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Swedish law. Age is also responsible for prosecution in the case of illegal arms sales by Nobel Kemi--a Bofors subsidiary. In June 1987 he charged Karl-Erik Schmitz--a private arms trader--and former Nobel Kemi executive Mats Lundborg with illegal arms trafficking. No further details of court proceedings have been reported.

Police Investigations: Swedish police are conducting separate investigations into Bofors' and Nobel Kemi's arms sales to support Age in developing the court cases.

Constitutional Committee: Because the Bofors case raised the possibility that government officials permitted illegal arms sales, the "Constitutional Affairs Committee"--made up of prominent Members of Parliament--began to oversee the Bofors and Nobel Kemi investigations. This is the same Committee that is overseeing the Palme murder investigation. Minister of Agriculture Mats Hellstrom was criticized by the Committee in May 1987 for misrepresenting facts surrounding Sweden's arms sales to Indonesia during his tenure (1982-1986) as Minister for Foreign Trade.

Parliamentary Arms Export Commission: In February 1985 a special commission was established to report on arms export issues to parliament and provide guidance to the arms industry.

Advisory Committee: The government established a separate committee of experts to recommend revisions in Swedish arms export laws that would provide for tighter enforcement. The recommendations were presented to the Social Democratic Cabinet in June 1987, but have not yet been formally presented to parliament.

National Audit: As the police investigations revealed that Bofors may have bribed Indian middlemen and officials, the Swedish equivalent of the GAO conducted a national audit of Bofors' transactions with India. The audit, completed in June 1987, indicated that as much as $40 million were paid in commissions to middlemen. Because the information was taken from Central Bank records, the exact amounts and recipients were not made public by the government. Bofors rejected the government's request to reveal this information, claiming such disclosure would jeopardize its credibility as an arms dealer. Both the government and Bofors have asserted, however, that the payments were made to close contracts with middlemen once Indian authorities insisted on excluding intermediaries, rather than as pay-offs to Indian officials.

Citizens Committee: in order to bolster

the

credibility of Stockholm's account of the bribery case, a "citizens committee" was established to review the classified documents of the Bofors audit and determine whether the government was presenting an accurate picture. This committee has not yet submitted its findings.

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(b)(3).

CONFIDENTIAL

Approved for Release: 2017/09/13 C06141809