on the Iraqi

contract never worked. The sonar system, which the Iraqis had insisted

on, was unacceptable for the job. The prototype ROV also failed to do

the job.

It was these two failures, along with chaotic administration by Global

on the contract, that infuriated the Iraqis and allowed them to invoke a

''non-conformance'' clause in the contract. But it was not only the

Iraqis who became angry.

Men who had been working on the project in Basra, including divers,

hydrographers and administrative staff, discovered to their fury that

wages had not been paid for months.

A project administrator recruited by Global in Yorkshire through a

local government-run Job Club went out to Basra in April last year.

His wife received half a month's pay in May and then nothing more was

paid into their bank account until the beginning of August.

Communications between the men working on the project and home were

few and far between because of the poor telephone system in Iraq and

mail which went missing or arrived months late.

But alarming news on the grapevine began to alert the Global

employees, many of whom were working offshore on Iraqi naval vessels,

that all was not well with the company. Approaches to Global were met

with promises that wages would be paid.

After a break in the UK in August, the project administrator returned

to Iraq with assurances from Global that wages owed would be paid into

the bank immediately. The money never arrived. His wife, frantic with

worry, received nothing until the following January when her husband

returned home for good.

Unable to pay the mortgage or the grocery bills she had turned to a

money lender and social security. The couple are still trying to pay off

their debts. They are still owed more than #2000 in unpaid wages.

A Scottish hydrographer returned home, his work on the project

complete, to discover the #8000 he was due had never been paid.

It was the same story elsewhere. Some divers who arrived for a 90-day

contract would stay a week and decide to return home. Others who had

invested months of their time in Iraq decided to hang on in the hope of

being paid and because they were afraid that it they quitted their wages

would never be paid.

Many were ex-service personnel, some former SAS and SBS men. They were

not amused by Global's failure to pay the wages. The atmosphere among

the employees was reported to be electric.

A chef who had been employed to cook for the men in the Basra villa,

which was their shore accommodation, was paid off. From then on the men

were given 10 dinars a day, a few pence, by Global to pay for their

meals. It was by all accounts totally inadequate.

The problem, according to what Global told its employees and

sub-contractors, was cash flow; the Iraqis were not paying up as quickly

as they should.

There were also disputes between Global and the top naval personnel --

not uncommon in major contracts.

Mr Blackburn travelled back and forward to Iraq from Deeside, arguing

with the Iraqis over the contract, chivvying along payments and trying

to cajole money out of them.

Payments were to be made on the basis that 80% was to be paid in

sterling, the remainder in local currency. Some employees' wages were

paid through a Global subsidiary company set up in Jersey called

Technical Management Resources Overseas Ltd., of 18 Parade Road, St

Helier. Global also had bank accounts with the National Westminster on

the Isle of Wight and in Chester.

The Iraqis became disenchanted by the failure of the sonar system and

the ROV, and the job of clearing the waterways was in the main being

carried out by sub-contractors.

While they were continuing with the work of clearing the waterways, by

all accounts doing a competent job of clearing the shipping lanes, word

was filtering back to the UK of shambolic management on the site.

One major sub-contractor sent out its own man to oversee work. He

reported back that he was appalled by what he found: unhappy personnel

who had not been paid, and equipment failing to arrive on time or

breaking down.

At one stage, senior Iraqi naval personnel ordered a check on the

Basra hangar in which Global kept its stores for the contract.

Everything, from rolls of tape and diving gear to an inflatable boat,

was piled in heaps unsorted around the warehouse.

Senior sources who worked on the project say Global was incompetent at

managing the contract. Experienced personnel working for sub-contractors

tried to give advice on elements of the contract that were causing

trouble. No-one would listen. They were subordinate to Global project

management and survey management.

By all accounts Global was out of its depth, and its cashflow crisis

was mounting.

The clearance work was completed earlier this year and following the

12-month contract, Lloyd's Register issued a final certificate of

clearance. Most of the objectives of the contract were met. The Iraqis

had their waterways cleared for international shipping, they had the

technology they wanted and an indigenous capability to maintain and

operate it.

They continue to argue that the letter of the contract has not been

completed. The failure of the sonar system and ROV are given as two

cases in point.

Of the #3.4m price of the contract, Global is known to have received

two tranches of #300,000 in 1989. Three further payments of #248,000,

#196,000, and #450,000 were due to be paid to Global by the Iraqis on

December 20. It is known that the three sums were paid by the Iraqis.

Approximately one-half has been disbursed to creditors so far.

The Aberdeen-based Oceonics company took out a debenture, a floating

charge, in November 1989 to protect the reputed #300,000 it is owed by

Global for the supply of hydrographic surveying equipment.

The two directors continued to bluff out the Global cash crisis. But

relations between Mr Blackburn and Mr Mellor are reported to have become

fraught towards the end of last year. They continued to drive around in

their leased Rolls-Royce Corniches, but money pressures were building

up.

Mr Blackburn, anxious it is said to protect his reputation in Iraqi

circles, travelled to Edinburgh at the beginning of this year to

terminate his partnership with Mr Mellor. Within 72 hours he had changed

his mind.

He set up a new Global company, registered this time in England,

called Global Technical and Management Services Ltd., with his wife,

Lorraine, as company secretary.

He was fearful that his credibility with Iraq was being damaged. He

was also anxious to win further contracts which were likely to arise in

southern Iraq.

In Edinburgh, his partner's company, Viscount Offshore Services Ltd.,

which he had set up in 1982 as a marine hire, charter, and shipbuilding

operation and which had run at a loss for some years, was struck off by

the Registrar of Companies for failing to lodge up-to-date accounts in

September of last year.

Mr Mellor's home at Eskbank, Dalkeith in Midlothian, which had been

purchased through this company, was sold. He and his wife, Helen, and

young son moved into a rented house nearby.

As creditors threatened to foreclose on Global, Oceonics stepped in to

protect its debt and has been assisting with Global's day-to-day

administration in the hope that the Iraqis will complete payment of the

contract.

Global sent letters to creditors asking them to bide their time and

agree not to force the company into liquidation with the promise that

money was forthcoming from the Iraqi contract, and from other

''substantial contracts'' won by Global. One of these, overseen by Mr

Mellor, is in Tunisia, working on seabed installations in deep water.

It was implied in a recent letter sent to creditors that revenues from

the contract surplus would be applied to Global creditors.

The company came within a whisker of liquidation in February when a

London-based leasing company to which it owed #16,000 decided to take

action to recover its debt in the Scottish courts.

At Edinburgh Sheriff Court, on February 21, Sheriff John Horsburgh

heard a petition for winding up Global. A week later a stay of

liquidation was granted. The leasing company agreed to withdraw the

proceedings on the basis that if Global crashed, very many creditors

would lose out and that the Iraqis would not complete payments on the

contract.

On February 15, six days before the liquidation proceedings began,

Global company records show that Mr Blackburn resigned as a director. He

has since claimed this was a mistake that should have been rectified by

his lawyers and that he remains a director.

On the same day, Mr Mellor set up another company called Viscount

Offshore Services Ltd., registered in Edinburgh. His wife is recorded as

the company secretary.

A month later, Customs officers raided Global's offices, the

directors' homes and the offices of their company secretary and

accountant. Mr Blackburn and Mr Mellor were questioned by investigators.

The outcome of the investigation should be known within the next few

weeks. The outcome for Global's creditors is unknown.