LETTER TO TOM MURPHY FROM WILLIAM J. CASEY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88B00443R001704310054-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 15
• Document Creation Date: December 22, 2016
• Document Release Date: April 1, 2010
• Sequence Number: 54
• Publication Date: May 15, 1985
• Content Type: LETTER

STAT
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!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
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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
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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
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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
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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-
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- 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 .
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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
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 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
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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.
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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.
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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
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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
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IV.
Continued
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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.
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I/ .
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