The Rakon files: NZ company's weapons role

When bombs started dropping in Iraq, Prime Minister Helen Clark described the war as wrong. Little did the public know that an Auckland company had played a crucial role in developing weapons raining down on Bagdhad. Following an extensive investigation the Weekend Herald reveals the hidden story behind star technology company Rakon.

* * *

It's nothing special to look at. Cream, expansive, functional, little in the way of frills to make it stand out in this semi-industrial pocket of Auckland.

The headquarters of technology company Rakon rubs shoulders with businesses dealing in automatic doors, hire equipment, health products. Across the road you can get a deal on a bedroom suite.

Practicality reigns. It's easy to miss the pod of trophies - including the New Zealand Trade & Enterprise Supreme Exporter of the Year award - in a corner of Rakon's modest reception area. Unless you have a nose for such things, you might not realise this is home to the type of operation the Government sees as our economic salvation: a clever tech company that's found a niche and got the jump on the rest of the world.

Rakon makes crystals and oscillators, essential components of global positioning systems (GPS). It has led the way in making its products small enough, cheap enough and accurate enough to appeal to makers of high-performance GPS products.

It's an edge that has won it big-name clients such as Motorola and prompted some Very Important People to beat a path to its door on the slopes of Hamlins Hill, in Mt Wellington.

In 2002 Rakon hosted Charles Swindells, at the time the United States Ambassador to New Zealand. Three years earlier it was big cheese US Air Force official Darleen Druyun.

Druyun is a former chief of staff of space agency Nasa and chaired Nato's Airborne Early Warning and Control Programme Management board of directors. Her visit to Rakon was in her role as the US Air Force's key adviser for product acquisitions.

She wanted to meet the people who run a small company in an anti-nuclear Pacific nation which makes a tiny but key component of the United States' smart weapons: bombs and shells which are guided to their targets by GPS and satellites. A company which has gone on to work on a product for the US's "nuclear arms industry".

Rakon documents describe the purpose of the visit by Druyun's high-powered party thus: "[assisting] the US Airforce ... to become comfortable with us supplying TSXO parts to Rockwell".

TSXO stands for Temperature Sensing Crystal Oscillator, used by the US in its JDAM [Joint Direct Attack Munition] smart bomb. The first JDAM bomb was handed over in June 1998 the year before Druyun's visit to Rakon in a ceremony at manufacturer Boeing's headquarters at which Druyun accepted it on behalf of the US Government. "The delivery of this weapon today marks the beginning of a new era," said Druyun, whose title is principal deputy assistant secretary of the airforce. "JDAM introduces a new and awesome capability that will revolutionize warfare."

Rockwell is American company Rockwell Collins, supplier of the bulk of navigation and weapons guidance technology to the US military including for the Boeing-made JDAM. Rockwell uses Rakon components in almost all its GPS applications.

Since 1998 more than 140,000 JDAM smart bomb kits have been made for the US and 14 other countries including Israel, Norway and Australia.

Rakon has become an important supplier of specialised components for a range of guided weapons systems made by Rockwell for the US Government, most recently for a new generation of weapons.

Early last year Rakon began work on a crystal oscillator specially designed to withstand nuclear radiation. Intended for the US nuclear defence programme, it would enable guided weapons to be used in response to a nuclear attack.

Another Rakon product is designed for a navigation system which turns dumb shells into smart shells and must be able to withstand the G-shock of being fired out of an artillery piece.

The Weekend Herald's examination of Rakon documents indicates the company has provided smart bomb components since Rockwell won the JDAM navigation contract in late 1995 and has struggled for years with product faults with the potential to cause a guided weapon to go astray.

It raises questions about whether Rakon has withheld from clients information about such faults, and whether its products have slipped through the net of regulations designed to control military exports.

How Rakon got into the bomb-navigation business

Rakon began life in 1967 in Warren Robinson's Howick basement, from where Robinson, 71, hand-made quartz crystals for the VHF and marine industries. The business did well enough until new technology saw demand dwindle.

The company's first significant breakthrough came in the 1980s when 46-year-old Brent Robinson - Rakon's managing director and an electronics engineer like his father, Warren - found a way to overcome a significant stumbling block to the development of GPS technology.

GPS receivers use quartz crystals because they oscillate at reliable frequencies, allowing satellite data to be converted into positioning information. Trouble was, the crystals' base frequency would change with temperature variations, causing satellite link problems.

Rakon's temperature-compensated crystal oscillators (TCXOs) fixed that.

But it was another breakthrough that was the genesis of Rakon's relationship with Rockwell. In 1990, Rakon developed oscillators unmatched in miniaturisation and frequency stability, opening up a variety of potential uses including GPS weapons navigation.

A year later, Rockwell began ordering large volumes of Rakon's TCXOs. At the time (1991), the US was in the Middle East pursuing Saddam Hussein in the first Gulf War, the first conflict to extensively use precision weapons such as laser-guided and terrain-sensing weapons.

This war heralded a new dimension for weapons with such accuracy they could potentially be guided through a window of a target building. But they had an Achilles heel which was exposed during the war - they were ineffective when low cloud or smoke obscured the target.

GPS-guided weapons emerged as the solution to these problems, with the JDAM smart bomb leading the way.

Four years on, Rockwell won the contract to supply the US with the JDAM smart bomb guidance system. Rakon was to supply the crystal oscillator.

In October 1995, one of Rockwell's senior staff sent an email with the news to Rakon's sales and marketing director, Darren Robinson, 44 (another of the founder's sons). Headed "JDAM TSXO", the email said: "I don't know if you heard or not, but we won the JDAM contract! This is great news for all. With this in mind, what is the latest delivery info on the TSXO? ... I am going to a meeting right now to discuss the TSXO, and when we will be able to implement into our production."

TSXO, temperature-sensing crystal oscillator, is an adaptation of the TCXO. Rakon had indicated it would be able to begin supplying the smart bomb TSXO from February 1996.

A delicate subject

Rakon is privately proud of its relationship with such a heavyweight specialist in military GPS as Rockwell but plays it down in public.

It may be that it is restrained by its contract with Rockwell. Rockwell's contracts typically include this clause headed "release of news information and advertising": the supplier shall not without Rockwell's prior written consent "make any news release, public announcement, denial or confirmation".

But the supply of weapons componentry by a New Zealand company is a delicate subject too, in a country with an anti-nuclear stance, a Government opposed to the war in Iraq, and regulations which seek to control the export of weapons products.

Although export regulations don't specifically identify crystals and oscillators as products that must be vetted before being sent overseas, there are sections which appear to deal with goods for guidance systems. "The handling, control ... of bombs, torpedoes, rockets [and] missiles ... " says one section under the heading of munitions in the Ministry of Foreign Affairs and Trade's strategic goods list. "Target acquisition, designation, range-finding, surveillance or tracking systems" says another, while yet another specifies products for "guidance and navigation for [naval] military use" as exports that may be restricted.

Underlining the sensitivity of exporting weapons products is that Rakon has a significant documented issue with faults sufficient to cause GPS malfunction which, in turn, could result in a guided weapon going off target.

Soon after Rakon won the Supreme Exporter of the Year award, Helen Clark repeated her criticism of the war in Iraq, telling an Otago University audience that the Iraqi people should have been left to deal with Saddam Hussein themselves.

"The war was wrong. We have said that consistently," Clark said in September. "We made up our minds that that was not justified and that's why we wouldn't send people."

JDAM smart bombs have been used heavily in Iraq and Afghanistan, having first been deployed in wartime when dropped over Kosovo by the US during Operation Allied Force in 1999.

It is likely these JDAM bombs were guided to their targets with the help of Rakon crystal oscillators.

In 1998, within 12 months of the first JDAM being dropped over Kosovo, the US Air Force awarded Rakon a commendation for "outstanding delivery performance in critical times". A possible deduction is that the commendation relates to Rakon's delivery of its smart bomb component for the Kosovo campaign.

There is international debate about whether JDAM bombs carried depleted uranium, a substance which has allegedly been linked to the development of cancers. Depleted uranium is considered to enhance penetration.

'The ugly word nuclear'

An exception to Rakon's tight-lipped approach to discussing its military products occurred last August when Darren Robinson reportedly acknowledged the company's technology went into "smart bombs and missiles" and that it had invented technology specifically for US smart bombs.

According to the New Zealand Press Association report, when asked if the technology was being used in Iraq, he said the company "didn't really want to draw attention to where [the US military] are using it. We don't want to become a target."

The report caused a furore and drew a quick reaction by Rakon which issued a statement under Brent Robinson's name stating that Rakon "has not developed any technology specifically for the US military ... was not privy to the end-use systems, equipment or applications developed by its customers ... [and that] no technology has been specifically developed by Rakon for use in smart bombs or missiles ".

However, at the very least the spirit of these assertions is contradicted in confidential Rakon documents, including the company's 2005-06 business plan - recorded as having been written by Brent Robinson, and approved and signed by him three months earlier on May 6, 2005.

This document states that its military products include crystal oscillators for inclusion in "smart bombs (JDAM, Navstrike)", "G-hardened crystals for ... smart shells ... able to withstand being shot out of a shell [sic]", and that it has "received hundreds of thousands of dollars in development funding from Rockwell for ... cost and size reduction for the CDXO [planned as a cheaper possible replacement for the TSXO used in smart bombs], and development of a high-G-shock crystal".

Rockwell supplies the US military with JDAM and NavStrike navigation systems and is developing the smart shell guidance mechanism for which Rakon is specifically developing its high G-shock product.

Rakon's business plan also states that:

* "Except for a very expensive [crystal oscillator] Rockwell builds themselves, Rakon is [its] sole supplier."

* Rakon aims to dominate "the lucrative and expanding guided munitions and military positioning market" within five years.

Other Rakon documents refer to the requirement that Rakon components for a proposed new smart-bomb-navigation system be "radiation hardened" or "nuclear hardened".

Rakon was due to deliver a first batch of 220 of its "radiation-hardened" crystal oscillators to Rockwell last February, followed by 4000 a year from 2009.

Rockwell requested pricing for 36,000 nuclear-hardened crystal oscillators. Specifications included that the component function correctly at a depth of up to 135 metres and at a maximum altitude of 24,000 metres, which might indicate they are for weapons to be stored in silos.

JDAM navigation kits could be used on nuclear as well as conventional weapons.

In internal emails, a Rakon manager questions how this product sits with New Zealand's nuclear-free policy. "I wouldn't think it is any more of a compromise than our present products going into munitions," he writes, "but since the ugly word 'nuclear' has been branded on to this product, it would be best to check."

He reports back that: "No Nucs [sic] legislation appears to only be concerned with nuclear explosives ownership and manufacture along with the no radioactive waste dumping etc. There isn't anything about supply into the nuclear arms industry."

These emails make no specific mention of export regulations regarding weapons componentry, however in April last year the manager cautions the Rakon team working on new military products to refer to them by their Rakon technical codes only. "Please strike the references JDAM, DAGR, [Defence Advanced Global Positioning System Receivers, an advanced handheld GPS designed for the military] and Artillery off our documentation," the manager wrote, "as they cloud understanding."

Faults, failures and questions

A history of persistent faults in a small percentage of Rakon's products are documented in its private records, in contrast to the company's public claim of a "long history of delivering fault-free products to customers' specifications".

Rakon's prospectus - issued before its stock market launch this month - said its specialised test equipment enabled "100 per cent temperature screening ... to ensure that non-performing crystals and oscillators are eliminated".

Its in-house correspondence, however, shows that aside from other faults, it struggled for several years to identify the root cause of the failure of some products at hot and cold ends of temperature specifications.

It is unclear from the documents whether the problems have been resolved.

Clients regularly returned items after discovering faults, and Rakon's response raises questions about how forthcoming it was with its clients about failures.

One of these clients was Rockwell, which sent a delegation to Auckland in 2002 to investigate faults in some Rakon crystal oscillators that it installs into smart bomb guidance kits.

Rockwell's visit in September 2002 occurred two months after a Pentagon spokesman reportedly confirmed one of seven smart bombs fired at caves in Afghanistan had gone astray.

It appears from documents that Rakon suggested at its Auckland meeting with Rockwell executives that the cause of the faults lay with Rockwell's technicians in north Pennsylvania causing solder joints to crack on Rakon components due to overheating during installation. Rockwell's north Pennsylvania plant is where it assembles its JDAM smart bomb navigation system.

At the meeting, Rakon agreed to conduct tests "to prove North Penn and not Rakon induced [the] failures". Subsequent internal Rakon emails show that tests it conducted in the weeks after the meeting confirmed solder joint faults were occurring in some TSXOs before export to Rockwell.

"This severely damages our North Penn theory," Rakon's engineering manager, Phil Brownlie, said of these test results in an internal email. He advises staff conducting the tests to move focus "to trying to determine another root cause (other than the North Penn stuffed something up story)."

"The next place to look," Brownlie wrote on September 18, 2002, "is probably to see if the problem came from crystal production or if we damaged them in TSXO production."

This information appears not to have been passed on to Rockwell - at least by December 21, 2002, when Rockwell complained it had heard nothing, despite having requested a report several weeks earlier.

A Rockwell executive asked Rakon to make such a report "a priority" and said the matter had become "critical" because Rockwell had confirmed new failures and had to resort to testing 100 per cent of Rakon's parts.

Rakon's manager of quality, Phil Kemble, noted in an email to senior Rakon management that this was "a bit of a bollocking for us" requiring a "very organised" and prompt response. It is not clear how Rakon responded.

Rockwell, however, continued to detect flaws in Rakon parts. In June 2003, a Rockwell staff member sent a breakdown of more than 1600 failures it had detected in Rakon's smart bomb components during the previous six months.

Other emails suggest Rakon may have been less than frank with clients about faults on other occasions. Those relating to Rockwell include:

* November 2001: "Next step is to put together a story," a Rakon manager advised colleagues after tests of defective goods returned by Rockwell pointed to a Rakon machine causing the defect.

* December 2002: "Obviously do not mention any of the above information," a Rakon manager tells a subordinate tasked with responding to Rockwell about a product failure. The manager instructs that Rockwell is to be told "we are very upset over hearing of a vibe test failure after putting corrective actions in place to prevent this from happening", although it is clear from the same email that all corrective actions had not been put in place.

Documents seen by the Weekend Herald include many examples of missed supply deadlines and suggest Rakon has regularly struggled to fill orders.

In one instance, in October 2003, a Motorola executive told Rakon managers they were about to cause Motorola to stand down six vehicle GPS manufacturing lines due to a parts shortage and requested Rakon to get people ready to fly from Auckland to hand-deliver components to its Texas factory.

"This is a CODE RED item! We CANNOT incur any manufacturing line down time. Any line down time will impact a GM [General Motors] body and assembly plant. A GM impact will cost Motorola and Rakon millions of dollars in line down charges ... PARTS MUST SHIP TODAY!"

The email said Rakon was 98,000 units behind on delivery and chastised the company for "communication flow which is well below our expectations ... the information delay on this part is unacceptable and has created a crisis situation".

Rakon's problems seem not to have improved six months later when a Rakon account manager who had been fielding clients' complaints vented his frustration to Brent Robinson.

"Although Rakon has been through tough time [sic] it's not as bad as you think," Robinson replied. "There is [sic] worldwide delivery issues ... and there are very well organised companies fucking their customers worse than us as there [is] simply not enough capacity to meet demand".

These emails present a picture of a growing company stretching to meet daily demand while aspects of the business such as communication with clients and planning have suffered.

Security, too, appears to have been a problem. Aside from the Herald's obtaining sensitive company documents, a Rakon manager complained of one weekend finding the "main entry to building 3 completely open ... free access available to anyone!"

Conundrum

While Rakon works on weaknesses, the Government may want to examine whether the strategic list designed to keep track of the export of weapons technology is doing the job intended, whether Rakon is telling it the full story about its military involvement and whether it has declared those products used to guide weapons.

The conundrum for the Labour Government is that Rakon is the sort of tech-based export success story it wants to shout from the rooftops - except that its inventory includes products almost certainly used to guide bombs in a war the Prime Minister is dead against.