A FRONT OR A FRAUD?

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00552R000605480098-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 22, 2016
• Document Release Date: June 30, 2011
• Sequence Number: 98
• Publication Date: May 28, 1984
• Content Type: OPEN SOURCE

Sanitized Copy Approved for Release 2011/06/30: CIA-RDP90-00552R000605480098-3
ARTICLE APPEARED NEWSWEEK .3 41 ON PAGE 28 May 1984
Rewald: An alleged Ponzi scheme-and claims of CIA involvement
A Front or a Fraud?
As authorities closed in on his high-flying investment firm last
July, Ronald Rewald took desperate measures. He checked into a
Waikiki hotel room and slit his wrists. He lived to make an even
more bizarre attempt to escape his troubles, however: last sum-
mer Rewald claimed he was a covert agent for the Central
Intelligence Agency and that his firm was a CIA front. What
sounded like a preposterous defense gained credence when CIA
lawyers persuaded a federal judge to seal some 200 of the firm's
papers in the interests of national security.
As details of the tangled case emerge, Rewald's operation
seems increasingly suspect and the CIA increasingly foolish. A
bankrupt sporting-goods salesman from Wisconsin, Rewald
founded Bishop, Baldwin, Rewald, Dillingham & Wong in
Honolulu in 1978, brazenly borrowing the names of three old-
monied island families. A slick brochure boasted of the firm's 40-
year history, an average annual return on deposits of 26 percent
and clients ranging from a former U.S. president to House and
Senate committees. By 1983 more than 400 investors-including
retired high-ranking military officers, the former CIA represent-
ative in Honolulu and his successor-had deposited $20.4 mil-
lion, and Rewald was enjoying a lavish estate, a fleet ofluxury cars
and a string of polo ponies. In fact, according to court-appointed
bankruptcy administrator Thomas Hayes, Bishop, Baldwin was
a "classic Ponzi scheme"-later deposits paid back earlier inves-
tors, shored up the firm's facade and bankrolled Rewald's life-
style. When suspicious investors forced the bankruptcy, Hayes
found the firm had only about $1 million in cash and recoverable
assets. More than $10 million had vanished.
According to court documents NEWSWEEK obtained, Rewald
claims the CIA directed him to set up Bishop, Baldwin as a
conduit for financing overseas operations. He writes
that on agency instructions the firm made covert
arms sales, including tanks, helmets, bulletproof
vests and laser sighting devices to Taiwan-and that
he personally stole secret blueprints for Japan's
high-speed surface transport. CIA funds were min-
gled with investors' deposits, Rewald contends.
"We had ample resources to call on to meet any
financial need," he told NEwswEEK-including
more than $60 million in secret offshore CIA assets.
According to Rewald, several operations stood to
net Bishop, Baldwin big profits, but the deals dried
up when the CIA link was revealed. He has filed a
$671 million claim against the agency, alleging
breach of contract.
CIA officials deny that the agency created or "at
any time owned, operated, controlled or invested" in
Bishop, Baldwin, though they concede a "slight
involvement" with the firm. ("It did provide some
cover for agents," says one official familiar with the
case; court records show the agency paid Bishop,
Baldwin $2,700 for phone bills.) As for Rewald's
grander claims, officials refuse comment, but none seems the
stuff of cloak-and-dagger missions. Japan's high-speed train has
never been secret; and the United States sells more sophisticated
military equipment to Taiwan overtly. On balance, U.S. District
Judge Martin Pence concluded that "Rewald, through contacts
with members and former members of the CIA, considered
himself a more important undisclosed private associate of the
CIA than he was in fact." Officials say the agency was forced to
have the documents sealed to protect the identities of a handful of
agents. Says one, "This has got nothing to do with the CIA
ripping off retired officers and old ladies. CIA was not involved in
that, period."
`Commies': Still, some angry investors have filed claims against
the agency. "The CIA was set up to deal with commies and things
like that, not to take money from Americans," says Ted Frigard, a
retired chiropractor who invested $300,000. "We're not ques-
tioning their activities," says Paul Monzione, a lawyer for
Rewald and some of the complaining investors. "What we're
questioning is why they allowed this to happen to investors." The
claims could be bolstered if yet another possible twist in the case
proves true. The IRS was investigating the firm as early as 1982,
but Rewald contends that his CIA contacts stalled the probe.
Charged with two state counts of fraud, Rewald spent 51h
months in prison until Hawaiian officials reduced his record $10
million bond. Before that case goes to trial in September, the state
may bring more charges, a federal grand jury is still investigating
and bankruptcy attorneys are chasing Bishop, Baldwin assets.
Hayes is considering his own suit against the CIA on behalf of
investors. Rewald, in turn, is suing Hayes for defamation. In the
tangled world of claims and counterclaims, just who was fronting
for whom may never be completely clear.
MELINDA BECK with RICHARD SANDZA in Honolulu
and KIM WILLENSON in Washington
Sanitized Copy Approved for Release 2011/06/30: CIA-RDP90-00552R000605480098-3