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',Big Tax Investigation Vas Quietly Scuttled by Intelligence Agency 18 A-PR 00 7.1-7 I /15itz It now appears that pressure from the e Central Intelligence Agency, rather than any k. legal problem, was what caused the Justice `'1. VOL d NO. 77 Department to drop what could have been the biggest tax-evasion case at all time. 7"-,-Conifttuecl Prom First Page' ' Moreover, the supposed legal obstacle to or Panamanian; according to the list. Other IRS vs. CIA using the Castle Bank depositors' list was documents In Nelsen show that the common F pie the government al- equestionable at best- thread of these companies is that they were ready had in its possession the same list, le- • mostiy.formed or.controlled by Paul Huth- ; . ',Big Tax Investigation gaily obtained. -well and his associates. :What caused the 'Justice Department to . .back off seems to have been the CIA's argu- The gruff Mr. Helliwell, 62 when he tiled OD Vas Quietly Scuttled ment that pursuit of the Castle Bank would Christmas Eve: 1975, from emphysema endanger "national security." This was In- complications, was no stranger to the murky world of spying. During World War By Intelligence Agency volved because the bank, besides its possible he use as a haven for tax evaders, was the con- was chief of special intelligence In China for the Office of Strategic Services, or OSS. the duit for millions of dollars earmarked by the .J3aharnian 'Bank's Hundreds CIA for the funding of clandestine opera- forerunner of the CIA. tions against Cuba and for other covert in- • Colleagues from those' days recall that t Of U.S. Account Holders telligence operations directed at countries In Mr. Heillwell.• then A colonel, regularlylized • Latin America, and the Far East. A major to buy Information with five-pound ship- r a Go Unchecked as a Result tax-evasion investigation of the bank proba- ments of opium ("three sticky brown tars," bly would have endangered these CIA opera- according to one man). They also say he ran .• an operation code-named "Deer Mission," in which. WS personnel secretly parachnted ;SEC Runs Into a Stone Wall Drafting a New CIA Charter Into Indochina to treat HolChl Minh for ina- _The case has current significance be- cause Congress at the moment is consider- •.••• aii‘JI14 DRIN:i HALL In•1951; Mt. Elelliwell helped setup and . ing a new CIA charter that would give con- v.:: Staff Reporter of "I'Mx R ALL grarlia JOI: Kt:AL run Sea Supply Corp.. a concern controlled NASSAU, Bahamas-One of the more lit- gressional committees and the courts ad- by the CIA as a front. For almost 10 years, : iUating business stories that sonteliew man- vance notice of such undercover or front Sea Supply was used to supply huge operations. ' aged to reach the public prints in-the last amounts of weapons and equipment to 10,000 decade was the great Castle Bank caper. , - Castle Bank was set up and principally Nationalist Chinese troops in Burma as well controlled by the late Patti Lionel Edward Remerriber7 It was the escapade " in as to Thailand's police. - ' " • ,' • Helilwell, a Miami lawyer, Ywhich -two Internal Revenue Service agents -Mr. Helliwell, ; One former federal °Metal who helped who had longstanding ties to the U.S. Intelli- outdid themtelyes as sleuths only to have --Berutinize Castle says, "Castle was one of ,,their chief throw out their hard-gained evi• gence community. was instrumental in help- the CIA's finance channels for operations choice pf possible Massive tax evasion as ing to direct a network of CIA undercover against Cuba." Mr. Helliwell reputedly was operations and "proprietaries." fA prop:1e- thadmissIble.•e• ., • • . • .• .r one of the paymasters for the ill-fated Bay Lary is a concern secretly set up and con- For years IRS agents had been trying. r - of Pigs invesion In 196!, as well as for other '. trolled by the CIA, ostensibly as a- legitimate ir'without much .sucress, to pbtala eloCumen- 0.'extenxive", CIA operations., throughout •. Lary proof that Americans were using off: business tan America, In particular, the former shore banks In the Caribbean to hide income • Despite. rep' eatedrequeSts for. comment, federal official says, M. Heilltiell was s:and evade taxes. (Me of the suspect banks ;.1, officials at the CIA: Justice Depoirpent and rdeeply Involved" in financing a series of the Helliwell law firm refuse to discuss the was the privately owned, Nassau-based Cas- covert forays between 1961 and 1975 against case. ;Castle Bank, which closed its opera- '„. tie Bank 84 Trust'tBahamasl Ltd. So one Cuba by CIA operatives working from An• iaightiti 1973, while an official of the Castle :. Lions In the Bahamas and cayman Islands rosIsland, the largeet of the Baharnl4n 1977. Is currently based In Panama. but `.'Bank was having dinner at a posh Key Ells- in •• - • " • " • ' % tayne, .Fla., restaurant with a woman an apparently has no offices there. Although • e- -Retired CIA general counsel Lawrence .. IRS Informant had hired as a decoy, the in- .-?-the -government has nevet released the ' Houston, while declining to talk about ape- ', formant let himself into her-apartment, took names of Castle Bank's 1973 account hold- ctflc agency activities, comments that "Paul, the banker.; briefcase and gave It to two - ers, a copy of the list was reviewed by this was always wllItng to talk to us and help newspaper. s- •.IRS agents. After photographing the brief- , ease's contents, the agents had the briefcase Playboy and- Penthouse Blow for IRS Agents returned to the woman's apartment and, for *.; On the list, either In their own names or .-, A former member -..,the time being at least, the banker was none of Mr. Helliwell's law • 'under the names of trusts or companies they th7n says It was general knowledge among -the wiser. ; f - • • . , controlled, were such people as Chicago's the firm's members "that Castle was a CIA ik Rich Haul -- ' wealthy Pritzker family, Detroit land devel- Account," but that only Mr, Helliwell and The photographed documents were a re- ;,Oper Arnold Aronoff„Playboy magazine pub-. No other lawyers had access to any -Infor- c ielation. One of them was a computer print- • . Usher Hugh Hefner, Wenthouse Magazine 'nation on the bank. Ha recalls one Incident :out of the bank's account holders-some 308 , owner Robert Guccione, actor Tony Curtis, In tho late 156Cs when "the CIA had at- *•-itarnes, Including not only nationally known the former rock group Creedente Clear- ...lensed to transfer a huge amount of money --V S. businessmen and entertainers but quite -,..'.tivater, and three men-Morris Dalitz, .14er- ',A few well-known organized-crime figures as ris ,Kleinman and Samuel. A. Tucker-Who ,well. The account holders controlled about a '. have been -described in 'Justice Department quarter of a billion dollars in assets, To the documents as organized-crime figures. =jubilant agents the fist preeented the possl: . Of course; having money on deposit is 4 Una/ of the single biggest tax-evasion. strike foreign bank, by-itself, is no. eyidence of ,In IRS history. •-..e. r. „.. wrongdoing:None o the above individuals, -Their elation eventually faded,' iweVer, •,. with the exception of Mr, Hefner, returned Donald Alexander, then the IRS corn: phone cats Inquiring about the accounts: A Jnissioner,. announced that Project Payee, .., spokesmanfor ,the'PlayboY publisher saye- ,":.-as•the Caribbean investigation Wa5 'called. t-, Mr. Hefner ''doesn't rememberr. having an was being suspended because the surrepti- .•'account at Castle; though he' does 'recall 'Vous acquisition of the list was an illegal .eyesting in a mOylfc9mpany, Oar dyalt *fib search., The .Justice 'Department .-which • launched a grand-jury Investigutn after The bulk pf ifieUille accountsuits are in the The IRS dropped out of the .picture, said. in hames of foreign eitities.'-mo4tfy fah lirlan V977 that it, too, was bowing out because a Thiat•fo Pape Oolurnakfee)I., efederal district court judge hid ruled that , • e • , _ , tithe list had been illegally obtained.. '1;1 1-4; I fP1R- ED l'through Castle,", and that "Paul Pik the WSJ` ',Whole office on a security tied like it wu rconic kind of war operation." . • , ;„:Dropping of Project Haien by the IRS r caused tremendous turmoil within the tax• collecting agency. -One IRS memo says that Another government offictal Close to the At the time of the Intercontinental con- when the InvestiptIon wad shut down there Castle investigation says, "There was noth- sent decree, the SEC also disciplined Mary ' were 488 pending cases involving tax deft- ing sinister about why it ( the investigation) ' Jane Melrose.. 61, former vice president, : ctencies of "hundreds of millions" of dol- didn't go anywhere. The CIA convinced Jus- general counsel and director of Interconti- nental for lars. Many'veteran IRS agents resigned. To tice that exposure of Castle and, of neces- her alleged participation in a this day the drain of taxable money through sity, other Helliwell dealings, would compro- scheme to hide the diversion of $1,3 million of the company's funds. Besides her position Bahamas banks is continuing, largely be- mise very sensitive and very aignfficant In- at Intercontinental, Mrs. Melrose was also cause that country's suict disclosure laws telligence operations. It's as simple as that." . the second ranking member of Paul Hell prevent outsiders from obtaining banking • • . well's Miami law firm, Helliwelh Melrose & records. A 1979 study of offshore banking. -It was the CIA's Office of General Coun- sel that apparently repeatedly requested the DeWoif. She refuses to discuss the Intercon- prepared for the Ford Foundation, coo- tinental case. , eludes that the "flow of criminal arid tax Justice Department to back away from Cu- flu.
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