SPY STORY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00552R000605480113-5
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 22, 2016
• Document Release Date: March 30, 2011
• Sequence Number: 113
• Publication Date: April 18, 1984
• Content Type: OPEN SOURCE

Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480113-5
"-TC E A=PEARED
0i+ P..G_ 18 April 19E1+
Spy t5 tort' Bail: $10 Million
Suits Focus on Extent
Of CIA Involvement
In an Alleged Fraud
Bankruptcy in Hawaii Left
Widows, Retirees Broke;
Was Firm Just a Front?
Suicide Try at the Sheraton'
By JONATHAN KwITNY
St v.ff Reporter of THx WALL S?rRwr JOURNAL
HONOLULU - A Central Intelligence
Agency covert operation, in the movies and
spy novels at least, is the very essence of
stealth: quiet men in drab topcoats slipping
in and out of a nondescript backstreet office
set up as a business front.
Forty-one-year-old Ronald R. Rewald,
however, doesn't fit the mold. During his six
years on this island gateway to the Far
East, this CIA man flaunted his close con-
nections with top U.S. intelligence and mili-
tary officials. Far from courting obscurity,
he spent money with the abandon of an Arab
oil sheik: He owned a personal fleet of 12
limousines and luxury cars (including an
Excalibur, two Mercedes-Benzes and a
Rolls), ranches, polo clubs and an ocean-
front villa with its own lagoon. He threw
eye-popping parties and, although married
with five children, surrounded himself with
gorgeous women, on some of whom he lav-
ished their own Mercedes-Benzes.
His business career as an investment
banker and financial counselor was equally
spectacular. Promising interest rates of 27%
to 100% a year, Mr. Rewald lured invest-
ments of about S23 million to his company,
Bishop, Baldwin, Rewald, Dillingham &
Wong. When it was discovered last July that
there was no money to pay some 400 deposi-
tors, he slashed his wrists in what he said
was an unsuccessful suicide attempt.
At that point, Bishop Baldwin looked like
a classic Ponzi scheme. Initial testimony in
U.S. district court showed that Mr. Rewald
apparently didn't invest in any profitable
deals, had used cash from new deposits to
pay interest on the old ones and had spent
most of the money he took in on himself and
his company. Bishop Baldwin was declared
bankrupt-a ruling that Mr. Rewald's law- syndicates and bilked U.S. investors of mil-
yers are appealing-and the Securities and lions of dollars. The Rewald case, however,
Exchange Commission filed a civil anti- may be the first in which some of the wiped-
fraud action against Mr. Rewald and his out investors have filed suit against the CIA
firm. Money magazine wrote the case up to recover their money.
last fall as a warning to investors.
But a funny thing happened on the way
to the courthouse. CIA lawyers suddenly ap-
pe;.red in Honolulu and persuaded U.S. Dis-
trict Judge Martin Pence to seal every
scrap of evidence in the case on national-se-
curity grounds. Relatively minor state fraud
charges, were filed, and Mr. Rewald was
jailed on an astounding $10 million bail. For
six months, while the federal government
ran its own closemouthed and so far incon-
clusive investigation, state authorities held
him almost incommunicado: The few close
friends who were allowed brief visits with
him were forbidden to bring in written ques-
tions or take notes.
Although the CIA later cleared a small
part of the evidence, and Judge Pence put it
on the public record, most of the evidence in
the SEC and bankruptcy actions is still
sealed. And the CIA persuaded the judge to
throw a sweeping gag order over the cases,
forbidding "all parties and their attorneys
and their agents ... from communicating to
any person ... by oral, written, or any other
means ...information relating to matters
pertaining to the Central Intelligence
Agency."
Mr. Rew ald's lawyers say those orders
prevent him from asserting his defense:
that Bishop Baldwin was created by and run
as a front for the CIA. Mr. Rewald says-in
court papers and other statements made
available by persons close to him-that he
himself was a "nearly full-time" covert
agent under contract to the CIA and that ev-
erything he did at Bishop Baldwin was on
CIA orders.
Tacit Concession
The CIA has denied that it controlled
Bishop Baldwin or knew that Mr. Rewald
was diverting funds. It won't elaborate. But
a relationship was tacitly conceded by CIA
counsel Robert M. Laprade in papers he
filed with Judge Pence to obtain the secrecy
orders. Without those orders, he argued, Mr.
Rewald's lawyers "will divulge in detail
Rewald's relationship to the Central Intelli-
gence Agency. It is the obligation of the Un-
ited States to act in accordance with appro-
priate executive orders ... whenever ...
national security information may be sub-
ject to unauthorized disclosure."
Mr. Rewald's case appears to be the lat-
est in a series raising the issue of whether'
the CIA, in fulfilling its foreign-policy mis-
sion, might be abetting crimes against U.S.
citizens, either intentionally or through neg-
ligence. Most notably, it is reminiscent of
Nugan Hand Ltd., an Australian-based bank-
ing concern run by retired CIA and Penta-
gon
brass that financed heroin and arms
any investors put nearly every nickel
into Bishop Baldwin, and individual ac-
counts ran as high as Si million. Mr. Rewald
persuaded some to give him power of attor-
ney to handle all their financial affairs. His
clients included retirees, widows and disa-
bled people who now are destitute.
Some of those clients have hired noted
lawyer Melvin Belli to represent them in
their claims against the CIA. Mr. Belli says
he has also agreed to represent Mr. Rewald,
who asserts that he relied on a secret CIA
fund in the Caribbean to pay everyone off.
Mr. Rewald says the CIA ruined his business
career by abandoning him, and he is asking
the CIA for $571 million in damages and in-
demnification against the claims of his for-
mer clients.
'Pont Scheme'
Judge Pence has ruled, without elaborat-
ing, that from his reading of the secret docu-
ments, Mr. Rewald's CIA connection isn't
relevant to the bankruptcy or SEC cases. In
the SEC case, Judge Pence has already
ruled that Bishop Baldwin was a "fraud"
and a "Ponzi scheme," and that Mr. Rewald
simply.pocketed the investors' money. At
the SEC's request, he enjoined Mr. Rewald.
and the firm from continuing such busi-
ness.
Questioned by a repor ter, Judge Pence
declared, "The whole thing is under seal be-
cause the CIA has not yet made their report
to me as to their involvement, if any, with
Rewald. I cannot and will not release any
(of the files)."
Whether the CIA ? sanctioned Mr.
Rewald's financial misdeeds may never be
known. But from the time he came to Ha-
waii in November 1977-with a prior theft
conviction and a personal bankruptcy in
Wisconsin, generally unknown, under his
belt-Mr. Rewald worked hard to surround
himself with top CIA and FBI officials, mili-
tary brass and politicians. At his parties, he
would point out those dignitaries to potential
investors, confide that Bishop Baldwin was
part of the CIA and stress that this meant
their money would be safe in his hands. "If
you can't trust the government, who can you
trust?" several clients say he told them.
Obviously, it would be in Mr. Rewald's
interest now to exaggerate his CIA ties, and
most officials involved in the case believe he
is doing that, at least to some extent. But,
even if Mr. Rewald fails in portraying him-
self as a CIA pawn, his former clients will
probably argue that the CIA lent credibility
to his business dealings and that the agency
knew-or should have known-what was go-
ing on. Robert A. Smith, a Honolulu lawyer !
working with Mr. Belli, says, "I don't have
to prove they ordered it. All I have to prove
is that they knew about it and allowed it to
happen."
STAT
6ontinued
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Sanitized Copy Approved for Release 2011/03/30: CIA-RDP90-00552R000605480113-5