WITH GUILE AND GALL, THIS MAN GULLED HAWAII

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00552R000605480150-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 7
• Document Creation Date: December 22, 2016
• Document Release Date: March 30, 2011
• Sequence Number: 150
• Publication Date: December 1, 1983
• Content Type: OPEN SOURCE

Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
ARTICLE APPEARED MONEY MAGAZINE
ON PAGE__ December 1983
~
LLED HAWAII
by Marlys Harris
%1'11 9;1
ALL, THIS
ets investors princspei wuuc a4,3 n ub .......
l h test paid out of funds obuined
along wit to er
ome 300 trusting
from newcomers to the deception. ButRewald's investors lost $12
was a particularly stunning example.' not
so much in terms of the money involved as
in his sheer gall and the depth of his victims'
trustfulness.
How did so many people-often college edu-
cated, well connected, sophisticated-succumb
to such a swindle? By taking Rewald on faith
and his firm at race value. They asked no ques-
lions, or if they did. tney heard the answers they
wanted to hear. What's more-and it's hard to
blame them for this-they put their confidence
in people and institutions that were supposed to
?guard their interests: lawyers and financial plan-
ners, who had referred them to Bishop Baldwin,
the Securities and Exchange Commission,. the
Internal Revenue Service and other govern-
ment agencies. Many clients became unwitting
accomplices, recommending Rewald to col-
leagues and acquaintances. Nobody ever
n the evening of Friday, July 29, 1983,
Ronald Ray Rewald, 41, chairman of
the Honolulu investment firm Of
Bishop Baldwin Rewald Dillingham & Wong,
checked into the Sheraton Hotel on Waikiki's
tourist-packed main drag. At four o'clock the
next afternoon, in a routine inspection of
rooms, the assistant manager found Rewald ly-
ing in a pool of blood. Using a razor blade, 'he
had slashed deep into his wrists and left forearm
in an unsuccessful attempt to killhimself.
His near suicide followed a local television
news report contending that Rewald was not
the successful and upstanding businessman he
claimed to be. This combination of events was
one of the biggest bombs to hit Honolulu since
Pearl Harbor. Several hundred people--celeb
rities, prominent businessmen and top-ranking
military men, as well as middle-income families
and even widows of modest means=had a total
of S 12 million invested with the firm.
During the next week, investors frantically
pounded at the locked doors of Rewald's im-
pressive 26th-floor offices in Honolulu to de-
mand their money. Letters from troubled clients
on the mainland began pouring in too. But
Bishop Baldwin's doors were locked for good.
On Friday, Thomas E. Hayes, whom the court
had appointed interim bankruptcy trustee. gave
investors the bad news: he had found no evi-
dence that Bishop Baldwin "owns or holds any
assets ... that begin to equal the amount of in-
vestments outstanding."
Ultimately, a federal court would-assert that
Ronald Rewald had operated a Ponzi scheme
the time-worn scam in which a promoter pock-
checked Rewald's background-not even, it ap-
pears, the master checkers at the Central Intelli-
.gence Agency. with whom Ronald Rewald says
he was deeply involved. .
Rewald's firm had inspired trust. The names
Bishop, Baldwin and Dillingham were those of
kamaaina families-the 19th-cenfury,pioneers
in Hawaii who had built .large fortunes and
whose names still enjoy considerable influence
in the Islands. Rewald's firm claimed to have 24
."consultants," many of them lawyers. accoun-
tants and insurance specialists. In addition to
the investment accounts that it managed. the
firm offered individuals and businesses a wide
range of services. from "Estate Coordination"
to "Psychiatric Evaluation of Personnel." " A
network of Bishop Baldwin offices spanned the
globe from London to Tahiti, where the com-
pany supposedly entertained clients on a dou-
ble-hulled canoe. -..may
million in a stunning
example of a Ponzi
scheme. When the
scandpl broke, it
erupted over the Is-
-lands like Kilauea.
Bishop Baldwin brochures
described worldwide oh
flees. in Tahiti, clients sup-
posedly wen entertained
? on.double-hulled cone.
Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
STAT
 Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
There was comfort too in the firm's claims l; who then coached both sports, "Ronnie had
that the Federal Deposit Insurance Corporation ? limited ability as an athlete." He rarely played in
insured investors' money for up to S 150.000.
The accounts were also said to be tax deferred,
and Rewald promised 20% annually-a gener-
a game and did not win a varsity letter. Rewald
never went to Marquette; he didn't even com-
plete his graduation requirements at the Mil-
ous return, although not so huge as to provoke waukee Institute of Technology, the junior
utter disbelief. college that he attended in 1961-63.
': Rewald himself radiated wealth and respect- Rewald filed an affidavit with the court that,
ability. With his wife Nancy, 41:and a brood of was censored heavily by the CIA before it was
five well-mannered teenagers,: he lived in a made public. Money has obtained a document
mansion in Honolulu. He also owned a fleet of that appears to be an early unsigned draft of the
classic cars. two Hawaiian ranches and a string complete affidavit. In it, Rewaldsays that in his
of polo ponies, including one named Gucci. His second year of college a dean introduced him
Marquette University diplomas in business and and another student to a man who said he was
law bespoke legitimacy. and his mentions of'a from the CIA. The man asked the two students
stint in prole' cional football commanded ad- to spend some time at the University of Wiscon-
miration. He numbered among his friends Lieu- sin at Madison spying on radical groups.
tenant Governor John Waihee, TV actor Jack Rewald says he was paid S 120 a week in-cash for
Lord and other notables. News of his doings about nine months' undercover work. The dean
regularly made the society pages, and the busi- says he can't recall the incident.
ness pages respectfully quoted his views on the He quit to take a job as a wholesale sporting
international economy. goods salesman: It was during this time that
ball career, the business expertise. No ruling-
.,class Bishops. Baldwins or Dillinghams were
associated with the firm. Rewald just appropri-
ated the names. Most of the worldwide offices
were little more than mail drops. The FDIC pro-
tection was bogus too; the federal government
covers only bank accounts and not for more
than Sl00.000 each.
Today Rewald resides at the Oahu Commu-
nity Correctional Center. charged with two
counts of first degree theft. He has no money to
pay his 5200,000 bail because the court declared
his firm bankrupt and froze his personal assets.
He has pleaded not guilty, and federal and state
grand juries are conducting investigations.
Also, last August the SEC filed a complaint
against Rewald in federal court for civil securi-
ties fraud. More than 200 investors are lined up
as creditors in bankruptcy court. A hundred or
so have not stepped forward, partly out of
embarrassment but also because they figure
they have little to gain. Those who have filed
claims don't know if they will ever sec a nickel.
Anyone who tared to investigate Rcwald's
origins in Milwaukee could easily have learned
that he was at rtsuntt puffer and a small-time
cheat who had earned not degrees or football
laurels but a conviction for business fraud. At
South Division High School. his grades were
mediocre. Except for his high school sweet-
heart, Nancy Imp, whom he married in 1962,
Rewald was a loner. He joined the football and
track teams, but according to Pat Jankiewicz.
Rewald's football exploits took their inflated
form. He told people around Milwaukee that he
was playing with the semipro Racine (Wis.)
Raiders, but the team's records make no men-
tion of him. He did try out for a few professional
teams and was one of many in 1965 who signed
a contract with the Cleveland browns, but he
never played in a game. Rewald says he spent a
summer at the Kansas City Chiefs training
camp, but the club does not keep records that
would verify his claim.
A fter working at his sales job for a year.
Rewald acquired 15% of College Ath-
letic Supply Co., a retail chain, using
512,000 in borrowed funds. In 1972. he bor-
rowed more and bought out his partner. Right
away, claims a former colleague, "Ron started
manipulating the books to make the company
look more profitable." Rewald was two-faced in
more areas than double-entry bookkeeping dur-
ing this period. A pious convert to Catholicism,
he started business meetings with prayers. On
many afternoons, a former associate relates.
Rewald had kexual encounters with various
women-one a secretary with the CIA. Before
returning to the office, he would stop at Mar-
queue University's chapel for confession.
Cooking the books did not seem to gain
Rewald any business advantage. In 1973 he ran
short of money and began selling sporting goods
store franchises. As the franchisor. Rewald was
obliged to keep the stores stocked, but he didn't
2?
Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
 Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
have enough capital to do so. Most of the frtn- he kamaaina names caught on quickly
chiles eventually went under. I with investors who never questioned
Even as the small businesses hc? franchised their authenticity. One woman wh
were struggling. Rewald was proclaiming in an
iew that appeared in a September 1974 planned to'leave her savings with the firm says
interview she didn't of the Milwaukee Sentinel that his chain 't inquire for fear of embarrassment. "1
was chagrined that I had never heard of this
was thriving. The article described him as "a -company. I thought I was ignorant. and I was
Marquette University business administration not going to admit it by asking about those
graduate." He also lied to the reporter in assert- names..
ing that the loan to buy out his partner had been Reriald's extravagant
paid off and that the company regularly leased a
plane and other equipment. style of living scented to bark tip his reputation l
Rewald and a former employee were charged as a bnllrtnt investment counselor. lie lived in a
that year with criminal violations of Wiscon- four-hedronm. five-bath waterfront house pur-
sin's franchise investment law: (riling to register chased in 1980 for 5950.000. Four bodyguards
protected Rewald and his family. The children
with the state and making untrue and mislead- went to their music lessons in a chauffeur-
ing statements to franchisees. The two men driven limousine. In 1982. Rewald bought the
eventually pleaded guilty to a misdemeanor, foundering Hawaii Polo Club and began pour-
and each paid S2,500 to the franchisees in res- into it. He imposed a dress code and
titution. In 1975. College Athletic went bust. ing money
was able to give the club some snob appeal.
Soon afterward, Rewald filed for personal bank- There he hobnobbed with wealthyforeign bull-
Bruptcy. Most ankruptcy of did his not creditors ate humble their Rewald. losses. Only nessmen-Enrique Zobel, the Philippine bank-
seven days after notice appeared in the newspa- ing billionaire, the Sultan of Brunei and Indiri
per of his inability to pay his debts, he ventured Gautama, an Indonesian industrialist. Some of
them invested with Bishop Baldwin.
into a new area-financial consulting-estab Clients were accepted "by referral only."
fishing a company called CMI Investment Most people heard about Bishop Baldwin and
Corp. When he applied for registration, the its high-yielding accounts from trusted friends
SEC asked about prior federal securities viola- or business associates-who usually turned out
I lions only, so Rewald didn't tell the agency, of to be consultants in Rewald's pay or friends of
his run-in with state law. He did tell the SEC consultants. Ken Pickering. a tile layer, and his
that he was a Marquette graduate. As it- rou- wife Jean invested 525,000 two years ago at the j
tincly does, the SEC approved his registration suggestion of Bishop Baldwin consultant Rich-
without checking the information. and Spiker. Spiker was a former bank branch
WitWhis SEC papers in hand, Rewald moved
his foniiF and consulting business to Hawaii in I manager and a longtime friend. Says Jean Pick-
1977. He also took with him S30tl.tttl0 to ering: "I made up.my mind to invest on the basis
S400.000 raised among Milwaukee friends to of my friendship with Dick. If I hadn't known
open a sporting goods store in the Islands. He him and trusted him. I wouldn't have made this
told people there that he had earned his capital deal." Spiker's lawyer says his client took no
in a successful business in Wisconsin. commissions. None of the consultants has been
In 1979. Rewald set out to manufacture a charged with any wrongdoing.
brand-new image for CM1, putting out the word Sizable accounts were brought in by consul-
that the firm would speciplize in investments in tents. One of them; William Jolly, maintained
the Far East. Rewald and a new partner, Sunlin an active law practice on the so-called Big Is-
Wong-who is now cooperating with federal land. Hawaii. Lawyer Mark Thomason, who is
investigators-changed the company name to suing Jolly on behalf of a group of investors, as-
Bishop Baldwin Rewald Dillingham & Wong. I serts that "when Jolly had a client with a settle-
They also had considered calling it Castle s: ment, inheritance or trust. he often would direct
Cooke, which is the name of the sugar and pine- I the money to Rewald." Thomason estimates
apple conglomerate that is to Honolulu what that Jolly's efforts brought about S I million into
U.S. Steel is to Pittsburgh. In new brochures. Bishop Baldwin coffers. Jolly could not be
the two men endowed Bishop Baldwin with'a reached for comment. _
long history. One mailing said, in a flat lie. that AVOTEMM, the concern had been doing business in Hawaii
for as long as four decades-"since territorial
days." Rewald also claimed that the firm
"served the past four national administrations."
3.
Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
 Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
Rewald instructed consultants to explain that
the firm handled only high rollers. That made
small investors drool to get in, and Rewald was
g s
o
always ready to make an exception. Patricia wished to shelter funds in the U.S. with the help
Brug, 49, an Air Force pilot's widow who in- of Bishop Baldwin and the CIA.
vested the 575,000 in insurance she received at Along with his two forged Marquette diplo-
her husband's death, was told by a Bishop Bal- mas, on his office wail hung a certificate identi-
dwin consultant that the company normally tying him as a member of the Association of
'
didn
t accept such small sums but that as a favor
she would get Mrs. Brug an account. "That
made me feel very fortunate." she says.
Far from being con men, some consultants
,
, p
y
e-
were investors themselves. Chester Owen. 73, a cause a Bishop Baldwin consultant said the firm
retired real estate developer. met Rcwald in Ha- was associated with the CIA. "The agency had
waii and was impressed. He invested 5200.000 suffered so many embarrassments in the past
with Bishop Baldwin-practically everything that I was sure they would screen a company
he had. When Owen decided to relocate to Cali- they did business with to make certain that it
fornia last year, Rewald asked him to pass out was legitimate," says the psychologist.
Bishop Baldwin brochures to friends. On the Rewald snared at least two CIA men as inves-
strength of Owen's say-so, his neighbors in a tors. One was John Kindschi, a successor to the
Santa Maria trailer park, half a dozen rcla- station chief who was his original contact.
rives in Oregon and a score of their friend% in Kindschi joined Bishop Baldwin as a consultant
the Iii rthwesi mailed in at least S.htN-,1NN-.' when he retired. He put in S185.000of his own
Rcwald displayed a talent fir using thtisc and S1 12.000 for his mother Hazel in Wiscon-
he'd sucked in to dupe others. lneredihly.'the sin. Kindschi withdrew S 140,000 the day before
CIA appears to be one of his victim/recruiters. , Rewald's suicide attempt. Jack Rardin, who
R
ld h
ewa
ad resumed his association with the
CIA before he left the mainland. He alleges that
in 1977 a CIA man operating-out of Chicago
told him to volunteer his services-to the Hono-
lulu station chief. In the draft affidavit. Rewald
asserts that he told the station chief that he.
Rewald, had important international clients, al-
though at that time he didn't. He says he was
then asked to develop intelligence on China and
other countries in Asia. Rewald also claims the
station chief helped him transform his little con-
sulting business. CIVIL into the far-flung Bishop
Baldwin and that the CIA used his offices as
clearinghouses for messages to agents.
I n reality, his activities on behalf of
the CIA seem to have been much more
limited. Because his office served as a
message center. Rewald's organization was re-
imbursed by the CIA for some telephone and
telex bills. However, Thomas Hayes, now em-
ployed as a consultant to the law firm handling
.the bankruptcy, says that since 1978 Rewald has
collected no more than S 1,500 from the CIA.
Rewald seemed infatuated with the idea of
being a spy. In Milwaukee. he had frequented a
nightclub called the Safe House, where wait-
resses
wore abbreviated trench coats and the
lights looked like hand grenades. Rewald
planned to open a similar establishment in Ho-
nolulu, but nothing ever came of the project.
On several occasions. Rewald used his rela-
tionship with the CIA to cover questionable
transactions. Clients would entrust securities to
the firm. and Rewald sometimes had employees
or relatives sell them. He explained that the se-
curities came from highly placed forei
ner wh
'Former Intelligence Officers. To credulous
would-be investors, he displayed another bit of
paraphernalia: a CIA identification card. A Ho-
nolulu psychologist invested S 18
000
artl
b
later took over the station-chief post, in-
vested at least 51,700.
Rcwald used associations with military
brass in the same way he used his CIA
tics-as evidence for investors that the
firm had high government connections.
Gen. Hunter Harris. retired former Air
Force commander for the Pacific, was ar-
rested twice for drunken driving in 1981
and 1982. Rewald helped get him into an
alcoholism rehabilitation program and
paid some of his debts (using investors'
funds). Rewald also obtained power of at- '
torney over 575,000 worth of South Ko-
rean oil drilling leases owned by Harris,
promising in return to provide him a
steady income. Impressed by this seem-
ingly selfless gesture, high-ranking offi-
cers in the Air Force and Army invested
substantial sums with Rewald. _
Some would-be clients did try to check
out Bishop Baldwin
The customar
.
y
sources of information-the Better Busi-
ness Bureau and the Hawaii Department
of Commerce and Consumer Affairs-
had nothing to report. Lawyer Thomason
says that many of those he represents
"called the usual run of investment advis-
ers, and they simply wouldn't commit
themselves. Investors took a 'not nega-
tive' response as an endorsement." An in-
vestigator used by General Harris told
him that Rewald wasn't who he claimed
to be. Confronted with the accusation,
Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
 Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
Rewald offered to return funds to Harris
on the spot. That was enough to convince
Harris of his probity.
Bishop Baldwin's financial state-
ments-footnoted with the phrase "au-
dited by Price Waterhouse" (they
weren't)-received barely a glance from
most investors. Says Chester Owen:
"When [ saw that the firm had 51.23 bil-
lion in assets in 1981, what did I have to
ask?" Yet the statements were amateurish
fakes. The 1982 balance sheet was pre-
cisely the same as that of the previous
year except that the last digit of each en-
try was dropped, reducing the firm's net
worth by a factor of 10.
What projects was Bishop Baldwin in-
vesting in that could produce an annual
yield of 20%, as promised? Most people
didn't ask, but everybody who did got
a different explanation. Patricia Brug
thought the funds went for start-up con-
struction loans. The psychologist was told
that the money went for wrap-up con-
struction loans. There was also talk of real
estate developments on Oahu, the main-
land and in Europe, steel companies in
Asia, tea plantations in Indonesia and
small businesses that were just about to
become profitable. Rewald told his clos-
est. associates that the company would
earn big commissions on CIA arms deals
with India and Taiwan. When one
woman inquired what her money would
be going for, Rewald said that he wanted
to hear clients' views on how their funds
should be invested. She replied that she
had heard that real estate in the Kona dis-
trict on the Big Island was soaring in
value. Indeed, Rewald readily affirmed,
Bishop Baldwin already had substantial
holdings there.
So far, bankruptcy consultant Hayes
has found no proof that clients' money
was invested in such ventures. It went in a
single bank account into which Rewald
dipped to pay his personal expenses. Not
only did he draw $20,000 a month in sal-
ary, but also, according to Hayes, in the
two months before his attempted suicide,
Rewald took from investors' funds about
$50,000 for mortgage payments on his
house and ranches, $9,000 to pay his kids'
tutor and $13,000 for relatives. A lot of
money disappeared into Bishop Baldwin,
the polo club and other unprofitable en-
terprises. Today Rewald's businesses and
related assets, including General Harris'
oil drilling investments, are worth $1.5
million. After Bishop Baldwin funds pay
the fees of Hayes and the bankruptcy law-
yers, however, little will be left.
It was an anonymous phone call that
led to the TV report that brought about
Rewald's undoing. It wasn't the diligence
of government watchdog agencies, which
had received complaints but failed to
press investigations. The SEC didn't
make its move until a week after the TV
report.. The Internal Revenue Service
launched an inquiry, for reasons officials -.
won't disclose, in November 1982, but it_.'
never went anywhere. When the IRS'
agent in Honolulu demanded to see his
and Bishop Baldwin's financial records,
Rewald attempted to get Jack Rardin,
who was then CIA station chief in Hono-
lulu, to have the IRS "stand down." But
in February the IRS again pushed,
though not very hard, for records. Mean
while, Bishop Baldwin was taking in
more investment money than ever be-
fore-$3.2 million in April and May and
$2.6 million in June and July.
The firm's collapse left investors with
questions about government agencies.
What's the point of requiring firms to reg-
ister with the SEC if they don't have to
disclose key information and if the in-
formation they, do provide is never
checked? Why did the IRS allow Rewald
to stall its investigation for nine months,
and would he still be stalling that agency
if others hadn't caught up with him? If
Rewald was only a bit player in the murky
drama of cloak and dagger, should the
CIA have allowed him to impersonate a
major operative? Or if he was a full-
fledged agent, why did the CIA let him
His relatives did
not escape his anti-
Midas touch. His
wife has been
looking for jobs
cleaning houses.
operate a Ponzi scheme? To many ob-
servers, it looks as though the CIA was a
party to a swindle of U.S. citizens.
Indeed, Rewald's victims have been
left with questions and little else. One 46-
year-old nurse was planning to retire to
part-time work on her Bishop Baldwin
interest payments. The loss of her money
has forced her to keep her job, take in a
roommate and look for ways to moon-
light. Patricia Brug, the Air Force widow
who invested $75,000, can no longer af-
ford the cost of treatment for a son with a
chronic bone disease. An elderly doctor
was forced to sell his house and move to a
smaller one. One Big Island retiree,
cheated out of his nest egg, is working at a
minimum-wage job. Even Rewald's rela-
tives did not escape his anti-Midas touch.
His wife's uncle, Nicholas imp of Sher-
man Oaks, Calif., lost $52,000. And
Nancy Rewald, who has returned.to Mil-
waukee, has been looking for jobs clean-
ing houses.
A few people stand to profit by
Rewald's exploits. Consultant Hayes is
currently getting $9,000 a month. The
case has been a windfall for Honolulu's
legal community. And then there are the
people on the sidelines trying to make
money from Hawaii's morbid fascination
with the case. For $7.50 at Mr. Lucky's, a
novelty shop in Honolulu's Chinatown,
you can buy a T-shirt that proclaims:
FREE REWALD. IT'S ONLY MONEY.
Reporter associates: Lard Meyers, Lisa Redd,
Nancy Stesin
S.
Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
 Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
Signs of success' a mansion
and Rolls.oyce; a day at
the polo club with lean
Ariyoshi, wife of the gever?
nor, and lavish offices
Rewold (No. 84) folsely
damned a pro football co.
roar. His high school year.
book listed him as on the
team, but he rarely played.
rho diploma is forged.
_ND S
CONO ~ IC Tf1E i ` r, _~.:. h.wlric-and;sP.lint rin4 of he ?.
interest t rates, imprunp- .-' ,,4sive bank lobby1n9. r-?';; ^ ? We do.
int
percent interest e' 'aping much below 'current levels ievets
proorp thIF ill spur consumer spa"
Football; Track ; Cardinal Men's Club.
REWALD, RONALD "Swivel Nips" Elective
Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
 Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4
rho polka booked Ronald
Roweld on M+of chores
when he was well onouph
to have "to hospital af-
ter attempting suicld..
Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480150-4