Federal Judge Thomas P. Griesa ruled for Israel Wednesday in a courtroom hearing called by Recon Optical Inc. of suburban Chicago. Recon was hoping to frustrate efforts by Israel to liquidate the company’s $20 million letter of credit.
The case gained sudden media attention when Recon president Larry Larson accused Israel of orchestrating an espionage plot to steal its technology. Israel steadfastly refused comment on the case, except to proclaim its innocence and label Recon’s charges “a desperate attempt to influence a commercial contract dispute with wild media allegations.”
The conflict arose from a top secret aerial reconnaissance project Israel had contracted with Recon in 1984 to produce. Code-named Rom Pisgot (Highest Mountain,) the project would have yielded the most sophisticated aerial reconnaissance system to date.
Capable of photographing distinctly a man smoking a cigarette 100 miles away, the system would have been an invaluable asset to Israel’s defense.
The original contract carried a “fixed price” of $40 million. But when earlier this year Recon proposed cost-overruns that would more than double the cost of the project, Israel refuse.
Recon then halted production, and under a default provision of the contract, Israel declared it would recover some $20 million already paid to Recon by drawing down its letter of credit.
Recon then filed an arbitration demand to settle the default question, and sought a federal court order restraining Israel’s recovery of the money. Larson later told government investigators that Israel was stealing classified documents. When the investigations did not develop, Recon took its case to the media.
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