Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 SenatorLaxalt and the Mob 1 Alsolnthis Issue: Reagan Censors Government Workers • The CIA's "Free"Elections in El Salvador • Philippine Elections "Made in U.S.A." • CIA Goesto Rutgers • South Africa Positions for Olympic Gold• Corruption in El Salvador• Right Wing Subverts Australian Labor Approved For Release 2010/06/14: CIA-RDP90-00845R000100_1�0002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 2 June-August 1984 Counterspy Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Editor COUNTERSPY JUNE-AUGUST 1984 John Kelly FEATURES Board of Advisors Cover to Cover: Rewald's CIA Story Dr. Walden Bello by John Kelly Congressional Lobby When Rewald's investment company went bankrupt, furious In­ Director, Philippine 8 vestors filed suit against Rewald-and the CIA- to recover Support Committee their money. For Rewald claims his company was a CIA front, John Cavanagh cultivating wealthy individuals as CIA contacts through money­ Economist making schemes. Dr. Noam Chomsky Paul Laxalt's Debt to the Mob Professor at MIT by Murray Waas Peace Activist Paul Laxalt-U.S. Senator, close friend and personal confidant 18 of the President, and Chairman of the Republican national Com­ Dr. Joshua Cohen Assistant Professor, MIT mittee-accepted a $950,000 loan arranged by organized crime friends. Joan Coxsedge Member of Parliament World Bank State of Victoria, Australia A poem by Arjun Makhijani Konrad Ege 27 Journalist Ruth Fitzpatrick ... And Lifetime Censorship for All Member, Steering Committee by Angus MacKenzie of the Religious Task Force Congress thought it had stopped a new rule subjecting govern­ on Central America 28 ment workers to censorship for life. But the administration had Dr. Laurie Kirby pJepared-andis implementing-a second rule that amounts to Professor the same thing. City University of New York The CIA's "Free" Elections Tamar Kohns by John Kelly Political Activist In Italy 30 years ago and in El Salvador today, the U.S. govern­ 31 ment has used a combination of the CIA, the AFL-CIO's interna­ Annie Makhijani Chemistry Student tional branch, and Christian Democrats to subvert elections. Dr. Arjun Makhijani Philippine Elections: Made in the U.S.A. Consultant on Energy and by Walden Bello Economic Development The U.S. pushed Marcos to hold elections to "stabilize" the 34 situation after the massive outrage over Aquino's assassina­ Martha Wenger Office Worker, .tion. But electoral fraud has sparked new protests. Counterspy's Copy Editor Rutgers University: Intelligence Goes to College by Konrad Ege Design A CIA-funded research project at Rutgers is collecting informa­ Rose Marie Audette 42 tion on European opposition groups. But the 100 students work­ ing on the project and the groups contacted for information don't know about the CIA link. Counterspy magazine South Africa Goes for Olympic Gold P.O. Box 647 by Dr. Dennis Brutus and Allan Ebert-Miner Ben Franklin Station South Africa claims it no longer discriminates against some Washington, D.C. 20044 44 eleven million blacks because they are now "citizens of their own homelands." Thus Pretoria argues that it should be allowed ISSN 0739-4322 back into the Olympics. NEWS P�OT IN TIIE NEWS Cover photo: Ronald Rewald and Jack Kindschi, the former CIA station chief 4 El Salvador: Corruption on Top of Brutality for Hawaii, celebrate in the happier 5 ACLU and CIA Agree to Curb on Information days before Rewald's investment com­ pany went bankrupt. 5 Right Wing Subverts Australian Labor Counterspy June-August 1984 3 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 El Salvador: Corruption on Top of Brutality by Joy Hackel While the Salvadoran military and U.S. capital and intermediate goods. and Company in June of 1983 details security forces have felt some In theory, the program is said to spur the variety of ways in which enterpris­ pressure of late to tidy up death squad new private investment and "stabili­ ing Salvadorans make use of AID actitivities and reduce other routine zation" of the Salvadoran economy. generosity. The simplest and most atrocities, the recipients of U.S. In fact, studies completed for AID common method of illegally obtaining economic aid in the war torn nation and the GAO detail how Support Pro- funds, according to the report, is false are carrying on business as usual. A invoicing. Salvadorans in the business confidential audit conducted for the sector can obtain dollars from the U.S. Agency for International Studies completed for Central Bank if they present an in­ Development (AID) and several un­ voice for the goods to be purchased to published reports by the Government AID and the GAO detall the Bank's import licensing unit along Accounting Offic'! (GAO) verify that how Support Program with the equivalent amount of American aid dollars are being illegal­ funds have been pocketed Salvadoran colones. The confidential ly diverted by the Salvadoran private by Salvadoran audit notes that importers frequently sector for their own personal gain. entrepreneurs and then inflate the supposed cost on an item El Salvador, like most other poor and pocket the difference. countries, suffers from an acute shffted to purchase Miami Businessmen may even obtain credit in foreign exchange crisis.To an increas­ real estate or llne Salvadoran colones from the govern­ ing extent, U.S. aid is required to European bank accounts. ment, exchange it for economic shore up its Central Bank with dollars, assistance funding in dollars at an ad­ which the Salvadoran business sector vantageous exchange rate-2.S col­ relies upon to import goods from the gram funds have been pocketed by ones buys one dollar through AID United States. In fiscal year 1983, the Salvadoran entrepreneurs and then rather than 4.25 colones which is the Reagan Administration channeled shifted to purchasing Miami real open market rate. $222 million to El Salvador for a pro­ estate or line European bank ac­ The owner of a textile factory in San gram of "economic stabilization." Of counts. Salvador, for instance, might present this total, $120 million was allotted to A confidential audit of Foreign Ex­ an invoice requesting dollars, paid for the Private Sector Support Program, a change Policy and Management in El in credit, to import spare parts for U.S. dollar fund to be used to import Salvador prepared by Arthur Young machinery at a price of $60,000. The goods he is in fact purchasing, however, may cost only $40,000.The request for credit to purchase spare parts earns the businessman $20,000 in hard, exchangeable dollars. "False invoicing," the June audit explains, "appears to be far beyond the control of the three people in the price checking unit .... Given the lax­ ity of enforcement the most creative businessmen are proving to be the most successful." "Creative" business practices take a number of forms in a country locked in violent civil strife. The report acknowledges that in order to obtain import licenses, "pressure applied by interested parties appears to be the major consideration in obtaining fast approval." "Price checkers," the Young and Company audit clearly states, "might be susceptible to "tt ,.,_•IWY ..,.,., timeplay you tt •ndn·• onlyone-tenth thecost of pressure and possible intimidation 1111 the othel'gama." video even if they do discover invoices that have been overstated," and "some 4 June-August 1984 Counterspy Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 claim that either political influence or on capital flight are so weak, in fact, payoffs are necessary to obtain timely More Corruption that between 1979, the year of the so­ financing for imports." called reform coup, and 1981 more The overall goal of economic assis­ than $1. l billion in capital was hustled tance to El Salvador, AID claims, is to illegally out of the country. Mean­ restore stability to the country's Other U.S. government-funded while new investment is at a standstill. economy. Young and Company's programs in El Salvador are also At least 200 medium and large-sized confidential audit points out that what suffering from corruption. An inter­ businesses closed their doors in recent is in fact "stabilized" by U.S. spon­ nal State Department audit reported years, while Salvador's "growth" rate sored programs is the use of illegal that an AID-financed public works for 1983 plummeted to a negative l.5 mechanisms such as funneling dollars employment program has been percent. from the black to the parallel market, plagued by diversion away from in­ Consequently, the more funding transferring doliars from the black tended recipients of supplies and Washington funnels to El Salvador, market to offshore dollar accounts, wages. In several instances, laborers the steadier is the flow of funds back and "triangle financing" where an im­ were paid with public funds while to accounts in wealthy countries, and porter buys dollars "off-the-record" working on private construction the faster the Salvadoran economy from an exporter before the money is projects. And The Los Angeles erodes. Aid is, in fact, exacerbating deposited in the bank. Times reported that the U.S. Food the lopsided relation that spawned the The extensive corruption reported for Peace food shipments have also civil war-the concentration of wealth in the Young report is corroborated by been diverted from refugees to Sal­ and power in the hands of the few. The verbal reports of the General Accoun­ vadoran military personnel, par­ extent of fraud and corruption reveal­ ting Office to the House and Senate, ticularly in San Vicente province. ed by the confidential audits suggests which declared that "control to pre­ that economic aid to the Salvadoran vent capital flight through over­ government only serves to consolidate invoicing of imports is weak." It is not cent likelihood that it will be inflated, the alliances that set rich against poor.