THE CIA'S SHELL GAME

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-01208R000100010012-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 22, 2016
• Document Release Date: February 22, 2011
• Sequence Number: 12
• Publication Date: July 11, 1976
• Content Type: OPEN SOURCE

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Sanitized Copy Approved for Release 2011/02/22 : CIA-RDP90-01208R000100010012-9
-STATc"::tl','r-A/ ED ~1ASHIL oft POST
v-r? PaGE_ C-i. 11 JULY 10/76
By John Marks
J EFFREY A. Manley has his name on the door at Bur-;
well, Hansen & Manley, but he Is not allowed to use,
his own firm's Xerox machine. The problem, according
to Manley, is that he doesn't have a government security
clearance and the copier is located in a room full of clas-i
silted documents. Manley, a mustachioed young Harvard.,
law graduate, observes that a closed-circuit television
system scans the law firms reception room in down-
town Washington and that the monitor is located in a
part of the office be has never entered.
These extraordinary precautions at Burwell, Hansen &
Manley exist because the firm shares office space with
Southern Capital & Management Corporation and South-
ern Capital is what is known in the intelligence trade as
a "proprietary." It Is, in other words, a wholly owned
and operated subsidiary of the CIA.
So far as is known, Southern Capital is the CIA's larg-
est remaining proprietary. Its work in managing the
CIA's $30 million investment portfolio is so secret that
the Agency persuaded the Senate Intelligence Commit-
tee not to press for the company's actual name, instead
calling It "The Insurance Complex."
For more than two decades, the CIA has made exten-
sive use of proprietaries like Southern Capital to hide op-
erations under the mantle of.private enterprise. In order
to incorporate and run this "business" empire, the .
Agency has relied on lawyers. Washington is a city of
lawyers. Therefore, it is hardly surprising that the local
bar brims with lawyers who perform secret services for
the Agency's overlapping, interlocking network of front
companies. The trail of lawyers leads from Southern
Capital to more than 15 recently discovered proprietar-
ies in the Washington area alone. Some have been dis-
banded; others, like Southern Capital, are still active.
`Insurance Complex'
S OLZHE& I Capital, our starting point, takes the CIA
straight to Wall Street. It is the investment arm of an
assortment of proprietary financial companies, located.
mainly in foreign tax havens such as the Bahamas, Ber-
muda, the Cayman Islands and Panama. Southern Cap!-.
tal was created In 1962 as a front insurance company to
provide coverage for agents and equipment involved in
covert operations - particularly those connected to
Cut-owned airlines. "The Insurance Complex" then
branched out into other entrepreneurial ventures. It re-
ceived money from CIA insurance premiums, from de-_
ductions taken from secret agents' pay and - at least
once in the past 10 years, according to a CIA budget spe-
cialist - from funds left over from the Agency's con-
gressional appropriation.
By the late 1960s, Sou
tween $25 and $30 millie
stocks, bonds and other
.domestic. During the eat
employee, Investment. d
the brokerage firm of Sc
no evidence that the In
tie.) But in either 1969 or
cluded that the Agency
CIA experts decided wb
board of directors cha
Lawrence Houston to0
for Southern Capital.
On this committee -
TUAL group - sat th
director of finance an(
nomic research. This 1.
portant, according to a
enabled Southern Capital to "craw vu u,c au?.e.. -- ----
(CIA's) economic research people. Any stockbroker
would like 300 trained experts giving advice. If it wa7
not a conflict of interest, it at least should have been of-
fered to the public."
The proprietary's best earner was Eurodollar deposits
made through the Morgan Guarantee-Bank's Brussels
office with a return of 13 per cent at one point. a former
employee recalls. After the MUTUAL committee took
over, Southern Capital branched out from its normal
blue chip purchases to more speculative fields, including
short term buys of Swiss francs and several hundred
thousand dollars in Mexican pesos. Another source re-
ports- that during the early 1970s, when the CIA was
working secretly with iTT to keep Salvador Allende
from power in Chile, Southern Capital owned some ITT
stock. MUTUAL Chairman Houston told the Senate corn-
mittee: "Well, a couple of times our investment advisor
recommended a stock which I knew we had big con-
tracts with, and I told the board no, this involves a con-
flict of interest. We won't touch it.-
The net profit on Southern Capital's portfolio in 13"x4
was more than $1.5 million, according to the Senate re-
port. Most of that money never found its way Onto
Southern's balance sheets, however, because it legally
belonged to proprietary insurance asnd financial compa-
nies in overseas tax havens. Southern Capital, as a Dela-
ware corporation doing business in the District of Col-
umbia, did submit U.S. tax returns but was under no ob-
ligation to list the money it made for its sister proprie-
taries. The company kept three or four lawyers busy
fulltime, a former Southern employee recalls. "Mr. Ev-
ans was a stickler on legality," he says.
"Mr. Evans" is Marvin L. Evans, who ran Southern
Capital for the CIA until his retirement in 1973. Evans
extends the proprietary trail to Africa, among other ,
~farks is- nn n4 ,
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