Ivan Kapetanovic says it happened "just like on TV."
As Kapetanovic and two friends--Marko Belinic and Zeljko Vusir, both Croatian citizens--strode across the parking lot of Scottsdale's Los Arcos Mall on May 31, 1991, a horde of armed federal agents swung into action.

"Down on the ground, now! You're under arrest!" they barked, surrounding the trio with a bristling display of weaponry. As bystanders scattered, unmarked cars and vans bearing more agents screeched to a halt nearby. Badges and gun barrels flashed in the sun; the click-clack of rifle bolts being pulled into firing position provided a menacing soundtrack.

There was only one thing wrong with the scene. The men in handcuffs didn't look dangerous. They just looked amused.

In fact, Kapetanovic was laughing.
"I thought it must be a joke, you know," says Kapetanovic, a naturalized Croatian immigrant who lives in Fountain Hills. He was still waiting for the punch line when police officers at Madison Street Jail in Phoenix snapped his booking photo. It shows him grinning with the kind of unrestrained mirth usually reserved for the lucky souls who match all six numbers in LOTTO.

Kapetanovic didn't have a clue about what was happening, or why. Federal agents held a press conference before they ever explained it to him.

At a nationally televised event in Phoenix following the arrest, U.S. Customs Service officials proudly announced that they had thwarted a diabolical international gunrunning scheme.

Basking in the glow of the television lights, federal agents told how a six-month undercover "sting" operation had revealed a conspiracy by the 58-year-old Kapetanovic to smuggle $500,000 worth of guns, rockets and mortars from the U.S. into war-torn Yugoslavia. The agents solemnly presented reporters with a large map, emblazoned with bold arrows detailing how Kapetanovic, Belinic and Vusir planned to secretly route arms from Phoenix and San Antonio to the Balkan state.

For attempting to violate U.S. export laws, the trio faced up to ten years in federal prison.

It was an exciting story of international intrigue, and from the details provided, it was easy to deduce that Kapetanovic was the smuggling gang's ringleader. The G-men had obviously bagged a big one.

The reality, however, was something far less glamorous.
Court records reveal that rather than capturing a sinister international ne'er-do-well, all Customs had managed to do was lock up a somewhat bewildered older gentleman; a simple, plainspoken immigrant who had never even received a traffic ticket.

The only reason Kapetanovic found himself in the dock at all, his attorney says, is because the undercover operation mounted against him wasn't motivated by a need to stop criminal activity or serve justice, but by a less lofty goal--the production of a cash payoff for the informants and federal agencies involved.

According to the government's own top witness, virtually everyone involved in the case had a stake in seeing Kapetanovic ensnared. One undercover informant was promised $100,000 if Kapetanovic could be convicted, the payoff to be drawn from the funds raised by the sale of Kapetanovic's nearly $1 million in property (which the feds could seize under racketeering laws) and the confiscation of $500,000 brought into the country from Croatia by Belinic and Vusir.

Kapetanovic, who owns a small book-publishing company in Fountain Hills, unwittingly set in motion the events that would lead to his arrest by making a few inquiries on behalf of the Croatian government about the prices of various weapons. He innocently answered a few ads in magazines like Soldier of Fortune, requesting gun catalogues and price lists.

But it was Kapetanovic's bad luck that two of the ads had been placed by government informants who quickly told Customs officials that Kapetanovic was seeking to smuggle vast amounts of weaponry to Croatian rebels, in violation of State Department rules. For a price, the informants would be willing to help capture Kapetanovic for federal agents.

A friendly man who speaks slightly broken English, Kapetanovic thus stumbled into a shadowy world he did not understand, a spy-movie realm replete with characters straight out of Central Casting: real gunrunners, former CIA agents and cloak-and-dagger undercover operatives.

Over the next five months, federal agents would tape hundreds of hours of conversations between Kapetanovic and this motley crew, in which the informants can be heard working overtime to convince him to buy and illegally export weapons.

While U.S. Customs officials and the U.S. Attorney's Office refused to discuss details of the case, transcripts of the taped conversations obtained by New Times suggest that the agents deliberately led Kapetanovic down the primrose path--pushing him toward a crime he did not want to commit.

The term "gunrunner" conjures up an image of a greedy, deceitful merchant of death. In this instance, however, it was the men with badges and their paid informants--not Kapetanovic--who were motivated by a lust for riches, and who were willing to lie and manipulate to achieve their ends. They misled Kapetanovic, played off his emotions and patriotism and, finally, used a thinly veiled threat of violence in an effort to entice him into breaking the law.