COUNTERSPY: CIA FRONT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00845R000100130002-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 60
• Document Creation Date: December 22, 2016
• Document Release Date: June 14, 2010
• Sequence Number: 2
• Publication Date: August 1, 1984
• Content Type: OPEN SOURCE

CM
FRON
Also in this issue: Reagan Censors Government Workers ? The CIA's "Free" Elections in El
Salvador ? Philippine Elections "Made in U.S.A." ? CIA Goes to Rutgers ? South Africa
Positions for Olympic Gold ? Corruption in El Salvador ? Right Wing Subverts Australian Labor
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Senator Laxalt and the Mob
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June-August 1984 Counterspy
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Editor
John Kelly
Board of Advisors
Dr. Walden Bello
Congressional Lobby
Director, Philippine
Support Committee
John Cavanagh
Economist
Dr. Noam Chomsky
Professor at MIT
Peace Activist
Dr. Joshua Cohen
Assistant Professor, MIT
Joan Coxsedge
Member of Parliament
State of Victoria, Australia
Konrad Ege
Journalist
Ruth Fitzpatrick
Member, Steering Committee
of the Religious Task Force
on Central America
Dr. Laurie Kirby
Professor
City University of New York
Tamar Kohns
Political Activist
Annie Makhijani
Chemistry Student
Dr. Arjun Makhijani
Consultant on Energy and
Economic Development
Martha Wenger
Office Worker,
Counterspy's Copy Editor
Design
Rose Marie Audette
Counterspy magazine
P.O. Box 647
Ben Franklin Station
Washington, D.C. 20044
Cover photo: Ronald Rewald and Jack
Kindschi, the former CIA station chief
for Hawaii, celebrate in the happier
days before Rewald's investment com-
pany went bankrupt.
COUNTERSPY JUNE-AUGUST 1984
Cover to Cover: Rewald's CIA Story
by John Kelly
When Rewald's investment company went bankrupt, furious in-
vestors filed suit against Rewald-and the CIA- to recover
their money. For Rewald claims his company was a CIA front,
cultivating wealthy individuals as CIA contacts through money-
making schemes.
Paul Laxalt's Debt to the Mob
by Murray Waas
Paul Laxalt-U.S. Senator, close friend and personal confidant
of the President, and Chairman of the Republican national Com-
mittee-accepted a $950,000 loan arranged by organized crime
friends.
World Bank
A poem by Arjun Makhijani
... And Lifetime Censorship for All
by Angus MacKenzie
Congress thought it had stopped a new rule subjecting govern-
ment workers to censorship for life. But the administration had
prepared-and is implementing-a second rule that amounts to
the same thing.
The CIA's "Free" Elections
by John Kelly
In Italy 30 years ago and in El Salvador today, the U.S. govern-
ment has used a combination of the CIA, the AFL-CIO's interna-
tional branch, and Christian Democrats to subvert elections.
Philippine Elections: Made in the U.S.A.
by Walden Bello
The U.S. pushed Marcos to hold elections to "stabilize" the
situation after the massive outrage over Aquino's assassina-
.tion. But electoral fraud has sparked new protests.
Rutgers University: Intelligence Goes to College
by Konrad Ege
A CIA-funded research project at Rutgers is collecting informa-
tion on European opposition groups. But the 100 students work-
ing on the project and the groups contacted for information
don't know about the CIA link.
South Africa Goes for Olympic Gold
by Dr. Dennis Brutus and Allan Ebert-Miner
South Africa claims it no longer discriminates against some
eleven million blacks because they are now "citizens of their
own homelands." Thus Pretoria argues that it should be allowed
back into the Olympics.
4 El Salvador: Corruption on Top of Brutality
5 ACLU and CIA Agree to Curb on Information
5 Right Wing Subverts Australian Labor
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El Salvador: Corruption on Top of Brutality
by Joy Hackel
W bile the Salvadoran military and
security forces have felt some
pressure of late to tidy up death squad
actitivities and reduce other routine
atrocities, the recipients of U.S.
economic aid in the war torn nation
are carrying on business as usual. A
confidential audit conducted for the
U.S. Agency for International
Development (AID) and several un-
published reports by the Government
Accounting Office (GAO) verify that
American aid dollars are being illegal-
ly diverted by the Salvadoran private
sector for their own personal gain.
El Salvador, like most other poor
countries, suffers from an acute
foreign exchange crisis. To an increas-
ing extent, U.S. aid is required to
shore up its Central Bank with dollars,
which the Salvadoran business sector
relies upon to import goods from the
United States. In fiscal year 1983, the
Reagan Administration channeled
$222 million to El Salvador for a pro-
gram of "economic stabilization." Of
this total, $120 million was allotted to
the Private Sector Support Program, a
U.S. dollar fund to be used to import
U.S. capital and intermediate goods.
In theory, the program is said to spur
new private investment and "stabili-
zation" of the Salvadoran economy.
In fact, studies completed for AID
and the GAO detail how Support Pro-
and Company in June of 1983 details
the variety of ways in which enterpris-
ing Salvadorans make use of AID
generosity. The simplest and most
common method of illegally obtaining
funds, according to the report, is false
invoicing. Salvadorans in the business
sector can obtain dollars from the
Central Bank if they present an in-
voice for the goods to be purchased to
the Bank's import licensing unit along
with the equivalent amount of
Salvadoran colones. The confidential
audit notes that importers frequently
inflate the supposed cost on an item
and pocket the difference.
Businessmen may even obtain credit in
Salvadoran colones from the govern-
ment, exchange it for economic
assistance funding in dollars at an ad-
vantageous exchange rate-2.5 col-
ones buys one dollar through AID
rather than 4.25 colones which is the
open market rate.
The owner of a textile factory in San
Salvador, for instance, might present
an invoice requesting dollars, paid for
in credit, to import spare parts for
machinery at a price of $60,000. The
goods he is in fact purchasing,
however, may cost only $40,000. The
request for credit to purchase spare
parts earns the businessman $20,000
in hard, exchangeable dollars.
"False invoicing," the June audit
explains, "appears to be far beyond
the control of the three people in the
price checking unit.... Given the lax-
ity of enforcement the most creative
businessmen are proving to be the
most successful."
"Creative" business practices take
a number of forms in a country locked
in violent civil strife. The report
acknowledges that in order to obtain
import licenses, "pressure applied by
interested parties appears to be the
major consideration in obtaining fast
approval." "Price checkers," the
Young and Company audit clearly
states, "might be susceptible to
pressure and possible intimidation
even if they do discover invoices that
have been overstated," and "some
Studies completed for
AID and the GAO detail
how Support Program
funds have been pocketed
by Salvadoran
entrepreneurs and then
shifted to purchase Miami
real estate or line
European bank accounts.
gram funds have been pocketed by
Salvadoran entrepreneurs and then
shifted to purchasing Miami real
estate or line European bank ac-
counts.
A confidential audit of Foreign Ex-
change Policy and Management in El
Salvador prepared by Arthur Young
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4 June-August 1984 Counterspy
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claim that either political influence or
payoffs are necessary to obtain timely
financing for imports."
The overall goal of economic assis-
tance to El Salvador, AID claims, is to
restore stability to the country's
economy. Young and Company's
confidential audit points out that what
is in fact "stabilized" by U.S. spon-
sored programs is the use of illegal
mechanisms such as funneling dollars
from the black to the parallel market,
transferring dollars from the black
market to offshore dollar accounts,
and "triangle financing" where an im-
porter buys dollars "off-the-record"
from an exporter before the money is
deposited in the bank.
The extensive corruption reported
in the Young report is corroborated by
verbal reports of the General Accoun-
ting Office to the House and Senate,
which declared that "control to pre-
vent capital flight through over-
invoicing of imports is weak." It is not
even possible, the GAO found, to
verify what U.S. AID funds are used
for, since AID funds are lumped to-
gether with other accounts. "In fact,"
the GAO reports, "the money can be
spent anywhere." While local curren-
cy generated by the sale of U.S. AID
dollars are supposed to be spent on
projects approved by AID, the GAO
reported that "AID does not closely
monitor local currency uses."
The fact that AID funding inspires
capital flight and profiteering is sup-
ported by a private report by the U.S.
Inspector General on April 20, 1983.
The report states that while the Cen-
tral Bank in El Salvador approved
over 70,000 import transactions in
1982, only 112 import applications
were actually reviewed. Of those 112,
one out of each five was found to be
inflated. With the less than 1 percent
likelihood that an invoice will be
reviewed and an acknowledged 20 per-
More Corruption
Other U.S. government-funded
programs in El Salvador are also
suffering from corruption. An inter-
nal State Department audit reported
that an AID-financed public works
employment program has been
plagued by diversion away from in-
tended recipients of supplies and
wages. In several instances, laborers
were paid with public funds while
working on private construction
projects. And The Los Angeles
Times reported that the U.S. Food
for Peace food shipments have also
been diverted from refugees to Sal-
vadoran military personnel, par-
ticularly in San Vicente province.
cent likelihood that it will be inflated,
the margin for corrupt use of funds is
gigantic.
Massive amounts of aid have done
little to revive Salvador's economic
woes. As quickly as new aid is in-
jected, the economy is bled. Controls
"CIA and ACLU Support
Curb on Information" read the
headline on a New York Times article
of May 11, 1984. Mistake? Unfortu-
nately not. "It was a rare moment of
accord," said the article, between the
CIA and the ACLU on pending legis-
lation to exempt CIA operational files
from the Freedom of Information
Act. According to the Times, ACLU
attorney Mark Lynch told a House
subcommittee: "We believe that this
bill will not enable the CIA to with-
hold any meaningful information
which the agency is now required to
on capital flight are so weak, in fact,
that between 1979, the year of the so-
called reform coup, and 1981 more
than $1.1 billion in capital was hustled
illegally out of the country. Mean-
while new investment is at a standstill.
At least 200 medium and large-sized
businesses closed their doors in recent
years, while Salvador's "growth" rate
for 1983 plummeted to a negative 1.5
percent.
Consequently, the more funding
Washington funnels to El Salvador,
the steadier is the flow of funds back
to accounts in wealthy countries, and
the faster the Salvadoran economy
erodes. Aid is, in fact, exacerbating
the lopsided relation that spawned the
civil war-the concentration of wealth
and power in the hands of the few. The
extent of fraud and corruption reveal-
ed by the confidential audits suggests
that economic aid to the Salvadoran
government only serves to consolidate
the alliances that set rich against poor.
Joy Hackel is a freelance journalist
who has traveled to Nicaragua and
Cuba. Her articles have appeared in
the Washington Post and elsewhere.
release.... We're confident that
we're not going to lose anything."
Author Angus MacKensie has dem-
onstrated otherwise. He has produced
a list of FOIA requests which the CIA
is currently required to honor, in-
cluding a FOIA request from the
Center for National Security Studies
which employs Mark Lynch. MacKen-
sie has uncovered that it is the CIA's
opinion that if the pending legislation
is enacted it will not have to respond to
this list of FOIA requests.
Right Wing Subverts Australian Labor
by Joan Coxsedge
Australian politics are once again
in turmoil. Much of this turmoil
shows the familiar pattern of outside
interference. The most serious desta-
bilization involves the attempted af-
filiation of four right-wing unions to
the Victorian Branch of the Australian
Labor Party.
The Australian Labor Party is the
oldest political party in Australia.
Labor Parties were formed in the
Australian States in the 1890s as the
political arm of a broadly based and
militant trade union movement.
Australia's strong unionism is based
on the vigorous democratic involve-
ment of Chartist convicts and Irish
Fenians deported from Britain, as well
as on the sturdy individualism of peo-
ple who joined the gold rush in the
1840s and 1850s. This diverse group of
people created a Labor Party with at
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least nominal adherence to socialist
principles. They insisted that decisions
made by the rank and file should be
binding on all Parliamentarians and
wrote this into the Party's constitu-
tion.
ALP politicians are therefore
theoretically bound to carry out provi-
sions of the Party's policy which are
sometimes quite radical. Due to left-
wing influence, particularly in Vic-
toria, there are strong policies against
uranium mining, on economic matters
and on many foreign affairs issues
such as aid for Vietnam and support
for Fretilin, the organization fighting
for the liberation of East Timor.
Another important Labor Party
policy which threatens U.S. hegemony
is support for a nuclear free Pacific.
U.S. corporate interests view these
Australian Labor Party policies and
the very participation of the Party
rank and file* in such major policy
decisions as a threat to their otherwise
almost complete dominance over Aus-
tralia and its politics.
In an interview (Counterspy, Dec.
83-Feb. 84), I detailed the CIA-led
coup that toppled the government of
the last Labor Prime Minister, Gough
Whitlam, in 1975. I pointed out that in
contrast, the present incumbent, Bob
Hawke, appears to have the full sup-
port of American big business as well
as the seal of approval from President
Reagan himself.
A recently leaked secret defence
strategy policy document is causing
acute embarrassment to the Hawke
Government because it shows just
how close Hawke's thinking is to
Reagan's. This secret policy,
acknowledged to be far more cold-war
than that of Hawke's conservative
predecessors, totally accepts
Pentagon-CIA strategy for the Pacific
region. Ignoring poverty and all the
other problems in the region, it sees
the entire world in terms of super-
power rivalry. It repeats the U.S.
right-wing myth about Soviet superi-
ority in nuclear weapons, and urges
that Australia should move more
closely towards having nuclear
weapons of its own. The policy af-
firms unlimited support for the U.S.
war machine to the extent of harbor-
ing U.S. nuclear-armed ships and
nuclear-armed aircraft. More disturb-
ing still, it urges support for the Papua
New Guinea Government to brutally
repress any opposition to Indonesia's
mini-imperialism in Irian Jaya (West
New Guinea). The document states
that, in some naval exercises in the In-
dian Ocean, Australian naval ships are
under direct U.S. command.
The entire document not only ig-
nores Australian Labor Party policy
but goes in a totally opposite direc-
tion. It expressly opposes our policy
for a nuclear-free Pacific, and recom-
mends we supply Australian uranium
to the Philippines. It is best summed
up in the way it describes Australian
participation in the U.S. alliance as
the "status to comment in Washing-
A new attempt to subvert
the Australian Labor
Party's traditional
progressive positions by
foisting right wing unions
upon It has some U.S.
connections which run
through diverse CIA-
linked organizations.
ton on any moves that we consider
detrimental to our security."
This is the background to the at-
tempt to foist the four previously anti-
Labor unions on to the Victorian
Branch of the Australian Labor Party,
an attempt which is being vigorously
pushed by the Hawke faction.
The labor unions which are seeking
to affiliate with the Party are
dominated by the National Civic
Council, the nearest thing in Australia
to a fascist movement. Some of its
leadership supported Franco in the
Spanish Civil War, and they have
always pushed the dogma of the cor-
porate state. The National Civic
Council, originally a Roman Catholic
sectarian movement, caused a split in
the Labor Party that kept it out of of-
fice for almost two decades. They
formed their own political party, now
defunct, which was allied to the far
right. They are virulently anti-
feminist, pro-uranium mining,
pro-U.S. bases and have an anti-
communist paranoia that would have
upstaged the late, unlamented Joe Mc-
Carthy.
This new attempt to destabilize the
Australian Labor Party and to subvert
its traditional progressive positions
through the foisting of right wing
unions upon it has some U.S. connec-
tions. These run through diverse CIA-
linked organizations. One tactic is to
get suitable union leaders into "train-
ing" programs sponsored by these or-
ganizations, enabling the establish-
ment of permanent links among at
least some of these leaders. Such pro-
grams involve the U.S.,based Labor
Committee for Pacific Affairs and the
Australian Trade Union Program at
Harvard Foundation.
, The Labor Committee for Pacific
Affairs was established in 1983 with a
grant of $300,000 from the United
States Information Agency, as the
result of an initiative by Roy Godson,
director of the Georgetown Interna-
tional Labor Program. (By a not so
strange coincidence, Godson's father,
Joe, started a similar committee in
Britain.) Godson junior directs the
continuing funding of the Australian
counterpart.
The other founding committee
members are former U.S. Ambas-
sador to New Zealand, John Henning,
as well as Albert Shanker and Dale
Good. Godson and Good, together
with secretary Larry Specht, are
associated with the "Labor Desk," a
non-government agency set up in 1974
with co-operation from Georgetown
University. Shanker, Good and Henn-
ing all work for the AFL-CIO, which
operates an extensive international
political program. In March 1983,
Specht and two other top-ranking of-
ficials paid a visit to Australia and
New Zealand, by-passing official
trade union bodies in both countries.
This was followed by the careful selec-
tion of ten trade unionists from the
two countries as the first "study
team."
A similar U.S. briefing activity for
the Australian and New Zealand right-
wing union elite is the Australia-New
Zealand Labor Leader Project. This is
totally funded by the United States In-
formation Agency, which aims at the
"introduction of Australian and New
Zealand participants to the organiza-
tional structure of the American trade
union movement and the issues of con-
cern to that movement." However, the
itinerary of the project in July-August
1983, while not providing a single visit
to an American industry or giving a
chance to talk to real workers, includ-
ed such morsels as a talk by Dora
Alves, Research Associate of the
Georgetown Center. It also planned
visits to libraries, galleries and
religious services, as well as the
obligatory White House tour. In a
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frank "debriefing" (note the lan-
Macquarie University in New South
guage), USIA admitted that the visit
had done little to acquaint U.S. unions
Wales. Each selected participant in the
Harvard course gets more than fares
with what
was
going on in the
and course
fees. For
the
13-week
Australian
and
New Zealand trade
course, they
receive
$250
a week
union movements. It was suggested
that "there wasn't really much interest
in the two down-under nations." It
was also mentioned that there had not
been much time to talk to the various
labor attaches with which all par-
ticipants, with one exception, were
acquainted. Favorably mentioned
were the talks with AFL-CIO officials
and a talk with a group of State
Department Labor Bureau Chiefs. All
the delegates regretted there was not
time to attend the AFL-CIO's George
Meany school. The school fittingly
named after the late George Meany,
"Mr. CIA" of the American trade
union movement.
Another "separate" organization
which hands out large sums for U.S.
visits by right-wing Australian trade
union officials is called the Australian
Trade Union Program and Harvard
Foundation. Of the 68 trustees listed,
each of whom has to contribute $2500
(tax deductible) for that honor, all are
top executives of very large com-
panies, mainly multinational, except
for four extreme right-wing union of-
ficials, two of whom crop up in the
Labor Committee for Pacific Affairs,
two tame politicians (one from each
major party) and one academic. The
most interesting trustee is Peer de
Silva, now a Honeywell top executive,
but well-known to us as a former CIA
Station Chief in Australia.
The foundation, created in July
1976, launders its income through
spending money on top of their ac-
comodation costs. At the end of the
course, the U.S. government gives
each student an additional allowance.
Four students of proven leadership
potential are sent each year. One
A recently leaked secret
defense strategy
document is causing
acute embarassment to
Australia's Hawke
Government because it
shows just how close
Hawke's thinking is to
Reagan's and totally
accepts Pentagon-CIA
strategy for the Pacific
region.
trustee, Mr. Wilson of Koopers
Australia, spelled out what he ex-
pected from the course. He said,
"... It's been an experience that open-
ed their eyes on how the system can
work ...to the benefit of
everybody. . . . " He went on with a lit-
tle anecdote on how they had financed
a member of the Divers Association
which only has 200 members but was
engaged in a vital oil project. "If that
union chose to be militant and to try to
wreck the system, it would be within
their means. Therefore, lo have a man
setting up that union who has a wide
view... is in his union's and Australia's
benefit" [emphasis added]. No doubt it
would also benefit Koppers Australia,
a subsidiary of a major U.S. mining
equipment supplier.
I discovered one of the most in-
teresting aspects of this exercise on my
recent visit to the U.S. The "Harvard
Foundation" which provides the fi-
nancial backing for Australian trade
unionists to attend the course, has no
connection whatsoever with the Har-
vard Foundation that is actually
situated in the middle of the Universi-
ty and legitimately involved with stu-
dent affairs. The CIA-linked Harvard
Trade Union Training Program has so
far "trained" some 1200 trade
unionists from all over the world. The
Joe O'Donnell who runs it is the very
same gentleman who was brought to
Australia back in 1977 on behalf of
another right-wing organisation called
"Enterprise Australia" to give us the
"right" line on trade unionism.
Some of these worthies, selected for
training in CIA-linketd organizations
and programs, are now the leaders of
the right wing unions which seek to af-
filiate with the Australian Labor Par-
ty in an attempt to undermine and sub-
vert progressive, internationalist and
anti-nuclear policies of much of the
rank and file of that Party and its
unions.
Joan Coxsedge is a Member of Parlia-
ment (Victoria) and co-author of
"Rooted in Secrecy. "
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The staff of the now bankrupt Bishop,
Baldwin, Rewald, Dillingham & Wong posed
for this company photograph. Their names
correspond with the numbers at right.
1. Gerald N.Y.C. Lam
2. Edward Hoffman
3. D. Alden Newland
4. John Kindschi
5. Charles Conner
6. Gunadi Gautama
7. Jerry Signori
8. Timothy Holzer
9. Richard Spiker
10. Michael Dailey
11. Jason Wong
12. David Baldwin
13. Ned Avary
14. Robert Jinks
15. John Ing
16. Pranata Hajadi
17. Kenneth Sanders
18. Nolan Metzger
19. Yoshiko Payne
20. Chris Freeze
21. Sali Toda
22. Karen Koshko
23. Mary Rudolph
24. Sunlin Wong
25. Ronald R. Rewald
8 June-August 1984 Counterspy
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COVER TO COVER:
Rewald's CIA Story
When Ron Rewald's investment company was charged
with fraud, Rewald tried to commit suicide. After
Bishop, Baldwin, Rewald, Dillingham, & Wong went
bankrupt, furious investors filed suit against
Rewald -and the CIA -to recover their money. For
Rewald claims his company was a CIA operation -
cultivating wealthy individuals around the world as CIA
contacts through joint ventures and by offering lucrative
(and supposedly guaranteed) investments.
BY JOHN KELLY
Ronald Rewald has a letter from
Ronald Reagan. Signed by Lyn
Nofziger, it says: "Governor
Reagan appreciates the material
you have been sending him and has in-
deed found it helpful as he has no
doubt told you."
After a pitch for campaign con-
tributions, the letter ends. "Should
Governor Reagan visit Hawaii after
becoming a candidate, I am sure he
would be most happy to take you up
on your gracious offer to host an event
at your home."
Rewald has an invitation from
Reagan, George Bush and the
Republican members of the Senate
and House to attend the 1983
Republican Senate-House dinner in
honor of James S. Brady, who was
seriously wounded in the shooting of
Reagan.
Rewald has an earlier letter from
Senator Edward Kennedy (D-Mass.).
"Thank you very much for your
thoughtful notes in connection with
your recent trip to China and Japan,"
said Kennedy. "They will be most
helpful to me as I pursue my strong in-
terest in strengthening our relation-
ship with both the Chinese and
Japanese peoples... "
Rewald has an August 20, 1982 let-
ter from John M. Fisher, Ad-
ministrative chairman of the U.S.
Congressional Advisory Board. "We
were delighted," said Fisher, "to
receive your acceptance of our invita-
tion to attend our first meeting for
Chairman's Advisors of the United
States Congressional Advisory Board
on September 30."
Rewald has an invitation to lunch
from Hawaii's Governor George Ari-
yoshi and his wife. Rewald has an in-
vitation to cocktails and dinner from
then-Commander in Chief Pacific Air
Forces, Lt. Gen. Arnold W. Brasswell
and his wife.
Not long after his cocktails and din-
ner with General Brasswell, Rewald
was found sitting unconscious in a
pool of his own blood. Head propped
up against the bathtub in his room at
the Sheraton Wakiki hotel. The
previous evening he had slashed his
wrists in an attempted suicide.
Why the sudden plunge of Hawaii's
overnight success? Who had travelled
in the company of princes, sultans,
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generals, governors, and multi-
millionaires. Apparently, the suicide
attempt was connected to the sudden
misfortunes of Rewald's Honolulu-
based company, Bishop, Baldwin,
Rewald, Dillingham, & Wong
(BBRDW). On the very day of Re-
wald's suicide attempt, there was a
television broadcast about BBRDW.
The report was that BBRDW had
fraudulently misrepresented itself to
investors. And, therefore, was under
government investigation.
BBRDW was in the investment ad-
visement business. According to its
registration statement with the
Securities and Exchange Commission
(SEC), BBRDW provided investment
advice at the rate of $180 per hour.
"Our principal business," said the
statement, "is serving as estate plan-
ners and business advisers and we
serve clients who are interested in
estate planning advice, such as wills,
trusts, pension plans, and tax and
bookkeeping advice."
BBRDW also provided free eco-
nomic reports to its clients and real
estate assistance for an hourly fee.
BBRDW claimed to receive no percen-
tages, commissions, or royalties for its
work.
BBRDW's SEC statement failed to
mention its Tax Deferred Investment
Savings Account. Through this ac-
count, BBRDW offered and sold se-
curities in the form of interest-20%
guaranteed interest with it rising to
26% to 27% annually. BBRDW
claimed these monies were put into
lucrative investments. That they were
insured for up to $150,000 by the
Federal Deposit Insurance Corpora-
tion (FDIC). And, that investors
could have their money back upon de-
mand.
It was the investment account that
got Rewald and BBRDW into trouble.
On the Monday following Rewald's
suicide attempt, a BBRDW investor,
Hugh Fraser, an insurance agent,
went to BBRDW's office. He had seen
the TV reports about BBRDW as well
as Rewald's suicide attempt. He
wanted his money back immediately
as promised. Fraser could not get into
the office. So, he phoned. He was told
that no funds were being disbursed.
On August 3, 1983, Fraser filed a
formal complaint with the Hawaii
Department of Regulatory Agencies
(DRA) and the Honolulu Police
Department. Subsequently, Rewald
was arrested. And, imprisoned under
a $10 million bail for two counts of
10 June-August 1984 Counterspy
Jack Kindschi, former CIA station chief in Hawaii, and Rewald pose during a 1983
BBRD W social function. Kindschi, according to Rewald, was the principal contact
between BBRD W and the CIA.
theft. A few weeks later, the courts
declared BBRDW bankrupt and froze
all of its assets as well as Rewald's per-
sonal assets. BBRDW is now under in-
vestigation by the SEC and the IRS.
After six months of imprisonment,
Rewald was released under a much
reduced bail. He is scheduled to go to
trial in June 1984 for the theft charges
only. He and BBRDW are also being
sued by some of the investors for their
money. But, so far no federal indict-
ments have been issued
Actually, there were two com-
plainants against Rewald. And, there-
in lies the deeper story of this seeming-
ly simple scam operation. The second
complainant was John "Jack" Kind-
schi, a BBRDW consultant and in-
vestor. More significantly, Kindschi
was the former CIA Chief of Station
in Hawaii. Prior to that, he had work-
ed under deep cover for the CIA in
Stockholm and Mexico City. His
cover had been the Robert Mullen
Co., a public relations firm that
employed E. Howard Hunt in the
months before Watergate.
Why was a person such as Kindschi
working at BBRDW? Because, accor-
ding to Rewald, it was a CIA opera-
tion. According to a sworn affidavit,
censored by the CIA, and sealed by the
courts, Rewald claimed the following.
"I am, and for the past five years
have been, a covert agent for the
Central Intelligence Agency. The
purpose of this affidavit is to detail
my relationship with the CIA, which
began in my college days, and the
link between this relationship and in-
vestor monies. In the past few years,
this relationship has involved nearly
full-time activity on my part. Addi-
tionally, there are 10 or more
employees of my company, Bishop
Baldwin, who on a full or part-time
basis served the Central Intelligence
Agency...."
The CIA has not issued its usual "No
Comment." Instead, it has issued a
public denial. CIA attorney Robert M.
Laprade said in a sworn statement that
"the CIA did not cause Bishop,
Baldwin, Rewald, Dillingham, &
Wong to be created nor has the agency
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at any time owned, operated, control-
led or invested in Bishop, Baldwin,
Rewald, Dillingham, & Wong .... "
Yet, Laprade submitted an affidavit
to U.S. District Judge Martin Spence
as to why defense documents should
be sealed. What Laprade said is not
known. The affidavit itself is sealed.
But, on September 15, 1983, Spence
sealed all documents directly or in-
directly pertaining to the CIA. Spence
also placed a gag order on all involved
parties, attorneys, and agents. It pro-
hibited communication by oral, writ-
ten, or any other means of any infor-
mation pertaining to the CIA, in-
cluding legal papers.
Coincidentally, perhaps, one of the
prosecuting attorneys is John Peyton,
a former CIA attorney.
We have obtained Rewald's uncen-
sored affidavit sealed by Spence. For
comparison, we also have the public-
ly-released affidavit, extensively
deleted by the CIA. The uncensored
affidavit details BBRDW's CIA op-
erations according to Rewald. Finally,
we have many additional documents;
tapes and transcripts of confidential
attorney/client interviews with
Rewald; and our own interviews and
Documents we have
obtained on the
Rewald case
constitute the first
explicit detailing of a
little known primary
mission of the CIA:
securing and
furthering private U.S.
economic interests.
those of BBC television with many of
the involved individuals.
The story they tell in no way solves
the question of Rewald's guilt or in-
nocence regarding his legal charges.
What they do tell, if true, constitutes
the first explicit detailing of a little
known primary mission of the CIA.
This is the securing and furthering of
private U.S. economic interests. This,
of course, is carried out through tax-
payers' monies. And, it entails the
supporting of various repressive
governmental and business elites
around the world who facilitate the
use and exploitation of their own
countries by corporate America. As
we shall see, implementation of this
CIA mission is also done at the ex-
pense of U.S. allies such as Japan and
Europe.
Ostensibly the CIA's corporate mis-
sion is carried out under the rationale
of intelligence work. For instance,
Rewald was assigned to develop or to
cultivate CIA assets, i.e. intelligence
sources, agents of influence, coopera-
tive government officials, etc. There
were two financial techniques for
cultivating these foreign assets. Ac-
cording to the affidavit, BBRDW's in-
vestment account, at the CIA's direc-
tion, was used to "shelter monies of
highly placed foreign diplomats and
businessmen, who wished to `export'
cash to the United States, where it
Rewald, General Arnold W. Brasswell, Ned A vary, and Mrs. Brasswell socialize at a 1983 BBRD W function. Both Brasswell and
A vary, according to Rewald's affidavit, helped arrange an arms sale to India with provisions for kickbacks to key Indian govern-
ment and private sector officials.
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would be available to them in the event
of emergency." Rewald says that the
CIA had provided such a service to
President Lon Nol when he was
displaced by the Cambodian people
and fled to Hawaii.
The affidavit says that the CIA
directed individuals to BBRDW's
shelter accounts. Secondly, that these
funds were in the form of negotiable
securities, wire transfers, or checks,
many from the Chase Manhattan
bank. Thirdly, that BBRDW would
convert these funds into U.S. dollars.
Julie Suda was in charge of receiving
and disbursing funds for BBRDW.
She testified in court that she was told
occasionally by Rewald about upcom-
ing wire transfers which were to be
deposited in BBRDW's investment ac-
count. She said that these were not
regular investors' funds. And, that oc-
casionaliy the wire deposit was as high
as $200,000.
Letters between Charles T. Conner
and Jack Kindschi confirm that
BBRDW was providing this shelter.
Conner, according to Rewald, was a
long-time CIA agent. He has for all in-
tentions and purposes disappeared.
He wrote to Kinschi: "We could
develop very close and important con-
nections with the Greek government
through our old friend Dino [Goulos]
... And, there is absolutely no ques-
tion that Dino does have this good 'en-
tre' in top Greek circles, including
with very wealthy people and business
leaders... most anxious to get their
money out of the country:" Conner
said further that he told Dino that
through BBRDW these investors would
be able to circumvent Greece's tight
foreign exchange control restrictions.
Kindschi, whom Rewald says was
still working for the CIA at the time,
wrote back to Conner. "Moreover, if
Dino can find investment friends seek-
ing safe haven in dollar denominated
investments with BBRD&W, we would
be able to pay him a `finders fee' of up
to 5 percent...."
Rewald's affidavit included a list of
21 investors in this sheltered account.
The individual's amount and account
number are also listed. The total was
$3,748,603.39. The names of the in-
vestors are real persons including
Rewald and several CIA agents. They
are not, however, the actual deposi-
tors. Such "salting" of money in the
U.S., if not a crime, is a definite
political liability in most countries.
Particularly, if the CIA's involvement
"Salting" of money in
the U.S. through
sheltered investment
accounts like those
offered by BBRDW, if
not a crime, is a
definite- political
liability in most
countries-particularly
if the CIA's involve-
ment was exposed.
was exposed. For this reason, deposi-
tors were listed under cover names.
A second cultivation technique was
the use of joint business ventures. The
affidavit says this approach was ap-
plied to four individuals. Enrique
Zobel, a billionaire banker; the Sultan
of Brunei; Sauud Mohammed, a crown
prince of the United Arab Emirates;
and Indri Gautama, a wealthy Indone-
sian industrialist. These individuals
were to be cultivated as intelligence
sources, particularly the movement of
oil prices in OPEC countries. This is in-
formation of great value to U.S. oil
companies. As well as CIA Director,
William Casey, who owns stock in oil.
Its relevance to genuine national securi-
ty is not readily apparent.
Specifically, the way this worked,
was to place [CIA] monies with
them, at their disposal, in 'in-
vestments' in foreign countries in
various joint business activities."
Thus, Rewald formed the Hawaiian-
Arabian Investment Co. and U.S &
United Arab Emirates Investment Co.
with Sauud Mohammed and Indri
Gautama. And, the Ayala-Hawaii
Corp. with Enrique Zobel of the
Philippines. State of Hawaii incor-
poration papers exist for each of these
companies.
These CIA "investments" could
also be used to export and shelter
12 June-August 1984 Counterspy
monies. Following Rewald's im-
prisonment, the Honolulu Star-
Bulletin reported that the Philippine
government was examining the Ayala-
Hawaii Corporation. The government
was concerned that Zobel might be
placing money directly into Ayala-
Hawaii. This way he could avoid ex-
changing pesos through the Philippine
Central Bank. Thus, secretly export
his money to the U.S. And there
would be no government record of this
flight of capital.
Following this article, reporter
Charles Memminger was shown a let-
ter from Zobel. And told by his editor
to write a second article. The second
article all but denied the charges of
possible flight of capital on the part of
Zobel. And claimed that Zobel's only
connection to Rewald was polo. Re-
wald had predicted in his affidavit
that: "People involved with them
[joint BBRDW investments] are forc-
ed to deny a connection and forced,
further, to deny that these transac-
tions have existed."
Enrique Zobel is a supporter and
funder of the elite oposition to Presi-
dent Marcos of the Philippines. He
and the force he represents are an ac-
ceptable replacement to Marcos who
is under increasing attack. Acceptable
that is to U.S. corporate and financial
investors since he would allow them
business-as-usual. Even though under
their domination repression and pov-
erty have increased in the Philippines.
True to its corporate mission, the CIA
was cultivating Zobel-whom, Re-
wald says, was aware of CIA involve-
ment in their dealings.
The intelligence value of the Sultan
of Brunei, described as an "absolute
ruler" by Fortune is highly ques-
tionable. Not so his monetary value to
U.S. financial institutions. Shortly
after Rewald began cultivating the
Sultan, he transferred his $6 billion in-
vestment portfolio from British Crown
Agents to Citibank and Morgan
Guaranty as well as two Japanese
firms. The potential fee income from
this account, according to Dun's
Business Month, is $30 million.
a
Industrial Espionage
nother expression of the CIA's
primary mission is industrial es-
pionage. One country targeted
by the CIA is Japan, a U.S.
ally. The Church Committee found
that in 1967 the CIA quietly establish-
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Among the wealthy
individuals Rewald
cultivated for the CIA
were: (above) the Sultan
of Brunei (second from
left) and Enrique Zobel
(second from right), a
billionaire banker from the
Philippines who was very
close to Marcos, seen here
after a match at Rewald's
polo club in Hawaii; and
(right) Indri Guatama, an
Indonesian businessman.
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One of the CIA's primary missions is industrial espionage. As part of an intelligence gathering assignment for the CIA, Rewald went to
Japan where he claims he obtained blueprints for Japan's top secret High Speed Surface Transport, or the HSST, shown above.
ed a separate office, the Office of
Economic Research. Because of the
"growing strength of Japan and the
countries of Western Europe." And
because CIA "analysts found them-
selves called upon for detailed
research on these countries as trading
partners and rivals of the United
States. "
Included in the exhibits were what
Rewald called CIA requirements for
several countries. These were his in-
telligence gathering assignments for
each country. The first requirement
for Japan was for information on the
top secret High Speed Surface
Transport (HSST) being developed by
Japan Airlines.
Rewald went to Japan. In addition
to filing an intelligence report with
then CIA Chief of Station, Eugene
Welsch, Rewald claims to have ob-
tained HSST blueprints from a
BBRDW client's son who worked in
the Japanese Ministry of Railroads.
Rewald was asked by his attorney why
the CIA wanted the HSST plans. He
answered as follows:
"It was a secret. The plans for this
thing [HSST] were being protected
at great costs at this particular time
because, you know, this [sic] is such
a potential worldwide for marketing
something like this with enormous,
if they could, you know. Anyway,
the potential for marketing some-
thing like this to countries all over
the world for the Japanese would be
enormous and that's their [CIA's]
interest in it. Everything, of course,
is high technology."
In the documents obtained in-
dependently of Rewald were detailed
sketches and descriptions of the
HSST. We have obtained the name
and a photograph of the Japanese
BBRDW client whom Rewald says
assisted in obtaining the HSST
blueprints. We have not, however, ob-
tained the actual blueprints which
Rewald says originated in the
Japanese Ministry of Railroads.
Another Japan operation was the
T&B International Co., Ltd. This was a
CIA funding transmission belt run
through Japan. We have obtained
copies of four notes on T&B stationery
from BBRDW consultant, Russell Kim
to Rewald. Kim was brought into the
CIA by Rewald. The notes were for in-
terest free loans for Rewald, totalling
$390,000. In the notes, Kim told
Rewald he was free to use the money
for as long as he needed. And, some
time in the vague future, Rewald might
14 June-August 1984 Counterspy
want to invest it for Kim. The lending
of large, interest-free loans between
Rewald and various BBRDW
employees was apparently a method of
conduiting CIA monies in and out of
BBRDW.
India
The Rewald affidavit says: "We
were approached to serve as in-
termediaries to arrange through the
CIA for the supply of military hard-
ware to Indira Ghandi.... At my
direction, and with the knowledge of
Jack Rardin, who had succeeded Jack
Kindschi as CIA station chief in
Honolulu, Sunny Wong and Dave
Baldwin, another employee of our
company, were working through
Shauna [Pasrich] and [Chan] Pasrich
to receive the list of military hardware
desired by Indira Ghandi."
Chan Pasrich, says Rewald, is a
close friend of Indira's son, Rajive
who was directly involved in the pend-
ing arms deal. Pasrich, who had
"some intelligence experience and
background," was introduced
through his friend David Baldwin. A
copy of a CIA secrecy agreement sign-
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ed by Baldwin on November 11, 1982
has surfaced. Rewald says Baldwin
knew BBRDW was CIA-involved be-
fore he became involved. He was
subsequently required to sign a CIA
secrecy agreement. Because "we had
to let him know too much."
Pasrich presented himself to Re-
wald as Rajive's representative who
wished to acquire military equipment.
"So," says Rewald, "I went back to
the Agency and told them about it in-
itially.... And, then they came back,
and they were very enthused ... and
said we'll certainly work something
out."
"So," continued Rewald, "I
brought in [Ned] Avary. Went over
the whole thing in detail with him. He
made the necessary contacts; traveled
back and forth between Miami and
Paris. And made other arrangements
to supply the equipment that they
needed through Paris."
Rewald has a tape of a conversation
with CIA officer, Jack Rardin. In the
tape, the pending deal is discussed as a
CIA project. Rewald says to Rardin
on the tape that Rajive was soliciting
military hardware including AWAC
and L1011 aircraft. The following
remarks were recorded:
JR: "But in any case, Pasrich is be-
ing used as an intermediary."
RR: "Between Indira Ghandi's
son."
JR: "son and"
RR: "And us."
Brasswell
Rewald says Gen. Arnold W.
Brasswell, then Commander-in-Chief
U.S. Pacific Air Force (CINCPACAF),
was personally involved in the Indian
arms deal. "One of the big things that
he [Brasswell] was helping us with was
a request we had out of India for ac-
quiring some air force military
equipment ... we were going directly
through a number of companies...
like Boeing, McDonnell-Douglas, and
Hughes. He would make the contacts
at a high level. Generally, they were
retired Air Force generals who were
now vice-presidents of these com-
panies. And he would set up the con-
tacts, so I could go directly to
them.... So, you know, he was work-
ing already [for BBRDW]. And, he
knew what that project was. And
some others that we were working
on.,,
Among the exhibits is a list of names
and private phones on CINCPACAF
stationery. Dated January 11, 1984,
the names were: Gen. Jack Cotton,
Lt. Gen. J.J. Burns, Charles Conrad,
Jr., Chuck De Bedts, and G.E. Todd.
The latter three were described as vice-
presidents for international marketing
for McDonnell-Douglas, Lockheed,
and Hughes, respectively. The ex-
hibits also included handwritten notes
about these transactions and an offer
of assistance from Brasswell.
Rewald added, "Brasswell did his
part all the way through. There was
never a point when Brasswell wasn't,
you know, working closely with us on
this effort. And, you know, Brasswell
absolutely was an employee of ours all
the way through.... He was always
part of Bishop, Baldwin. And, a very
important part of what we were doing
involving India and a couple of other
areas, too-which were all under his
command."
Brasswell did not receive a BBRDW
salary but compensation, says Re-
wald. This was through the handling
of his investments. And providing him
large returns, some $100,000 over 2
years. Rewald adds that Brasswell was
set to join BBRDW upon his retire-
ment. A Brasswell spokesperson con-
firmed that he was considering joining
BBRDW.
Rewald claims Pasrich first came to
him. And, "He laid out in no uncer-
tain terms the facts of life for me. So,
that I'd understand that it [the arms'
cost] would have to come in at a bill
higher than what it was worth. So that
the money could get divided among a
number of people in government and
the private sector in India. And ar-
rangements would have to be made for
that. And, he realized that these com-
panies were reluctant to do that.
However, if we could get him ap-
pointed as their representative or
someone from Bishop Baldwin as the
representative for India from
McDonnell-Douglas or from what-
ever company this happened to be.
Then they could divide up the commis-
sion on it, and it would work out the
same way."
Asked why Pasrich and Rajive did-
n't seek to buy the military equipment
openly, Rewald said, "Well, there was
no way for them to split up the money.
Because if it came in openly it would
have to go out on a bid. And, there
was no way to divide up the money.
See, their only interest in acquiring
anything was to get some money under
the table.... I had been given the
names ... of the key people, you
know, in government in India that had
to have their part of this in order for it
to work out. . . . "
"Kickbacks and bribes were the key
to the whole India thing...."
Asked whether Rajive Ghandi was
positioned to make money on the deal,
Rewald said, "Well, you know, this is.
I'm talking to you absolutely off the
record, okay? But, of course, he was,
you know."
Calvin Gunderson, president of
Legal Investigations which provided
security and investigatory services to
Rewald and BBRDW also attested to
the pending Indian deal. He told Larry
Price the following on KITV/4 (NBC
in Hawaii) television.
"...And when big arms deals are
being made, Bishop Baldwin at
times acted as a middleman. For one
instance, India. They were looking
to buy arms from the United States.
Bishop Baldwin would be the mid-
dleman working through the Agen-
cy. And, when the deal went
through, Bishop Baldwin would get
a commission off it. You know we're
talking millions of dollars."
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Gunderson added this remarkable
statement: "Ron [Rewald] met with
the FBI to niake sure that the legal
aspects of arms deals and things of
that nature were, you know, meeting
the legal requirements of the United
States."
Rewald agreed he had been concern-
ed because of "the way this sort of
transaction's been monitored in recent
years. It bothered me a little. And, I
expressed concern to it, to the Agency.
And, I wasn't getting satisfactory
answers from them.
"And, I mentioned it to Bill Erwin
[FBI/Hawaii], face to face. And said
look, I don't want to end up the next,
you know, the next Lockheed scandal
or whatever it is. How can I protect
myself? ... "
"... So then he went and got some
opinion from the attorney general on
what I could do and how to handle it
and so on. And he was telling me what
to do to protect myself.... And we
finally felt the best thing that we'd do
was just act as the middleman.... But
not handle any of the money going
back and forth ourselves. And, the on-
ly way we could coordinate that was
not to handle it through the United
States. We'd have to handle it through
someone else through another coun-
try.
Rewald claims that Ned Avary was
in Paris attempting to complete the In-
dia deal when BBRDW collapsed.
Rewald does not know if the deal
transpired.
Rewald was asked why the CIA was
secretly selling military equipment.
And, facilitating bribes, and
kickbacks.
"Why would the CIA want to
get involved with something like
that, Ron-just to make the
contacts with these people?"
in a position where we could be
dealing with him on that level.
Are you kidding? You don't
know the answer to that?"
"No. What is that. What is the
answer to that? You were going
to blackmail him then?"
RR: "Oh, not blackmail him. But,
certainly we'd be in a position
to know everything that's hap-
pening. To ask a favor. To do a
lot of things, you know. Not the
least of which is just gain his
confidence. You never know
when you might need that card
down the road, you know..."
16 June-August 1984 Counterspy
CIA spokesperson
Dale Peterson says
that the CIA had only
"slight involvement"
with BBRDW. "But,"
added Peterson, "I'm
not at liberty to go
into details of what
the relationship was."
Congressional hearings, govern-
mental investigations, and press ac-
counts have documented the use of
bribes and kickbacks by McDonnell-
Douglas, Lockheed, Hughes Aircraft
and others to obtain foreign contracts.
These arrangements, often facilitated
by the CIA, resulted in hundreds of
millions of dollars in profits. There is
no record of any concern about the
possible repressive nature of the arms
buyers.
In 1977, President Jimmy Carter
signed into law the corporate bribery
bill. It outlawed bribes and kickbacks
by U.S. corporations. Unless these
corrupt payments are made in the
name of national security. This
loophole amendment was attached
following the secret intervention of
the CIA with Congress. According to
its own charter, the CIA is not suppos-
ed to be involved in the legislative pro-
cess.
Q: "Who specifically were you to
call for these sums of
money?"
RR: "Well, you know, generally I
could go through [Jack] Kind-
schi, you know, most of the
time. But, I could also go
through [Charles] Richard-
son, `Cavannaugh,' you
know, these people. Doroci-
ak, you know, Belcher, any
number of people."
BBRDW's pending Indian arms
deal had a convenient' intelligence ra-
tionale: to penetrate and cultivate
various Indian military and political
officials as CIA assets. So, any bribes
or kickbacks would have been exempt
under the national security loophole.
Business-as-usual, brought to you by
the CIA.
Taiwan
A second major arms deal by
BBRDW was with Taiwan. "As
time passed," says Rewald's af-
fidavit, "our relationship with
the Agency continued to further
deepen and change, from the gather-
ing of general economic and political
intelligence, to the gathering of
political and military intelligence, and
finally to assisting in specific military
operations, including military hard-
ware to foreign countries."
In an unusual letter, even for the
CIA, Director William Casey was told
point blank:
"Information has now been receiv-
ed from more than one source in-
dicating that after July 29,~1983-
when events commenced here in
Hawaii to unravel the affairs of
Bishop Baldwin-CIA agent Ned
Avary, who had earlier been
negotiating the arms transaction
with the Taiwan government through
Russell D.C. Kim, was able to con-
clude that transaction and earned a
commission of not less than $10
million dollars. Information receiv-
ed indicates that this commission
was received by Avary, not for
Bishop Baldwin's account, but
rather for the account of some other
company to which all Bishop
Baldwin/CIA operations have been
transferred.
"As most of the work which went in-
to the Taiwan arms transaction was
performed by Bishop Baldwin
agents and employees, Bishop
Baldwin therefore lays claim to its
commensurate proportion of the
$10 million dollar commission."
The letter was written by attorney
Robert Smith for Rewald who has
contended all along that Avary and
Kim were negotiating various arms
deals. Former BBRDW employee,
David Decaires said that Avary
mentioned an arms deal with Taiwan
at a meeting of BBRDW personnel in
August 1983.
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Telexes from Avary discussed the
Taiwan deal. One telex "Urgent for
Ron Rewald," said: "I am now in ef-
fective direct contact with Russell Kim
on all phases of current operations."
Another to Avary's son Don said:
"Finally found Russell Kim in Korea.
He rushing Samsung data to you. I
hope repeat hope to finalize fantastic
military order with awesome yet af-
fable Lebanese gorilla this weekend."
A related telex to Kim said: "Don
Avary awaiting Samsung electric data
from you. Do you have details C 130
request?" The same day Avary wired
Rewald: "Your See one Thirty
[C-1301 aircraft available same sup-
pliers Taipei order. My son Don
Avary contacting you for specs." The
next day Avary wired Kim and a
Michael Tai: "Second paragraph my
telex should read tanks will cost about
repeat about six hundred thousand
dollars each. Personnel carriers less."
Finally Avary wired Rewald: "Elec-
tronic data for Don Avary from Kim.
Awaiting urgent details as to firmness
of order from the big man here.
Itemized numbers of heavy equipment
in paragraph six mandatory. Have
assurance order can be processed
okay."
Several of the telexes mentioned
"Dauphin." Rewald claims this was a
codename for an unknown middle-
man. In the exhibits was a BBRDW
memo indicating that Russ Kim, c/o
Dauphin Int'l, was the BBRDW con-
tact in Taiwan.
Rewald's affidavit says the Taiwan
Government was seeking fiberglass
helmets ($200,000), bullet-proof
vests, M- 16 laser-sighting devices, and
tanks through BBRDW and the CIA.
The order for the laser sighting devices
alarmed the CIA, says Rewald, be-
cause "the device and the model
numbers requested were all top secret
at that time."
In the exhibits was an apparent or-
der for all of these items except the
tanks. The contract was to be awarded
in March 1983. Either to Winfield
Manufacturing in Mississippi or Louis
J. Sportswear, Inc. in Pennsylvania.
The Honolulu Star-Bulletin (4/7/84)
reported Avary as saying he went to
Paris at Rewald's request. To contact
an arms dealer for Taiwan. He added
that Rewald failed to send him the
number of tanks Taiwan wanted or
the amount it was willing to spend.
Therefore, the deal was never tran-
sacted. The Star-Bulletin (4/16/84)
Ned Avary, consultant to the CIA and-
BBRDW
"I'd sure like to sit down
and be wired meeting with
Ned Avary. Because his last
four projects for us, from
South America, Brazil,
Singapore, Australia, Paris,
were all deep covert Agency
projects. . . . "
-Ron Rewald
added later that: "Avary said he is not
now working and has never worked
for the CIA and said that he does not
know of a single CIA-directed opera-
tion in Rewald's company." How-
ever, the Wall Street Journal
(4/18/84) reported that Avary receiv-
ed lists of questions from the CIA.
And that, in Avary's words, he filed
"damned good reports" for the CIA.
Particularly, in his case, about the
probable outcome of the 1983 elec-
tions in Germany.
Rewald was involved in a melange
of CIA operations. Some of which are
detailed below according to the coun-
try involved. The CIA's identity with
corporate interests is evident
throughout these operations.
Eugene J. Welsch
When Rewald went to live in
Hawaii, he contacted then-CIA
Chief of Station, Eugene J. Welsch.
At this time, Rewald also incor-
porated CMI Investment Corp. with
Sunny Wong. Welsch apparently ask-
ed Rewald to gather intelligence
through and from CMI clients. "So at
this time," he says, 'I began doing so,
at the same time informing Sunny
Wong of my involvement with and ac-
tivities on behalf of CIA."
In the exhibits is a rambling, 19-
page report on CMI stationery, ad-
dressed to Eugene J. Welsch. Marked
"Personal and Confidential," it is a
potpourri of economic and political
intelligence on Japan and China.
Rewald says he was briefed for his
trips to Japan and China by Robert A.
Scalapino, director of the East Asian
Studies Institute and a political science
professor at the University of Califor-
nia. Scalapino also set up meetings
and contacts. The CIA arranged the
meeting with Scalapino. But, Rewald
says he did not tell Scalapino he was
with the CIA.
Rewald summed up his report.
"While the information I have ac-
quired at this time may or may not be
what you had hoped for, I am certain
that with your help and cooperation I
can develop several of these sources
into reliable avenues of acquiring in-
telligence data."
Apparently pleased, Welsch next
directed Rewald to set up two CIA
dummy corporations. One of these
was H & H Enterprises. The dummies
served as message and assignment
centers for CIA operatives. And, their
call cards provided credentials for
agents in the field.
H & H Enterprises
Copies of rarely-seen cover sheets
are among the exhibits. Cover sheets
contain the phony names of personnel
and financial make-up of the com-
pany. As well as what to tell inquiring
Continued on p. 48
Counterspy June-August 1984 17
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PAUL LAXALT'S
DEBT TO THE MOB
Paul Laxalt- US. senator, close friend and personal
confidant of the President, and Chairman of the
Republican National Committee - accepted a $950, 000
loan arranged by organized crime friends.
18 June-August 1984 Counterspy
few days after Ronald Reagan
was sworn in as President of the
United States, Sen. Paul Laxalt
(R-Nevada) was ushered into
the Oval Office for a private meeting
with the President. Laxalt and Reagan
had become close friends while the
two men were governors of their
neighboring states, Nevada and
California. When Ronald Reagan
decided to run for president he named
Laxalt chairman of his campaign
finance committee. And more recent-
ly, when Reagan decided to seek a se-
cond term for the presidency, he turn-
ed again to one of the men he trusted
most in public life. On Nov. 7, 1982
Reagan named Laxalt Chairman of
the Republican National Committee.
As a U.S. Senator, as close friend and
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would meet, according to two Justice
Department officials, three times with
the Attorney General to complain
about Justice Department investiga-
tions of mob influence in his home
state of Nevada. When asked to con-
firm the existence of Laxalt's meetings
with Smith, Tom Stewart, a Justice
Department spokesman said: "The At-
torney General does not keep a calen-
dar or written record of his daily ap-
pointments. If he were to do that
anyone would be able to obtain a com-
plete list under the Freedom of Infor-
mation Act of everyone he's met with
since taking office. And the Attorney
General feels he should be able to keep
that information confidential."
But in a subsequent interview,
Stewart also said he later asked Smith
if he remembered meeting with Laxalt
and the Attorney General remem-
bered one such meeting shortly after
taking office. Steward added, though,
that "he [Smith] doesn't remember
the subject or substance of that
meeting."
The meetings between Laxalt and
Reagan and Laxalt and Smith to
discuss criminal investigations raise
disturbing questions about organized
crime's possible influence on the
Reagan Administration. For informa-
tion in the files of William French
Smith's own Justice Department
detail extensive ties between Sen. Lax-
alt and some of the nation's most
powerful organized crime figures.
In addition, an investigation has
found that Sidney Korshak, described
by one high level Justice Department
official as "one of the four or five
most powerful men in organized crime
in America," helped facilitate a
$950,000 loan to Laxalt from a
Chicago bank at a time a casino Laxalt
owned was facing near bankruptcy.
President Reagan returns to the White House with Senator Paul Laxalt after horseback Another individual who helped Laxalt
riding. obtain the loan was Delbert W. Col-
personal confidant of the President,
and as Chairman of the Republican
National Committee, Paul Laxalt is
one of the most powerful men in
America today.
So it was not unusual for Laxalt to
be ushered into the Oval Office for a
private meeting with the president in
January 1981. During that meeting,
Laxalt patiently explained his problem
to the President: Overly aggressive
Justice Department officials and FBI
agents were hurting Nevada's gaming
and casino industry with their in-
vestigations of the Mafia's infiltration
of Las Vegas. Laxalt told the Presi-
dent that he was against organized
crime, that he had steadfastly fought
the mobsters as governor of Nevada,
but the Justice Department was
harassing casino operators who had
only circumstantial ties to the Mafia.
Reagan listened sympathetically to
his old friend and then set up an ap-
pointment for Laxalt with the nation's
highest law enforcement officer, then
Attorney General-designate, William
French Smith.
During the first several months of
the Reagan administration, Laxalt
eman, a business partner of
Korshak's, who in 1969 was charged
by the Securities and Exchange Com-
mission for his role in setting up a
sophisticated stock fraud scheme.
Both Korshak and Coleman have been
the subjects of numerous federal in-
vestigations, much like those that Lax-
alt complained about in his meeting
with the Attorney General and the
President.
According to sources familiar with
the bank ,loan to Laxalt in 1973, the
senator was then a co-owner of a Car-
son City, Nevada casino, the Ormsby
House. At the time, the casino was in
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serious financial trouble and Laxalt
turned to a longtime friend, Delbert
W. Coleman, for financial aid. Cole-
man, in turn, approached his one-time
business partner Sidney Korshak for
assistance.
Due to the intervention of Coleman
and Korshak, according to reliable
sources, Robert L. Heymann, then an
executive vice president of the First
National Bank of Chicago, authorized
the $950,000 loan to Laxalt and the
Ormsby House.
At first, according to a former of-
ficer of the bank, First National of
Chicago was reluctant to make the
loans to the Ormsby House. For one
thing, the casino was in serious finan-
cial trouble, and casinos, in general,
were considered in the banking com-
munity to be bad risks for loans. In ad-
dition, says the former officer, the
bank was more cautious than usual at
the time in making loans. "We had
some bad luck in collecting on some
REITs (Real Estate Investment
Trusts), so when it came to loans, we
did our homework a little more than
we normally would when evaluating
an application for a loan."
Despite such objections to the Lax-
alt loan posed by some officials of the
bank, the loan was finally approved at
the insistence of Robert Heymann. In
a telephone interview, Heymann ad-
mitted he was in contact with Korshak
at the time the loan was being con-
sidered by the bank.
"Yeah, I talked to Sidney
Korshak," said Keymann, "and he
asked me what I could do on Laxalt's
behalf. But everyone in this town
knows Sidney Korshak. If you're try-
ing to say that Sidney was responsible
for that loan, though, you don't have
your facts straight. I made the final
decision on that loan, and no one, in-
cluding Sidney Korshak, dictates to
me how to conduct my business."
The former bank officer agrees with
Heymann's version of events only to
some extent: "I don't know that
Sidney did anything for Heymann in
exchange for his approving the Laxalt
loan, but their relationship has been a
longterm one and Korshak has per-
formed any one of a dozen favors for
Heymann and the bank in the past."
In fact, Korshak's involvement with
the First National Bank of Chicago
dates back more than 30 years. In the
late 1940s, according to federal law
enforcement officials, Korshak was
hired as a labor lawyer for the bank by
Walter Heymann, then vice chairman
i
eve monk
r~ ,times w
Aral
.
J~41
o
~ c h.
state N~~
of First National. Walter Heymann,
who retired from the bank in 1962, is
none other than Robert Heymann's
father.
Korshak provided numerous favors
for Walter Heymann and the bank,
suggesting to a number of his cor-
porate and labor union clients that
they deposit their assets there. In
return, Walter Heymann suggested to
other Chicago bankers that they hire
Korshak as their "labor counsel."
Law enforcement officials, however,
say that Korshak provided favors for
the banks that went beyond the tradi-
tional role of labor counsel. They say
Korshak was hired to insure "labor
peace" for the banks that he represen-
ted and that some of the monies paid
to him were funneled into the pockets
of corrupt labor union officials who
assured that their rank and file would
never strike against the banks.
When Walter Heymann retired
from First National in 1962, according
to a former bank officer, his son,
Robert, became the man at the bank
who handled its dealings with Kor-
shak. By 1973, when Korshak called
the younger Heymann and suggested
he make a loan to Laxalt, Heymann
and Korshak already had a longstand-
ing and established relationship.
In a telephone interview, Heymann
refused to discuss, to any great extent,
his or Korshak's role in facilitating the
Laxalt loan. "Paul Laxalt is good
man," said Heymann. "His father
20 June-August 1984 Counterspy
was a sheep herder, an immigrant
from Spain. He had to work for
everything he now has in life. You're
just picking on him because he's a con-
servative. Teddy Kennedy can kill
some girl. But nobody gets upset
about that because he's a rich guy, a
liberal.
"Listen, I have nothing more to say
to you. All of you guys in the media
make me out to be some kind of crimi-
nal or something."
But Robery Heymann has only
himself to blame for that. In February
1978, five years after he approved the
Laxalt loan, Heymann pleaded guilty
to federal charges in U.S. District
Court in Chicago. In exchange for his
arranging a $30 million loan from his
bank to Hardwicke, Inc. to develop
the Great Adventure Amusement Park
in New Jersey, Heymann accepted a
$50,000 bribe and a secret financial in-
terest in a Hardwicke subsidiary. In
addition, Heymann also pleaded guil-
ty to charges that he embezzled
$248,000 from the First National
Bank of Chicago.
The role that Sidney Korshak play-
ed to help Paul Laxalt obtain the loan
from the First National Bank of
Chicago deserves further investigation
for two reasons. First, the loan was
made at a crucial time in Laxalt's
career. If he did not receive the loan to
bail him out of his disastrous casino
deal at the time, it is doubtful he
would have had the opportunity to run
for the U.S. Senate and become the
powerful political figure that he is to-
day. Second, as we shall see, Sidney
Korshak is not one to perform an im-
portant favor for a politician without
something in return either for himself
or his associates in the Mafia.
The mysterious world of Sidney
Korshak first came to the public's at-
tention in an extraordinary four-part
series about him in the New York
Times in June 1976, by investigative
reporters Jeff Gerth and Seymour
Hersh.
"To his associates in Los Angeles,
Sidney R. Korshak is a highly suc-
cessful labor lawyer, an astute
business adviser to major corpora-
tions, a multi-millionaire with im-
mense influence and many connec-
tions, a friend of Hollywood stars and
executives," wrote Gerth and Hersh.
"He is so well entrenched in
Hollywood's social and business
structures that he mingles easily with
such entertainers as Dinah Shore,
Debbie Reynolds, and Tony Martin
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 and with such prestigious businessmen
as Charles G. Bludhorn, chairman of
Gulf & Western Industries, Inc., and
Lew R. Wasserman, chief executive of
MCA, Inc., the entertainment con-
glomerate.
"But Sidney Korshak leads a dou-
ble life.
"To scores of federal, state, and
local law enforcement officials, Mr.
Korshak is the most important link
between organized crime and
legitimate business. They describe him
as a 'behind the scenes fixer' who has
been instrumental in helping criminal
elements gain power in union affairs
and infiltrate the leisure and enter-
tainment industries.
"On the basis of their files on Kor-
Meyer Lansky (left) and Jimmy Hoffa
(right) exemplified the close ties between
Las Vegas casinos and organized crime.
shak, federal officials contend that he
has been involved in such activities as
bribery, kickbacks, extortion, fraud,
and labor racketeering, and that he
has given illegal advice to members of
organized crime.
"A well informed Justice Depart-
ment official has described Mr. Kor-
shak as a 'senior intermediary for and
senior adviser to' organized crime
groups in California, Chicago, Las
Vegas, and New York. 'He directs
their investments, their internal af-
fairs, their high level decision
making,' the official said.
"At a closed meeting of Justice
Department officials in May 1976,
Mr. Korshak was described as the
archetype of a new kind of in-
termediary, who is able to deal
simultaneously with organized crime
and the highest echelons of legitimate
business.
"At another meeting in April 1976,
senior attorneys in the Organized
Crime Division of the Justice Depart-
ment reached a consensus that Mr.
Korshak was one of the five most
powerful members of the underworld,
according to one participant."
Despite such a dubious back-
ground, however, Korshak has served
as an attorney for more than a hun-
dred of America's top corporations,
including Gulf & Western, Diners
Club, the Hilton and Hyatt chains,
and Madison Square Garden Cor-
poration. In Hollywood, he has been
equally powerful, serving as a, major
Counterspy June-August 1984 21
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decision maker in the nation's third
largest theatrical booking agency and
as a close friend of movie stars and
producers.
But the most important role that
Sidney Korshak plays for the Amer-
ican underworld is his close relation-
ships with some of the nation's most
powerful politicans, many of whom
-sometimes unwittingly-have pro-
vided favors for his mob associates.
casino ~~
4 5
ter r0
sere not s?
~~ purse to
vain due
In June 1979, for example, Korshak
was attempting to close down the
Hollywood Park Race Track, in In-
glewood, California, in an effort to
help mob interests take over the track.
Assisting Korshak in his efforts to
close down the track were California
Governor Jerry Brown and his chief of
staff, Gray Davis. Brown had previ-
ously requested and received a $1,000
campaign contribution from Korshak
during a presidential campaign ap-
pearance Brown made in New Hamp-
shire. There is no evidence that Brown
and Davis knew of Korshak's real in-
tentions when he asked them to help
close down the Hollywood Park track.
But both Brown and Davis should
have been more circumspect in their
dealings with Korshak in that Browns'
own California Crime Control Com-
mission had previously referred to
Korshak as a "mob connected at-
torney" in one of their public reports.
Korshak had first made it a practice
to court public officials when he
graduated from law school in the late
1930s and began a law firm in Chicago
with his brother, Marshall. Already,
Marshall Korshak was a key figure in
Cook County's corrupt Democratic
Party political machine and would
later serve as an Illinois state senator
and in top posts in Chicago's city
government.
Meanwhile, Sidney Korshak began
to represent members of Chicago's
Capone mob. Later, according to
federal law enforcement officials, he
would become a key adviser to An-
thony (Tony) Accardo, a former
bodyguard to Al Capone who would
later serve as boss of Chicago's mob
family from 1943 to 1956. During that
period, many of Chicago's top politi-
cians and mobsters were in close
alliance with one another. Sidney Kor-
shak served as a trusted go between
and intermediary in many of those
relationships.
Apparently, some 30 years later,
Korshak still has some influence in
Chicago's political circles. In 1980, he
and his brother, Marshall, con-
tributed $4,000 to the re-election cam-
paign committee of Chicago Mayor
Jane Byrne.
Another political figure who has
been the beneficiary of Korshak's
largess has been Pierre Salinger, a one-
time Press Secretary to the late Presi-
dent John Kennedy who is currently
the Paris Bureau Chief for ABC
News. While running for the U.S.
Senate in California in 1964, Salinger
accepted a $10,000 contribution from
Korshak despite the fact that seven
years earlier, in 1957, when he was a
Senate aide investigating the Mafia's
control over the Teamsters Union, he
wrote a report saying that Korshak
"had a reputation of being extremely
close to the old Capone syndicate."
"The fact is I needed to raise $2
million for the campaign," Salinger
explained at the time the campaign
contribution was made public.
Unlike Salinger, many politicians
who have been befriended by Korshak
have been genuinely unaware of his
mob connections. The reason is that
the Mafia has gone to great lengths to
keep their relationship a secret one.
"Korshak is the ultimate 'man up
front'," says one federal law enforce-
ment official, "but he can only do the
mob's bidding and serve as their front
as long as legitimate people don't
know the interests he's really represen-
ting."
In 1961, FBI wiretaps disclosed that
a Chicago mob figure, Leslie (Killer)
Kruse, was told by his Mafia superiors
never to personally contact Korshak
for fear that his being seen with Kor-
shak would damage the lawyer's repu-
tation. Two other Chicago mobsters
were also overheard on wiretaps a
short time later being given similar in-
structions.
More recently, Jimmy (the Weasel)
Fratianno, a one-time acting boss of
the Los Angeles mob family, who later
became a government witness against
his former associates, told a similar
tale. In his autobiography, The Last
Mafioso, written with writer Ovid
Demaris, Fratianno said he was
ordered by Joseph Aiuppa, boss of
Chicago's mob family, never to meet
personally with Korshak.
"Look, Jimmy, do me a favor,"
Fratianno quotes Aiuppa telling him,
"If you ever need a favor from Sid,
come to us. Let us do it. You know,
the less you see of him the better. We
don't want to put heat on the guy...
"We've spent a lot of time keeping
this guy clean. He can't be seen in
public with guys like us. We have had
our own ways of contacting him and
it's worked pretty good for a long
time."
While dealing with some politi-
cians, Korshak has made no secret
about his underworld loyalties. Dur-
ing the late 1950s, the late Sen. Estes
Kefauver planned to hold hearings in
Chicago about organized crime activi-
ty in that city. But Kefauver abruptly
changed his plans at the last moment.
According to the New York Times
series on Korshak, Korshak had
shown Kefauver infrared pictures of
the senator in a compromising posi-
tion with a young girl in Chicago's
Drake Hotel.
Such activities, however, are not
part of the usual Sidney Korshak style.
Korshak is a man who would much
rather charm than intimidate someone
and who would rather do a favor for a
powerful person in hopes of getting
something in return rather than
blackmailing them. More typical of
Sidney Korshak's behavior than his
alleged pressuring the late Sen.
Kefauver is his courtship and interven-
tion on behalf of Sen. Paul Laxalt.
Our story begins in the late 1950s
when Las Vegas' two largest industries
22 June-August 1984 Counterspy
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were the casinos and organized crime.
Paul Laxalt was then just a young at-
torney, and the Mafia was just begin-
ning to take over the city. With the
help of some organized crime figures,
Paul Laxalt would become governor
of Nevada and, later, senator from
that state. During that same time,
organized crime in Nevada would not
ony flourish but grow by leaps and
bounds.
It had all begun with a dream by the
late mobster Bugsy Siegel. The hand-
some, debonair mobster believed that
legalized gambling in Nevada would
make Las Vegas the gambling and vice
capital of North America. With the
financial backing of Meyer Lansky
and the East Coast mob families,
Seigel began building the largest and
most spectacular casino in Las Vegas.
For a time, Siegel led a charmed life.
He lived in glamour with his beautiful
girl-friend, Virginia Hill, and spread
around tens of thousands of dollars on
the nights they spent out on the town
on the Las Vegas Strip.
Even a murder indictment was a
momentary problem for the hand-
some mobster. In 1940, Siegel and an
associate were indicted for the murder
of fellow mob figure Harry "Big
Greenie" Greenberg. The case was
delayed, time and time again, until the
government's key witness, Abe Reles,
"fell" out of a New York hotel room
window while in government custody.
The charges were then dismissed by
Los Angeles District Attorney John
Dockweiller, who said he wanted to
save the taxpayers of Los Angeles the
cost of a lengthy trial. Apparently a
$30,000 campaign contribution made
by Siegel to Dockweiller's election
campaign had nothing to do with the
disposition of the case.
Bugsy Siegel had little to fear from
the government or public officials, but
his associates in the underworld were a
different case. The cost of the Flam-
ingo had sky-rocketed from the $1.5
million Siegel said it would cost to
over $5.5 million. On June 26, 1947 a
mob hitman, acting on the orders of
Meyer Lansky, murdered Bugsy
Siegel.
Oddly, with Siegel's death his
dream came alive. Las Vegas soon
blossomed, and the mob through its
hidden interests in many of-the city's
largest casinos, illegally skimmed tens
of millions of dollars each year.
Onto the scene came the young,
politically ambitious attorney, Paul
Laxalt. In 1951, he was elected District
Attorney of Ormsby County, Nevada.
In 1962, he was elected as Nevada's
lieutenant governor. And two years
later, he lost a close race for the U.S.
Senate.
In 1966, Laxalt successfully ran for
governor of Nevada. A key fundraiser
in that campaign was Ruby Kolod, an
organized crime figure originally from
Cleveland, who was a part owner of
Las Vegas' Desert Inn along with mob
figures Moe Dalitz and Louis
Rothkoff.
In 1965, less than a year before
Kolod helped raise funds for Laxalt's
gubernatorial campaign, he was con-
victed of fraud and extortion. Kolod
and an associate, Israel "Icepick
Willie" Alderman, invested $78,000
in an oil venture with a Denver, Col-
orado lawyer, Robert Sunshine. Ac-
cording to a federal grand jury indict-
ment, when the venture failed, Kolod
and "Icepick Willie" sent two
Chicago mob associates to Denver to
"threaten to injure and/or murder"
Sunshine and his family if their invest-
ment money was not returned. What
interested federal investigators most
about the case was that Sunshine
testified at the trial that Kolod obtain-
ed the $78,000 needed for the oil ven-
ture by simply walking into the count-
ing room of the Desert Inn and skim-
ming the money "right off the top." A
subsequent FBI investigation later
determined that the $78,000 was only
a fraction of the tens of millions of
dollars the Mafia was skimming from
the Desert Inn, the Sands, the Dunes,
the Frontier, and other Las Vegas
casinos.
Despite such incidents as Ruby
Kolod's role in his gubernatorial cam-
paign, Laxalt has been able to suc-
cessfully cultivate a public image-
one of trying to force out the mob
from Las Vegas' casinos.
In 1980, for example, Congres-
sional Quarterly reported in a
biographical article on Laxalt: "The
new governor pushed through the le-
gislature a measure allowing cor-
porate ownership of casinos in an ef-
fort to rid the gambling industry of the
taint of organized crime."
In fact, the end result of the new
legislation merely helped facilitate
organized crime's dominance of the
Las Vegas casino industry. The
history of many of the casinos has
been one of revolving ownership by
organized crime interests. When
federal investigations have found a
secret organized crime interest in a
casino, public outcry has demanded a
new owner. But the new owner has
often turned out also to be a front for
organized crime interests. Such has
been the way the casinos have oper-
ated during the time Paul Laxalt has
been a powerful Nevada politician.
Part of the reason such activities have
been allowed to occur is that he has
maintained close relationship with
men involved in such schemes-men
such as Delbert W. Coleman.
One of the first beneficiaries of
Gov. Laxalt's legislation allowing cor-
porate ownership of Nevada casinos
was Chicago businessman Coleman.
In 1968, Coleman sold off his major
interest in Chicago's J.P. Seeburg
Corporation for $4.8 million. With
the proceeds from that sale, Coleman
bought a controlling interest in the
Beverly Hills-based Parvin-Dohr-
mann Corporation. At the time,
Parvin-Dohrmann owned two Las
Vegas hotel-casinos, the Aladdin and
the Freemont.
In 1969, Coleman and Parvin-
Dohrmann purchased a third Las
Vegas hotel-casino, the Stardust,
from organized crime figure Moe
Dalitz. Coleman had his corporation
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make a secret $500,000 payoff to
Sidney Korshak, the Securities and
Exchange Commission would later
reveal, for introducing Coleman and
Dalitz and setting up the deal.
Later, Korshak would also be ap-
pointed counsel for the Parvin-
Dohrmann Corporation. But says a
former investigator for the SEC:
"Although on paper Korshak was just
the counsel for Parvin-Dohrmann, in
reality he was the most important in-
dividual in making decisions for the
firm next to Coleman. Some of the
people we interviewed even suggested
it was really Korshak running the
show and pulling the strings and that
Coleman was just his front man."
Shortly after the Stardust casino
was purchased from Moe Dalitz by
Parvin-Dohrmann, Coleman and
Korshak made Frank (Lefty) Rosen-
thal manager of the casino. Federal
law enforcement officials have iden-
tified Rosenthal as the overseer in Las
Vegas for Chicago mob boss Joseph
Aiuppa and the man in charge of that
mob family's casino-skimming opera-
tions.
With the involvement of Korshak
and Rosenthal in Parvin-Dohrmann's
operations, federal investigators did
not believe the mob wasn't still taking
its cut when Moe Dalitz sold the Star-
dust to the corporation. Apparently,
Laxalt's casino "reform" legislation
did little to stem mob involvement in
Las Vegas casinos.
But if the legislation did not benefit
the public, it did benefit Paul Laxalt.
In 1970, Laxalt decided against run-
ning for a second term and instead
made plans to expand his Carson City,
Nevada law firm. Among the firms'
first clients was Delbert W. Coleman,
who paid Laxalt a $100,000 a year re-
tainer.
Already in 1969, Parvin-Dohrmann
had come to need a good law firm. In
that year, the Securities and Exchange
Commission charged in a civil lawsuit
that Coleman, Korshak and 15 other
officers and investors of Parvin-
Dohrmann had engaged in stock fraud
and violations of federal securities
laws in artificially inflating the price
of Parvin-Dohrmann stock on the
American Stock Exchange. According
to internal SEC investigative files,
Coleman, when he took control of
Parvin-Dohrmann, bought 300,000
shares of stock in the corporation at
the price of $35 a share. Shortly
thereafter, Korshak bought a smaller
amount of Parvin-Dohrmann stock.
Within a few months, the stock rose
meteorically in value, eventually sell-
ing for $150 a share. Delbert Coleman
made an easy $34.5 million profit.
Sidney Korshak made $1.8 million
from the deal.
But the SEC's investigation found
that the rise in value of Parvin-
Dohrmann's stock was not due to the
viability of the corporation, but due
rather to a sophisticated stock fraud
and manipulation scheme based on
the "old boiler room scheme" and set
up by Korshak and Coleman.
In 1970, the SEC settled its lawsuit,
forcing Coleman and Korshak to sell
their stock in Parvin-Dohrmann and
give up profits they earned from the
stock fraud. But that did not happen
until the two men engaged in some
high-level influence peddling.
In mid-1969, Dr. Martin Sweig,
then an aide to House Speaker John
McCormack, and Nathan Voloshen, a
Washington lobbyist, were indicted by
a federal grand jury on charges of using
the prestige of the Speaker's office on
behalf of Voloshen clients. Among the
charges was that Coleman, on Kor-
shak's recommendation, paid Volo-
shen and Sweig $50,000 to use their in-
fluence to try to close down the SEC
investigation. Coleman was granted
immunity from prosecution in ex-
change for his testimony at the trial
against Sweig and Voloshen.
24 June-August 1984 Counterspy
On May 6, 1969 Coleman testifed
that he and Voloshen and Sweig
visited the new offices of the SEC in
Washington and met with then SEC
chairman Hammer Budge in an effort
to curtail the Parvin-Dohrmann in-
vestigation.
"I bring you warm greetings from
the Speaker of the House," Coleman
testified Voloshen said to the SEC
chairman as the meeting began. But
despite the lofty introductions, the in-
fluence peddling was unsuccessful.
The SEC carried on with its investiga-
tion and later filed suit against Parvin-
Dohrmann. One of the findings of
that investigation was that the $50,000
payoff made by Coleman to Voloshen
and Sweig ended up as a tax write-off
on Parvin-Dohrmann's books.
Also helping in the effort to stop the
SEC investigation was Laxalt, then
governor of Nevada, who traveled to
Washington, D.C. to meet with SEC
officials about the case. Laxalt had no
effect on the investigation, but within
,a year he would be the recipient of the
$100,000 retainer from Delbert Col-
eman as a private lawyer.
With such lucrative law fees, the ex-
governor now decided to expand his
career into the business world. Along
with several partners he financed and
built the Ormsby House Casino in
Carson City, Nevada.
According to Nevada state gaming
records, Laxalt's original capital con-
tribution was $938. His brother and
partner in the venture, Peter, con-
tributed only $913. Apparently, the
casino was mostly financed through
$5 million in loans made to the Laxalts
by three Nevada banks.
Laxalt soon found that his business
skill was not on the same level as his
political acumen. By mid-1973, the
Ormsby House was close to bankrupt-
cy, and Laxalt turned to his old friend
Delbert Coleman for help. The end
result was an unsecured $950,000 loan
to Laxalt and the casino from the First
National Bank of Chicago.
Still other loans were made later by
Heymann and the First National Bank
to keep the casino afloat. Laxalt once
told a friendly interviewer that "I call-
ed Bob Heymann and told him we had
to have a couple of hundred thousand
or we will close. Within a day he gives
$200,000. In February (1974) the same
problems. I told him I need $200,000.
He gives another. At that point he was
in a second position secured only by
our stock, which meant that he could
take it in a moment."
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In September 1974, the First Na-
tional Bank loaned an additional $7.3
million to the Ormsby House. All in
all, Heymann and his bank loaned
more than $10 million to Paul Laxalt
and the Ormsby House, until it was
sold in 1976 to different interests.
But Robert Heymann, like Sidney
Korshak, has never had to spend a day
in jail. In exchange for pleading guil-
ty, Heymann received the sentence of
four year's probation. At the sentenc-
ing hearing, Heymann's lawyer, George
Cotsirilos, said that Heymann had
started a consulting business since
leaving the bank. But the embezzle-
ment and subsequent federal indict-
ment were not hurting business, Cot-
sirilos told the court. "He hasn't lost a
client."
While Robert Heymann seemed to
come away from his embezzlement
trial unscathed, the First National
Bank of Chicago, which had cooper-
ated with federal authorities in their
investigation, did not fare well.
Among Robert Heymann's closest
friends-and also one of First Na-
tional of Chicago's largest customers
-have been Chicago businessman Jay
Pritzker and his father, A.N. Pritzker.
The two men are key members of the
Pritzkers of Chicago, one of the
wealthiest families in America.
Through a number of privately owned
corporations, the Pritzker family's
own assets reportedly generate
revenues exceeding $3 billion each
year. Among their holdings are the
privately held Hyatt Corporation and
a controlling interest in the Hyatt In-
ternational Corporation. The Pritzker
family also owned much of the Hard-
wicke Corporation and the Great
Adventure Amusement Park at one
time. Those two entities were reci-
pients of the loans made by Heymann
for which he was given kickbacks and
for which he was later convicted.
When officials at First National
first learned of Heymann's embezzle-
ment, the Pritzkers lent him $160,000
to repay the bank. Heymann's lawyers
could thus point out at the sentencing
hearing that he had already made
restitution. They also pointed out that
he was also now working as a consul-
tant to "some of the finest
companies," one of which was Hard-
wicke, Inc.
According to a former official of
the First National Bank of Chicago,
the Pritzkers-upset with the bank's
firing of Heymann and its help in the
federal investigation-transferred
tens of millions of dollars in assets
from the First National Bank to the Il-
linois Continental Bank and Trust
Company.
Maybe part of the reason the Pritz-
kers have been so sympathetic to
Heymann's problems is that they too
have had their problems with federal
law enforcment authorities. In De-
cember 1978, the Pritzkers settled a
lawsuit with the Securities and Ex-
change Commission alleging conflicts
of interest and inadequate disclosure
to stockholders of the Hyatt Corpora-
tion and Hyatt International.
During the SEC investigation,
evidence also surfaced showing that
the Pritzkers have had personal rela-
tionships and business dealings with a
number, of highly placed organized
crime figures and their associates. In a
deposition taken during the SEC in-
vestigation, Peter DiTulo, the late
president of the Hyatt International
Corp., admitted that he knew Meyer
Lansky, reputed to be the financial
czar of American organized crime,
and that he had borrowed money from
two Canadians who had invested
money for a notorious Lansky
associate. In addition, the mob-
dominated Central States Teamsters
Pension Fund has made more than $50
million in loans to Hyatt and other
corporations owned by the Pritzkers.
Three high level Teamsters officials
who helped the Pritzkers obtain those
loans-the late Teamster President
Jimmy Hoffa, the late Allan Dorfman
and Alvin Barron-have all had close
ties to organized crime figures and
have been convicted of major felonies.
But the Pritzkers have the closest
relationship to Korshak, dating back
more than 40 years to when both
families had law offices in a modest
building at 134 North La Salle Street
in Chicago. Korshak was later in-
strumental in helping the Pritzkers ob-
tain some of their loans from the
Teamsters Union Central States Pen-
sion Fund. Korshak also later became
a counsel for the Hyatt corporation.
While Korshak and his associate
Robert Heymann were instrumental in
keeping the Ormsby House afloat,
another associate of Korshak's
Nevada businessman Bernard
Nemerov, also helped finance the
casino venture.
The single largest investor in the
Ormsby House was Nemerov who, ac-
cording to law enforcement officials
and public records, has had long-
standing and close associations with
some of the country's most prominent
organized crime figures.
According to Nevada state gaming
records, Nemerov loaned Paul and
Peter Laxalt some $475,000 to help
construct the Ormsby House. He also
contributed another $75,000 to the
project as a capital contribution.
In testimony before the Nevada
State Gaming Commission, Paul Lax-
alt said that Nemerov was going to
play a key role in running the Ormsby
House:
"I see him as being another right
arm to me because my function in this
operation is not going to be opera-
tional. I'm not going to be housed or
officed in the hotel, nor will Mick
(Peter). We'll be on the policy level
only and we felt we needed liaison on
the hotel level from an experienced
person, and this is where we see Mr.
Nemerov."
In June 1972-as part of the licen-
sing procedure for the Ormsby House
-Nemerov was repeatedly asked
about his associations and relation-
ships with a wide assortment of
organized crime figures during an ap-
pearance before Nevada's State Gam-
ing Corporation.
Nemerov admitted during his
testimony before the Gaming Com-
mission to having had close relation-
ships with the late Teamsters Union
President Hoffa and the late Allen
Dorfman, who for more than two
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decades served as the dominant figure
in the mob-dominated Teamsters
Union Central States Pension Fund.
Under Dorfman's leadership the
massive $1.4 billion pension fund
served as nothing more than a private
bank for the Mafia and those willing
to make kickbacks to Dorfman and
other pension fund executives in ex-
change for loans.
Perhaps more than any other man
in America, with the possible excep-
tion of the late Meyer Lansky, Dorf-
man was responsible for the massive
organized crime infiltration of Las
Vegas and its casinos. At Dorfman's
direction, the Central States Pension
Fund loaned hundreds of millions of
dollars to mob-controlled interests to
purchase at least eight Nevada casinos
since the late 1950s.
In 1972, Dorfman was convicted on
federal charges and sentenced to
prison for accepting a $55,000
kickback in arranging a $1.5 million
Central States Pension Fund loan for
a Miami businessman. In late 1974,
Dorfman was acquitted of federal
charges of bankruptcy fraud and con-
spiracy to defraud the Central States
Pension Fund after a key government
witness in the case was murdered
gangland style.
Dorfman himself was murdered
gangland style last year in a suburb of
Chicago while awaiting sentencing
after, being convicted of federal
charges that he conspired to bribe
Paul Laxalt's then Nevada senatorial
colleague Sen. Howard Cannon.
Laxalt also maintained a long and
cordial relationship wtih Dorfman. In
1971, Laxalt wrote a letter to then
President Richard Nixon recommen-
ding that the President release then
Teamsters boss Jimmy Hoffa from
prison. Laxalt told the President that
he decided to ask him to release Hoffa
from prison after meeting with Dorf-
man, who he claimed was not "the
.criminal type so often depicted by the
national press."
Nemerov has also enaged in a close
relationship with Sidney Korshak over
the years. While questioned before the
Nevada State Gaming Commission,
Nemerov admitted to knowing Kor-
shak socially. He also said that the two
men had offices in the same Chicago
office building.
With Nemerov's investment in the
Ormsby House, yet another close
associate of Korshak was involved
financially with Laxalt.
On Nov. 1, 1983 the Sacramento
Bee reported that the Ormsby House
was the subject of a 1973 Internal
Revenue Service investigation that
looked into allegations that organized
crime interests were illegally skimming
an estimating $2 million a year of the
casino's proceeds.
But, according to reporter Denny
Walsh, IRS agents were not allowed to
puruse the investigation due to in-
tervention from the Nixon White
House. Wrote Walsh: "One of the tax
agents noted that the Nixon White
House's influence in the upper reaches
of the IRS was something he and his
colleagues had to live with.. `For the
most part, anything [traced. to]
Republicans was given the fast once-
over,' the agent said.
"Referring to those types of situa-
tions, he said, 'I pursued what I
thought was appropriate until I was
told not to.'
"Asked if the Laxalt matter was one
he was told not to pursue, he said,
`Yes.' "
Walsh later added: "Information
about the scheme was derived primari-
ly through physical surveillance and
from Ormsby House employees devel-
oped as informants by IRS agents...
"Implicated as a courier of the skim
money, according to the sources, was
Rocco Youse, identified in federal,
state and county intelligence files as an
associate and front for Milwaukee
Mafia boss Frank Balistrieri...
"[In addition] at the Ormsby
House, IRS agents watched on a
number of occasions as Youse met
with Joseph Viscuglia, one of the
casino's managers.
"Casino employees told tax agents
an average 20 percent of the house's
take was being skimmed and being
held by Viscuglia until picked up by
Youse."
In a prepared statement made after
the Sacramento Bee's report, Laxalt
branded the story "ludicrous" and
said that he hoped those named in the
news account would "sue the tail off
the Sacramento Bee."
It is impossible to substantiate the
Sacramento Bee's charge that
"substantial sums of money were il-
legally skimmed from the proceeds of
Carson City's Ormsby House Hotel
Casino during the time it was owned
by Paul Laxalt," due to the Nixon Ad-
ministration's intervention that halted
the investigation.
If the allegations are indeed true,
they would seem to coincide with find-
ings by this reporter's investigations
that Sidney Korshak intervened with
an official of Chicago's First National
Bank to gain approval for loans to
keep the Ormsby House in business.
Korshak was at the time, and still is,
according to federal law enforcement
officials, a senior adviser in the
Chicago mob family. The main bene-
ficiary of the alleged skimming opera-
tion, according to the initial IRS pro-
be, was the Milwaukee mob family of
Frank Balistrieri, an adjunct of the
Chicago mob 'family of which Kor-
shak is a senior adviser.
If the allegations of skimming at the
Ormsby House are untrue, Sen. Lax-
alt's behavior still deserves further at-
tention. This reporter's investigation
has shown that only with the help of
Sidney Korshak and his associates
-Delbert Coleman, Robert Heymann,
and Robert Nemerov-was Laxalt's
Ormsby House venture allowed to
become a viable entity.
At the same time, Sen. Laxalt has
engaged in a number of activities in his
official government positions that
have helped Sidney Korshak and
Chicago's mob bosses.
Laxalt's discussions with the Presi-
dent and Attorney General to curb mob
investigation in Las Vegas would have
to be at the top of the list. His attempts
to stop the federal investigation of
Parvin-Dorhmann also benefitted
Sidney Korshak and Delbert Cole-
man, who were eventually charged by
the Securities and Exchange Commis-
sion with stock fraud related to the
case. And Laxalt's attempts to free
Jimmy Hoffa from prison also would
have benefitted Korshak's and
Chicago's mob bosses, who previous-
ly made tens of millions of dollars in il-
legal Teamsters Union-related activ-
ities when Hoffa was its president.
At best, Sen. Paul Laxalt is a man
who was allowed to own a casino with
the help of Sidney Korshak and other
individuals tied to organized crime. At
worst, he is a man who has engaged in
activities as a public official which
help those same organized crime in-
terests that helped him with his private
business dealings.
Murray Waas is a freelance journalist
who has published in the Washington
Post, The Nation, and elsewhere. He
was the recipient of the 1983 H.L.
Mencken Award for Investigative
Reporting. This article is reprinted
from The Rebel magazine with the
author's permission.
26 June-August 1984 Counterspy
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World Bank
Arjun Makhijani
dedicated to the struggles for freedom of the people of the Philippines
(i)
Fountains babble on the thirteenth
floor, softening fluorescence,
punctuating the clink of
cocktail glasses and
talk of small
farmers.
Thought I'd crush them (said M)
with eight point two billion pounds:
bombs cratering fields, napalm
burning children, agent
orange sterilizing mothers and
earth.
But worse than insects, they
dig tunnels and multiply
in ways I never learned; illiterate
learn to fire
anti-aircraft guns,
singing
songs of freedom that make
black and young chant Ho Ho Ho
Chi Minh, Uncle Ho, and
hate me who sought only
their love with
Edsel.
(ii)
Johnson raising a stink on the White
House toilet said y'all get 'em in
the Wall Street World Bank way -
make loans to their usurers
to get the biggest bang for the
buck.
Agent orange as pesticide makes dollars -
green as nuclear plants for Westinghouse
lighting roads for
troops beautifying Imelda's eyes
by razing workers'
huts.
Woman bent hungry in the field
cutting sugarcane
to the rhythm of Bells and Hueys
sucking her' child's sweat to
pay the moneylender's
debts.
Fountains on the thirteenth floor
stop the clink and the babble
as they hear the rumblings
in her womb -
the people's song of
freedom.
Counterspy' June-August 1984 27
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...AND LIFETIME
CENSORSHIP FOR ALL
BY ANGUS MACKENZIE
To prevent dissident bureaucrats
from publishing or talking to
reporters, President Reagan last
March ordered government
workers to sign contracts that would
force them to submit to prior censor-
ship even after they leave federal ser-
vice, but Congress rebelled, voting to
delay Reagan's order at least until
April 15, 1984.
Or so Congress thought. And so the
press has reported.
Legislators had demanded a chance
to consider the order before it stripped
public servants of their First Amend-
ment rights. "We must ensure that the
free-speech rights of our most ex-
perienced public servants are not
restricted unnecessarily," said
Republican Senator Charles McC.
Mathias of Maryland. "The ad-
ministration should stop implemen-
ting the censorship program."
Congress thought it had stopped the
implementation of the order by a Nov.
17 vote. Yet, as denizens of the
District prepared to celebrate the new
year, the National Security Council
was ordering fifty agency heads to get
four million employees' signatures on
forms that will, after all, contract
them to lifetime censorship of their
books, articles, and speeches. The
Reagan administration is laying the
groundwork, to avoid the congres-
sional prohibition against the spread
of prepublication review.
This is so despite the reports on
February 15 that the administration
was suspending "key provisions" of
its security program while it tried to
reach a compromise with Congress.
A review of relevant court cases sug-
gests that everything the Reagan team
is doing to hush its workers has been
found strictly legal by the highest
judges in the land.
The Reagan team had prepared not
one but two censorship forms for its
bureaucrats to sign. Congress post-
poned, and the adminsthation - has
28 June-August 1984 Counterspy
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abandoned, only one of them. With
form number two, the administration
is doing an end run around Congress.
The National Security Council letter
of late December orders the imple-
mentation of form number two, and
last month a White House source con-
firmed that implementation is pro-
ceeding "full steam ahead."
Form number two allows the
government to obtain injunctions
against those who sign it. Those
injunctions, under case law, may
require prepublication review of the
employee's writings, under the con-
tractual obligation not to disclose
secrets.
Congress decided that no regulation
could be implemented that "would re-
quire any officer or employee to sub-
mit, after termination of employment
with government, his or her writings
for prepublication review." The presi-
dent signed that into law Nov. 22 as
part of the State Dept. appropriations
bill.
But, says the man who is in charge
of administering the nondisclosure
agreement, Information Security
Oversight Director Steven Garfinkel,
the amendment "is no bar to us going
to court to seek injunctions to prevent
publication."
"Subtleties," said a House of
Representatives staff investigator
questioned about the nondisclosure
agreement, "are overlooked in Wash-
ington all the time." He acknowledg-
ed that people on Capitol Hill were
unaware of the implications of form
number two.
This whole censorship business
began at the CIA, which the courts
have found has a legitimate need to
keep secrets and to censor its em-
ployces. Employees there have for
decades signed nondisclosure agree-
ments that are now being spread from
that agency to fifty others.
On April 18, 1972, Victor Marchet-
ti, a CIA expert on Soviet military aid
to the Third World, became the first
U.S. author to be served a court order
that prohibited him from revealing
CIA secrets in a book he had yet to
write. That injunction required him to
submit his manuscript, when comple-
ted, for agency review.
When Marchetti's "CIA and the
Cult of Intelligence" went to press two
years later, 168 big- white spaces ap-
peared where CIA censors had order-
ed the text removed-the first govern-
The Reagan team had
prepared not one but
two censorship forms
for its bureaucrats to
sign. Congress
postponed only one of
them. With form
number two, the
administration is
doing an end run
around Congress.
ment-ordered deletions in a book in
U.S. history.
The courts upheld the CIA's right to
censor Marchetti because he had
promised, in an agreement he signed
when coming to work for the CIA, not
to reveal secrets he learned there.
"The Marchetti case allows the
government to sue to stop disclosure
of classified material," says Gar-
finkel. "The injunction enables
government, when it is aware that
someone is about to publish, to enjoin
them from publishing based on the
contractual relationship."
Should any one of the 2.5 million
government employees plus 1.5 mil-
lion government contractors who are
now being asked to sign form number
two decide to publish something, the
government may seek a prepublica-
tion injunction like the one served on
Marchetti.
In practice, the employee will have
signed an agreement not to reveal
secrets. If the government thinks that
individual might be getting ready to
publish, it may get a court order that
requires the employee to submit to
prepublication review.
Next came the case of former CIA
agent Frank Snepp. He joined the
agency in 1968, served in Vietnam,
and wrote a book called "Decent In-
terval," in which he roasted the CIA
for abandoning its friends during the
1975 evacuation of Saigon.
In May of 1977 Snepp decided not
to submit his book to agency censors,
depite his contract. In 1980 the U.S.
Supreme Court upheld the govern-
ment: Snepp was forced, because of
that contract, to submit any future
writings-even his novels-to the CIA
Publication Review Board. And he
must also forfeit his royalties on "De-
cent Interval," even though the book
revealed no classified information.
0 n March 31, 1982, just over a
year after the Supreme Court
decided that Snepp was wrong
and the government was right, a
panel consisting of high-level officials
from the CIA and the departments of
State, Treasury, Justice, Defense, and
Energy suggested to the President:
Spread those CIA-type secrecy agree-
ments to every employee who handles
classified information.
On March 11, 1983, Reagan issued
such an order. Steven Garfinkel in the
Information Security Oversight Of-
fice began drafting two new secrecy
agreements to be signed by half the
federal workforce, in accord with the
Snepp and Marchetti court decisions.
Garfinkel is a nice guy, with two
kids, a big round belly, and shirt col-
lars worn a little thin. He has a quick
smile, straight teeth, pudgy hands,
and seems an honest fellow. He says
his nondisclosure agreement number
two will allow the government to ob-
tain injunctions "to prevent publica-
tion and to deprive the person of pro-
fits from any such publication, even
when the agreements signed do not
call for prepublication review."
And that's what Congress and the
press missed entirely. Congress stop-
ped only the implementation of one
agreement, the one that called explicit-
ly for prepublication review. But
agreement number two amounts to the
same thing without using the words
"prepublication review."
"We're not trying to trick the
public," Garfinkel says. "There was
no attempt to do implicitly what we
did not do explicitly." He told the
Quill he could not predict what legal
theories or remedies the Justice Dept.
might use in seeking to enforce the
agreement, but "never once in any of
the discussions about this did any
representative of any agency say,
`Let's try to sneak in prepublication
review even though it's not mentioned
in the agreement.' "
Counterspy June-August 1984 29
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Nevertheless, the agreement on its
face, given the Marchetti and Snepp
precedents, provides for a system of
prepublication review. The distinction
between the two forms is a bit techni-
cal, sure, but hang on.
Secrecy agreement number one is
called the "Sensitive Compartmented
Information Nondisclosure Agree-
ment." That so-called SCI agreement
contains this demand for prepublica-
tion review: "I hereby agree to submit
for security review ... all materials, in-
cluding works of fiction, that I con-
template disclosing to any person not
authorized to have such [SCI) infor-
mation."
The paragraph also states: "I un-
derstand that my obligation to submit
such information and materials for
review applies during the course of my
access to SCI and at all times there-
after." That is the lifetime commit-
ment Congress thought it was delaying
until April 15.
Congress took great offense to
such censorship spreading from
the CIA to other agencies
without its consent. Senator
Mathias proposed a rider to the State
Dept. appropriations measure to stop
the rush to prepublication review. He
told the Senate that "Congressional
consideration must precede the im-
plementation of the censorship plan."
The Senate sided with Mathias on
Oct. 20 by a vote of 56 to 34.
On Nov. 17 the House agreed to the
measure, which says in part that no
head of a department may enforce a
regulation before April 15, 1984, that
would require employees, after ter-
mination of employment with the
government, to submit writings for
prepublication review unless the agen-
cy had been using nondisclosure
agreements before Reagan's March 11
order.
The New York Times reported that
the amendment "would force a stop to
the censorship measures, at least until
next April."
But not quite so fast. Ask Gar-
finkel. He'll tell you what he told me:
"The Senate action on prepublication
review did not touch on what we're
doing in this office. Having read the
language of that amendment it is a lit-
tle unclear as to what it means."
"I don't know that we're doing
anything differently," he said.
"Agency security officials are calling
me up, asking do we stop signing peo-
ple up? No. I tell them, certainly not."
Garfinkel says yes, implementation
of the SCI form number one requiring
prepublication review has stopped.
But form number two, the "Classi-
fied Information Nondisclosure
Agreement," which does not contain
a prepublicaton review clause like that
in form number one, is now being
distributed. And while form number
two does not specify prepublication
review, it means the same thing. And
that's the dodge.
Read paragraph six on that form
number two, which is now being im-
plemented:
"I understand that the United
States Government may seek any
remedy available to it to enforce this
Agreement, including, but not limited
to, application for a court order pro-
hibiting disclosure of informaton in
breach of this agreement."
In other words, form two, now be-
ing pushed on half the federal
workforce, will allow the government
to seek from the courts Marchetti-type
injunctions that will require the
employee to submit to prepublication
review, even though the form does not
use that phrase.
Garfinkel says bureaucrats have
become confused by news reports that
say the secrecy agreements can't be
signed due to congressional action.
That is why the National Security
Council has sent a letter to some fifty
agency heads to push regulations that
require their employees to sign agree-
ment number two, which does not call
for prepublication review but means
the same thing. That form number
two obligates signers not to disclose
information while they are in service
to government "and at all times
thereafter," making them subject to
injunctions requiring prepublication
review for the rest of their lives. That
would seem to conflict with the spirit
if not the letter of the law Congress
passed and Reagan signed.
UPDATE
T he most recent presidential and
congressional stances regarding
NSDD-84 were detailed March 20,
1984, by National Security Advisor
Robert C. McFarlane in a letter to
Rep. Patricia Schroeder, Democrat
of Colorado, chairwoman of the
subcommittee on civil service.
McFarlane's letter noted that
Congress last year barred until April
15, 1984 "two provisions of the
directive: paragraph 1(b), which
authorized broader use of prepub-
lication clearance agreements, and
paragraph 5, relating to the use of
the polygraph. . . . "
As a result, McFarlane wrote
Schroeder, he directed that those two
provisions be held in abeyance. "The
President has authorized me to in-
form you that the Administration
will not reinstate these two provi-
sions of NSDD-84 for the duration
of this session of Congress."
What McFarlane failed to tell
Schroeder: NSDD-84 contains 16
sections. The delay of two leaves 14
sections in force, including 1(a) call-
ing for half the federal workforce to
sign nondisclosure agreements, and
section 1(b) saying those agreements
are "enforceable in civil action." In
other words, NSDD-84 still threat-
ens 4 million government workers
with injunctions requiring
prepublication review.
30 June-August 1984 Counterspy
T he Reagan team has done a suc-
cessful end run around Congress
on the question of prepublication
review in order to keep its
secrets. And form number two doesn't
limit "secrets" to national security in-
formation. The administration, under
President Reagan's classification
guidelines can stamp SECRET anything
it doesn't want you to know, regard-
less of its true relationship to the na-
tional security.
Half of all government workers are
about to be silenced-and neither the
press nor Congress seems to under-
stand.
What may slow the signing of these
secrecy agreements is simply that so
many must do so. It may take years for
the 2.5 million government employees
plus 1.5 million government contrac-
tors to actually sign up-although, in
the meantime, new hires will be enlisted
as a condition of employment. So
there may still be time for Congress to
correct its oversight.
Angus MacKenzie is director of the
Freedom of Information Project of the
Center for Investigative Reporting in
San Francisco.
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THE CIA'S
"FREE" ELECTIONS
In Italy 30 years ago and in El Salvador today, the U.S. government has used a
combination of the CIA, the AFL-CIO's international branch, and Christian
Democrats to subvert elections.
BY JOHN KELLY
n 1948, a few months after the
CIA's' founding, a Milan silk
manufacturer, Pietro Ruffini, flew
into New York for secret meetings
with U.S. bankers and industrialists.
Ostensibly, Ruffini was having
business meetings.
In fact, Ruffini carried credentials
from the "highest responsible
authorities" in Italy. And his trip had
been arranged by the U.S. Embassy in
Rome. A 1948 State Department cable
marked "top secret" said: "His [Ruf-
fini's] plan, as outlined to a member
of the embassy, is to form a small
committee in New York of industri-
alists and bankers with European in-
terests who might be willing to con-
tribute to the Christian Democratic
party, which is leading the fight
against communism in Italy. No
publicity whatsoever will be given to
his activities."
That the U.S. Embassy in Rome
was directing covert intervention in
the Italian elections for U.S. corpora-
tions was evident from the "top
secret" cable of March 12, 1948 to
Secretary of State George Marshall.
"Norris Chipman tells me that Secre-
tary [W. Averell] Harriman was of
great assistance in obtaining contribu-
tions for [CIA labor operative] Irving
Brown from U.S. industrialists with
large stakes in France. Could he not be
of assistance to us. Following com-
panies have large interests in Italy:
Standard Oil of New Jersey, Vacuum
Oil, General Electric, Singer Sewing,
American Radiator and Standard
Sanitary, National Cash Register,
Great Lakes Carbon, American
A "to secret" letter
of 1 48 illustrates
that the CIA, through
a labor operative, was
covertly intervening in
the internal affairs of
Europe for private
U.S. corporate
interests.
Viscose Company, Otis Elevator.
Would you speak to him about his
matter."
Another "top secret" letter of
February 24, 1948 illustrates that the
CIA through a labor operative was
covertly intervening in the internal af-
fairs of Europe for private U.S. cor-
porate interests. Written by U.S. Am-
bassador to France, Jefferson Caffery
to Undersecretary of State, Robert A.
Lovett, it said: "...I have just heard
that certain important American busi-
ness interests in France recently sent
representatives to Washington with an
offer to donate certain sums for the
battle which we are waging. I unders-
tand that they spoke to [CIA Director]
Admiral Hillenkoetter who informed
them that the government should and
would shoulder this burden. I am en-
tirely in accord with this position in
principle...
"I am enclosing a rough outline of a
concrete plan for work among the
[French] port workers, which hereto-
fore has been the stronghold of the
communists, and I think that this pro-
ject should be pushed as rapidly as
possible. On this we are in close touch
with Irving Brown, European repre-
sentative of the A F of L, who is work-
ing out the details, including the
choice of competent militants."
Ruffini's trip to New York was a
success. The money he gathered was
deposited in a special account for
transfer through a Vatican bank to
political parties in Italy. And the CIA
and U.S. corporations launched their
covert interventions into electoral
politics through a representative of
U.S. labor.
Thirty odd years later, Irving
Brown is still the U.S. labor represen-
tative in Europe, now for the AFL-
CIO. Brown has been identified as a
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CIA labor operative by at least four CIA agent...." An internal CIA
former CIA officers. Former CIA of- assessment of Agee's book called it
ficial Thomas W. Braden published "complete" and "accurate."
that he gave $15,000 in CIA money to
Brown to pay his "strong-arm
squads" used in France to attack strik-
ing dock workers. These strong-arm
squads were Brown's "competent mil-
itants" referred to in U.S. Am-
bassador Caffery's letter quoted
above.
Brown denied ever meeting or tak-
ing cash from Braden. He subsequent-
ly admitted possibly meeting Braden
in Paris. Braden told Wall Street Jour-
nal reporter, Jonathon Kwitny that
the $15,000 was one of many CIA
payments to AFL-CIO officials. And
that he assumes such CIA payments
continue to this day.
Former CIA officer John Stockwell
was quoted as saying that: "Irving
Brown was 'Mr. CIA' in the labor
movement." Recalling to Kwitny a
1966 labor conference in the Ivory
Coast organized by Brown, Stockwell
said: "In a hall that could have seated
several hundred, there were eight peo-
ple. And I knew that five were CIA.
Brown was one of the five." Another
former CIA officer, Paul Sakwa, has
8 S&vsdor
This combination of the CIA, U.S.
corporations, and labor intervening in
foreign unions and elections continues
today in El Salvador. This is done
through the American Institue for
The CIA has now
admitted conducting
covert operations in El
Salvador and
intervening in the
March 198? elections.
stated that he was Brown's CIA case Free Labor Development (AIFLD).
officer from 1952-54. During this Not surprisingly, Irving Brown has
period, Sakwa approved Brown's CIA been involved with AIFLD. William
budget of from $150,000 to $300,000. C. Doherty, AIFLD's president, told
From 1955-58, Sakwa served under- Kwitny: "He [Brown] is a very dear
cover as assistant labor attache in the friend of mine and most people who
U.S. Embassy in Brussels. Sakwa told work for this organization [AIFLD]."
Kwitny that he continued to be aware AIFLD was founded in conjunction
that Brown and other AFL-CIO of- with some 100 U.S. corporations
ficials were receiving CIA money. which funded it in part until recently.
Sakwa says that Brown also delivered AIFLD's chairman until 1981 was J.
CIA money to Tom Mboya, a Kenyan Peter Grace, head of W.R. Grace and
politician and CIA agent. Also under Company which is notorious for its
Brown's direction, the CIA-connected anti-labor policies in Latin America.
African American Labor Council set Grace has been positively linked to the
up training programs for certain Nazis. Philip Agee wrote that Grace
union leaders in Kenya that continue was a "front man for CIA labor
today. operations." Agee also wrote that
In Zaire, Brown helped organize the William C. Doherty, Jr. was a "CIA
CIA's counter-revolutionary National agent in labor operations." And that
Front for the Liberation of Angola AIFLD was a "CIA-controlled labor
under CIA agent Holden Roberto. center financed through AID [Agency
Brown called the organization a union for International Development]."
though there were no employers or
employees. He told Kwitny that it Former AIFLD organizer, Richard
"was an attempt to train people for Martinez, has stated,that he worked
trade union activites when they went for the CIA through AIFLD and Do-
back [to Angola]." herty. Martinez says that he helped
In his book, Inside the Company, run the labor component of the CIA's
former CIA officer Philip Agee said destabilization and coup in Brazil in
that Irving Brown was the "European 1964. The result being a military junta
representative of the American that destroyed the union movement in
Federation of Labor and principal Brazil.
32 June-August 1984 Counterspy
A 1980 U.S. government audit of
AIFLD noted that its operations tend
to be seen as "political in nature rather
than for developmental purposes."
Ironically, evidence about current
AIFLD/CIA operations in El Salvador
came out at the Supreme Court hear-
ing in 1981 over Philip Agee's appeal
of the Government's revocation of his
passport. U.S. Solicitor General
Wade H. McCree, Jr. was attempting
to convince the court that Agee's iden-
tification of CIA agents endangered
their lives. "Just recently," he said,
"two Americans have been killed in El
Salvador. Apparently they were some
kind of undercover persons, working
under the cover of a labor organiza-
tion." McCree was referring to
AIFLD officials, Michael Hammer
and Mark Pearlman who had been
murdered at the Sheraton Hotel in San
Salvador. Hammer was given a rare
military burial in Arlington National
Cemetery on special authorization of
President Jimmy Carter. Hammer
hardly met the definition of a worker
or unionist. He had joined AIFLD
while at Georgetown University's
School of Foreign Service, a spawning
ground of CIA officers.
The CIA has now admitted conduc-
ting covert operations in El Slavador
and Intervening in the March 1982
elections.- In a sworn affidavit, Louis
J. Kube, Information Review Officer
of the Directorate of Operations of the
CIA stated that: "For purposes of this
litigation, there has been official
acknowledgement that special ac-
tivities [covert operations] are ongo-
ing in Central America."
Kube was responding to a Freedom
of Information request for informa-
tion about CIA activities in El Sal-
vador. He said he had identified 20
documents regarding CIA activities in
Central America, 16 of which contain-
ed information about CIA covert
operations.
The CIA refused to release these 20
documents. It did, however, release
parts of a two-page document dated
January 22, 1982, entitled: "Salvador
Elections," which admitted CIA in-
volvement in the March 1982 elec-
tions. At the same time, the CIA ad-
mitted there were three additional
documents regarding its involvement
in the elections which it refused to
release.
In the Wall Street Journal of July
16, 1982, CIA Director William Casey
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said: "For instance, we helped in the
El Salvador election.".
Later in a letter to the New York
Times of,July 30, 1982, Casey said:
"...We provided the Salvadoran
Government with information and
capabilities which helped it reduce the
supply of weapons from Cuba and
Nicaragua and to break up guerrilla
formations intended to destroy the
election. . . "
"In addition," said Casey, "we
provided election authorities invisible
ink, which could be placed on the wrist
of each voter and be detected again
only under ultraviolet light. This was
needed to assure an honest vote and to
protect voters from retaliation, with
which the guerrillas had threatened
anybody who voted."
The CIA's two page document
claimed that: "The credibility of the
election process hinges on the ink
being available." Of course, CIA in-
?t Let as assure you that I have International terrorism well in hand. It
volvement negates the credibility of
any election. Moreover, it was widely
reported that the invisible ink stamp Democrats to subvert an election. The
was used to force Salvadorans to vote CIA provided funding to a publicity
in the election. In which there were no agency, the Venezuelan Institute for
opposition candidates. Salvadorans Popular Education (IVEPO). This
found without the invisible stamp CIA money was laundered through a
were penalized by the Salvadoran West German Christian Democratic
government. The reasoning being that Foundation, reportedly the Konrad
absence of the stamp meant one Adenauer Foundation. IVEPO pro-
boycotted the election.`And thus, one vided free publicity for the Duarte
was a rebel sympathizer. Such campaign. It also paid the salaries of
categorizations can get one assas- about 300 employees of the Central
sinated in El Salvador. This fact Elections Council according to the
would tend to explain the panic at council's project manager, Jorge
voting polls which could not ac- Rochac. The Washington Post quoted
comodate everyone. Rochac as saying: "I don't know who
The CIA also provided invisible the hell finances it [IVEPO].... I stay
silver nitrate ink for the March and up at night sometimes and wonder
May 1984 elections in El Salvador, who is writing the checks."
and a lot more. During the May 6th election, these
The New York Times (5/12/84) 300 council employees served as poll-
reported the CIA spent $2.1 million in ing place guides to lead voters to the
direct contributions to the elections. right ballot boxes and to staff elec-
The CIA gave $960,000 to the Chris- tions information booths.
tian Democratic party to support the A Washington-based auditing firm,
candidacy of Jose Napoleon Duarte Deloitte, Haskins and Sells, under an
and $437,000 to the ultra-right Na- Agency for International Develop-
tional Republican Alliance to assist its ment (AID) contract, was in charge of
candidate Francisco Jose Guerrero. delivery of voter registers, ballot
The CIA also secretly financed trips to boxes and other equipment to polling
El Salvador by eleven European and places nationwide. AID has covered
Latin journalists in March and nine in for the CIA for years.
May. The journalists were provided The Central Elections Council was
derogatory information about funded and more or less directed by
ARENA party candidate, Roberto AID. In particular, AID computer ex-
D'Aubuisson. pert, John Kelley, who created the
As in Italy some 30 years prior, the council's comprehensive plan for run-
U.S. government used the conibina- ning the May 6th election.
tion of the CIA, the AFL-CIO inter- The Salvadoran Communal Union
national branch, and the Christian (UCS) which receives at least three-
fourths of its budget from AIFLD
provided 400 of its personnel to cam-
paign for Duarte. Samuel Maldona-
do, UCS secretary general, told the
Boston Globe (5/4/84): "They
became Christian Democrat
activists." Maldonado also admitted
that their political work was illegal
under Salvadoran law.
AIFLD representative in El Salva-
dor, Bernard Packer, told the Globe
(5/4/84): "We have no relation with
the UCS's political efforts. To engage
in politics is the exclusive province of
the Salvadoran labor union move-
ment."
But, Packer added, "It's a tricky
business. They try to drag us in. But if
they went out and campaigned on
their own time for a political party,
there's nothing we can do about it."
White House spokesperson, Larry
Speakes, all but confirmed CIA fund-
ing of the UCS. "It's been the policy
of this and previous Administrations,"
he said, "to provide assistance to
democratic institutions, such as trade
unions [and] private sector organiza-
tions." "We can't go beyond that.
I'm not discussing covert money."
Capping off the CIA's involvement
was the sudden trip to El Salvador by
CIA coup engineer and all-around
trouble shooter, Vernon Walters.
Now known as Ambassador-at-Large,
Walters reportedly told Roberto
D'Aubuisson to shut up and then ac-
companied Duarte on his plane to
Washington.
Counterspy June-August 1984 33
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PHILIPPINE ELECTIONS:
MADE IN THE U.S.A.
A
s the smoke clears following the
May 14 elections in the Philip-
pines, several things have
emerged:
? The pro-participation opposition
did better than expected, winning
some 58 of 183 contested seats, despite
massive electoral fraud on the part of
the ruling party. Pre-election specula-
tion was that it would garner no more
than 30 seats;
? Ferdinand Marcos is in no mood
to yield his dictatorial powers.
The dictator wasted no time in belit-
tling the opposition's showing. "I
would presume that our instructions
to our people to allow the opposition
to win some seats might have -been
taken too literally," Marcos told a
CBS interviewer... only half in jest.
To underline his scorn for the results,
he announced a plan to increase the
number of presidentially appointed
members of the National Assembly,
then shelved it when it elicited the
predictable furor. Marcos' constitu-
tion currently "allows" him to ap-
point 17 out of 200 delegates.
Marcos Hangs on to Law-Making Power
But on one point the dictator made
it clear he was not joking: he would
,34 June-August 1984 Counterspy
The U. S. pushed Marcos to,
hold elections to "stabilize"
the situation after the
massive outrage over
Aquino's assassination.
Though the elections
succeeded in splitting the
opposition, electoral fraud
by Marcos supporters has
sparked new protests.
not give up his self-arrogated power to
make laws. As usual Marcos invoked
the need to fight "subversion and ter-
rorism." And, in words clearly
designed for Ronald Reagan, he re-
marked: "I don't know why
Americans do not seem to realize the
danger of a communist rebellion in the
Philippines. Ever since Vietnam
you've been trying to close your eyes
to the danger that arises from com-
munism. And we people are fighting
communism and facing possible li-
quidation. We have to face up to the
fact that if we do not weaken the NPA
[New People's Army] subversives
now, later on they'll be marching in
the streets here and proclaiming a
takeover of the government."
Contrary to Marcos' claim,
however, the, U.S. is worried about the
threat posed by the progressive move-
ment. What separates Marcos from
those who currently guide U.S. policy
toward the Philippines is the latter's
assessment that Marcos' monopoly of
political power has become the main
factor contributing to the radicaliza-
tion of the population.
Elections: Part of U.S. Stabilization Strategy
T he May 14 elections were part of a
U.S. stabilization strategy design-
ed to gradually achieve reconcilia-
tion of the Philippines' badly frag-
mented elite and isolate the left. The
"electoral option," forged by State
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Department and CIA "pragmatists"
in alliance with influential Congres-
sional liberals, became U.S. policy
when the explosion of mass discontent
after the assassination of Benigno
Aquino last August rendered the
Reagan policy of full, uncritical sup-
port for the dictator untenable.
This assassination confronted the
previously complacent Reagan ad-
ministration with a serious dilemma.
For no administration has been as
determined in its backing of the
Filipino dictator than the presidency.
The classic expression of the close
relations with Marcos was provided by
Vice President George Bush, who
toasted the Filipino strongman in the
following fashion during a visit to
Manila in June 1981: "We love you,
sir, we love your adherence to
democratic rights and processes."
Bush's statement was no idiosyncratic
blunder. It reflected the Reaganites'
profound fear that liberalization and
democratization in the Third World
are merely the antechamber to revolu-
tion. And it served as a glaring exam-
ple of the conservatives' easy and
cynical transmutation of words into
their opposite when dealing with
"friends" trying to cope with the
threat of popular movements.
Authoritarianism or chaos was the
choice presented to U.S. foreign
policymakers by the administration's
top foreign policy ideologue, Jeane
Kirkpatrick, in her seminal essay Dic-
tatorships and Double Standards:
...The fabric of authority unravels
quickly when the power and status
of the man at the top are undermin-
ed or eliminated. The longer the
autocrat has held power, and the
more pervasive his personal in-
fluence, the more dependent a na-
tion's institutions will be on him.
Without him the organized life of
the society will collapse, like an arch
from which the keystone has been
removed.'
Unlike Jimmy Carter's shamefaced
backing of Marcos for "strategic
reasons" which allegedly overrode
human rights concerns, Reagan's sup-
port for Marcos stemmed not only
from the so-called strategic imperative
but also from a deep ideological af-
finity with strongman regimes.
The policy of full support for Mar-
cos translated into the appropriation
of $100 million per annum in military
and military-related assistance be-
tween 1979 and 1984, under a five-
year agreement granting secure status
to the two U.S. military bases in the
country, Subic Naval Base and Clark
Air Base. In June 1983, as part of
another five-year agreement, the
Reagan administration upped the aid
to $180 million a year.
Increasing Doubt
However, some U.S. officials,
especially in the State Department, did
not share the White House's en-
The May 14 elections
were part of a U.S.
stabilization strategy
designed to gradually
achieve reconciliation
of the Philippines'
badly fragmented elite
and isolate the left.
thusiasm for Marcos. In early 1982,
after a three-month tour of the island
of Mindanao, the Philippines' second
largest, Consul G.S. Sheinbaum pain-
ted a picture of a discredited regime
and a rapidly growing guerrilla op-
position. "The NPA [New People's
Army] thrives on government inatten-
tion to basic needs in many (but not
all) rural areas," the U.S. official
wired then-Secretary of State Alex-
ander Haig. In many areas, he noted,
the NPA had become "more impor-
tant than the local government struc-
ture." He concluded: "This may
sound like a worst-case scenario but
present circumstances are not en-
couraging and the future is
ominous."'
Sheinbaum's fears about the U.S.
going down with Marcos were shared
by many in the Central Intelligence
Agency. In the summer of 1982, the
CIA, fearing another Iran scenario in
the Philippines, began tapping the
resources of Philippine academic
specialists to figure out U.S. options
in the event of Marcos' overthrow or
demise from natural causes. The ap-
prehensions of the agency were evi-
dent in the description of a major
CIA-funded study directed by Justin
Green, professor of political science at
Villanova University: "[We] might
discuss various scenarios regarding
when and how Marcos might leave,
the state of the various oppositions,
possible successor regimes and what
this might mean to domestic and inter-
national futures and how these might
be affected by external events, U.S.
activity and the changing Philippine
domestic scene."' Green and other
academics close to the agency, like
David Joel Steinberg, vice president of
Brandeis University, were brought
together for a major CIA-sponsored
conference on May 12, 1983. Pessi-
mism about the future was the order
of the day in this meeting attended by
officials from the State Department,
Defense Department, Treasury and
other U.S. agencies. One concrete
result of the conference was the setting
up of an "Inter-Agency Task Force"
to monitor the unravelling Philippine
situation.'
Unlike the pragmatists at the CIA
and the State Department, however,
the right,-wing ideologues at the White
House confidently ignored the danger
signals, until the storm broke follow-
ing the assassination of former
senator Benigno Aquino at the Manila
International Airport on August 21,
1983. Initially paralyzed by surprise
over the intensity of opposition to
Marcos, the U.S. gradually adopted a
policy of putting some distance be-
tween Reagan and Marcos.
The Pragmatist Take the lead
I he first break in the tight Reagan-
Marcos embrace occurred in early
October, when the White House
cancelled Reagan's upcoming trip
to the Philippines. The Reagan move
came after intense lobbying by the
American envoy in Manila, Michael
Armacost. Regarded as one of the
most skilled career men at the State
Department, Armacost is also con-
sidered a pragmatist.
That the White House was allowing
the pragmatists to take the initiative
became evident in the coming weeks,
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when a "parliamentary strategy" for
stabilizing the dangerous situation in
the Philippines took shape.
Working In tandem, the State
Department and Rep. Solarz were
fashioning it middle course which
would open up the system a bit, thus
defusing opposition pressure, without
destabilizing Marcos. Just as in the
case of Diem in Vietnam in 1963, the
U.S. would reluctantly but firmly
pressure an entrenched dictator ally to
make some "reforms" to stabilize the
system as a whole. The leverage would
be provided by the threat of with-
holding U.S. aid-a prospect which
Ambassador Armacost invoked none
too subtly in a controversial speech
before the Makati Rotary Club in mid-
November: "No help from outside
will produce durable results unless ac-
companied by actions which will
restore the confidence of Filipinos in
the future of their economy and the
stability and predictability of political
arrangements."' Not unexpectedly,
Armacost's remarks were attacked by
Imelda Marcos and the regime's con-
trolled press as "American interven-
tion in Philippine domestic affairs." 10
fairs. "10
It might be noted that there was a
precedent for the U.S. government's
intervention for "free elections." In
1954, with the Philippine elite and the
U.S. facing a similar situation of deep
social. instability stemming from the
Communist-led "Huk" rebellion,
Col. Edward Lansdale deployed the
resources of,the Central Intelligence
Agency in an effort to hold "clean
elections" which swept away the cor-
rupt Liberal Party leadership and in-
stalled America's choice, Ramon
Magsaysay, in the presidency. The
CIA effort included the formation of
"citizen inspectors" and other public-
relations paraphernalia which con-
vinced the entrenched elite faction
that the United States was determined
to have Magsaysay, a reformist w om
Lansdale had snatched from pro~in-
cial obscurity, elected president in
order to take the wind out of the sails
of the insurgents."
The successful Lansdale effort,
which contributed to defeating the
Huks and stabilizing the Philippines
for over a decade undoubtedly
animated many of the pragmatists
who in 1984 felt they confronted a
parallel situation.
On October 18, at a gathering of the
Asia Society in Washington, Paul
Wolfowitz, assistant secretary of state
for East Asia and the Pacific, declared
that a "bipartisan consensus" had
developed on U.S. policy toward the
Philippines.' The content of that
policy was articulated in a resolution
which passed the House of Represen-
tatives on October 24 by a vote of 413
to 3. Sponsored by Rep. Steven Solarz
(Dem-NY), the powerful chairman of
the House Foreign Affairs commit
tee's Subcommittee on Asia-Pacific
In an important sense,
the electoral strategy
was designed to pre-
vent democratization-
that is, majority
participation and a
system oriented to
serving majority
interests.
Affairs, the resolution called for a
"thorough, independent, and impar-
tial investigation of the Aquino
assassination" and "genuine, free,
and fair elections" to the national
Assembly in May 1984.6
The Solarz resolution passed in the
midst of an increasingly strident
debate within the foreign policy
establishment on the Marcos problem.
The Wall Street Journal reaffirmed
the old Reagan posture of backing
Marcos at all costs: "Not only does
Mr. Marcos have enemies worth
fighting; he is waging his fight with a
skill that gives us little reason, now at
least, to count him out."' Former
Ambassador to the Philippines Wil-
liam Sullivan, on the other hand, ad-
vanced what was tantamount to a pro-
posal for a CIA covert action when he
suggested that the U.S. "take action,
however messy, to assist a peaceful
and democratic transition in the
Philippines."' Sullivan spoke with
some authority, since he had not only
served as ambassador to the Philip-
pines but he had also run the CIA's
secret war in Laos in the late sixties
and managed the State Department-
CIA operation in Iran in the late
seventies.
Qankars lick tM Pelia etary Option
While the State Department
and Solarz were concen-
trating on figuring out ways
to grapple with the crisis of
political legitimacy, the economic-
financial time-bomb exploded. Strap-
ped with a $25 billion debt to interna-
tional banks and multilateral financial
institutions which had to be serviced
to the tune of over $3 billion annually,
the regime saw the economy collapse
from under it, as the Aquino assassin-
ation provoked a massive capital
flight. In merely two months' time,
the country's foreign exchange
reserves dropped to $430 million or
less than the equivalent of one
month's imports. The resultant freeze
and rationing of foreign exchange
provoked a sharp further decline in
economic activity in this import-
dependent economy.
A major rescue operation was
necessary, but the banks were not
about to sink more money into the
country unless they received guaran-
tees that the political situation would
remain stable enough to allow them to
collect later. In the following weeks,
American financial and corporate in-
terests threw themselves behind the
"electoral option"-an ironic
development since they were the same
forces which were the first to laud
Marcos for his imposition of martial
law in September 1972.12 In Manila,
the American Chamber of Commerce
joined other business bodies in
demanding "the clear designation of a
presidential successor, free news
media, an independent and honest
judiciary, the restoration of basic con-
stitutional rights, and an end to per-
vasive militarization.' 113
Dotalod Assassnlont of Objectira of IM
SnpporNn of lb. Patliainontary Option
By December 1983, therefore,
powerful external political -and
economic interests had lined up
behind the limited parliamentary op-
tion. For the American banks and cor-
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porations, the main interest was a
stable succession in the event of Mar-
cos' demise. Another concern leading
the banks toward elections was the
fear that Marcos was so discredited
that he would lack the legitimacy
necessary to impose on the population
an austerity program designed by the
International Monetary Fund (IMF).
This program, which included such
belt-tightening measures as wage cuts,
devaluation of the currency, tax
raises, and cutbacks on government
social expenditures, was the sine qua
non of a $4 billion rescue package
which the banks had in principle
agreed to provide by late December.
In other words, to succeed, austerity
had to be "democratized" or applied
by a government with some legitimacy
derived from elections.
For the U.S. government, the elec-
toral option was dictated by two close-
ly related objectives. One was to split
the opposition, which had come to-
gether as a working, albeit fragile,
coalition after the Aquino assassina-
tion. The strongest element in the op-
position was clearly the National
Democratic Front, whose component
groups include the Communist Party,
New People's Army (NPA), May First
Movement of Workers (KMU), Chris-
tians for National Liberation, and
various associations of professionals
like the Nationalist Association of
Teachers and Nationalist Association
of Health Workers.
Prior to the Aquino assassination,
government assessments were ap-
parently pessimistic about the ability
of the U.S. to head off a process of
mass radicalization a la Nicaragua or
Iran. But, with the urban middle class
passing over from passive to active op-
position after the murder, the pragma-
tists at the CIA and State Department
became more optimistic about the
chances of stopping the leftist momen-
tum. The electoral option emerged as
a strategy of divorcing the middle-
class opposition, led by disgruntled
business leaders and the traditional
elite opponents of Marcos, from the
left opposition. The most prominent
exponent of the parliamentary
strategy, Rep. Solarz, has not conceal-
ed this thrust behind the U.S. moves:
I think that these [May 1984] elec-
tions may well constitute a historic
watershed in the history of the
Philippines. At a time when there is
growing support in that country for
the Communist-dominated New
People's Army... this may well be
the last opportunity to demonstrate
to the Filipino people that peaceful
change is possible in their country."
Isolating the Left is one prong of the
U.S. electoral strategy; the other is
reunifying an elite which has been
badly fragmented since the Marcos
faction of the establishment
monopolized political power with the
declaration of martial law in
September 1972. Participation in the
coming May 14 elections to the
Marcos-controlled National
Assembly is seen as a first step in this
process of reunification. Again,
American officials have been candid;
at congressional hearings on Feb. 7,
1984, John Monjo, deputy -assistant
secretary of state for East Asia,
asserted:
We trust that responsible Philippine
leaders from the government, the
opposition, and the private sector
will make the extra efforts to make
this electoral process a genuine
milestone in the political normaliza-
tion process. If this election is suc-
cessful, it could be the vehicle for
bringing into democratic political
life a whole new generation of office
holders."
A special group within the elite that
the CIA has targetted for cultivation is
the disaffected local business elite.
"Already," reports Mark Fineman of
the Philadelphia Inquirer, "U.S. in-
telligence agents are known to be mak-
ing overtures to Manila's business
community, searching their disaf-
fected ranks for a potential successor
to power rather than looking within
the nation's petty and immature
political opposition."" This looking
to young business figures to lead the
elite opposition was reflected in
former Ambassador Sullivan's recom-
mendation that the U.S. pay special
attention to "the young businessmen
who now have come out to take
political action, who had gone into
business because careers in politics
were blocked." These figures, the
former CIA operator asserted, "are
well disposed toward the United
States.""
Invigorated by fresh elements from
business, loosely reunified within a
limited and largely cosmetic parlia-
mentary framework and resting on a
military-rural and urban middle-class
social base, the elite can then get on
with the task of mounting the massive
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counterinsurgency campaign which
will be needed to stop the National
Democratic Front-(NDF). It is for this
reason that hand in hand with the elec-
toral strategy, the pragmatists are also
pushing for the continued disburse-
ment of the $900 million in military
and military-related aid promised to
Marcos under the new military bases
agreement approved in June 1983. As
James Kelly, deputy assistant secretary
of defense for East Asia and Pacific
Affairs, told Congress on Feb. 7,
1984, the New People's Army "in-
surgency could reach critical propor-
tions in future years if the Govern-
ment fails to improve its credibility
and implement an effective counter-
insurgency program which incor-
porates political and economic, as well
as military components."" That both
the administration and liberal
pragmatists in Congress are united on
the strategic importance of a massive
counterinsurgency program was
shown in the Solarz subcommittee's
report on FY 1985 aid levels: "The
Subcommittee strongly believes that
U.S. military assistance should be
utilized primarily for equipment that
will assist the Philippines in dealing
with what is presently its chief military
problem, the NPA insurgency."19
A third, if subsidiary concern,
motivating the U.S. push for elections
is to provide a "demonstration" of
the current regime's legitimacy and
viability fa the U.S. public. The
assassination of Aquino and Marcos'
subsequent appalling performance on
U.S. television, where he gave off the
image of a blustering Mafia kingpin,,-
has made the traditional justification
of U.S. aid to him-protecting the
U.S. bases-much less convincing to
an already skeptical citizenry. The pic-
ture of a dictatorship on its way to
democracy is essential to prevent the
widespread public opposition to mili-
tary aid for Marcos from passing from
a passive to a dangerous active stage,
as in the case El Salvador.
Phase One of the U.S. Plaan:
The Janwary 11 Plebiscite
cally: that the extremely unpopular
Imelda Marcos be barred from suc-
ceeding Marcos, and that a constitu-
tionally sanctioned process of succes-
sion be established. The latter would
consist of establishing the office of
vice president and 'holding elections
for president and vice president not
less than 60 days after Marcos' death.
"Marcos resisted the move to re-
store the vice presidency," reported
"I would presume that
our instructions to our
people to allow the
opposition to win
some seats might
have been taken too
literally," Marcos told
an interviewer... only
half in jest.
the Washington Post. "But he
relented after his advisers convinced
him that it was part of the price that
the International Monetary Fund and
private bankers would insist on before
providing any more money."=0 Mar-
cos, however, was not the only one to
resent the pressure from the U.S. and
the banks. The American hand in the
plebiscite was so obvious that the
Catholic Bishops Conference-a body
generally critical of Marcos but hardly
a bastion of radicalism and nation-
alism-felt compelled to warn: "No
foreign power is to meddle with our
political sovereignty by attempting to
determine in any way the conduct of
our political process.""
1984 elections to the National Assem-
bly. The Americans became especially
concerned when only an estimated 37
percent of the electorate voted in the
January 27 referendum, signifying
widespead public skepticism over the
value of the exercise.
By the beginning of 1984, Marcos
confronted an opposition dominated
by five major blocs:
? The traditional elite opposition
leaning toward participation in the
May elections. The leading political
grouping of this force was the United
Democratic Opposition (UNIDO), led
by former Senator Salvador Laurel.
? Newer elements of the elite, main-
ly with regional or local power bases,
grouped in the Filipino Democratic
Party-Laban, who also favored par-
ticipation.
? Traditional elite personalities op-
posed to participation, led by former
President Diosdada Macapagal and
former Senator Jovito Salonga, head
of the Liberal Party.
? The pro-boycott Nationalist
Alliance, which brought together elite
nationalists like former Senator
Lorenzo Tanada and "sectoral" op-
position groups representing, among
others, the lower clergy, workers,
peasants, and the urban poor. The
regime and the U.S. regarded the Na-
tionalist Alliance as allied to the illegal
National Democratic Front (NDF) and
thus saw it as the most potent of the
opposition groups.
? The political groupings formed by
businessmen who had spearheaded the
much-publicized demonstrations after
the Aquino assassination at the
Makati financial district. Perhaps the
most powerful representative of this
group was Enrique Zobel, a billionaire
banker with close ties to the CIA.22
But probably the most significant
grouping was the August 21 Move-
ment (ATOM), led by "Butz"
Aquino, the slain opposition leader's
younger brother. Undecided on
whether or not to participate, the
politicized business sector was being
intensely wooed by the participa-
tionists, the pro-boycott forces, and,
as noted earlier, the United States.
In early January, the U.S. became
alarmed by a development which ap-
peared to show that the pro-boycott
forces were gaining the upper hand:
most of the major Philippine opposi-
tion groups convened as the "Con-
gress of the Filipino People"
(Kongreso ng Mamamayang Pilipino
he first phase of the electoral no Second Pbise.
strategy for elections began in the
weeks leading up to the plebiscite Ike Mg 14 Netionni Assembly Flatirons
on the succession issue held on
January 27, 1984. This electoral exer- The second phase in the U.S.'s "elec-
cise was intended mainly to satisfy the toral stabilization" program was to
banks, who wanted two things specifi- generate momentum for the May 14,
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or Kompil) and issued a set of condi-
tions that the regime had to meet
before they would participate in the
elections.
Key among the demands of Kompil
was the repeal of Marcos' right to
make laws, which was, theoretically,
the function of the National
Assembly. Essentially, this was a de-
mand to dismantle dictatorship or
one-man rule. This was a sine qua non
of any meaningful electoral exercise,
for as Sullivan observed: "Free and
fair elections are of little consequence
if the legislative body chosen in those
elections has no authority or if its
authority can be usurped by Presiden-
tial decrees."23
Equally important were the other
demands raised by the joint opposi-
tion:
? repeal of Marcos' power to order
the preventive detention of persons
suspected of being "threats to na-
tional security" and other Draconian
laws;
? general amnesty and release of all
political detainees;
? the demilitarization of the elec-
toral process or keeping the military
away from the voting booths;
? appointment of "independent-
minded" persons to the Commission
on Elections and the creation of a new
voters' registration list.
Kompil was, in short, articulating a
set of conditions without which a fair
election could not be said to take
place. When asked in congressional
hearings about the State Department's
attitude towards the opposition
demands, John Monjo answered in
classic Orwellian fashion: "I am not
certain that each of these conditions is
absolutely necessary for free elections.
I cannot say that without these, there
cannot be free elections."" Monjo's
ambiguousness, however, reflected
what former Ambassador Sullivan
diagnosed as a larger policy am-
bivalence:
Despite the testimony of administra-
tion officials... the position of the
United States government remains
ambiguous in the eyes of most
Filipinos, and probably in the eyes
of President Marcos. This is true
because the President of the United
States has given no clear signal of his
own personal commitment to a re-
turn to democracy in the Philip-
pines. So long as the President of the
United States seems to waver be-
tween the choice of authoritarianism
or democracy in the Philippines, it
seems clear that the President of the
Philippines will feel justified in con-
tinuing to retain an authoritarian
government."
"Ambivalence" is too kind a word,
however, since the United States was
not really interested in genuine
democratization. It was interested
principally in achieving "stability" on
terms that would satisfy U.S. in-
terests. As long as Marcos could pro-
vide this without any vestige of formal
or substantive democracy, there had
been no complaints. Elections in 1984
were designed to provide a substitute
form of stable elite rule by isolating
the progressive opposition and bring-
ing the elite opposition to a modus
vivendi with- Marcos. With the rapid
unravelling of the dictatorship, an
electoral ratification of such an
"enlarged" elite guard seemed
necessary to mobilize adequate public
support. But in an important sense,
the design was to prevent democra-
tization-i.e., majority participation
and a system oriented to serving ma-
jority interests.
This may explain the notable lack of
enthusiasm of the pragmatists for the
full complement of conditions neces-
sary for a really free election. As one
government source privy to the State
Department's negotiations with Mar-
cos and the elite opposition put it:
"Sure, the opposition's demands are
reasonable. But they're unrealistic.
Marcos won't grant key concessions
and he will determine much of the out-
come. But some opposition people
will win-maybe 20 to 30-and that
will at least give them a voice in the
Assembly."26 At stake were 183 seats.
To give the exercise some legiti-
macy, however, Marcos had to be
made to make some concessions,
albeit non-substantial ones. Just as he
had reluctantly created the office of
vice president, the dictator grudgingly
agreed to suspend the issuance of
preventive detention actions till June 1
and to agree to create a new voter's
list.
While working closely with State
Department officials in the com-
plicated effort to stabilize the political
situation by getting Marcos and the
elite opposition to agree to an electoral
modus vivendi, Congressman Solarz
was prepared to lean harder on Mar-
cos in order to grant more legitimacy
to the controversial exercise. He got
his congressional subcommittee to
amend President Reagan's proposed
aid package for Marcos for fiscal year
(FY) 1985, the first year of the new
bases agreement, which will provide
Marcos $900 million in military aid
and military-related economic aid
over five years. Reagan proposed a
military aid package totaling $180
million and consisting of $60 million
in Foreign Military Sales Credits
(FMS), $25 million in military grant
aid (MAP), and $95 million in
Economic Support Funds (ESF).
Solarz postponed the $60 million FMS
credit to later in the five-year period of
the agreement and increased the
economic support fund allocation to
$155 million. Thus, instead of receiv-
ing $85 million in direct military aid in
1985, the regime would receive only
$25 million. The administration put
up only token opposition to this in-
itiative.
But to former Ambassador Sulli-
van, the advocate of a more radical
approach to Marcos, the Solarz stick
was no stick at all: "I see no virtue in
altering the mix. The Philippine
government will presumably spend
what it wants for military. purposes
and changing the components in ex-
ternal funds merely means a compen-
satory change in internal funds."" In
other words, Solarz' "backloading"
of military aid merely confronted
Marcos with an accounting problem.
Indeed, the more important mes-
sage to Marcos was not the non-
existent cut in aid but the reluctance of
one of his most vocal critics in Con-
gress to question the rationale of the
$900 million aid package. Indeed, in
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justifying the "frontloading" of the
economic component of the bases aid
package, Solarz conceded that the
regime, despite all its liabilities, could
not be simply cut loose:
... The Subcommittee is greatly
concerned about the severe
economic crisis presently confront-
ing the Philippines, which is poten-
tially far more dangerous than any
present external military threat.
Unless this economic challenge is ef-
fectively addressed, the possibility
of an economic collapse cannot be
precluded. Under such circumstan-
ces, the ensuing political chaos
would certainly lead to political in-
stability, and play directly into the
hands of the NPA, whose ranks
would be appreciably swelled by the
victims of the collapse.
In order to avoid these adverse
developments, which would have
undesirable consequences for both
the Filipino people and the United
States, the Subcommittee believes it
would better serve the interests of
both countries to provide a higher
level of economic assistance to the
Philippines this year than the level
requested by the Administration."
Solarz's effort to advance economic
aid was, in fact, paralleled by an
administration-orchestrated effort to
rush in huge sums of bilateral, World
Bank, and Asian Development Bank
loans to Marcos in order to enable the
cash-strapped regime to pay for im-
ports through the period preceding the
elections. With close to $1 billion in
emergency aid committed by the U.S.
government, U.S.-dominated multi-
lateral institutions, and U.S. allies like
Japan and Australia, the regime was
spared the prospect of having to apply
an IMF austerity program prior to the
elections. An agreement with the Fund
was the key condition for a financial
rescue package from the private
banks, but the devaluation of the peso
to the black market rate which the
Fund demanded would have been
suicidal for the already discredited
regime if it were done before the elec-
tions.
Splitting the Opposition
espite Marcos' refusal to
dismantle his law-making
powers, the U.S. achieved its
primary goal of splitting the
opposition, with the established elite
opposition opting for participation
and the issue-oriented progressive sec-
tor, which included the illegal national
Democratic Front, pushing hard for
boycotting the event.
Why the United Democratic Op-
position (UNIDO) decided to par-
ticipate despite minimal concessions
by Marcos was explained by former
Senator Jose Diokno, the prestigious
nationalist who stood at the forefront
of the boycott movement: "Those'
In 1982, the CIA,
fearing another Iran
scenario in the Philip-
pines, began tapping
the resources of
Philippine academic
specialists to figure
out U.S. options in the
event of Marcos' over-
throw or demise from
natural causes.
participating in the elections are only a
new generation of the old breed of
leaders... these are leaders whose on-
ly training has been in the electoral
process, so when the electoral process
dies, as in a dictatorship, they don't
know what to do."
For twelve years, the Marcos' fac-
tion's monopoly _of political
patronage had left the opposition elite
without the wherewithal to sustain
their grassroots networks, at the same
time that the underground left was in
the process of forging powerful mass
organizations based on class-specific
demands and issues. When the elite
opposition and the left joined hands to
boycott Marcos' stage-managed elec-
tions in 1981, the former became un-
comfortably aware of their depen-
dence on the organizational clout of
the progressive movement to turn the
venture into the success that it was. It
40 June-August 1984 Counterspy
was not surprising then that when the
U.S. stepped in to "guarantee" the
elections, despite Marcos' obstinacy,
class interest immediately reasserted
itself against momentary political uni-
ty. Here was an opportunity for the
elite opposition not only to politically
differentiate itself from the left but
also to build. itself up as a viable
organized alternative to the latter
through the electoral campaign.
Former Senator Eva Estrada Kalaw,
one of the key elite opposition figures,
typified this swing. Regarded as one of
the ruling-class personalities closest to
the left during the 1981 boycott cam-
paign, Kalaw emerged as one of the
most vocal proponents of participa-
tion in 1984. Indeed, in the thick of the
campaign, Kalaw echoed the State
Department line of elite reunification
in the face of the threat from the pro-
gressive movement when he attacked
the boycott movement as "heavily in-
filtrated by elements of the radical left
and the Communist Party of the
Philippines."29
Marcos Sabotages the Strategy
But if stability was what the U.S.
hoped to gain from the elections, it
was badly disappointed. For to
counter a massive anti-Marcos vote in
the larger cities, which went for op-
position candidates, Marcos partisans
engaged in massive fraud in the rural
areas, where few foreign corre-
spondents and neutral observers were
present to observe the voting. Marcos'
powerful electoral machinery, which
had delivered "landslide" victories in
the nine previous voting exercises
since 1972, again worked its "magic"
to ensure dominance of the National
Assembly by Marcos' ruling party.
By belittling the stronger than ex-
pected showing of the opposition in
the Manila area, charging the latter
with fraud and terrorism, and brazen-
ly advancing a plan to increase his ap-
pointees to the 200-member Assem-
bly, Marcos was telling the opposition
that he was in no mood for genuine
reconciliation and signalling the U.S.
not to expect any more concessions.
The U.S. project was clearly being
undermined by the dictator, as a post-
election analysis in the Washington
Post revealed:
Instead of trying to put the best face
on the opposition's strong electoral
showing and to draw the alienated
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moderates back into a revitalized
Philippines political process, Mar-
cos' ruling party seems to be doing
its utmost to roll back the moder-
ates' gains and shut them out even
more. The effort risks vindicating
those who advocated a boycott ... 1*
The paper noted that "those who
stand to lose most from such a recon-
ciliation are the communist rebels of
the New People's Army, who have
been waging a steadily growing in-
surgency in the countryside.""
Marcos also took the offensive
against the State Department
pragmatists. In an attempt to split
U.S. policymakers, Marcos began
harping on a theme close to the heart
of the conservative ideologues at the
White House: the looming "Com-
munist threat." In justifying his con-
tinuing to exercise emergency law-
making powers, he stated: "I don't
know why Americans do not seem to
realize the danger of a communist
rebellion in the Philippines.... We
have to face up to the fact that if we do
not weaken the NPA subversives now,
later on they'll be marching in the
streets here and proclaiming a
takeover of the government."
The U.S. Dilemma
H alf-way liberalization is often-
times more destablizing than
all-out repression. This lesson
from other countries where the
U.S. tried to pull off a controlled
decompression is apparently being
played out in post-election Philip-
pines. A few days after the election,
several thousand enraged citizens tried
to storm a provincial capital in protest
against electoral fraud. This incident
was merely the most dramatic of
scores of post-election manifestations
of a deep sense of popular anger at the
dictator's cavalier attitude toward the
massive vote against him.
With its attempt at stabilization
leading instead to swifter radicaliza-
tion, the U.S. is increasingly faced
with the very unpleasant choice of
riding with Marcos through hell or
high water (if the right-wing ideo-
logues prevail) or throwing him out
through a military coup using disaf-
fected "professionals" in the military
(if the pragmatists continue to call the
shots). The latter would be an ex-
tremely difficult course given the
strategic placement of Marcos loyal-
ists within the Army command. And,
as with the project of electoral
stabilization, it is difficult to see what
a coup by "military reformists" can
do to arrest what is a larger trend: the
accelerating momentum of the Philip-
pine polity toward the left.
Notes
1. Jeane Kirkpatrick, "Dictatorships
and Double Standards," Commentary,
July 1979, p. 37.
2. Confidential airgram from G.S.
Sheinbaum, U.S. Consul, Cebu (Philip-
pines) to Secretary of State Alexander
Haig, Washington, April 13, 1982.
3. Letter to Prof. Belinda Aquino from
Justin Green, March 7, 1983.
4. Personal communication from a par-
ticipant in the conference who wishes to re-
main anonymous, March 15, 1984. This
person, a noted Philippine specialist, now
regrets his participation. The title of the
conference was "Crisis in the Countryside:
The Rural Economy and Insurgencies in
the Philippines." A list of participants is
available from the authors upon request.
5. Talk at Asia Society, Washington,
D.C., October 18, 1983.
6. Congressional Record, October 24,
1983, p. H8566.
7. Wall Street Journal, editorial, Oc-
tober 6, 1983.
8. New York Times, October 3, 1983.
9. Quoted in Jesus Bigornia, "Armacost
has Pricked Filipino Sensibilities,"
Bulletin Today (Manila), Nov. 22, 1983.
10. Ibid.
11. Lansdale's exploits are documented
in his autobiography, In the Midst of Wars
(New York: Harper and Row, 1972).
12. The American Chamber of Com-
merce was one of the first to send Marcos a
congratulatory telegram which read: "The
American Chamber of Commerce wishes
you every success in your endeavor to
restore peace and order, business con-
fidence, economic growth, and well-being
of the Filipino people and nation. We
assure you of our confidence and coopera-
tion in achieving these objectives. We are
communicating these feelings to our
associates and affiliates in the United
States." Cited in Walden Bello, David
Kinsey, and Elaine Elinson, Development
Debacle: The World Bank in the Philip-
pines, p. 21.
13. "Marcos Blames Businessmen for
Economic Crisis," Washington Post, Nov.
11, 1983.
14. Congressional Record, October 24,
1983, p. H8566.
15. John Monjo, "Statement before the
House Foreign Affairs Subcommittee on
East Asia and the Pacific," Washington,
D.C. Feb. 7, 1984, p. 10.
16. Mark Fineman, "Anatomy of a Dy-
Parts of this essay are adapted from a
larger study by Walden Bello and Ed
Herman entitled "U.S. -Sponsored
Elections: The Philippine Example, "
which appeared in Who Magazine
(Philippines), on May 2 and May 9,
1984.
ing Regime," Philadelphia Inquirer,
January 8, 1984, p. 17.
17. Answer to question by Rep. Steven
Solarz at hearing of the House Foreign Af-
fairs Subcommittee on East Asia and the
Pacific, Washigton, D.C. Feb. 22, 1984.
18. James Kelly, "Statement to the Sub-
committee on Asian and Pacific Affairs of
the Committee on Foreign Affairs, House
of Representatives," Washington, D.C.
Feb. 7, 1984.
19. House Foreign Affairs Subcommit-
tee on Asian and Pacific Affairs, "Report
and Recommendations of the Subcommit-
tee on Asian and Pacific Affairs to the
House Foreign Affairs Committee on
Fiscal Year 1985 Foreign Assistance
Legislation," Washington, D.C., March
1, 1984, p. 27.
20. "Philippine Referendum Revives
Vice Presidency," Washington Post,
January 28, 1984, p. A17.
21. "Bishops Urge Fair Play," Agence
France-Presse, Jan. 6, 1984.
22. Zobel's close connections with the
CIA were disclosed in court papers of the
scandal involving the activities of Ron
Rewald which is now rocking Honolulu.
Rewald is being charged with fraud and
embezzlement in connection with the
operations of his firm, an investment com-
pany. Rewald claims his office was a CIA
financial front. The CIA then moved to
censor Rewald's defense affidavits and seal
most of the defense exhibits and docu-
ments. The Rewald case was the subject of
a British Broadcasting Company (BBC)
documentary, which aired in London in
mid-March 1984.
23. William H. Sullivan, "Testimony
before the Subcommittee on Asian and
Pacific Affairs, House Committee on
Foreign Affairs," Washington, D.C. Feb.
22, 1984, p. 3.
24. Answer to question by Rep. Steven
Solarz at hearing of Subcommittee on
Asian and Pacific Affairs, House Foreign
Affairs Committee, Feb. 7, 1984.
25. Sullivan, p. 2.
26. Personal communication from U.S.
government officer who wishes to remain
anonymous, Feb. 2, 1984.
27. Sullivan, p. 3.
28. House Subcommittee on Asian and
Pacific Affairs, p. 25.
29. Quoted by Agence France-Presse,
March 3, 1984.
30. Washington Post, May 23, 1984.
31. Ibid.
Counterspy June-August 1984 41
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RUTGERS UNIVERSITY:
INTELLIGENCE GOES TO
COLLEGE
BY KONRAD EGE
Rutgers University Professor
Richard Mansbach is examining
whether political organizations
in Western Europe are en-
dangering U.S. geopolitical and
military interests. Has the West Ger-
man Green Party managed to under-
mine NATO unity? Are the anti-
nuclear Dutch churches infiltrated
and directed by Communists? What
parties in the Federal Republic of Ger-
many, Italy, France and England put
roadblocks in the way of the foreign
policy decisions of their governments?
Richard Mansbach's effort is not
your average academic research pro-
ject. The professor is a consultant to
the Central Intelligence Agency. The
CIA commissioned the project and is
paying well over $20,000 for it.
At Rutgers, Mansbach is known as
an intelligent and liberal professor.
"For two years, he served as the en-
vironmental commissioner in his
hometown of Bridgewater, New
Jersey and in one of his courses about
nuclear war, students are required to
read a piece by peace activist Helen
Caldicott.
In 1967, Mansbach wrote his disser-
tation at Oxford University ("The
Soviet-Yugoslav Rapprochement of
1955-1958: Its Political and Ideo-
logical Implications"). Then he
became an assistant professor at
Swarthmore College and Rutgers
University. Later on, he served as a
visiting professor at the University of
Singapore and at Princeton Universi-
ty. Today he is the chairperson of the
Political Science Department at
Rutgers in New Brunswick.
Throughout virtually his entire
career, Mansbach has had close ties to
intelligence and other. government
agencies. In 1975, he lectured at the
CIA, in 1977 at the United States In-
formation Agency (USIA), in 1982 at
the National Security Agency and at
the U.S. Army War College. In 1978
42 June-August 1984 Counterspy
he served as a consultant to the USIA.
From January 1981 to January 1983,
Mansbach was a full-time staffer at
CIA headquarters.
In those two years, Mansbach
worked in the National Intelligence
Council's European Analysis divi-
sion. Apparently, he did a good job.
As Mansbach was leaving, his
superior let him know that the CIA
had "profited greatly" from his ser-
vice. Mansbach was also invited to re-
join the CIA whenever he wanted.
But Mansbach made a different
career decision. He went back to
Rutgers to become the head of the
political science department. The
CIA's National Intelligence Council
immediately tried to develop projects
on which their valuable researcher
could work while at Rutgers. The
Council chose ENSAP-the Euro-
pean Non-State Actors Projects.
(Non-state actors are those organiza-
tions, institutions and individuals who
attempt to influence government deci-
sion from the outside.)
For his ENSAP effort, Mansbach is
assisted by Rutgers Professor Harvey
Waterman. As does Mansbach,
Waterman has a top-secret security
clearance. -About 100 students have
been gathering information for EN-
SAP for academic credit. Most of the
students don't know that they are
working for the CIA.
Mansbach has also written to
dozens of organizations and research
institutes in Europe. In his form letter,
the professor states that "a research
group in the Political Science Depart-
ment at Rutgers is embarking on a
study of social, economic and political
changes in Western. Europe that may
affect national foreign policies vis-a-
vis the Atlantic Alliance." Mansbach
asks his European colleages to inform
him of "completed work, or work-in-
progress, that may be useful to us in
our effort to synthesize what is known
about the many aspects of change in
West European society and politics."
The letter does not mention that this
"research group" is financed by the
CIA. Neither does it disclose that
Mansbach works as a CIA consultant.
ENSAP is based on the theory that
there has been a resurgence of Euro-
pean opposition movements over the
last few years which aim to influence
the decision-making process on
foreign and military policies. ENSAP
is to determine how they prevent the
European governments from follow-
ing a "consistent" foreign policy, and
how they impact on U.S.-European
relations.
The term "non-state actors" in-
cludes organizations and institutions
from a wide spectrum of society: chur-
ches, the media, opposition parties,
unions and women's groups-to name
a few. About churches, for example,
ENSAP-i.e., the CIA-would like to
know how many members there are;
who is in charge of their publications;
what their "known assets" are; and
how extensive their "tax-exempt pro-
perty" is.
Questions about the media aim for
information about ownership, cir-
culation, and "advertising revenue
and sources." As far as women's
groups are concerned, ENSAP is in-
terested in their alignment with other
forces. And asks: "How homogenous
are women's groups?"
The ENSAP questions apparently
were changed at CIA's request. The
CIA demanded "data-intensive
analysis." Mansbach apparently will
present the CIA with his research
results in August 1984. In addition, he
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plans to write a book based on the EN-
SAP material.
In his book Quantitative Ap-
proaches to Limited Intelligence: The
CIA Experience, Richard Heuer, the
former head of the CIA's Methods
and Forecasting Division, confirms
that an ENSAP-type research project,
financed by the CIA, is different from
"regular" academic research. "While
the academic researcher is relatively
free to define a problem on his own
terms, our [CIA] research problems
are greatly defined by the re-
quirements of U.S. foreign policy.
The academic researcher chooses a
topic for which data are available,
whereas it is often new problems (or
old problems defined in new ways) for
which the policymaker requires in-
telligence analysis."'
Analysis for the CIA is geared
toward providing information that
shows how the CIA might be able to
influence events. Detailed informa-
tion about a publication's advertising
revenue, for instance, might allow
"someone" to influence its editorial
policy through pressure on large
advertisers. Information about the
homogenity of women's groups might
give clues about how to disrupt them.
According to some of the students
working on ENSAP, Mansbach is
especially interested in uncovering
"communist influence" on opposi-
tion organizations. The West German
Green Party has been closely scrutiniz-
ed in that regard, said one student.
To Rule The World
M ansbach is not an isolated case.
CIA Director William Casey
places great emphasis on close
collaboration with universities.
In a 1981 speech to agency employees,
Casey stated that CIA officers
"regularly" meet with scientists and
academicians to discuss a wide variety
of questions. At the University of Il-
linois (Chicago), for example, the CIA
has been funding a project to
"develop statistical models of gover-
nability on a global basis."Z
While the U.S. government might
not be quite ready to govern "on a
global basis," it is making every effort
to keep control of individual coun-
tries. Academia plays a role in laying
the groundwork and maintaining the
status quo. At Villanova University in
Pennsylvania, for instance, the CIA,
through the consulting firm of Booz,
Allen and Hamilton has been paying
Professor Justin Green to gather in-
formation about the New People's Ar-
my, the armed wing of the communist
Party of the Philippines.'
According to Casey's predecessor,
Admiral Stansfield Turner, the CIA's
relationship with academia has "been
of inestimable value to the intelligence
community." In working with the
professors, however, Turner wrote to
Harvard University president Derek
Bok, that the CIA was not willing to
comply with existing university
regulations about "outside
contracts."
When the CIA was taken to court
several years ago because it refused
-and still refuses-to release files
When Richard
Mansbach left the
CIA, the, CIA's
National Intelligence
council immediately
tried to develop
projects on which
their valuable
researcher could work
while at Rutgers.
containing the names of professors
who had consulted for the CIA,
F.W.M. Janney, then the CIA's per-
sonnel director, expressed even more
clearly the CIA's need for assets in the
academic community. In many fields,
Janney wrote, it is "absolutely essen-
tial that the agency have available to it
the single greatest source of expertise:
the American academic community."
CIA officers in the National Foreign
Assessment Center, Janney added,
regularly consult with academicians
on an "informal and personal basis,
often by telephone."'
According to former CIA press
spokesperson Dale Petersen, the CIA
has been holding three to four con-
ferences for university presidents a
year to discuss "mutual problems."
Many of the presidents accept the in-
vitations, Petersen said. Documents
released under the Freedom of Infor-
mation Act show, for instance, that
several university presidents (from the
University of Tulane in New Orleans,
Johns Hopkins University and the
University of Minnesota), along with
Jack Peltason, president of the
American Council on Education, met
with Turner and a number of high-
ranking CIA officers at CIA head-
quarters in Langley, Virginia in June
1978. The academicians were given
confidential briefings, including one
by John Stein, then Associate Deputy
Director for Operations, and by the
Deputy Chief of the Domestic Collec-
tion Division (whose name is deleted
on the FOIA documents).
Turner had invited the presidents,
saying that it was time to improve
CIA-academic relations. "In the wake
of considerable public criticism over
the last several years," Turner wrote
in a May 1978 letter to Michigan
University President Robben Flem-
ing, "the Agency has had difficulty in
maintaining open and mutually
beneficial relationships" between the
CIA and academia. "I would like to
ask your help and advice in determin-
ing how best to restore a useful but
proper connection between academia
and the world of intelligence."
The conference seems to have been
a success. Several days after it, Turner
wrote to Jack Peltason that he found
"our exchanges both stimulating and
helpful." "I am especially ap-
preciative," Turner continued, "of
the concrete suggestions that you and
your colleagues left behind." Turner's
letters to the other participants were
equally laudatory. Although Peter
Magrath from the University of Min-
nesota urged Turner to keep his par-
ticipation at the CIA conference
secret.
Pentagon Contracts
he CIA is not the only intelligence
agency active at U.S. universities.
For the last few years, the Defense
Intelligence Agency has increa-
singly tried to "farm out" research
projects to academicians and univer-
sities. In 1981, for instance, the DIA
offered various universities specializ-
ing in African studies hundreds of
thousands of dollars. CIA analysts
wanted to attend these African studies
departments to study languages. And,
the departments would also par-
ticipate in DIA research projects and
conduct field studies.'
Counterspy June-August 1984 43
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According to a Christian Science
Monitor article, all African Studies
Centers (there are 12 in the country)
turned down the DIA offer, in spite of
the DIA's promise that everything
would be "out in the open,
aboveboard." Rita Breen, executive
officer of Harvard University's Com-
mittee on African Studies argued that
"any intelligence linkage is a
suspicious one.... Even the agency's
overtures might compromise scholars,
there is so much suspicion of U.S. in-
telligence." Other academicians
argued that collaborating with the
DIA was incompatible with academic
openness. And that "even the ap-
pearance of such a relationship is very
dangerous from an academic point of
view. 996
Even more common than university
collaboration with intelligence agen-
cies is university research for the Pen-
tagon. (The 1976 Senate Select Com-
mittee on Intelligence report on the
CIA stated that academics col-
laborating with the CIA "are located
in over 100 American colleges, univer-
sities and related institutes.") 250
universities and colleges had Pentagon
contracts during 1980 and 1981, with a
combined value of about $1 billion.
Two universities were able to attract
nearly half of that money:
Massachusetts Institue of Technology
and Johns Hopkins University.
-Topics for academic research pro-
jects range from biological warfare
related issues (University of Maryland
at College Park) and laser technology
(University of Washington at Seattle)
to weather modification (University,
of Berkeley) and submarine warfare
(Catholic University).
Universities are becoming increas-
ingly dependent on Pentagon money
under the Reagan administration.
While programs such as the national
Science Foundation have been cut, the
Pentagon budget is on the rise. Several
months after Reagon took office, an
internal Princeton University
memorandum stated that the universi-
ty would try to make up some of the
NSF cuts by applying for Pentagon
grants. Chemical and biological war-
fare were listed as especially promising
fields.
The lucrative Pentagon contracts
and a close relationship with the CIA
have tied many universities closely to
the "National security apparatus."
The Reagan administration is
deliberating additional steps to bring
the international studies field virtually
under the control of the National
Security Council. Under such an NSC
scheme -favorably described in a
publication of Georgetown Universi-
ty's Center for Strategic and Interna-
tional Studies- the NSC, advised by
governmental and academic commit-
tees, would be in charge of allocating
government money for various inter-
national study projects. The NSC
would determine which research best
served U.S. government interests.'
Advocates of that scheme argue
that the U.S. has a "deficit" in inter-
national studies research. This is said
to have impeded foreign policy deci-
sions. "Failures" such as the revolu-
tion in Iran were not intelligence
failures, but research failures, accor-
ding to Robert Ward (Stanford Uni-
versity), one of the originators of the
NSC scheme. "There was ... a persis-
tent failure to analyze or appreciate
the precariousness of the Shah's rule
in Iran.. . . "' As of now, universities
simply are not prepared to research
problems in a timely and systematic
The Professor Speaks
irst telephone call to Mansbach.
Question: Who is paying for the
ENSAP research? Mansbach:
"Basically the State Department."
Is it true that you are a CIA consul-
tant at present? "Yes, it's true, but it
has nothing to do with ENSAP."
Second call, a few days later. Con-
fronted with more evidence, the pro-
fessor codes that ENSAP is fi-
nanced by the CIA. The professor is
-angry. His work in ENSAP presents
no conflict with academic standards,
he says. "If I saw a conflict, I
wouldn't do it." Everything about
ENSAP is open, according to
Mansbach.
The professor says he does not like
the "conspiracy sound" of the ques-
tions. He prefers it, he says, when in-
telligence agencies gather material
the way they do it through ENSAP.
Intelligence agencies should use
more open sources, he adds.
Mansbach also denies that he
discussed the shape of ENSAP with
the CIA. Counterspy has documents
proving the contrary.
44 June-August 1984 Counterspy
way geared to policy makers. Under
the NSC proposal, that would change.
Some university presidents have ex-
pressed concern about "academic
freedom" if much of the government
money for research is channeled
through the National Security Council.
And the NSC plan is likely to remain
on hold until after the presidential
elections. With further cuts in other
government funding programs, how-
ever, it seems likely that more and
more universities might eventually
agree to the project. Many U.S. pro-
fessors have no qualms about doing
research for the CIA and the Pen-
tagon. They seem to agree with former
CIA Deputy Director Frank
Carlucci's statement that the CIA
functions much like a university.
Some organizations and individuals
examining the CIA's academic con-
nections have come to a different con-
clusion. The Student Cooperative
Union at the University of California,
in its report entitled "A Censored
History of Relations Between the
University of California and the Cen-
tral Intelligence Agency" concluded
that the "university cannot col-
laborate with the CIA without sharing
culpability for its actions. Research
done for the CIA has direct impact on
the lives of people around the world.
... As long as the university functions
as a service agency for the CIA, or as a
cover for its `academic' and pro-
paganda purposes, any claim to the
university's role as an open and
democratic institution is farce."
Notes
1. Quoted in Walden Bello, "CIA Taps
Academia to Design Post-Marcos Scenar-
io," Counterspy, vol. 8, no. 2, p. 29.
2. See Counterspy, vol. 7, no. 2, p. 8.
3. Cf. supra, n. 1.
4. Washington Post, 6/12/78.
5. Christian Science Monitor, 8/20/81.
6. Ibid.
7. See John Kelly, "Princeton is No
Tiger Lily," Counterspy, vol. 6, no. 4, pp.
23-29.
8. Robert Ward, "Studying Interna-
tional Relations," The Washington
Quarterly, Spring 1983, pp. 160-168. See
also Andrew Kopkind, "A Diller, A
Dollar, An NSC Scholar," The Nation,
6/25/83, for an analysis of the NSC, plan.
9. Robert Ward, "Studying Interna-
tional Relations," The Washington
Quarterly, Spring 1983.
This article appeared first in an ab-
breviated version in Konkret (Hamburg,
West Germany), May 1984.
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 South Africa claims it no longer discriminates against some eleven million blacks
because they are now "citizens of their own homelands." Thus Pretoria argues
that it should be allowed back into the Olympics.
BY DR. DENNIS BRUTUS
AND ALLAN EBERT-MINER
By signing non-aggression pacts
with Mozambique, Angola, and
Swaziland, Prime Minister Botha
of South Africa has won a victory
of sorts. It is an indication that South
Africa has shifted its tactics. The
largest resistance movement of South
Africa, the African National Congress
(ANC), will undoubtedly feel the
brunt of these moves, which will also
serve to appease Pretoria's Western
critics. These initiatives may even help
South Africa get a publicity office out-
side the 1984 Olympic Games in Los
Angeles, and may very well get them
full participation in the 1988 Games in
South Korea, a move they desparately
desire.
To understand the connection bet-
ween South Africa's latest "peace"
initiatives and their participation in
the Olympics, some history is in order.
South Africa last had a team in the
Olympics in Rome in 1960. Then, in
1964, after heated debates and
demonstrations, South Africa was ex-
cluded from the Tokyo Olympics for
refusing to pledge that it would select
its best athletes on merit and not ex-
clude blacks. In 1968, after more
rankling and demonstrations, South
Africa was excluded from the Mexico
Olympics. Several countries threatened
a massive boycott at that time if South
Africa were allowed to participate.
In 1970 South Africa was finally ex-
pelled from the International Olympic
Committee (IOC) for violating a fun-
damental principle of the Olympic
Charter which forbids membership to
any country that discriminates on the
basis of race, color, religion or
politics.
Nonetheless, the Pretoria govern-
ment is bidding for participation in the
1988 Olympics in South Korea. They
have already applied to the IOC for
readmission' and are looking forward
to operating a propaganda center in
Los Angeles during the summer
games. South Africa also has eight
honorary consulates in country, and
an additional two approved in princi-
ple by the State Department. These
consulates offer information on South
African sports which argues that they
have been wrongfully excluded.
In a British Broadcasting Corpora-
tion telecast last summer Dr. Wilf
Rosenburg, former Springbok rugby
center and League player for the
Leeds, South Africa team, claimed
that "unbelievable changes" have oc-
curred since the 1970s. He admitted
that some wrongs have occurred in the
past. But, he said, "we are moving
forward in the right direction, par-
ticularly the present [Botha] govern-
ment. "2
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Recent advertisements in major
U.S. newspapers and magazines boast
that change is occurring in South
Africa. One particular ad features two
students strolling through the white-
pillared halls of a university, amiably
conversing with books in hand. One
student is white, the other black. The
heading reads, "South Africa Is
Changing."
Another recent advertisement ap-
peared in a major mid-west
newspaper. It featured three little
black children playing in front of a
newly-built ranch home. We get the
impression that they live in that home.
The ad reads: "Imagine buying a four-
roomed, State-built house for as little
as $800. Or a five-roomed house for
between $2,331 and $16,000. It's hap-
pening right now in South Africa."
The ad goes on to assert, "South
Africa is involved in a remarkable pro-
cess of providing fair opportunities
for all its population groups. The
South African government is commit-
ted to ensure that each of South
Africa's many nationalities have the
ability and resources to realize their
social, economic and political aspira-
tions."
The implications are clear. South
Africa is saying that everyone is being
given a fair chance. All races are on
equal footing now. Apartheid and
racial discrimination have been eradi-
cated. But it may all be part of a long-
distance game plan to win friends and
influence people before the 1988
Olympics in South Korea. The truth is
things have not gotten better for black
athletes. They're gotten worse.
In fiscal year 1982-83 the South
African government spent 9.9 million
Rand (1 Rand equals 1 U.S. dollar)
promoting white school sports. It
spent a mere 14,700 Rand on black
children "interested" in sports.'
Black school age children outnumber
white children 4 to 1. In short, the
white rate of spending was 680 times
that of the black rate on school sports.
Of interest also is the comparison of
the 14,700 Rand spent on black sports
and government expenditures on
visiting teams and athletes: 47,500R
was spent on foreign cycling tours;
20,000R on a fencing tour; 15,000R on
some foreign gliders; and 35,000R for
an international "tug-of-war."4 The
South African government claims that
such expenditures are related to the in-
ternational importance of the events,
and the publicity they generate for
Pretoria.
In 1964, after heated
debates and demon-
strations, South Africa
was excluded from
the Tokyo Olympics
for refusin to pledge
that it wou d select its
best athletes on merit
and not exclude
blacks.
The sharpest clash of sporting
'disparities comes when one looks at
Soweto, that overcrowded ghetto of
black workers, and Johannesburg, its
largely white, metropolitan neighbor.
Soweto has well over a million in-
habitants while Johannesburg has
about one-third as much. Soweto has
only five swimming pools, six cricket
patches, four rugby fields, 140 soccer
fields, most of them in poor condi-
tion, one bowling green and one golf
course.' According to Harry Pangola,
black boxing reporter for the white
Rand Daily Mail, Soweto has only one
gymnasium, its condition appalling. It
has one `Twilley' lamp, a punch bag,
no showers, no lockers and "no
semblance of a ring."6 Meanwhile,
Johannesburg has per capita the
greatest number of private tennis
courts, swimming pools and golf
courses in the world. Behind only the
United States and Australia, South
Africa is the greatest user and im-
porter of swimming pool chemicals.'
S, ' outh Africa's official and com-
plicated sports policy is basedlon
1971 recommendations by the
"Broederbond" F-a secret broth-
erhood of "Super Afrikaaners" who
harness all political, administrative,
social and, where possible, economic
forces for its own cause.' This policy
states that Bantustans, which are
ostensibly "independent" and only
recognized by South Africa, control
their own sports matches. And South
African teams, called "internation-
als," can compete against them.
Athletes of all races, called "interna-
tionals," should belong to their own
clubs and control their own sporting
events. Committees from these "inter-
nal nations" are to cooperate among
themselves and arrange, with govern-
ment, permission, inter-group com-
petition. By permit from the Minister
of Sport they arrange matches bet-
ween themselves and even "leagues
comprising different groups."9 Final-
ly, sports facilities for blacks are to be
improved, but their use is to be reserv-
ed for black associations which
respect this official policy. A small
black elite is encouraged and por-
trayed publicly to buttress Pretoria's
claims that things inside South Africa
are truly changing.
Pretoria claims it no longer
discriminates against some eleven
million blacks (about 40% of black
population) because they are now
"citizens of their own homelands."
These independent homelands are free
Jo make their own sports policy. Thus,
Pretoria argues that they have "been
persecuted too long" and want back
into the Olympics. But these are all
very strange and paradoxical
arguments. The government forcibly
removes blacks, "colored" and
Asians from communities where they
have been living for generations and
dumps them into desolate, barren,
rural areas where there is no possibili-
ty of work or any kind of social
development. Families of 6 are sup-
posed to live on 1OR a month.
Malnutrition, diarrhea and other
diseases are rampant. This side-
stepping or abandonment of blacks in-
to "homelands" on the grounds of
their "independence" is as calculated
and vicious an evasion of responsibili-
ty as any in South Africa's racial
history.
South Africa is more readily chang-
ing its relations with its neighbors.
Domestic changes in sport and
elsewhere have simply not occurred.
Change will not occur if the South
African government can appease its
critics through non-aggression pacts
which are tentative and often unen-
forced, but good for their interna-
tional image. Recent parliamentary
reforms have only come about
because of external pressure. Any pro-
posed change in social, cultural, or
sports life will only come about
because of bannings, boycotts and the
46 June-August 1984 Counterspy
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like and 'not because the government
or sports administrators suddenly get
struck by brotherly love.
Serious questions are being raised
now with the Los Angeles Olympics a
few short months away. It has been
reported that the Olympic Charter is
being completely revised, maybe in time
for the summer games. Various groups
want to see the ban against South
Africa upheld. They don't want the
wording of the Charter diluted so as to
provide the IOC with,a loophole for
South Africa's readmission. The
South African Non-Racial Olympic
Committee (SAN-ROC) wrote a letter
in February to Dr. Juan Samaranch,
president of IOC. They requested an
answer to the rumor that he had con-
vened a committee to investigate
whether or not South Africa could be
readmitted. SAN-ROC also wanted
information on what considerations
were going into revising the Olympic
Charter. The letter ended with a de-
mand that South Africa not be read-
mitted into the Olympics "until all
legislation discriminating against
athletes on the ground of race be
removed."
A month later Dr. Samaranch
responded. But never mentioned
whether or not a committee had been
'convened to look into South Africa's
participation. He did not declare his
position on the future participation of
South Africa, but merely stated that
the IOC's "policy has not changed"
with regard to South Africa.
One problem faced by organiza-
tions opposed to South African par-
ticipation in the Olympics is that the
Olympic Executive Committee gener-
ally votes in secret on these matters.
That would defuse much needed
public debate. The U.S. Olympic Com-
mittee Chair is William Simon,
Richard Nixon's Secretary of the
Treasury. He has not come out against
South Africa's participation in the
Olympics. As in other international
organizations, U.S. influence in the
IOC is quite formidable.
If the Olympic Charter is revised
and reflects a relaxed attitude toward
the participation of apartheid South
Africa in the Olympic games, then Dr.
Samaranch would also be following
policy in the interests of Pretoria. A
simple declaration that South Africa
would not be able to participate in
such a great event until it dismantles
apartheid seems sufficient and would
defuse explosive controversy for the
IOC.
Imagine buying a four-
roomed, State-built
house for as little as
S880. Or a five-roomed
house for between $2 331 and 516 000.
Its happening right now - in
South Africa.
SHARING A BETTER
QUALITY OF LIFE
South Africa is involved in a
remarkable process of providing fair
opportunities for all its population groups.
The South African Government is
committed to ensure that each of south
Africa's many nationalities have the
ability and resources to realize their social,
economic and political aspirations.
Housing is a leading example of South
Africa's development process. And as an
integrated part of its drive towards home
ownership for everyone the South
African Government has given the go-
ahead for the sale of 500 000 State
financed homes at discounts of up to
40 % of their market value
MEETING THE
HOUSING CHALLENGE
South Africas urban Black population
is expected to rise from 9 million currently
to around 20 million by the turn of the
century It is estimated that an additional
4.9 million housing units will have to be
provided to accommodate this
phenomenal urbanisation.
The housing challenge is being met by
both the Government and the private
seer. Government initiatives are directed
mainly towards providing the machinery
and support for self-help building projects,
while private enterprise provides loans,
subsidies and guarantees
THE FUTURE - BETTER
PROSPECTS FOR ALL
A recent survey indicated that 82 % of
all employers were prepared to provide
their Black staff withlassstance to buy
their own homes.
The facts on housing
present only pan
of the picture Sla nv
aspects of South
changing.,, an ever-increasing rate The
"'lure is exciting because we have the
people the deuccation and a buoyant
economy to enable , to keep on
providing opponut itties and improving
the quality of life of all our people
Because South Africa is a microcosm of
so many of the world's sensitivities, it is
often a contentious subject. if ),,t, are
faced with a decision regarding Scala"
Africa, make sure you have all the feu .
For more information,
simply complete the
coupon below
rlo 1Tc.,fir,tsrrOnhm:ueml. --- ~
i nx Gnnh Afna,rinhn, I
I tMl Amrl,uttmx Amiss I
I ~C:,ahn,Qlnn nr . 2(M0M S W I
Ika,? rmA nv nr?r mfnnnai.xi,ni,nvu,,, I
ImmN' 1111 t, m.si,at,t4 mk'nt.,n h,Nnh Sine,
I hNnn
L------------------j
V~e're looking forward to the firture.
ttttttt~ttt~a
This ad which appeared in the Chicago Tribune in January claims that "the S
th
ou
African Government is committed to ensure that each of South Africa's man
y
nationalities have the ability and resources to realize their social, economic and
political aspirations. "
NOTES:
1. "Keep South Africa Out of the Olym-
pics," D. Brutus, Los Angeles Times
(March 1984).
2. "South Africa Sport and the
Boycott," Producer, Ron Pickering,
British Broadcasting Corporation. Televis-
ed in England June 28, 1983; shown in U.S.
on ABC's "Four Corners" (Aug. 6, 1983).
3. House of Assembly in South Africa,
Hansard (May 2, 1983) cols. 6115-6128;
cited by Colin Tatz, "Sport in South
Africa," Australian Quarterly, Vol. 55,
No. 4 (Sum. 1983) p. 6.
4. C. Tatz, p. 5.
5. BBC Broadcast.
6. C. Tatz, p. 6.
7. C. Tatz, p. 7.
8. "The Super Afrikaners: Inside the
Afrikaner Broederbond," Ivor Wilkins
and Hans Strydom, Jonathan Ball Pub-
lishers, (1978) Ch. 14, "Sport Policy," pp.
239-252.
9. Ibid.
Dennis Brutus is a South African exile,
poet and professor at Northwestern
University. He led the successful move-
ment in the 1960s to exclude South
Africa from the Olympics.
Allan Ebert-Miner is a freelance jour-
nalist and student at Antioch School
of Law. He is also the Washington
,coordinator for Africa Network.
Counterspy June-August 1984 47
South Africa
Houses for sale:
16 000 and less
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REWALD'S CIA STORY
Continued from p. 17
parties. H & H's cover sheet said it was
run by Rewald and Sunny Wong. Re-
wald's wife, Nancy, is also listed as
someone to call. The cover sheet con-
cludes: "All expenses related to the
operation of this cover shall be reim-
bursed by the Central Intelligence
Agency."
At this point, says Rewald's affida-
vit, "In my role as an international
business consultant, and attempting
to cultivate social and business con-
tacts with wealthy and well-placed
businessmen and government offici-
als, I became concerned that I did not
have, and needed to have, something
sufficient in the way of academic
credentials to carry off the cover of an
international businessman."
To this end, Rewald did not return
to college. Welsch provided him with
diplomas in business administration
and law from Marquette University in
Wisconsin.
A computer print-out from 1978
from Marquette University listed
Rewald as a graduate. On the basis of
his Marquette "law degree," Rewald
later attended Harvard's Program of
Instruction for Lawyers (PIL). The
PIL is exclusively for members of the
Bar or anyone licensed to practice law.
The CIA "set up" Rewald's atten-
dance at the PIL "to meet certain peo-
ple." A copy of a PIL attendance
roster lists Rewald as an attendee.
Within the intelligence community,
Rewald says, Harvard is considered
one of the "family."
Later, Rewald felt his cover needed
further embellishment. "In carrying
out my Agency charge to cultivate
these [wealthy] individuals on a social
and business level, I was required to
live in a style commensurate and com-
patible with the social and economic
status which these people enjoyed in
their own countries. I did so largely
through the use of Agency funds, and
my own salary from Bishop, Baldwin.
... This explains my use of Bishop,
Baldwin monies, which were in turn
'fueled by CIA funds on an as-needed
basis (up to $2,000,000 of CIA monies
could be supplied to me, more or less
on demand, within a two-month
period of time)."
In 1978, Welsch directed Rewald to
replace CMI with a new company,
Rewald cultivated
Enrique Zobel for the
CIA through joint
ventures. "Our whole
purpose in developing
Zobel was he was
very, very close to
President Marcos.
And, we were getting
very, very high
intelligence on
Marcos' frame of
mind, his moods,
his intentions."
Bishop, Baldwin, Rewald, Dillingham
& Wong. During the initial phase of
BBRDW, Sue Wilson, formerly of the
National Security Agency (NSA), was
hired. "Her experience with the
NSA," says Rewald's affidavit, "was
more than merely that of a secretary,
and thus we were starting to develop
more of an intelligence profile. Sue
Wilson was brought in by Sunny
Wong for her intelligence background
in the hope that we might attract more
Agency work. She was approved by
Eugene Welsch."
In the exhibits is a copy of Wilson's
career resume. It indicates that she
had top level security positions at
NSA. Wilson later stated on KITV/4
in Hawaii that it was "pretty common
knowledge" that BBRDW was a CIA
operation. And that she had regular
contacts with the CIA for BBRDW.
Welsch was replaced by Jack
Kindschi as CIA Chief of
Station irk Honolulu. Under
Kindschi, another cover op-
eration was created, ; Canadian Far
East Trade Corp. Kindschi was to pay
its expenses and phone bills. In the ex-
hibits are copies of Kindschi checks
corresponding to Canadian's phone
bills. There is also a State of Hawaii
incorporation statement. Dated May
30, 1979, it was signed by Rewald as
vice-president/treasurer. In court, in-
terim bankruptcy. trustee Thomas
Hayes stated that BBRDW was pro-
viding a "special phone" for the CIA.
A reporter found a black phone in
Rewald's office separate from
BBRDW's switchboard. It was listed
in the telephone directory under Cana-
dian Far East Trade Corp. CIA agents
James T. Edwards (aka "James T.
Bishop") and Jack Porter (aka
"Thomas Thompson") operated out
of Canadian acording to the affidavit.
Another full-time CIA agent pro-
vided cover was Charles H. Richard-
son, aka "Richard P. Cavannaugh."
Richardson operated out of Califor-
nia on projects involving the Far East
and the Middle East. His cover was
CMI which had been taken over by the
CIA. This was done without the
knowledge of CMI's vice-president.
In the exhibits are letters from Richard
P. Cavannaugh to Rewald regarding
this cover arrangement. Also, there
are copies of Cavannaugh's call card
and a printer's bill for same.
"As time progressed," says the af-
fidavit, "our activities on behalf of
the CIA began to expand from merely
maintaining cover names." An exam-
ple given was Kindschi's request to
facilitate an operation to investigate
the feasibility of trading with the Peo-
ple's Republic of China. This was to
be carried out by Wilfred K. Dorociak
(aka "Thomas Tom Song"). He pos-
ed "as Chinese American born on the
West Coast." A copy of apparent in-
structions about Dorociak from Kind-
schi is in the exhibits. In concludes:
"The station is grateful that `R' has
agreed to facilitate request. Again,
our thanks for his support." "R,"
says Rewald, was his codename which
had replaced "Winterdog." There are
also lists of intelligence questions
(CIA requirements) and an internal
CIA report about the PRC in the ex-
hibits.
Argentina
The following is a copy of the
rarely-seen CIA "hit-lists." In this
case, for Argentina and Mexico. Per-
sons on the hit lists were individuals of
interest to the CIA to be assessed and
possibly cultivated by Rewald. Calvin
Gunderson had been given a copy of
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this hit list. He informed us that
Rewald had asked him to go to Mexico.
to undertake this assignment. Gunder-
son was under the belief that this in-
formation was for the CIA.
Also in the exhibits was a two-page
briefing paper on Argentina. Its
headings were: Present status of
Argentine banking system; Status of
the peso; Argentine debt; Union
demands; and Argentine credit status.
Rewald went to Argentina under the
guise of BBRDW and polo. Osten-
sibly, he was attempting to buy a
bank. As the attached requirements
sheet indicates, Rewald was mainly
gathering financial intelligence. As
usual, the use of such information to
U.S. corporate and financial investors
is immediately evident. While its
relevance to true U.S. national securi-
ty is hard to decipher.
ARGENTINA
Guillermo Walter KLEIN,
Economist and Attorney
Adalberto Kreiger VAS (?),
Former Minister of Economy
Alvary Carlos ALSOGARAY,
Economist
Domingo CAVALLO, Former
Central Bank President
Juan OCAMPT, Banker
MEXICO
Manuel CLOUTHIER, President
of the Businessmen's Co-
ordinating Council
Emilio Goicoecea LUNA, Presi-
dent of the Confederation of
Chambers of Commerce
Alfonso Pandal GRAF, President
of the Confederation of National
Chambers of Industry
Jose Maria Basagioti, President
of the Board of the Alfa
Industrial Group
Ernesto Fernandez HURTADO,
Chairman of RAMSA and Uncle
of DE LA MADRID
Need personality assessment and
biographic information. Current in-
formation on their expertise, in-
fluence with the government and in-
ternational connections, and at-
titude toward the U.S. is needed.
Comments on the likelihood of any
private sector leaders being asked to
assist the government in any way
would also be valuable.
REQUIREMENTS FOR ARGENTINA
MAIN FINANCIAL CONTACT:
MARTINEZ HOZ
An assessment of Argentine credit
statis [sic) with western banks.
Rewald poses with Robert Jinks, BBRDW's Investment development manager, and
Sonny Wong, president of BBRD W. Jinks has stated in a lawsuit filed against the CIA
that BBRD W was a CIA operation and that he was consciously involved in the
company's CIA functions.
"In other words, what lies we
were to tell."
-Ron Rewald
What effect has the hostilities had on
union demands during this period of
time.
Who has supplied financial assistance
to Argentina should war break out.
Perception of Argentine access to
major credit marketable long-term
and short-term in nature for funds.
What contingency plans does Argen-
tina have in the event hostilities break
out after May.
What exposure do European banks
have in Argentina, namely United
Kingdom.
How are United Kingdom debts be-
ing serviced under present cir-
cumstances.
Statis [sic] on Argentine banking
system.
Describe use of guarantee and non-
guarantee requirements to the private
sectors by banks.
What effect has the crisis had on the
Peso in the black markets of Argen-
tina.
Rewald went to Chile for the CIA
under the guise of BBRDW and polo.
BBRDW consultant Michael Dailey, a
Hawaii polo player, assisted in the
project. Because he had business con-
nections there. And was fluent" in
Spanish. BBRDW telexes from Dailey
to Chile discuss his trip. It is not known
whether he was aware of the CIA's in-
volvement.
While in Chile, Rewald says he was
briefed at the British Embassy. There
he received classified information that
the Argentines had shot down a British
Harrier jet with an intercept missile.
And, a British naval vessel had been
sunk.
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In Chile, Rewald was attempting to
buy a bank, $1 million for a $16 million
bank. In this regard, he met with the
second-ranking member of the CIA-
installed Pinochet junta. He offered to
give BBRDW 28,000 acres of prime
agricultural land in Southern Chile.
For arranging the bank deal.
Gormmy
The following were Rewald's CIA
requirements for Germany. Rewald says
he passed them on to BBRDW consul-
tant, Ned Avary. Who was apparently
involved in a multitude of CIA/BBR-
DW operations.
1. Prospects for the West German
elections to be held March 1983.
2. West German reaction to the sta-
tioning of U.S. Intermediate Nuclear
Forces (INF) in the country, such as
the Pershing II missiles, in summer
1983.
3. Reaction to ? the recent agreement
by the European Community to limit
steel exports to the U.S.
4. Reaction to U.S. concerns over
technology transfer to Eastern
Europe by West European firms;
reaction to U.S. easing of restrictions
on European subsidiaries selling
pipeline equipment to the USSR.
5. Current West German political-
economic concerns regarding the
Western alliance and NATO, in view
of the NATO Ministerial Meetings in
December 1982.
6. West German expectations regard-
ing the visit of Soviet Foreign
Minister Gromyko to the country in
January 1983.
Ina letter from Avary to Rewald,
Avary said he had passed on the Ger-
many requirements to various German
sources including Jon Lodeesen. Jon S.
Lodeesen is deputy director for (Soviet)
broadcast analysis at Radio Free
Europe/Radio Liberty in Germany.
He worked for Radio Liberty'when it
was a CIA program. Prior to that, he
served in the intelligence section of the
U.S. Embassy in Moscow. He was ex-
pelled from the Soviet Union for
'`suspected spy activities."
More recently, according to
Avary's letter, Jon "visited his father
and in a 2-hour confidential 'unload-
ing'-had described in graphic detail
many of his interviews with Soviet
double agents, disidents [sic] and
escapees." In the letter, Avary says he
CIA cover sheets
contain phony names
of personnel and the
financial make-up of a
company. The cover
sheet for H & H
Enterprises, set up by
Rewald at the request
of the CIA's top man
in Hawaii, states, "All
expenses related to
the operation of this
cover shall be reim-
bursed by the CIA.. '
gave Lodeesen the Germany re-
quirements and asked for a report.
"Obviously," added Avary, "Jon
Lodeesen's report will comprise
unclassified although expert, infor-
mation-from a truly superb source."
However, "If indicated, a personal
`family' visit to Jon in Munich by
myself would have an excellent chance
of obtaining any special data required
and requested-of a highly classified
nature."
We have obtained a copy a Lodee-
sen's report. It consists of one-
paragraph responses to each of the six
questions. In Lodeesen's note accom-
panying the report, he described the
replies as: "The highly opinionated in-
sights appended are the fruits of the
labors of the deranged mind of a super
patriot living in involuntary exile."
We have also obtained another in-
teresting memo from Avary to Re-
wald. " 'Dolfo' Galland," says the
memo, "is a highly respected and
superbly successful businessman-
industrialist in Bonn, West Germany.
He represents top U.S.A. Aircraft
Corporations like Sikorsky, General
Electric, Hamilton Standard, Pratt
and Whitney, etc.
"As a personal and professional
friend of mine for many years-BBR-
DW has a sympathetic and powerful
potential contact in General
Galland." The stated subject of
Avary's memo was: "An `Ace' Ger-
man Friend, for BBRDW." General
Adolf Galland was the Nazi Supreme
Commander German Fighter Forces
during World War II. Obviously, the
CIA has a blind eye for Nazis with
superb business acumen.
Guam
Rewald had incorporated a trust
company in Guam. We have obtained
a copy of the incorporation cer-
tificate. Rewald explained the objec-
tive of the trust.
"The agency always needed
bankers. And laundry operations
and so on. They were always pushing
us to put up offshore banks and
things of this nature. We would
spend, I had a couple of people in
our company working on that and
we would send it [sic] down to
research offshore bank possibilities
in the Caymans and the Cook Is-
lands. . . . This is what we were doing
in Guam. Guam was going to try an
offshore banking system. And we
opened the trust company there. We
had the only trust company approv-
ed for Guam. The full purpose of it
really was going to be moving for-
eign funds into the United
States....
"...It's an important part of the
Agency function to be able to leave
funds around the world. And banks
and trust companies are the easiest
way to do that."
An article in the Pacific Daily News
(7/21/83) reported about BBRDW's
trust company in Guam. It said that
BBRDW's objective was to turn
Guam into a Netherland Antilles-type
tax haven for investors. Staffing the
Guam office were Allen and Mary
Pelletier and BBRDW consultant,
Dan Clement. According to Clement:
"I will work with families whose goals
are perpetuating their wealth and im-
proving their financial position."
Hong Kong
Another BBRDW consultant
working with the Guam trust
was Robert Jinks. He was BBR-
DW's investment manager. And
told the Pacific Daily News that
"Guam will see a lot of Hong Kong
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money invested here" if BBRDW
could turn Guam into an offshore
banking center. There is at present a
worldwide scramble for the capital of
Hong Kong which reverts back to the
People's Republic of China (PRC) in
1997. Right in the center of this scram-
ble is the CIA. Battling for private
U.S. corporate and financial interests:
"The CIA," says Rewald's affidavit,
"determining that it would benefit the
United States to attract to the United
States the `flight' of foreign capital...
determined to use [BBRDW) as the
vehicle to attract such capital."
Thus, the CIA had BBRDW con-
duct a study on how to lure Hong
Kong capital to Hawaii. The CIA,
through a "John C. Edwards" funded
the study and provided much of the
data according to Rewald. The study
called for corporate tax incentives and
other legislative changes to lure Hong
Kong investors to Hawaii. In conduc-
ting their research for the study in
Hong Kong, BBRDW personnel made
key contacts and publicized BBRDW
as a haven to place Hong Kong
capital. They also had input into the
on-going media campaign to stimulate
the flight of Hong Kong capital.
Robert Jinks has now stated public-
ly that BBRDW was a CIA operation.
And that he was consciously involved
in the CIA functions of BBRDW. In a
lawsuit filed against the CIA in the
U.S. District Court in Northern
California, Jinks (plaintiff) made the
following charges.
A. Plaintiff met with [name deleted]
the Station Chief of the Honolulu
office of the C.I.A. in the office of
Bishop Baldwin on several occa-
sions. Discussions revolved around
activities Bishop Baldwin was engag-
ed in on behalf of the C.I.A. On no
occasion did [name deleted] ever ob-
ject to reference to the C.I.A. or
disavow C.I.A. envolvement [sic].
B. Plaintiff was shown a telephone
in the office of Ronald R. Rewald at
Bishop Baldwin that was a direct and
exclusive line to C.I.A. head-
quarters. Plaintiff overheard
numerous conversations between
Ronald R. Rewald and C.I.A. per-
sonnel concerning C.I.A. activities.
C. Plaintiff was introduced to
numerous C.I.A. agents, either ac?
tive or retired, who were employed
by Bishop Baldwin. Plaintiff was
able to confirm through outside
"I became concerned
that I did not have,
and needed to have
something sufficient in
the way of academic
credentials to carry
off the cover of an
international
businessman." So the
CIA provided Rewald
with diplomas in
business administra-
tion and law from
Marquette University
in Wisconsin.
sources that these personnel were in
fact employees or past employees of
the C.I.A.
D. Plaintiff was made aware of the
association of [name withheld] with
Bishop Baldwin. [Name withheld]
was the former senior C.I.A. repre-
sentative in Moscow, responsible to
the American ambassador and
C.I.A. for all aspects of C.I.A. in-
telligence activities in the U.S.S.R.
E. Plaintiff was shown a study, com-
piled by Bishop Baldwin in 1978, that
analyzed the economic consequences
of recognizing Communist China by
the Nixon administration. Plaintiff
was told that the report had been
prepared by the C.I.A. on a confi-
dential basis for President Nixon.
F. Plaintiff accompanied Ronald R.
Rewald and [name withheld] on an
interrogation mission of a refugee
from Afganistan [sic] shortly after
the Russian invasion into
Afganistan [sic]. Plaintiff was told
that the mission was being con-
ducted for C.I.A. purposes.
G. Plaintiff was introduced to [name
withheld), the former Station Chief
of the Honolulu office of the C.I.A.
Plaintiff was told that [name with-
held] was now a "consultant" to
Bishop Baldwin.
H. Plaintiff made a trip with Ronald
R. Rewald and [name withheld] to
Hong Kong using an alias for the
purposes of obtaining information
regarding banking policies in light of
the treaty negotiations between the
British and Communist China over
the future transfer of ownership of
Hong Kong.
I. Plaintiff saw in the office of
Ronald R. Rewald a magazine enti-
tled "Association of Former In-
telligence Officers" that had Ronald
R. Rewald's name on the mailing
label. Also on the wall was a plaque
that said that Ronald R. Rewald was
a member of the Association of
Former Intelligence Officers. On,
numerous occasions while plaintiff
was in the office with [name with-
held] and [name withheld) who were
well known C.I.A. officers, no men-
tion was made of Ronald R. Rewald
not being an officer of the C.I.A.
J. Plaintiff was told by Ronald R.
Rewald that he had requested the
help of [name withheld] of the
C.I.A. to stop an IRS audit of
Bishop Baldwin for fear that their
covert activites would be uncovered.
Plaintiff learned of this request in
the presence of [name withheld], a
known C.I.A. officer who did not
disavow the request.
K. Plaintiff Robert W. Jinks had
numerous other meetings with Ron-
ald R. Rewald and [name withheld]
to discuss C.I.A. operations con-
ducted by and through Bishop
Baldwin.
India
Even dirt poor India was a financial
target of the CIA under the guise of
national security. The Fund of India
(FOI) was a pending venture which the
CIA encouraged Rewald to join. We
have obtained an FOI prospectus. Its
officers were to be: Rewald, Shauna
Pasrich, "Chan" Pasrich, David J.
Baldwin, Sunny Wong, Teri Wong,
and Gaylord Nelson, former U. S.
Senator and Governor of Wisconsin.
One stated objective of FOI was: "To
channel some of the `holy money' in
the hands of Foundations and
Ashrams for direct investments into
India or through the Fund of India."
Rewald explained FOI's purpose in
the following exchange.
Q: "What was the Fund of India
going to do? Or supposed to
do?"
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Dave Baldwin, a BBRD W consultant seen here with a friend, helped arrange a military
hardware sale to Indira Ghandi. He signed a CIA secrecy agreement.
RR: "They wanted to bring out a
whole lot of money out of In-
dia. And, they wanted, they
wanted also to utilize funds that
belonged to Indians that had
left India...."
"I mean what were they going
to do with this money?"
RR: "It was going to be invested in
the United States."
The Philippines
I n the exhibits was a list of corporate
directors, clergy, political figures,
educators, labor officials, and
media personnel in the Philippines.
Rewald was supposed to cultivate
them for the C.I.A. In a confidential
memo dated August 19, 1983 from at-
torney Robert Smith, entitled "CIA
Contacts and Operations," the
following was noted.
(3) Also, the CIA is concerned to
monitor Marcos in the Philippines,
both in respect of capital flight and
in that Mrs. Imelda Marcos is a close
friend of Jean Ariyoshi [wife of
Hawaii's governor] and is buying
real estate through another name. It
is [Enrique] Zobel who is close to the
Marcos family, and this is Ron's
contact.
(4) Additionally, Zobel and
members of the Marcos family-all
involved in the Philippine govern-
ment-have the project being pro-
posed in Soto Grande, Spain ......
In a confidential attorney/client in-
terview, Rewald discussed Imelda
Marcos.
"We were keeping a close eye on
Mrs. Marcos the last couple of years
under the direction of the Agency.
She had been negotiating on pur-
chasing some land here, all this is
legal. They're allowed to do that.
But it was the Agency's feeling that
they were doing it in anticipation of
early exile and obviously they looked
to the United States. They had
developed a close relationship with
[Hawaii's] Governor and Mrs. Ari-
yoshi. And we had developed a very
close relationship with the Gover-
nor's chauffeur. And we really were
coming up with real good informa-
tion."
BBRDW did contract Legal In-
vestigations, Inc. for a "confidential
investigation" of Hawaii property
purchases by Marcos. The report
(Case #030281-01) was submitted to
Sunny Wong on March 4, 1981. It was
the understanding of the investigator
that the information was for the CIA.
According to the report, Marcos
had purchased two estates in 1977 and
1980. Through Bienvenido and
Oliceria Tantoco, Marcos purchased a
28,714 sq. ft. estate at 2338 Makiki
Heights Drive for $717,000 ($200,000
down payment). The Tantocos are
friends of Marcos and reportedly
owners of the Rustan Shopping
Center in Manila. Through Antonio
Floirendo, Marcos bought the 46,280
sq. ft. Helen Knudsen Estate at 2443
Makiki Heights Drive, across the
street from his other estate. The price
was $1 million with an $800,000 down
payment. Floirendo is reportedly a ma-
jor land owner in the Philippines and a
supporter of Marcos.
As mentioned earlier, Enrique Zo-
bel claimed that his only connection to
Rewald was through polo. In a con-
fidential attorney/client interview,
Rewald said the following about
Zobel.
"Enrique Zobel. This is such a
key thing and such a big deal.
Because he was the number one,
number three person on the
Agency's list of most influential peo-
ple around the world. They wanted
to establish contact with and
develop. And, I had developed that
over a period of many years. My first
contact with Enrique was back in
'79, and it developed to the point in
the last couple of years where, you
know, we were doing very, very big
things. But, Ayala-Hawaii Corpora-
tion was never set up to develop or
handle polo.
"First of all, I had everything
there was in polo already wrapped
up in the Hawaii Polo Club which
was a corporation. If I had wanted
to do something with Enrique in
polo, we would have done it through
there. Ayala was set up really to hold
a transaction we were closing in Soto
Grande, Spain where we were trans-
ferring millions of dollars and much of
that, half of it would have gone back
to Enrique. And, Ayala is really his
company, and his name and
everything else. It was just being set
up here to facilitate that, and, you
know, at the Agency's urging."
Zobel never mentioned a joint proj-
ect in Soto Grande, Spain. BBRDW
files contained several items regarding
Zobel, BBRDW, and Spain. One was-
a note to Rewald from his secretary. It
says: "Enrique Zobel would like to
know when you are going to Spain. He
is holding a house for you. . . . "
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Another item was a June 27, 1983
report from BBRDW consultant, Ned
Avary. It was a detailed assessment of
the Soto Grande community. It por-
trayed Soto Grande as a highly-
attractive investment. And that
"Soto Grande has a past and possibly
present cash flow problem." Finally,
it said the reported owners included
the Ayala Family of Manila (75%).
BBRDW files also included telexes
from Avary originating in Soto
Grande.
A fourth item was a financial
viability study on Soto Grande by
Richard Ellis.
Before being jumped on by Zobel,
the Honolulu Star Bulletin reported
that the Philippine government was
scrutinizing the Ayala-Hawaii Corp.
The government was concerned that
Zobel might be placing money directly
into Ayala-Hawaii. This way he could
avoid exchanging pesos through the
Philippine Central Bank. Thus, he
could secretly export his money to the
U.S. and there would be no govern-
ment record of this flight of capital.
Rewald claims the CIA and BBR-
DW were so sheltering foreign
monies. In a memo from attorney
Robert Smith, attorney Peter Wolff
argued that the reported, pending
Zobel/BBRDW project in Soto
Grande was to secretly export Zobel's
money to Spain, then to shelter in
Hawaii.
Rewald explained the CIA's cultiva-
tion of Zobel. "And, our whole pur-
pose in developing Zobel was he was
very, very close to President Marcos.
And, we were getting very, very high
intelligence on Marco's frame of
mind, his moods, his intentions, and,
you know, movements at high levels in
the Philippines. And, that was the
purpose of it."
In the same interview, Rewald ad-
dressed Zobel's assertions that he had
not become involved except for polo.
Also, Zobel's contention that he ad-
vised others not to trust Rewald and to
withdraw their money in BBRDW.
"That was back in 1980 that Enrique
supposedly did that. And, it's ob-
vious to see that everything we were
doing with Enrique in the last couple
of years happened after that. And, if
he was advising people that we were
doing something wrong and they
should take their money out, he was
sure acting funny because that's
when we set up Ayala-Hawaii.
That's when we put together the
project in Spain with the Sultan of
According to Rewald's
affidavit, "We were
approached to
arrange through the
CIA for the supply of
military hardware to
Indira Ghandi."
"Kickbacks and bribes
were the key to the
whole India thing."
Brunei. That's when we planned this
trip. November, he was introducing
me personally; had meetings set up
with President Marcos and myself
and dinners and so on. Even though
I was going on this mission, the
[U.S.] government mission, in
November to the Philippines, Enri-
que had set up private dinners and
meetings besides that, you know,
which.. .plus we were doing an
awful lot. None of it relating to
polo....
". . . But, Enrique in anticipation of
that had set up his own personal
meetings between Marcos and Enri-
que and I and, you know, dinners
and that was being handled separate-
ly on that Reagan trip. Some of the
delegation was going on to Hong
Kong or other places afterwards. I
don't even remember where they
were. I think possibly Indonesia or
something, I'm not sure. I just don't
recall. And, Enrique had asked me
to stay on there which I had agreed
to do, you know. And, we were go-
ing to do some business."
In a separate confidential at-
torney/client interview, Rewald
elaborated about Zobel.
"Everybody in town [Hawaii] had
tried to develop a relationship with
him. And I started doing that about
3 or 4 years ago. It developed to the
point where last time he was in town
we had dinner together maybe 4 or 5
times in about a week and a half.
And his kids and all sorts of things.
We had a very, very close relation-
ship and we were getting very, very
high level intelligence out of him on
Marcos. They would have dinner
together, entertain other politicians
and world leaders together. And
he'd come back and tell me about
it.... Because we were talking about
finance, investments, Philippines
and the United States... we really
hit it off and we developed a very
close relationship. So we were really
using this to monitor not only Presi-
dent Marcos, who we were getting a
lot of intelligence on him, but the
financial world in the Philippines, in
Europe, where ever they [Ayala]
had... he owns banks in San Fran-
cisco, on the mainland, and large
projects in Spain and in
Europe...."
When asked whether Zobel was
aware of the CIA involvement, Re-
wald answered: "Yeah, I believe he
was." Rewald added: "And, he was
an easy talker. I mean, he was very
opinionated. He was not a fan of Mar-
cos. Although he was, you know, very
close to Marcos. They would have din-
ner together. And, he would relay,
you know, all the type of information
we wanted freely, you know. But,
understand, we were saying `yes' to
everything he wanted too."
Indonesia
In the affidavit, Rewald says, "We
were presently funding small expenses
to Mr. Gardell Simpson, the Indone-
sian Consul General here. I think we
were covering his car payments. He
was to name me Honorary Consul
General this Fall [1983], which would
have further opened the door for high
level Indonesian intelligence."
Simpson maintained an office at
BBRDW. In a confidential lawyer/
client interview, Rewald added that
his appointment would be the "entry
to our doing a lot of work with the
government in Indonesia.... I was
being asked to do more and more
... and we [CIA] were getting a lot out
of it too."
In Rewald's personal papers there
was a letter from Gardell Simpson,
Jr., Honorary Vice Consul for In-
donesia in Honolulu. Dated March 8,
1983, it read, "With as strong a
language as the Indonesians are wont
to use, it was `assured' that upon Mr.
Rehberg's retirement from PRI and
his resignation as the current
Honorary Consul in Honolulu, your
name would be presented for the
honorarium to President Soeharto.
Now, please understand that this is
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not set in concrete or guaranteed;
however, at this juncture the position
is yours if at the time of appointment
you are still desirous of same."
Simpson began his letter by saying it
was a "trips report" for the period
February 25-March 4, 1983 to Wash-
ington, D.C. He added, "Attached
please find most of my expenses incur-
red. I have another receipt for approx-
imately $300 but am unable to find it.
When I do will submit." The report
was an itemization of Simpson's daily
visits with various Indonesian officials
in Washington.
Simpson promised to keep Rewald
informed of Indonesian dignitaries
passing through Hawaii. And to ar-
range meetings with them. "The peo-
ple in Washington felt that this could
be accomplished," said Simpson,
"and an exposure of yourself
[Rewald] would benefit you when ap-
pointment time comes."
Simpson stated that "I look for-
ward to a long and lasting relation-
ship." Still he cautioned: "I cannot
over emphasize the requirement for
confidentiality at this time; I'm sure
you can appreciate my position."
The same day, Simpson sent a letter
to the Indonesian Counselor in Wash-
ington, Sadijar Sastrohandojo. "Now
that I have thawed out from your
frigid D.C. weather," said Simpson,
"I ... extend my most sincere thanks
for all your efforts on my and Mr.
Rewald's behalf.
"I have relayed to Mr. Rewald the
circumstances under which his
recognition will be forthcoming and
he is anxiously awaiting the oppor-.
tunity to serve."
One Indonesian connection to
Rewald was the wealthy industrialist,
Indri Gautama, a BBRDW consul-
tant and investor. There are many
photographs of Rewald and Guatama
together in business and social set-
tings. Rewald says he incorporated
Hawaiian-Arabian Investment Com-
pany, Inc. on July 2, 1982 and the
United Arab Emirates Investment Co.
with Guatama. In Rewald's papers was
a share in Hawaiian Arabian Invest-
ment. It showed it to be incorporated
in Hawaii on July 2, 1982with Rewald
as president and secretary.
A notice in the Pacific Business
News (8/30/82) reported both com-
panies had been incorporated in
Hawaii. And Guatama was treasurer
of both. Notarized State of Hawaii
corporation papers exist for both
Hawaiian-Arabian and United Arab
Sue Wilson, a BBRDW
employee who had
worked for the
National Security
Agency, told a Hawaii
TV station that it was
pretty common
knowledge" that
BBRDW was a CIA
operation. She had,
she said, regular
contacts with the CIA,
for BBRDW.
Emirates. They list Guatama as
treasurer for both.
Guatama's precise role is not
known. But, Rewald's affidavit does
say that: "The Agency's concern is to
know what OPEC countries are going
to do so as to gain advance knowledge
on the movement of oil prices. In-
donesia is a leading member of
OPEC.... These covert operations
are ongoing today, and involve ... the
Guatamas, wealthy Indonesian in-
dustrialists.... The ultimate aim was
to place monies with them, at their
disposal, in `investments' in foreign
countries in various joint business ac-
tivities. But these investments were
secondary to the intelligence to be
gathered from them concerning the
OPEC community."
Another example of Guatama's role
was a pending Philippine resort
development project. CIA money,
some $600,000, was to be passed to
Sauud Mohammed through Indri.
The affidavit says: "...I did locate
eight checks in small denominations,
to Indri Guatama [Exhibits 86
through 94], totalling $48,000. This is
but one example of using someone as a
conduit for the funnelling of [CIA]
funds."
The affidavit indicates a G.
Guatama as having $399,893.83 in a
sheltered account (#506) at BBRDW.
This was a CIA/BBRDW service. It
secured an individual's money outside
his or her country. If they had to flee,
the money was waiting for them in the
U.S.
Asked whether Indri Gautama was
aware of the CIA involvement,
Rewald replied. The "Guatamas
maybe didn't [know] for about three
weeks, and then from then on they
did."
Marshall Lon Nol is the former CIA
installed president of Cambodia.
Rewald bought a house from Lon Nol
in Hawaii. And used it as an address
for some of his CIA ventures.
Rewald's affidavit says Lon Nol "ask-
ed for help in supplying arms to fight
the Khymer [sic] Rouge. After talking
to the Agency, all I could provide was
some supportive editorials."
The exhibits include a Rewald let-
ter-to-the-editor attacking Pol Pot
and the Khmer Rouge and a December
4, 1978 letter to Rewald from Lon
Nol. The letter thanks Rewald for his
L-T-E. Advocates the overthrow of
the Khmer Rouge regime. And, re-
quests a "donation" of "weapons"
for "the resistants in the Country. . . "
Domestic Propaganda
R ewald claimed to be planting ar-
ticles in the U.S. press for the
CIA. An illegal domestic pro-
paganda operation. His exhibits
included a "Media Highlights Up-
date" bearing the CIA emblem. A
notification states that the updates are
"to bring to the attention of key In-
telligence Community personnel news
items of interest to them in their of-
ficial capacities. They are for internal
informational purposes only." The
update featured highlights from a
critical review of the anti-CIA film,
"On Company Business." Attached
was a copy of the review. It was by the
ca-right tabloid, Human Events.
Rewald said the CIA would show
him "things that other people had
written." To give him "ideas to write
on and areas they'd like covered..."
In an interview with attorney Robert
A. Smith, the following exchange oc-
curred.
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RR: "Here's an editorial I did on
Cambodia. The agency [CIA]
would direct activity they
wanted created, whether they
be in the area of getting the
word out on certain political
issues there, their economic
issues, this one happens to be
on Cambodia on the commu-
nists and I put on an editorial
which got published."
RAS: "Ya, the article is in there, the
newspaper."
RR: "Ya, all of mine got publish-
ed. I probably put out you
know, dozens, you know in
various papers, and so on... "
The exhibits included Rewald's
editorial on Cambodia printed as a
Letter-to-the-Editor in a Hawaii
newspaper. As well, there was a letter
from Marshal Lon Nol, the former
CIA-installed President of Cambodia.
It thanked Rewald for his L-T-E.
(Rewald once owned Lon Nol's
former home.) Another exhibit was an
editorial by Rewald published in the
Honolulu Star-Bulletin of May 21,
1980. Appropriately entitled: "Re-
building the CIA."
Rewald added the following in
another confidential attorney/client
interview.
RR: "... I was just going to mention
in passing that Jack Kindschi,
when he was station chief, had
me working on some anti-
ACLU [American Civil Liber-
ties Union] project. We wrote a
number of editorials, submitted
them to papers and so on."
"Any overt action on your
part?"
RR: "Not other than editorial
writing. But I know that these
editorials are available some-
where, too. It might be in-
teresting reading for you or
other friends of yours down the
road."
"Kindschi wrote a number of
them. I might have, somewhere
in the files, the name that Kind-
schi used to write them under. I
used my own name sometimes.
Mine is easy. Kindschi - used
another name, because he was
the overt officer here. They
were always trying to subvert
that."
Information Rewald sent to Senator
Edward Kennedy and then-presiden-
tial candidate Ronald Reagan has also
to be seen as domestic propaganda.
The information he sent to Kennedy
"The Agency always
needed bankers. And
laundry operations
and so on. They were
always pushing us to
put up offshore banks
and things of this
nature. It's an
important part of the
Agency function to be
able to leave funds
around the world. And
banks and trust
companies are the
easiest wasy to do
that."
was based on CIA-connected trips.
And, Rewald said he was trying to per-
sonally cultivate Reagan for the CIA
in case he was elected.
Retirement
Rewald claims he wanted to retire at
40. But the CIA continued to escalate
its involvement. This was personified
in John Sager. As Rewald put it,
"Despite all the investigations, many
covert CIA operations continued; and
almost the last thing I did before the
events of July 29 was extend an offer
of employment to one John Sager,
whose resume [Exhibit 791 marks him
unmistakably as a full-tithe in-
telligence and counter-intelligence of-
ficer of absolutely top caliber. There
would have been no reason for me to
hire him except in furtherance of
Agency activities; and thus my rela-
tionship with the Agency was ongoing
as of July 29."
John Sager's resume, reportedly
released by interim bankruptcy trustee
Thomas Hayes, did mark him as a top
level CIA officer. It bears quoting at
length.
Experience
INTELLIGENCE OFFICER-
Soviet and Middle East Af-
fairs-overseas collection opera-
tions, counterintelligence and
security. CIA Headquarters opera-
tions executive.
Intelligence interviewing and repor-
ting on contemporary [1980s] Soviet
internal affairs. Interviewed former
Soviet citizens employed in scientific
and research /development pro-
grams. Prepared intelligence reports
for distribution throughout U.S. in-
telligence community covering crit-
ical-interest topics in computer
hardware technology, petroleum ex-
traction and production planning,
and anti-aircraft weapons systems.
Senior CIA representative in
Moscow, responsible to American
ambassador and CIA headquarters
for all aspects of CIA intelligence ac-
tivities under control or jurisdiction
of CIA representation in USSR. Ten
years' overseas residence and ex-
perience in the USSR and Middle
East, plus numerous official visits to
European capitals and major cities.
Liaison and negotiations with
foreign government officials, civil
and military. Secured and then im-
plemented agreements of coopera-
tion and support to American in-
telligence collection programs.
Developed and participated in train-
ing programs for foreign intelligence
officers. Provided frequent
guidance to program development
within foreign intelligence services.
In the U.S., CIA Branch Chief,
supervised work of thirty intelligence
officers, intelligence assistants and
clerical personnel. Initiated opera-
tional programs to be executed by
overseas field stations and supervised
Headquarters support of these ac-
tivities. Also responsible for prepar-
ing or reviewing personnel perfor-
mance evaluations, assessments of in-
telligence collection programs,
budget preparations and requests,
and reviewing and modifying
organizational structures.
Over the years developed, recruited,
trained and utilized scores of in-
dividuals, foreigners and Ameri-
cans, from a wide variety of occupa-
tions, as sources of foreign in-
telligence. Planned, managed and
directed intelligence support net- .
works and collected, processed, and
reported to CIA headquarters for-
eign intelligence in the military,
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economic, science/technology, and
social fields, especially relating to
the USSR and the Middle East.
Counterintelligence and security,
American embassies abroad. Re-
sponsible for counterintelligence
programs at U.S. Embassy in
Moscow and for personnel security
measures among U.S. Mission
staffs.
Speak, read, write Russian.
Teaching/training (have been train-
ed in then taught others):
Observation, description, report
writing.
Intelligence collection techniques.
Repair of technipal collection
equipment, photographic other.
Psychological assessment techni-
ques and evaluation of potential in-
telligence sources.
Balloon piloting.
Intelligence tradecraft (photog-
raphy, Identi-Kit, flaps/seals and
surreptitious entry, locks'and safes,
secret writing, agent radio com-
munications, surveillance and
countersurveillance).
John Sager's call card says he's a
retired U.S. Foreign Service Officer.
When he was contacted, he said he was
joining BBRDW with regards to in-
vestments in fly-fishing. Informed
that his resume was in hand, he said:
"I thought we had sealed all those."
Rewald says that Sager's fly-fishing
contention was an "absolute lie."
Rewald adds that Sager had previous-
ly worked on BBRDW projects with
Jack Kindschi. That Sager "was a
Russian expert for the most part."
That Rewald was "directed by Kind-
schi to hire" Sager. And that Sager
"was being brought in at that par-
ticular time to work with Kindschi."
IRS
n November 1982, Rewald became
'concerned about an audit of
BBRDW by the Internal Revenue
Service (IRS). It threatened to un-
cover the CIA involvements. So
Rewald contacted CIA station chief
Jack Rardin. To get the IRS to "stand
down" from its investigation, i.e., to
stop.
"Yet the IRS investigation," says
Rewald, "had continued unabated. I
became concerned, at this point, that I
was not getting support from the
Agency which I felt I should be get-
ting. This in turn caused me to decide
that I should take steps to insure that I
Rewald planted
articles in the U.S.
press for the CIA: an
illegal domestic
propaganda operation.
Rewald said the CIA
would show him
things that other
people had written to
give him ideas to
write on and areas
they'd like covered.
have evidence, should the time ever
come when it was necessary to use
such evidence, establishing my con-
nections with the Agency."
So, Rewald secretly taped a meeting
with Rardin. Regarding the IRS inves-
tigation, the following was recorded.
RR:"Jack, has the agency got
back to you on my tax prob-
lem and"
JR: "No, not yet, but I had
some, uh, should have some
information today, I
think."
RR:"You know, I just, you
know, really like to get some
word and assistance and
direction on what I should
do and what I shouldn't do
and"
JR: "Ya."
RR: "So if you could get back to
me on that I sure would ap-
preciate it."
JR: "Ya. Well, as I say."
RR:I don't want any problems
with the IRS."
JR: "No, I know. Sure don't.
We don't either."
To Rewald's surprise, the IRS in-
vestigation continued. We have ob-
tained a copy of an IRS Summons to
Rewald to appear before Camplone
on January 28, 1983 along with
BBRDW's financial records. The
summons was issued on January 17th.
The next day Rewald signed a letter
to Rardin dictated by Kindschi. "By
this time," said Rewald, "Kindschi
was a full-time consultant for Bishop
Baldwin but continuing in CIA ac-
tivities, as Rardin,well knew. Kindschi
was incredulous and angry that Rar-
din had not taken steps to stop the IRS
investigation."
A copy of the letter has been obtain-
ed. It states that the IRS was focused
on Canadian Far East Trade Corp.,
CMI Investment Corp., Hudley,
Johnson & Moore, ITTHENTER,
H&H Enterprises, John C. Kindschi,
and Eugene Welsch. And that the
pending audit "threatens the security
of all subsidiary companies, as well as
Bishop, Baldwin, Rewald, Dillingham
& Wong and myself."
"Can Washington representative,"
continued the letter, "meet with
cleared IRS official to deflect continu-
ing probes or does Washington prefer
to send tax staff experts to Honolulu
to counsel me directly???"
"Request immediate action to
preserve cover and security of com-
pany complex," concluded the letter.
On January 28, 1983, Rewald did
not appear before Camplone. Dana
Smith, then Rewald's corporate at-
torney was told by Camplone that a
stand down was in effect. Smith con-
firmed the stand down that same day
in a letter to Camplone. It said: "I
wish to confirm that the District
Director of the Internal Revenue Ser-
vice has instructed your supervisor,
Mr. Ken Taylor, to instruct you to
hold off in your investigation of my
client, Mr. Ronald R. Rewald."
(Subsequent press inquiries to
Camplone have met with: "No Com-
ment.")
However, Camplone returned to
BBRDW. The Honolulu Star-Bulletin.
claims that in the interim the CIA ex-
tracted one of its agents from BBR-
DW. Because his cover was threatened
by the IRS audit.
So, Smith wrote again to
Camplone.
"I was surprised to learn that you
had visited Mr. Ronald R. Rewald's
residence and that you examined his
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wife concerning the tax matter under
investigation. Your conduct violates
what I assumed was our understand-
ing regarding contacts on this case.
In addition, it was my understanding
pursuant to our telephone conversa-
tion of January 28, 1983 and my let-
ter to you of the same date, that
government intelligence incursion
had resulted in a suspension of your
investigation in this matter pursuant
to your instruction from the District
Director of the Internal Revenue
Service...
"At your earliest convenience, I
would like to meet with you to
discuss the substance of your con-
tacts with the C.I.A., the perimeter
and scope of your resumed inquiry,
and, in view of intelligence agency
interest, the procedural steps you
plan to employ."
Subsequently, says Rewald,
Camplone informed Smith that sealed
instructions had been received by the
IRS Director from the CIA. They
ordered the stand down. And, the IRS
was complying.
By the following June, no IRS audit
of BBRDW had been completed. That
month Rewald received a letter from
CIA agent "Rick Cavanaugh." It
said: "I assume your `tax problem'
with CMI has also all been taken care
of." Presumably, Cavanaugh was
referring to the IRS stand down.
Apparently, a stand down was in ef-
fect. For according to IRS records,
Camplone had served BBRDW with a
second summons for their financial
records on March 7, 1983. BBRDW
provided some of these records. But,
an IRS enforcement action requiring
the remainder was not filed until July
27, 1983. And, a summons was not
served until August 2nd. After
BBRDW had collapsed. To the pres-
ent time, the IRS has not caused any
indictments to be issued in this case.
In March 1984, Senator Daniel In-
ouye of Hawaii told the Hawaiian
press that he had asked the CIA about
its involvement with Rewald and BB-
RDW. "This matter," Inouye was
quoted as saying, "has been under ac-
tive consideration and close scrutiny
by the Agency. Beyond that, I cannot
say anything."
CIA spokesperson, Dale Peterson,
now says that the CIA had only
"slight involvement" with BBRDW.
"But," added Peterson, "I'm not at
liberty to go into details of what the
relationship was. We deny any allega-
tions that suggest we had anything to
do with running the company."
Rewald contends that
the CIA should share
responsibility for the
missing funds because
investor's monies were
mixed with CIA funds
and expended in 'CIA
investments.
Apparently,. some of the
investors agree, for
they are suing the CIA
for their missing funds.
Bankruptcy administrator, Thomas
Hayes, after reviewing the financial
records, now says BBRDW received
$2,744 from the CIA over a four-year
period for phone and telex costs. At
one point, he said this figure was
$5,000. Originally, he said there was
no CIA involvement.
The Honolulu Advertiser (3/28/84)
now reports that some eight CIA per-
sonnel, including Jack Kindschi and
Jack Rardin, invested almost
$500,000 in BBRDW. And, at least
some of them made a profit. Both
Kindschi and Rardin withdrew their
money plus interest shortly before
BBRDW collapsed. Rewald's affida-
vit adds that CIA agent Charles
Richardson had an investment ac-
count at BBRDW. And, that at one
point, BBRDW paid him a 10% com-
mission. We have obtained a copy of a
letter from Richardson requesting this
payment.
Investments by current and former
CIA personnel in a CIA-connected
operation would appear to present a
conflict-of-interest and a highly ques-
tionable practice.
CIA attorney Robert Laprade's
affidavit said that: "The CIA
was not aware of, and had ab-
solutely nothing to do with,
Ronald Rewald's alleged appropria-
tion to himself of the funds of Bishop,
Baldwin, Rewald, Dillingham & Wong
or its investors."
Where's the Money
Rewald could be using his CIA in-
volvements in an effort to evade
potential liability for the $12 to $20
million in missing investors' funds.
But the way he could have used that
was to threaten to expose CIA opera-
tions unless the legal charges were
dropped. Since much of the CIA's in-
volvement with BBRDW has been ex-
posed, Rewald can hardly use it to
evade liability.
What Rewald has apparently con-
tended from the beginning is that the
CIA should come forth and share
responsibility for the missing funds.
Because investors' monies were mixed
with CIA operational funds and ex-
pended in CIA investments. Thus,
"with Agency assistance," as Rewald
put it in his affidavit, "it may yet be
possible, despite all the publicity, and
if Agency connections are utilized, to
realize on these transactions or at least
bring back into Bishop Baldwin
money which has gone into these [CIA]
transactions."
Apparently, some of the investors
agree. For they are now suing the CIA
for their missing funds.
Even if Rewald did abscond with
the money, the CIA bears responsibili-
ty. Because of its admitted involve-
ment, the CIA knew or should have
known of the manner in which Rewald
and BBRDW were raising and expend-
ing investors' funds. Thus, if there
were fraud going on, the CIA should
have become aware of it at some
point. Particularly since it is an in-
telligence agency.
Secondly, Rewald had undergone a
personal bankruptcy and was con-
victed of fraud in Wisconsin before his
involvement with BBRDW. The CIA
either failed to put Rewald through a
security check which would have
revealed the bankruptcy and the con-
viction. Or it did put him through a
security check. Ignored the bankrupt-
cy and conviction. And undertook a
working relationship with him in a
position where he could engage in
fraud. Either way, it would appear
that the CIA was negligent in choosing
Rewald. And thus, bears responsibili-
ty with regards to missing funds.
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