LETTER TO TOM MURPHY FROM WILLIAM J. CASEY

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CIA-RDP88B00443R001704310054-0
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May 15, 1985
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STAT Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 !hc h;rcrtor t~ chiral Intclligcncc 15 May 1985 Dear Tom, This will interest you if you haven't seen it already. Yours, William J. Casey Mr. Thomas S. Murphy Chairman of the Board Capital Cities Communications, Inc. 24 East 51st Street New York, New York 10022 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 L . . Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 11w Uirci'' of Ccntral Intclligcnce 15 May 1985 Dear Walter, Sorry I had to miss the party Charlie and Mary Jane gave for you. The enclosed editorial of the LOS ANGELES TIMES is interesting if you haven't already seen it. With warm regards. Yours, William J. Casey The Honorable Walter Annenberg "Sunnylands" Post Office Box 730 Palm Desert, California 92260 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 7c not-,: 8May 1985 Government as Truth Fairy -..,Every journalist from time to time faces a the Federal Communications Commission in- --dilemma: what to do with a story that has a certain volved. Agencies of the federal government may amount of. information on one side and contra- not sue for libel, so the CIA took another tack. dictory information on another side. A balanced It brought a complaint to the FCC under. the story. ("on the one hand . . . on the other hand") fairness doctrine, which requires that broadcasters "is unlikely to be very interesting, and, worse, it present all sides. of a controversial issue. Earlier = may not be an accurate representation of reality. this year the commission's staff ruled that a ,.The truth may not lie in the middle. It may lie on challenge by a government agency under the `one side. In that case, giving equal weight to both fairness doctrine is permissible-a decision that sides is a distortion.. But failing to give equal has far-reaching implications for the holders of all -weight to both sides may also be unfair. As lawyers broadcast licenses in the United States. and journalists know well, many cases are open- ABC appears to have aired a story that was ,and shut until you've heard the other side. wrong. It was not alone. British Broadcasting This perennial hazard of reporting comes up . Corp., the Wall Street Journal and CBS News, to now because of the troubling' case of ABC News, a greater or lesser extent, had earlier published the Central Intelligence Agency, the Federal or broadcast accounts of Rewald and the CIA Communications Commission and Ronald R. _ connection, though .none went as far as ABC did. Rewald, .a former Hawaii businessman who faces ' ABC got out the hypodermic needle and pumped .:,!federal charges of fraud, tax evasion and perjury this story up-not the first time in the history of :;?involving- an alleged investment scandal. Last journalism (nor, alas, probably not the last) that :,;fall:: ABC. broadcast a two-part series asserting '., reporters refused to let facts get in the way of a that ,Rewald had been a CIA agent during his : - good yarn: .;financial' escapades - and that the agency had But under no circumstances should the govern- `plotted to murder him to keep his story from ment be involved in investigating the accuracy of getting out: a broadcast. Down that road lies government- s' As detailed by Times staff writer David Crook imposed Truth,.. which is much more dangerous in :last Sunday's : Calendar section,' the basis for than a story that is wrong. However, the CIA, like :'the 'ABC story 'was flimsy at best. It was not 'everyone else, is entitled to fair, accurate and ; ,.-,adequately checked, and it lacked independent responsible journalism, and there is a way to set ^confirmation. The network subsequently retracted things right. the charge about the plot to kill Rewald, but it ? ABC would be doing itself, its viewers, all broad- :stands by the rest of the story.*. ' casters and all journalists a service by conducting ,'This would be a matter between ABC and its its own investigation of what went wrong in the ;viewers were it not for the CIA's decision to get Rewald story and making the results public Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 ARTICLE AIPlm L. Rn~ C~~ P; LOS ANGELES TIMES 5 May-1985 ADVENTURES IN PARADISE. hol?l- -ntaaeu' the CIA-and Why the CIA Fought Back BC ~. ~. By DAVID CROOK ONOLL'LU-When "World News Tonight" anchorman Peter Jennings .[L introduced a two-part story last September about a Hawaii businessman and the Central intelligence Agency, ABC News unwittingly set off a string of events that produced a new ruling about how govern- ment regulates radio and television. The adminstrative ruling, arrived at in January by the staff of the Federal Commu- nications Commission, holds that a federal agency may legally challenge the fairness of television news broadcasts-which, by ex- tension, threatens a broadcaster's license. e wvante f.6 see if we could redress the deficiency which..Ied to their doing such an outrageous 'piece' of work,"said William J. Casey,..director,bf central intelligence, in a rare tape-recorded interview at his Langley, Va., office... Casey insisted that he has no serious desire to- see ABCs :licenses Tev_oked; and a ' later CIA filing.'- backed down from the initial -request.-.:Casey. wants~ABC_ to conduct an internal investigation of the broadcasts and makepublic the.results-as CBS News did in the early-stages. of its dispute with retired Gen.=Wflliam.C.. Westmoreland over enemy -troop estimates in the Vietnam'War.;.;: .:;'_'We sought a procedure which could point .and perhaps lead.to a correction of the defi ciencies-which led .1q giving the whole American public this false information about theCIA; ' Casey'ontinued hope. in e:orderly way by oiu:FCC complaint-this could lead to standards which would better in 3he~long,rtm per~manently,piotect the,net- ;. rl public - and _ the ' CIA ,against The full five-member FCC is now review- ing the staff decision. But the issue might never have surfaced had ABC News not broadcast the story of a $22-million Hawaii financial scandal as a tale of international intrigue, espionage and murder linked to the CIA Until ABC's broadcasts, few persons out- side the islands had ever even heard of Rcnald Ray Rewald or his alleged swindle. Few who saw Rewald's story on ABC Sept. 19 and 20, 1984, probably recall much of it, but now he has become a secondary charac- ter in an unprecedented confrontation be- tween government and media. Rewald, 42, faces 100 federal criminal charges of fraud, tax-evasion and perjury associated with the August; 1983, collapse of his investment firm-Bishop, Baldwin, Re- .. wald, Dillingham & Wong. Prosecutors . charge that he duped nearly 400 persons in his alleged swindle. However, Rewald in his'. defense, claims that he was a covert CIA agent and that his firm was set up and" controlled by the CIA... In the disputed broadcasts, ABC appeared to substantiate most-of Rewald's claims. In addition, the network'broadcast charges that the CIA plotted to murder Rewald and threatened the life of an investor in his firm. The CIA reacted loudly and angrily to. the - ABC broadcasts. With its FCC filing, the CIA became the first federal agency to openly try to put a TV broadcaster out of business.. . recuirences'of this`rush to;pubhsh-with*t ' decentproo f of adequate checking _5 w= aiii a asx'S yvtll Is. S-10 settie for less than ABC's corporate head on a platter, his FCC complaint may have opened the door for similar constitutional assaults on broad- casters. New York libel attorney Robert Sack summed up the issue at the heart of the CIA-ABC case: "One department of govern- ment is trying to get another department of government to punish someone for publish- ing something they didn't like. It's so obviously loaded with First Amendment implications as to boggle the mind." Few constitutional experts believe that the FCC will exercise its ultimate police power over ABC or hold up the recently announced $3.5-billion ABC-Capital Cities'Communica- tions Inc. merger. But the case raises serious questions about the practice of TV investiga- tive journalism in general and ABC's conduct in the Rewald affair in particular. After the CIA's first public response to the .broadcasts, senior ABC News executives held an in-house, two-day examination of the Rewald reports. ABC concluded that, except for one murder charge, the story was accurate and properly substantiated. Said David W. Burke, ABC News execu- tive vice president and assistant to ABC News President Roone Arledge: "We walked away feeling that we had a good story here, given the limitations that surrounded this story from day one-the nature of the agency's response to ordinary inquiry and the fact that so many things that were being referred to in the story at that time'.. and I guess even today, were under the cover of the court in Hawaii" A Los Angeles Times inquiry into the disputed broadcasts, however, found little to substantiate the network's charges against the CIA and raised questions about ABC's -sources and news-gathering practices in the Rewald story. The Times confirmed that public records-including Bishop, Baldwin bankruptcy proceedings, financial records and court documents in more than a dozen civil and criminal cases, published books and other materials-show no independent evi- dence of major CIA involvement with Re- wald. ' Although evidence sustaining Rewald's and ABC's claims may yet surface in his pending federal trial, The Times found that: O Five of ABC's seven on-air interviews were with individuals who are plaintiffs or attorneys with lawsuits against the CIA. ABC admitted on the air 'that the sixth person's story could not be substantiated. And the network's seventh interview subject says the network misrepresented his posi- tion. b On air, ABC offered no independent substantiation for its charges. Subsequent to the broadcasts, the network defended its investigative reporting on the grounds that the CIA does not adequately answer report- ers' questions. The CIA argued, however, that its position was represented in the public records of the case. O Those records, which include Bishop, Baldwin financial accountings that ABC did not acquire until last month establish two , links between the CIA and Rewald: the use Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 > d1k handful of intelligence officers and personal ABC alone left. its- viewers with the investments in Bishop, Baldwin by CIA, impression that the GIAr planned to kill two officers. American citizens Hawaii-based journalists and legal figures 'Tint's just utteriyinsane,"said Stansfield connected with the Rewald story claim that' Turner, director of central intelligence dur- ABC failed to verify Rewald's charges. . ing the Carter Administration. - "I can't Among them is Richard Borreca, a report- `` imagine why ABC believed that. .' . I think er with KHON-TV in Honolulu. Borreca said 6 the agency had great cause to be very upset that the Rewald story reported by ABC and with ABC."= other top news media bore little relation to ; So did Thomas Hayes, the Bishop, Baldwin the one he and another reporter broke and ..bankruptcy .administrator'who'had been have covered for nearly two years. local- reporters'- principal - source' on the "I've wanted to do a piece on 'When the Rewald story. *As court-appointed adminis- 1 Big Boys Come Into Town and What They '-trator of the bankrupt.flrm,'Hayes and the Leave With.,'" Borreca said in an interview. 'trustee by whom he is employed are entitled "1 think there's a great amount of pressure to a pre-tax percentagE;-of any: recovered , on them to come back from Hawaii with a company assets story. I think that's what happened here. The `,: Of ABC's on-air interview subjects, Hayes CIA doesn't appear to be that tremendously has the strongest, most immediate financial involved with it. You have a couple of guys interest in proving that Rewald's firm was a who would like it to be involved, but that { majorcIA operati on- Hayves has not proved it I doesn't make it so." to date, but he has reserved his option to sue Thomas E. Hayes, Bishop, Baldwin's the CIA if he can establish that it had any' court-appointed bankruptcy administrator,, liability for the company's bankruptcy. has reconstructed the firm's finances . he ; -claims to have accounted for all but about $600 of the $22 million known to have passed through the company and has no evidence of significant CIA involvement. "I was shocked when I saw ABC News," Hayes said in an interview. "It scared the hell out of me because there's a story I know the background of. The average citizen looks at the national news and there's an imprima-. tur of credibility.... They sound almost like God-like everything they say is the absolute truth. When you see this kind of pure garbage that came out in that (ABC) report, it scares the living hell out of you. It did to me." Although only ABC has been taken to task by the CIA, the network is not out on the limb alone. Individuals close to the Rewald case say that the British Broadcasting Corp. and the Wall Street Journal also misreported the story. They say that CBS News' version of the story was flawed, although to a?much lesser extent. All of those news organizations worked from much the same source material but arrived at different conclusions. Like ABC, the BBC presented Rewald's claims of CIA involvement as fully substantiated but did not broadcast the alleged CIA murder plots.- The Wall Street Journal.portraye4Ilcwald as a renegade CIA agent who used his association with the agency to his own personal ends. CBS reached no conclusions at all on the story but relied on the same questionable sources as ABC and the BBC. .3arnes claims that he met with high. ranking agency officials at the Royal Hawai- ian Hotel on Waikiki. On the air, Barnes Said that he was told at that meeting: "We gotta take him out.. . You know, kill him." No other accusation in ABC's broadcasts so infuriated the CIA. Director Casey insisted that the agency is not in the business of killing Americans. Despite the CIA's alleged record of involve- ment in political assassinations and at- tempts-including at least five foreign lead- ers noted in the 1975 report of the Senate Select Committee on Intelligence (Church Committee) -Casey argued that the distinc- tions between political assassinations and Barnes' charge are "clear and obvious." ?' .;'.' "Whatever happened in the '60s, whatever happened to the extent it did happen, was an' act of state authorized at the very top," Casey said. "Here, you (ABC) have us (the' CIA) trying to put somebody in jail to kill a guy. Since that time (the '60s ), there's been a ' specific (executive) ruling against that-a specific prohibition that did not exist in the "The involvement that I've proven so far,, earlier period. I don't think you can compare is still minimal, although somewhat more, whatever was directed or authorized (then) than the CIA publicly admits," Hayes said. and a prisoner in a jail in Hawaii.". In the disputed reports, however, ABC correspondent Gary Shepard and producer Charles Stuart used Hayes' on-air comments as confirmation that Bishop, Baldwin fronted worldwide clandestine and illegal CIA oper- ations: . (Director Casey's statement-that alleged CIA assassinations were authorized at the highest level of government-is unusual and startling. The Church Committee was unable to conclude that any Administration ever authorized killing foreign leaders.) Shepard: The man appointed by the court as f . ABC backed away from Barnes' story on the firm's bankruptcy trustee confirms the I Nov. 21, 1984, admitting on the air that his CIA connection. , stor could not b b t e su l t d Th t d Hayes: Clearly this was a commerical cover operation for the Central Intelligence Agency. One or more agents used it for. that purpose. But that doesn't justify stealing $22 million of someone's money. Shepard: But Rewald denies that the money is missing at all. He says it's in several different banks under other names. And as far as slight CIA involvement is concerned, ABC News has learned that the agency was heavily entrenched in Bishop, Baldwin, running a number of foreign and domestic intelligence. operations, one of which violated an intern-' tional agreement, others in direct violation of U.S. law. "That's all wrong-100% wrong," said CIA General Counsel Stanley Sporkin in an interview. Sporkin filed the CIA's fairness- doctrine complaint against ABC, even though he knew that the network would relent on one uncorroborated murder charge. In its Sept. 20 broadcast, ABC aired a claim by former Oahu County Correctional Center guard Scott T. Barnes that the CIA ordered him to spy on Rewald in jail and, later, to kill him. o s n ta e . a ay, J the CIA filed its fairness-doctrine complaint against the network with the FCC. (The FCC's fairness doctrine requires broadcasters to present opposing views on controversial issues of public importance.) - ABC offered the CIA appearances on either of its critically acclaimed late-night news program.-"Nightline" or "View:' point"-which the network was willing to devote to the Rewald case. But the CIA did not believe ABC's offers were fi.-m. Besides, in the CIA's view, the issues raised by ABC were not matters of differing opinions or points of view. Rather, they were issues of fact, Casey said. and in that case "the burden of proof is on the affirmative." sional journalists. .- 0 ABC defends its reporting with the basic rule of libel law that the press may level charges against public figures or agencies that otherwise would not be made against private individuals. The U.S. Supreme Court has upheld this concept as necessary to preserve the right of the press to engage in free and robust criticism of government More stringent than the Court's guidelines, however, are the standards of many profes- Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 ? - Columbia Ijn versify journalism proiesso- Melvin Menzher, author of a widely circulat. ed 'basic and int.esmediary reporting text- book, said that responsible journalism re_ quires proper verification of charges, no matter who is the accuser or who is the target It is not enough to balance an unverified charge with a denial, he said -Just because your target is a public figure or agency, I don't think you're any less responsible to adhering to the canons of fairness and the requirements of truth-tell- ing," Mencher said. Clearly, ABC before its broadcasts sought some statements from the CIA. The CIA answered with "no comments," flat denials and suggestions that ABC examine the public records in the case. - The network insists that the CIA's unco- operative attitude allowed it to air unverified and uncorroborated charges. Senior ABC News executives defend the disputed broad- ilogue of alleged CIA operations that ABC claimed to have verified in the second disputed broadcast. . , Shepard: ABC News has learned that Rewald's company provided the cover for some of the CIA's most sensitive and embarrassing operations. Not only was Bishop, Baldwin involved in selling arms to Taiwan, India and Syria and promoting financial panic in Hong Fong, it was also fueling capital flight from two allies, Greece and the Philippines, countries with destabilized economics, in change for intelligence information. And, according to Ron Rewald, the agency was conducting illegal domestic operations, spying on foreign stu- dents on college campuses and planting do- shoot an M-I6. mestic propaganda. . Among those charges, the most serious is Of ABC's specific charges, the CIA ac- the Taiwan arms deal, which ABC claimed knowledges only that an agency official violated a U.S. agreement with mainland recruited Rewald's son to "spot and assess" China. The network confirmed that the foreign students on the Hawaii campus of U~ ane's Armour and Artillery, the stand- ard reference on world military armaments, lists no M-60 tanks e'dded to the Taiwan arsenal in 1983 and notes that Taiwan is developing its own medium battle tank to compete with the American-made M-60. According to one of the Bishop, Baldwin cables, the Taiwan deal included 250,000 laser sighting devices for M-16 rifles, but, according to the 1984-85 edition of Jane's Infantry Weapons, the country has only about 5,000 M-16 rifles. Furthermore, the laser devices cited in the cable have no battlefield capability. They are training devices used to teach new recruits how to casts on the grounds that the CIA does not "back-door" deal occurred with copies of Brigham Young University. CIA officials issue information through a. "workable" i cables among Rewald and his associates. claim that the collecting of information on public-relations office or through a According to those cables, the deal included foreigners within the United States doesn't long-term series of source-reporter contacts. laser sighting devices for.M-16 rifles, ar- violate the agency's charter barring do- mestic activities. Depart- mored personnel carriers and M-60 tanks Said ABC's Burke: "If it was the - . ment of Defense or the Department of State, I Nowhere in the cables is there any think things would have been altogether evidence that the arms were ever ordered or different These are agencies of government shipped. There is, however, independent that have a long history of establishing what evidence that, prior to the ABC broadcasts, is necessary in a free society-a workable the United States publicly sold some of those press relations department, an office that weapons to Taiwan. deals with an inquisitive press... One month before the ABC reports, Con- "The CIA may have a press office, but gress approved the sale of M-60 tank there's nothing there." I chassies to the Taiwan government, accord- However, neither of ABC's two Washing- ing to the records of Defense Marketing ton-based reporters who regularly cover the Services Inc., a Greenwich, Conn.-based firm CIA, and who presumably have the closest that tracks international arms trades. ties to the agency, were consulted on the "There's no reason to go covert on Rewald story prior to its broadcast. something like that," said Leland S. Ness According to CIA press office records, reporter Shepard never asked questions on most of the specific charges that he and Rewald were making against the agency. The CIA claims that it was unaware of the magnitude of ABC's story before it aired or the seriousness of the charges the network planned to make. "What are you supposed to do with this Baldwin-the White House announced a - ..` . -_ .- "? "_ ?"" Ycuuaaab. aac you supposed to go to them and say, -This is also said that he made the $350,000 offer to 5530-million Taiwan arms deal that included the CIA and that the Death threat was only a lor) our no c'? You a,~andm a question then and the)' additional armored personnel carriers and warning from a government-employed kits for upgrading older M-48 tanks. !friend. Frigard refuses to identify his friend, 1 to lay out the entire stor}? so that they iudge 1 In an interview, William Lord, executive j but claims that he is a hi whether or not to talk to you on the basis of gh-rankuzg intelli - producer of ABC's "World News Tonight" pence community official. the magnitude? Is that what a reporter's said, All I know is that the information that supposed to do?" our producer and corre ondent had was "I never thought he was with the CIA," Aga'dsaid Shepard made two ver solid g ccm y oing on there. I on what was calls m Chead telephone quarters, one in personally did not go to the Library of July and another one week before the Congress and sit down and work on that." broadcasts. The CIA records, which the agency acknowledges may be incomplete, do Continued 1984-85 edition of Britain's authorits- The CIA vehemently denies the rest of ABC's and Rewald's allegations, especially the alleged agency death threat to Bishop, Baldwin investor Theodore Frigard. A for- mer California chiropractor, Frigard lost about $250,000 when the firm collapsed. He has filed a $3-million lawsuit against the CIA in an effort to regain his. lost life savings. Shepard: He (Frigard) says the government offered him a payoff if he'd drop his lawsuit against the agency. Frigard: Their offer was that they would pay me $350,000 in triple-A, unregistered, municipal bonds. And then as, we got up to armored vehicles specialist for the firm. "I , ."a'ye' Inc man said, roc know, if you Become can't see why Taiwan would buy M-60s too big of c pain in the arse," he said. "they wiL' under the table when we have openly sold shoo: you through the hear:. They will report it !them these vehicles as recently as last as a heart attack.:'our body will be cremated by mistake and all that will be lef r will be the summer." corofl.e 's report that you had a heart attach:." In December. 1962, Congress approved the . Shepard: Frigard says the CIA never Caine sale of nearly $100 million worth of armored through with, the money, and he s still suing. personnel carriers to Taiwan. On July 15, In a February interview with The Times, ,moo . Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 O "This would have been the biggest story 'ever found against the agency-a plot to murder an American citizen," the CIA's Sporkin said. "How does it happen that they can put on artificial news?" The answer says much about reporting of the Rewald affair. It also shows how national journalists, who often have only a short while to report a story in a strange city, can be caught in a quagmire of claims and counterclaims. Interest in Ronald Rewald's tale effective- ly ' began on July 29, 1983, when KHON reporters Borreca and Barbara Tanabe first reported on Bishop, Baldwin. Rewald re- sponded to their first broadcast by checking into a Honolulu hotel and slicing his wrists. Rewald's claims that the CIA controlled Bishop, Baldwin surfaced almost immediate- ly in news reports and in federal and state inquiries. Hawaii viewers watched most local reporters and investigators examine the claims and debunk many of them. "The ' first time that I talked to Ron Rewald, I had the impression that I had walked through a mirror," said Honolulu Advertiser reporter Walter Wright, who also has contributed to Washington Post reports of the story. "It was just like being in Wonderland-ev- erything's just all flipped around," Wright said in an interview. "He's extremely per- suasive, extremely convincing, ingenuous, but what Rewald and the people who were associated with him were saying-that the CIA created and planned this thing and that the CIA had complete control of it-is about 170 degrees out from what we were getting from other sources of information." Almost alone ' among Hawaii reporters, ABC affiliate KTTV's Larry Price ignored the financial scandal and pursued the CIA angle. A former football coach and popular local radio personality, Price emerged in October, 1983, with a five-part series dramatically entitled "Shadow House.", . More succinctly than any subsequent TV version of the story, Price's reports detailed the. relationship ..between Rewald and the CIA, including the use of three Bishop. Baldwin subsidiaries as so-called "shadow houses"-seemingly legitimate businesses providing commercial cover for CIA agents.:: In agency parlance, such companies are called "proprietaries" providing covert agents with "non-official," or commerical, a s rice, ABC and the BBC cover. Working under such cover, CIA reported lves to d th emse intelligence officers presente Few other Hawaii reporters went along foreign contacts as international business- with ice's version of the story-In following men employed by Bishop, Baldwin subsidi- the dollars that passed through Bishop, cries. Baldwin, most of the Hawaii press found that t According to individuals who have seen the CIA's sealed affidavit in Rewald's crimi- nal case and another associated case in . irginia, the CIA acknowledges that the Bishop, Baldwin subsidiaries provided cover for seven intelligence officers. Rewald-with whom the agency ac- knowledges having had a signed secrecy agreement at one time-provided so-called "backstopping" for the intelligence officers (taking phone messages, collecting mail and the like). He also apparently volunteered to the CIA information that he acquired on his frequent overseas business trips. The sealed evidence in the case reveals names and covers of CIA agents who invested personal funds in Bishop, Baldwin, said U.S. District Judge Martin Pence in an interview. Pence, who oversaw the bank- ruptcy proceedings, said that evidence gath- ered from the firm's business files shows that through Rewald's contacts with CIA em- ployees he managed to collect sensitive information about CIA agents in the field, as well as secret CIA sources and methods of intelligence gathering. Among the investors, explained Pence, "were individuals who were not known as being CIA members. There may have been those, I don't know where in the world, who came and fed through their buddy-buddy (system). If you go back and locate who they were and what they were doing then it goes to 'sources and methods.' It might cause embarrassment or exposure of some of those individuals who are using different names in different places." The judge said that the sealed evidence I does not support Rewald's claims of exten- sive personal involvement with the CIA. "This is little pipsqueak stuff," said Pence, first appointed to the' federal bench by President Harry S. Truman. "To me, it's T. financial records did not substantiate the CIA connections that Price, the BBC, ABC and, to a lesser extent, the Wall Street Journal claimed were there. ABC executives insist that the financial aspects of the Rewald story have no rele- vance to their reporting on the espionage angle of the case. Other than Rewald's and his associates' assertions that he received massive amounts of CIA money, no inde- pendent physical evidence has surfaced showing any unexplained funds that could have provided Rewald with the money necessary to carry out his alleged CIA assignments. _"The CIA didn't put any money in, and they didn't take any money out," bankruptcy administrator Hayes said. "What did they do . here? They used it for commercial cover, to the extent they used it. What story can there be beyond that that can be documented?" That documentation sat on Hayes' desk for anyone with an interest in Bishop, Baldwin's affairs to see-an 8-inch-thick computer printout that traced the deposits and dis- bursements of nearly $22 million known to have passed through the firm from late 1978 through July, 1983. "When Tom Hayes goes through the records of Bishop, Baldwin and can account for almost all of the money, the CIA connection seems much, much, much flimsi- I er," said Wally Zimmermann, news director for KHON. "There were no big blocks of' money either coming in unaccounted for or going out unaccounted for." Prior to the ABC broadcasts, judge Pence called Bishop, Baldwin a classic Ponzi scheme-early investors were paid off with money put into the firm by newer investors. According to one local news report, some investors were hired as consultants and paid finders fees for bringing in new investors. One of those consultants was former Napa County, Calif., attorney, Robert W. Jinks, whom ABC quoted on the air claiming to be a CIA agent. Jinks' only apparent claim to a CIA association is that Rewald swore him into the agency. Jinks has a $5-million lawsuit -against the CIA and a long and curious association with Rewald. As trustee of a $3.7-million estate, Jinks signed the lease agreement installing Re- wald in his Honolulu office. One month before ABC's broadcast, a federal judge removed Jinks from his position with the estate for negligence and misconduct. The judge found that Jinks had delegated discre- tion over estate investments to Rewald. The judge also found that Jinks co-mingled estate funds with his own, used the estate to invest in his own businesses and transferred estate money to his personal accounts. pipsqueak in so far as the use by the CIA of a company as a (mail)drop. That doesn't necessarily involve the financial aspects of the company in the slightest." According to bankruptcy administrator Hayes, who has reviewed most of the sealed materials in the case, Rewald managed to mushroom his minor CIA ties into an association appearing much deeper. The CIA, Hayes said, has contributed to the misreport- ing of its involvement by sealing evidence that has little to do with national security. The CIA insists that neither Rewald nor the officers who were provided cover by Bishop, Baldwin conducted the extensive clandestine operations that Rewald claims and th t KITV' P CentlltuW Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Nine days ueiurc uic z%1Z w uauLu. LZ, we - Inai pan OI IL IS noicwouS, said Richard Napa Register newspaper reported that Jinks resigned from 17 Napa limited partner- ships amid "a series of federal and state lawsuits challenging his professional con- duct." Local Napa residents were said to have invested about $1 million in Jinks' various business deals-including nearly $600,000 in Bishop, Baldwin during a nine- month period when Jinks received $47,000 from the firm. The bankruptcy court found no major income-producing Bishop, Baldwin invest- ments and determined that investors' funds were squandered at an alarming rate. At one point, according to bankruptcy records, Rewald's personal spending exceeded $250,000 a month. It was all part of his CIA cover, Rewald .asserted. Rewald lived at the elegant apex of the pyramid. From his headquarters in a Hono- lulu skyscraper, he jetted around the world. His home was filled with fine art. He kept a fleet of automobiles and entertained women, a sultan, generals, admirals and millionaires at his elegant Oahu polo club. Rewald described his life in a confidential affidavit first filed in a Securities and Exchange Commission inquiry into his finan- cial activities. At Rewald's request and with the concurrence of the CIA, Judge Pence sealed the affidavit for reasons of national security. Copies, however, have been obtained by The Times and other news organizations. In his affidavit, Rewald claims that he led his lavish life style and hobnobbed with the rich and powerful for the CIA. "In carrying out my agency charge to cultivate these individuals on asocial and business level," Rewald swore, "I was re- quired to live in a style commensurate and compatible with the social and economic status which these people enjoyed. "I did so largely with the use of agency funds. My own salary from Bishop, Baldwin, standing alone ($20,000 per month), gave me, after withholding and other deductions, approximately 510.000 per month-ample income, many would say, but nowhere nearly sufficient to allow me to consort with millionaires and people of wealth as one of their social and economic peers." . The 'financial facts of Rewald's life were laid out in bankruptcy records: $656.000 for personal residences, $354,000 for automo-. biles, $226,000 for household help, $540.000 for polo and horses and the like. Bankruptcy records indicated that Rewald's personal expenses reached about $5 million during his. 'five-year reign at Bishop, Baldwin. Former CIA officials and others ridiculed Rewald's assertion that his life style was part of his agency cover. _. Helms, director of central intelligence during the Nixon Administration. "As far as Mr. Rewald's concerned; you can put a line right through his name. I don't know where he got- that kind of money, but it's a cinch that he didn't get it from the United States government" Clearly, however, Rewald received some support from the government Included in bankruptcy administrator Hayes' computer printout are two pages labeled "CIA Activi- ty." They show. that at least two local CIA station chiefs-one of whom later went to work for, Rewald-paid $2,711.10 to Bishop, Baldwin for stationery, telephone and Telex: known in Washington as a "news broker." charges from early 1979 to late 1982.. :, . That's the term that William Lord, execu- r -Loca1 reporters and investigators-estab- tive producer of ABC's "World News To- 'lisped those links long before ABC.came onto- night," used to describe John Kelly, frequent the scene. They had evidence that the, CIA CIA critic and editor of Counterspy, a Service investigation of. Rewald's personal magazine that regularl attempts to expose finances, a4 .investigation that he repre sent CIA activities. Kelly's role turned out to be critical in ed to at least one CIA ageat as an inquiry into. -? - getting the Rewald story to mainland report- agency ? Local. reporters also estabiished.,that a>3 ers and in persuading some in the national "' ` many press that Rewald was the covert CIA agent . a as s 14 CIA agents ?invested more thana dotal.of $300,000 in that he claimed to be. _, personal -funds in the company.. But local reporters and investigate The story was all over Hawaii, including -tors could not trace the R:e-wald-CIA -links AP and UPI, but nothing was reaching the mainland, absolutely nothing," Kelly said in i nearly as far as ABC claimed they extended. an interview in his Washington apartment. A ],.f- ABC ' d?t ar i S ye re acre I repor , en. s s Daniel Inouye (D-Hawaii), while a member of the Senate Intelligence Committee, com- missioned a staff inquiry into the Bishop, Baldwin affair. That investigation concurred with the findings of Judge Pence and bankruptcy administrator Hayes. Staff investigators for the ? oversight and erne-puffer and small - time cheat," which A?ald claims libels him (see box, above). Pulitzer Prize-winning investigative re- porter Seymour Hersh and "GO Minutes" producer Ira Rosen looked in on the Rewald story and decided not to do reports based on his claims, even after reviewing the docu- ments others later used for substantiation. Said producer Rosen: "I have seen docu- ments that they (Rewald and his associates) have represented to be the things that will bring someone over to believe their side of it. They don't. They're not convincing." The documents supporting Rewald and his associates apparently did persuade a man Rewald and company were concerned about the lack of coverage because pretty much he had decided his only defense was the CIA defense. And if you can't get any publicity, you're nowhere on that, you know." Kelly, armed 'with nearly 300 pages of documents that he said were su li d t hi pp e o m investigations subcommittee of the House by Rewald's brother-in-law, became a major Energy and Commerce Committee, who source on the story for the Wall Street have been looking into the Bishop, Baldwin 'Journal, the BBC, CBS and ABC. He was matter for more than a year, have found little evidence suggesting that Rewald's CIA con- interviewed on the air in March, 1984, by the BBC and in May, 1984, by the "CBS Evening nection was as deep as ABC alleged.. i News." Subcommittee investigator Peter Stock- I ABC did not put Kelly on the air but hired ton's inquiry has included reviewing secret him as a "consultant/reporter" on the story. cables between the Honolulu CIA office and Kelly wrote a Counterspy cover story, agency headquarters. Stockton said those cables show that Rewald "just appeared on the scene one day" in 1977 and offered his service to the local CIA station. The cables also shoe, Stockton said, that after Rewald began his association with the CIA he managed to persuade the agency not to conduct a background check on him. Despite the magnitude of Rewald's alleged; scam and his allegations of CIA involvement, the major national media at' first ignored 1what Hawaii residents were calling their biggest story since statehood. Only Money !magazine looked in on the story, characteriz- ing Bishop, Baldwin a scam and Rewald "a featuring a picture 'of Rewald with Bishop, Baldwin consultant and former Honolulu CIA station chief John C. (Jack) Kindschi. The cover lines read: "CIA FRONT: Caught Red-Handed in Hawaii." . ? Kelly first contacted David Taylor, a BBC Washington-based producer, in .the fall of 1983. In December, Taylor sent Kelly to Hawaii at the BBC's expense.. Two months later, Kelly returned to the mainland convinced that Bishop, Baldwin' was just what Rewald claimed it to' be. He was impressed by Larry Price's series of Continued Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-O' Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0~ rfews reports, especially an interview with -pectrum of CIA operations." Unlike ABC; ' Bishop, Baldwin operations manager Sue E. Wilson. She said that it was "common -knowledge" among the staff that the compa- ny frequently performed duties for the CIA. "The significant part-what impressed me right away-was (that) for the first time on American television, to my knowledge, somebody went on camera and said, 'Yes, I worked for the CIA,' " Kelly said. Like ABC's broadcasts, the BBC's half-hour documentary presented Rewald's- claims as substanti ated. Kelly told the BBC interviewer: "This is a rare instance of extensive documentation of a covert CIA operation.: In my research, I've never come across such'a.lazge amount-of documenta- tion.' .ry~ The BBC claimed.it had proof that Rewald stole for the 'CIA the plans -for a Japanese high-speed.train; spied on President .Ferdi- nand Marcos of the Philippines and secretly sold arms to Taiwan. - - The BBC version used a great deal of tape footage supplied'to it by Honolulu station KHON. News Director Wally Zimmermann made a deal to air the-BBC documentary in Hawaii in exchange for providing the video- tape. After seeing the documentary, 'Zim- mermann didn't run the program. ? - .* "I didn't think he had enough facts to back i up the allegations he was making, '.Zimmer- mann said. ""There was nothing there. There were no facts' there-that- we didn'tlmow about, that we hadn't-checked through.and ! that we, had not. come to. either stonewallI; ends or dead ends. Where 'was nothing' new Kelly. -also. provided press clippings -and other documents to. Wall Street: Journal;. reporter Jonathan -Kwitny, who said he had,, used material from Kelly in the past. Kwit- -ny's front-page story ran in April, 1984 ; ,: "He (Kelly) may well have'been the first lead I got," Kwitny said in an interview in his New York office: "Certainly 'he -was over there when I was. We ate and drank and talked together." While acknowledging that BS also quoted persons who believed that - Rewald had little to do with the CIA. "Though the CIA cited-national security as the reason for secrecy, a revealing look is provided by some of those documents ob- tained by CBS News," correspondent Barry Petersen said as the images of Rewald's shattered life appeared for the first time on,' TV screens across the country. "They (the documents) paint a wide-; spread picture of apparent CIA involvement, including claims that Rewald was a covert' -'CIA agent for years, that he was ordered by? 'the CIA to set up Bishop, Baldwin, that from. these luxurious offices CIA agents claiming to be Bishop, Baldwin employees traveled,- .worldwide, negotiated a major arms deal' with Taiwan-tanks, planes and other mili=:. tary equipment-a deal the U.S. government couldn't make openly without damaging U.S. relations with China." ? Five months later, ABC would .repeat; many of those same claims with only a slight' but significant twist, one phrase really. Instead of "Ronald Rewald claims," the new version would say "ABC News has'- learned." 0 EXPERTS PRAISE, CRITICIZE ABC Leading journalism experts inter- viewed by The Times praised-ABC for its. courage to attempt such a significant and potentially important sto- ry. When asked about The Times' findings, however, they said that ABC had failed to verify its charges. "If ABC wants to take that risk," said Columbia University journalism profes- sor Melvin Mencher, "they should live with the consequences. The consequenc- es are, 'Prove W They haven't made their case." "The ABC piece summed up almost quintessentially what's wrong with in- vestigative news these days," said Ned Schurnam, a- New York-based media Kwitny said that nothing in the story was4 tic and producer of public television's attributed to Kelly: "I mean he's not a source ..-in the sense that I attached something that's in the paper to him as the source of it" Kelly and BBC footage appeared again in*- the CBS version of the story. Kelly was-not' paid to 'appear on CBS, however, and that; network took a much different tack from- the-BBC before it and ABC after it. - CBS distanced itself from Rewald's'claims.' In its two-part May, 1984, report, CBS used Kelly's documents without claiming to have corroborated their contents.. : ; ... = CBS quoted Kelly saying that Bishop,. Baldwin was "covering pretty much the full. former. press-watchdog series "Inside Story. "They were relying on first-per- son interviews. I didn't see them sup- ported by any real serious documenta- tion..' .*There wasn't anything beyond that patina-that 'surface of personal identification-that really supported this story, other than Rewald, his friends, the injured parties, those people who stood to benefit from this story surfacing." "This sounds very bad," said Richard Salant, former president of CBS News and of the disbanded National News Council, which regularly reviewed public complaints against the press. But, Salant emphasized, "No matter how bad it is, this is not a matter-that should be before a government agency." ^ -D.C. Continued Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 THE LAWSUITS ABOUND The Ronald Rewald case is actually more than a dozen criminal and civil suits filed in the months since the August, 1982, collapse of the Bishop, Baldwin, Rewald, Dillingham & Wong investment firm. In addition to his 100- count federal criminal indictment, Re- wald faces Hawaii state "theft by decep- tion" charges and a number of civil actions arising out of the Bishop, Baldwin bankruptcy. A strict.gag order bars Rewald from talking with reporters about the CIA or his criminal case. Rewald, 42, who now lives in a rented home in the elegant Hancock Park district of Los Angeles, has brought his own legal actions totaling in the hun- dreds of millions of dollars. All of Rewald's suits are pending. D In February, 1984, Rewald filed a S671-million claim in federal court against the CIA, charging that the intelli- gence agency se. up and controlled Rewald's firm. D In March, 1984, Rewald sued Bishop, Baldwin bankruptcy administrator Thomas E. Haves in Hawaii state court for S150 million. The suit alleges that Haves defamed Rewald, invaded his privacy, held him up to false light and negligently and intentionally inflicted serious mental distress. O Time Inc., which owns Money maga- zine, faces a $10-million suit that Rewald filed in March, 1984. Rewald claims that Money libeled and slandered him in a December,-1-983, article. O On April 15, 1985 in federal court in' Honolulu, Rewald filed a $12-million defamation action against Honolulu TV station KHON. Named in the suit are reporters Barbara Tanabe and Richard Borreca as well as local anchorman Joe Moore. ^ -D.C. On ABC's "World News Tonight" Correspondent Gary Shepard backed up Rewald's daim !: -that'he was a covert,CIA operative =ti 'ABCNews has learned that the agency, was heavily entrenched in (Rewald's Bishop, Baldwin, running a number: ;:. of foreign-and domestic intelligence: operations one o . which violated an international agreement, others indirect Gary Shepard of ABC Nezvs,~: William Lord, exec producer. reported that Rewald's of-"World News .Tonight," company was_ a CIA front::" - cited "solid:': in f orrriation. Cantinued 7. Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 CIA Director William J. Casey insists that the intelligence agency has no serious desire to see ABC's licenses revoked: `We sought a procedure which could.lead to standards which would permanently protect the network,-the p* ublic and the CIA against recurrences of this rush to publish without decent proof or adequate checking.' `This would have been the biggest story everfound against the agency a plot to murder an American citizen: How does it happen that.., they can put on artificial news?'.. f not 'I Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 In 1983, Ronald Rewald was arrested by the Honolulu Police Department, left. Today, he faces 100 federal criminal charges of fraud, tax evasion and perjury as a result of the collapse of his investment firm, Bishop, Baldwin; Rewald, Dillingham & Wong. ABC News later reported that Rewald was a CIA agent and that his company was controlled by the CIA, which plotted to murder Rewald and threatened to kill an investor in . r Reuaald's f irm._ . Continued Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 IV. Continued Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 We gotta take him out... you know, kill him (Rewald). Scott Barnes, quoted above in ABC's - broadcast, claims that he was ordered r - to kill.Ronald Rewald, left. The k '-,,'-CIA denies any association with withdrew the murder allegation. Sanitized Copy Approved for Release 2010/04/06: CIA-RDP88B00443R001704310054-0 I/ . 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