C.I.A. OFFICERS TESTIFY AT HAWAII FRAUD TRIAL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00494R001100710121-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 22, 2016
• Document Release Date: July 26, 2010
• Sequence Number: 121
• Publication Date: September 1, 1985
• Content Type: OPEN SOURCE

Approved For Release 2010/07/26: CIA-RDP90-00494RO01100710121-4
A16
C.I.A. Officers Testify at Hawaii Fraud Trial
By ROBERT LINDSEY
Special to The New York rime
HONOLULU, Aug. 29 - A retired
officer of the Central Intelligence
Agency's clandestine service has told,
in tears, how he persuaded his 86-year-
old mother, who was blind and dis-
abled, to invest most of her savings in
the business ventures of Ronald R. Re-
wald.
"I don't want to appear as if I'm a
patsy," John C Kindschi, the former
agent, testified here this week, ac-
knowledging that his mother had lost
more than $100,000 after giving her sav-
ings to Mr. Rewald."But sometimes
the head follows the heart."
Among the cases of espionage and in-
trigue that have filled this summer, the
one unfolding in a Honolulu courtroom
has been perhaps the most curious.
Mr. Rewald, a 41-year-old Honolulu
businessman, is being tried before
Federal District Judge Harold M. Fong
on 98 counts of fraud, perjury and tax
evasion.
'Ability to Convey Sincerity'
Prosecutors say that Mr. Rewald, de-
scribed by one of his lawyers as some-
ore who has the "ability to convey sin-
cerity," swindled hundreds of inves-
tors out of $22 million.
The prosecutors charge that Mr. Re-
wald not only mesmerized investors
with promises of a 26 percent annual
return on their investments but also de-
ceived the Central Intelligence Agency
and many of its officers experienced in
matching wits with the K.G.B., the
Soviet intelligence agency.
At least five and perhaps as many as
a dozen C.I.A. officers appear to have
invested and lost hundreds of thou-
sands of dollars in dealings with Mr.
Rewald, and the prosecutors charge
that he exploited a connection with the
agency to persuade other investors to
give him money.
Mr. Rewald's lawyers assert that he
never intended to defraud anyone and
that he was a patriot who was used and
abandoned by the C.I.A. - "a spy left
out in the cold," in the words of one of
his lawyers, Brian Tamanaha, a public
defender.
Outline of Case So Far
He bought the Hawaii Polo Club and a
string of polo ponies and spent lavishly
on women, the prosecutors say.
They say that Mr. Kindschi, who
upon his retirement from the C.LA. in
1980 went to work, for one of Mr. Re-
wald's companies, was not the only
person impressed by Mr. Rewald's
charm and personal magnetism.
Promises of high returns on their in-
vestments, which were sometimes ful-
filled, had lured many professional
people in Hawaii and on the mainland
to give money to Mr. Rewald. One offi-
cial in the C.I.A.'s clandestine opera-
tions was dismissed for inducing other
agents to invest with Mr. Rewald.
In fact, according to John Payton, an
Assistant United States Attorney who
heads the prosecution, Mr. Rewald was
generating ever-increasing invest-
ments by using money from later in-
vestors to pay high interest rates to
early investors, which in turn lured
new investors.
In 1982, according to court records,
Joseph Camplone, an agent of the In-
ternal Revenue Service who lived not
far from Mr. Rewald, became puzzled
by his apparent wealth, especially re-
ports from his own children describing
how Mr. Rewald's children were some-
chauffeured limousines.
Court documents indicate that when
Mr. Camplone discovered that Mr. Re-
wald had reported receiving no income
in the previous two years, he opened an
investigation. The prosecutors say that
when Mr. Rewald heard about the in-
quiry he informed the C.I.A. that it
could prove embarrassing to the
agency and persuaded it to intervene to
stop the inquiry.
Ultimately the investigation was re-
opened. On July 29, 1983, Mr. Rewald
was found barely conscious in a hotel
room overbooking Waikiki Beach,
with a suicide note nearby.
When his bank accounts were
checked for $22 million in investors'
money, only $300,000 could be found.
Mr. Rewald said he had spent much of
the money to finance a high-flying style
demanded by the C.I.A.-
The 58-year-old Mr. Kindschi, who
spent more than 20 years in the C.I.A.
and who said he had lost more than
$100,000 of his own money with Mr. Re-
wald, said at the trial that he had re-
garded Mr. Rewald as "an all-Amer-
ican boy," and that he and his wife had
become so close to the businessman's
five children that they "looked on us al-
most as grandparents."
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The jury trial began Aug. 7 and is ex-
pected to last two more months.
This is an outline of the case the Gov-
ernment has presented so far, based on
court documents and testimony:
Mr Rewald, a native of Wisconsin,
was an ambitous, athletic young man
who has said that as a junior-college
student in the 1960's he provided infor-
mation to the C.I.A. about student anti-
war activists.
In 1977 he moved to Hawaii after
pleading no contest to a petty theft
charge brought against him in Wiscon-
sin. Mr. Rewald had opened a chain of
sporting goods stores, and the authori-
ties said he had violated Wisconsin
laws while trying to sell franchises for
the stores.
In Hawaii Mr. Rewald established a
financial consulting company, the Con-
solidated Mutual Investment Corpora-
tion. In 1978 he visited the Honolulu of-
fice of the Central Intelligence Agency,
introduced himself to its Director, Eu-
gene I. Welch, and volunteered to do
whatever he could for the agency. ,
Mr. Welch later suggested to other
C.I.A. officials that the businessman
could be helpful in reporting on intelli-
gence matters while traveling abroad
or by providing "corporate cover" to
intelligence officers needing to conceal
their identities while working in this
country or abroad.
Before long Mr. Welch had intro-
duced Mr. Rewald to his successor, Mr.
Kindschi, and they became friends.
Testimony by C.I.A. officers has in-
dicated that the agency has a branch
that makes agreements with bona fide
businesses to create the illusion that its
agents are employees of the compa-
nies.
Under such an arrangement the com-
panies fictitiously list the agents on
their payrolls, issue them business
cards and stationery, and agree to con-
firm their employment toany callers, a
process called "backstopping."
Few Questions Asked
Court testimony indicates that the
agency sometimes asks few questions
about the companies with which it
makes such agreements.
John H. Mason. a member of the cor-
porate cover branch in the late 1970's,
testified that after a one-hour meeting
with Mr. Rewald in 1978, he recruited
qim to provide cover for a C.I.A. opera-
tive, C. L. Richardson, who needed an
alias for a planned attempt to recruit
as a spy an unidentified foreign na-
tional who was temporarily in this
country.
Although a check by the agency's Of-
fice of Security uncovered Mr. Re-
wald's Wisconsin conviction, Mr.
Mason said he recommended against a
full investigation because Mr. Rewald
had complained that interviews with
his neighbors might create "unfavora-
yl, int~ n f
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Approved For Release 2010/07/26: CIA-RDP90-00494RO01100710121-4