THE SUITS THICKEN IN THE CIA VERSUS ABC

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00494R001100710056-7
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: July 26, 2010
• Sequence Number: 56
• Publication Date: August 12, 1985
• Content Type: OPEN SOURCE

Approved For Release 2010/07/26: CIA-RDP90-00494R001100710056-7 ----
ARTICLE LOS ANGELES TITHES
1 ft
ON P1 12 August 1985
THE SUITS- THICKEN IN
THE CIA VERSUS ABC
By DAVID CROOK,
Times Staff Writer
A tangled web of unusual
lawsuits and legal proceed-
ings may lead to the truth
behind a hotly disputed ABC News
investigation broadcast last Sep-
tember.
The legal contests began last
week in Honolulu with jury selec-
tion and opening arguments in the
long-delayed criminal trial of the
central character in ABC's report
on allegedly illegal operations of
the Central Intelligence Agency.
The trial of former investment
counselor Ronald R. Rewald prom-
ises either to expose ABC's disput-
ed broadcasts as imaginative fabri-
cations or to reveal ABC as a
courageous news organization that
refuses to back down from a story
regardless of the pressure.
Efforts to discuss the various
legal cases with ABC officials have
proved futile. The network's
spokesman on the CIA matter-
David W. Burke, ABC News vice
president and assistant to President
Roone Arledge-has not returnee
repeated phone calls from The
Times.
The 11-month controversy sur-
rounding the ABC report has taken
a significant shift in recent weeks
as questions about ABC's reporting
techniques have overshadowed
constitutional issues involving the
power of government to challenge
news broadcasts.
The legal actions stem from
ABC's claim that it verified alle-
gations-that the CIA used Rewald's
now-bankrupt Honolulu invest-
ment firm-Bishop Baldwin Re-
wald Dillingham & Wong-to en-
gage in a catalogue of clandestine
and illegal activities throughout
Asia and the Pacific.
The CIA has strongly denied
ABC's allegations and charged the
network with lying and creating
the story out of thin air.
The charges and countercharges
are getting their first full hearing in
Rewald's 100-count federal fraud,
tax evasion and perjury trial. He is
charged with swindling nearly 400,
persons out of about $22 million.
According to an attorney associ-
ated with the Rewald case but who
asked not to be identified because
he did not wish to be quoted talking
about an ongoing proceeding, the
Hawaii trial promises to examine
"the two types of stories that have
come out of this case-that this is a
fraud case or whether it had all of
these CIA undercurrents in it."
"It really is a battle between
which side is correct," the attorney
said.
In his opening statement in the
Honolulu court last week. U.S.
Atty. John Peyton said that Re-
wald exploited his limited CIA ties
to bilk investors in his firm, which
collapsed in August of 1983.
Until now, most attention has
centered on the CIA's unprece-
dented efforts to challenge the
veracity of ABC's reporting-in-
cluding a widely criticized and so
far unsuccessful attempt by the
intelligence agency to persuade the
Federal Communications Commis-
sion that the network violated the
FCC's fairness doctrine and en-
gaged in deliberate news distortion.
The CIA has yet to decide whether
it will appeal last month's FCC
decision denying the agency's
complaint against ABC, CIA Gen-
eral Counsel Stanley Sporkin said.
Michael McDonald, general
counsel of the American Legal
Foundation, a Washington-based
conservative public-interest law
firm, insists that the foremost issue
in the ABC-CIA matter all along
has been the network's actions in
the preparation and presentation of
its two-part investigative report
broadcast Sept. 19 and 20, 1984.
McDonald insists that the ABC-
CIA affair is comparable to last
spring's widely reported libel ac-
tions by former Israeli Defense
Minister Ariel Sharon against Time
magazine and by retired Gen. Wil-
liam C. Westmoreland against CBS
News.
The ABC-CIA matter "is a major
case in the same way that Sharon
,and Westmoreland were major cas-
es focusing on the standards and
practices of news organizations,"
McDonald said in a telephone inter-
view. "It's creating a bit of discom-
fiture on the part of news execu-
tives."
Chief among the legal cases
affecting the ABC-CIA matter is
'Rewald's criminal trial, but it is not
;the only legal proceeding touching
,on the ABC broadcast.
-In Washington, the American
Legal Foundation is preparing to
defend the CIA's efforts to contest
the ABC broadcast, and the FCC is
suiting up to defend its conclusion
that ABC violated no federal regu-
lations despite engaging in what
'one commission member, James
Quello, tagged "shoddy journal-
-In New York, the American
Civil Liberties Union is considering
;Taking the FCC to court for allow-
ing federal agencies to, file fair-
ness-doctrine complaints against
TV and radio broadcasters.
-In Los Angeles, the liberal
,-iilericans for Democratic Action
-and Scott T. Barnes, a major source
,for the ABC report, have teamed in
a $145-million libel action accusing
;ABC and the CIA of violating
federal racketeering statutes with
a retraction of a portion of the
disputed news story.
All of these other cases are still
months, if not years, from resolu-
tion. For now, most of the parties
interested in the ABC-CIA matter
are turning their attention toward
Honolulu, where the government
will try to persuade the jury that
Rewald is a swindler whose victims
included even the CIA. Rewald's
attorneys, on the other hand, will
try to portray him as an honorable
CIA intelligence officer left out in
the cold by the agency.
The CIA did to Rewald what it
does when an operation is threat-
ened: "They cover their tracks and
then cut and run," assistant federal
public defender Brian Tamanaha
told jurors in his opening statement
Thursday.
T estimony of investors who
lost thousands of dollars in
Rewald's alleged scam began
on Thursday and is scheduled to
resume Tuesday. The trial is ex-
pected to last about three months.
"If there are any significant
revelations, that might focus new
attention on ABC," said Andrew
Schwartzman, executive director
of the Washington-based Media
Access Project public-interest law
firm. "If something ABC reported
turns out to be completely fabricat-
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ed-or to be true-that would
change the whole posture of the
thing."
ABC has assigned senior national
security correspondent John Scala
to oversee reporting of the Honolu-
lu trial. Scali was not consulted
during the preparation of the origi-
nal two-part investigative report,
which was by Los Angeles-b#sed
correspondent Gary Shepard and
New York producer Charles Stuart.
working directly under William
Lord, executive producer of the
network's top news show, "World
News Tonight."
Appearing to, have confirmed
much of Rewald's criminal defense,
Shepard and Stuart reported that
Rewald's firm was a front for
illegal covert CIA operations, in-
cluding clandestine arms ship-
ments to Taiwan, India and Syria.
In addition, ABC broadcast charges
that the CIA plotted to murder
Rewald and threatened the life of
an investor in his firm.
ABC later retracted one murder
threat (a move that has led to a
libel suit being filed by alleged CIA
hit man Barnes against ABC) while
the subject of the second alleged
threat-Bishop Baldwin investor
Theodore Frigard-has changed
his story.
Subsequent to the ABC broad-
casts, the CIA vehemently denied
the charges while acknowledging a
limited involvement with the busi-
nessman and the company. Public-
ly, the CIA admits to having a
signed secrecy agreement with Re-
wald.
According to individuals who
have seen a secret CIA affidavit
filed in the Honolulu court, the
agency also admits that seven
intelligence officers used the firm
as so-called "commercial" or
"non-official" cover. The CIA op-
eratives represented themselves as
Bishop Baldwin employees while
on CIA intelligence missions, and,
according to bankruptcy records,
the agency paid Bishop Baldwin
nearly $3,000 in telephone, Telex
and stationery expenses from early
1979 to late 1982.
Bankruptcy proceedings also es-
tablished that as many as 14 CIA
agents invested as much as
$300,000 in personal funds in Bish-
op Baldwin.
The CIA denies, however, that
any of its agents associated with
the firm committed the illegal acts
that ABC claimed occurred.
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