Gary Hyde  Arms industry

British gun dealer investigated in US over AK-47 empire

Gary Hyde is under investigation in the US for deals that stretched across the globe

British arms dealer Gary Hyde, left, is escorted into the federal courthouse in Rochester, New York, on 15 February. Photograph: Jay Capers Staff Photographer/AP
His lawyers contend he is a model citizen. And as a successful businessman, Gary Hyde certainly exudes an aura of respectability. For years the 41-year-old father of two was a volunteer police officer in his home town of York, until a serious injury forced him to retire. "He is an upstanding and respected member of that community," his lawyers argued last week.

But now another picture of Hyde is emerging. A man who had turned his enthusiasm for guns and military memorabilia into a thriving business is Britain's very own lord of war; an international arms dealer, whose chief currency is the AK-47 assault rifle.

Currently under investigation in two continents for his role in deals involving huge shipments of arms, stretching from the UK and the Balkans to Iraq and China, Hyde's activities have triggered calls from a leading human rights group for governments to tighten the licensing of arms dealers, the shadowy middlemen who broker multi-million-pound deals through a multitude of companies. Hyde was arrested last month in Nevada at Shot, the Shooting, Hunting, Outdoor Trade Show, the US gun industry's annual jamboree that this year was attended by a record 60,000 enthusiasts and 1,600 exhibitors. US officials arrested Hyde in connection with the alleged illegal import into the US of almost 6,000 Chinese-produced AK-47 magazines, each capable of holding up to 75 rounds of ammunition.

The US authorities contend that Hyde, Karl Kleber, a German arms dealer, and a Kent-based businessman, Paul Restorick, tried to pass off the magazines as made in Bulgaria to get round a US arms embargo on weapons produced in China.

Kleber, 61, has already signed a plea bargain. Hyde's application to return to the UK while he awaits trial has been refused by a US judge. Released from prison on bail, he has been forced to put up his house as surety, surrender his passport and consent to wear an electronic tag. His lawyers say he denies the charges and that the case against him is weak. Intriguingly, however, the US case reveals that Hydez may have many more questions to answer than those simply relating to importing AK-47 magazines.

Federal prosecutors revealed in court last week that Hyde also faces criminal allegations in England relating to the sale of 40,000 AK-47s. Prosecution documents also reveal that UK customs "initiated an investigation of Gary Hyde in 2007" and searched his home and the premises of two of his arms dealerships: Jago Ltd and York Guns. Last week a spokesman for the Crown Prosecution Service declined to comment.

What is irrefutable is that Hyde is a man who likes to deal in large quantities of AK-47s, the most popular assault rifle in the world. Companies linked to Hyde, who according to his defence documents regularly does business with the Ministry of Defence, legally imported 78,000 AK-47s from Bosnia to an armoury in Nottingham in 2005. It was a major coup for the man who joined York Guns in 1985 straight from school. Friends recall that he would buy the odd rifle or pistol from Kleber. But as the two men built a business relationship, Hyde developed an appetite for large deals. How big is only starting to become apparent.

Recently released confidential US embassy cables revealed that in 2008 York Guns tried to ship 130,000 of the assault rifles to Libya. The memo, obtained by the website WikiLeaks, reveals that the company was acting as the intermediary between an unidentified Ukrainian arms manufacturer and Libyan officials. The size of the deal raised eyebrows in diplomatic circles, as Libya has only 70,000 ground-force troops and these would be unlikely to use a weapon as dated as the AK-47. The cable noted that the export licence was rejected because the "UK is concerned that the intention may be to re-export the weapons, particularly to armed rebel factions backed by Khartoum and/or Ndjamena in the Chad/Sudan conflict".

It has also emerged in the US case against Hyde that in 2008 the German federal police agency, the BKA, launched an investigation into Kleber to determine whether he had been involved in "the illegal sale of machine guns via Croatia to Iraq". This was in response to allegations that companies linked to Hyde had sold tens of thousands of guns to Ziad Cattan, the former head of military procurement at the Iraq Defence Ministry, without an appropriate arms brokering licence. Cattan fled Iraq after a warrant was issued for his arrest amid allegations that he had siphoned off millions of dollars in corrupt deals.

The weapons shipment, facilitated by a Croatian company, Scout, run by Ivan Peranec, a former travel agent, was controversial. Amnesty International expressed concerns that many of the guns shipped to Iraq disappeared after delivery. The Italian newspaper Corriere della Sera alleged that Italian-made Beretta pistols, exported legally from a UK company not linked to Hyde, found their way into the hands of al-Qaida.

Campaigners said the fiasco highlighted the need for a comprehensive overhaul of the military's relationship with private arms brokers. But tracking arms shipments brokered by UK dealers is a laborious process. A single transaction can involve a plethora of companies and locations, many in tax havens.

A Kent-based arms dealer, John Knight, jailed for illegally shipping machine guns from Iran to Kuwait, brokered many of his deals via a company based in the British Virgin Islands. Knight has previously admitted negotiating sales of large quantities of weapons to Sudan. In one deal involving Hyde, a Romanian company acted as a "middle-man". Several of Hyde's deals involved transactions with a company in Germany. A UK company, Mil-Tec Corporation shipped guns into Rwanda before the UN arms embargo, and was alleged to have links to another arms-dealing firm in the Isle of Man.

Many companies ostensibly based in the UK are little more than shells. Evidence presented to parliament established that a Cornish company that brokered the sale of small arms components to Rwanda without a trade control licence was owned by two Ukrainians based in Kiev. Its connection to Britain was simply a brass plate in Truro. One former arms dealer told the Observer that many of the complex transactions involving UK brokers could ultimately be traced to companies in China.

Hyde is not the only UK arms dealer in the news. Last week Guy Savage, a Harrow-based gun dealer, was arrested by the Metropolitan Police working in conjunction with US officials seeking his extradition. Neighbours of Savage told how officers of Scotland Yard's firearms squad shot out the tyres of his Mercedes and threw stun grenades as they raided his house early on Wednesday morning.

Savage, 42, who has reportedly advised ministers on drafting firearms policy, is accused of smuggling weapons to Iraq and the Middle East. As owner of a British company, Sabre Defence Industries, Savage and four others allegedly engaged in a multi-million-pound racket to illegally export weapons in crates with false bottoms using forged shipping records.

Savage's lawyer insists his client is a "properly licensed trader in arms".

Amnesty wants the UK government to agree concrete rules that it will not authorise weapons shipments where there is a substantial risk they will fuel human rights violations, armed conflict, crime, terrorism, poverty or corruption.

This policy could take form next month when governments meet in New York to negotiate a new UN arms treaty that is expected to be drafted by 2012. "Negotiations for an international arms trade treaty are at a crucial stage," said Oliver Sprague from Amnesty. "If they go well, we could get a treaty that stops arms brokers and gunrunners selling weapons to human rights abusers. This would save lives. If they go badly, people will continue to exploit legal loopholes and get rich by fuelling armed violence."