COUNTERSPY: CIA FRONT
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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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Senator Laxalt and the Mob Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 ?. 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Money need formed But w _ - _ _ _ - June-August 1984 Counterspy Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Counterspy June-August 1984 3 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 dye' ~~ tlu ~oja' 11 I it l , low ~ ,.~trn?,^ a ,;~ a " It gals acarler awry 11m you play it and it's only one-tenth the cost of all the other video games." 4 June-August 1984 Counterspy Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Counterspy June-August 1984 5 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 6 June-August 1984 Counterspy Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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. " Counterspy June-August 1984 7 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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, Counterspy June-August 1984 9 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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. Counterspy June-August 1984 11 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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- Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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. Counterspy June-August 1984 13 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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- Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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." Counterspy June-August 1984 15 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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. Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Counterspy June-August 1984 19 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Counterspy June-August 1984 23 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14 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." Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 Counterspy June-August 1984 25 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 Approved For Release 2010/06/14: CIA-RDP90-00845R000100130002-1 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 i