WHY AN ITALIAN SPY GOT CLOSELY INVOLVED IN THE BILLYGATE AFFAIR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000403630010-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: February 9, 2012
• Sequence Number: 10
• Publication Date: August 8, 1985
• Content Type: OPEN SOURCE

Declassified and Approved For Release 2012/02/09: CIA-RDP90-00965R000403630010-8
ARTICLE APPEARED WALL STREET JOURNAL
8 August 1985
UN PAGE ( MWOM
Tale of Intrigue
Why an Italian Spy
Got Closely Involved
In the Billygate Affair
Journalist Michael Ledeen,
Pursuing the Story in 1980,
Got Agent Pazienza's Aid
What Is the Haig Connection?
By JONATHAN KwrrNY
Staff Reporter of THa W Au. STRRET JOURNAL
An Italian court called it "the Libyan
business of Billy Carter."
Most Americans remember it as "Billy-
gate"-the scandal that erupted in 1980 af-
ter it was learned that the president's
brother had visited Libya in 1979 and had
received a $220,000 loan in connection with
an oil deal.
Col. Muammar Qadhafi's regime was
also said to have paid him $50,000 to help
Carter was said to have met with Palestine
Liberation organization chief Yasser Ara-
fat on the trip. The affair alone may not
have cost President Carter reelection, but
it didn't improve his odds.
What concerned the Italian court was
the role in exposing "the Libyan business"
played by Francesco Pazienza, who in 1980
?y p
was a hhlac Italian me Bence
agent.
Mr. Pazienza was arrested by U.S.
agents in New York last March 4 and re-
mains jailed without
bail while a federal
judge decides
whether to order
him extradited to It-
aly to stand trial.
The charge: a $250,-
000 fraud on Banco
Ambrosiano, which
sank under the
weight of $1.3 billion
in bad loans to Vati-
can-connected com-
panies in 1982. Mr.
Pazienza served as
a consultant to the
bank's chairman.
In Italy, Mr. Pazienza is also charged
with a host of other offenses, all of which
he denies, including extortion, cover-ups of
right-wing terrorism that killed scores of
people, cocaine possession and "criminal
associations of a Mafia type."
Mr. Pazienza already has been con-
victed, to a entin, o some charges.
Among them: that he abused his inteW-
gence o using extortion and fraud to
obtain embarrassing facts about Bill te,
and that he obtained the facts "in collabo-
ration c ae een an American
ourncommentator, conservative
thin7- t 'ait-r and consultant on terrorism
and other matters for the State and De
fense de artments. Mr. Ledeen wasn't in-
dicte .
By his own admission (though he denies
it was a crime), Mr. Pazienza obtained the
information on Billy Carter with a classic
stratagem of spookdom. He says he ar-
ras ed tout a hidden tape
iecorrder on an
Italian
burn fist st an n MEW
which em o enza as wen. e
journwas friendly Michelle Papa,
an Italian lawyer representing Libyan in-
terests in Italy. Mr. Papa spilled out pre-
viously undisclosed details of Billy Carter's
trip in a conversation with the journalist.
The tape was then turned over to Mr. Le-
deen.
In preparing the story, Mr. Ledeen
teamed up wih Arnaud de Borchgrave, like
Mr. Ledeen an exponent of hard-line po-
licies toward the Soviet Union (t ry
on ptge+ 12). A former Newsweek reporter,
Mr. de Borchgrave now edits the Washing-
ton Times, a newspaper affiliated with the
Rev. Sun Myung Moon's Unification
Church.
The expose was published in the New
Republic magazine. Headlined "Qadhafi,
Arafat and Billy Carter," and subtitled
"Further Arabian Nights of the President's
Brother," the story was picked up by the
press and television. It helped keep "Billy-
gate" in the news as President Carter was
seeking reelection.
Accuracy Questioned
Some newspapers questioned the accu-
racy of the story by noting Mr. Carter's
subsequent denials that he had taken the
$50,000 and that he had seen Mr. Arafat.
Messrs. Ledeen and de Borchgrave de-
fended their story, which said that Mr.
Carter hadn't returned their phone calls
seeking his comments on the account. Ac-
curacy in Media, a conservative "watch-
dog" group, ran advertisements criticizing
newspapers that questioned the Ledeen-de
Borchgrave article.
11 Carter wasn't the only one alleg-
edly getting money from a foreign govern-
ment. Mr. Pazienza says that Mr. Ledeen
sometimes worked for Italian ce
and received at least $120,000 from SISMI,
pus expenses, in 1980 or 1981. At least
some of the money was paid into a Ber-
muda bank account, Mr. Pazienza says. At
SISMI, Mr. Pazienza says, Mr. Ledeen
warranted a coded identification: Z-3.
Mr. Ledeen says he was never called Z-
3 "that I can remember." He says a con-
sulting firm he owned, ISI, undertook work
for SISMI either late in 1980 or early in
1981 and the price "may well have been
$100,000, I can't remember." SISMI may
have paid another fee for other work in
1980, Mr. Ledeen says. He says his travel
expenses were also paid. And he says, "I
had, I think, for a period of a few months,
a personal account in Bermuda." He de-
clines to discuss further "any of my per-
sonal finances."
Mr. Ledeen is vague about the nature of
his work for the Italians, referring to one
project as "risk assessment." But wit-
nesse before an Italian parlia-
me
Mary
commis on have testified that he helped
train Italian Intelligence agents.
Federico Umberto Amato. who has
held several top security lobs and is known
as "the J. Edgar Hoover of Italy." testified
before parliament in 1982 that "Ledeen had
collaborated with the an services"
and- after the Moro case Ithe 193 kidnap-
Alao Morol tau t courses n Italy) "to-
gether with two former CIA wen t ." The
late Gen. Giuseppe Santovito,the head of
SISMI and Mr. Pazienza's superior at the
time, gave s ar testimony.
Mr. Ledeen, however, denies ever
teaching any such courses.
Mr. Ledeen's and Mr. Pazienza's activj-
ties went beyond intelligence. Mr. Pa-
zienza anothers say that he and Mr. Le-
deen in 1980 and 1981 forged a direct link
between some U.S. supporters of Ronald
Reagan and the right wing of the then-rul-
ing Christian Democratic Party in Italy.
Essentially, they worked as a team of mid-
dlemen between Italian leaders and the in-
coming Reagan administration, bypassing
the Carter-appointed ambassador in Rome
and normal Italian-American diplomatic
channels.
Mr. Ledeen has since become a
high-level consultant to the Reagan admin-
istration, in addition to other pursuits. Af-
ter the U.S. invasion of Grenada in 1983,
the administration hired him to analyze
documents recovered from the overthrown
government of the island. He co-authored a
report about the Marxist government's se-
cret plans that helped justify the adminis-
tration's contention that the U.S. had in-
vaded in "the nick of time." He then was
hired by Harper's magazine and by the
ABC network as a Grenada expert.
Mr. Ledeen is often called on for such
work. A fellow of the Georgetown Center
for Strategic and International Studies, a
foreign-policy think tank, he serves on call
for both the State and the Defense depart-
ments, which say they pay him for days he
works at an annual rate of $57,227. He also
writes articles, mostly on terrorism and
Soviet intentions, and recently published a
book.
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4r,
Questioned about his association with
Mr. Pazienza, Mr. Ledeen says "I wish
you wouldn't" ask about it. "It's a waste of
everyone's time." He says he barely knew
the man.
Mr. Pazienza says SISMI's agent in
New York (working at the time under the
cover of a United Nations job) introduced
him to Mr. Ledeen on a trip to the U.S. in
the summer of 1980, when Messrs. Ledeen
and de Borchgrave were pursuing the
Billygate story. Mr. Ledeen told him, Mr.
Pazienza says, that he was working to help
Alexander Haig, who was the president of
United Technologies Corp., a delegate to
the Republican convention, and widely
thought to be a candidate for high office in
a Reagan administration.
Mr. Ledeen says he won't' discuss Mr.
Pazienza's account of events because doing
so would violate confidences. "You can ask
that 50 times, and I'm still not going to an-
swer it," he says. But he says his Interest
in Billygate was strictly journalistic; at
the time, he was the editor of the Washing-
ton Quarterly, published by the George-
town center.
For his part, Mr. Haig says he wasn't
angling for public office at the time. He
says that Mr. Ledeen "has always been a
very good source of information." (It isn't
clear whether Mr. Haig knew what Mr. Le-
deen was doing in the Billy Carter mat-
ter.)
In any case, Mr. Ledeen flew to Rome.
There, by Mr. Pazienza's account, Mr. Pa-
zienza and right-wing Christian Demo-
cratic leaders of SISMI were willing to try
to help tilt the election against Mr. Car-
ter-even going so far as to jeopardize a
valuable source of information. A SISMI
officer, Mr. Pazienza says, put him on to a
journalist and secret SISMI informer who
came from the same Sicilian town as Mr.
Papa, the lawyer representing Libyan in-
terests.
Through the journalist, Mr. Pazienza
was told that Billy Carter had received $50,-
000 in traveling expenses from Libya and
had met with Yasser Arafat and George
Habash, a PLO military leader. (Mr. Car-
ter later said he was introduced to Mr.
Habash but never met Mr. Arafat nor re-
ceived $50,000.) Mr. Pazienza said he re-
ported all this to Mr. Ledeen, who was un-
satisfied, and asked to hear the story
straight from Mr. Papa.
At a long, champagne-drenched dinner
billed to SISMI, Mr. Papa repeated the
story to the Italian journalist-informer who
this time was equipped with an expensive
hidden tape recorder. Mr. Ledeen flew to
Rome to get the tape, according to Mr. Pa-
zienza, and insisted on listening to it over
earphones at a restaurant table. "This was
before the time everybody had a Walk-
man," Mr. Pazlenza says. "So we were
eating dinner and the tape gets to the part
with Habash's name on it, and all of a sud-
den Ledeen jumps up and starts yelling,
'We got it, we got it!' " Other diners, he
says, looked on, puzzled:
Mr. Ledeen says that all that "doesn't
sound like me" but that he doesn't remem-
ber the conversation. He says he did take
the tape from Mr. Pazienza and later gave
it to FBI agents investigating Billy Carter,
who was never prosecuted.
After the U.S. election, the association
between Messrs. Pazienza and Ledeen ap-
parently continued as they made contacts
with various Italian leaders eager to deal
with the new American leadership.
Emilio Columbo, the foreign minister of
Italy in 1980 and 1981, offers an example.
In an interview with an Italian newspaper,
confirmed by his office as accurate, he
says that Mr. Ledeen and Mr. Pazienza ap-
proached him as representatives of the
new Reagan administration to help him
plan a visit to Washington in 1981. Unsure
of their status, he says, he accepted, even
though he said he made his own arrange-
ments for a Washington visit through other
channels. He says that they visited him
again after his return as if ofake credit
for his success. and that Mr. NiFenza
came a t ird time to announce he was un-
erta c n an intelligence mission to Beirut
for the American government.
Mr. Ledeen, however, says he visited
Mr. Columbo only once, as a journalist, be-
fore joining the State Department in 1981
as Mr. Haig's special adviser. He says he
never represented himself as acting on be-
half of the administration.
But Mr. D'Amato, the security official,
testified in parliament that after the 1980
election "we observed a peculiar phenome-
non." He added, "In a certain sense, rela-
tions between the Italian politicians and
the new power group in the U.S. were
maintained by Pazienza and Ledeen. The
Americarr embassy was inactive, and -so
was the CIA. Trips were organized
through messy es sent by Ledeen, who
was-or said he was, and i was
true-Haig's adviser, and by Pazienza."
ward Gardner, e American ambas-
sador to Rome at the time, says Mr.
D'Amato's testimony "has a large element
of truth in it." He adds, "In arranging
trips for those who wanted to get to know
the new administration, those two [Messrs.
Pazienza and Ledeeni were very active."
He says they "substituted" for the em-
bassy and caused "great problems." He
says he considered them "free-lancers
with questionable credentials. I just don t
know how much of their activity was self-
promotion and how much of it was author-
ized."
In the U.S., Mr. Pazienza says, he and
Mr. Ledeen also visited Mr. Haig, soon to
become secretary of state, in his United
Technologi s office on Dec. 9, 1980. After a
chat about friends, he says, the three dis-
cussed the outlines of a plan to infiltrate
spies into Libyan terrorist camps through
Italian construction companies.
Mr. Pazienza says the plan was eventu-
ally aborted; the next spring, SISMI's
leadership collapsed in a political and fi-
nancial scandal that ultimately brought
down the Christian Democratic govern-
ment of Italy. In the meantime, though, he
insists, he undertook the mission to Beirut
authorized by Mr. Ledeen, to see Mr. Ara-
fat. Mr. Arafat won't comment on the
story.
Mr. Ledeen and Mr. Haig say they don't
remember the Dec. 9 meeting, though Mr.
Haig says he may have met Mr. Pazienza
"as a social accommodation to Mike Le-
deen." Mr. Ledeen says Mr. Pazienza
"may have carried a message once from
Gen. Santovito to Haig." But both say they
wouldn't have discussed a spy mission with
Mr. Pazienza. Says Mr. Haig: "I don't be-
lieve at that date I was anticipating being
secretary of state." It was, however,
widely predicted at the time, and the White
House made the announcement on Dec.
16.
A few months later, Flaminio Piccolt,
the head of the Christian Democratic
Party, went to Washington and tried vainly
for several days to see Mr. Haig, then the
secretary of state. Mr. Piccoli testified in
an Italian parliamentary inquiry that he
called SISMI's Gen. Santovito, who sug-
gested calling Mr. Pazienza for help. Mr.
Piccoli testified that one phone call from
Mr. Pazienza to a contact persuaded Mr.
Haig to postpone a trip to Camp David to
help President Reagan with a major
speech, and grant Mr. Piccoli a 43-minute
meeting.
"Could you explain to the commission
why Piccoli, having waited four days to
see Haig, was received at once on Pa-
zienza's request?" a member of the panel
asked Gen. Santovito.
Said the general: "This shows how well
he knew his contacts. Pazienza was no
megalomaniac. He told the truth."
Declassified and Approved For Release 2012/02/09: CIA-RDP9O-00965ROO0403630010-8