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December 2, 1974
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11 Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340M2-8+ INTERNAL USE ONLY This publication contains clippings from the domestic and foreign press for YOUR BACKGROUND INFORMATION. Further use of selected items would rarely be advisable. SPECIAL Destroy after backgrounder has served its purpose or within 60 days. CONFIDENTIAL Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 heat'. X ~31 0 0 - Wh a-~ F. Interview with William E.. Colby, Director of Is spying on enemies and friends, or subver- sion of governments, immoral? Mr. Colby was invited to visit the magazine. to give editors his first comprehensive interview dealing with CIA's worldwide operations. Q Mr. Colby, many people around the world question the moral right of the Central Intelligence Agency to spy on friendly countries, as opposed to countries that are potential enemies of the United States. Flow do you answer that? A First, it's hard to distinguish so clearly between friends and potential enemies, as over our history a number of countries have been both. But basically the question comes down to the concept of state sovereignty and the right of a country to protect itself, which have long been recognized as part of international relations. That includes the right to carry out such operations in the world as are believed necessary for self-protection. I think that moralists over the years have accepted some degree of clandestine work as part of the normal relationship between states. In any case, is spying any less moral than developing great weapons systems, or many of the other things that nations do in their self-interest? ?. How do you decide whether to operate in a friendly or neutral country? A The decision concerning any intelligence operation is determined by the answer to four questions: What is the importance to our nation of the intelligence result being sought? What is the risk of exposure? What would be the impact of exposure? And how much does it cost? In most open societies, you don't have to conduct clandes- tine operations to get information. So you would be foolish to run the risks and absorb the costs of a clandestine mission. Obviously, in a friendly country the adverse impact of exposure would be very great. So that is a very negative factor. But there will be situations in some parts of the world where a well-conceived, low-risk operation is necessary to get some information which could be terribly important to us. . Q What about covert operations such as the one the,.CIA conducted in Chile before the overthrow of Allende? A Again, it's a matter of the United States taking a decision that a certain course of action is important in the best interests of our country, and friendly elements in another one. There have been exposures before. The U-2 [spy plane] operation, of course, is a notable example. Q Do you, as the Director of the CIA, decide that a covert operation, such as against Chile, should be conducted? A These decisions are very carefully structured. The authority for them stems from the National Security Act. This authorizes the CIA to carry out such other functions and duties related to foreign intelligence as the National Security Council may direct. Furthermore, we explain to our congressional oversight subcommittees in general how we propose to use the funds that are appropriated annually for the CIA. We provide the most-sensitive information and have no secrets as far as these subcommittees are concerned. I don't necessarily describe each operation in each country in detail, but if a member of these subcommittees asks what we are doing in any particu- lar country, I'll give him a full and fair picture. Q Who actually makes the decision that a covert operation should be undertaken? A The actual operation is approved by a committee of the National Security Council-the Forty Committee. If there is high-level policy concern about the situation in some country, we in CIA look at it and see what we might do that would help implement national policy. Then we go up to the Cennral In elilence Mr. Colby's first involvement in intelligence work was in the Office of Strategic Services in World War II. He then earned a law degree from Columbia Law School, and in 1950 joined the CIA. He served in Rome, Stockholm and Saigon, and as head of the Agency's clandestine services. He became Director of the CIA on Sept. 4, 1973. He appears, at right in photo, in the conference room of "U. S. News & World Report." National Security Council and say, "Here is what we think we can do to carry out the general policy with regard to that country." If the proposal is approved, we go ahead and carry it out. I'm not suggesting that CIA has been pushed or shoved into undertaking actions of this sort; it's part of our job. Q Is clandestine activity the major element in CIA activ- ity--even in these days of detente? A To answer that question, we have to stand back and examine what the United States intelligence "community" includes. It embraces the CIA, the Defense Intelligence Agency, the National Security Agency, the intelligence services of the Army, Navy and Air Force, the intelligence units in State, Treasury and the Atomic Energy Commission, and the FBI. All of these agencies, collaborate on the intelligence job. After all, intelligence consists essentially of the collection of information-by overt, technical and clandestine means- the assessment of all this information, and deriving conclu- sions and judgments about what is going on or is likely to go on in the world. In 1971, President Nixon said that the Director of Central Intelli gence should take a leadership role in this whole effort. And I've tried to do this. Essentially I have four jobs: One of my jobs is to be head of the intelligence communi- ty. Apart from the CIA, I don't have full authority over these other agencies, but I do have certain influence on them because of my responsibility to report on what they are doing. A second job is running the CIA. Third, I have to be substantively informed about situations around the world so that I can provide briefings, information and assessments to the National Security Council. Fourth is the job of acting as a kind of public spokesman and handling problems like our recent troubles. Now, to get back to your question: By reason of the way the community is structured, clandestine activity, most of which is clandestine collection rather than covert political or similar action, does represent a considerable percentage of CIA's activity. But if you measure it against the whole of the intelligence community, it's a rather small percentage of the total community effort. Q Has detente changed the character of your work or reduced the need for clandestine intelligence? A I wish it would. If you get to the logical end of detente, then we would have established a relationship with the Soviet Union of mutual respect for each other's strengths, so that our differences can be negotiated about rather than fought over. This, in turn, should encourage the Soviets to believe that they ought to be more open with their information. But that's not the situation now. Today the Soviet attaches can go to almost any newsstand in this country, pick up a copy of a technical aviation or space magazine, and from it learn a vast amount of detail about our weapons systems. Unfortunately, we have to spend hundreds _ of millions of dollars to get comparable information about the Soviet Union We couldn't fulfill o A J't r esp Approved For Release 2001/08/01 : CIA-RDP77-00432R000100340002-8 onsr es o ,Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Congress and the nation unless we did spend those millions of dollars gathering that information. ?. There is pressure for CIA to restrict itself to the collection of foreign intelligence such as you've described, and abandon covert operations-that is, aiming at the overthrow of governments. How do you react to that idea? A Given the state of the world today, the Capitol would not collapse tonight if the CIA were not permitted to conduct such covert operations any longer. In fact, we do considerably less of these than we did during the worldwide confrontation with the Soviets and the expansionist drive of the. Communists in the 1950s. And we do considerably less than during the period in the '60s, when we were dealing with Communist insurgency and subversion in a number of countries. Changes in the world situation and our national policies have decreased such activities. We still do some; but covert actions of this type are a very small percentage of our total effort at the moment. Q. Why is it needed at all? A There are a few situations where a little discreet help to a few friends of the United States or a little help to a few people espousing a certain policy or program in a foreign country can enable us to influence a local situation in a way that may avert a greater crisis in the future. And times change. We might be faced with a real need for early, quiet influence against a rising threat, which otherwise we might have no alternative than to meet by force later. We no longer want to send the Marines to such situations. I think this flexible tool is important to preserve so that we can use it if we have to. Q Do you assume that undercover agents from friendly countries are operating in the United States? A Certainly I do. The FBI has identified a number in the past. You have to recognize that, in dealing with a lot of countries around the world, it's accepted that we all engage in the clandestine gathering of intelligence. Nobody gets emotional about it. It's been going on since Moses sent a man from each tribe to spy out the Land of Canaan. 0. There has been some comment that budget cutbacks have hurt intelligence gathering to the point where Secretary of State Kissinger goes into talks with the Russians with inadequate information. Is there any truth in that? A We obviously are suffering budgetary pressures from inflation. I think we are still giving a very good intelligence product to our Government. I have great confidence in it. There have been some projects that we have turned down because they were totally out of reach financially. These have been in the category of things that would have made our intelligence more complete, but I don't think that we have yet dropped below a danger line. I don't think it has imperiled our ability to negotiate. However, as we look ahead a few years, we do have a problem coming up because of the inflationary squeeze. We've tried to respond to this by focusing our effort on the more-important things and dropping off the things that we may have needed in a different world.' 0. Where have you been able to cut back? A Luckily, today we are not required to maintain the scale of effort that we did in Southeast Asia, for example. Our problems in some of the other parts of the world are more manageable than they were when we were deeply con- cerned about a large number of countries that were under pressure of Communist subversion or insurgency. The im- pact on the world balance then could have been quite substantial if any one country had made a change in political direction. Today, I think the world balance is a little more stable, at least with respect to major military threats to our country. The real challenge for intelligence is to provide the kind of information that enables us to negotiate and enables us to anticipate future developments in countries that would be of great importance to us. Obviously, the subject of economics has become more important in the past few years. Terrorism has become a threat to the safety of our citizens. Also, the narcotics problem has grown in the past few years. But other situations correspondingly have declined, and we've been able to compensate. ?. Nfr. Colby, the CIA has been widely criticized for its involvement in Watergate- A The CIA did two wrong things in the Watergate affair: The first was providing Howard Hunt paraphernalia for use 2 in his work for the White House. The second was providing White House employes the psychological profile of Daniel Ellsberg. They weren't earthshaking, but they were wrong. We shouldn't have done them, and we have told our employes that we won't do them again. a. If someone called today from the White House and asked the CIA to do something improper, what could you do about it? A Well, that's very clear. In my confirmation hearing on July 2 last year, I said that if I was ordered to do something improper, I would object and quit if necessary. That's easy. Also our employes have been instructed that if they have any. question about anything that they. are asked to do, they are to come to me. If anybody really tried to misuse the CIA in the future, I think the organization would explode from inside. It really would. And that's good, because it's the best protection we have against this kind of problem. 0. Do you operate at all inside the United States? A We have no internal-security functions or police or law- enforcement powers. It is clear that our function is only foreign intelligence. What do we do inside the United States? We have a large building up on the Potomac River with a lot of employes. In order to know something about them before we hire them, we conduct security investigations. We also make contracts with people around the country to supply us with things that we can use in our activities abroad. And we have contracts for research projects so that we can expand the base of our knowledge. We have a service in our agency that talks to Americans who may have knowledge of some foreign situation that they are willing to share with their Government. We identify ourselves as representatives of the CIA, and we assure these Americans that they will be protected as a source-and we will do so. But we don't pay them and we don't conduct clandestine operations to obtain such intelligence from Americans. We have some support structures in this country for our work abroad. We also collect foreign intelligence from foreigners in America. This is intelligence about foreign countries and has nothing to do with protecting the internal security of this country against those foreigners. That is the job of the FBI, with which we have a clear understanding and good co-operation as to our respective functions. ?. A number of Congressmen complain that there is no effective control over the CIA. Is there any reason why your agency shouldn't be subjected to tighter supervision? A I think we have responded to Congress's right and desire to know about the details of our activities over the years in the form that Congress itself has arranged. Now, the arrangements we have with our oversight committees in Congress are a lot more intense today than in past years. Twenty years ago, all of this was considered a very secret affair. Today, Congress is much more demanding. We answer any questions our oversight committees ask, and I must volunteer to them matters they might not know to ask about. That's the way Congress wants it, and we are responding. If we didn't, we'd be in real trouble. CL Mr. Colby, do you feel that the effective- ness of the CIA is impaired by all the publicity that you've been getting lately about secret operations? A Obviously this has raised questions among some of our foreign friends about the degree to which we can keep secrets. Leading officials of foreign governments have brought it up in discussions with me. Individuals who have worked with us in various parts of the world have indicated a disinclination to work with us any longer because of the very real dangers to them of exposure. In that respect, we have been hurt. But I like the way our society runs. I think it is perhaps unique that the chief of intelligence has to be exposed, as he is in America. But we have a responsibility to the American people. We are as responsive as we can be and still run an intelligence service. We regularly brief newsmen on world situations, we talk publicly about our activities in general terms, and we Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Approved For Release.2001/08/08 : CIA-RDP77-00432R000100340002-8 release our information and assessments whenever we can. I think America gains a great deal of strength from this, even though it's a big change from traditional intelligence secrecy. Q How do leaks affect morale at the CIA? A You have to draw a distinction between leaks that lead to criticism of our programs and policies and leaks that expose our people. I think that we can and should stand up to the criticism. But exposing our people can be very difficult and also very dangerous. You will recall Mr. Mitrione, who was killed in Uruguay. [Dan Mitrione, a U. S. employe of the Agency for Interna- tional Development assigned to train police in Uruguay, was kidnaped on July 31, 1970, and later killed by Tupamaro guerrillas.] He was murdered-that's the only word for it. He was alleged to have been a CIA officer, which he was not. I think it is reckless to go around naming people as being identified with the CIA. 0. Why can't you prevent former CIA officials from publishing books that reveal secrets of your agency and the names of secret agents? A There are criminal penalties for people who reveal income-tax returns or census returns or even cotton statistics. But there are no similar criminal penalties for people who reveal the name of an intelligence officer or agent or an intelligence secret, unless they give it to a foreigner or intend to injure the United States. I think it's just plain wrong for us not to protect our secrets better. I am charged in the National Security Act with the protection of intelligence sources and methods from unau- thorized disclosure. But the only tool I have is the secrecy agreement we require our people to sign as a condition of employment. We invoked this agreement against one of our ex-employes who wrote a book. We didn't censor his opinions or criticisms; we just tried to prevent him from revealing names of people and sensitive operations, some still going on. We are currently engaged in a civil action in the courts to determine whether we can enforce the agreement he made. I recommended legislation that would make it possible for us to protect intelligence secrets more effectively. My recommendations would apply only to those of us who voluntarily sign an agreement that gives us access to these secrets; it would not impinge on First Amendment guaran- tees. 0. Mr. Colby, can we get back to the question of the necessity for the United States to maintain a big, secret intelligence operation in an era of detente? A Yes-I didn't fully reply to that. I feel it is essential to the protection of our country, not only our military security but also in the sense of security against the other problems we face overseas-economic pressures, terrorism, local problems that can start in various parts of the world and eventually involve us. Through our intelligence work we must anticipate these problems and take protective steps. If we don't know that another country is developing a particular threat, we can be caught very badly off base. Beyond that, our intelligence work makes it possible to engage in negotiations. The SALT [Strategic Arms Limita- tion Talks] agreement between U. S. and Russia is the most obvious example. Without the knowledge we had of Soviet weapons through our intelligence activities, it would not have been possible for us to negotiate. We also have what I would call a peacekeeping role, which I see of increasing importance in the years ahead. On a number of occasions, we have seen situations developing in a dangerous manner. By alerting our Government in good time, it has been possible for it to defuse these situations. 0 What part do spy satellites and other forms of modem technology play in your work of collecting intelligence? A Quite frankly, technology has revolutionized the intelli- gence business. You have seen the photographs that came out of the U-2 operation over Cuba. You can realize the great importance of this development if you think back to the great debate in 1960 about a missile gap. People took strong positions on both sides, and we at the CIA were trying to determine what really was happening-whether a missile gap actually was opening up in favor of the Soviet Union. Today it would be impossible to have that debate because the facts are known. This kind of technical intelligence made the SALT agree- ment possible. For years we insisted that any arms agree- ment would require inspection teams to monitor on the ground what the Russians were doing. Given their closed society, they wouldn't permit it. That stalled negotiations for years. Finally our "national technical means," as we politely call them, were improved to the extent we could tell the President and Congress that we can monitor the 1972 SALT agreement without on-site inspection teams, and we could make the agreement. 4 Some argue that satellites and other forms of technical intelligence can do the job and that there is no real need for clandestine agents ferreting out information. Do you agree? A Not at all. Technical systems and open observation can tell us a great deal of what is physically there in closed societies. But they can't tell us what is going to be there in three or four years' time because of decisions that are being made in board rooms today. They can't tell us the internal political dynamics to allow us to assess how such a society is changing. And they can't tell us the intentions of people who may be bent on deceiving us. Intelligence of this sort can be obtained only by what we call "clandestine collection." Q Looking at Russia's intelligence operation-the KGB- how does it compare with ours in scale and effectiveness? A I think Soviet intelligence is going through a change-a good change. For years the big thrust was on stealing secrets. You remember the atom spies in America and all that sort of thing. In the past few years the Soviets have apparently become aware of the significance of assessment-the analysis function of intelligence. They've set up institutes to study the United States, realizing that the facts are easy to obtain in America. Their real problem is assessing what we might do, which is a terribly complicated and difficult intelligence problem. C1 Are you suggesting that the KGB no longer maintains spies in this country? A Oh, they do-sure, they do.. What I am saying is that they have moved from heavy dependence on espionage to greater reliance on more-normal ways of collecting and assessing intelligence. You can only say that's 'a change for the good; it should give them a more accurate picture of us, and it could hopefully reduce their espionage someday. But the Soviets still run very extensive covert operations around the world. In any kind of foreign mission they send abroad-for example, delegations to international organiza- tions-there always will be KGB people or people from GRU, their military intelligence. They also conduct a long- term program of training people and putting them in place under false identities to stay for many years. Colonel Abel [Rudolf Abel, a convicted Soviet spy, was returned to Russia in exchange for U-2 pilot Francis Gary Powers in 1962] was an example of that. They have the benefit, of course, of indirect support from a variety of Communist parties around the world. - 0. The Director of the FBI has said that there-now are so many Soviet spies in America that he is having trouble trailing them. Why do we let so many in? A We let them in as diplomats, commercial travelers, or in some other capacity. You have to realize that there has been a very large increase in the number of Soviet citizens in the United States, as compared with 10 years ago-partly as a result of detente. Nov, if you get an increase in Soviet citizens in this country, you are inevitably going to get an increase in Soviet agents. You see, in the Soviet Union the intelligence service is a very, very powerful institution because of its responsibilities for internal security as well as foreign. intelligence. They have, in effect, merged the CIA, the FBI and our State police forces. And their intelligence service carries a very high degree of responsibility for preserving the power of the Soviet state, for party discipline and for public discipline. Consequently, the KGB has an institutional power that is totally different from the FBI and CIA combined in our country. .I think our system makes its a better and a stronger nation. Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 ERA INTELLIGENCE SIZES UP WORLD'S TROUBLE SPOTS The massive flow of information pouring into Washing- ton requires William Colby, as Director of Central Intelli. gence, to make constant evaluations of fresh global developments bearing on U. S. interests. Following, in his own words, is the appraisal Mr. Colby gave editors of "U. S. News & World Report" of tensions around the world, what they mean, what they could lead to, and.the possible impact on the superpowers. Strategic balance: U. S. vs. Russia. "The Soviets are developing new missile systems that will increase their strategic power considerably. "But we do not see that in the foreseeable future they can dominate us. We have both reached the point where we can destroy each other, and the rest of the world-and they know it. "You ask if the transfer of American technology to the Soviets is a matter of concern. "We know that the military have a very high priority in Soviet decision-making. We have procedures that put limita- tions on giving them things of direct military value. And they have a problem of adapting our technology, which works because of our competitive system. That is a problem they've got to do some adjusting to. "The Soviets are, of course, well behind us technologically. But they are able to challenge us in arms competition by taking a much-more-disciplined approach, particularly in assigning their best talent to arms work. One very interest- ing thing is to compare the Soviet military work in space with the Soviet civilian work in space. There is an obvious qualitative difference between the two. The military work is much, much better." Detente: Why Soviets want it. "There are three main reasons for Soviet interest in promoting detente with the United States. "First, they obviously want to prevent the kind of horren- dous confrontation that is pos- sible in this age of superweap- ons. The result of a nuclear exchange between us would be just so incredible now that they realize that something has to be done to avoid it. "Secondly, they insist that they be recognized as one of the world's two superpowers and get the status that their strength implies. They might some of those countries-including demands for greater freedom of action. "The old idea of total Soviet dominance and control is under challenge even from some of the Communist Party leaders in Eastern Europe." Western Europe: Communist penetration. "One thing the Soviets want is Communist participation in the govern- ments of Western Europe. "This is in line with Communist ideology, which says that collapse of the European democratic system is inevitable, so that the movement of Communist forces from minority voices to participation will enable the Communists eventual- ly to take over governments there and run them.. "Obviously, the Communists are playing a role in some countries by reason of the 25 per cent or 28 per cent of the votes they represent, and the difficulties of organizing governments among the fragmented non-Communist par- ties. "There's been some increase in Communist Party in- fluence. But several trends are running: One is the increase in European Communist Party influence in these countries; another is the apparent increase in the independence of European Communist parties from Moscow's control, and another is the non-Communist parties' reaction to this, to detente, and to each other. It's premature to tell where these trend lines are going to cross. "We are certainly not saying, 'It doesn't matter whether the Communists participate in power.' What I'm saying is that this is a complicated, multifactored matter." Cuba: Castro's policy now. "Fidel Castro's attempts to export his brand of Communist insurgency to other countries of Latin America didn't work. "The Cubans have stressed in recent years the develop- ment of state-to-state relationships. And they've been quite successful with that new policy. "As for Russia, the Soviets still rate Cuba as a geographic asset-no question about it. It's a very substantial geographic asset, but it's a very costly one to them in terms of the support the Cubans have required over the years. "Cuba's present activities in Latin America-stressing state links-are, in general, of long-term use to Soviet interests." War in Mideast: Quite Possible. "Another round of war between Israel and the Arabs is possible-quite possible. "It depends in great part on peacemaking diplomacy. Obviously, the Arab summit meeting at Rabat, which named the Palestine Liberation Organization as the sole legitimate representative of Palestinians living on Arab land held by Israel, raises new difficulties. "As for the Soviet role: They desire to play the role of a major power in the Middle Eastern area. They are endeavor- ing to express that through their naval presence, through their military-aid programs, through their economic aid, and so forth. Their policy right now is to keep that presence active, keep the capability of influencing the situation. But at the same time they have a considerable interest in continu- ing detente with the United States. They've got to try to go along a rather narrow track without abandoning their influence, but, on the other hand, not seeing the whole thing derail. "The Soviets do get a certain amount of benefit from the economic troubles that afflict the West as a result of the oil problems, but they don't have to do much about that. It's taking place pretty much on its own. On the other hand, they have to realize that an aggressive move by them to cut off oil could cause a reaction on our side; It would be a very direct affront to any detente hopes that they have." also benefit from a relaxation of the Western solidarity: that characterized the 1950s and 1960s. "Thirdly, they would like to accelerate their development in economic and technical terms, because as they look at the enormous power of the West-America particularly, but also the other countries-they see it moving at a tremendous rate. They hope to benefit by a greater degree of exchange and borrowing from that movement. "Generally, the Soviet concern over their internal disci- pline is very high. This is partly a result of detente. They are nervous about what detente can do in terms of getting new thoughts and new political drives going within the Soviet Union. And they just don't want that to happen." Soviet empire: Starting to crumble? "The Soviets face a problem as the states in Eastern Europe show signs of dissatisfaction over. iron-fisted control from Moscow. The' Russians have made it clear that they are not going to brook any substantial break in their Eastern European buffer zone. "But, at the same time, they obviously have the problem of dealing with the new political ideas that are circulating in Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340007 8 BALTIMORE SUN 25 November 1974 :.Colby beks teinge ce. l Washington t1Pf-The director ~of -_,the Central-t_ Intelligence ,Agency says stronger protection! is:: needed to safeguard intelli- jgence.secrets. .William E. Colby, in, a copy- righted interview published yes- terday'in U.S. News--& '. World `Report, said'he has Tecommetn- f ded?-legislation to help protect .such information. - 1. "There are criminal -.penal- !ties for people who reveal in tcome tax returns or. census re !turns or even cotton statistics. But there are no similar penal- ties for persons who reveal the name of an intelligence officer or agent or an intelligence sec- ret, unless they give it to a foreigner or intend to injure the United States," he said. "I think it's Just plain wrong; for us not to protect our secrets; better." Mr. Colby said recent publi ';city about secret CIA operations) ,has raised questions among for-' reign friends about "the. degree to which we can keep secrets." Mr. Colby said that, while this may hurt the operation, he likes the' way American society runs. Open as possible The agency, he said, is as open as possible, briefing news-, men and providing public in formation and assessments' whenever possible. "I think America gains a great deal of strength from this, even though it's a big I change from traditional intelli- gence secrecy," he said. Questioned about the Water-1 gate scandal. Mr. Colby said the agency did two things wrong-; providing paraphernalia for E. Howard Iltint, Jr., convicted; ?Watergate burglar, and provid-` ing the psychological profile of Daniel Elisberg, the man who leaked the Pentagon papers. But he said steps have been taken to prevent any future misuse-of the CIA, with employ- lees instructed to report any such attempts directly to him. "If anybody really tried to misuse the CIA in the future, he said, "I think: the organiza- tion would explode from inside. It really would. And that's good, because it's the best pro- tection..we have against ? this kind of problem." LOS ANGELES TIMES 18 November 19.74, CIA Showing Ifs Secrets in. Bid fo Polish Its Image. Criticism, New International Attitude Bring Disclosures; Lid Still on Vital Operations BY MURRAY SEEGER Times Staff Writer WASHINGTON-One of the big- gest of the bureaucratic icebergs in Washington, t h e C e n t r a I Intel- ligence Agency, is riding a. little higher in the water these days. Under the heaviest internal and external. attacks of its 27-year histo- ry, "the agency" or "the company"- as its employes and those who deal with the CIA call it-has initiated a subtle campaign to refurbish its po- litical standing and generate new. public support. In this campaign the agency is disclosing more of itself to public view, while leaving what it consid- ers to be vital dimensions well hid- den beneath the surface of essential secrecy. "If we don't protect the names of our people abroad and people who work with us, we won't have people who will work with us," William E.. Colby, the career official who took, over as CIA director last year in the midst of the agency's worst prob- lems, said recently. ? "If we can't protect some of our. technical. systems that give us infor- mation, then the other side can take countermeasures and we will no longer be able to benefit from those systems." he said. The recent wave of criticism against the CIA., the keystone in an intelligence community that spends about SS billion a year, was stimulat- ed by disclosures of its peripheral involvement in the Watergate scan- dals and. its direct involvement in Chilean politics. CIA officials are equally disturbed by the more recent phenomenon of employes leaving the tightly closed circle, where morale and loyalty tra-, ditionaily have been remarkably high, and selling their secrets in books and magazine articles. Although the official; say they are willing to accept. informed criticism of the agency's performance and ad- just their operations to changes in national policy, they are apprehen- sive about the possibly fatal effects of disclosures made by former agents. guard against secrets`,"being disc' pensed by its current employes but. the only restraint against former em- ployes telling all is a contract they sign when they joined the CIA and: the. general laws against espionage. The agency has been involved for; months in an embarrassing suit di- rected at blocking publication of parts of the book, "The CIA and the Cult of Intelligence," by Victor Marchetti, a former agency official, and John D. Marks, who worked for the Department of State. A more recent book, "Inside the Company: a CIA Diary," by former agent Philip Agee, has been pubs lished in Britain, where, of course, the agency. cannot block the print- ing of anything it considers sensi- tive. To counter such publica- tions, the agency is sup- porting legislation t h a t would make it a crime for former employes to dis- close. secret information. Disclosures by former employes and other pub- lished information on the agency's activities have supplied ammunition for private individuals and congressmen who believe the CIA should give up its "dirty tricks." "There is no justification in our legal,' moral or reli- gious principles for opera- tions of a U.S. agency which result In assn, sina- tions, sabotage, political disruptions or other med- dling in another country's, internal affairs, all in the name of the American. people," Sen. James G. Abourezk (D-S.D.) said. "It amounts to nothing more than an arm of the U.S. government conduct- ing a secret war without either the approval of Con- gress or the knowledge of the American people," he said. The. traditional rationale for such activity, that the Soviet Union works even harder to undermine and overturn Iegiti mate governments, was given by President Ford at his Sept. 16 press conference when he was asked wheth- er the CIA had an interna- tional right to interfere in the internal affairs of Chile. "Our government, like other governments, does take certain actions in the intelligence field to help implement foreign policy and protect national secur- it.v," Mr. Ford said. "I am informed reliably t h a t Communist nations spend vastly more money than we do for the same kind of purposes." man said in referring to some of the The added: "I think this is recent insider tales of agency life. In the hest interest of the "These are people who put their; people in Chile, and ,or_ faith is us." tainly in our best interest.." The agency has strong authority to conflict between Western- style democracy and Com- munisni has changed and. that there is room for de- bate on the agency's fu- ture 'role. "It is advocated by some that the United States .abandon covert action," he said in a recent speech. "This is a legitimate ques- tion and in the light of current American policy it would not have a major impact on our.cur- rent activities or on the current security of the United States." In recent history the CIA developed and sent. an a r m e d invasion against Cuba at the Bay of Pigs and armed a secret army in Laos in the Indochina "i war. However, it is sup- porting few, if any, such operations now. In Chile the agency had subsidized opposition par- ties and newspapers in an attempt to block the elec- tion of Salvadore Allende, a Marxist, to the presiden- cy and later to prevent his crushing of all political op- position. Although such opera- tions apparently are sanc- tioned under the general public authorization issued by President Harry .S Truman when he estalb- lished the CIA in 1!17 from the' remains of the wartime Office of Strate- gic Services, the, agency has been given more rc- cent, secret authority to carry on covert actions abroad. More controversy than that generated by the overseas "dirty tricks" was stimulated by the dis- closure that the CIA had helped one of its former "old boys," E. Howard Hunt Jr., in his clandes- tine White House assign- ments without knowing what they were. Domestic use of CIA au- thority is clearly illegal. Although the agency way- erecl under the strong Colo admits that the Approved For Release 2001/08/08 : CIA-RDP77 00432R000100340002-8 Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 pre'ssure' of tfi;e Nlixo' 11 White House, it finally' 'fought back and saved its dented reputation. "It was lower-level peo ple who blew the whistle on Hunt," one agency member recalled. A f t e r giving the retired agent; some equipment, the "low- er-level" executives re- ported his requests to higher-ups, and Hunt was cut off from' additional. support. On the international po- litical scene, agency offi cials are examining the, historic role of covert operations. They are con- winced they must; retain the capacity to take"direct,: secret actions but feel' there is less demand for: such operations than there' was in the past. In t h e contemporary world, American i n t e I., ligence experts have: made two major contributions, technology and research in their field. Secretary of State Henry A. Kissinger confirmed the skill of American intel- ligence last July in Nos- cow when he reported that. Soviet 'experts had been Startled by his knowledge 'bf their missile - installa- tions as they discussed the Text round of the strategic arms limitation t a 1 k s JSALT). "In the 1960s we had a great debate on the missile gap," an intelligence ex- pert said. "Now we can't have that debate - we have the facts . . the SALT talks depend on this 'l Ind of intelligence." Research and analysis afire the chief functions of the CIA. Most of its 16,000 employes work in a huge, isolated building in subur- ban Langley, Va., in academic-like pursuit of knowledge with the bene- fit of "total. sources." The CIA overseas agents collect secret information, which is combined with public material and data from electronic systems to produce reports that are supposed to be neutral in political content and as ac curate as possible. "If we learn when an- other power is developing a weapons system when it is on the, drawing board instead of when it appears in the field, then we can do something about it," a .CIA man said. "But if we sec it only h the field, we may be three or four years behind." :1 g e n c y officials call themselves the "techni- :, cians" of intelligence be- `cause they are only part of a larger community and take their orders on opera- tions from elsewhere. Colby, an easy-going .man of medium height who hardly looks the part of a secret 'agent who worked behind enemy lines in World War II, not only heads the CIA but holds the position of direc- tor of central. intelligence to coordinate. activities of .all information -gathering agencies. He sits as head of the 'U.S. Information' Board, which includes. the De- fense Intelligence Agency, National Security Agency, the S t a t e Department's Bureau' of Intelligence and: Research, Atomic Energy, commission, Federal Bureau of Investigation ..and Department: 'of 'the Treasury. Experts from each agen cy submit reports on:dif- ferent intelligence issues; and when conflicts hi. in= formation develop, Colby resolves them. The missions of. the CIA, Defense I n t elligenc& Agency, National Security Agency and other intelli-. Bence gatherers are set out, by another little known coordinating group called the 40 Committee, which is headed by Kissinger through' his position as assistant to the President. for national security. .In defending itself from criticism, the QIA pointed, out that its instructions on, covert operations, c a in e from this super secret committee whose, decisions are approved personally-: by the President. "Being under pressure is- nothing novel to the agenr' cy,". a CIA man said reg. cently. "The thing that is different is the climate of opinion in America, which: is more questioning, more demanding than it used to be. "We have tried to come out and explain things to the American people. To gain new credibility and political support, the CL-~ is conducting a Modest public relations and lobbying campaign. One agency source said Colby met every morning with his advisers on con ' and public af- fairs. . . When it came time to receive congressional. con- firrrlation for his appoint- ment last y e a r, C o I b y passed the word that he had no objection to being the first intelligence chief to face the. Senate Armed Services Committee in ari open hearing. "That's fine, I think it's great," Colby said recent- ly. "Frankly, I think it is protection for the republic that the head, of intelle- gence is subject :to . that kind of popular :and .con gressional control." The agency has estab-.. lished three levels of ex- posure, starting with a public stance that includes the congressional hearing and some speeches. . . At the next level, the .CIA makes some of its re- .search available to' differ- e n t agencies, reporters and academic 'groups. A recent congressional re- port on the Soviet,econoa 7ny, for instance, includes chapters written. by CIA experts that contain infor- mation to be found no- where else. On a more mundane lev- el, the CIA prints the only. accurate street map of Moscow, one based on aer-' ial photographs of the city: The Russians publish for tourists only "schematic" maps of their cities. At a third level, the CIA talks only to a small num- ber of senators and .repre-: Washington Post 25 Nov. 197!1 aerate ee .. ,tutu, I : j A3&oc We The- director of , the CIA, William: c t. Colby, .says stronger, protection is 'needed to safeguard. intelligence se-' crets. -In an. interview pub- j lished"yesterday in U.S. News & World Report, Colby said he 1 has recommended legislation j to help protect such' informa- "There are criminal penal- ties for people who reveal in- come tax returns or census re- turns or even cotton statistics. But there are no similar pen- (alties for persons. who reveal the name of an intelligence of- ficer or agent or an intelli- gence secret, unless they give it to a foreigner or intend to injure the. United States," he said. "I think it's just plain wrong ; -sentatives on two commit- -tees' that have the official .duty. of overseeing its work. They get "total in- formation," a CIA man said. The, agency's secret budget-estimated at $750 million a year, or less than 10% of what all intellig- ence activity costs-is ap- [proved by the congres- sional committees but is buried in various ac- counts. The agency staff ' has been trimmed in an effi ciency program started when Secretary of Defense James R. Schlesinger served a short term as CIA. director. Targets of this campaign were older "ro- mantic" officials and agents more attuned to the darker days of the cold war than the modern era of East-West relations. . Although the most sev- ere critics of the CIA have not been satisfied with the changes the agency has made in its operations, there is little doubt that Colby has been able, so far, to neutralize the most . serious opposition without giving away very much of what he considers the agency's vital secrets. for us not to protect our se-; crets better." . ; Colby said recent publicity,: about secret. CIA operations has raised questions among foreign allies about "the 'de- gree to which we can keep se- crets." - The CIA, he said, is as open as possible, briefing newsmen and providing public informa- tion and assessments when- ever it is able, "I think Amer- ica gains .a; great deal of strength frorp this, even though it's a big change from traditional intelligence se- . Crecy," Colby said.:. ' -' Questioned about Water-! I gate, he said the CIA made two, errors--providing'para-t phernalia for E'. Howard Hunt and releasing the psycholo gi- cal profile of Daniel Ellsberg, , But he said steps have been! taken to prevent future mis. use of the CIA, with employ-, ear instructed to report such attempts directly to him. If anybody 'really tried to misuse the CIA in the future,' ,he said, "I think the organiza- tion would explode from in-! side. It really would. And that's good, because it's the i best protection we . ; have against this kind of problem." Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002=8 EARPER' S MAGAZINE Dec 19Th. Jim Hougan The proliferation of private intelligence agencies has made civilian espionage a growth industry W ASHINGTON IS A PARANOID CITY these days; if one listens intently enough, it's easy to imagine the strains of Danse Macabre welling up from the living rooms of George- town and the CIA suburbs of Virginia. Dusk delivers a sense of impending Walpur- gisnacht, and the reason is clear: never before have there been so many "spooks" abroad in the land, so many spies and counterspies, clan- destine analysts, secret movers, shakers, agents, operatives, wiremen, and gumshoes. They come from the CIA, of'-course-but. also from the DIA, FBI, NSA, AEC;. and State Department; from the intelligence sections of the Army, Navy, Air Force, IRS, and the Treasury Depart- ment; from the Justice Department's Internal Security; Intelligence, and Organized. Crime Strike Force divisions; from the Secret Ser- ? vice, narcotics-control agencies, and metropoli- tan "Red squads"; from the -hundreds of "pros pri:.taries," "conduits," and "covers" that some of these agencies have maintained.' The "intelligence community," once a mere., suburb of government, has grown to the dimen- sions of a metropolis, a secret Pittsburgh in our. midst. For the most part, it is a new community, a postwar. boomtown built upon the mining (and manufacture) of information. Its internal organization owes less to coherent federal plan- ning, than it does to the emergence of new per- ceptual hardware and techniques (e.g.,. satel- lites, computers, and systems analysis) whose very existence has transformed relationships be- tween governments, industries, and people. There is no way to determine the exact size, let alone the influence, of that community. Its budgets are secret, its operations clandestine, and its advice classified. At its fringes-where, .for instance, the State Department and the CIA meet---an institutional.osmotis takes place. Funds for one agency are concealed in the bud- get of another; military personnel are. "sheep-; dipped,'' or placed under cover, and loyalties of employees in one department are "turned" bye operatives in a second. It is difficult to accurately assess the number: of intelligence workers, but Sen. William Prox- mire estimated last year that the government employs at least 148,000 of them. That figure is low, however, since it encompasses only the "downtown district" of the community-thee part concerned with "classic" intelligence ob- jectives on a full-time basis. Specifically, Prox- mire's number (the only one ever published by the government) includes only those employees of agencies seated on the U.S. Intelligence Ad- visory Board--CIA, NSA, DIA, Intelligence and; Reports Bureau of the State Department, and: .the intelligence sections of the Army, Navy, Air: Force, FBI,. AEC, and Treasury Department. It. does not include part-time operatives, subsidi ary alien apparats,'' businesses which exist by virtue of their contracts with the intelligence agencies,** and the vast number of de facto: agents and investigators distributed throughout: government in supposedly "open" entities such as the IRS and Justice Department. ' ' Whatever its exact size may be, the intelli- gence community is huge and growing. At the. very least, its wardrobe is large enough. to ac- commodate 148,000 cloaks and perhaps _ an equal number of daggers. Its special skills (infil- tration, subversion, surveillance,. and espio-' nag e) are in increasing demarid. While there are still many different, sources of power. in the United States, it is apparent that the nation's drift toward technocracy entails a more com- plete equivalence between data and power. More than ever before, political and economic strength accrues to those who have special ac- cess to, or control over, lines of communication and information that are not accessible to the. ''public. The spectacular growth of the federal intelligence community, however, has resulted in the spin-off of an invisible industry, a securi- ty-industrial perplex whose influence is more insidious for the fact that its activities are most- ly unseen. Spying for profit N THE PAST DECADE, literally dozens of private intelligence agencies have been created, join- ing over 32,000 registered private eyes and 4,000-odd security firms. Staffed almost entirely by former government operatives, the mercen- ary apparats place their skills at the disposal of the rich and paranoid, or work for a single cli- ent. The proliferation of the private apparats is attributable to two causes. The first is that each year, hundreds of agents (fired, retired, or merely ambitious) leave government for private practice. Last year, for instance, the civilian work force absorbed the greatest number of CIA agents in its history. These were mostly middle-aged men who had been with the agency since its earliest days. Having risen to the up- per echelons of the intelligence community, they found themselves (in their late forties and fif- ties) with ten or fifteen years remaining in their working lives-and with virtually no pos- sibility of further advancement. Forced into re- Gen. Reinhard Gehlen's former apparat is an ex- ample of this. Some CIA examples: Southern Air Transport **Until recently, according to statements of its (proprietary); the Kaplan Fund (conduit and Rob. r q WOW Po t, Psycholog- ert R. _NfullenA~ ffEai8 lease 001/08/08 :7Clic1FP Z71iON ,F Q e of these. Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 tirement by the CIA, more than 1,000 execu- tive spies joined thousands of other retired spooks in studying a new kind of classified ma- terial: the want ads. But under what job head- ings should they look? "Putsch Director"? "In- terrogation Engineer"? "Propagandist"? Or, more likely, "Marnagement Consultant," "Per- sonnel Adviser," and "Public Relations Spe- cialist." Of course, if they preferred to work for themselves, they could follow the lead of James McCord and others who had set up their own firms and independently marketed their strange expertise to industry. A second reason for the emergence of the pri- vate apparats is the multinational phenomenon. Some -multinationals have been described as "sovereign states." The metaphor is more than apt, and one consequence of its currency is that the federal intelligence community no longer au- tomatically equates the national - interest with the multinationals', investments. It is increas- ingly apparent that what's good for the multina- tionals is not necessarily good for America (as the Navy learned when, during the last Mideast crisis, its ships were refused fuel by a supposed- ly "American" oil company whose executives feared to offend their Arab partners and hosts). Certainly, the longterm foreign policy goals of the United States do not always coincide' with the timetables of the multinationals, even when their interests are mutual. The CIA, as ITT director John McCone found out when he sought to sabotage the economy and manipulate the elections of Chile, does not make its opera- tions contingent upon the availability of million- dollar grants from private industry." Because the CIA is not for hire, it cannot be trusted. Whether it's guarding "proprietary informa- tion" at home, encoding communications, infil- trating governments in the Middle East, or fund- ing counterrevolutions in Latin America, the multinationals would rather do it themselves. To preserve their investments and increase their profits, corporate giants and paranoid tycoons therefore shell out millions to develop their own intelligence services or to hire the expertise of firms whose loyalties are for sale. The costs are tax deductible. There is nothing wrong with this per se (as they say). Gunboat capitalism has generally gone the way of gunboat diplo- macy: in 'big business, as in international poli- tics, a subtler strategy is required today than was ever necessary in the past. It is, however, a basically antidemocratic strategy in that it de- pends upon the surreptitious manipulation of institutions, information, and public opinion- an operational style inimical to, and destructive of, an open society. The skills of the intelli- gence community are, after all, the skills of war. The multinationals' reliance on those skills sug- gests that they recognize the sometimes martial nature of their relationship to other countries, to government regulation, and to the public. Spookery's spread to the private sector therefore poses two dangers. First, by applying intelligence and counterintelligence tactics to public opinion, it threatens to transform the society into a nation of "friendlies" whose or- dinary activities are controlled by hidden per- suaders of which they know nothing. (In this regard one sees the oil companies' recent ad campaign for what it was: a propaganda fugue designed to pacify a countryside of raped con- sumers.) The second danger is that commer- cial intelligence activities threaten to compro- mise the neutrality of government, and thereby threaten the security and rights of all. Agents who leave federal service for private employ- ment often take with them not just their special expertise but their "connections" as well. Fre- quently, former agents retain informal access to privileged information, and it is obvious that some even retain an ability to influence the: actions of their old agencies. After years of probing organized crime, the` Senate Permanent Subcommittee on Investiga- tions (chaired by Sen. Henry Jackson) has be- gun an inquiry into precisely this area. Of par ticular concern are: the extent to which federal agents "moonlight"; former agents' continued access to secret or privileged data and dossiers; the ability of "retired" agents to inspire or otherwise influence federal investigations; "joint operations" between private apparats and fed- eral agencies; and the suspicious transitions of some federal agents to extremely lucrative jobs with industry. There is substantial evidence that all these. practices take place and that, in fact, they may be rather common. In the area of "joint opera- tions," for instance, one notes the extraordinary cooperation extended by Justice Department of- ficials to Howard Hughes in his take-over of the Nevada gambling industry. As for "access to secret information," a government source re- cently complained to me that Exxon's Venezue- lan subsidiary, Creole, Inc., has a larger intelli- gence budget than the local CIA station-and that, in recognition of this, the two organiza- tions have consolidated their files: in Venezue- la, at least, what's good for Creole is apparently good for America. 0 NE MIGHT GO oN, scoring a litany of in- stances in which the federal intelligence and investigative machinery seems to have been penetrated by, or come under the undue influ- ence of, special interests. More helpful than such a list, however, would be to understand how a private . intelligence apparat actually works, how it came to exist, and who its clients and employees are. With that knowledge it may be possible to do more than take note of past abuses. The ideal firm to look at is one which places a comprehensive array of sophisticated intelli- gence skills at the disposal of clients whose busi- ness directly affects the public. There are a number of such firms, though exactly how many is unknown. The private in- telligence agencies carry their penchant for dis- cretion to the verge of anonymity; they are, as they prefer to be, an invisible industry. Still, one or another firm occasionally finds its way into the headlines. Thus, one learns of the Wackenhut Corporation's aggressive com- pilation of dossiers on Florida citizens, and of its secret analysis of "Communist penetration" in the Caribbean. Dektor Counterintelligence,. hired by the White House to account for gaps in the Presidential tapes, has also received pub- * Actually, McCone should have known this since he is himself a former director of the CIA (1961.65). Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 licity. Maheu & Associates, reported to have or ganized two assassination attempts on Fidel Castro, has come under scrutiny through its owner's contretemps with Howard Hughes and its dealing with the Greek shipowner Stavros Niarchos. McCord Associates has received at. tention from the press ever since its owner, James McCord, ,was nabbed at the Watergate. The best example of a private apparat, how- ever, is probably International Intelligence, Inc. (Intertel), a mysterious firm whose activities have impinged on the affairs of Howard Hughes, Robert Maheu, Robert Vesco, the Plumbers, ITT, Bebe Rebozo, and even the Mafia. Indeed, it has a particular contemporary relevance in that its very existence seems to have cast a shad- ow of paranoia over Richard Nixon-and, at least indirectly, contributed to the former Presi- dent's political reversal. In 1971 Jack Caulfield, a White House opera- tive, was so concerned about. Intertel--which he described as `.`an intelligence gun for hire"-that he recommended a counterintelligence cam- paign to neutralize the firm. Caulfield alleged that one Intertel agent was expert at "bag jobs" and warned ' that the firm "continued to have unauthorized access to sensitive government files in many areas." What- alarmed Caulfield was the volatile mixture of political and eco- nomic associations that surrounded the firm. Like Democratic superpol Larry O'Brien, many Intertel agents'a n the employ of Howard Hughes had a deep affection for the Kennedy 'family. The controversial relationship between members of the. Nixon family and Hughes, coupled with the political sympathies of O'Brien and agents at Intertel, suggested the possibility of revela- tions embarrassing to the President in an elec- tion year. Partly to combat the private apparat, Caulfield concocted Operation Sand Wedge, a scheme that included the establishment of what he described as "a Republican Intertel." This was to be an "independent" intelligence agency called Security Consulting Group, Inc. Unable- to decide who should head the firm (Caulfield nominated himself while others insisted on Rose -Mary Woods's brother), the White House ex- panded the activities of its internal "plumbing unit"-with known results. Caulfield's proposal illustrates a corollary of the private apparats: they feed upon each oth- er's paranoia. It also tends to confirm what many journalists have come to believe: taps on the telephones in the Watergate complex seem to have been an exercise in counterintelligence. International Intelligence, Inc. HERE ARE A NUMBER OF WAYS to describe lritertel, but the most delightful comes from the Senate Watergate Hearings. In them, a special counsel to President Nixon defined it as "a commercial firm specializing in the identifi- cation of typewriters." That droll summation is akin to describing Playboy as a "Midwestern little magazine." in fact, Intertel is a network of paladin agents whose collective expertise in- cludes specialties from within the fields of law in-,. and the behavioral sciences. The firm has its headquarters on the second floor of the Hill. Building in Washington, a few steps up Seven- teenth Street from the White House. It also has branch offices in London, the Bahamas, Toron- to, Detroit, New York, and Los Angeles. The firm declines to provide a client list, but it is known to advise stock exchanges, investment bankers, newspapers, airports, insurance cor- porations, pension funds, billionaires, govern- ments, gambling joints, and multinational cor- porations. Tom McKeon, Intertel's executive vice-president and general counsel, says that the organization accepts foreign and domestic cli- ents alike but that its primary marketing target is the Fortune 1,000 group. Most of the fim's services are provided to clients under oral agree- ments, and the bulk of its revenues come from a handful of customers. .What Intertel does is protect proprietary in- formation (secrets) whether it's on tape, in print, or in an employee's head; perform back- ground investigations and "employee attitude assessments"; establish industrial "intelligence systems" and guard against . corporate espio- nage; provide "defensive electronic surveys" to learn if their client is being bugged; authenti- cate or discredit documents; undertake "com- munications integrity analyses" to learn if their client needs scrambling or cryptographic equip-: ment; hermeticize the data in computers; sani- tize public images; shred red tape, monitorrele- -vant government Iegislation, and lobby; advise. on geopolitical "switch-trading opportunities";" identify stolen stocks and bonds; prevent the theft of securities; and make "industrial site re- location surveys," a sort of sociopolitical eco- nomic analysis that will tell you, among other things, whether the place you're moving to has enough railroads or too many Reds. And lots,. lots more, all of it couched in the most recondite language imaginable. What Intertel will not do is tell you if your. wife is cheating, though that might come up if she's also stealing your money, selling your se- crets, blabbing to Jack Anderson, or concealing her links to the mob. Intertel is, in other words, a "management consulting firm" that specializes in confidential intelligence services. Lest anyone think that In- tertel is just a group of depleted gumshoes, double-chinned cops-cashing in on feet that long ago went flat, the following is a selection of roles its agents have fulfilled: chief, Special Projects Section, National Security Agency; di- rector, Intelligence and Internal Security Divi- sions, Internal Revenue Service; deputy director of security, National Security Agency; chief, Intelligence Division and Organized Crime Strike Forces, Bureau of Narcotics and Danger- ous Drugs; deputy director of security, U.S. Department of State; supervisor of Intelligence Activities, Federal Bureau of Investigation; chairman, Criminal Intelligence Services (On- tario); commissioner of Scotland Yard; super- visor of Espionage and Internal Security Inves- tigations, FBI; senior adviser, U.S. Department of State, Southeast Asia; coordinator Of INTER- POL operations for the Royal Canadian Mount- enforcement, intelligence gathering, economics, * Switch-trades are international deals in which the data processing, accounting, systems engineer- seller is paid, at least in part, by valuable consider. Approved For Release 2001/088 aibfi4-0DP7 tN64WRbf#M0 0002-8 Approved For Release 2001/08/08 : CIA-RDP77-00432R00p1.00340002-8 ed Police; supervisor, Organized Crime and In- telligence Squads, Internal Revenue Service; chief, Justice Department's Organized Crime Strike Force; detective supervisor, Special In- vestigating Unit and Narcotics Squad, New York City Police Department; director of en- forcement, U.S. Bureau of Customs; chief, Mar- ket Surveillance Section, Securities and Ex- change Commission; and J. Edgar Hoover's only nephew. There are, in addition, more than fifty professionals and special agents from virtually every other precinct of government, and it should be noted that Intertel's director of intel- ligence operations is Edward M. Mullin, former- ly of the FBI and the CIA. CLEARLY, INTERTEL IS to most other manage- meat consultants as the CIA is to the Planned Parenthood Federation. The firm is nothing less than the legal incorporation of an old-boy network, whose ganglia reach into vir- tually-every nerve cell of the federal investiga- tive/intelligence community. There is nothing "wrong" m that. Civil servants are not chattels of the state, and if they decide to sell their skills in the marketplace, so what? But some who are skeptical of the motives of, for instance, How- ard Hughes and ITT may become concerned upon learning of the special talents and knowl- edge that their assets command. To this, Tom McKeon says, "We don't act as a shield or um- brella for anybody. We won't let ourselves be uses that way." And one would like to believe hint. But the fact is that the firm is for hire; it does what it's paid to do, and its clients are secret. "No one likes to admit they've got a problem," McKeon explains, '*but each of our clients has or else he wouldn't come to us. That's why we don't dis- close- their names." It's not the motivation of Intertel that de- serves to be questioned but that of its clients. A communications integrity rity anal} pis" sounds fine (it's meant to), but what if the resulting scramblers, codes, and cryptanalysis equip- ment are used to ruin the economy, or subvert the political institutions of a foreign democ- racy? Are the "analysts" responsible? "Document authentication" also sounds fine, but what, if the client twists the resulting infor- mnation in order to deceive the public? "Background" inquiries may also be of value, but not if the private investigators are part of an elaborate strategy involving federal agents and White House operatives acting in tandem on behalf of very special interests. ITT, a client of Intertel's, has tiptoed through all these areas, and used the intelligence agency in at least two of them. The potentials for abuse are many, and sus- picion of the private apparats is only natural. What makes Intertel of particular interest, how- ever, is the notoriety of some of its known cli- ents and the widely diverging views about its motives. Some instances: Caulfield was convinced that Intertel was engaged in "black" operations. In- tertel denies it does this and, in fact, says that it doesn't accept politicians as clients or engage in any political work at all. Huntington Hart- ford, heir to the A&P fortune,.is suing Intertel's parent firm for millions, charging that profits Approved from a casino that Intertel oversees have been fraudulently reported. Intertel denies the charge and points out that Hartford has yet to produce any meaningful evidence of his asser- tion. Yet another view of Intertel is held by Robert Afaheu, former confidant of Howard Hughes. After Intertel took charge of the bil- lionaire's Las Vegas casinos following Hughes's flight to the Bahamas. Malieu thought that his boss had been kidnapped. An attempt to "res- cue" IIughes was thwarted by Bahamian offi- cials accompanied by Intertel agents. Not everyone agrees that Intertel is aptly compared to Ian Fleming's SPECTRE. Some in- sist that the firm is better compared to the Fan- tastic Four, and point out that it was organized for the express purpose of "crime prevention." One Senate investigator who became curious about Intertel left their offices scratching his head. "It's surprising," he said. "The guy who owns the company is tight with Nixon and Re- bozo, but almost all its operatives, from the top on down, are old Bobby Kennedy men. Really, they're plugged into all the good guys in Washington." A check with Sen. Edward Kennedy's staff confirms that view. As one Kennedy aide said, "Intertel? They're our friends, man, that's who they are. I almost went to work for them my- self." But, he hastens to add, Intertel's rela- tionship to the Kenneclys is platonic rather than contractual. "They've never done any work for us," he says. "In fact, my understanding is that they don't do any political work at all." Trouble in paradise NTERTEL WAS NURTURED in the geopolitical humus of the Bahamas, an archipelago of more than 2,500 rocks and islands that fan out from the southern coast of Florida. It was rich soil for the emergence of a mission-impossible agency, a milieu peopled by hustlers, hoods, high rollers, playboys, pimps, billionaires, Brit- ish colonials, and dirt-poor blacks. For most of their history, the Bahamas were controlled by a group of white merchants 'known as the Bay Street Boys, a power bloc that ran the islands. One of the most powerful Boys was Sir Stafford Sands, an attorney whose private prac- tice did not suffer for his public work as Minis- ter of Finance and Tourism. One of his clients,, an ex-con named Wallace Groves, paid the bar- rister-knight almost $2 million in "legal fees." Groves could afford it. Thanks to legislation drafted by Sir Stafford, Groves was able to buy up 211 square miles of Grand Bahama Island for $2.50 an acre. It was as if a national fire sale had been held because, only a few years later, some of those same acres sold for $50,000 each. Sands was also responsible for obtaining the permissions needed to allow gambling at Freeport, a keystone of Groves's financial em- pire. By 1964 Groves's holdings were worth many millions of dollars, and his power was im- mense. Through one of his firms, he even had the authority to deport "undesirables." In achieving this, Groves had considerable help, and not just from Sir Stafford. Help. also came from a partner in Groves's Lucayan Beach Ho- tel-Lou Chesler, a Canadian financier who went to the banks for cash and to Meyer Lansky Approved For Release 2001/08/08 ; CIA-RDP77-00432R000100340002.8 for advice. It is unknown if Lansky, reputed comptroller of the mob, gave it-but he certainly had rea- son to. Ever since Castro nationalized mob as- sets in Cuba, organized crime had been seeking a new site for its offshore gambling facilities. The Bahamas were a reasonable alternative to Havana, and Lansky repeatedly sought to obtain influence there. Nevertheless, if he obtained that influence-as many believe he did-proof has so far eluded the courts.'' While these events were taking place at Free- port, Huntington Hartford was endeavoring to transform a dilapidated islet. named Hog into the. Monaco of the Caribbean. The eccentric grocery magnate renamed the island Paradise and poured millions into its development. But Paradise Island, . located across the channel from Nassau, lacked two things- that were essen- tial to its success: a bridge. to 'the mainland, and a permit for gambling. Hartford was unable to obtain either, possibly because his casino would compete with the one owned by Groves,:4 and possibly because he'd made the blunder of contributing to the Progressive Liberal Party (PLP), the rival of the Bay Street Boys. Tot save his position, Hartford sold all. but a minor-, ity share of his Paradise Island interests to the Mary Carter Paint Company-the firm that' would become Resorts International, the found- er of Intertel. Hartford's new partner, James M. Crosby, wasted no time in closing a deal with. Wally Groves, acquiring the services of Sir Staf- ford Sands, and, shortly thereafter, securing the necessary permits to gamble and build a bridge. The Paradise Island casino was not due to open until January 1968, but already the facility had) .drawn the attention of the man who would be-~ come the president of Intertel: Robert Pelo quin. At that time chief of the' Justice Depart ment's first Organized Crime Strike Force, Pelo-: quin had .spent his entire career in the inner, precincts of the intelligence community: a com- mander in Naval Intelligence, he later joined the National Security Agency before moving on to the Internal Security Division of the Justice Department. One of the men most responsible for exposing, or popularizing, the concept of a national criminal conspiracy called La Cosa Nostra, Peloquin had this to say about the Para- dise Island transactions: "The atmosphere seems ripe for a Lansky skim." * A few months after making this notation, Peloquin received a visit at the Justice Depart- ment from James Crosby._Grosby asked Pelo- quin's assistance with two problems. First, lie wanted the name of a firm capable of handling. security and checking personnel at his hew ca-I sino. Peloquin said he was unable to recom.1 =end any such firm. Second,. Peloquin and'[ McKeon agreed. that Crosby was "literally; scared to death" of a gambler named Mike' McLaney, who, along with others, wanted a piece of the action on Paradise Island. With this second problem Peloquin was forthcoming and admits initiating an investiga- tion on Crosby's behalf. Just what else Peloquin * Sir Stafford has testified that Lansky offered him $2 million for gambling concessions on the islands- and that he refused. * This comment was contained in a Justice Depart. anent memo written in 1966. Compan ? vice chairman i rd,director Approved For Release 2001/0W08dl 114 o~~ 4 ~ i7:rAQfI~ -8a did for Crosby remains unclear. What is certain is that a. number of exposes appeared in the' American press (Tire Wall Street Journal, Life, and Look) describing the influence of "orga-f nized crime" in the Bahamas. It has been alleged; that Peloquin furnished information for at least' one of those exposes, the one that appeared in Lie. Peloquin later admitted that he spent "a great amount of my time negotiating with the government of the Bahamas to exclude" various persons from- the island. He also provided stra- tegic, if unofficial, assistance and information to the Royal Commission of Inquiry convened by the Bahamian government to study the local gambling industry, its links to the mob, and its allegedly corrupt relationship with the Bay Street Boys. The commission was headed by Sir Ranulph Bacon, a former head of Scotland Yard, who was later to become a director of In- tertel. By August 1967 the commission's work was mostly clone, and so was Peloquin's. The Jus- tice Department strategist retired from govern- ment, taking with him the department's annual award for outstanding service, conferred upon him for his Bahamian investigations. FEW MONTHS AFTER LEAVING the Justice De- n partment, Peloquin was able to solve Cros- by's other problem-taking charge of security at Paradise Island and checking out the casino's personnel. By then, the commission had accom- plished several objectives. In exposing the Bay Street Boys, it destroyed their influence for- ever. A new government, headed by Lynden 0. Pindling, a black, had taken power amid the shock waves of the gambling scandals. (Sir Stafford, whose activities figured prominently in the commission's inquiries, retired to Spain.) A second result of the commission's probe was that, in focusing on existing casino operations, it necessarily preoccupied itself with Crosby's competition. Hopelessly entangled in the affairs of Sir Stafford, Groves withdrew from the ar- rangements he'd made with Crosby. Meanwhile, Crosby's nemesis, Mike McLaney, had unexpec- tedly fallen on hard times. McLaney is the former operator of a casino in Cuba, an ersatz socialite whose biggest long shot seemed to have paid off with the election of Pindling. Resentful of Sir Stafford and the Boys, 11IcLaney claims that he financed the Pindling campaign almost single-handedly. The gambler insists that he would have helped Pind- ling in any case, but adds that the aspiring pre- mier promised to reward his largesse by na- tionalizing the island's casinos and letting Mc- Laney run theta in return for a split of the profits. Pindling is said to have reneged on his prom- ises after his election. Indeed, he went even further and declared McLaney persona non grata. That may seem harsh treatment for a sup- porter, but McLaney wasn't surprised. In testi- mony before a Senate investigating committee, McLaney alleged that his banishment was the result of a conspiracy between Peloquin, agents of the IRS, and the owners of Paradise Island. Among Intertel's other directors are men who are, or have been, president of the Dreyfus Corporation and publisher of Life; president of Carte Blanche; hoard chairman of the Royal flank of Canada Trust Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 After strenuously denying any connection with Meyer Lansky, and offering to take a poly. graph test on the subject, McLaney was asked if he thought "Lansky had anything to do with the reneging of the prime minister" and the gambler's subsequent eviction from the archi- pelago. "No, McLaney answered, "I thought Inter- tel had something to do with it. Mr. Peloquin, from the Justice Department, and three special agents from [the Internal Revenue Service]- they are the ones that conspired to run me out of the Bahamas. . . . Those are the people re- sponsible for getting me .... eighty-three days of conviction [on a tax charge], and everyone works for the gambling interests in the Ba- hamas. Intertel was formed for them. When they got rid of me, $2 million was furnished them by Resorts International, and that formed a thing called Intertel."* Asked, "Who is behind Resorts Internation- al?" McLaney said, "I don't know. It is misty, shadows." ESORTS INTERNATIONAL is an offspring of the Mary Carter Paint Company. After the casino on Paradise Island was built, Crosby severed the Bahamas holdings from the rest of Mary Carter, sold off the latter, and established the new imprimatur. When the casino opened, the new corporation's prospects seemed grand. Peloquin left the Justice Department and set up the law firm of Hundley and Peloquin, which took on Resorts as a client. His partner, William- Hundley, was a lawyer who shared Peloquin's investigative background, having been chief of the Smith Act Section in the Justice Depart. nient's Internal Security Division. Peloquin and Hundley served on the casino's operating committee, supervising the work of its manager, Eddie Cellini. The choice of Cellini to manage the gambling joint was an odd one, .however, since his brother Dino has been de- scribed as Lansky's "top aide" and "right arm.) Before long, Eddie became an embar- rassment. "The publicity was awful," Peloquin explains.. "Whenever someone mentioned the casino at Paradise Island, they said it was run by a brother of Lansky's top man. It was pure guilt by association. After all, Eddie's fifteen or twenty years younger than his brother, hasn't got a record, and, besides, our bottom line was higher than anybody's. If Eddie was skimming, I'd like to know how he did it! Frankly, he was the best manager we've ever had: he loved the place and took real pride in it. But one day Jimmy Crosby couldn't take the publicity any- more. He told me, `Look, I don't care if he's Pope Paul-can him.' So I did. And you know what happened when I told Eddie he was fired? He burst into tears. Does, that sound like Mafia to you? Christ, I still feel bad about it." One might have expected more consideration from the chairman of Resorts International, but there was a lot at stake. The new company's stock had begun to take off, thanks in part to a $4 million purchase of unregistered "letter * Of the three IRS agents who probed into Mc. Laney's affairs, two worked for Intertel while the third secured employment with the casino on Grand Bahama Island. "Vincent Teresa, My Life in the Mafia, pp. 219 stock" by the fund-managers of Investors Over- -seas Services (IOS-). By 1969 (a little more than a year after the casino opened), Resorts' stock had climbed more than 1,000 percent in value -from about $5 per share to $60. Things were going so well that Crosby began to give money away. A close friend and business associate of Bebe Rebozo's (it was Crosby whom Rebozo called for advice when the banker got stuck with a wad of stolen IBM stock), Crosby donated $100,000 to Richard Nixon's 1968 campaign only a few weeks after Rebozo introduced the two men.* The meeting between Nixon- and Crosby seemed- to be a matter of love at first. sight. Crosby even placed the company yacht, at the candidate's disposal and later became an occa- sional guest at the White House. Six months after the election, Crosby hired James O. Gold- en, reportedly ,at Nixon's request. Like Peloquin and Hundley, Golden was at home in the intelligence community. A former Secret Service agent who'd served in Russia, Central America, and the Bahamas, he'd been Richard Nixon's personal attache during the Eisenhower administration and held the curious distinction of being an honorary agent of the Philippine National Bureau of Investigation (for services rendered there). Before he took charge of security at Nixon's headquarters in 1968, he had worked as the international repre. sentative of the Lockheed Corporation. In 1969, Golden became deputy director of security for Resorts International. After this, Golden went on to other positions: vice-president of Intertel (1970) and security chief' 'for the Hughes Tool Company (1971). He is now chief of the Orga- nized Crime Section of the.Justice Department's Law Enforcement Assistance Administration (LEAA), a job whose responsibilities include setting up intelligence and strike-force teams throughout the country.** Despite the credentials of its security team, the halcyon days of Resorts International have been few: today its stock is trading at about $2' per share. The decline traced to-a num- ber of circumstances. First, the Bahamian. move- ment toward independence greatly diminished the demand for local real estate, and thereby maimed the earnings of an important subsidi- ary. Second, Premier Pindling announced that all casinos will be nationalized by 1977. Third, casino profits are hard hit by special taxes. Fourth, Resorts apparently blundered when it sought, in 1969, to gain control of Pan Ameri- can World Airways, whose subsidiaries own several casinos and hotels in the Caribbean- (It was as if Luxembourg had tried to annex Bel- gium: when the smoke cleared, Resorts owned only 3 percent of the airline's stock, having paid S27 million for shares that are now valued at less than $4 million.) * The donation took the form of thirty-three checks for $3,000 each and one in the amount of $1,000. **Oddly, Peloquin and McKeon deny that Golden worked for Intertel, even though at least one Intertel brochure associates Golden with the firm. For his part, Golden says that he was "in on the ground floor" and insists that Crosby made him a vice-president of the apparat. and 220. Approved For Release 2001/08/08~:tIA-RDP77-00432R000100340002-8 Approved For Release 2001/08/08 CIA-RDP77-00432R000100340002.8 The Hughes connection AFTER YEARS OF DE FACTO existence, Intertel's long gestation ended. In January 1970 Re- sorts provided the financing that allowed the apparat to incorporate as a "consulting organi- zation created specifically to safeguard business from the hidden risks of vulnerability to. crimi- nal elements and to assist the states and cities inl development of comprehensive crime controls." Those in on the ground floor-Crosby, Peloquin, Hundley, and Golden-believed that the fine's services could be successfully marketed, and there was every reason to believe they were right. During the 1960s, the United States un- derwent a moral upheaval that resulted in a. re- definition of many conventional views. Much attention has been paid to the effective leg aliza- tion of pornography, but even more important, economically, was the new attitude toward gam- bling. What had once been a racket run by mobsters became, by the decade's end, an in dustry administered by government bureaucrats: and corporations such as Hughes Tool, Pan Arn,`?.. and ITT. The vacuum left by "known gamblers" was rapidly filled because no other business al lows its owner to literally name the percentage of his profit. The man who pioneered the take- over of mob turf by legitimate business was Howard Hughes. With a $546 million check from his forced sale of Trans World Airlines,. Hughes moved into Las Vegas under a:-med guard in 1966 and began making offers no one could refuse. Abetted to an embarrassing extent by federal bureaucrats and state politicians, Hughes quickly gained control of the state's major industry. His acquisitions were so many and so swift that the Justice Department's opin- ion of him was divided: while one faction in- sisted that Hughes was in violation of antitrust laws, the Criminal Division applauded his pri- vate war against the Mafia. Hughes continued to look for new properties, and one of the places that interested him the most was the Bahamas. A secret study (entitled Downhill Racer) was commissioned prior to Hughes's move there. The report was any- thing but favorable, citing political instabil- ities, the likelihood of race riots, and the prob- ability of an eventual social "cataclysm." Never. theless, Hughes is now living in the Bahamas, acquiring property there, and issuing orders that his staff "wrap up" the government. What caused the billionaire to change his mind, or disregard the advice he'd commissioned, is un- clear. What's certain about the move is that In- tertel was deeply involved in his expatriation. On Thanksgiving eve 1970, Hughes was scooped from his headquarters atop the Desert Inn and put aboard a plane bound for Paradise Island. Acting on orders from top executives of the Hughes Tool Company, Intertel took con- trol of Hughes's casinos. Robert Maheu, the bil- lionaire's longtime confidant and charge d'af- faires, was summarily fired, as were other trust- ed employees. Maheu charged that his boss was the victim of a "kidnapping," and marshaled evidence" to back up the allegation. A physi- cian who had seen Hughes a few weeks earlier claimed that the tycoon was too ill to have been a eu were trackinn M. safely moved, ~~~~~ #eas2dorv8/pe~~~~OR~Q~~~9~stigating clition, pneumonia, and anemia. He was, the doctor said, receiving blood transfusions and weighed less than 100 pounds.. That Hughes should go to the Bahamas seemed-in view of the secret study, his illness, and his disaffection for blacks-eccentric in the extreme. Toni McKeon, Intertel's general counsel, is still sensitive about the Hughes operation. Seat- ed in, his Washington office, feet propped on his desk, McKeon said, "The Hughes organization got in touch with us in the summer of 1970.. A few months later, in August or so, Peloquin went to Los Angeles to discuss how the move should be made. Now, you see, we try to operate on the Five Ps Principle: Proper planning pre- vents piss-poor performance. Well, we devel- oped a plan, all right: it was about this thick. [His thumb and forefinger measured out a space that would hold Gravity's Rainbow.) While we were still preparing for D day-that's what we called it--the Hughes organization tele- phoned and said, in effect, `Get every man you've got out here right away. We're moving tonight.' So there went the plan. I can under- stand why Maheu thought Mr. Hughes had been kidnapped; it was all so sudden." The assignment to plan Hughes's exodus from Las Vegas was a large and sensitive one; that it should be entrusted to a firm which was only a few months old seemed extraordinary to many. A few, however, thought this was no accident, and speculated that perhaps Intertel was formed expressly for the purposes of "the Thanksgiving coup." McKeon denies that, pointing out thatr the firm's employees had proven their worth ini federal service and that, moreover, no less al personage than J. Edgar Hoover sometimes rec-1 ommended them for commercial assignments. Whatever the case, the Hughes contract was profitable and gave the fledgling apparat a spec-; tacular start and plenty of continuing business. Sailing to Byzantium Y THE END OF INTERTEL'S first year, the firm was enmeshed in a tense, if sometimes farci- cal, game of spy-versus-counterspy. While Inter- tel was investigating Maheu, and vice versa, White House spy Jack Caulfield was investigat- ing Intertel, convinced that the firm was a pri- vate CIA working in behalf of the Kennedy in- terests. What led Caulfield to that conclusion isn't hard to guess. In 1968, less than a month after Sen. Robert Kennedy was slain, Hughes ordered Maheu to hire Larry O'Brien and the "four or five key men in the Kennedy camp." Maheu eventually succeeded, and O'Brien's firm was retained by Hughes for the sum of $15,000 per month. Exactly what O'Brien (lid for that sum is unclear-"public-relations work" i~ the catchall description. But, whatever it was, he did it for less than two years. After the Thanksgiving coup of 1970, Hughes's relationship with O'Brien ended, and the public-relations account was transferred to Robert R. Mullen &- Company---a firm with strong links to the Republican party and the CIA. At this point, the situation became one of Byzantine complexity, and secret agents began stacking up like lemmings at the seashore. While Caulfield and M h Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002-8 Maheu. (Intertel was also looking into Jack An- derson's affairs on behalf of ITT, and into Clif- ford Irvin-'s affairs on behalf of Hughes.) i At about the same time, E. Howard }-cunt, an employee of both Mullen and the White house (who may or may not have also been an under-'i cover agent for the CIA) was planning to bur glarize the offices of a Las Vegas publisher in order to purloin a sheaf of secret Hughes memos. In these negotiations, Hunt conferred with Hughes security agents-not Intertel, and not Golden, but a third network headed by a fellow named Ralph Winte.. Who is Ralph Winte? Frankly, this reporter doesn't 'know and doesn't want to ask. Enough is, allegedly, enough. Or is it? While these events unfolded, yet an- other dimension was added to what had become a virtual plenum of intrigue: Robert Vesco. Throughout 1972 Vesco was negotiating with James Crosby to purchase most of the Para- dise bland assets, including the casino which Pindling had promised to nationalize. Vesco reportedly offered $60 million for the properties, a huge sum in view of their special problems. At the time of the negotiations, Vesco.was the target of a massive investigation by the Securi- ties and Exchange Commission -(SEC). As a result of that investigation, Vesco was accused by the SEC of having organized one of the big gest frauds in the history of money: an esti- mated S224 million was allegedly diverted from Investors Overseas Services (IOS) into the pockets of Vesco and his cronies.* At the same time, Vesco was also under study by Intertel. One of Intertel's main functions as a subsidiary of Resorts International was to "advise management of their possible exposure to organized crime - through companies with whom. .. they are considering business rela- tionships." Considering the connections and ex- pertise at Intertel, one would assume that Cros- by's own apparat would have advised against the deal. In fact, however, Intertel raised no substantial objections. Asked how that could have happened, McKeon says, "Well, at what point does a man become suspect?" That explanation, however, must be dismissed. The nature of Intertel's business is such that a man becomes suspect very early. Moreover, In- tertel's second director of operations is the former chief of the SEC's Branch of. Market Surveillance; certainly lie was not without ac- cess to- information. And, if these were not enough, Crosby himself ought to have known that Vesco deserved suspicion since no less an authority on the subject than Bernie Cornfeld told him so. The founder and former head of IOS, a sometime backgammon part- ner: of Crosby's. In a conversation with Corn- feld, the playboy-financier told me he had re- peatedly warned Crosby that the SEC was about to come crashing down on Vesco, and that the deal shouldn't go through. Crosby ignored that advice, Cornfeld said. (According to the SEC, the transaction "came to a grinding halt" with the commencement of the SEC lawsuit.) By all accounts, it would have been a very profitable deal for Crosby. * Interestingly, the SEC brief contends that an estimated $150 million of this sum was "hot" money illegally invested in IDS by tax evaders and others. 14 Approved For Release 2001/08/08 The dance goes on HF. INTRIGUES, OF COURSE, CONTINUE. While Vesco was under study by the SEC and In- tertel, agents of the Bureau of Narcotics and Dangerous Drugs .(BNDD) were hired by an associate of Vesco's to search the financier's New, Jersey headquarters for hidden bugging devices. (That was in the fateful month of June 1972).. Vesco subsequently repaid the organizer of the search with $3,000 in gambling chips at a Bahamian casino. Only a year after receiving assistance from the BNDD agents, Vesco was himself alleged to be the financier behind an international heroin transaction. That allegation, unsupported by other evidence, was repeatedly made in tape-re- corded conversations between an important in- formant and a big-time Canadian smuggler. In an apparently unrelated set of events, In- tertel was itself involved with narcotics agents during the early part of 1973. BNDD officials approached Intertel in February with a proposal called Operation Silver Dollar. This was a plot to nab an unwelcome guest of the Hughes- owned Frontier Hotel-a guest who was thought to be dealing drugs. The BNDD promised to in- filtrate the man's milieu if Intertel would prevail upon the Hughes organization to finance the operation. Intertel agreed, and, as a result, the Summa Corporation provided . the under- cover agents with a hefty bankroll. The agents dutifully garnbled the money away, but the tar- get of the operation was unimpressed by the flashing cash. No sale. By this time the reader may be thoroughly, if thoughtfully, confused. That's probably as it should be, however. My purpose is not to make sense of all these intrigues (the task would de- feat an Aquinas), or even to imply anything more than a coincidental relationship in the in- tersecting paths of Hunt, Hughes, Intertel, Vesco, and so forth. Rather, my intention is to indicate the degree to which. America has haunted itself, and to describe some of the nodes in what seems to be a maze of espionage. . As to what legislation might be proposed to curb existing, abuses, several possibilities come to mind. Private intelligence agencies, no mat- ter what euphemism they go by, should be de- fined, identified, licensed, and regulated. At the very least, client lists should be made public, Moonlighting by employees of federal agencies having intelligence-gathering or investigative functions should be forbidden. Joint operations between such agencies and profit-making orga- nizations should also be proscribed by law. Fi- nally, the transition of workers from govern- ment to private industry should be closely ob- served to detect instances in which it appears that a former government worker retains influ- ence over his old agency, or seems to have been rewarded by private industry for tasks per- formed in the federal service. Of course, so long as there are skeletons in the closet, .there will be spooks by the door. Walpurgisnacht is here to stay. While we can- not expect legislative. incantations to exorcise the corridors of power, we may hope to conjure light enough to see, and count, our shadows. And that, at least, would make the danse a trifle less macabre. 0 CIA-RDP77-00432R000100340002-8 'Approved For Release 2001/08/08 : CIA=RDP77-00432R0001,00340002a8 ROLLING STONE 21 November 1974 .CIA men. are not-supposed to talk, but Philip?Agee, ex-Agency man, :does=in -an. exclusive. interview with . Daniel.-',Yergin for ? ROLLING STONE. Agee's book, Inside the CIA: A Company Diary, will be pub- lished in England early next year. American publishers, wary of legal. battles with.the CIA, are hesitant to release the book in this country.' -.By DANIEL YERGIN: In January 1972, a CIA station chief 'hurried to Paris to see one Philip Agee, formerly. a CIA case officer in Latin 'America:'. The. Agency's elaborate in- ternal control mechanism had screwed up. Agee had just come back from sev- ' oral months in Havana-not exactly the place for a former CIA agent to take his holiday.'The Agency had, apparently," ;found.this out by accident. While in -Havana,: Agee had written a letter to a magazine in Uruguay, where he had formerly. served, warning of CIA inter- vention in that country's 1971 elections. He had added that he .expose of the Agency's activities in Latin* America based upon his own experiences. It was that last item that really wor ried the J'.gency, and so now in Paris .the station chief was blunt: The dire;- ior of the CIA, he said, wanted to know just what in ? hell' Agce,,was doing. Agee ;realized that he had made a mistake with his letter. Instead of ad- mitting that he was struggling to write a book, which might have provided suf- ficient motivation for a timely accident, he bluffed and said that he had already written a book."-,: . `? The-.spooks were deeply disturbed. On July 9, 1974, Senator Howard Baker of the Watergate Committee re- leased a report that mentioned CIA documents from the summer of 1972 that referred to a "WH Flap." When Senate investigators first encountered' these documents, they assumed the WH referred to "White House" flap. Later,- the y discovered that the WH' fact.refcrrcd to a Western Hemisphere Flap-and that meant Agee and the revelations the Agency feared. After the " belated discovery of Agee's literary in- terests, the CIA, according to one of the .documents;.had to "terminate pro-, jests and move assets subject to com- promise." In July of this year, someone tried to `cover up the entire blunder by leaking a story that a drunk and despondent CIA officer, "down in. his cups,'! had sat down somewhere in Latin America with ' a KGB agent and spil!cd the refried beans. The New York Times and other news organizations, with the conspicu- ous exception of Laurence Stern of the Was/,i,,glon Post, bought the story at first-but it was a fabrication. The CIA A'CIA Diary. "No one has yet been able to give a full picture of what agents in the field do," Richard Barnet wrote re- cently in the New York Review, "al- though a book about to be published in England, by a secret agent in. Latin America for many years, may begin to fill this gap." One, long-time Agency watcher calls it-in its unpublished form-"an underground classic." 'Agee's story is already ' a sensation in the Latin American' press-where that .press is not censored to a shrivel. Agee is modest, calling it only a "small window" on the CIA. Admittedly, in the years between 1956-68, he served in Ecuador, Uruguay and Mexico City, none of them famous hot spots. On one' level, his story is a* narrative of massive American intervention in Latin Ameri-' can 'politics.. It's also the day-to-day story of CIA officers-busy, busy, busy -competent and incompetent-buying' off politicians, tapping phones, funding strikes, organizing demonstrations and provocations, setting up massive propa ganda campaigns. It's a description of, office politics-or rather "station" poliJ tics, with1officers fighting and bidding for prestige and importance. Agee's book makes clear why the Watergate bugging was no "third-rate burglary," but rather, the whole mess -the burglars and the plumbers, the dirty tricks and the funneled 'money- was. the pattern and technique of CIA intervention abroad being brought home, to disrupt and ultimately destroy the American. political process. Agee's story is also an American' drama--the young, idealistic true be liever, who enlisted in the cause of the Good and the Virtuous, but who could not finally understand the distance be- tween his ideals and what he practiced. Driven by the memory of his own role in the relationship between CIA covert activities and the epidemic of repres- sive, right-wing juntas throughout Latin America, he has again become a true' believer-but now-pushed far to the other side. The train from London's Paddington Station took more than six hours to roil through the West Country in a bleak rain to the station nearest Agee's quiet retreat near Cornwall:Then a cab across country to the tiny village on the edge of a tidal estuary that is a favorite nest- ing spot both for birds. and, for bird finally disowned that particular story. -watchers. Agee, youngish,_(at, 39),' However, in the years since the 1972 stocky, dark haired, wearing 'a. floppy Paris conversation, Agee had finally sweater and with a bounce to his step, written his book-lnsWV~rbry ffla :Re ' Aft fl/* r-nClAtftbOF O43 15 We chatted that evening, and then the next day we started talking in earnest. He did make clear that some areas he :;would only discuss' at a later times I began with a simple question.Why.` believe him? "'There can be no doubt that I am who I say I am," he replied. "The CIA has already confirmed that-they have already taken measures to try to offset .some of the damage. They closed that ,cover office in Mexico City, they trans.. (erred agents. So the CIA has lent cre- dence. Anyone who wants to. can check the events I say occurred. What's al- 'ready, been revealed about the CIA in -other places also confirms what I say. I.had so much material and such a small place to put it into-there was no need to embellish. I wasn't an important man in the CIA. I was only coming into my mid-career level when I resigned. And Ecuador and Uruguay and Mexico' aren't in themselves all that important, but when taken as a' pattern and ex-' .tended to the rest of the Third World, it shows our secret foreign policy and our 'secret political police work." .'.Of course, the world of covert politics .and secret agents is so confusing, con- voluted and dark that no reader should uncritically accept what follows. We cannot dismiss the possibility that the "new" Agee works for the intelligence service of a hostile country or of a: friendly one or even for the Pentagon, eager to besmirch the reputation of its bureaucratic rival. On balance, how- ever, Agee is almost surely who he says he is. His story is consistent and has in many ways been confirmed. . In 1956, a CIA official suggested that the Agency recruit Agee, then graduat- ing with a degree in liberal arts from Notre Dame. She knew his family well, and he was a good prospect--a God- fearing anticommunist, who as a stu- dent chaired the proceedings in which General Curtis "Bombs Away" LcMay had received the university's patriotism award. Agee at first rejected the over- ture, but then, after returning to Florida for law school (there's only a trace of Tampa in his speech), took up the offer to go into the Junior Officers Training Program. Apparently such activity was respectable, purposeful, vital and a great way to see the world-and was a good deal more interesting than the family's laundry and uniform business. He signed a secrecy pledge, passed the ,lic-detector test, and heard Allen Dulles and other senior officials explain to the new recruits that God Himself had instituted the practice of spying on this planet. Agee spent two years in The Air Force, in cooperation with the CIA, and then spent six months at the CIA's training camp-The Farm-outside Washington. D.C., learning the. tech- j~jjf~~~j covert and Para; 1'fa'rropera ions Foreign agents were Approved For Release 2001/08/08 : CIA-RDP77-00432R000100340002=8 periodically brought in for special train -ing but security was so tight?that some' did not even know they. werein the United States.. Finishing training in-. JuIy< 1960, Agee, equipped-."With the code;name Jeremy $. Hodapp;~was assigned to the Western'Hemisphere Division-which -.was looked down upon elsewhere in the Agency because-it was -filled with old FBI men who had been absorbed into the Agency when the nascent CIA had assumed the FBI's Latin American op-. . erations after World War 11. - Agee was assigned as a "case officer'. to Ecuador, where seven employees op- erated on a budget of $500,000. During his years in Ecuador, two-reformist * presidents-Velasco (elected by the. largest majority - in? -the. country's his-- tory), and Arosemena -were thrown- -out of office, primarily because of po-. iitical disturbances.resulting from their` failure to. break diplomatic relations with Cuba and to strike much harder at the local Left. These disturbances were .instigated and directed bythe CIA:::-` "We weren't: trying to. get them' thrown out of office,".Agee recalled: :"We were trying to get them to adopt -certain policies we wanted' adopted.: It -so, happened that they - resisted-and they fell, both of them.". Essentially, the Agency carried out a:`: covert program- of destabilization to create the political pressures -deemed necessary for a swing to the right. They worked through a wide variety of-paid j agents. The list stretched from -top i politicians and military figures (when a member of the legislature became Ecuador's vice-president, his CIA "re= tamer" increased from $800 to $1000-a month), to an official of the airmail sec- tion of the Central Post Office (you're always curious about the mail), to a leading liberal journalist in the country (who did at least stylistically touch up the columns the CIA provided for his byline), to a local distributor of Ameri- can cars, even in an indirect fashion to The YMCA basketball team (a good way. to make. contacts-and they re- ceived their sneakers through the diplo- matic bag). Others included a member of the Chamber of Deputies, Minister of the Treasury, Secretary-General of one socialist party and an Ecuadorian ambassador to the United Nations-at the time Agee left Ecuador, this man was recommended for the august status of Career Agent---sort of a CIA Hall of Fame. . This network was utilized to build up a fear of communism and instability. The Agency generated a campaign to mobilize a cardinal into a crusade against communism. It organized the disruption of a visit by the Soviet am bassador to Mexico. CIA agents in Peru broke into Ecuador's embassy in Lima, stole documents and faked others that showed Ecuador as aligning itself with Cuba-and led to Peru's breaking dip- lomatic relations. An effort to bug the Czechoslovak legation failed when, a la Watergate, four Indian guards sleep- ing in the room next door awakened. The CIA, through goon squads, organ- ized a series of church bombings, as well as "spontaneous demonstrations" -.sometimes..:in'-headquarters..The. ?als.?, in protest. rovaI process goes through the GIB.. All of this, Agee emphasized to me, and: then'" over to the. undersecreta:.' should not. be misunderstood. ',That's level of the,, National Security Count' the point,". he said. "The CIA may de= -Once. these documents are approv.-. . stabilize and eventually bring about the they go back to the CIA,. so an assist:: fall of a government, but they will'not . secretary of state for inter-Americ_ _ necessarily say','nbw is the time, boys., affairs can say that the Agency has In many,.cases,- the mititary-wiIl:not. programs of destabilization or. pre; ..necessarily know'what the CIA is do- ganda or however they describe it. ' ing behind the scenes.. They don't know does not know all that is going on. Ni.. ...that all this propaganda is roming.but A her do the ambassadors." in; the newspapers;. or on.the television Or, as Agee's first chief of station or the walls or in the; fly sheets that. Ecuador explained to him .The amb:, ate distributed The military iu Ecuador- sador knows nothing about the oper