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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

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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

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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. even possible, the GAO found, to the margin for corrupt use of funds is verify what U.S. AID funds are used gigantic. for, since AID funds are lumped to­ Massive amounts of aid have done Joy Hackel is a freelance journalist gether with other accounts. "In fact," little to revive Salvador's economic who has traveled to Nicaragua and the GAO reports, "the money can be woes. As quickly as new aid is in­ Cuba. Her articles have appeared in spent anywhere." While local curren­ jected, the economy is bled. Controls the Washington Post and elsewhere. cy generated by the sale of U.S. AID dollars are supposed to be spent on projects approved by AID, the GAO reported that "AID does not closely "CIA and ACLU Support monitor local curr�ncy uses." Curb on Information" read the The fact that AID funding inspires headline on a New York Times article release.... We're confident that capital flight and profiteering is sup­ of May 11, 1984. Mistake? Unfortu­ we're not going to lose anything." ported by a private report by the U.S. nately not. "It was a rare moment of Author Angus MacKensie has dem­ Inspector General on April 20, 1983. accord," said the article, between the onstrated otherwise. He has produced The report states that while the Cen­ CIA and the ACLU on pending legis­ a list of FOIA requests which the CIA tral Bank in El Salvador approved lation to exempt CIA operational files is currently required to honor, in­ over 70,000 import transactions in from the Freedom of Information cluding a FOIA request from the 1982, only 112 import applications Act. According to the Times, ACLU Center for National Security Studies were actually reviewed. Of those 112, attorney Mark Lynch told a House which employs Mark Lynch. MacKen­ one out of each five was found to be subcommittee: "We believe that this sie has uncovered that it is the CIA's inflated. With the less than 1 percent bill will not enable the CIA to with­ opinion that if the pending legislation likelihood that an invoice will be hold any meaningful information is enacted it will not have to respond to reviewed and an acknowledged 20 per- which the agency is now required to this list of FOIA requests.

Right Wing Subverts Australian Labor

by Joan Coxsedge the Victorian Branch of the Australian Australia's strong unionism is based Labor Party. on the vigorous democratic involve­ Australian politics are once again The Australian Labor Party is the ment of Chartist convicts and Irish in turmoil. Much of this turmoil oldest political party in Australia. Fenians deported from Britain, as well shows the familiar pattern of outside Labor Parties were formed in the as on the sturdy individualism of peo­ interference. The most serious desta­ Australian States in the 1890s as the ple who joined the gold rush in the bilization involves the attempted af­ political arm of a broadly based and 1840s and 1850s. This diverse group of filiation of four right-wing unions to militant trade union movement. people created a Labor Party with at

Counterspy June-August 1984 5

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 least nominal adherence to socialist that, in some naval exercises in the In­ tions. These run through diverse CIA­ principles. They insisted that decisions dian Ocean, Australian naval ships are linked organizations. One tactic is to made by the rank and file should be under direct U.S. command. get suitable union leaders into "train­ binding on all Parliamentarians and The entire document not only ig­ ing" programs sponsored by these or­ wrote this into the Party's constitu­ nores Australian Labor Party policy ganizations, enabling the establish­ tion. but goes in a totally opposite direc­ ment of permanent links among at ALP politicians are therefore tion. It expressly opposes our policy least some of these leaders. Such pro­ theoretically bound to carry out provi­ for a nuclear-free Pacific, and recom­ grams involve the U.S.-.based Labor sions of the Party's policy which are mends we supply Australian uranium Committee for Pacific Affairs and the sometimes quite radical. Due to left­ to the Philippines. It is best summed Australian Trade Union Program at wing influence, particularly in Vic­ up in the way it describes Australian Harvard Foundation. toria, there are strong policies against participation in the U.S. alliance as , The Labor Committee for Pacific uranium mining, on economic matters the "status to comment in Washing- Affairs was established in 1983 with a and on many foreign affairs issues grant of $300,000 from the United such as aid for Vietnam and support States Information Agency, as the for Fretilin, the organization fighting result of an initiative by Roy Godson, for the liberation of East Timor. A new attempt to subvert director of the Georgetown Interna­ Another important Labor Party the Australlan Labor tional tabor Program. (By a not so policy which threatens U.S. hegemony Party's traditional strange coincidence, Godson's father, is support for a nuclear free Pacific. Joe, started a similar committee in U.S. corporate interests view these prosresslve positions by Britain.) Godson junior directs the Australian Labor Party policies and folstlns rlsht wins unions continuing funding of the Australian the very participation of the Party upon It has some U.S. counterpart. rank and file· in such major policy connections which run The other founding committee decisions as a threat to their otherwise throush diverse CIA• members are former U.S. Ambas­ almost complete dominance over Aus­ llnked orsanlzatlons. sador to New Zealand, John Henning, tralia and its politics. as well as Albert Shanker and Dale In an interview (Counterspy, Dec. Good. Godson and Good, together 83-Feb. 84), I detailed the CIA-led with secretary Larry Specht, are coup that toppled the government of associated with the "Labor Desk," a the last Labor Prime Minister, Gough ton on any moves that we consider non-government agency set up in 1974 Whitlam, in 1975. i pointed out that in detrimental to our security." with co-operation from Georgetown contrast, the present incumbent, Bob This is the background to the at­ University. Shanker, Good and Henn­ Hawke, appears to have the full sup­ tempt to foist the four previously anti­ ing all work for the AFL-CIO, which port of American big business as well Labor unions on to the Victorian operates an extensive international as the seal of approval from President Branch of the Australian Labor Party, political program. In March 1983, Reagan himself. an attempt which is being vigorously Specht and two other top-ranking of­ A recently leaked secret defence pushed by the Hawke faction. ficials paid a visit to Australia and strategy policy document is causing New Zealand, by-passing official acute embarrassment to the Hawke The labor unions which are seeking trade union bodies in both countries. Government because it shows just to affiliate with the Party are This was followedby the careful selec­ how close Hawke's thinking is to dominated by the National Civic tion of ten trade unionists from the Reagan's. This secret policy, Council, the nearest thing inAustralia two countries as the first "study acknowledged to be far more cold-war to a fascist movement. Some of its team." than that of Hawke's conservative leadership supported Franco in the A similar U.S. briefing activity for predecessors, totally accepts Spanish Civil War, and they have the Australian and New Zealand right­ Pentagon-CIA strategy for the Pacific always pushed the dogma of the cor­ wing union elite is the Australia-New region. Ignoring poverty and all the porate state. The National Civic Zealand Labor Leader Project. This is other problems in the region, it sees Council, originally a Roman Catholic totally funded by the United States In­ the entire world in terms of super­ sectarian movement, caused a split in formation Agency, which aims at the power rivalry. It repeats the U.S. the Labor Party that kept it out of of­ "introduction of Australian and New right-wing myth about Soviet superi­ fice for almost two decades. They Zealand participants to the organiza­ ority in nuclear weapons, and urges formed their own political party, now tional structure of the American trade that Australia should move more defunct, which was allied to the far union movement and the issues of con­ closely towards having nuclear right. They are virulently anti­ cern to that movement." However, the weapons of its own. The policy af­ feminist, pro-uranium mining, itinerary of the project in July-August firms unlimited support for the U.S. pro-U .S. bases and have an anti­ 1983, while not providing a single visit war machine to the extent of harbor­ communist paranoia that would have to an American industry or giving a ing U.S. nuclear-armed ships and upstaged the late, unlamented Joe Mc­ chance to talk to real workers, includ­ nuclear-armed aircraft. More disturb­ Carthy. ed such morsels as a talk by Dora ing still, it urges support forthe Papua This new attempt to destabilize the Alves, Research Associate of the New Guinea Government to brutally Australian Labor Party and to subvert Georgetown Center. It also planned repress any opposition to Indonesia's its traditional progressive positions visits to libraries, galleries and mini-imperialism in Irian Jaya (Wes� through the foisting of right wing religious services, as well as the New Guinea). The document states unions upon it has some U.S. connec- obligatory White House tour. In a

8 June-August 1984 Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 frank "debriefing" (note the lan­ Macquarie University in New South union chose to be militant and to try to guage), USIA admitted that the visit Wales. Each selected participant in the wreck the system, it would be within had done little to acquaint U.S. unions Harvard course gets more than fares their means. Therefore, 10 have a man with what was going on in the and course fees. For the 13-week setting up that union who has a wide Australian and New Zealand trade course, they receive $250 a week view ...is in his union's and Australia's union movements. It was suggested spending money on top of their ac­ benefit" [emphasis added]. No doubt it that "there wasn't really much interest comodation costs. At the end of the would also benefit Koppers Australia, in the two down-under nations." It course, the U.S. government gives a subsidiary of a major U.S. mining was also mentioned that there had not each student an additional allowance. equipment supplier. been much time to talk to the various Four students of proven leadership I discovered one of the most in­ labor attaches with which all par­ potential are sent each year. One teresting aspects of this exercise on my ticipants, with one exception, were recent visit to the U.S. The "Harvard acquainted. Favorably mentioned Foundation" which provides the fi­ were the talks with AFL-CIO officials nancial backing for Australian trade and a talk with a group of State unionists to attend the course, has no Department Labor Bureau Chiefs. All A recently leaked secret connection whatsoever with the Har­ the delegates regretted there was not defense strategy vard Foundation that is actually time to attend the AFL-CIO's George document Is causing situated in the middle of the Universi­ Meany school. The school fittingly acute embarassment to ty and legitimately involved with stu­ named after the late George Meany, Australia's Hawke dent affairs. The CIA-linked Harvard "Mr. CIA" of the American trade Government because It Trade Union Training Program has so union movement. far "trained" some I 200 trade Another "separate" organization shows Just how close unionists from all over the world. The which hands out large sums for U.S. Hawke' s thinking Is to Joe O'Donnell who runs it is the very visits by right-wing Australian trade Reagan's and totally same gentleman who was brought to union officials is called the Australian accepts Pentagon-CIA Australia back in 1977 on behalf of Trade Union Program and Harvard strategy for the Pacific another right-wing organisation called Foundation. Of the 68 trustees listed, "Enterprise Australia" to give us the each of whom has to contribute $2500 region. "right" line on trade unionism. (tax deductible) for that honor, all are Some of these worthies, selected for top executives of very large com­ training in CIA-link�d organizations panies, mainly multinational, except and programs, are now the leaders of for four extreme right-wing union of­ trustee, Mr. Wilson of Koopers the right wing unions which seek to af­ ficials, two of whom crop up in the Australia, spelled out what he ex­ filiate with the Australian Labor Par­ Labor Committee for Pacific Affairs, pected from the course. He said, ty in an attempt to undermine and sub­ two tame politicians (one from each " ...It's been an experience that open­ vert progressive, internationalist and major party) and one academic. The ed their eyes on how the system can anti-nuclear policies of much of the most interesting trustee is Peer de work ...to the benefit of rank and file of that Party and its Silva, now a Honeywell top executive, everybody ...."He went on with a lit­ unions. but well-known to us as a former CIA tle anecdote on how they had financed Station Chief in Australia. a member of the Divers Association Joan Coxsedge is a Member of Parlia­ The foundation, created in July which only has 200 members but was ment (Victoria) and co-author of 1976, launders its income through engaged in a vital oil project. "If that "Rooted in Secrecy."

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Jli•\q, '1atb11tiu,..��btalb, J · · International Consultants

The staff of the now bankrupt Bishop, Baldwin, Rewald, Dillingham & Wong posed for this company photograph. Their names correspond with the numbers at right. I. Gerald N.Y.C. Lam 14. Robert Jinks 2. Edward Hoffman 15. John Ing 3. D. Alden Newland 16. Pranata Hajadi 4. John Kindschi 17. Kenneth Sanders 5. Charles Conner 18. Nolan Metzger 6. Gunadi Gautama 19. Yoshiko Payne 7. Jerry Signori 20. Chris Freeze 8. Timothy Holzer 21. Sali Toda 9. Richard Spiker 22. Karen Koshko 10. Michael Dailey 23. Mary Rudolph 11. Jason Wong 24. Sunlin Wong 12. David Baldwin 25. Ronald R: Rewald 13. Ned Avary

8 June-August 1984 Counterspy

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COVER TO COVER: Rewald's CIA Story

When Ron Rewald's investment company was charged with fraud, Rewald tried to commit suicide. After Bishop, Baldwin, Rewald, Dillingham, & Wong went bankrupt, furious investors filedsuit against Rewald- and the CIA- to recover their money. For Rewald claims his company was a CIA operation - cultivating wealthy individuals around the world as CIA contacts through joint ventures and by offering lucrative ( and supposedly guaranteed) investments.

BY JOHN KELLY

onald Rewald has a letter from ship with both the Chinese and Ronald Reagan. Signed by Lyn Japanese peoples ... " Nofziger, it says: "Governor Rewald has an August 20, 1982 let­ Reagan appreciates the material ter from John M. Fisher, Ad­ you have been sending him and has in­ ministrative chairman of the U.S. Rdeed found it helpful as he has no Congressional Advisory Board. "We doubt told you." were delighted," said Fisher, "to After a pitch for campaign con­ receive your acceptance of our invita­ tributions, the letter ends. "Should tion to attend our first meeting for Governor Reagan visit Hawaii after Chairman's Advisors of the United becoming a candidate, I am sure he States Congressional Advisory Board would be most happy to take you up on September 30." on your gracious offer to host an event Rewald has an invitation to lunch at your home." from Hawaii's Governor George Ari­ Rewald has an invitation from yoshi and his wife. Rewald has an in­ Reagan, George Bush and the vitation to cocktails and dinner from Republican members of the Senate then-Commander in Chief Pacific Air and House to attend the 1983 Forces, Lt. Gen. Arnold W. Brasswell Republican Senate-House dinner in and his wife. honor of James S. Brady, who was Not long after his cocktails and din­ seriously wounded in the shooting of ner with General Brasswell, Rewald Reagan. was found sitting unconscious in a Rewald has an earlier letter from pool of his own blood. Head propped Senator Edward Kennedy (D-Mass.). up against the bathtub in his room at "Thank you very much for your the Sheraton Wakiki hotel. The thoughtful notes in connection with previous evening he had slashed his your recent trip to China and Japan,'' wrists in an attempted suicide. said Kennedy. ''They will be most Why the sudden plunge of Hawaii's helpful to me as I pursue my strong in­ overnight success? Who had travelled terest in strengthening our relation- in the company of princes, sultans,

Counterspy June-August 1984 9

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 generals, governors, and multi­ millionaires. Apparently, the suicide attempt was connected to the sudden misfortunes of Rewald's Honolulu­ based company, Bishop, Baldwin, Rewald, Dillingham, & Wong (BBRDW). On the very day of Re­ wald's suicide attempt, there was a television broadcast about BBRDW. The report was that BBRDW had fraudulently misrepresented itself to investors. And, therefore, was under government investigation. BBRDW was in the investment ad­ visement business. According to its registration statement with the Securities and Exchange Commission (SEC), BBRDW provided investment advice at the rate of $180 per hour. "Our principal business," said the statement, "is serving as estate plan­ ners and business advisers and we serve clients who are interested in estate planning advice, such as wills, trusts, pension plans, and tax and bookkeeping advice.'' BBRDW also provided free eco­ nomic reports to its clients and real estate assistance for an hourly fee. BBRDW claimed to receive no percen­ tages, commissions, or royalties for its work. BBRDW's SEC statement failed to Jack Kindschi, formerCIA station chief in Hawaii, and Rewald pose duringa 1983 mention its Tax Deferred Investment BBRD W socialfunction. Kindschi, according to Rewald, was the principal contact Savings Account. Through this ac­ between BBRDW and the CIA. count, BBRDW offered and sold se­ curities in the form of interest-20% guaranteed interest with it rising to theft. A few weeks later, the courts Why was a person such as Kindschi 26% to 27% annually. BBRDW declared BBRDW bankrupt and froze working at BBRDW? Because, accor­ claimed these monies were put into all of its assets as well as Rewald's per­ ding to Rewald, it was a CIA opera­ lucrative investments. That they were sonal assets. BBRDW is now under in­ tion. According to a sworn affidavit, insured for up to $150,000 by the vestigation by the SEC and the IRS. censored by the CIA, and sealed by the Federal Deposit Insurance Corpora­ After six months of imprisonment, courts, Rewald claimed the following. Rewald was released under a much tion (FDIC). And, that investors "I am, and for the past five years could have their money back upon de­ reduced bail. He is scheduled to go to have been, a covert agent for the mand. trial in June I 984 for the theft charges Central Intelligence Agency. The It was the investment account that only. He and BBRDW are also being purpose of this affidavit is to detail got Rewald and BBRDW into trouble. sued by some of the investors for their my relationship with the CIA, which On the Monday following Rewald's money. But, so far no federal indict­ began in my college days, and the suicide attempt, a BBRDW investor, ments have been issued link between this relationship and in­ Hugh Fraser, an insurance agent, Actually, there were two com­ vestor monies. In the past few years, went to BBRDW's office. He had seen plainants against Rewald. And, there­ this relationship has involved nearly full-time activity on my part. Addi­ the TV reports about BBRDW as well in lies the deeper story of this seeming­ tionally, there are 10 or more as Rewald's suicide attempt. He ly simple scam operation. The second employees of my company, Bishop wanted his money back immediately complainant was John "Jack" Kind­ Baldwin, who on a full or part-time as promised. Fraser could not get into schi, a BBRDW consultant and in­ basis served the Central Intelligence the office. So, he phoned. He was told vestor. More significantly, Kindschi Agency.... " that no funds were being disbursed. was the former CIA Chief of Station On August 3, 1983, Fraser filed a in Hawaii. Prior to that, he had work­ The CIA has not issued its usual "No formal complaint with the Hawaii ed under deep cover for the CIA in Comment." Instead, it has issued a Department of Regulatory Agencies Stockholm and Mexico City. His public denial. CIA attorney Robert M. (DRA) and the Honolulu Police cover had been the Robert Mullen Laprade said in a sworn statement that Department. Subsequently, Rewald Co., a public relations firm that "the CIA did not cause Bishop, was arrested. And, imprisoned under employed E. Howard Hunt in the Baldwin, Rewald, Dillingham, & a $10 million bail for two counts of months before Watergate. Wong to be created nor has the agency

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Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 at any time owned, operated, control­ What they do tell, if true, constitutes led or invested in Bishop, Baldwin, Documents we have the first explicit detailing of a little Rewald, Dillingham, & Wong.... " known primary mission of the CIA. Yet, Laprade submitted an affidavit obtained on the This is the securing and furthering of to U.S. District Judge Martin Spence private U.S. economic interests. This, as to why defense documents should Rewald case of course, is carried out through tax­ be sealed. What Laprade said is not payers' monies. And, it entails the known. The affidavit itself is sealed. constitute the first supporting of various repressive But, on September 15, 1983, Spence governmental and business elites sealed all documents directly or in­ explicit detailing of a around the world who facilitate the directly pertaining to the CIA. Spence use and exploitation of their own also placed a gag order on all involved little known primary countries by corporate America. As parties, attorneys, and agents. It pro­ we shall see, implementation of this hibited communication by oral, writ­ mission of the CIA: CIA mission is also done at the ex­ ten, or any other means of any infor­ pense of U.S. allies such as Japan and mation pertaining to the CIA, in­ securing and Europe. cluding legal papers. Ostensibly the CIA's corporate mis­ Coincidentally, perhaps, one of the furthering private U.S. sion is carried out under the rationale prosecuting attorneys is John Peyton, of intelligence work. For instance, a former CIA attorney. economic interests. Rewald was assigned to develop or to We have obtained Rewald's uncen­ cultivate CIA assets, i.e. intelligence sored affidavit sealed by Spence. For sources, agents of influence, coopera­ comparison, we also have the public­ tive government officials, etc. There ly-released affidavit, extensively were two financial techniques for deleted by the CIA. The uncensored cultivating these foreign assets. Ac­ affidavit details BBRDW's CIA op­ cording to the affidavit, BBRDW's in­ erations according to Rewald. Finally, those of BBC television with many of vestment account, at the CIA's direc­ we have many additional documents; the involved individuals. tion, was used to "shelter monies of tapes and transcripts of confidential The story they tell in no way solves highly placed foreign diplomats and attorney /client interviews with the question of Rewald's guilt or in­ businessmen, who wished to 'export' Rewald; and our own interviews and nocence regarding his legal charges. cash to the United States, where it

... " ' ...... Rewald, General Arnold W. Brasswell, Ned A vary, and Mrs. Brasswell socialize at a 1983 BBRD W function. Both Brasswell and Avary, according to Rewald's affidavit, helped arrange an arms sale to India with provisions for kickbacks to key Indian govern­ ment and private sector officials. Counterspy June-August 1984 11 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1

would be available to them in the event monies. Following Rewald's im­ of emergency." Rewald says that the "Salting" of money in prisonment, the Honolulu Star­ CIA had provided such a service to Bulletin reported that the Philippine President Lon Nol when he was the U.S. through government was examining the Ayala­ displaced by the Cambodian people Hawaii Corporation. The government and fled to Hawaii. sheltered investment was concerned that Zobel might be The affidavit says that the CIA placing money directly into Ayala­ directed individuals to BBRDW's accounts like those Hawaii. This way he could avoid ex­ shelter accounts. Secondly, that these changing pesos through the Philippine funds were in the form of negotiable offered by BBRDW, if Central Bank. Thus, secretly export securities, wire transfers, or checks, his money to the U.S. And there many from the Chase Manhattan not a crime, is a would be no government record of this bank. Thirdly, that BBRDW would flight of capital. convert these funds into U.S. dollars. definite· political Following this article, reporter Julie Suda was in charge of receiving Charles Memminger was shown a let­ and disbursing funds for BBRDW. liability in most ter from Zobel. And told by his editor She testifiedin court that she was told to write a second article. The second occasionallyby Rewald about upcom­ countries-particularly article all but denied the charges of ing wire transfers which were to be possible flight of capital on the part of deposited in BBRDW's investment ac­ if the CIA's involve­ Zobel. And claimed that Zobel's only count. She said that these were not connection to Rewald was polo. Re­ regular investors' funds. And, that oc­ ment was exposed� wald had predicted in his affidavit casionally the wire deposit was as high that: "People involved with them as $200,000. [joint BBRDW investments] are forc­ ed to deny a connection and forced, Letters between Charles T. Conner further, to deny that these transac­ and Jack Kindschi confirm that tions have existed." BBRDW was providing this shelter. Enrique Zobel is a supporter and Conner, according to Rewald, was a funder of the elite oposition to Presi­ long-time CIA agent. He has for all in­ dent Marcos of the Philippines. He and the force he represents are an ac­ tentions and purposes disappeared. was exposed. For this reason, deposi­ ceptable replacement to Marcos who He wrote to Kinschi: "We could tors were listed under cover names. is under increasing attack. Acceptable develop very closeand important con­ A second cultivation technique was that is to U.S. corporate and financial nections with the Greek government the use of joint business ventures. The investors since he would allow them through our old friend Dino [Goulos] affidavit says this approach was ap­ business-as-usual. Even though under ... And, there is absolutely no ques­ plied to four individuals. Enrique their domination repression and pov­ tion that Dino doeshave this good 'en­ Zobel, a billionaire banker; the Sultan erty have increased in the Philippines. tre' in top Greek circles, including of Brunei; Sauud Mohammed, a crown True to its corporate mission, the CIA with very wealthy people and business prince of the United Arab Emirates; was cultivating Zobel-whom, Re­ leaders. . . most anxious to get their and lndri Gautama, a wealthy Indone­ wald says, was aware of CIA involve­ money out of the country:" Conner sian industrialist. These individuals ment in their dealings. said further that he told Dino that were to be cultivated as intelligence through BBRDW theseinvestors would sources, particularly the movement of The intelligence value of the Sultan be able to circumvent Greece's tight oil prices in OPEC countries.This is in­ of Brunei, described as an "absolute ruler" by is highly ques­ foreign exchange control restrictions. formation of great value to U.S. oil Fortune tiopable. Not so his monetary value to Kindschi, whom Rewald says was companies. As well as CIA Director, U.S. financial institutions. Shortly still working forthe CIA at the time, William Casey, who owns stock in oil. after Rewald began cultivating the wrote back to Conner. "Moreover, if Its relevance to genuine national securi­ Sultan, he transferred his $6 billion in­ Dino can findinvestment friends seek­ ty is not readily apparent. vestment portfoliofrom British Crown ing safe haven in dollar denominated Specifically, the way this worked, Agents to Citibank and Morgan investmentswith BBRD&W, we would "was to place [CIA] monies with be able to pay him a 'findersfee' of up them, at their disposal, in 'in­ Guaranty as well as two Japanese to 5 percent.... " vestments' in foreign countries in firms. The potential fee income from this account, according to Rcwald's affidavitincluded a list of various joint business activities." Dun's is $30 million. 21 investors in this sheltered account. Thus, Rewald formed the Hawaiian­ Business Month, The individual's amount and account Arabian Investment Co. and U.S & number are also listed. The total was United Arab Emirates Investment Co. $3,748,603.39. The names of the in­ with Sauud Mohammed and Indri Industrial Espionage vestors are real persons including Gautama. And, the Ayala-Hawaii Rewald and several CIA agents. They Corp. with Enrique Zobel of the nother expression of the CIA's arc not, however, the actual deposi­ Philippines. State of Hawaii incor­ primary mission is industrial es­ tors. Such "salting" of money in the poration papers exist for each of these pionage. One country targeted U.S., if not a crime, is a definite companies. by the CIA is Japan, a U.S. political liability in most countries. These CIA "investments" could Aally. The Church Committee found Particularly, if the CIA's involvement also be used to export and shelter that in 1967 the CIA quietly establish-

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Among the wealthy individualsRewald cultivated for the CIA were: (above) the Sultan of Brunei (second from left) and EnriqueZobel (second from right), a billionairebanker from the Philippines who was very close to Marcos, seen here after a match at Rewald's polo clubin Hawaii; and (right) lndri Guatama, an Indonesian businessman.

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One of the CIA 's primary missionsis Industrial espionage. As part of an intelligence gathering assignment for the CIA, Rewald went to Japan where he claims he obtained blueprints for Japan's top secret High Speed Surface Transport, or the HSST, shown abm·e. ed a separate office, the Office of a potential worldwide for marketing want to mvest it for Kim. The lending Economic Research. Because of the something like this with enormous, of large, interest-free loans between "growing strength of Japan and the if they could, you know. Anyway, Rewald and various BBRDW countries of Western Europe." And the potential for marketing some­ thing like this to countries all over employees was apparently a method of because CIA "analysts found them­ conduiting CIA monies in and out of the world for the Japanese would be BBRDW. selves called upon for detailed enormous and that's their [CIA's] research on these countries as trading interest in it. Everything, of course, partners and rivals of the United is high technology." States." In the documents obtained in­ India Included in the exhibits were what dependently of Rewald were detailed Rewald called CIA requirements for sketches and descriptions of the The Rewald affidavit says: "We several countries. These were his in­ HSST. We have obtained the name were approached to serve as in­ telligence gathering assignments for and a photograph of the Japanese termediaries to arrange through the each country. The first requirement BBRDW client whom Rewald says CIA for the supply of military hard­ for Japan was for information on the assisted in obtaining the HSST ware to Indira Ghandi. . . . At my top secret High Speed Surf

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Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 JR: "But in any case, Pasrich is be­ ment. A Brasswell spokesperson con­ ing used as an intermediary." firmed that he was considering joining RR: "Between Indira Ghandi's BBRDW. son." Rewald claims Pasrich first came to JR: "son and" him. And, "He laid out in no uncer­ tain terms the facts of life for me. So, RR: "And us." that I'd understand that it [the arms' cost] would have to come in at a bill higher than what it was worth. So that Brasswell the money could get divided among a number of people in government and Rewald says Gen. Arnold W. the private sector in India. And ar­ Brasswell, then Commander-in-Chief rangements would have to be made for U.S. Pacific Air Force(CINCP ACAF), that. And, he realized that these com­ was personally involved in the Indian panies were reluctant to do that. arms deal. "One of the big things that However, if we could get him ap­ he [Brasswell] was helping us with was pointed as their representative or a request we had out of India for ac­ someone from Bishop Baldwin as the quiring some air force military representative for India from equipment ...we were going directly McDonnell-Douglas or from what­ through a number of companies ... ever company this happened to be. like Boeing, McDonnell-Douglas, and Then they could divide up the commis­ Hughes. He would make the contacts sion on it, and it would work out the at a high level. Generally, they were same way." retired Air Force generals who were Asked why Pasrich and Rajive did­ now vice-presidents of these com­ n't seek to buy the military equipment panies. And he would set up the con­ openly, Rewald said, "Well, there was tacts, so I could go directly to no way for them to split up the money. them .... So, you know, he was work­ Because if it came in openly it would ing already [for BBRDW]. And, he have to go out on a bid. And, there knew what that project was. And was no way to divide up the money. some others that we were working See, their only interest in acquiring on." anything was to get some money under ed by Baldwin on November 11, 1982 Among the exhibits is a list of names the table.. . . I had been given the has surfaced. Rewald says Baldwin and private phones on CINCPACAF names ...of the key people, you knew BBRDW was CIA-involved be­ stationery. Dated January 11, 1984, know,in government in India that had fore he became involved. He was the names were: Gen. Jack Cotton, to have their part of this in order for it subsequently required to sign a CIA Lt. Gen. J.J. Burns, Charles Conrad, to work out. ... " secrecy agreement. Because "we had Jr., Chuck De Bedts, and G.E. Todd. "Kickbacks and bribes were the key to let him know too much." The latter three were described as vice­ to the whole India thing .... " Pasrich presented himself to Re­ presidents for international marketing Asked whether Rajive Ghandi was wald as Rajive's representative who for McDonnell-Douglas, Lockheed, positioned to make money on the deal, wished to acquire military equipment. and Hughes, respectively. The ex­ Rewald said, "Well, you know, this is. "So," says Rewald, "I went back to hibits also included handwritten notes I'm talking to you absolutely off the the Agency and told them about it in­ about these transactions and an offer record, okay? But, of course, he was, itially .... And, then they came back, of assistance from Brasswell. you know." and they were very enthused ...and Rewald added, "Brasswell did his Calvin Gunderson, president of said we'll certainly work something part all the way through. There was Legal Investigations which provided out.'' . never a point when Brasswell wasn't, security and investigatory services to "So," continued Rewald, "I you know, working closely with us on Rewald and BBRDW also attested to brought in [Ned] A vary. Went over this effort. And, you know, Brasswell the pending Indian deal.He told Larry the whole thing in detail with him. He absolutely was an employee of ours all Price the following on KITV / 4 (NBC made the necessary contacts; traveled the way through. .. . He was always in Hawaii) television. back and forth between Miami and part of Bishop, Baldwin. And, a very Paris. And made other arrangements important part of what we were doing to supply the equipment that they involving India and a couple of other " .. .And when big arms deals are areas, too-which were all under his being made, Bishop Baldwin at needed through Paris." times acted as a middleman. command.'' For one Rewald has a tape of a conversation instance, India. They were looking with CIA officer, Jack Rardin. In the Brasswell did not receive a BBRDW to buy arms from the United States. tape, the pending deal is discussed as a salary but compensation, says Re­ Bishop Baldwin would be the mid­ CIA project. Rewald says to Rardin wald. This was through the handling dleman worlcing through the Agen­ on the tape that Rajive was soliciting of his investments. And providing him cy. And, when the deal went military hardware including AWAC large returns, some $100,000 over 2 through, Bishop Baldwin would get and LlOl 1 aircraft. The following years. Rewald adds that Brasswell was a commission off it. You know we're remarks were recorded: set to join BBRDW upon his retire- talking millions of dollars."

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Gunderson added this remarkable BBRDW's pending Indian arms statement: "Ron [Rewald] met with CIA spokesperson deal had a convenient' intelligence ra­ the FBI to II\ake sure that the legal tionale: to penetrate and cultivate aspects of arms deals and things of Dale Peterson says various Indian military and political that nature were, you know, meeting officials as CIA assets. So, any bribes the legal requirements of the United that the CIA had only or kickbacks would have been exempt States." under the national security loophole. "slight involvement" Business-as-usual, brought to you by Rewald agreed he had been concern­ the CIA. ed because of ''the way this sort of transaction's been monitored in recent with BBRDW. "But," years. It bothered me a little. And, I added Peterson, "I'm expressed concern to it, to the Agency. And, I wasn't getting satisfactory not at liberty to go Taiwan answers from them. "And, I mentioned it to Bill Erwin into details of what second major arms deal by [FBI/Hawaii], face to face. And said BBRDW was with Taiwan.'' As look, I don't want to end up the next, the relationship was." time passed," says Rewald's af­ you know, the next Lockheed scandal fidavit, "our relationship with or whatever it is. How can I protect the Agency continued to further myself? ... " deepen and change, from the gather­ '' ... So then he went and got some ing of general economic and political opinion from the attorney general on intelligence, to the gathering of what I could do and how to handle it Congressional hearings, govern­ political and military intelligence, and and so on. And he was telling me what mental investigations, and press ac­ finally to assisting in specific military to do to protect myself. .. . And we counts have documented the use of operations, including military hard­ finallyfelt the best thing that we'd do bribes and kickbacks by McDonnell­ ware to foreign countries." was just act as the middleman .... But Douglas, Lockheed, Hughes AifCraft In an unusual letter, even for the not handle any of the money going and others to obtain foreign contracts. CIA, Director William Casey was told back and forth ourselves. And, the on­ These arrangements, often facilitated point blank: ly way we could coordinate that was by the CIA, resulted in hundreds of "Information has now been receiv­ not to handle it through the United millions of dollars in profits. There is ed from more than one source in­ States. We'd have to handle it through no record of any concern about the dicating that after July 29, 1983- someone else through another coun­ possible repressive nature of the arms when events commenced here in try." buyers. Hawaii to unravel the affairs of Rewald claims that Ned Avary was In 1977, President Jimmy Carter Bishop Baldwin-CIA agent Ned in Paris attempting to complete the In­ signed into law the corporate bribery Avary, who had earlier been dia deal when BBRDW collapsed. bill. It outlawed bribes and kickbacks negotiating the arms transaction Rewald does not know if the deal by U.S. corporations. Unless these with the Taiwan government through trarispired. corrupt payments are made in the Russell D.C. Kim, was able to con­ name of national security. This clude that transaction and earned a Rewald was asked why the CIA was commission of not less than $10 secretly selling military equipment. loophole amendment was attached million dollars. Information receiv­ And, facilitating bribes. and following the secret intervention of ed indicates that this commission kickbacks. the CIA with Congress. According to was received by Avary, not for its own charter, the CIA is not suppos­ Q: "Why would the CIA want to Bishop Baldwin's account, but get involved with something like ed to be involved in the legislative pro­ rather for the account of some other that, Ron-just to make the cess. company to which all Bishop contacts with these people?" Baldwin/CIA operations have been transferred. RR: "Oh. To put someone like that in a position where we could be "As most of the work which went in­ to the Taiwan arms transaction was dealing with him on that level. "Who specifically were you to Are you kidding? You don't Q: performed by Bishop Baldwin know the answer to that?" call for these sums of agents and employees, Bishop money?" Baldwin therefore lays claim to its Q: "No. What is that. What is the RR: "Well, you know, generally I commensurate proportion of the answer to that? You were going could go through [Jack] Kind­ $10 million dollar commission." to blackmail him then?" schi, you know, most of the The letter was written by attorney RR: "Oh, not blackmail him. But, time. But, I could also go Robert Smith for Rewald who has certainly we'd be in a position through [Charles] Richard­ to know everything that's hap­ contended all along that Avary and son, 'Cavannaugh,' you Kim were negotiating various arms pening. To ask a favor. To do a know, these people. Doroci­ lot of things, you know. Not the deals. Former BBRDW employee, least of which is just gain his ak, you know, Belcher, any David Decaires said that Avary confidence. You never know number of people." mentioned an arms deal with Taiwan when you might need that card at a meeting of BBRDW personnel in down the road, you know ... " August 1983.

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Telexes from Avary discussed the' detailed below according to the coun­ Taiwan deal. One telex "Urgent for try involved. The CIA's identity with Ron Rewald," said: "I am now in ef­ corporate interests is evident fective direct contact with Russell Kim throughout these operations. on all phases of current operations." Another to Avary's son Don said: "Finally found Russell Kim in Korea. Eugene J. Welsch He rushing Samsung data to you. I hope repeat hope to finalize fantastic When Rewald went to live in military order with awesome yet af­ Hawaii, he contacted then-CIA fable Lebanese gorilla this weekend.'' Chief of Station, Eugene J. Welsch. A related telex to Kim said: "Don At this time, Rewald also incor­ Avary awaiting Samsung electric data porated CMI Investment Corp. with from you. Do you have details C 130 Sunny Wong. Welsch apparently ask­ request?" The same day Avary wired ed Rewald to gather intelligence Rewald: "Your See one Thirty through and from CMIclients. "So at [C-130) aircraft available same sup­ this time," he says, 'I began doing so, pliers Taipei order. My son Don at the same time informing Sunny Avary contacting you for specs." The Wong of my involvement with and ac­ next day A vary wired Kim and a tivities on behalf of CIA." Michael Tai: "Second paragraph my In the exhibits is a rambling, 19- telex should read tanks will cost about page report on CMI stationery, ad­ repeat about six' hundred thousand dressed to Eugene J. Welsch. Marked dollars each. Personnel carriers less." "Personal and Confidential," it is a Finally Avary wired Rewald: "Elec­ potpourri of economic and political tronic data for Don Avary from Kim. intelligence on Japan and China. Awaiting urgent details as to firmness Rewald says he was briefed for his of order from the big man here. trips to Japan and China by Robert A. Itemized numbers of heavy equipment Scalapino, director of the East Asian in paragraph six mandatory. Have Studies Institute and a political science assurance order can be processed professor at the University of Califor­ okay." nia. Scalapino also set up meetings Several of the telexes mentioned and contacts. The CIA arranged the "Dauphin." Rewald claims this was a Ned Avary, consultant to the CIA and' meeting with Scalapino. But, Rewald codename for an unknown middle­ BBRDW says he did not tell Scalapino he was man. In the exhibits was a BBRDW with the CIA. memo indicating that Russ Kim, c/o Rewald summed up his report. Dauphin Int'l, was the BBRDW con­ "I'd sure like to sit down "While the information I have ac­ tact in Taiwan. and be wired meeting with quired at this time may or may not be Rewald's affidavit says the Taiwan Ned Avary. Because his last what you had hoped for, I am certain Government was seeking fiberglass four projects for us, from that with your help and cooperation I helmets ($200,000), bullet-proof South America, Brazil, can develop several of these sources vests, M-16 laser-sighting devices, and Singapore, Australia, Paris, into reliable avenues of acquiring in­ tanks through BBRDW and the CIA. were all deep covert Agency telligence data." The order for the laser sighting devices projects .... '' Apparently pleased, Welsch next directed Rewald to set up two CIA alarmed the CIA, says Rewald, be­ -Ron Rewald dummy corporations. One of these cause "the device and the model was H & H Enterprises. The dummies numbers requested were all top secret served as message and assignment at that time." added later that: "Avary said he is not centers for CIA operatives. And, their In the exhibits was an apparent or­ call cards provided credentials for der for all of these items except the now working and has never worked agents in the field. tanks. The contract was to be awarded for the CIA and said that he does not in March 1983. Either to Winfield know of a single CIA-directed opera­ Manufacturing in Mississippi or Louis tion in Rewald's company." How­ J. Sportswear, Inc. in Pennsylvania. ever, the Wal l Street Jou rnal The Honolulu Star-Bulletin (4/7 /84) (4/18/84) reported that Avary receiv­ H & H Enterprises reported Avary as saying he went to ed lists of questions from the CIA. Paris at Rewald's request. To contact And that, in Avary's words, he filed Copies of rarely-seen cover sheets an arms dealer for Taiwan. He added "damned good reports" for the CIA. are among the exhibits. Cover sheets that Rewald failed to send him the Particularly, in his case, about the contain the phony names of personnel number of tanks Taiwan wanted or probable outcome of the 1983 elec­ and financial make-up of the com­ the amount it was willing to spend. tions in Germany. pany. As well as what to tell inquiring Therefore, the deal was never tran­ Rewald was involved in a melange sacted. The Star-Bulletin (4/16/84) of CIA operations. Some of which are Con tinued on p. 48

Counterspy June-August 1984 17

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,✓ f,, lllllfl!IIIJ:_--_· _·•. �

Senator Paul Laxa/t PAUL LAXAL T'S few days after Ronald Reagan was sworn in as President of the DEBT TO THE MOB United States, Sen. Paul Laxalt (R-Nevada) was ushered into Athe Oval Office for a private meeting with the President. Laxalt and Reagan had become close friends while the Paul Laxalt- US. senator, close friend and personal two men were governors of their confidant of the President, and Chairman of the neighboring states, Nevada and California. When Ronald Reagan Republican National Committee-accepted a $950,000 decided to run for president he named loan arranged by organized crime friends. Laxalt chairman of his campaign finance committee. And more recent­ ly, when Reagan decided to seek a se­ cond term for the presidency, he turn­ BY MURRAY WAAS ed again to one of the men he trusted most in public life. On Nov. 7, I 982 Reagan named Laxalt Chairman of the Republican National Com•mittee. As a U.S. Senator, as close friend and

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would meet, according to two Justice Department officials, three times with the Attorney General to complain about Justice Department investiga­ tions of mob influence in his home state of Nevada. When asked to con­ firm the existence of Laxalt's meetings with Smith, Tom Stewart, a Justice . Department spokesman said: "The At­ torney General does not keep a calen­ dar or written record of his daily ap­ pointments. If he were to do that anyone would be able to obtain a com­ plete list under the Freedom of Infor­ mation Act of everyone he's met with since taking office. And the Attorney General feels he should be able to keep that information confidential." But in a subsequent interview, Stewart also said he later asked Smith if he remembered meeting with Laxalt and the Attorney General remem­ bered one such meeting shortly after taking office. Stewardadded, though, that "he [Smith] doesn't remember the subject or substance of that meeting." The meetings between Laxalt and Reagan and Laxalt and Smith to discuss criminal investigations raise disturbing questions about organized crime's possible influence on the Reagan Administration. For informa­ tion in the files of William French Smith's own Justice Department detail extensive ties between Sen. Lax­ alt and some of the nation's most powerful organized crime figures. In addition, an investigation has found that Sidney Korshak, described

"'.)" by one high level Justice Department • Ci•· . � j • official as "one of the four or five most powerful men in organized crime in America," helped facilitate a -' ,11:; $950,000 loan to Laxalt from a '�. ft•\ ' "•'�'"'l·� Chicago bank at a time a casino Laxalt ' f \, owned was facing near bankruptcy. ♦ ··� 't : ,'' • \f J' • ..._,,:;.\.-'\·"' 1' PresidentReagan returnsto the White House with Senator Paul Laxaltafter horseback Another individual who helped Laxalt riding. obtain the loan was Delbert W. Col­ eman, a business partner of personal confidant of the President, of Las Vegas. Laxalt told the Presi­ Korshak's, who in 1969 was charged . and as Chairman of the Republican dent that he was against organized by the Securities and Exchange Com­ National Committee, Paul Laxalt is crime, that he had steadfastly fought mission for his role in setting up a one of the most powerful men in the mobsters as governor of Nevada, sophisticated stock fraud scheme. America today. but the Justice Department was Both Korshak and Coleman have been So it was not unusual for Laxalt to harassing casino operators who had the subjects of numerous federal in­ be ushered into the Oval Office for a only circumstantial ties to the Mafia. vestigations, much like those that Lax­ private meeting with the president in Reagan listened sympathetically to alt complained about in his meeting January 1981. During that meeting, his old friend and then set up an ap­ with the Attorney General and the Laxalt patiently explained his problem pointment for Laxalt with the nation's President. to the President: Overly aggressive highest law enforcement officer, then According to sources familiar with Justice Department officials and FBI Attorney General-designate, William the bank ,loan to Laxalt in 1973, the agents were hurting Nevada's gaming French Smith. senator was then a co-owner of a Car­ and casino industry with their in­ During the first several months of son City, Nevada casino, the Ormsby vestigations of the Mafia's infiltration the Reagan administration, Laxalt House. At the time, the casino was in

Counterspy June-August 1984 19

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14 : CIA-RDP90-00845R000100130002-1 serious financial trouble and Laxalt was a sheep herder, an immigrant turned to a longtime friend, Delbert from Spain. He had to work for W. Coleman, for financial aid. Cole­ everything he now has in life. You're man, in turn, approached his one-time just picking on him because he's a con­ business partner Sidney Korshak for servative. Teddy Kennedy can kill assistance. some girl. But nobody gets upset Due to the intervention of Coleman about that because he's a rich guy, a and Korshak, according to reliable liberal. sources, Robert L. Heymann, then an "Listen, I have nothing more to say executive vice president of the First to you. All of you guys in the media National Bank of Chicago, authorized make me out to be some kind of crimi­ the $950,000 loan to Laxalt and the nal or something." Ormsby House. But Robery Heymann has only At first, according to a former of­ himself to blame for that. In February ficer of the bank, First National of 1978, five years after he approved the Chicago was reluctant to make the Laxalt loan, Heymann plea

20 June-August 1984 Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Mey, Lansky (left) and Jimmy Hoffa (right) exemplified the close ties between Las Vegas casinos and organized crime. and with such prestigious businessmen shak, federal officials contend that he termediary, who is able to deal as Charles G. Bludhorn, chairman of has been involved in such activities as simultaneously with organized crime Gulf & Western Industries, Inc., and bribery, kickbacks,' extortion, fraud, and the highest echelons of legitimate Lew R. Wasserman, chief executive of and labor racketeering, and that he business. MCA, Inc., the entertainment con­ has given illegal advice to members of "At another meeting in April 1976, glomerate. organized crime. senior attorneys in the Organized "But Sidney Korshak leads a dou­ Crime Division of the Justice Depart­ ble life. "A well informed Justice Depart­ ment reached a consensus that Mr. ment official has described Mr. Kor­ Korshak was one of the five most "To scores of federal, state, and shak as a 'senior intermediary for and powerful members of the underworld, local law enforcement officials, Mr. senior adviser to' organized crime according to one participant." Korshak is the most important link groups in California, Chicago, Las Despite such a dubious back­ between organized crime and Vegas, and New York. 'He directs gre>und,however, Korshak has served legitimate business. They describ� him their investments, their internal af­ as an attorney for more than a hun­ as a 'behind the scenes fixer'who has fairs, their high level decision dred of America's top corporations, been instrumental in helping criminal making,' the official said. including Gulf & Western, Diners elements gain power in union affairs "At a closed meeting of Justice Club, the Hilton and Hyatt chains, and infiltrate the leisure and enter­ Department officials in May 1976, and Madison Square Garden Cor­ tainment industries. Mr. Korshak was described as the poration. In Hollywood, he has been "On the basis of their files on Kor- archetype of a new kind of in- equally powerful, serving as a major

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Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 decision maker in the nation's third mission had previously referred to mob's bidding and serve as their front largest theatrical booking agency and Korshak as a "mob connected at­ as long as legitimate people don't as a close friend of movie stars and torney'' in one of their public reports. know the interests he's really represen­ producers. Korshak had first made it a practice ting." But the most important role that to court public officials when he In 1961, FBI wiretaps disclosed that Sidney Korshak plays for the Amer­ graduated from law school in the late a Chicago mob figure, Leslie (Killer) ican underworld is his close relation­ 1930s and began a law firm in Chicago Kruse, was told by his Mafia superiors ships with some of the nation's most with his brother, Marshall. Already, never to personally contact Korshak powerful politicans, many of whom Marshall Korshak was a key figure in for fear that his being seen with Kor­ -sometimes unwittingly-have pro­ Cook County's corrupt Democratic shak would damage the lawyer's repu­ vided favors for his mob associates. Party political machine and would tation. Two other Chicago mobsters later serve as an Illinois state senator were also overheard on wiretaps a and in top posts in Chicago's city short time later being given similar in­ government. structions. Meanwhile, Sidney Korshak began More recently, Jimmy (the Weasel) to represent members of Chicago's Fratianno, a one-time acting boss of Capone mob. Later, according to the Los Angeles mob family, who later federal law enforcement officials, he became a government witness against would become a key adviser to An­ his former associates, told a similar thony (Tony) Accardo, a former tale. In his autobiography, The Last bodyguard to Al Capone who would Mafioso, written with writer Ovid later serve as boss of Chicago's mob Demaris, Fratianno said he was family from 1943 to 1956. During that ordered by Joseph Aiuppa, boss of period, many of Chicago's top politi­ Chicago's mob family, never to meet cians and mobsters were in close personally with Korshak. alliance with one another. Sidney Kor­ "Look, Jimmy, do me a favor," shak served as a trusted go between Fratianno quotes Aiuppa telling him, and intermediary in many of those "If you ever need a favor from Sid, relationships. come to us. Let us do it. You know, Apparently, some 30 years later, the less you see of him the better. We Korshak still has some influence in don't want to put heat on the guy ... Chicago's political circles. In 1980, he "We've spent a lot of time keeping and his brother, Marshall, con­ this guy clean. He can't be seen in tributed $4,000to the re-election cam­ public with guys like us. We have had paign committee of Chicago Mayor our own ways of contacting him and Jane Byrne. it's worked pretty good for a long Another political figure who has time." been the beneficiary of Korshak's While dealing with some politi­ largess has been Pierre Salinger, a one­ cians, Korshak has made no secret time Press Secretary to the late Presi­ about his underworld loyalties. Dur­ dent John Kennedy who is currently ing the late 1950s, the late Sen. Estes the Paris Bureau Chief for ABC Kefauver planned to hold hearings in News. While running for the U.S. Chicago about organized crime activi­ Senate in California in 1964, Salinger ty in that city. But Kefauver abruptly In June 1979, for example, Korshak accepted a $10,000contribution from changed his plans at the last moment. was attempting to close down the Korshak despite the fact that seven According to the New York Times Hollywood Park Race Track, in In­ years earlier, in 1957, when he was a series on Korshak, Korshak had glewood, California, in an effort to Senate aide invei;;tigating the Mafia's shown Kefauver infrared pictures of help mob interests take over the track. control over the Teamsters Union, he the senator in a compromising posi­ Assisting Korshak in his efforts to wrote a report saying that Korshak tion with a young girl in Chicago's close down the track were California "had a reputation of being extremely Drake Hotel. Governor Jerry Brown and his chief of close to the old Capone syndicate." Such activities, however, are not staff, Gray Davis. Brown had previ­ "The fact is I needed to raise $2 part of the usual Sidney Korshak style. ously requested and received a $1,000 million for the campaign," Salinger Korshak is a man who would much campaign contribution from Korshak explained at the time the campaign rather charm than intimidate someone during a presidential campaign ap­ contribution was made public. and who would rather do a favor for a pearance Brown made in New Hamp­ Unlike Salinger, many politicians powerful person in hopes of getting shire. There is no evidence that Brown who have been befriended by Korshak something in return rather than and Davis knew of Korshak's real in­ have been genuinely unaware of his blackmailing them. More typical of tentions when he asked them to help mob connections. The reason is that Sidney Korshak's behavior than his close down the Hollywood Park track. the Mafia has gone to great lengths to alleged pressuring the late Sen. But both Brown and Davis should keep their relationship a secret one. Kefauver is his courtship and interven­ have been more circumspect in their "Korshak is the ultimate 'man up tion on behalf of Sen. Paul Laxalt. dealings with Korshak in that Browns' front'," says one federal law enforce­ Our story begins in the late 1950s own California Crime Control Com- ment official, "but he can only do the when Las Vegas' two largest industries

22 June-August 1984 Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 were the casinos and organized crime. Attorney of Ormsby County, Nevada. casino, public outcry has demanded a Paul Laxalt was then just a young at­ In 1%2, he was elected as Nevada's new owner. But the new owner has torney, and the Mafia was just begin­ lieutenant governor. And two years often turned out also to be a front for ning to take over the city. With the later, he lost a close race for the U.S. organized crime interests. Such has help of some organized crime figures, Senate. been the way the casinos have oper­ Paul Laxalt would become governor In 1966, Laxalt successfully ran for ated during the time Paul Laxalt has of Nevada and, later, senator from governor of Nevada. A key fundraiser been a powerful Nevada politician. that state. During that same time, in that campaign was Ruby Kolod, an Part of the reason such activities have organized crime in Nevada would not organized crime figure originally from been allowed to occur is that he has ony flourish but grow by leaps and Cleveland, who was a part owner of maintained close relationship with bounds. Las Vegas' Desert Inn along with mob It had all begun with a dream by the figures Moe Dalitz and Louis late mobster Bugsy Siegel. The hand­ Rothkoff. some, debonair mobster believed that In 1965, less than a year before legalized gambling in Nevada would Kolod helped raise funds for Laxalt's make Las Vegas the gambling and vice gubernatorial campaign, he was con­ capital of North America. With the victed of fraud and extortion. Kolod financial backing of Meyer Lansky and an associate, Israel "Icepick and the East Coast mob families, Willie" Alderman, invested $78,000 Seigel began building the largest and in an oil venture with a Denver, Col­ most spectacular casino in Las Vegas. orado lawyer, Robert Sunshine. Ac­ For a time, Siegel led a charmed life. cording to a fed�ral grand jury indict­ He lived in glamour with his beautiful ment, when the venture failed, Kolod girl-friend, Virginia Hill, and spread and "Icepick Willie" sent two around tens of thousands of dollars on Chicago mob associates to Denver to the nights they spent out on the town "threaten to injure and/or murder" on the Las Vegas Strip. Sunshine and his family if their invest­ Even a murder indictment was a ment money was not returned. What momentary problem for the hand­ interested federal investigators most some mobster. In 1940, Siegel and an about the case was that Sunshine associate were indicted for the murder testified at the trial that Kolod obtain­ of fellow mob figure Harry "Big ed the $78,000 needed for the oil ven­ Greenie" Greenberg. The case was ture by simply walking into the count­ delayed, time and time again, until the ing room of the Desert Inn and skim­ government's key witness, Abe Reles, ming the money "right off the top." A "fell" out of a New York hotel room subsequent FBI investigation later window while in government custody. determined that the $78,000 was only The charges were then dismissed by a fraction of the tens of millions of Los Angeles District Attorney John dollars the Mafia was skimming from Dockweiller, who said he wanted to the Desert Inn, the Sands, the Dunes, save the taxpayers of Los Angeles the the Frontier, and other Las Vegas cost of a lengthy trial. Appareqtly a casinos. $30,000 campaign contribution made Despite such incidents as Ruby by Siegel to Dockweiller's election Kolod's role in his gubernatorial cam­ campaign had nothing to do with the paign, Laxalt has been able to suc­ men involved in such schemes-men disposition of the case. cessfully cultivate a public image­ such as Delbert W. Coleman. Bugsy Siegel had little to fear from one of trying to force out the mob One of the first beneficiaries of the government or public officials, but from Las Vegas' casinos. Gov. Laxalt's legislation allowing cor­ his associates in the underworld were a In 1980, for example, Congres­ porate ownership of Nevada casinos different case. The cost of the Flam­ sional Quarterly reported in a was Chicago businessman Coleman. ingo had sky-rocketed from the $1.5 biographical article on Laxalt: "The In 1968, Coleman sold off his major million Siegel said it would cost to new governor pushed through the le­ interest in Chicago's J.P. Seeburg over $5.5 million. On June 26, 1947 a gislature a measure allowing cor­ Corporation for $4.8 million. With mob hitman, acting on the orders of porate ownership of casinos in an ef­ the proceeds from that sale, Coleman Meyer Lansky, murdered Bugsy fort to rid the gambling industry of the bought a controlling interest in the Siegel. taint of organized crime." Beverly Hills-based Parvin-Dohr­ Oddly, with Siegel's death his In fact, the end result of the new mann Corporation. At the time, dream came alive. Las Vegas soon legislation merely helped facilitate Parvin-Dohrmann owned two Las blossomed, and the mob through its organized crime's dominance of the Vegas hotel-casinos, the Aladdin and hidden interests in many of•the city's Las Vegas casino industry. The the Freemont. largest casinos, illegally skimmed tens history of many of the casinos has In 1969, Coleman and Parvin­ of millions of dollars each year. been one of revolving ownership by Dohrmann purchased a third Las Onto the scene came the young, organized crime interests. When Vegas hotel-casino, the Stardust, politically ambitious attorney, Paul federal investigations have found a from organized crime figure Moe Laxalt. In 1951, he was elected District secret organized crime interest in a Dalitz. Coleman had his corporation

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make a secret $500,000 payoff to On May 6, 1969 Coleman testifed Sidney Korshak, the Securities and that he and Voloshen and Sweig Exchange Commission would later visited the new offices of the SEC in reveal, for introducing Coleman and Washington and met with then SEC Dalitz and setting up the deal. chairman Hammer Budge in an effort Later, Korshak would also be ap­ to curtail the Parvin-Dohrmann in­ pointed counsel for the Parvin­ vestigation. Dohrmann Corporation. But says a "I bring you warm greetings from former investigator for the SEC: the Speaker of the House," Coleman "Although on paper Korshak was just testified Voloshen said to the SEC the counsel for Parvin-Dohrmann, in chairman as the meeting began. But reality he was the most important in­ despite the lofty introductions, the in­ dividual in making decisions for the fluence peddling was unsuccessful. firm next to Coleman. Some of the The SEC carried on with its investiga­ people we interviewed even suggested tion and later filed suit against Parvin­ it was really Korshak running the Dohrmann. One of the findings of show and pulling the strings and that that investigation was that the $50,000 Coleman was just his front man." payoff made by Coleman to Voloshen Shortly after the Stardust casino and Sweig ended up as a tax write-off was purchased from Moe Dalitz by on Parvin7Dohrmann's books. Parvin-Dohrmann, Coleman and Also helping in the effort to stop the Korshak made Frank (Lefty) Rosen­ SEC investigation was Laxalt, then thal manager of the casino. Federal governor of Nevada, who traveled to law enforcement officials have iden­ Washington, D.C. to meet with SEC tified Rosenthal as the overseer in Las officials about the case. Laxalt had no Vegas for Chicago mob boss Joseph effect on the investigation, but within Aiuppa and the man in charge of that ,a year he would be the recipient of the mob family's casino-skimming opera­ $100,000 reta1ner from Delbert Col­ tions. eman as a private lawyer. With the involvement of Korshak Within a few months, the stock rose With such lucrative law fees, the ex­ and Rosenthal in Parvin-Dohrmann's meteorically in value, eventually sell­ governor now decided to expand his operations, federal investigators did ing for $150 a share. Delbert Coleman career into the business world. Along not believe the mob wasn't still taking made an easy $34.5 million profit. with several partners he financed and its cut when Moe Dalitz sold the Star­ Sidney Korshak made $1.8 million built the Ormsby House Casino in dust to the corporation. Apparently, from the deal. Carson City, Nevada. Laxalt's casino "reform" legislation But the SEC's investigation found According to Nevada state gaming did little to stem mob involvement in that the rise in value of Parvin­ records, Laxalt's original capital con­ Las Vegas casinos. Dohrmann's stock was not due to the tribution was $938. His brother and But if the legislation did not benefit viability of the corporation, but due partner in the venture, Peter, con­ the public, it did benefit Paul Laxalt. rather to a sophisticated stock fraud tributed only $913. Apparently, the In 1970, Laxalt decided against run­ and manipulation scheme based on casino was mostly financed through ning for a second term and instead the "old boiler room scheme" and set $5 million in loans made to the Laxalts made plans to expand his Carson City, up by Korshak and Coleman. by three Nevada banks. Nevada law firm. Among the firms' In 1970, the SEC settled its lawsuit, Laxalt soon found that his business first clients was Delbert W. Coleman, forcing Coleman and Korshak to sell skill was not on the same level as his who paid Laxalt a $100,000 a year re­ their stock in Parvin-Dohrmann and political acumen. By mid-1973, the tainer. give up profits they earned from the Ormsby House was close to bankrupt­ Already in 1969, Parvin-Dohrmann stock fraud. But that did not happen cy, and Laxalt turned to his old friend had come to need a good law firm. In until the two men engaged in some Delbert Coleman for help. The end that year, the Securities and Exchange high-level influence peddling. result was an unsecured $950,000 loan Commission charged in a civil lawsuit In mid-1969, Dr. Martin Sweig, to Laxalt and the casino from the First that Coleman, Korshak and 15 other then an aide to House Speaker John National Bank of Chicago. officers and investors of Parvin­ McCormack, and Nathan Voloshen, a Still other loans were made later by Dohrmann had engaged in stock fraud Washington lobbyist, were indicted by Heymann and the First National Bank and violations of federal securities a federal grand jury on charges of using to keep the casino afloat. Laxalt once laws in artificially inflating the price the prestige of the Speaker's office on told a friendly interviewer that "I call­ of Parvin-Dohrmann stock on the behalf ofVoloshen clients. Among the ed Bob Heymann and told him we had American Stock Exchange. According charges was that Coleman, on Kor­ to have a couple of hundred thousand to internal SEC investigative files, shak's recommendation, paid Volo­ or we will close. Within a day he gives Coleman, when he took control of shen and Sweig $50,000to use their in­ $200,000. In February (1974) the same Parvin-Dohrmann, bought 300,000 fluence to try to close down the SEC problems. I told him I need $200,000. shares of stock in the corporation at investigation. Coleman was granted He gives another. At that point he was the price of $35 a share. Shortly immunity from prosecution in ex­ in a second position secured only by thereafter, Korshak bought a smaller change for his testimony at the trial our stock, which meant that he could amount of Parvin-Dohrmann stock. against Sweig and Voloshen. take it in a moment."

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In September 1974, the First Na­ Jimmy Hoffa, the late Allan Dorfman tional Bank loaned an additional $7 .3 and Alvin Barron-have all had close million to the Ormsby House. All in ties to organized crime figures and all, Heymann and his bank loaned have been convicted of major felonies. more than $10 million to Paul Laxalt But the Pritzkers have the closest and the Ormsby House, until it was relationship to Korshak, dating back sold in 1976 to different interests. more than 40 years to when both But Robert Heymann, like Sidney families had law offices in a modest Korshak, has never had to spend a day building at 134 North La Salle Street in jail. In exchange for pleading guil­ in Chicago. Korshak was later in­ ty, Heymann received the sentence of strumental in helping the Pritzkers ob­ four year's probation. At the sentenc­ tain some of their loans from the ing hearing, Heymann's lawyer, George Teamsters Union Central States Pen­ Cotsirilos, said that Heymann had sion Fund. Korshak also later became started a consulting business since a counsel for the Hyatt corporation. leaving the bank. But the embezzle­ While Korshak and his associate ment and subsequent federal indict­ Robert Heymann were instrumental in ment were not hurting business, Cot­ keeping the Ormsby House afloat, sirilos told the court. "He hasn't lost a another associate of Korshak's client." Nevada businessman Bernard While Robert Heymann seemed to Nemerov, also helped finance the come away from his embezzlement casino venture. trial unscathed, the First National The single largest investor in the Bank of Chicago, which had cooper­ Ormsby House was Nemerov who, ac­ ated with federal authorities in their cording to law enforcement officials investigation, did not fare well. federal investigation-transferred and public records, has had long­ Among Robert Heymann's closest tens of millions of dollars in assets standing and close associations with friends-and also one of First Na­ from the First National Bank to the Il­ some of the country's most prominent tional of Chicago's largest customers linois Continental Bank and Trust organized crime figures. -have been Chicago businessman Jay Company. According to Nevada state gaming Pritzker and his.father, A.N. Pritzker. Maybe part of the reason the Pritz­ records, Nemerov loaned Paul and The two men are key members of the kers have been so sympathetic to Peter Laxalt some $475,000 to help Pritzkers of Chicago, one of the Heymann's problems is that they too construct the Ormsby House. He also wealthiest families in America. have had their problems with federal contributed another $75,000 to the Through a number of privately owned law enforcment authorities. In De­ project as a capital contribution. corporations, the Pritzker family's cember 1978, the Pritzkers settled a In testimony before the Nevada own assets reportedly generate lawsuit with the Securities and Ex­ State Gaming Commission, Paul Lax­ revenues exceeding $3 billion each change Commission alleging conflicts alt said that Nemerov was going to year. Among their holdings are the of interest and inadequate disclosure play a key role in running the Ormsby privately held Hyatt Corporation and to stockholders of the Hyatt Corpora­ House: a controlling interest in the Hyatt In­ tion and Hyatt International. "I see him as being another right ternational Corporation. The Pritzker During the SEC investigation, arm to me because my function in this family also owned much of the Hard­ evidence also surfaced showing that operation is not going to be opera­ wicke Corporation and the Great the Pritzkers have had personal rela­ tional. I'm not going to be housed or Adventure Amusement Park at one tionships and business dealings with a officed in the hotel, nor will Mick time. Those two entities were reci­ number. of highly placed organized (Peter). We'll be on the policy level pients of the loans made by Heymann crime figures and their associates. In a only and we felt we needed liaison on for which he was given kickbacks and deposition taken during the SEC in­ the hotel level from an experienced for which he was later convicted. vestigation, Peter DiTulo, the late person, and this is where we see Mr. When officials at First National president of the Hyatt International Nemerov." first learned of Heymann's embezzle­ Corp., admitted that he knew Meyer In June 1972-as part of the licen­ ment, the Pritzkers lent him $160,000 Lansky, reputed to be the financial sing procedure for the Ormsby House to repay the bank. Heymann's lawyers czar of American organized crime, -Nemerov was repeatedly asked could thus point out at the sentencing and that he had borrowed money from about his associations and relation­ hearing that he had already made two Canadians who had invested ships with a wide assortment of restitution. They also pointed out that money for a notorious Lansky organized crime figures during an ap­ he was also now working as a consul­ associate. In addition, the mob­ pearance before Nevada's State Gam­ t ant to "s ome of the finest dominated Central States Teamsters ing Corporation. companies," one of which was Hard­ Pension Fund has made more than $50 Nemerov admitted during his wicke, Inc. million in loans to Hyatt and other testimony before the Gaming Com­ According to a former official of corporations owned by the Pritzkers. mission to having had close relation­ the First National Bank of Chicago, Three high level Teamsters officials ships with the late Teamsters Union the Pritzkers-upset with the bank's who helped the Pritzkers obtain those President Hoffa and the late Allen firing of Heymann and its help in the loans-the late Teamster President Dorfman, who for more than two

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decades served as the dominant figure On Nov. 1, 1983 the Sacramento ings by this reporter's investigations in the mob-dominated Teamsters Bee reported that the Ormsby House that Sidney Korshak intervened with Union Central States Pension Fund. was the subject of a 1973 Internal an officialof Chicago's First National Under Dorfman's leadership the Revenue Service investigation that Bank to gain approval for loans to massive $1.4 billion pension fund looked into allegations that organized keep the Ormsby House in business. ·served as nothing more than a private crime interests were illegally skimming Korshak was at the time, and still is, bank for the Mafia and those willing an estimating $2 million a year of the according to federal law enforcement to make kickbacks to Dorfman and casino's proceeds. officials, a senior adviser in the other pension fund executives in ex­ But, according to reporter Denny Chicago mob family. The main bene­ change for loans. Walsh, IRS agents were not allowed to ficiary of the alleged skimming opera­ Perhaps more than any other man puruse the investigation due to in­ tion, according to the initial IRS pro­ in America, with the possible excep­ tervention from the Nixon White be, was the Milwa}lkee mob family of tion of the late Meyer Lansky, Dorf­ House. Wrote Walsh: "One of the tax Frank Balistrieri, an adjunct of the man was responsible for the massive agents noted that the Nixon White Chicago mob· family of which Kor­ organized crime infiltration of Las House's influence in the upper reaches shak is a senior adviser. Vegas and its casinos. At Dorfman's of the IRS was something he and his If the allegations of skimming at the direction, the Central States Pension colleagues had to live with. 'For the Ormsby House are untrue, Sen. Lax­ Fund loaned hundreds of millions of most part, anything [traced to] alt's behavior still deserves further at­ dollars to mob-controlled interests to Republicans was given the fast once­ tention. This reporter's investigation purchase at least eight Nevada casinos over ,' the agent said. has shown that only with the help of since the late 1950s. "Referring to those types of situa­ Sidney Korshak and his associates In 1972, Dorfman was convicted on tions, he said, 'I pursued what I -Delbert Coleman, Robert Heymann, federal charges and sentenced to thought was appropriate until I was and Robert Nemerov-was Laxalt's prison for accepting a $55,000 told not to.' Ormsby House venture allowed to kickback in arranging a $1.5 million ''Asked if the Laxalt matter was one become a viable entity. Central States Pension Fund loan for he was told not to pursue, he said, At the same time, Sen. Laxalt has a Miami businessman. In late 1974, 'Yes.' " engaged in a number of activities in his Dorfman was acquitted of federal Walsh later added: "Information official government positions that charges of bankruptcy fraud and con­ about the scheme was derived primari­ have helped Sidney Korshak and spiracy to defraud the Central States ly through physical surveillance and Chicago's mob bosses. Pension Fund after a key government from Ormsby House employees devel­ Laxalt's discussions with the Presi­ witness in the case was murdered oped as informants by IRS agents ... dent and Attorney Generalto curb mob gangland style. "Implicated as a courier of the skim investigation in Las Vegas would have money, according to the sources, was to be at the top of the list. His attempts Dorfman himself was murdered Rocco Youse, identified in federal, to stop the federal investigation of gangland style last year in a suburb of state and county intelligence files as an Parvin-Dorhmann also benefitted Chicago while awaiting sentencing associate and front for Milwaukee Sidney Korshak and Delbert Cole­ after. being convicted of federal Mafia boss Frank Balistrieri ... man, who were eventually charged by charges that he conspired to bribe "[In addition] at the Ormsby the Securities and Exchange Commis­ Paul Laxalt's then Nevada senatorial House, IRS agents watched on a sion with stock fraud related to the colleague Sen. Howard Cannon. number of occasions as Youse met case. And Laxalt's attempts to free Laxalt also maintained a long and with Joseph Viscuglia, one of the Jimmy Hoffa from prison also would cordial relationship wtih Dorfman. In casino's managers. have benefitted Korshak's and 1971, Laxalt wrote a letter to then "Casino employees told tax agents Chicago's mob bosses, who previous­ President Richard Nixon recommen­ an average 20 percent of the house's ly made tens of millions of dollars in il­ ding that the President release then take was being skimmed and being legal Teamsters Union-related activ­ Teamsters boss Jimmy Hoffa from held by Viscuglia until picked up by ities when Hoffa was its president. prison. Laxalt told the President that Youse." At best, Sen. Paul Laxalt is a man he decided to ask him to release Hoffa In a prepared statement made after who was allowed to own a casino with from prison after meeting with Dorf­ the Sacramento Bee's report, Laxalt the help of Sidney Korshak and other man, who he claimed was not "the branded the story "ludicrous" and individuals tied to organized crime. At .criminal type so often depicted by the said that he hoped those named in the worst, he is a man who has engaged in national press." news account would "sue the tail off activities as a public official which Nemerov has also enaged in a close the SacramentoBee.'' help those same organized crime in­ relationship with Sidney Korshak over It is impossible to substantiate the terests that helped him with his private the years. While questioned before the Sacramento Bee's charge that business dealings. Nevada State Gaming Commission, "substantial sums of money were il­ Nemerov admitted to knowing Kor­ legally skimmed from the proceeds of Murray Waas isa freelance journalist shak socially. He also said that the two Carson City's Ormsby House Hotel who has publishedin the Washington men had offices in the same Chicago Casino during the time it was owned Post, The Nation, and elsewhere. He office building. by Paul Laxalt, " due to the Nixon Ad­ was the recipient of the 1983 H.L. With Nemerov's investment in the ministration's intervention that halted Mencken A ward for Investigative Ormsby House, yet another close the investigation. Reporting. This article is reprinted associate of Korshak was involved If the allegations are indeed true, from The Rebel magazine with the financially with Laxalt. they would seem to coincide with find- author's permission.

26 June-August 1984 Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 .------World Bank------Arjun Makhijani dedicated to the struggles for freedom of the people of the Philippines (i) Fountains babble on the thirteenth floor, softening fluorescence, punctuating the clink of cocktail glasses and talk of small farmers. Thought I'd crush them (said M) with eight point two billion pounds: bombs cratering fields, napalm burning children, agent orange sterilizing mothers and earth. But worse than insects, they dig tunnels and multiply in ways I never learned; illiterate learn to fire anti-aircraft guns, singing songs of freedom that make black and young chant Ho Ho Ho Chi Minh, Uncle Ho, and hate me who sought only their love with Edsel. (ii) Johnson raising a stink on the White House toilet said y'all get 'em in the Wall Street World Bank way­ make loans to their usurers to g�t the biggest bang for the buck. Agent orange as pesticide makes dollars­ green as nuclear plants for Westinghouse lighting roads for troops beautifying Imelda's eyes by razing workers' huts. Woman bent hungry in the field cutting sugarcane to the rhythm of Bells and Hueys sucking her' child's sweat to pay the moneylender's debts. Fountains on the thirteenth floor stop the clink and the babble as they hear the rumblings in her womb- the people's song of freedom.

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. . . AND LIFETIME CENSORSHIP 'FOR ALL ment rights. "We must ensure that the Reagan administration is laying the BY ANGUS MACKENZIE free-speech rights of our most ex­ groundwork · to avoid the congres­ perienced public servants are not sional prohibition against the spread o prevent dissident bureaucrats restricted unnecessarily,'' said of prepublication review. from publishing or talking to Republican Senator Charles Mee. This is so despite the reports on 1 reporters1 President Reagan last Mathias of Maryland. "The ad­ February IS that the administration March ordered government ministration should stop implemen­ was suspending "key provisions" of workers to sign contracts that would ting the censorship program." its security program while it tried to force them to submit to prior censor­ Congress thought it had stopped the reach a compromise with Congress. ship even after they leave federal ser­ implementation of the order by a Nov. A review of relevant court cases sug­ vice, but Congress rebelled, voting to 17 vote. Yet, as denizens of the gests that everything the Reagan team delay Reagan's order at least until District prepared to celebrate the new is doing to hush its workers has been April IS, 1984. year, the National Security Council found strictly legal by the highest Or so Congress thought. And so the was ordering fiftyagency heads to get judges in the land. press has reported. four million employees' signatures on The Reagan team had prepared not Legislators had demanded a chance forms that will, after all, contract one but two censorship forms for its to consider the order before it stripped them to lifetime censorship of their bureaucrats to sign. Congress post­ public servants of their First Amend- books, articles, and speeches. The poned, and the adminst'ration· bal -

28 June-August 1984 Counterspy

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abandoned, only one of them. With In May of 1977 Snepp decided not form number two, the administration The Reagan team had to submit his book to agency censors, is doing an end run around Congress. depite his contract. In 1980 the U.S. The National Security Council letter prepared not one but Supreme Court upheld the govern­ of late December orders the imple­ ment: Snepp was forced, because of mentation of form number two, and two censorship forms that contract, to submit any future last month a White House source con­ writings-even his novels-to the CIA firmed that implementation is pro­ for its bureaucrats to Publication Review Board. And he ceeding "full steam ahead." must also forfeithis royalties on "De­ sign. Congress cent Interval," even though the book orm number two allows the revealed no classified information. government to obtain injunctions postponed only one of Fagainst those who sign it. Those injunctions, under case law, may them. With form n March 31, 1982, just over a require prepublication review of the year after the Supreme Court employee's writings, under the con­ number two, the decided that Snepp was wrong tractual obligation not to disclose and the government was right, a secrets. administration is panel consisting of high-level officials Congress decided that no regulation from the CIA and the departments of could be implemented that "would re­ doing an end run O State, Treasury, Justice, Defense, and quire any officer or employee to sub­ Energy suggested to the President: mit, after termination of employment around Congress. Spread those CIA-type secrecy agree­ with government, his or her writings ments to every employee who handles forprepublication review.'' The presi­ classified information. dent signed that into law Nov. 22 as On March 11, 1983, Reagan issued part of the State Dept. appropriations such an order. Steven Garfinkel in the bill. ment-ordered deletions in a book in Information Security Oversight Of­ But, says the man who is in charge U.S. history. fice began drafting two new secrecy of administering the nondisclosure The courts upheld the CIA's right to agreements to be signed by half the agreement, Information Security censor Marchetti because he had federal workforce, in accord with the Oversight Director Steven Garfinkel, promised, in an agreement he signed Snepp and Marchetti court decisions. the amendment "is no bar to us going when coming to work forthe CIA, not Garfinkel is a nice guy, with two to court to seek injunctions to prevent to reveal secrets he learned there. kids, a big round belly, and shirt col­ publication." "The Marchetti case allows the lars worn a little thin. He has a quick "Subtleties," said a House of government to sue to stop disclosure smile, straight teeth, pudgy hands, Representatives staff investigator of classified material," says Gar­ and seems an honest fellow. He says questioned about the nondisclosure finkel. "The injunction enables his nondisclosure agreement number agreement, "are overlooked in Wash­ government, when it is aware that two will allow the government to ob­ ington all the time." He acknowledg­ someone is about to publish, to enjoin tain injunctions "to prevent publica­ ed that people on Capitol Hill were them from publishing based on the tion and to deprive the person of pro­ unaware of the implications of form contractual relationship.'' fits from any such publication, even number two. Should any one of the 2.5 million when the agreements signed do not This whole censorship business government employees plus 1.5 mil­ call for prepublication review.'' began at the CIA, whicp the courts lion government contractors who are And that's what Congress and the have found has a legitimate need to now being asked to sign form number press missed entirely. Congress stop­ keep secrets and to censor its em­ two decide to publish something, the ped only the implementation of one ployees. Employees there have for government may seek a prepublica­ agreement, the one that called explicit­ decades signed nondisclosure agree­ tion injunction like the one served on ly for prepublication review. But ments that are now being spread from Marchetti. agreement number two amounts to the that agency to fifty others. same thing without using the words On April 18, 1972, Victor Marchet­ In practice, the employee will have "prepublication review." ti, a CIA expert on Soviet military aid signed an agreement not to reveal "We're not trying to trick the to the Third World, became the first secrets. If the government thinks that public," Garfinkel says. "There was U.S. author to be served a court order individual might be getting ready to no attempt to do implicitly what we that prohibited him from revealing publish, it may get a court order that did not do explicitly.'' He told the CIA secrets in a book he had yet to requires the employee to submit to Quill he could not predict what legal write. That injunction required him to prepublication review. theories or remedies the Justice Dept. submit his manuscript, when comple­ Next came the case of former CIA might use in seeking to enforce the ted, foragency review. agent Frank Snepp. He joined the agreement, but "never once in any of When Marchetti's "CIA and the agency in 1968, served in Vietnam, the discussions about this did any Cult of Intelligence" went to press two and wrote a book called "Decent In­ representative of any agency say, years later, 168 big· white spaces ap­ terval," in which he roasted the CIA 'Let's try to sneak in prepublication peared where CIA censors had order­ for abandoning its friends during the review even though it's not mentioned ed the text removed-the first govern- 1975 evacuation of Saigon. in the agreement.' "

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Nevertheless, the agreement on its regulation before April 15, 1984, that Agreement, including, but not limited face, given the Marchetti and Snepp .would require employees, after ter­ to, application for a court order pro­ precedents, provides for a system of mination of employment with the hibiting disclosure of informaton in prepublication review. The distinction government, tq submit writings for breach of this agreement." between the two forms is a bit techni­ prepublication review unless the agen­ In other words, form two, now be­ cal, sure, but hang on. cy had been using nondisclosure ing pushed on half the federal Secrecy agreement number one is agreements before Reagan's March 11 workforce, will allow the government called the "Sensitive Compartmented order. to seek from the courts Marchetti-type Information Nondisclosure Agree­ The New York Times reported that injunctions that will require the ment." That so-called SCI agreement the amendment "would force a stop to employee to submit to prepublication contains this demand for prepublica­ the censorship measures, at least until review, even though the form does not tion review: "I hereby agree to submit next April." use that phrase. for security review ... all materials, in­ But not quite so fast. Ask Gar­ Garfinkel says bureaucrats have cluding works of fiction, that I con­ finkel. He'll tell you what he told me: become confused by news reports that template disclosing to any person not "The Senate action on prepublication say the secrecy agreements can't be authorized to have such [SCI] infor­ review did not touch on what we're signed due to congressional action. mation." doing in this office. Having read the That is why the National Security The paragraph also states: "I un­ language of that amendment it is a lit­ Council has sent a letter to some fifty derstand that my obligation to submit tle unclear as to what it means." agency heads to push regulations that such information and materials for "I don't know that we're doing require their employees to sign agree­ review applies during the course of my anything differently," he said. ment number two, which does not call access to SCI and at all times there­ "Agency security officials are calling for prepublication review but means after." That is the lifetime commit­ me up, asking do we stop signing peo­ the same thing. That form number ment Congress thought it was delaying ple up? No. I tell them, certainly not." · two obligates signers not to disclose until April 15. Garfinkel says yes, implementation information while they are in service of the SCI form number one requiring to government "and at all times prepublication review has stopped. thereafter,'' making them subject to ongress took great offense to But form number two, the "Classi­ injunctions requiring prepublication such censorship spreading from fied Information Nondisclosure review for the rest of their lives. That the CIA to other agencies Agreement," which does not contain would seem to conflict with the spirit without its consent. Senator a prepublicaton review clause like that if not the letter of the law Congress CMathias proposed a rider to the State in form number one, is now being passed and Reagan signed. Dept. appropriations measure to stop distributed. And while form number the rush to prepublication review. He two does not specify prepublication he Reagan team has done a suc­ told the Senate that "Congressional review, it means the same thing. And cessful end run around Congress consideration must precede the im­ that's the dodge. on the question of prepublication plementation of the censorship plan." Read paragraph six on that form review in order to keep its The Senate sided with Mathias on number two, which is now being im­ secrets. And form number two doesn't Oct. 20 by a vote of 56 to 34. plemented: T limit "secrets" to national security in­ On Nov. 17 the House agreed to the "I understand that the United formation. The administration, under measure, which says in part that no States Government may seek any President Reagan's classification head of a department may enforce a remedy available to it to enforce this guidelines can stamp SECRET anything it doesn't want you to know, regard­ less of its true relationship to the na­ tional security. UPDATE Half of all government workers are The most recent presidential and provisions be held in abeyance. "The about to be silenced-and neither the congressional stances regarding President has authorized me to in­ press nor Congress seems to under­ NSDD-84 were detailed March 20, form you that the Administration stand. 1984, by National Security Advisor will not reinstate these two provi­ What may slow the signing of these Robert C. Mcfarlane in a letter to sions of NSDD-84 for the duration secrecy agreements is simply that so Rep. Patricia Schroeder, Democrat of this session of Congress." many must do so. It may take years for of Colorado, chairwoman of the What Mcfarlane failed to tell the 2.5 million government employees subcommittee on civil service. Schroeder: NSDD-84 contains 16 plus 1. 5 million government contrac­ Mcfarlane's letter noted that sections. The delay of two leaves 14 tors to actually sign up-although, in Congress last year barred until April sections in force, including l(a) call­ the meantime, new hires will be enlisted 15, 1984 "two provisions of the ing for half the federal workforce to as a condition of employment. So directive: paragraph l(b), which sign nondisclosure agreements, and there may still be time for Congress to authorized broader use of prepub­ section l(b) saying those agreements correct its oversight. lication clearance agreements, and are "enforceable in civil action." In paragraph 5, relating to the use of other words, NSDD-84 still threat­ Angus MacKenzie is director of the the polygraph .... " ens 4 million government workers Freedom of Information Project of the As a result, Mcfarlane wrote with injunctions requiring Center for Investigative Reporting in Schroeder, he directed that those two prepublication review. San Francisco.

30 June-August1984 Counterspy

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THE CIA'S ''FREE'' ELECTIONS

In Italy 30 years ago and in El Salvador today, the U.S. government has used a combination of the CIA, the AFL-CIO's international branch, and Christian Democrats to subvert elections.

panies have large interests in Italy: porate interests. Written by U.S. Am­ BY JOHN KELLY Standard Oil of New Jersey, Vacuum bassador to France, Jefferson Caffery Oil, General Electric, Singer Sewing, to Undersecretary of State, Robert A. n 1948, a few months after the American Radiator and Standard Lovett, it said: "... I have just heard CIA's' fou.nding, a Milan silk Sanitary, National Cash Register, that certain important American busi­ manufacturer, Pietro Ruffini, flew Great Lakes Carbon, American ness interests in France recently sent into New York for secret meetings representatives to Washington with an Iwith U.S. bankers and industrialists. offer to donate certain sums for the Ostensibly, · Ruffini was having battle which we are waging. I unders­ business meetings. tand that they spoke to [CIA Director] In fact, Ruffini carried credentials Admiral Hillenkoetter who informed from the "highest responsible A "top secret" letter them that the government should and authorities" in Italy. And his trip had would shoulder this burden. I am en­ been arranged by the U.S. Embassy in of 1948 illustrates tirely in accord with this position in Rome. A 1948 State Department cable principle ... marked "top secret" said: "His [Ruf­ that the CIA, through "I am enclosing a rough outline of a fini's] plan, as outlined to a member concrete plan for work among the of the embassy, is to form a small a labor operative, was [French] port workers, which hereto­ committee in New York of industri­ covertly intervening in fore has been the stronghold of the alists and bankers with European in­ communists, and I think that this pro­ terests who might be willing to con­ the internal affairs of ject should be pushed as rapidly as tribute to the Christian Democratic possiJ,le.On this we are in close touch party, which is leading the fight Europe for private with Irving Brown, European repre­ against communism in Italy. No sentative of the AF of L, who is work­ publicity whatsoever will be given to U.S. corporate ing out the details, including the his acti vi ti es." choice of competent militants." That the U.S. Embassy in Rome interests. Ruffini's trip to New York was a was directing covert intervention in success. The money he gathered was the Italian elections for U.S. corpora­ deposited in a special account for tions was evident from the "top transfer through a Vatican bank to secret" cable of March 12, 1948 to political parties in Italy. And the CIA Secretary of State George Marshall. Viscose Company, Otis Elevator. and U.S. corporations launched their "Norris Chipman tells me that Secre­ Would you speak to him about his covert interventions into electoral tary [W. Averell] Harriman was of matter." politics through a representative of great assistance in obtaining contribu­ Another "top secret" letter of U.S. labor. tions for [CIA labor operative] Irving February 24, 1948 illustrates that the Thirty odd years later, Irving Brown from U.S. industrialists with CIA through a labor operative was Brown is still the U.S. labor represen­ large stakes in France. Could he not be covertly intervening in the internal af­ tative in Europe, now for the AFL­ of assistance to us. Following com- fairs of Europe for private U.S. cor- CIO. Brown has been identified as a

Counterspy June-August 1984 31

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CIA labor operative by at least four CIA agent ....'' An internal CIA A 1980 U.S. government audit of formerCIA officers. Former CIA of­ assessment of Agee's book called it AIFLD noted that its operations tend ficial Thomas W. Braden published "complete" and "accurate." to be seen as ''political in nature rather that he gave $15,000in CIA money to than for developmental purposes." Brown to pay his "strong-arm Ironically, evidence about current squads'' used inFrance to attack stri k­ B S.1,ldor AIFLD/CIA operationsin El Salvador ing dock workers. These strong-arm came out at the Supreme Court hear­ squads were Brown's "competent mil­ This combination of the CIA, U.S. ing in 1981 over Philip Agee's appeal itants" referred to in U.S. Am­ corporations, and labor intervening in of the Government's revocation of his bassador Caffery's letter quoted foreign unions and electionscontinues passport. U.S. Solicitor General above. today in El Salvador. This is done Wade H. Mccree, Jr. was attempting Brown denied ever meeting or tak­ through the American lnstitue for to convince the court that Agee's iden­ ing cash from Braden. He subsequent­ tification of CIA agents endangered ly admitted possibly meeting Braden their lives. "Just recently," he said, in Paris. Braden told Wall Street Jour­ ''two Americans have been killed in El nal reporter, Jonathon Kwitny that Salvador. Apparently they were some the $15,000 was one of many CIA kind of undercover persons, working payments to AFL-CIO officials.And The CIA has now under the cover of a labor organiza­ that he assumes such CIA payments tion." McCree was referring to continue to this day. admitted conducting AIFLD officials, Michael Hammer Former CIA officer John Stockwell and Mark Pearlman who had been was quoted as saying that: "Irving covert operations in El murdered at the Sheraton Hotel in San Brown was 'Mr. CIA' in the labor Salvador. Hammer was given a rare movement." Recalling to Kwitny a Salvador and military burial in Arlington National 1966 labor conference in the Ivory Cemetery on special authorization of Coast organized by Brown, Stockwell intervening in the President Jimmy Carter. Hammer said: "In a hall that could have seated hardly met the definitionof a worker several hundred, there were eight peo­ March 198� elections. or unionist. He had joined AIFLD ple. And I knew that five were CIA. while at Georgetown University's Brown was one of the five." Another Schoo.Iof Foreign Service, a spawning former CIA officer, Paul Sakwa, has ground of CIA officers. stated that he was Brown's CIA case Free Labor Development (AIFLD). The CIA has now admitted conduc­ officer from 1952-54. During this Not surprisingly, Irving Brown has ting covert operations in El Slavador period, Sakwa approved Brown's CIA been involved with AIFLD. William and Intervening in the March 1982 budget of from $150,000to $300,000. C. Doherty, AIFLD's president, told elections.- In a sworn affidavit, Louis From 1955-58, Sakwa i;ervedunder­ Kwitny: "He [Brown] is a very dear J. Kube, Information Review Officer cover as assistant labor attache in the friend of mine and most people who of the Directorateof Operations of the U.S. Embassy in Brussels. Sakwa told work for this organization [AIFLDJ.'' CIA stated that: "For purposes of this Kwitny that he continued to be aware AIFLD was founded in conjunction liiigation, there has been official that Brown and other AFL-CIO of­ with some 100 U.S. corporations acknowledgement that special ac­ ficials were receiving CIA money. which fµnded it in part until recently. tivities [covtrt operation&] are ongo­ Sakwa says that Brown also delivered AIFLD's chair.man until 1981 was J. ing in Central America.'' CIA money to Tom Mboya, a Kenyan Peter Grace, head of W.R. Grace and Kube was responding to a Freedom politicianand CIA agent. Also under Company which is notorious for its of Information request for informa­ Brown's direction, the CIA-connected anti-labor policies in Latin America. tion about CIA activities in El Sal­ African American Labor Council set Grace has been positively linked to the vador. He said he had identified 20 up training programs for ' certain Nazis. Philip Agee wrote that Grace documents regarding CIA activities in union leaders in Kenya that continue was a "front man for CIA labor Central America, 16 of which contain­ today. operations." Agee also wrote that ed information about CIA covert In Zaire, Brown helped organize the William C. Doherty, Jr. was a "CIA operations. CIA's counter-revolutionary National agent in labor operations." And that Front for the Liberation of Angola AIFLD was a "CIA-controlled labor The CIA refused to release these 20 under CIA agent Holden Roberto. center financedthrough AID [Agency documents. It did, however, release Brown called the organization a union for International Development]." parts of a two-page document dated though there were no employers or January 22, 1982, entitled: "Salvador employees. He told Kwitny that it Former AIFLD organizer, Richard Elections," which admitted CIA in­ "was an attempt to train people for Martinez, has stated that he worked volvement in the March 1982 elec­ trade union activites when they went for the CIA through AIFLD and Do­ tions. At the same time, the CIA ad­ back [to Angola]." herty. Martinez says that he helped mitted there were three additional In his book, Inside the Company, run the labor component of the CIA's documents regarding its involvement former CIA officer Philip Agee said destabilization and coup in Brazil in in the elections which it refused to that Irving Brown was the "European 1964.The result being a military junta release. representative of the American that destroyed the union movement in In the WallStreet Journal of July Federation of Labor and principal Brazil. 16, 1982, CIA Director William Casey

32 June-August 1984 Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 said: "For instance, we helped in the El Salvador election.". Later in a letter to the New York Times of July 30, 1982, Casey said: '' ... We provided the Salvadoran Government with information and capabilities which helped it reduce the supply of weapons from Cuba and Nicaragua and to break up guerrilla formations intended to destroy the election ..." "In addition," said Casey, "we provided election authorities invisible ink, which could be placed on the wrist of each voter and be detected again only under ultravioJet light. This was needed to assure an honest vote and to protect voters from retaliation, with which the guerrillas had threatened anybody who voted." The CIA's two page document claimed that: "The credibility of the unnJ'Oll Ulat I have intel'JlaUonal HD'Oriamwell in hand. " election process hinges on the ink " Let•• being available." Of course, CIA in- volvement negates the credibility of any election. Moreover, it was widely reported t�at the invisible ink stamp Democrats to subvert an election. The fourths of its budget from AIFLD was used to force Salvadorans to vote CIA provided funding to a publicity provided 400 of its personnel to cam­ in the election. In which there were no agency, the Venezuelan Institute for paign for Duarte. Samuel Maldona­ opposition candidates. Salvadorans Popular Education (IVEPO). This do, UCS secretary general, told the found without the invisible stamp CIA money was laundered through a Boston Globe (5/4/84): "They were penalized by the Salvadoran West German Christian Democratic became Christian Democrat government. The reasoning being that Foundation, reportedly the Konrad activists." Maldonado also admitted absence of the stamp meant one Adenauer Foundation. IVEPO pro­ that their political work was illegal boycotted the election.�nd thus, one vided free· publicity for the Duarte under Salvadoran law. was a rebel sympathizer. Such campaign. It also paid the salaries of AIFLD representative in El Salva­ categorizations can get one assas­ about 300 employees of the Central dor, Bernard Packer, told the Globe sinated in El Salvador. This fact Elections Council according to the (5/4/84): "We have no relation with would tend to explain the panic at council's project manager, Jorge the UCS's political efforts. To engage voting polls which could not ac­ Rochac. The Washington Post quoted in politics is the exclusive province of comodate everyone. Rochac as saying: "I don't know who the Salvadoran labor union move­ The CIA also provided invisible the hell finances it [IVEPO] .... I stay ment.'' silver nitrate ink for the March and up at night sometimes and wonder But, Packer added, "It's a tricky May 1984 elections in El Salvador, who is writing the checks." business. They try to drag us in. But if and a lot more. During the May 6th election, these they went out and campaigned on The New York Times (5/12/84) 300 council employees served as poll­ their own time for a political party, reported the CIA spent $2.1 million in ing place guides to lead voters to the there's nothing we can do about it.'' direct contributions to the elections. right ballot boxes and to staff elec­ White House spokesperson, Larry The CIA gave $960,000 to the Chris­ tions informationbooths. Speakes, all but confirmedCIA fund­ tian Democratic party to support the A Washington-based auditing firm, ing of the UCS. "It's been the policy candidacy of Jose Napoleon Duarte Deloitte, Haskins and Sells, under an of this and previous Administrations,'' and $437,000 to the ultra-right Na­ Agency for International Develop­ he said, "to provide assistance to tional Republican Alliance to assist its ment (AID) contract, was in charge of democratic institutions, such as trade candidate Francisco Jose Guerrero. delivery of voter registers, ballot unions [and] private sector organiza­ The CIA also secretly financed trips to boxes and other equipment to polling tions." "We can't go beyond that. El Salvador by eleven European and places nationwide. AID has covered I'm not discussing covert money." Latin journalists in March and nine in for the CIA for years. Capping off the CIA's involvement May. The journalists were provided The Central Elections Council was was the sudden trip to El Salvador by derogatory information about funded and more or less directed by CIA coup engineer and all-around ARENA party candidate, Roberto AID. In particular, AID computer ex­ trouble shooter, Vernon Walters. D' Aubuisson. pert, John Kelley, who created the Now known as Ambassador-at-Large, As in Italy some 30 years prior, the council's comprehensive plan for run• Walters reportedly told Roberto U.S. government used the combina­ nihg the May 6th election. D'Aubuisson to shut up and then ac­ tion of the CIA, the AFL-CIO inter- The Salvadoran Communal Union companied Duarte on his plane to national branch, and the Christian (UCS) which receives at least three- Washington.

Counterspy June-August 1984 33

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PHILIPPINE ELECTIONS: MADE IN THE U.S.A.

not give up his self-arrogated power to make laws. As usual Marcos invoked BY WALDEN BELLO the need to fight "subversion and ter­ rorism." And, in words clearly designed for Ronald Reagan, he re­ s the smoke clears following the m arked: "I don't know why May 14 elections in the Philip­ Americans do not seem to realize the p,ines, several things have danger of a communist rebellion in the emerged: Philippines. Ever since Vietnam • The pro-participation opposition you've been trying to close your eyes did better than expected, winning to the danger that arises from com­ some 58 of 183 contested seats, despite munism. And we people are fighting massive electoral fraud on the part of communism and facing possible li­ the ruling party. Pre-election specula­ PresidentFerdinand Marcos quidation. We have to face up to the tion was that it would garner no more fact that if we do not weaken the NPA than 30 seats; [New People's Army] subversives • Ferdinand Marcos is in no mood now, later on they'll be marching in to yield his dictatorial powers. The U.S. pushed Marcos to. the streets here and proclaiming a The dictator wasted no time in belit­ hold elections to "stabilize" takeover of the government." tling the opposition's showing. "I Contrary to Marcos' claim, would presume that our instructions the situation after the however, the U.S. is worried about th� to our people to allow the opposition massive outrage over threat posed by the progressive move­ to win some seats might have · been ment. What separates Marcos from taken too literally," Marcos told a Aquino's assassination. those who currently guide U.S. policy CBS interviewer ... only half in jest. Though the elections toward the Philippines is the latter's To underline his scorn for the results, succeeded in splitting the assessment that Marcos' monopoly of he announced a plan to increase the political power has become the main number of presidentially appointed opposition, electoral fraud factor contributing to the radicaliza­ members of the National Assembly, by Marcos supporters has tion of the population. then shelved it when it elicited the sparked new protests., predictable furor. Marcos' constitu­ tion currently "allows" him to ap­ Sections: Part of U.S. StabUlzation Strategy point 17 out of 200 delegates. he May 14 elections were part of a U.S. stabilization strategy design­ Marcos Hangs on to Law-Making Power ed to gradually achieve reconcilia­ tion of the Philippines' badly frag- But on· one point the dictator made mented elite and isolate the left. The it clear he was not joking: he would "electoral option," forged by State

,34 June-August 1984 Counterspy

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Department and CIA "pragmatists" year agreement granting secure status the Philippines, began tapping the in alliance with influential Congres­ to the two U.S. military bases in the resources of Philippine academic sional liberals, became U.S. policy country, Subic Naval Base and Clark specialists to figureout U.S. options when the explosion of mass discontent Air Base. In June 1983, as part of in the event of Marcos' overthrow or after the assassination of Benigno another five-year agreement, the demise from natural causes. The ap­ Aquino last August rendered the Reagan administration upped the aid prehensions of the agency were evi­ Reagan policy of full, uncritical sup­ to $180 million a year. dent in the description of a major port for the dictator untenable. CIA-funded study directed by Justin This assassination confronted the Green, professor of political science at previously complacent Reagan ad­ Increasing Doubts Villanova University: "[We] might ministration with a serious dilemma. discuss various scenarios regarding For no administration has been as However, some U.S. officials, when and how Marcos might leave, determined in its backing of the especially in the State Department, did the state of the various oppositions, Filipino dictator than the presidency. not share the White House's en- possible successor regimes and what The classic expression of the close this might mean to domestic and inter­ relations with Marcos was provided by national futures and how these might Vice President George Bush, who be affected by external events, U.S. toasted the Filipino strongman in the activity and the changing Philippine following fashion during a visit to domestic scene. "3 Green and other Manila in June 1981: "We love you, academics close to the agency, like sir, we love your· adherence to The May 14 elections David Joel Steinberg, vice president of democratic rights and processes." Brandeis University, were brought Bush's statement was no idiosyncratic were part of a U.S. together for a major CIA-sponsored blunder. It reflected the Reaganites' conference on May 12, 1983. Pessi­ profound fear that liberalization and stabilization strategy mism about the future was the order democratization in the Third World of the day in this meeting attended by are merely the antechamber to revolu­ designed lo gradually officials from the State Department, tion. And it served as a glaring exam­ Defense Department, Treasury and ple of the conservatives' easy and achieve reconciliation other U.S. agencies. One concrete cynical transmutation of words into result of the conference was the setting their opposite when dealing with of the Philippines' up of an "Inter-Agency Task Force" "friends" trying to cope with the to monitor the unravelling Philippine threat of popular movements. badly fragmented elite situation.• Authoritarianism or chaos was the Unlike the pragmatists at the CIA choice presented to U.S. foreign and isolate the left. and the State Department, however, policymakers by the administration's the right,.wingideologues at the White top foreign policy ideologue, Jeane House confidently ignored the danger Kirkpatrick, in her seminal essay Dic­ signals, until the storm broke follow­ tatorships and Double Standards: ing the assassination of former senator Benigno Aquino at the Manila ...The fabric of authority unravels International Airport on August 21, quickly when the power and status thusiasm for Marcos. In early 1982, of the man at the top are undermin­ after a three-month tour of the island 1983. Initially paralyzed by surprise ed or eliminated. The longer the of Mindanao, the Philippines' second over the intensity of opposition to autocrat has held power, and the largest, Consul G.S. Sheinbaum pain­ Marcos, the U.S. gradually adopted a more pervasive his personal in­ ted a picture of a discredited regime policy of putting some distance be­ fluence, the more dependent a na­ and a rapidly growing guerrilla op­ tween Reagan and Marcos. tion's institutions will be on him. position. "The NPA [New People's Without him the organized life of Army] thrives on government inatten­ the societywill collapse, like an arch from which the keystone has been tion to basic needs in many (but not lhe PragmatistsTake theLetd removed.' all) rural areas," the U.S. official wired then-Secretary of State Alex­ he first break in the tight Reagan­ Unlike Jimmy Carter's shamefaced ander Haig. In many areas, he noted, Marcos embrace occurred in early backing of Marcos for "strategic the NPA had become "more impor­ October, when the White House reasons" which allegedly overrode tant than the local government struc­ cancelled Reagan's upcoming trip human rights concerns, Reagan's sup­ ture." He concluded: "This may to the Philippines. The Reagan move port for Marcos stemmed not only sound like a worst-case scenario but came after intense lobbying by the from the so-called strategic imperative present circumstances are not en­ American envoy in Manila, Michael but also from a deep ideological af­ couraging and the future is Armacost. Regarded as one of the finitywith strongman regimes. ominous. " 2 most skilled career men at the State The policy of full support for Mar­ Sheinbaum's fears about the U.S. Department, Armacost is also con­ cos translated into the appropriation going down with Marcos were shared sidered a pragmatist. of $100 million per annum in military by many in the Central Intelligence That the White House was allowing and military-related assistance be­ Agency. In the summer of 1982, the the pragmatists to take the initiative tween 1979 and 1984, under a five- CIA, fearing another Iran scenario in b�came evident in the coming weeks,

Counterspy June-August 1984 35

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when a "parliamentary strategy" for Wolfowitz, assistant secretary of state pines but he had also nin the CIA's stabilb;ing the dangerous situation in forEast Asia and the Pacific, declared secret war in Laos in the late sixties the Philippines took shape. that a "bipartisan consensus" had and managed the State Department­ Working in tandem, the State developed on U.S. policy toward the CIA operation in Iran in the late Department and Rep. Solarz were Philippines.' The content of that seventies. fashioning a middle course which policy was articulated in a resolution would open up the system a bit, thus which passed the House of Represen­ defusing opposition pressure, without tatives on October 24 by a vote of 413 destabilizing Marcos. Just as in the to 3. Sponsored by Rep. Steven Solarz case of Diem in Vietnam in 1963,the (Dem-NY), the powerful chairman of the House Foreign Affairs commit hile the State Department U.S. would reluctantly but firmly were pressure an entrenched dictator ally to tee's Subcommittee on Asia-Pacific and Solarz concen­ make trating on figuring out ways some "reforms" to stabilize the . to grapple with the crisis of system as a whole. The leverage would political legitimacy, the economic­ be provided by the threat of with­ financialtime-bomb exploded. Strap­ holding U.S. aid-a prospect which ped with a $25 billion debt to interna­ Ambassador Armacost invoked none In an important sense, tional banks and multilateral financial too subtly in a controversial speech institutions which had to be serviced before the Makati Rotary Club in mid­ the electoral strategy to the tune of over $3 billion annually, November: "No help from outside the regime saw the economy collapse will produce durableresults unless ac­ was designed to pre­ from under it, as the Aquino assassin­ companied by actions which will ation provoked a massive capital restorethe confidence of Filipinos in vent democratization­ flight. In merely two months' time, the future of their economy and the that is, majority the country's foreign exchange stability and predictability of political reserves dropped to $430 million or arrangements.''' Not unexpectedly, participation and a less than the equivalent of one Armacost's remarks were attacked by month's imports. The resultant freeze Imelda Marcos and the regime's con­ and rationing of foreign exchange trolled press as "American interven­ system oriented to 10 provoked a shal,l) further decline in tion in Philippine domestic affairs." "IO serving majority economic activity in this import­ fairs. dependent economy. It might be noted that there was a interests. A major rescue operation was precedent for the U.S. government's necessary, but the banks were not intervention for "free election�." In about to sink more money into the 1954, with the Philippine elite and the country unless they received guaran­ U.S. facing a similar situation of deep tees that the political situation would social·instability stemming from the remain stable enough to allow them to Communist-led "Huk" rebellion, Affairs, the resolution called for a collect later. In the following weeks, Col. Edward Lansdale deployed the "thorough, independent, and impar­ American financial and corporate in­ resources of, the Central Intelligence tial investigation of the Aquino terests threw themselves behind the Agency in an effort to hold "clean assassination" and "genuine, free, "electoral option "-an ironic elections" which swept away the cor­ and fair elections" to the national development since they were the same rupt Liberal Party leadership and in­ Assembly in May 1984.' forces which were the first to laud stalled America's choice, Ramon The Solarz resolution passed in the Marcos for his imposition of martial · Magsaysay, in the presidency. The midst of an increasingly strident law in September 1972. 12 In Manila, CIA effort included the formation of debate within the foreign policy the American Chamber of Commerce "citizen inspectors"and other public­ establish'menton the Marcos problem. joined other business bodies in relations paraphernalia which con­ The Wall Street Journal reaffirmed demanding • 'the clear designation of a vinced the entrenched elite faction the old Reagan posture of backing presidential successor, free news that the United States was determined Marcos at all costs: "Not only does media, an independent and honest to have Magsaysay, a reformistwJ.i �m Mr. Marcos have enemies worth judiciary, the restoration of basic con­ Lansdale had snatched from pro\rm­ fighting; he is waging his fight with a stitutional rights, and an end to per­ cial obscurity, elected president in skill that gives us little reason, now at vasive militarization."., order to take the wind out of the sails 7 11 least, to count him out. " Former of the insurgents. Ambassador to the Philippines Wil­ The successful Lansdale effort, liam Sullivan, on the other hand, ad­ which contributed to defeating the vanced what was tantamount to a pro­ DttliltdAssesslHIII of Oijtdfns ofIt Huks and stabilizing the Philippines posal for a CIA covert action when he S.,portersof ItParllalllldlry Option for over a decade undoubtedly suggested that the U.S. "take action, animated many of the pragmatists however messy, to assist a peaceful By December 1983, therefore, who in 1984 felt they confronted a and democratic transition in the powerful external political · and parallel situation. Philippines."' Sullivan spoke· with economic interests had lined up On October 18, at a gathering of the some authority since he had not only behind the limited parliamentary op­ Asia Society in Washington, Paul served as ambassador to the Philip- tion. For the American banks and cor-

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porations, the main interest was a the Communist-dominated New stable succession in the event of Mar­ People's Army ... this may well be cos' demise. Another concern leading the last opportunity to demonstrate the banks toward elections was the to the Filipino people that peaceful change is possible in their country." fear that Marcos was so discredited that he would lack the legitimacy Isolating the Left is one prong of the . necessary to impose on the population U.S. electoral strategy; the other is an austerity program designed by the reunifying an elite which has been International Monetary Fund (IMF). badly fragmented since the Marcos This program, which included such faction of the establishment belt-tightening measures as wage cuts, monopolized political power with the devaluation of the currency, tax declaration of martial law in raises, and cutbacks on government September 1972. Participation in the social expenditures, was the sine qua coming May 14 elections to the non of a $4 billion rescue package Marcos-controlled National w.1ich the banks had in principle Assembly is seen as a first step in this agreed to provide by late December. process of reunification. Again, In other words, to succeed, austerity American officials have been candid; had to be "democratized" or applied at congressional hearings on Feb. 7, by a government with some legitimacy 1984, John Monjo, deputy assistant derived from elections. se·cretary of state for East Asia, asserted: or the U.S. government, the elec­ f We trust that responsible Philippine toral option was dictated by two close­ leaders from the government, the ly related objectives. One was to split opposition, and the private sector the opposition, which had come to­ will make t.he extra efforts to make gether as a working, albeit fragile, this electoral process a genuine coalition after the Aquino assassina­ milestone in the political normaliza­ tion. The strongest element in the op­ tion process. If this election is suc­ position was clearly the National cessful, it could be the vehicle for Democratic Front, whose component bringing into democratic political groups include the Communist Party, life a whole new generation of office New People's Army (NPA), May First holders." Movement of Workers (KMU), Chris­ A special group within the elite that tians for National Liberation, and the CIA has targetted for cultivation is various associations of professionals the disaffected local business elite. like the Nationalist Association of "Already," reports Mark Fineman of Teachers and Nationalist Association the Philadelphia Inquirer, "U.S. in­ of Health Workers. telligence agents are known to be mak� Prior to the Aquino assassination, ing overtures to Manila's business government assessments were ap­ community, searching their disaf­ parently pessimistic about the ability fected ranks for a potential successor of the U.S. to head off a process of to power rather than looking within mass radicalization a la Nicaragua or the nation's petty and immature Iran. But, with the urban middle class political opposition." 16 This looking passing over from passive to active op­ to young business figures to lead the positionafter the murder, the pragma­ elite opposition was reflected in tists at the CIA and State Department formerAmbassador Sullivan's recom­ became more optimistic about the mendation that the U.S. pay special chances of stopping the leftist momen­ attention to "the young businessmen tum. The electoral option emerged as who now have come out to take a strategy of divorcing the middle­ political action, who had gone into class opposition, led by disgruntled business because careers in politics business leaders and the traditional were blocked." These figures, the elite opponents of Marcos, from the former CIA operator asserted, "are left opposition. The most prominent well disposed toward the United exponent of the parliamentary States." 11 strategy, Rep. Solarz, has not conceal­ Invigorated by fresh elements from ed this thrust behind the U.S. moves: business, loosely reunified .within a I think that these [May 1984) elec­ limited and largely cosmetic parlia­ tions may well constitute a historic mentary framework and resting on a watershed in the history of the military-rural and urban middle-class Philippines. At a time when there is social base, the elite can then get on growing support in that country for with the task of mounting the massive

Counterspy June-August 1984 37

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 counterinsurgency campaign which cally: that the extremely unpopular 1984 elections to the National Assem­ will be needed to stop the National Imelda Marcos be barred from suc­ bly. The Americans became especially Democratic Front'(NDF). It is for this ceeding Marcos, and that a constitu­ concerned when only an estimated 37 reason that hand in hand with the elec­ tionally sanctioned process of succes­ percent of the electorate voted in the toral strategy, the pragmatists are also sion be established. The latter would January 27 referendum, signifying pushing for the continued disburse­ consist of establishing the office of widespead public skepticism over the ment of the $900 million in military vice president and 'holding elections value of the exercise. and military-related aid promised to for president and vice president not By the beginning of 1984, Marcos Marcos under the new military bases less than 60days after Marcos' death. confronted an opposition dominated agreement approved in June 1983. As "Marcos resisted the move to re­ by five major blocs: JamesKelly, deputy assistant secretary store the vice presidency,'' reported • The traditional elite opposition of defense for East Asia and Pacific leaning toward participation in the Affairs, told Congress on Feb. 7, May elections. The leading political 1984, the New People's Army "in­ grouping of this forcewas the United surgency could reach critical propor­ Democratic Opposition (UNIDO), led tions in future years if the Govern­ by former Senator Salvador Laurel. ment fails to improve its credibility "I . would presume that • Newer elements of the elite, main­ and implement an effective counter­ ly with regional or local power bases, insurgency program which incor­ our instructions to our grouped in the Filipino Democratic porates political and economic, as well Party-Laban, who also favored par- as military components. " 11 That both_ people to allow the ticipation. the administration and liberal • Traditional elite personalities op­ pragmatists in Congress are united on opposition to win posed to participation, led by former the strategic importance of a massive President Diosdada Macapagal and counterinsurgency program was some seats might former Senator Jovito Salonga, head shown in the Solarz subcommittee's of the Liberal Party. report on FY 1985 aid levels: "The have been ta ken too • The pro-boycott Nationalist Subcommittee strongly believes that Alliance, which brought together elite U.S. military assistance should be literally," Marcos told nationalists like former Senator utilized primarily for equipment that Lorenzo Tanada and "sectoral" op­ will assist the Philippines in dealing an interviewer . . . only position groups representing, among with what is presently its chief military others, the lower clergy, workers, 1 problem, the NPA insurgency." ' half in jest. peasants, and the urban poor. The A third, if subsidiary concern, regime and the U.S. regarded the Na­ motivating the U.S. push for elections tionalist Alliance as alliedto the illegal is to provide a •�emonstration" of National DemocraticFront (NDF) and the current regime's legitimacy and thus saw it as the most potent of the viability fo the U.S. public. The opposition groups. assassination of Aquino and Marcos' the Washington Post. "But he • The political groupings formedby subsequent appalling performance on relented after his advisers convinced businessmen who had spearheaded the U.S. television, where he gave off the him that it was part of the price that much-publicized demonstrations after image of a blustering Mafia kingpin, '­ the International Monetary Fund and the Aquino assassination at the has made the traditional justification private bankers would insist on before Makati financial district. Perhaps the of U.S. aid to him-protecting the providing any more money. "20 Mar­ most powerful representative of this U.S. bases-much less convincing to cos, however, was not the only one to group was Enrique Zobel, a billionaire an already skeptical citizenry. The pic­ resent the pressure from the U.S. and banker with close ties to the CIA. 22 ture of a dictatorship on its way to the banks. The American hand in the But probably the most significant democracy is essential to prevent the plebiscite was so obvious that the grouping was the August 21 Move­ widespread public opposition to mili­ Catholic Bishops Conference-a body ment (ATOM), led by "Butz" tary aid for Marcos from passing from generally critical of Marcos but hardly Aquino, the slain opposition leader's a passive to a dangerous active stage, a bastion of radicalism and nation­ younger brother. Undecided on as in the case El Salvador. alism-felt compelled to warn: "No whether or not to participate, the foreign power is to meddle with our politicized business sector was being political sovereignty by attempting to intensely wooed by the participa­ determine in any way the conduct of tionists, the pro-boycott forces, and, P'Mseof Ont ItU.S. Plan: our political process." 21 Itaiary 27 Pltbisdte as noted earlier, the United States. In early January, the U.S. became he first phase of the electoral alarmed by a development which ap­ strategy for elections t,egan in the JIitPust: SeCOIKI peared to show that the pro-boycott weeks leading up to the plebiscite 1111May 1' NationalAssably Bections forces were gaining the upper hand: on the succession issue held on most of the major Philippine opposi­ January 27, 1984. This electoral exer­ The secondphase in the U.S.'s ''elec­ tion groups convened as the ''Con­ cise was intended mainly to satisfy the toral stabilization" program was to gress of the Filipino People" banks, who wanted two things specifi- generate momentum for the May 14, (Kongreso ng Mamamayang Pilipino

38 June-August 1984 . Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 . Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 ' or Kompil) and issued a set of condi- seems clear that the President of the tions that -the regime had to meet Philippines will feel justifiedin con­ before they would participate in the tinuing to retain an authoritarian elections. . government." Key among the demands of Kompil "Ambivalence" is too kind a word, was the repeal of Marcos' right to however, since the United States was make laws, which was, theoretically, not really interested in genuine the function of the Na tional democratization. It was interested Assembly. Essentially, this was a de­ principally in achieving "stability" on mand to dismantle dictatorship or terms that would satisfy U.S. in­ one-man rule. This was a sine qua non terests. As long as Marcos could pro­ of any meaningful electoral exercise, vide this without any vestige of formal for as Sullivan observed: "Free and or substantive democracy, there had fairelections are of little consequence been no complaints. Elections in 1984 if the legislative body chosen in those were designed to provide a substitute elections has no authority or if its form of stable elite rule by isolating authority can be usurped by Presiden­ 23 the progressive opposition and bring­ tial decrees." ing the elite opposition to a modus Equally important were the other vivendi with· Marcos. With the rapid demands raised by the joint opposi­ unravelling of the dictatorship, an tion: electoral ratification of such an • repeal of Marcos' power to order "enlarged" elite guard seemed the preventive detention of persons necessary to mobilize adequate public suspected of being "threats to na­ support. But in an important sense, aid package for Marcos for fiscal year tional security" and other Draconian the design was to prevent democra­ (FY) 1985, the first year of the new laws; tization-Le., majority participation bases agreement, which will provide • general amnesty and release of all and a system oriented to serving ma­ Marcos $900 million in military aid political detainees; jority interests. and military-related economic aid • the demilitarization of the elec­ This may explain the notable lack of over five years. Reagan proposed a toral process or keeping the military enthusiasm of the pragmatists for the military aid package totaling $180 away from the voting booths; full complement of conditions neces­ million and consisting of $60 million • appointment of "independent­ sary for a really free election. As one in Foreign Military Sales Credits minded" persons to the Commission government source privy to the State (PMS), $25 million in military grant on Elections and the creation of a new Department's negotiations with Mar­ aid (MAP), and $95 million in voters' registration list. cos and the elite ,opposition put it: Economic Support Funds (ESF). Kompil was, in short, articulating a "Sure, the opposition's demands are Solarz postponed the $60 million FMS set of conditions without which a fair reasonable. But they're unrealistic. credit to later in the five-year period of election could not be said to take Marcos won't grant key concessions the agreement and increased the place. When asked in congressional and he will determine much of the out­ economic support fund allocation to hearings about the State Department's come. But some opposition people $155 million. Thus, instead of receiv­ attitude towards the opposition will win-maybe 20 to 30-and that ing $85 million in direct military aid in demands, John Monjo answered in will at least give them a voice in the 1985, the regime wquld receive only classic Orwellian fashion: "I am not Assembly. ''26 At stake were 183 seats. $25 million. The administration put certain that each of these conditions is To give the exercise some legiti­ up only token opposition to this in­ absolutely necessary for free elections. macy, however, Marcos had to be itiative. I cannot say that without these, there made to make some concessions, But to former Ambassador Sulli­ 2 cannot be free elections.• • Monjo's albeit non-substantial ones. Just as he van, the advocate of a more radical ambiguousness, however, reflected had reluctantly created the office of approach to Marcos, the Solarz stick what former Ambassador Sullivan vice president, the dictator grudgingly was no stick at all: "I see no virtue in diagnosed as a larger policy am­ agreed to suspend the issuance of altering the mix. The Philippine bivalence: preventive detention actions till June l government will presumably spend Despite the testimony of administra­ and to agree to create a new voter's what it wants for military. purposes tion officials... the position of the list. and changing the components in ex­ United States government remains While working closely with State ternal funds merely means a compen­ ambiguous in the eyes of most Department officials in the com­ satory change in internal fonds. " 21 In Filipinos, and probably in the eyes plicated effort to stabilize the political other. words, Solarz' "backloading" of President Marcos. This is true situation by getting Marcos and the of military aid merely confronted because the President of the United e1ite opposition to agree to an electoral Marcos with an accounting problem. States has given no clear signal of his own personal commitment to a re­ modus vivendi, Congressman Solarz Indeed, the more important mes­ turn to democracy in the Philip­ was prepared to lean harder on Mar­ sage to Marcos was not the non­ pines. So long as the President of the cos in order to grant more legitimacy existent cut in aid but the reluctance of United States seems to waver be­ to the controversial exercise. He got one of his most vocal critics in Con­ tween the choice of authoritarianism his congressional subcommittee to gress to question the rationale of the or democracy in the Philippines, it amend President Reagan's proposed $900 million aid package. Indeed, in

Counterspy June-August 1984 39

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 justifying the "frontloading" of the and the issue-oriented progressive sec­ was not surprising then that when the economic component of the bases aid tor, which included the illegal national U.S. stepped in to "guarantee" the package, Solarz conceded that the Democratic Front, pushing hard for elections, despite Marcos' obstinacy, regime, despite all its liabilities, could boycotting the event. class interest immediately reasserted not be simply cut loose: Why the United Democratic Op­ itself against momentary political uni­ ...The Subcommittee is greatly position (UNIDO) decided to par­ ty. Here was an opportunity for the concerned about the severe ticipate despite minimal concessions elite opposition not only to politically economic crisis presently confront­ by Marcos was explained by former differentiate itself from the left but ing the Philippines, which is poten­ Senator Jose Diokno, the prestigious also to build . itself up as a viable tially far more dangerous than any nationalist who stood at the forefront organized alternative to the latter present external military threat. of the boycott movement: "Those i through the electoral campaign. Unless this economic challenge is ef­ Former Senator Eva Estrada Kalaw, fectively addressed, the possibility one of the key elite opposition figures, of an economic collapse cannot be typified this swing. Regarded as one of precluded. Under such circumstan­ the ruling-class personalities closest to ces, the ensuing political chaos would certainly lead to political in­ the left during the 1981 boycott cam­ stability, and play directly into the In 1982, the CIA, paign, Kalaw emerged as one of the hands of the NP A, whose ranks most vocal proponents of participa­ would be appreciably swelled by the tion in 1984. Indeed, in the thick of the victims of the collapse. fearing another Iran . campaign, Kalaw echoed the State In order to avoid these adverse scenario in the Philip­ . Department line of elite reunification developments, which would have in the face of the threat from the pro­ undesirable consequences for both pines, bega_n tapping gressive movement when he attacked the Filipino people ana the United the boycott movement as "heavily in­ States, the Subcommittee believes it filtrated by elements of the radical left would better serve the interests of the resources of and the Communist Party of the 2 both countries to provide a higher Philippines. " ' level of economic assistance to the Philippine academic Philippines this year than the level requested by the Administration. 21 specialists to figure MarcosSabotages the Strategy Solarz's effort to advance economic out U.S. options in the aid was, in fact, paralleled by an But if stability was what the U.S. administration-orchestrated effort to event of Marcos' over­ hoped to gain from the elections, it rush in huge sums of bilateral, World was badly disappointed. For to Bank, and Asian Development Bank throw or demise from counter a massive anti-Marcos vote in loans to Marcos in order to enable the the larger cities, which went for op­ cash-strapped regime to pay for im­ natural causes. position candidates, MarcQs partisans ports through the period preceding the engaged in massive fraud in the rural elections. With close to $1 billion in areas, where few foreign corre­ emergency aid committed by the U.S. spondents and neutral observers were government, U.$.-dominated multi­ present to observe the voting. Marcos' lateral institutions, and U.S. allies like participating in the elections are only a powerful electoral machinery, which Japan and Australia, the regime was new generation of the old breed of had delivered "landslide" victories in spared the prospect of having to apply leaders ... these are leaders whose on­ the nine previous voting exercises an IMF austerity program prior to the ly training has been in the electoral since 1972, again worked its "magic" elections. An agreement with the Fund process, so when the electoral process to ensure dominance of the National was the key condition for a financial dies, as in a dictatorship, they don't Assembly by Marcos' ruling party. rescue package from the private know what to do." By belittling the stronger than ex­ banks, but the devaluation of the peso For twelve years, the Marcos' fac­ pected showing of the opposition in to the black market rate which the tion's monopoly Qf political the Manila area, charging the latter Fund demanded would have been patronage had left the opposition elite with fraud and terrorism, and brazen­ suicidal for the already discredited without the wherewithal to sustain ly advancing a plan to increase his ap­ regime if it were done before the elec­ their grassroots networks, at the same pointees to the 200-member Assem­ tions. time that the underground left was in bly, Marcos was telling the opposition the process of forging powerful mass that he was in no mood for genuine organizations based on class-specific reconciliation and signalling the U.S. S,lltflnaIlle Oppositioll demands and issues. When the elite not to expect any more concessions. opposition and the left joined hands to The U.S. project was clearly being espite Marcos' refusal to boycott Marcos' stage-managed elec­ undermined by the dictator, as a post­ dismantle his law-ma king tions in 1981, the former became un­ election analysis in the Washington powers, the U.S. achieved its comfortably aware of their depen­ Post revealed: primary goal of splitting the dence on the organizational clout of Instead of trying to put the best face opposition, with the established elite the progressive movement to turn the on the opposition's strong electoral opposition opting for' participation venture into the success that it was. It showing and to draw the alienated

40 June-August 1984 Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 moderates back into a revitalized ists within the Army command. And, Parts of this essayare adapted from a Philippines political process, Mar­ as with the project of electoral larger study by Walden Bello and Ed cos' ruling party seems to be doing stabilization, it is difficult to see what Herman entitled "U.S.-Sponsored its utmost to roll back the moder­ a coup by "military reformists " can Elections: The Philippine Example," ates' gains and shut them out even do to arrest what is a larger trend: the which appeared in Who Magazine more. The effort risks vindicating those who advocated a boycott ...•• accelerating momentum of the Philip­ (Philippines), on May 2 and May 9, pine polity toward the left. 1984. The paper noted that "those who stand to lose most fromsuch a recon­ ciliation are the communist rebels of Notes the New People's Army, who have I. Jeane Kirkpatrick, "Dictatorships ing Regime," Philadelphia Inquirer, been waging a steadily growing in­ and Double Standards," Commentary, January 8, 1984, p. 17. surgency in the countryside." 3 1 July 1979, p. 37. 17. Answer to question by Rep. Steven Marcos also took the offensive 2. Confidential airgram from G.S. Solarz at hearing of the House Foreign Af­ against the State Department Sheinbaum, U.S. Consul, Cebu (Philip­ fairs Subcommittee on East Asia and the pragmatists. In an attempt to split pines) to Secretary of State Alexander Pacific, Washigton, D.C. Feb. 22, 1984. U.S. policymakers, Marcos began Haig, Washington, April 13, 1982. 18. James Kelly, "Statement to the Sub­ harping on a theme close to the heart 3. Letter to Prof. Belinda Aquino from committee on Asian and Pacific Affairs of Justin Green, March 7, 1983. the Committee on Foreign Affairs, House of the conservative ideologues at the of Representatives," Washington, D.C. White House: the looming "Com­ 4. Personal communication from a par­ Feb. 7, 1984. munist threat." In justifying his con­ ticipant in the conference who wishes to re­ 19. House Foreign Affairs Subcommit­ tinuing to exercise emergency law­ main anonymous, March 15, 1984. This tee on Asian and Pacific Affairs, "Report making powers, he stated: "I don't person, a noted Philippine specialist, now and Recommendations of the Subcommit­ know why Americans do not seem to regrets his participation. The title of the tee on Asian and Pacific Affairs to the realize the danger of a communist conference was ''Crisis in the Countryside: House Foreign Affairs Committee on The Rural Economy and In surgencies in Fiscal Year 1985 Foreign Assistance rebellion in the Philippines .... We the Philippines." A list of participants is have to face up to the fact that if we do Legislation," Washington, D.C., March available fromthe authors upon request. I, 1984, p. 27. not weaken the NPA subversives now, Talk at Asia Society, Washington, later on they'll be marching in the 5. 20. "Philippine Referendum Revives D.C., October 18, 1983. Vice Presidency," streets here and proclaiming a Washington Post, 6. Congressional Record, October 24, January 28, 1984, p. A17. takeover of the government." 1983, p. H8566. 21. "Bishops Urge Fair Play," Agence 7.Wall Street Journal, editorial, Oc­ France-Presse, Jan. 6, 1984. tober 6, 1983. 22. Zobel's close connections with the llltU.S. Dilemma 8. New York Times, October 3, 1983. CIA were disclosed in court papers of the 9. Quoted in Jesus Bigornia, "Armacost scandal involving the activities of Ron alf-way liberalization is often­ has Pricked Filipino Sensibilities," Rewald which is now rocking Honolulu. times more destablizing than Bulletin Today (Manila), Nov. 22, 1983. Rewald is being charged with fraud and IO. Ibid. embezzlement in connection with the all-out repression. This lesson 11. Lansdale's exploits are documented operations of his firm, an investment com­ from other countries where the in his autobiography,In the Midst of Wars pany. Rewald claims his office was a CIA U.S. tried to pull off a controlled (New York: Harper and Row, 1972). financial front. The CIA then moved to decompression is apparently being 12. The American Chamber of Com­ censor Rewald's defense affidavits and seal played out in post-election Philip­ merce was one of the first to send Marcos a most of the defense exhibits and docu­ pines. A few days after the election, congratulatory telegram which read: "The ments. The Rewald case was the subject of several thousand enraged citizens tried American Chamber of Commerce wishes a British Broadcasting Company (B BC) to storm a provincial capital in protest you every success in your endeavor to documentary, which aired in London in against electoral fraud. This incident restore peace and order, business con­ mid-March 1984. fidence,economic growth, and well-being 23. William H. Sullivan, "Testimony was merely the most dramatic of of the Filipino people and nation. We before the Subcommittee on Asian and scores of post-election manifestations assure you of our confidence and coopera­ Pacific Affairs, House Committee on of a deep sense of popular anger at the tion in achieving these objectives. We are Foreign Affairs," Washington, D.C. Feb. dictator's cavalier attitude toward the communicating these feelings to our 22, 1984, p. 3. massive vote against him. associates and affiliates in the United 24. Answer to question by Rep. Steven With its attempt at stabilization States." Cited in Walden Bello, David Solarz at· hearing of Subcommittee on leading instead to swifter radicaliza­ Kinley, and Elaine Elinson, Development Asian and Pacific Affairs, House Foreign tion, the U.S. is increasingly faced Debacle: The World Bank in the Philip­ Affairs Committee, Feb. 7, 1984. with the very unpleasant choice of pines, p. 21. 25. Sullivan, p. 2. riding with Marcos through hell or 13. "Marcos Blames Businessmen for 26. Personal communication from U.S. Economic Crisis," WashingtonPost, Nov. government officer who wishes to remain high water (if the right-wing ideo­ 11, 1983. anonymous, Feb. 2, 1984. logues prevail) or throwing him out 14. CongressionalRecord, October 24, 27. Sullivan, p. 3. through a military coup using disaf­ 1983, p. H8566. 28. House Subcommittee on Asian and fected "professionals " in the military 15. John Monjo, "Statement before the Pacific Affairs, p. 25. (if the pragmatists continue to call the House Foreign Affairs Subcommittee on 29. Quoted by Agence France-Presse, shots). The lattet would be an ex­ East Asia and the Pacific," Washington, March 3, 1984. tremely difficult course given the D.C. Feb. 7, 1984, p. 10. 30. Washington Post, May 23, 1984. strategic placement of Marcos loyal- 16. Mark Fineman, "Anatomy of a Dy- 31. Ibid.

Counterspy June-August 1984 41

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 RUTGERS UNIVERSITY: INTELLIGENCE GOES TO COLLEGE . group in the Political Science Depart­ BY KONRAD EGE ment at Rutgers is embarking on a study of social, economic and political utgers University Professor changes in WesternEurope that may Richard Mansbach is examining affect national foreign policies vis-a­ whether political organizations vis the Atlantic Alliance." Mansbach in Western Europe are en­ asks his European colleages to inform dangering U.S. geopolitical and him of "completed work, or work-in­ military interests. Has the West Ger­ progress, that may be useful to us in man Green Party managed to under­ our effort to synthesize what is known mine NATO unity? Are the anti­ about the many aspects of change in nuclear Dutch churches infiltrated West European society and politics." and directed by Communists? What The letter does not mention that this parties in the Federal Republic of Ger­ he served as a consultant to the USIA. "research group" is financed by the many, Italy, France and England put From January 1981 to January 1983, CIA. Neither does it disclose that roadblocks in the way of the foreign Mansbach was a full-time staffer at Mansbach works as a CIA consultant. policy decisions of their governments? CIA headquarters. ENSAP is based on the theory that Richard Mansbach's effort is not In those two years, Mansbach there has been a resurgence of Euro­ your average academic research pro­ worked in the National Intelligence pean opposition movements over the ject. The professor is a consultant to Council's European Analysis divi­ last few years which aim to influence the Central Intelligence Agency. The sion. Apparently, he did a good job. the decision-making process on CIA commissioned the project and is As Mansbach was leaving, his foreign and military policies. ENSAP paying well over $20,000for it. superior let him know that the CIA is to determine how they prevent the At Rutgers, Mansbach is known as had "profited greatly" from his ser­ European governments from follow­ an intelligent and liberal professor. vice. Mansbach was also invited to re­ ing a "consistent" foreign policy, and 'For two years, he served as the en­ join the CIA whenever he wanted. how they impact on U.S.-European vironmental commissioner in his But Mansbach made a different relations. hometown of Bridgewater, New career decision. He went back to The term "non-state actors" in­ Jersey and in one of his courses about Rutgers to become the head of the cludes organizations and institutions nuclear war, students are required to political science department. The from a wide spectrum of society: chur­ read a piece by peace activist Helen CIA's National Intelligence Council ches, the media, opposition parties, Caldicott. immediately tried to develop projects unions and women's groups-to name In 1967, Mansbach wrote his disser­ on which their valuable researcher a few. About churches, for example, tation at Oxford University ("The could work while at Rutgers. The ENSAP-i.e., the CIA-would like to Soviet-Yugoslav Rapprochement of Council chose ENSAP-the Euro­ know how many members there are; 1955-1958: Its Political and Ideo­ pean Non-State Actors Projects. who is in charge of their publications; logical Implications"). Then he (Non-state actors are those organiza­ what their "known assets" are; and became an assistant professor at tions, institutions and individuals who how extensive their "tax-exempt pro­ Swarthmore College and Rutgers attempt to influence government deci­ perty" is. University. Later on, he served as a sion from the outside.) Questions about the media aim for visiting professor at the University of For his ENSAP effort, Mansbach is information about ownership, cir­ Singapore and at Princeton Universi­ assisted by Rutgers Professor Harvey culation, and "advertising revenue ty. Today he is the chairperson of the Waterman. As does Mansbach, and sources." As far as women's Political Science Department at Waterman has a top-secret security groups are concerned, ENSAP is in­ Rutgers in New Brunswick. clearance. About 100 students have terested in their alignment with other Throughout virtually his entire been gathering information for EN­ forces. And asks: "How homogenous career, Mansbach has had close ties to SAP for academic credit. Most of the are women's groups?" intelligence and other: government students don't know that they are The ENSAP questions apparently agencies. In 1975, he lectured at the working for the CIA. were changed at CIA's request. The CIA, in 1977 at the United States In­ Mansbach has also written to CIA demanded "data-intensive formation Agency (USIA), in 1982 at dozens of organizations and research analysis." Mansbach apparently will the National Security Agency and at institutes in Europe. In his form letter, present the CIA with his research the U.S. Army War College. In 1978 the professor states that "a research results in August 1984. In addition, he

42 June-August 1984 Counterspy

Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 plans to write a book based on the EN­ Allen and Hamilton has been paying mation Act show, for instance, that SAP material. Professor Justin Green to gather in­ several university presidents (from the In his book Quantitative Ap­ formation about the New People's Ar­ University of Tulane in New Orleans, proaches to Limited Intelligence: The my, the armed wing of the communist Johns Hopkins University and the CIA Experience, Richard Heuer, the Party of the Philippines. 3 University of Minnesota), along with former head of the CIA's Methods According to Casey's predecessor, Jack Peltason, president of the and Forecasting Division, confirms Admiral Stansfield Turner, the CIA's American Council on Education, met that an ENSAP-type research project, relationship with academia has "been with Turner and a number of high­ financed by the CIA, is different from of inestimable value to the intelligence ranking CIA officers at CIA head­ "regular" academic research. "While community." In working with the quarters in Langley, Virginia in June the academic researcher is relatively professors, however, Turner wrote to 1978. The academicians were given free to define a problem on his own Harvard University president Derek confidential briefings, including one terms, our [CIA] research problems Bok, that the CIA was not willing to by John Stein, then Associate Deputy are greatly defined by the re­ comply with existing university Director for Operations, and by the quirements of U.S. foreign policy. regulations about ''o utside Deputy Chief of the Domestic Collec­ The academic researcher chooses a contracts." tion Division (whose name is deleted topic for which data are available, When the CIA was taken to court on the FOIA documents). whereas it is often new problems (or several years ago because it refused Turner had invited the presidents, old problems defined in new ways) for -and still refuses-to release files saying that it was time to improve which the policymaker requires in­ CIA-academic relations. ''In the wake telligence analysis.''' of considerable public criticism over Analysis for the CIA is geared the last several years," Turner wrote toward providing information that When Richard in a May 1978 letter to Michigan shows how the CIA might be able to University President Robben Flem­ influence events. Detailed informa­ Mansbach left the ing, "the Agency has had difficulty in tion about a publication's advertising maintaining open and mutually revenue, for instance, might allow CIA, thel CIA' s beneficial relationships" between the "someone" to influence its editorial CIA and academia. "I would like to policy through pressure on large National ·Intelligence ask your help and advice in determin­ advertisers. Information about the ing how best to restore a useful but homogenity of women's groups might council immediately proper connection between academia give clues about how to disrupt them. and the world of intelligence." According to some of the students tried to develop The conference seems to have been working on ENSAP, Mansbach is a success. Several days after it, Turner especially interested in uncovering projects on which wrote to Jack Peltason that he found "communist influence" on opposi­ "our exchanges both stimulating and tion organizations. The West German their valuable helpful." "I am especially ap­ Green Party has been closely scrutiniz­ preciative," Turner contmued, "of ed in that regard, said one student. researcher could work the concrete suggestions that you and your colleagues left behind." Turner's while at Rutgers. letters to the other participants were To Rule The World equally laudatory. Although Peter contammg the names of professors Magrath from the University of Min­ ansbach is not an isolated case. who had consulted for the CIA, nesota urged Turner to keep his par­ CIA Director William Casey F.W.M. Janney, then the CIA's per­ ticipation at the CIA conference places great emphasis on close sonnel director, expressed even more secret. collaboration with universities. clearly the CIA's need for assets in the In a 1981 speech to agency employees, academic community. In many fields, Casey stated that CIA officers Janney wrote, it is "absolutely essen­ Pentagon Contracts "regularly" meet with scientists and tial that the agency have available to it academicians to discuss a wide variety the single greatest source of expertise: he CIA is not the only intelligence of questions. At the University of Il­ the American academic community.'' agency active at U.S. universities. linois (Chicago), for example, the CIA CIA officers in the National Foreign For the last few years, the Defense has been funding a project to Assessment Center, Janney added, Intelligence Agency has increa- "develop statistical models of gover­ regularly consult with academicians singly tried to "farm out" research nability on a global basis. "2 on an "informal and personal basis, projects to academicians and univer­ While the U.S. government might often by telephone."• sities. In 1981, for instance, the DIA not be quite ready to govern "on a According to former CIA press offered various universities specializ­ global basis," it is making every effort spokesperson Dale Petersen, the CIA ing in African studies hundreds of to keep control of individual coun­ has been holding three to four con­ thousands of dollars. CIA analysts tries. Academia plays a role in laying ferences for university presidents a wanted to attend these African studies the groundwork and maintaining the year to discuss "mutual problems." departments to study languages. And, status quo. At Villanova University in Many of the presidents accept the in­ the departments would also par­ Pennsylvania, for instance, the CIA, vitations, Petersen said. Documents ticipate in DIA research projects and through the consulting firm of Booz, released under the Freedom of lnfor- conduct field studies.'

Counterspy June-August 1984 43

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According to a Christian Science under the Reagan administration. way geared to policy makers. Under Monitor article, all African Studies While programs such as the national the NSC proposal, that would change. Centers (there are 12 in the country) Science Foundation have been cut, the Some university presidents have ex­ turned down the DIA offer, in spite of Pentagon budget is on the rise. Several pressed concern about "academic the DIA's promise that everything months after Reagon took office, an freedom" if much of the government would be "o ut in the open, internal Princeton University money for research is channeled aboveboard." Rita Breen, executive memorandum stated that the universi­ through the National Security Council. officer of Harvard University's Com­ ty would try to make up some of the And the NSC plan is likely to remain mittee on African Studies argued that NSF cuts by applying for Pentagon on hold until after the presidential "any intelligence linkage is a grants. Chemical and biological war­ elections. With further cuts in other suspicious one .. .. Even the agency's fare were listed as especially promising government funding programs, how­ overtures might compromise scholars, fields. ever, it seems likely that more and there is so much suspicion of U.S. in­ The lucrative Pentagon contracts more universities might eventually telligence.'' Other academicians and a close relationship with the CIA agree to the project. Many U.S. pro­ argued that collaborating with the have tied many universities closely to fessors have no qualms about doing DIA was incompatible with academic the "National security apparatus." research for the CIA and the Pen­ openness. And that "even the ap­ The Reagan administration is tagon. They seem to agree with former pearance of such a relationship is very deliberating additional steps to bring CIA Deputy Director Frank dangerous from an academic pQint of the international studies field virtually Carlucci's statement that the CIA view."' under the control of the National functions much like a university. Even more common than university Security Council. Under such an NSC Some organizations and individuals collaboration with intelligence agen­ scheme -favorably described in a examining the CIA's academic con­ cies is university research for the Pen­ publication of Georgetown Universi­ nections have come to a different con­ tagon. (The 1976 Senate Select Com­ ty's Center for Strategic and Interna­ clusion. The Student Cooperative mittee on Intelligence report on the tional Studies- the NSC, advised by Union at the University of California, CIA stated that academics col­ governmental and academic commit­ in its report entitled "A Censored laborating with the CIA "are located tees, would be in charge of allocating History of Relations Between the in over 100American colleges, univer­ government money for various inter­ University of California and the Cen­ sities and related institutes.") 250 national study projects. The NSC tral Intelligence Agency" concluded universities and colleges had Pentagon would determine which research best that the "university cannot col­ contracts during 1980 and 1981, with a served U.S. government interests.• laborate with the CIA without sharing combined value of about $1 billion. Advocates of that scheme argue culpability for its actions. Research Two universities were able to attract that the U.S. has a "deficit" in inter­ done for the CIA has direct impact on nea rly half of that money: national studies research. This is said the lives of people around the world. Massachusetts Institue of Technology to have impeded foreign policy deci­ ... As long as the university functions and Johns Hopkins University. sions. "Failures" such as the revolu­ as a service agency for the CIA, or as a • Topics for academic research pro­ tion in Iran were not intelligence cover for its 'academic' and pro­ jects range from biological warfare failures, but research failures, accor­ paganda purposes, any claim to the related issues (University of Maryland ding to Robert Ward (Stanford Uni­ university's role as an open and at College Park) and laser technology versity), one of the originators of the democratic institution is farce." (University of Washington at Seattle) NSC scheme. "There was... a persis­ to weather modification (University· tent failure to analyze or appreciate Notes of Berkeley) and submarine warfare the precariousness of the Shah's rule 1. Quoted in Walden Bello, "CIA Taps (Catholic University). in Iran ...."' As of now, universities Academia to Design Post-Marcos Scenar­ Universities are becoming increas­ simply· are not prepared to research io," Counterspy, vol. 8, no. 2, p. 29. ingly dependent on Pentagon money problems in a timely and systematic 2. See Counterspy, vol. 7, no. 2, p. 8. 3. Cf. supra, n. 1. 4. Washington Post, 6/12/78. S. Christian Science Monitor, 8/20/81. 6. Ibid. The Professor Speaks 7. See John Kelly, "Princeton is No irst telephone call to Mansbach. wouldn't do it." Everything about Tiger Lily," Counterspy, vol. 6, no. 4, pp. F 23-29. Question: Who is paying for the ENSAP is open, according to ENSAP research? Mansbach: Mansbach. 8. Robert Ward, "Studying Interna­ "Basically the State Department." tional Relation s," The Washington The professor says he does not Uke Quarterly, Spring 1983, pp. 160-168. See Is it true that you are a CIA consul- the ''conspiracy sound'' of the ques- also Andrew Kopkind, "A Diller, A tant at present? "Yes, it's true, but it tions. He prefers it, he says, when in- Dollar, An NSC Scholar," The Nation, has nothing to do with ENSAP." telligence agencies gather material 6/25/83, for an analysis of the NSC plan. Second call, a few days later. Con- the way they do it through ENSAP. 9. Robert Ward, "Studying Interna­ fronted with more evidence, the pro- Intelligence agencies should use tional Relation s," The Washington fessor cedes that ENSAP is fi- more open sources, he adds. Quarterly, Spring 1983. nanced by the CIA. The professor is Mansbach also denies that he angry. His work in ENSAP presents discussed the shape of ENSAP with This article appeared first in an ab­ no conflictwith academic standards, the CIA. Counterspy has documents breviated version in Konkret (Hamburg, he says. "If I saw a conflict, I proving the contrary. West Germany), May 1984.

44 June-August 1984 Counterspy

Approved For Relea�e 2010/06/14: CIA-RDP90-00845R000100130002-1 South Africaclaims it no longer discriminates against some eleven million blacks because they are now "citizens of their own homelands." Thus Pretoria argues that it should be allowed back into the Olympics.

initiatives and their participation in ment is bidding for participation in the BY DR. DENNIS BRUTUS the Olympics, some history is in order. 1988 Olympics in South Korea. They South Africa last had a team in the have already applied to the IOC for AND ALLAN EBERT-MINER Olympics in Rome in 1960. Then, in readmission' and are looking forward 1964, after heated debates and to operating a propaganda center in y signing non-aggression pacts demonstrations, South Africa was ex­ Los Angeles during the summer with Mozambique, Angola, and cluded from the Tokyo Olympics for games. South Africa also has eight Swaziland, Prime Minister Botha refusing to pledge that it would select honorary consulates in country, and of South Africa has won a victory its best athletes on merit and not ex­ an additional two approved in princi­ of sorts. It is an indication that South clude blacks. In 1968, after more ple by the State Department. These Africa has shifted its tactics. The rankling and demonstrations, South consulates offer information on South largest resistance movement of South Africa was excluded from the Mexico African sports which argues that they Africa, the African National Congress Olympics. Several countries threatened have been wrongfully excluded. (ANC), will undoubtedly feel the a massive boycott at that time if South In a British Broadcasting Corpora­ brunt of these moves, which will also Africa were allowed to participate. tion telecast last summer Dr. Wilf serve to appease Pretoria's Western Rosenburg, former Springbok rugby critics. These initiatives may even help In 1970 South Africa was finally ex­ center and League player for the South Africa get a publicity office out­ pelled from the International Olympic Leeds, South Africa team, claimed side the 1984 Olympic Games in Los Committee (IOC) for violating a fun­ that "unbelievable changes" have oc­ Angeles, and may very well get them damental principle of the Olympic curred since the 1970s. He admitted full participation in the 1988 Games in Charter which forbids membership to that some wrongs have occurred in the South Korea, a move they desparately any country that discriminates on the past. But, he said, "we are moving desire. basis of race, color, religion or forward in the right direction, par­ To understand the connection bet­ politics. ticularly the present [Botha] govern­ ween South Africa's latest "peace" Nonetheless, the Pretoria govern- ment. " 2

Counterspy June-August 1984 45

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Recent advertisements in major African teams, called "internation­ U.S. newspapers and magazines boast In 1964, after heated als," can compete against them. that change is occurring in South Athletes of all races, called "interna­ Africa. One particular ad features two debates and demon­ tionals," should belong to their own students strolling through the white­ clubs and control their own sporting pillared halls of a university, amiably strations, South Africa events. Committees from these "inter­ conversing with books in hand. One nal nations" are to cooperate among student is white, the other black. The was excluded from themselves and arrange, with govern­ heading reads, "South Africa Is ment permission, inter-group com­ Changing." the Tokyo Olympics petition. By permit from the Minister Another recent advertisement ap­ of Sport they arrange matches bet­ peared in a major mid-west for ref using lo pledge ween themselves and even "leagues newspaper. It featured three little comprising different groups."' Final­ black children playing in front of a that if would select its ly, sports facilities for blacks are to be newly-built ranch home. We get the improved, but their use is to be reserv­ impression that they live in that home. best athletes on merit ed for black associations which The ad reads: "Imagine buying a four­ respect this official policy. A small roomed, State-built house for as little and not exclude black elite is encouraged and por­ as $800. Or a five-roomed house for trayed publicly to buttress Pretoria's between $2,331 and $16,000.It's hap­ blacks. claims that things inside South Africa pening right now in South Africa." are truly changing. The ad goes on to assert, "South Africais involved in a remarkable pro­ Pretoria claims it no longer· cess of providing fair opportunities discriminates against some eleven for all its population groups. The million blacks (about 40% of black South African government is commit­ population) because they are now ted to ensure that each of South The sharpest clash of sporting "citizens of their own homelands." Africa's many nationalities have the 'disparities comes when one looks at These independent homelands are free ability and resources to realize their Soweto, that overcrowded ghetto of . to make their own sports policy. Thus, social, economic and political aspira­ black workers, and Johannesburg, its :Pretoria argues that they have "been tions." largely white, metropolitan neighbor. persecuted too long" and want back The implications are clear. South Soweto has well over a million in­ into the Olympics. But these are all Africa is saying that everyone is being habitants while Johannesburg has very strange ancl paradoxical given a fair chance. All races are on about one-third as much. Soweto has arguments. The government forcibly equal footing now. Apartheid and only five swimming pools, six cricket removes blacks, "colored" and racial discrimination have been eradi­ patches, four rugby fields, 140 soccer Asians from communities where they cated. But it may all be part of a long­ fields, most of them in poor condi­ have been living for generations and distance game plan to win friends and tion, one bowling green and one golf dumps them into desolate, barren. influence people before the 1988 course.' According to Harry Pangola, rural areas where there is no possibili­ Olympics in South Korea. The truth is black boxing reporter for the white ty of work or any kind of social things have not gotten better for black Rand DailyMail, Soweto has only one development. Families of 6 are sup­ athletes. They're gotten worse. gymnasium, its condition appalling. It posed to live on lOR a month. In fiscal year 1982-83 the South has one 'Twilley' lamp, a punch bag, Malnutrition, diarrhea and other no showers, no lockers and "no African government spent 9.9 million 6 diseases are rampant. This side­ Rand (1 Rand equals 1 U.S. dollar) semblance of a ring." Meanwhile, stepping or abandonment of blacks in­ promoting white school sports. It Johannesburg has per capita the to "homelands" on the grounds of spent a mere 14,700 Rand on black greatest number of private tennis their "independence" is as calculated children "interested" in sports. 3 courts, swimming pools and golf and vicious an evasion of responsibili­ Black school age children outnumber courses in the world. Behind only the ty as any in South Africa's racial white children 4 to 1. In short, the United States and Australia, South history. Africa is the greatest user and im­ white rate of spending was 680 times 1 South Africa is more readily chang­ that of the black rate on school sports. porter of swimming pool chemicals. ing its relations with its neighbors. Of interest also is the comparison of Domestic changes in sport and the 14,700Rand spent on black sports uth Africa's official and com­ elsewhere have simply not occurred. and government expenditures on plicated sports policy is based1on Change will not occur if the South visiting teams and athletes: 47,SOOR 1971 recommendations by the African government can appease its was spent on foreign cycling tours; "Broederbond"f-a secret broth­ critics through non-aggression pacts 20,000Ron a fencing tour; 15,000Ron erhood of "Super Afrikaaners" who which are tentative and often unen­ some foreign gliders; and 35,000Rfor Sharness all political, administrative, forced, but good for their interna­ an international "tug-of-war."' The social and, where possible, economic tional image. Recent parliamentary South African government claims that forces for its own cause.• This policy reforms have only come about such expenditures are related to the in­ states that Bantustans, which are because of external pressure. Any pro­ ternational importance of the events, ostensibly "independent" and only posed change in social, cultural, or and the publicity they generate for recognized by South Africa, control sports life will only come about Pretoria. their own sports matches. And South because of bannings, boycotts and the

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like and ·not because the government or sports administrators suddenly get struck by brotherly love. SouthAfrica Serious questions are being raised no\\ with the Los Angeles Olympics a few short months away. It has been Housesfor sale: reported that the Olympic Charter is our being completely revised, maybe in time :=:.�=��i:i - d.16� an· -1��i�t�:'"� 000 lan r d 1ess for the summer games. Various groups y � a�!'.�med 'PJJ -- -- .ll a���r��l; �=-o ---,-,=:::-:-:-==c:-=- want to see the ban against South h useror between S2 331 and S16 000. MEETING THE Afrw.,n lifehave changed - andare Africa upheld. They don't want the It's happeningright now - in HOUSING CHALLENGE changmg ·'' an ever-increasingraie. TI1e futureis exa,m� u SouthAfrica. SouthAlrica·s u rbanBlack populati on beca se we havethe wording of the Charter diluted so as to ple the det!•� o SHARING A BETTER isexpected to riSe millionfrom 9 currently peo , ti n and a buoy21n to ena o provide the IOC with .a loophole for QUALITYOF LIFE u 20 on by m o economy l,le "'to keep n toaro nd milli thetu r the providingoppomn cenrury. It isestimared that anadditi on.al ••tiesand improving South Africa's readmission. The SouthAfrica is involved in a he uality ortire or al, ur" peo e o r mill housingunits wi llh ave to be l q pl � JllOO!SS r providingfa i 4.9 ion Sou h A South African Non-Racial Olympic all o u � l r � ,, a mtCIOCOS!llol opporrunitiesfor itspopulati n gro ps. providedto aa:ommodare this somany o the wor �s sennl 7 whether or not South Africa could be ownershipforeveryone,the South THEFUTURE - BETTER \ �'���'::.:,�'.::�: \ AfricanGovernment has given the go- PROSPECTSFOR ALL 1 ""'h""""'nr m,� ,w 1 readmitted. SAN-ROC also wanted r r aheadfo the sale of 500 000State u % of J 1\.-ar,c�:ndm1:rnflrr111rnl1:111111111n �ll'll\•• A recents rveyindicated th at 82 : rnmr:ant.I f(JA1ul lX.,1.-illplk11L,Ill :-.11.rlhMni.�• I information on what considerations financedhomes at discountsof up to allemployers were to prepared provide 40 % of their marketvalue. 1 �"'"' 1 were going into revising the Olympic their Black staffwithlassistance to buy 1 ""'"'�' , Charter. The letter ended with a de­ theirown homes L------��----J mand that South Africa not be read­ mitted into the Olympics "until all legislation discriminating against athletes on the ground of race be removed." A month later Dr. Samaranch responded. But never mentioned whether or not a committee had been 'convened to look into South Africa's participation. He did not declare his position on the future participation of South Africa, but merely stated that the IOC's "policy has not changed" with regard to South Africa. One problem faced by organiza­ �'relooking to forward the� tions opposed to South African par­ ticipation in the Olympics is that the Olympic Executive Committee gener­ This ad which appeared in the Chicago Tribune itt.January claims that "the South ally votes in secret on these matters. African Government is committed to ensure that each of South Africa's many That would defuse much needed nationalities have the ability and resources to realize their social, economic and public debate. The U.S. Olympic Com­ political aspirations." mittee Chair is William Simon, Richard Nixon's Secretary of the Treasury. He has not come out against NOTES: 8. "The Super Afrikaners: Inside the South Africa's participation in the Afrikaner Broederbond," Ivor Wilkins I. ''Keep South Africa Out of the Olym­ and Hans Strydom, Jonathan Ball Pub­ Olympics. As in other international pics," D. Brutus, Los Angeles Times lishers, (1978) Ch. 14, "Sport Policy," pp. organizations, U.S. influence in the (March 1984). 239-252. IOC is quite formidable. 2. "South Africa Sport and the 9. Ibid. If the Olympic Charter is revised Boycott,'' Producer, Ron Pickering, and reflects a relaxed attitude toward British Broadcasting Corporation. Televis­ the participation of apartheid South ed in England J1me28, 1983; shown in U.S. Africa in the Olympic games, then Dr. on ABC's "Four Corners" (Aug. 6, 1983). DennisBrutus is a South Africanexile, Samaranch would also be following 3. House of Assembly in South Africa, poet and professor at Northwestern policy in the interests of Pretoria. A Hansard (May 2, 1983) cols. 6115-6128; University. He led the successfulmove­ simple declaration that South Africa cited by Colin Tatz, "Sport in South ment in the 1960s to exclude South Africa," Australian Quarterly, Vol. 55, Africa from the Olympics. would not be able to participate in No. 4 (Sum. 1983) p. 6. such a great event until it dismantles 4. C. Tatz, p. 5. Allan Ebert-Miner is a freelance jour­ apartheid seems sufficient and would 5. BBC Broadcast. nalist and student at Antioch School defuse explosive cpntroversy for the 6. C. Tatz, p. 6. of Law. He is also the Washington IOC. 7. C. Tatz, p. 7. , r:oordinator for Africa Network.

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REW ALD'S CIA STORY corresponding to Canadian's phone Continued from p. 17 Rewald cultivated bills. There is also a State of Hawaii incorporation statement. Dated May Enrique Zobel for the 30 1979, it was signed by Rewald as vi�e-president/treasurer. In court, in­ parties. H & H's cover sheet said it was CIA through joint terim bankruptcy . trustee Thomas run by Rewald and Sunny Wong. Re­ Hayes stated that BBRDW was pro­ wald's wife, Nancy, is also listed as ventures. "Our whole viding a "special phone" for the CIA. someone to call. The cover sheet con­ A reporter found a black phone in cludes: "All expenses related to the purpose in developing Rewald's office separate from operation of this cover shall be reim­ Zobel was he was BBRDW's switchboard. It was listed bursed by the Central Intelligence in the telephone directory under Cana­ Agency." very, very close to dian Far East Trade Corp. CIA agents At this point, says Rewald's affida­ James T. Edwards (aka "James T. vit, "In my role as an international President Marcos. Bishop") and Jack Porter (aka business consultant, and attempting "Thomas Thompson") operated out to cultivate social and business con­ And, we were getting of Canadian acording to the affidavit. tacts with wealthy and well-placed Another full-time CIA agent pro­ businessmen and government offici­ very, · very high vided cover was Charles H. Richard­ als, I became concerned that I did not son aka "Richard P. Cavannaugh." have, and needed to have, something intelligence on Richardson operated out of Califor­ sufficient in the way of academic nia on projects involving the Far East credentials to carry off the cover of an Marcos' frame of and the Middle East. His cover was international businessman.'' CMI which had been taken over by the To this end, Rewald did not return mind, his moods, CIA. This was done without the to college. Welsch provided him with knowledge of CMI's vice-president. diplomas in business administration his intentions." In the exhibits are letters from Richard and law from Marquette University in P. Cavannaugh to Rewald regarding Wisconsin. this cover arrangement. Also, there A computer print-out from 1978 are copies of Cavannaugh's call card from Marquette University listed and a printer's bill for same. Rewald as a graduate. On the basis of "As time progressed," says the af­ his Marquette "law degree," Rewald fidavit, "our activities on behalf of Bishop, Baldwin, Rewald, Dillingham the CIA began to expand from merely later attended Harvard's Program of & Wong. During the initial phase of Instruction for Lawyers (PIL). The maintaining cover names." An exam­ BBRDW, Sue Wilson, formerly of the ple given was Kindschi's request to PIL is exclusively for members of the NationalSecurity Agency (NSA), was Bar or anyone licensed to practice law. facilitate an operation to investigate hired. "Her experience with the the feasibility of trading with the Peo­ The CIA "set up" Rewald's atten­ NSA," says Rewald's affidavit, "was dance at the PIL ''to meet certain peo­ ple's Republic of China. This was_ to more than merely that of a secretary, be carried out by Wilfred K. Dorociak ple.'' A copy of a PIL attendance and thus we were starting to develop roster lists Rewald as an attendee. (aka "Thomas Tom Song"). He pos­ more of an intelligence profile. Sue ed "as Chinese American born on the Within the intelligence community, Wilson was brought in by Sunny Rewald says, Harvard is considered West Coast." A copy of apparent in­ Wong for her intelligence background structions about Dorociak from Kind­ one of the "family. 1, in the hope that we might attract more schi is in the exhibits. In concludes: Agency work. She was approved by Later Rewald felt his cover needed "The station is grateful that 'R' has ' Eugene Welsch." further embellishment. "In carrying agreed to facilitate request. Again, In the exhibits is a copy of Wilson's our thanks for his support." "R," out my Agency charge to cultiv�te career resume. It indicates that she these [wealthy] individuals on a social says Rewald, was his codename which had top level security positions at had replaced "Winterdog." There are and business level, I was required to NSA. Wilson later stated on KITV /4 live in a style commensurate and com­ also lists of intelligence questions in Hawaii that it was ''pretty common (CIA requirements) and an internal patible with the social and e�onom!c knowledge" that BBRDW was a CIA status which these people enJoyed m CIA report about the PRC in the ex­ operation. And that she had regular hibits. their own countries. I did so largely contacts with the CIA for BBRDW. through the use of Agency funds, and my own salary from Bishop, Ba�dwin. ... This explains my use of Bishop, Argentina Baldwin monies, which were in turn elsch was replaced by Jaclt 1fueled by CIA funds on an as-needed Kindschi as CIA Chief of The following is a copy of the basis (up to $2,000,000of CIA monies Station iQ Honolulu. Under rarely-seen CIA "hit-lists." _In this could be supplied to me, more or less Kindschi, another cover op­ case, for Argentina and Mexico. Per­ on demand, within a two-month Weration was created,: Canadian· Far sons on the hit lists were individuals of period of time)." East Trade Corp. Kindschi was to pay interest to the CIA to be assessed and In 1978, Welsch directed Rewald to its expenses and phone bills. In the ex­ possibly cultivated by Rewald. Calvin replace CMI with a new company, hibits are copies of 'Kindschi checks Gunderson had been given a copy of

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Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 this hit list. He informed us that Rewald had asked him to go to Mexico to undertake this assignment. Gunder­ son was under the belief that this in­ formation was for the CIA. Also in the exhibits was a two-page briefing paper on Argentina. Its headings were: Present status of Argentine banking system; Status of the peso; Argentine debt; Union demands; and Argentine credit status. Rewald went to Argentina under the guise of BBRDW and polo. Osten­ sibly, he was attempting to buy a bank. As the attached requirements sheet indicates, Rewald was mainly gathering financial intelligence. As usual, the use of such information to U.S. corporate and financial investors is immediately evident. While its relevance to true U.S. national securi­ ty is hard to decipher. ARGENTINA Guillermo Walter KLEIN, Economist and Attorney Adalberto Kreiger VAS(?), Former Minister of Economy Alvary Carlos ALSOGARAY, Economist Domingo CAVALLO, Former Central Bank President Juan OCAMPT, Banker MEXICO Rewald poses with Robert Jinks, BBRD W's investmentdevelopment manager, and Sonny Wong, president of BBRDW. Jinkshas stated in a lawsuitfiled against the CIA Manuel CLOUTHIER, President that BBRD W was a CIA operation and thathe was consciously involved in the of the Businessmen's Co­ company's CIA functions. ordinating Council Emilio Goicoecea LUNA, Presi­ dent of the Confederation of What effect has the hostilities had on Chambers of Commerce union demands during this period of "In other words, what lies we time. Alfonso Panda! GRAF, President were to tell." of the Confederation of National Who has supplied financial assistance Chambers of Industry �RonRewald to Argentina should war break out. Jose Maria Basagioti, President of the Board of the Alfa Industrial Group Perception of Argentine access to Chile major credit marketable long-term Ernesto Fernandez HURTADO, and short-term in nature for funds. Chairman of RAMSA and Uncle Rewald went to Chile for the CIA of DE LA MADRID What contingency plans does Argen­ under the guise of BBRDW and polo. tina have in the event hostilities break Need personality assessment and out after May. BBRDW consultant Michael Dailey, a Hawaii polo player, assisted in the biographic information. Current in­ What exposure do European banks formation on their expertise, in­ have in Argentina, namely United project. Because he had business con­ fluencewith the government and in­ Kingdom. nections there. And was fluent· in ternational connections, and at­ How are United Kingdom debts be­ Spanish. BBRDW telexes from Dailey titude toward the U.S. is needed. ing serviced under present cir­ to Chile discuss his trip. It is not known Comments on the likelihood of any cumstances. whether he was aware of the CIA's in­ private sector leaders being asked to Statis [sic] on Argentine banking volvement. assist the government in any way While in Chile, Rewald says he was would also be valuable. system. Describe use of guarantee and non­ briefed at the British Embassy. There REQUIREMENTS FOR ARGENTINA guarantee requirements to the private he received classified information that MAIN FINANCIAL CONTACT: sectors by banks. the Argentines had shot down a British MARTINEZ HOZ What effect has the crisis had on the Harrier jet with an intercept missile. An assessment of Argentine credit Peso in the black markets of Argen­ And, a British naval vessel had been statis [sic] with western banks. tina. sunk.

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In Chile, Rewald was attempting to DW has a sympathetic and powerful buy a bank, $1 millionfor a$16million CIA cover sheets potential contact in General bank. In ,this regard, he met with the Galland." The stated subject of second-ranking member of the CIA­ contain phony names Avary's memo was: "An 'Ace' Ger­ installedPinochet junta. He offered to man Friend, for BBRDW." General give BBRDW 28,000 acres of prime of personnel and the Adolf Galland was the Nazi Supreme agricultural land in Southern Chile. Commander German Fighter Forces For arranging the bank deal. financial make-up of a during World War II. Obviously, the CIA has a blind eye for Nazis with company. The cover superb business acumen. Germany sheet for H & H The following were Rewald's CIA Enterprises, set up by Gu1m requirementsfor Germany. Rewald says Rewald had incorporated a trust he passed them on to BBRDW consul­ Rewald at the request company in Guam. We have obtained tant, NedAvary. Who was apparently a copy of the incorporation cer­ involved in a multitude of CIA/BBR­ of the CIA' s top man tificate. Rewald explained the objec­ DW operations. in Hawaii, state.s, "All tive of the trust. 1. Prospects for the West German ''T he agency always needed elec.tions to be held March 1983. expenses related to bankers. And laundry operations 2. West German reaction to the sta­ and so on. They were always pushing tioning of U.S. Intermediate Nuclear the operation of this us to put up offshore banks and Forces (INF) in the country, such as things of this nature. We would the Pershing II missiles, in summer cover shall be reim­ spend, I had a couple of people in 1983. our company working on that and we would send it [sic] down to 3. Reaction to the recent agreement bursed by the CIA." research offshore bank possibilities by the EuropeanCommunity to limit in the Caymans and the Cook Is­ steelexports to the U.S. lands .... This is what we were doing 4. Reaction to U.S. concerns over in Guam. Guam was going to try an technology transfer to Eastern offshore banking system. And we Europe by West European firms; gave Lodeesen the Germany re­ opened the trust company there. We reaction to U.S. easing of restrictions quirements and asked for a report. had the only trust company approv­ on European subsidiaries selling "Obviously," added A vary, "Jon ed for Guam. The full purpose of it pipeline equipmentto the USSR. Lodeesen 's report will comprise really was going to be moving for­ 5. Current West German political­ unclassified although expert, infor­ eign funds into the United economic concerns regarding the mation-from a truly superb source.'' States .... Western allianceand NATO, in view "... It's an important part of the of the NA TO Ministerial Meetings in However, "If indicated, a personal Agency function to be able to leave December 1982. 'family' visit to Jon in Munich by myself would have an excellent chance funds around the world. And banks 6. WestGerman expectations regard­ of obtaining any special data required and trust companies are the easiest ing the visit of Soviet Foreign way to do that." Minister Gromyko to the country in and requested-of a highly classified January 1983. nature." An article in the PacifiicDaily News We have obtained a copy a Lodee­ (7 /21/83) reported about BBRDW's In· a letter from Avary to Rewald, sen's report. It consists of one­ trust company in Guam. It said that Avary said he had passed on the Ger­ paragraph responses to each of the six BBRDW's objective was to turn many requirements to varfousGerman questions. In Lodeesen's note accom­ Guam into a Netherland Antilles-type sources including Jon Lodeesen. Jon S. panying the report, he described the tax haven for investors. Staffing the Lodeesenis deputy director for (Soviet) replies as: ''The highly opinionated in­ Guam office were Allen and Mary broadcast analysis at Radio Free sights appended are the fruits of the Pelletier and BBRDW consultant, Europe/Radio Liberty in Germany. labors of the deranged mind of a super Dan Clement. According to Clement: He worked for Radio Liberty ·when it patriot living in involuntary exile." "I will work with families whose goals was a CIA program. Prior to that, he We have also obtained another in­ are perpetuating their wealth and im­ servedin the intelligence section of the teresting memo from Avary to Re­ proving their financialposition.'' U.S. Embassy in Moscow. He was ex­ wald. " 'Dolfo' Galland," says the pelled from the Soviet Union for memo, ''is a highly respected and "suspectedspy activities." superbly successful businessman­ More recently, according to industrialist in. Bonn, West Germany. HonoKong Avary's letter, Jon "visited his father He represents top U.S.A. Aircraft nother BBRDW consultant and in a 2-hour confidential 'unload­ Corporations like Sikorsky, General working with the Guam trust ing' -had described in graphic detail Electric, Hamilton Standard, Pratt was Robert Jinks. He was BBR­ many of his interviews with Soviet and Whitney, etc.· DW's investment manager. And double agents, disidents [sic] and "As a personal and professional told the Pacific Daily News that escapees.'' In the letter, Avary says he friend of mine for many years-i3BR- "Guam will see a lot of Hong Kong

50 June-August 1984 Counterspy Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 money invested here" if BBRDW H. Plaintiff made a trip with Ronald could turn Guam into an offshore "I became concerned R. Rewald and [name withheld] to banking center. There is at present a Hong Kong using an alias for t� worldwide scramble for the capital of purposes of obtaining information that I did not have, regarding banking policies in light of Hong Kong which reverts back to the the treaty negotiations between the People's Republic of China (PRC) in and needed to have British and Communist China over 1997.Right in the center of this scram­ the future transfer of ownership of ble is the CIA. Battling for private something sufficient in Hong Kong. U.S. corporate and financial interests: "The CIA," says Rewald's affidavit, the way of academic I. Plaintiff saw in the office of Ronald R. Rewald a magazine enti­ "determining that it would benefitthe tled "Association of Former In­ United States to attract to the United credentials to carry telligence Officers" that had Ronald States the 'flight' of foreign capital ... R. Rewald's name on the mailing determined to use [BBRDW] as the off the cover of an label. Also on the wall was a plaque vehicle to attract such capital." that said that Ronald R. Rewald was international a member of the Association of Thus, the CIA had BBRDW con­ Former Intelligence Officers. On1 duct a study on how to lure Hong businessman." So the numerous occasions while plaintiff Kong capital to Hawaii. The CIA, was in the office with [name with­ through a ''John C. Edwards'' funded CIA provided Rewald held] and [name withheld] who were the study and provided much of the well known C.I.A. officers, no men­ data according to Rewald. The study with diplomas in tion was made of Ronald R. Rewald called for corporate tax incentives and not being an officerof the C.I.A. other legislative changes to lure Hong business administra­ J. Plaintiff was told by Ronald R. Kong investors to Hawaii. In conduc­ Rewald that he had requested the ting their research for the study in tion and law from help of [name withheld] of the Hong Kong, BBRDW personnel made C.I.A. to stop an IRS audit of Marquette University Bishop Baldwin for fear that their key contacts and publicized BBRDW covert activites would be uncovered. as a haven to place Hong Kong in Wisconsin. Plaintiff learned of this request in capital. They also had input into the the presence of [name withheld], a on-going media campaign to stimulate known C.I.A. officer who did not the flight of Hong Kong capital. disavow the request. K. Plaintiff Robert W. Jinks had Robert Jinks has now stated public­ sources that these personnel were in numerous other meetings with Ron­ ly that BBRDW was a CIA operation. fact employees or past employees of ald R. Rewald and [name withheld) And that he was consciously involved the C.I.A. to discuss C.I.A. operations con­ in the CIA functions of BBRDW. In a D. Plaintiff was made aware of the ducted by and through Bishop lawsuit filed against the CIA in the association of [name withheld] with Baldwin. U.S. District Court in Northern Bishop Baldwin. [Name withheld] California, Jinks (plaintifO made the was the former senior C.I.A. repre­ following charges. sentative in Moscow, responsible to the American ambassador and A. Plaintiff met with [name deleted] C.I.A. for all aspects of C.I.A. in­ India the Station Chief of the Honolulu telligence activities in the U.S.S.R. office of the C.I.A. in the office of E. Plaintiff was shown a study, com­ Even dirt poor India was a financial Bishop Baldwin on several occa­ piled by Bishop Baldwin in 1978, that target of the CIA under the guise of sions. Discussions revolved around analyzed the economic consequences national security. The Fund of India activities Bishop Baldwin was engag­ of recognizing Communist China by (FOi) was a pending venture which the ed in on behalf of the C.I.A. On no the Nixon administration. Plaintiff CIA encouraged Rewald to join. We occasion did [name deleted] ever ob­ was told that the report had been have obtained an FOi prospectus. Its ject to reference to the C.I.A. or prepared by the C.I.A. on a confi­ disavow C.I.A. envolvement [sic]. officers were to be: Rewald, Shauna dential basis for President Nixon. Pasrich, "Chan" Pasrich, David J. B. Plaintiff was shown a telephone F. Plaintiff accompanied Ronald R. Baldwin, Sunny Wong, Teri Wong, in the office of Ronald R. Rewald at Rewald and [name withheld] on an and Gaylord Nelson, former U.S. Bishop Baldwin that was a direct and interrogation mission of a refugee Senator and Governor of Wisconsin. exclusive line to C.I.A. head­ from Afganistan [sic) shortly after One statedobjective of FOi was: ''To quarters. Plaintiff overheard the Russian invasion into channel some of the 'holy money' in numerous conversations between Afganistan [sic). Plaintiff was told the hands of Foundations and Ronald R. Rewald and C.I.A. per­ that the mission was being con­ ducted for C.I.A. purposes. Ashrams for direct investments into sonnel concerning C.I.A. activities. India or through the Fund of India." G. Plaintiff was introduced to [name Rewald explained FOl's purpose in C. Plaintiff was introduced to withheld], the former Station Chief the following exchange. numerous C.I.A. agents, either ac­ of the Honolulu office of the C.I.A. tive or retired, who were employed Plaintiff was told that [name with­ Q: "What was the Fund of India by Bishop Baldwin. Plaintiff was held] was now a "consultant" to going to do? Or supposed to able to confirm through outside Bishop Baldwin. do?"

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According to the report, Marcos had purchased two estates in 1977 and 1980. Through Bienvenido and Oliceria Tantoco, Marcos purchased a 28,714 sq. ft. estate at 2338 Makiki Heights Drive for $717,000 ($200,000 down payment). The Tantocos are friends of Marcos and reportedly owners of the Rustan Shopping Center in Manila. Through Antonio Floirendo, Marcos bought the 46,280 sq. ft. Helen Knudsen Estate at 2443 Makiki Heights Drive, across the street from his other estate. The price was $1 million with an $800,000down payment. Floirendo is reportedly a ma­ jor land owner in the Philippines and a supporter of Marcos. As mentioned earlier, Enrique Zo­ bel claimed that his only connection to Rewald was through polo. In a con­ fidential attorney/ client interview, Rewald said the following about Zobel. ( \ Dave Baldwin, a BBRD W consultant seen here with a Jriend, helped allange a military "Enrique Zobel. This is such a hardware sale to Indira Ghandi. He signed a CIA secrecy agreement. key thing and such a big deal. Because he was the number one, number three person on the Agency's list of most influential peo­ RR: "They wanted to bring out a (4) Additionally, Zobel and ple around the world. They wanted whole lot of money out of In­ members of the Marcos family-all to establish contact with and dia. And, they wanted, they involved in the Philippine govern­ develop. And, I had developed that wanted also to utilize funds that ment-have the project being pro­ over a period of many years. My first belonged to Indians that had posed in Soto Grande, Spain .... " contact with Enrique was back in left India ...." In a confidential attorney/client in­ '79, and it developed to the point in Q: "I mean what were they going terview, Rewald discussed Imelda the last couple of years where, you to do with this money?" Marcos. know, we were doing very, very big things. But, Ayala-Hawaii Corpora­ RR: "It was going to be invested in "We were keeping a close eye on tion was never set up to develop or the United States." Mrs. Marcos the last couple of years handle polo. under the direction of the Agency. "First of all, I had everything The Philippines She had been negotiating on pur­ there was in polo already wrapped chasing some land here, all this is up in the Hawaii Polo Club which legal. They're allowed to do that. was a corporation. If I had wanted n the exhibits was a list of corporate But it was the Agency's feeling that to do something with Enrique in directors, clergy, political figures, they were doing it in anticipation of polo, we would have done it through educators, labor officials, and early exileand obviously they looked there. Ayala was set up really to hold media personnel in the Philippines. to the United States. They had a transaction we were closing in Soto Rewald was supposed to cultivate developed a close relationship with Grande, Spain where we were trans­ I [Hawaii's] Governor and Mrs. Ari­ ferringmillions of dollars and muchof them for the CJ.A. In a confidential memo dated August 19, 1983 from at­ yoshi. And we had developed a very that, half of it would have gone back close relationship with the Gover­ torney Robert Smith, entitled "CIA to Enrique. And, Ayala is really his nor's chauffeur. And we really were Contacts and Operations," the company, and his name and coming up with real good informa­ everything else. It was just being set following was noted. tion." up here to facilitate that, and, you (3) Also, the CIA is concerned to know, at the Agency's urging." BBRDW did contract Legal In­ monitor Marcos in the Philippines, Zobel never mentioned a joint proj­ vestigations, Inc. for a "confidential both in respect of capital flight and ect in Soto Grande, Spain. BBRDW in that Mrs. Imelda Marcos is a close investigation" of Hawaii property files contained several items regarding friend of Jean Ariyoshi [wife of purchases by Marcos. The report Zobel, BBRDW, and Spain. One was· Hawaii's governor] and is buying (Case #030281-01) was submitted to real estate through another name. It a note to Rewald from his secretary. It is [Enrique] Zobel who is close to the Sunni Wong on March 4, 1981. It was says: "Enrique Zobel would like to Marcos family, and this is Ron's the understanding of the investigator know when you aregoing to Spain. He contact. that the information was for the CIA. is holding a house for you .... "

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Another item was a June 27, 1983 together, entertain other politicians report from BBRDW consultant, Ned According to Rew aid' s and world leaders together. And Avary. It was a detailed assessment of he'd come back and tell me about the Soto Grande community. It por­ it.... Because we were talking about affidavit, "We were finance, investments, Philippines trayed Soto Grande as a highly­ and the United States ...we really attractive investment. And that approached to hit it off and we developed a very "Soto Grande has a past and possibly close relationship. So we were really present cash flow problem." Finally, arrange through the using this to monitor not only Presi­ it said the reported owners included dent Marcos, who we were getting a the Ayala Family of Manila (75%). CIA for the supply of lot of intelligence on him, but the BBRDW files also included telexes financialworld in the Philippines, in from A vary originating in Soto military hardware to Europe, where ever they [Ayala] Grande. had ...he owns banks in San Fran­ A fourth item was a financial Indira Ghandi." cisco, on the mainland, and large projects in Spain and in viability study on Soto Grande by Europe .... " Richard Ellis. "Kickbacks and bribes Before being jumped on by Zobel, When asked whether Zobel was the Honolulu Star Bulletin reported were the key to the aware of the CIA involvement, Re­ that the Philippine government was wald answered: "Yeah, I believe he scrutinizing the Ayala-Hawaii Corp. whole India thing." was." Rewald added: "And, he was The government was concerned that an easy talker. I mean, he was very Zobel might be placing money directly opinionated. He was not a fan of Mar­ into Ayala-Hawaii. This way he could cos. Although he was, you know, very avoid exchanging pesos through the close to Marcos. They would have din­ ner together. And, he would relay, Philippine Central Bank. Thus, he Brunei. That's when we planned this could secretly export his money to the trip. November, he was introducing you know, all the type of information U.S. and there would be no govern­ me personally; had meetings set up we wanted freely, you know. But, ment record of this flight of capital. with President Marcos and myself understand, we were saying 'yes' to Rewald claims the CIA and BBR­ and dinners and so on. Even though everything he wanted too." DW were so sheltering foreign I was going on this mission, the [U.S.] government mission, in monies. In a memo from attorney November to the Philippines, Enri­ Robert Smith, attorney Peter Wolff que had set up private dinners and Indonesia argued that the reported, pending meetings besides that, you know, Zobel/BBRDW project in Soto which... plus we were doing an In the affidavit, Rewald says, "We Grande was to secretly export Zobel's awful lot. None of it relating to were presently funding small expenses money to Spain, then to shelter in polo .... to Mr. Gardell Simpson, the Indone­ Hawaii. " ... But, Enrique in anticipation of sian Consul General here. I think we Rewald explained the CIA's cultiva­ that had set up his own personal were covering his car payments. He tion of Zobel. "And, our whole pur­ meetings between Marcos and Enri­ was to name me Honorary Consul pose in developing Zobel was he was que and I and, you know, dinners General this Fall (1983), which would very, very close to President Marcos. and that was being handled separate­ ly on that Reagan trip. Some of the have further opened the door for high And, we were getting very, very high delegation was going on to Hong level Indonesian intelligence." intelligence on Marco's frame of Kong or other places afterwards. I Simpson maintained an office at mind, his moods, his intentions, and, don't even remember where they BBRDW. In a confidential lawyer/ you know, movements at high levels in were. I think possibly Indonesia or client interview, Rewald added that the Philippines. And, that was the something, I'm not sure. I just don't his appointment would be the "entry purpose of it." recall. And, Enrique had asked me to our doing a lot of work with the In the same interview, Rewald ad­ to stay on there which I had agreed government in Indonesia. . . . I was dressed Zobel's assertions that he had to do, you know. And, we were go­ being asked to do more and more not become involved except for polo. ing to do some business." . ..and we [CIA] were getting a lot out Also, Zobel's contention that he ad­ In a separate confidential at­ of it too." vised others not to trust Rewald and to torney/ client interview, Rewald In Rewald's personal papers there withdraw their money in BBRDW. elaborated about Zobel. was a letter from Gardell Simpson, ''That was back in 1980 that Enrique "Everybody in town [Hawaii] had Jr., Honorary Vice Consul for In­ supposedly did that. And, it's ob­ tried to develop a relationship with donesia in Honolulu. Dated March 8, vious to see that everything we were him. And I started doing that about 1983, it read, "With as strong a doing with Enrique in the last couple 3 or 4 years ago. It developed to the language as the Indonesians are wont of years happened after that. And, if point where last time he was in town to use, it was 'assured' that upon Mr. he was advising people that we were we had dinner together maybe 4 or 5 Rehberg's retirement from PRI and doing something wrong and they times in about a week and a half. should take theii;money out, he was And his kids and all sorts of things. his resignation as the current sure acting fupny because that's We had a very, very close relation­ Honorary Consul in Honolulu, your when we set up Ayala-Hawaii. ship and we were getting very, very name would be presented for the That's when we put together the high level intelligence out of him on honorarium to President Soeharto. project in Spain with the Sultan of Marcos. They would have dinner Now, please understand that this is

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not set in concrete or guaranteed; sheltered account (#506) at BBRDW. however, at this juncture the position Sue Wilson, a BBRDW This was a CIA /BBRDW service. It is yours if at the time of appointment secured an individual's money outside you are still desirous of same." employee who had his or her country. If they had to flee, Simpson �egan his letter by saying it the money was waiting for them in the was a "trip I report" for the period worked for the U.S. February 25-March 4, 1983 to Wash­ Asked whether Indri Gautama was ington, D.C. He added, "Attached National Security aware of the CIA involvement, please findmost of my expenses incur­ Rewald replied. The "Guatamas red. I have another receipt for approx­ Agency, told a Hawaii maybe didn't [know] for about three imately $300but am unable to find it. weeks, and then from then on they When I do will submit." The report TV station that it was did." was an itemization of Simpson's daily visits with various Indonesian officials "pretty common in Washington. Simpson promised to keep Rewald knowledge" that Cl111bodil informed of Indonesian dignitaries passing through Hawaii. And to ar­ BBRDW was a CIA Marshall Lon Nol is the former CIA range meetings with them. ''The peo­ installed president of Cambodia. ple in Washington felt that this could operation. She had, Rewald bought a house from Lon Nol be accomplished," said Simpson, in Hawaii. And used it as an address "and an exposure of yourself she said, regular for some of his CIA ventures. [Rewald] would benefit you when ap­ Rewald's affidavitsays Lon Nol "ask­ pointment time comes." contacts with the CIA· ed for help in supplying arms to fight Simpson stated that "I look for­ the Khymer [sic] Rouge. After talking ward to a long and lasting relation­ for BBRDW. to the Agency, all I could provide was ship." Still he cautioned: "I cannot some supportive editorials." over emphasize the requirement for The exhibits include a Rewald let­ confidentiality at this time; I'm sure ter-to-the-editor attacking Pol Pot you can appreciate my position." and the Khmer Rouge and a December The same day, Simpson sent a letter 4, 1978 letter to Rewald from Lon to the Indonesian Counselor in Wash­ Emirates. They list Guatama as Nol. The letter thanks Rewald for his ington, Sadijar Sastrohandojo. "Now treasurer for both. L-T-E. Advocates the overthrow of that I have thawed out from your Guatama's precise role is not the Khmer Rouge regime. And, re­ frigid D.C. weather," said Simpson, known. But, Rewald's affidavit does quests a "donation" of "weapons" "I. ..extend my most sincere thanks say that: "The Agency's concern is to for "the resistants in the Country ... " for all your efforts on my and Mr. know what OPEC countries are going Rewald's behalf. to do so as to gain advance knowledge "I have relayed to Mr. Rewald the on the movement of oil prices. In­ chcumstances under which his donesia is a leading member of Domestic Propaganda recognition will be forthcoming and OPEC.. .. These covert operations he is anxiously awaiting the oppor- . are ongoing today, and involve ... the ewald claimed to be planting ar­ tunity to serve." Guatamas, wealthy Indonesian in­ ticles in the U.S. press for the One Indonesian connection to dustrialists .... The ultimate aim was CIA. An illegal domestic pro­ Rewald was the wealthy industrialist, to place monies with them, at their paganda operation. His exhibits Indri Gautama, a BBRDW consul­ disposal, in 'investments' in foreign included a "Media Highlights Up­ tant and investor. There are many countries in various joint business ac­ Rdate" bearing the CIA emblem. A photographs of Rewald and Guatama tivities. But these investments were notification states that the updates are together in business and social set­ secondary to the intelligence to be "to bring to the attention of key In­ tings. Rewald says he incorporated gathered from them concerning the telligence Community personnel news Hawaiian-Arabian Investment Com­ OPEC community." items of interest to them in their of­ pany, Inc. on July 2, 1982 and the Another example of Guatama's role ficialcapacities. They are for internal United Arab Emirates Investment Co. was a pending Philippine resort informational purposes only." The with Guatama. In Rewald's paperswas development project. CIA money, update featured highlights ·. from a a share in Hawaiian Arabian Invest­ some $600,000, was to be passed to critical review of the anti-CIA film, ment. It showed it to be incorporated Sauud Mohammed through Indri. "On Company Business." Attached in Hawaii on July 2, 198 2 with Rewald The affidavit says: " ... I did locate war a copy of the review. It was by the as president and secretary. eight checks in small denominations, uhra-right tabloid, Human Events. A notice in the Pacific Business to Indri Guatama [Exhibits 86 Rewald said the CIA would show News (8/ 30/ 82) reported both com­ through 94), totalling $4 8,000.This is him "things that other people had panies had been incorporated in but one example ofµsing someone as a written." To give him "ideas to write Hawaii. And Guatama was treasurer conduit for the funnelling of [CIA] on and areas they'd like covered ... " of both. Notarized State of Hawaii funds." In an interview with attorney Robert corporation papers exist for both The affidavit indicates a G. A. Smith, the following exchange oc­ Hawaiian-Arabian and United Arab Guatama as having $3 99,893.83 in a curred.

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RR: "Here's an editorial I did on Thomas Hayes, did mark him as a top Cambodia. The agency [CIA] "The Agency always level CIA officer. It bears quoting at would direct activity they length. wanted created, whether they be in the area of getting the needed bankers. And Experience word out on certain political laundry operations INTELLIGENCE OFFICER­ issues there, their economic Soviet and Middle East Af­ issues, this one happens to be fairs-overseas collection opera­ on Cambodia on the commu­ and so on. They were tions, counterintelligence and nists and I put on an editorial security. CIA Headquarters opera­ which got published." always pushing us to tions executive. RAS: "Ya, the article is in there, the Intelligence interviewing and repor­ " put up offshore banks newspaper. ting on contemporary [1980s] Soviet RR: "Ya, all of mine got publish­ internal affairs. Interviewed former ed. I pro1>a1>1y put out you and things of this Soviet citizens employed in scientific know, dozens, you know in and research/development pro­ various papers, and so on ... '' nature. It's an grams. Prepared intelligence reports for distribution tHroughout U.S. in­ The exhibits included Rewald's important part of the telligence community covering crit­ editorial on Cambodia printed as a ical-interest topics in computer Letter-to-the-Editor in a Hawaii Agency function to be hardware technology, petroleum ex­ newspaper. As well, there was a letter traction and production planning, from Marshal Lon Nol, the former able to leave funds and anti-aircraft weapons systems. CIA-installed President of Cambodia. Senior CIA representative in It thanked Rewald for his L-T-E. around the world. And Moscow, responsible to American (Rewald once owned Lon Nol's ambassador and CIA headquarters former home.) Another exhibit was an banks and trust for all aspects of CIA intelligence ac­ editorial by Rewald published in the tivities under control or jurisdiction Honolulu Star-Bulletin of May 21, companies are the of CIA representation in USSR. Ten 1980. Appropriately entitled: "Re­ years' overseas residence and ex­ building the CIA." easiest wasy to do perience in the USSR and Middle Rewald added the following in East, plus numerous official visits to another confidential attorney/ client that." European capitals and major cities. interview. Liaison and negotiations with foreign government officials, civil RR: " ...I was just going to mention and military. Secured and then im­ in passing that Jack Kindschi, plemented agreements of coopera­ when he was station chief, had tion and support to American in­ me working on some anti­ telligence collection programs. ACLU [American Civil Liber­ was based on CIA-connected trips. Developed and participated in train­ ties Union] project. We wrote a And, Rewald said he was trying to per­ ing programs for foreign intelligence number of editorials, submitted sonally cultivate Reagan for the CIA officers. Provided frequent them to papers and so on." in case he was elected. guidance to program development Q: "Any overt action on your within foreign intelligence services. part?" In the U.S., CIA Branch Chief, RR: "Not other than editorial Retirement supervised work of thirty intelligence writing. But I know that these officers, intelligence assistants and editorials are available some­ Rewald claims he wanted to retire at clerical personnel. Initiated opera­ where: too. It might be in­ 40. But the CIA continued to escalate tional programs to be executed by teresting reading for you or its involvement. This was personified overseas fieldstations andsupervised other friends of yours down the in John Sager. As Rewald put it, Headquarters support of these ac­ road." tivities.Also responsible for prepar­ "Despite all the investigations, many ing or reviewing personnel perfor­ "Kindschi wrote a number of covert CIA operationscontinued; and mance evaluations, assessmentsof in­ them. I might have, somewhere almost the last thing I did before the telligence collection programs, in the files, the name that Kind­ events of July 29 was extend an offer budget preparations and requests, schi used to write them under. I of employment to one John Sager, and reviewing and modifying used my own name sometimes. whose resume [Exhibit 79) marks him organizationalstructures. Mine is easy. Kindschi - used unmistakably as a full-time in­ another name, because he was telligence and counter-intelligence of­ Over the years developed, recruited, the overt officer here. They ficer of absolutely top caliber. There trained and utilized scores of in­ were always trying to subvert would have been no reason for me to dividuals, foreigners and Ameri­ that." hire him except in furtherance of cans, from a wide variety of occupa­ Agency activities; and thus my rela­ tions, as sources of foreign in­ InformationRewald sent to Senator telligence. Planned, managed and Edward Kennedy and then-presiden­ tionship with the Agency wasongoing asof July 29." directed intelligence support nei-. tial candidate Ronald Reagan has also works and collected, processed, and to be seen as domestic propaganda. John Sager's resume, reportedly reported to CIA headquarters for­ The information he sent to Kennedy releasedby interim bankruptcy trustee eign intelligence in the military,

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economic, science/technology, and To Rewald's surprise, the IRS in­ social fields, especially relating to Rewald planted vestigation continued. We have ob­ the USSR and the Middle East. tained a copy of an IRS Summons to Counterintelligence and security, articles in the U.S. Rewald to appear before Campione American embassies abroad. Re­ on January 28, 1983 along with sponsible for counterintelligence press for the CIA: an BBRDW's financial records. The programs at U.S. Embassy in summons was issued on January 17th. Moscow and for personnel security The next day Rewald measures among U.S. Mission illegal domestic signed a letter staffs. to Rardin dictated by Kindschi. "By propaganda operation. this time," said Rewald, "Kindschi Speak, read, write Russian. was a full-time consultant for Bishop Teaching/training (have been train­ Rewald said the CIA Baldwin but continuing in CIA ac­ ed in then taught others): tivities, as Rardin, well knew. Kindschi Observation, description, report would show him was incredulous and angry that Rar­ writing. din had not taken steps to stop the IRS Intelliaence collectiontechniques. things that other investigation." Repair of techniptlcollection A copy of the letter has been obtain­ equipment, photographic other. people had written to ed. It states that the IRS was focused Psychologicalassessment techni­ on Canadian Far East Trade Corp., ques and evaluationof potential in­ give him ideas to CMI Investment Corp., Hudley, telligence sources. Johnson & Moore, ,ITTHENTER, Balloonpiloting. write on and areas H&H Intelligence tradecrafr(photog­ Enterprises, John C. Kindschi, raphy, Identi-Kit, flaps/seals and they'd like covered. and Eugene Welsch. And that the surreptitious entry, locks.and safes, pending audit "threatens the security �ret writing, agent radio com­ of all subsidiary companies, as well as munications, surveillance and Bishop, Baldwin, Rewald, Dillingham countersurveillance). & Wong and myself." John Sager's call card says he's a retired U.S. Foreign Service Officer. "Can Washington representative," When he was contacted, he said he was continued the letter, "meet with joining BBRDW with regards to in­ cleared IRS official to deflectcontinu­ vestments in fly-fishing. Informed ing probes or does Washington prefer time ever that his resume was in hand, he said: have evidence, should the to send tax staff experts to Honolulu "I thought we had sealed all those." come when it was necessary to use to counsel me directly???" my con­ Rewald says that Sager's fly-fishing such evidence, establishing "Request immediate action to contention was an "absolute lie." nections with the Agency." preserve cover and security of c a meeting om­ Rewald adds that Sager had previous­ So, Rewald secretly taped Jjany complex," concluded the letter. the IRS inves­ ly worked on BBRDW projects with with Rardin. Regarding On January 28, 1983, Rewald did Jack Kindschi. That Sager "was a tigation, the following was recorded. not appear before Campione. Dana · :Russian expert for the most part." RR:"Jack, has the agency got Smith, then Rewald's corporate at­ That Rewald was "directed by Kind­ back to you on my tax prob­ torney was told by Campione that a schi to hire" Sager. And that Sager lem and" stand down was in effect. Smith con­ "was being brought in at that par­ firmed the stand yet, but I had down that same day ticular time to work with Kindschi." JR: "No, not in a letter some, uh, should have some to Campione. It said: "I wish to confirm information today, I that the District Director of think." the Internal Revenue Ser­ IRS vice has instructed your supervisor, RR:"You know, I just, you Mr. Ken Taylor, to instruct you to n November 1982, Rewald became know, really liketo get some hold off in your investigation of my ·concerned about an audit of word and assistance and client, Mr. Ronald R. Rewald." BBRDW by the Internal Revenue direction on what I should (Subsequent press inquiries to Service (IRS). It threatened to un- do and what I shouldn't do Campione have met with: "No Com­ cover the CIA involvements. So and" ment.") Rewald contacted CIA station chief JR: "Ya." However, Campione returned to Jack Rardin. To get the IRS to "stand BBRDW. The Honolulu Star-Bulletin down" from its investigation, i.e., to RR:''So if you could get back to claims that in the interim the CIA ex­ stop. me on that I sure would ap­ tracted one of its agents from BBR-, "Yet the IRS investigation," says preciate it." OW. Because his cover was threatened Rewald, "had continued unabated. I JR: "Ya. Well, as I say." by the IRS audit. becameconcerned, at this point, that I So, Smith wrote again to was not getting support from the RR: I don't want any problems Campione. with the iRS." Agency which I felt I should be get­ "I ,was surprised to learn that you ting. This in tum caused me to decide JR: "No, I know. Sure don't. had visited Mr. Ronald R. Rewald's that I should take steps to insure that I We don't either." residence and that you examinedhis

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wife concerning the tax matter under tion to himself of the funds of Bishop, investigation. Your conduct violates Baldwin, Rewald, Dillingham & Wong what I assumed was our understand­ Rewald contends that or its investors." ing regarding contacts on this case. In addition, it was my understanding the CIA should share pursuant to our telephone conversa­ tion of January 28, 1983 and my let­ responsibility for the ter to you of the same date, that Where's the Money government intelligence incursion missing funds because had resulted in a suspension of your investigation in this matter pursuant investor's monies were Rewald could be using his CIA in­ to your instruction from the District volvements in an effort to evade Director of the Internal Revenue mixed with CIA funds ·potential liability for the $12 to $20 Service ... million in missing investors' funds. But the way he could have used that "At your earliest convenience, I and expended in ·c1A would like to meet with you to was to threaten to expose CIA opera­ discuss the substance of your con­ investments. tions unless the legal charges were tacts with the C.I.A., the perimeter dropped. Since much of the CIA's in­ and scope of your resumed inquiry, Apparently,. some of the volvement with BBRDW has been ex­ and, in view of intelligence agency posed, Rewald can hardly use it to interest, the procedural steps you investors agree, for evade liability. plan to employ." What Rewald has apparently con­ Subsequently, says Rewald, theyare suing the CIA tended from the beginning is that the Campione informed Smith that sealed CIA should come forth and share instructions had been received by the for their missing funds. responsibility for the missing funds. IRS Director from the CIA. They Because investors' monies were mixed ordered the stand down. And, the IRS with CIA operational funds and ex­ was complying. pended in CIA investments. Thus, By the followingJune, no IRS audit "with Agency assistance," as Rewald of BBRDW had been completed. That put it in his affidavit, "it may yet be month Rewald received a letter from possible, despite all the publicity, and CIA agent "Rick Cavanaugh." It Ban�ruptcy administrator, Thomas if Agency connections are utilized, to said: "I assume your 'tax problem' Hayes, after reviewing the financial realize on these transactions or at least with CMI has also all been taken care records, now says BBRDW received bring back into Bishop Baldwin of." Presumably, Cavanaugh was $2,744 from the CIA over a four-year money which has gone into these [CIA] referring to the IRS stand down. period for phone and telex costs. At transactions." Apparently, a stand down was in ef­ one point, he said this figure was Apparently, some of the investors fect. For according to IRS records, $5,000. Originally, he said there was agree. For they are now suing the CIA Campione had served BBRDW with a no CIA involvement. for their missing funds. second summons for their financial The Honolulu Advertiser(3/28/84) Even if Rewald did abscond with records on March 7, 1983. BBRDW now reports that some eight CIA per­ the money, the CIA bears responsibili­ provided some of these records. But, sonnel, including Jack Kindschi and ty. Because of its admitted involve­ an IRS enforcement action requiring Jack Rardin, invested almost ment, the CIA knew or should have the remainder was not fileduntil July $500,000 in BBRDW. And, at least known of the manner in which Rewald 27, 1983. And, a summons was not some of them made a profit. Both and BBRDW were raising and expend­ served until August 2nd. After Kindschi and Rardin withdrew their ing investors' funds. Thus, if there BBRDW had collapsed. To the pres­ money plus interest shortly before were fraud going on, the CIA should ent time, the IRS has not caused any BBRDW collapsed. Rewald's affida­ have become aware of it at some indictments to be issued in this case. vit adds that CIA agent Charles point. Particularly since it is an in­ In March 1984, Senator Daniel In­ Richardson had an investment ac­ telligence agency. ouye of Hawaii told the Hawaiian count at BBRDW. And, that at one Secondly, Rewald had undergone a press that he had asked the CIA about point, BBRDW paid him a 10% com­ personal bankruptcy and was con­ its involvement with Rewald and BB­ mission. We have obtained a copy of a victed of fraud in Wisconsin before his RDW. "This matter," Inouye was letter from Richardson requesting this involvement with BBRDW. The CIA quoted as saying, "has been under ac­ payment. either failed to put Rewald through a tive consideration and close scrutiny Investments by current and former security check which would have by the Agency. Beyond that, I cannot CIA personnel in a CIA-connected revealed the bankruptcy and the con­ say anything." operation would appear to present a viction. Or it did put him through a CIA spokesperson, Dale Peterson, conflict-of-interestand a highly ques­ security check. Ignored the bankrupt­ now says that the CIA had only tionable practice. cy and conviction. And undertook a "slight involvement" with BBRDW. working relationship with him in a "But," added Peterson, "I'm not at IA attorney Robert Laprade's position where he could engage in liberty to go into details of what the affidavit said that: "The CIA fraud. Either way, it would appear relationship was. We deny any allega­ was not aware of, and had ab­ that the CIA was negligent in choosing tions that suggest we had anything to solutely nothing to do with, Rewald. And thus, bears responsibili­ do with running the company." RonaldC Rewald's alleged appropria- ty with regards to missing funds. Counterspy June-August 1984 57

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