ADM. INMAN'S CONCERNS ABOUT THE CIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00901R000500270007-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 39
• Document Creation Date: December 9, 2016
• Document Release Date: December 29, 2000
• Sequence Number: 7
• Publication Date: July 31, 1981
• Content Type: NSPR

:Rxrike ease 20(11041117i PRIAttROPf91 -00901R000
d:1; 31 July 1981
LETTERS TO HE EDITOR
Adm. Inman 's Concerns About the CIA
My appearance Monday night on
ABC's "Night Line" to confront pub-
licly false allegations that I had been
orchestrating or a part of the attack on
Director of Central Intelligence Wil-
liam Casey has produced a flood of cor-
respondence, mostly complimentary.
Not one of those letters has focused on
the 10 seconds of comment on political
factors in the confrontation. Nonethe-
less, when an astute observer like Jo-
seph Kraft makes that the only point
of significance from my appearance to
capture in his column, it is abundantly
clear that he has encountered sensi-
ti on that score from his Washing-
ton contacts. ,
In closed session ori the Hill and in
private conversations in the executive
branch over the past several months, I
? have laid great stress on the vital im-
portance of sustaining and building on,
the bipartisan approach to oversight
firmly established under the leadership
of Sen. Daniel Inouye and Rep. Ed-
ward Boland and strongly supported in:
their minority roles. by Sen. Barry
Goldwater and Rep. Kenneth Robin-
son, beginning in 1976. A non-political
approach to the intelligence com-
munity by the executive branch is a
critical element in support of that nec-
essary congressional bipartisan over-
sight. Some signs of fraying have been
visible from both branches in the last
few months, which has prompted in-
creasing worry from this professional
intelligence officer. Certainly the spirit
of bipartisan fairness in oversight was
superbly demonstrated in the Senate
Select Committee hearing on July 29 ,
into allegations against Mr. Casey.
But constant attention to this need
will be mandatory from executive
branch and congressional officials alike.
if we are to have any prospect of keep-
ing focus where it belongs on the criti-
cal rebuilding of the capabilities of the
U.S. intelligence community after a
long decade of drawdown of manpower
and real dollar investment.
B. R INMAN
Admiral. US. Navy,
Deputy Director of Central Intelligence
Washington
STATI NTL
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31 July 1931
IS-4;TTERS TO THE -0
OR
Adm. Inman's Concerns About the CIA
My appearance Monday night on
ABC's "Night Line" to confront pub-
licly false allegations that I had been
orchestrating or a part of the attack on
Director of Central Intelligence Wil-
liam Casey has produced a flood of cor-
respondence, mostly complimentary.
Not one of those letters has focused on
the 10 seconds of comment on political
factors in the confrontation. Nonethe-
less, when an astute observer like Jo-
seph Kraft makes that the only point
of significance from my appearance to
capture in his column, it is abundantly
clear that he has encountered sensi-
tiNity on that score from his Washing-
ton contacts. . .
In closed session ori the Hill and in
private conversations in the- executive
branch over the past several months, I
shave laid great stress on the vital im-.
portance of sustaining and building on,
the bipartisan approach to oversight
firmly established under the leadership.
of Sen. Daniel Inouye and Rep. Ed-
ward Boland and strongly supported in
their minority roles by. Sen. Barry
Goldwater and Rep. Kenneth Robin-
son, beginning in 1976. A non-political
approach to the intelligence com-
munity by the executive branch is a
critical element in support of that nec-
essary congressional bipartisan over-
sight. Some signs of fraying have been
visible from both branches in the last
few months, which has prompted in-
creasing worry from this professional
intelligence officer. Certainly the spirit
of bipartisan fairness in oversight was
superbly demonstrated in the Senate
Select Committee hearing on July 29
into allegations against Mr. Casey.
But constant attention to this need
will be mandatory from executive.
branch and congressional officials alike.
if we are to have any prospect of keep-
ing focus where it belongs on the criti-
cal rebuilding of the capabilities of the
U.S. intelligence community after a
long decade of drawdown of manpower
and real dollar investment.
B. R. INMAN
mIrtd. ma. Navy,
Deputy Director ot Central Intalgence
Washington
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STATI NTL
T OLE EARED
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THE BALTINORE SUN
29 July 1981
sition to
to --ease a
.ilv Curt Matthews
Washington Bureau of The Sun
Washington?Opposition to William J. Casey as dire
tor of central intelligence appeared to ease slightly yester-
day after members of the Senate Select Committee on In-
telligence spent three hours reviewing the allegations
a
gainst hen.
Mr. Casey has been under pressure to resign because he
placeed a potential security risk, Max Hugel, in charge of
ei.lande.stice operations at the CIA, and because he 'was in-
wived in questionable sees transactions before his own
appointment as head of the agency.
After yesterday's thtlligene committee meeting, Sen-
ator Baer] M. Goldwater (a, Atie.), the chairman, said the
decision to keep Mr. ?Casey in his-job rests with President
Reagan, not members of the Senate. ? -
Mr. Goldwater, one of Mr. Casey's sharpest critics in
receat days; did not restate his earlier insistence that Mr.
Casey ehould step down.. -
Asked if he thought Mr. Casey would resign, Mr. Gold-
water nald: "No. The president has said that Mr. Cesey is
.going to continue, and Mr. Casey is a creature of the
cot up toes." '
He added that he thought Mr.. Reagan 'has the right to
-do what he wants." ? ? - '?
Asked if he still thought, ns he announced last Thursday
at a late 'evening press =reference, that the- 68-year-old
Mr. Casey should "retire," Mr. Goldwater said: "(Mr.
Casey' is a creature of the president, and the president has
;pretty much usurped anything I say or do." ?
At the invitation of the intelligence committee, Mr.
Casey will appear tralay in a closed session to explain his
epersonal finances and the circtunstances of the hiring of
' Mr. Hugel. t ? ? ? - ? ? ?
; Mr. Goldwater said Mr. Casey waS being given a list of
questions well before the bearing, but the senator would
not outline them publicly. Mr. Casey said he received thefl
-questions yesterday afternOon. ? ? ? ? ? -
A committee source told the- Associated Press that
some of the Latest carestipris concerned Mr. Casey's report-
:ed lege] representation in 1977 of a New Jersey waste dis-
iPosal system with alleged ties to organized crime. e. ?
The: White House yesterday gave Mr. Casey another
vote of confidence, carefully limiting it to the facts now
!known about the CIA director. ?. ' ?
President Raga n's chief of staff, James A. Baker III,
id, "The prunident has made it clear that he has seen
?thing so far that would cause him to change his mind
pbout Bill Casey, aed that he continues to support Bill
Casey."
It. was the possibility of a scandal rooted in stock mar-
Iliteeeeee
Case
ter pmieI nefft36
ket dealing that forced Mr. Hugel to resign abruptly on
July It Critics of Mr. Casey say he should have checked
Mr. Hugel's background more closely before insisting that
he be given one of the most sensitive jobs in governmer
Several members of the intelligence committee h we
indicated they are withholding judgment on Mr. Casey's
.role in the Hugel matter until they have heard the direc-
tor's s-worn testimony.
, .
Senator Daniel P. Moynihan (D, N.Y.), the corrunittee's
ranking minority member, appeared with Mr. Goldwe ter
after yesterday's session and restated his concern about-
t e alle,gations against Mr. Casey. However, he Ls amoee a
number of- Democrats who have avoided a partisan con-
frontation over Mr. Casey pending further investigation.
Mr. G-oldwater said it appeared that the in telligeece
comraittee's probe of Mr. Casey 7fill go on at least a ve-ek
and may extend into the month-long congressional recess
that is due in early August
If the probe is not concleded before the receee, Mr.
-Casey may operate under a cloud at the CIA matil early
September ---a prospect not welcomed by him or by White
Horne officials. -
In the last few days, Mr. Casey has cendected a vigar-
ous campaign to keep his job. has been meeting ri-
vately with members of the intelligence committee, reek-
ing his case before employees at the CIA and on Sozw.33r
gave the intelligence coramittee a 2-foot stack of docu-
ments relating to the allegations against him.
Commenting yesterday on the materials provided by
Mr. Casey, Senator Richard G. Lugar (R, bd.), a zr.enaber
of the committee, indicated they offered "new detaes"
about Mr. Casey's business dealings.
Mr. Lugar would give no details of the materials; Say-
ing only that they do not suggest "character defects or 2-
fitness to serve...." ' ? - -
Various people who reviewed a report prepared by the
intelligence committee staff from the Materials proeided
by Mr. Casey say it deals priterily with issees that are al-
ready the focus of the tone dversy?Mr. Casey's nvole a-
mere in a now defunct farming firm called Mtomc.
and the selection of Mr. Hugel for a job at the CIA.
Despite yesterday's indicatiocs that Mr. Casey may 1?T
able to weather the controversy that arose when IV r.
Hugel resigned, at least three names of possible mace ti-
sors have been discussed by Republicans in Coegess.
One is Adm. Daniel 3. Murpby, chief of staff for Vice
President Bush and a fanner intelligence officer. Another
is Laurence Silberman, a San Frandaso lawyer who
served briefly as chief of the Reagan transition team .t.
the CIA and also was deputy attorney general in the Nixon
and Ford administratiorts. The third name being mei-
tio ned is Adm. Bobby R. Inman, deputy CLe director.
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ITEW YO
29 JUT? 101
CASEY SEES MN
ON EX-C,I,A, AGENTS
Says a Review of Contracts Is
Needed to Bar Disclosures
By STEVEN R-WEISYIAN
Special to The New York ?Imes
WASHINGTON, July 28? William J.
Casey, the Director:of ? Central Intelli-
gence, has ordered a review of C.I.A.
contracts to develop what he called
"additional protections" against the
transfer of technology and information
by former agents to such countries as
Libya andthe Soviet Union. ' ?
In the- texf or an 11-page speech pre-
pared for delivery to the Central:. Intel/i2
gence Agency's employees, Mr. Casey
specifically referred to the recent epi-
sode in which two former agents, Edwin
P. Wilson and Frank Terpil, used their
agency connections to travel to Libya to
train terrorists and transport,e,-geoeives
there illegal1y.9 e:
; Mr, Casey said that Stanley Sporkin, I
the C,I.A.'s general counsel, "is review-
ing our contracts to develop additional
protections against the kind of moon-
lighting and use of our contractors and
technology which occurred in the Wil-
son-Terpil situation."
The purpose of Mr. Casey's speech
was to reassure the agency's employees
that he intended to weather the current
controversy over his past financial
practices and management of the agen-
cy, which have led to calls for his resig-
nation by three key Republican Sena-,
tors, including Barry Goldwater, Re-
publican of Arizona, chairman of the
Senate Intelligence Committee. Today,
the committee said that it had asked Mr.
Casey to testify tomorrow about his
financial dealings and management of
the agency.
In the speech, Mr. Casey said he had
taken and would take several steps to
improve the agency's operations.
Asserting that past intelligence esti-
mates had not reflected "the full range
of threats which our policy makers need
to protect against," he said that he had,
on occasion, refused to accept estimates
prepared by agency analysts. He said
that estimates prepared on Africa and
Latin America, specifically, had "not
addressed Soviet interests, activities
and influence."
Assails Intelligence Reports
In the past, Mr. Casey said, agency
estimates had failed to address these
aspects. "Worse still," he continued, "I
have seen drafts of estimates prepared
a year or more ago by analysts in this
building which accurately predicted
what has happened in Nicaragua and
Cuba's new aggressive policies in Cen-
tral America at a time when those
developments certainly should have
teen carefully considered."
"Sadly," said Mr. Casey, "these ana-
lytical insights were strangled in the
clearance and coordinating process so
that they did not reach policy makers in
a national-estimate. I intend to see that
that does not happen as long as I am
D.C.!."
The issue of intelligence estimates
have long stirred debate among experts.
Previous C.I.A. directors, including Mr.
Casey's predecessor, Adm. Stansfield
Turner, have been accused of altering
certain assessments to reflect their
views or those,of their Administrations.
STATI NTL
tuaL Mt. Casey, for example, re-
jected a C.I.A. draft assessmer t on ter-
rorism that, according to thteI1i ence of-
ficials, failed to conclude that the Soviet
Union was directly involved in foment-
ing international terrorism.
In his speech, Mr. Casey sale he had
"revised timetables and procecures for
doing national estimates to get hem out
more quickly, making them mere crisp
and more relevant to policy nee( s."
Mr. Casey also said he had reoved to
improve coordination between -ine intel-
ligence community and policy .naker3.
He said that both he and his deputy,
Adm. Bobby It. Inman, were Low hav-
ing weekly breakfast meetings with Sec-
retary of State Alexander M. 'Y. laig Jr.
and Defense Secretary Caspar W. Wein.
berger. and "regular meetings" with
President Reagan. and the National Se-
curity Council. e, -
Hugel Affair Mentioned
Some of Mr. Casey's remark:, related
to a reorganization of the agence's clan-
destine operations that led to les origi-
nal selection of Max C. Hugel as director
of clandestine operations. Mr. I, ugel re-
signed two weeks ago after former busi-
ness associates accused him of f!nancial
misconduct. Mr. Hugel. den ed the
charges. The ensuing con r reversy
helped create questions about Mr.
Casey's judgement among members of
the Senate intelligence panel.
Mr. Casey acknowledged in the
speech that the Hugeteepisteie had
'?turned out badlye'e';:
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27 July 1981
Washington -1-)LWTogm?
Time Running Out on CIA's Casey?
Despite public statements of support
from the President, insiders say it is
only a matter of time before the be-
sieged William Casey departs as di-
rector of the CIA and is succeeded by
Deputy Director Bobby Inman, who
is widely regarded as the nation's
most respected intelligence expert.
* * *
White - House aides are suspicious
that reporters got wind of a 2-month-
old court ruling against Casey at the
same time they were tipped to allega-
tions of improper business dealings
by his deputy, Max Hugel. Conclu-
sion by some presidential advisers:
Both men made bitter enemies with-
in the CIA itself, and these foes
leaked the matters to the press.
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PAGE *.c7
27 July 1 981
Sudden departure of a controversial spy master is sparking
probes of the agency's security system?and even of the top
man himself. The upshot could pose a problem for Reagan.
The nation's secret intelligence orga-
nization is caught up in a new and
damaging crisis?just as it was showing
signs of recovery from six years of scan-
dals and turmoil.
Triggering the crisis: The forced res-
ignation on July 14 of Max Hugel as the
Central Intelligence Agency's spy mas-
ter. He quit as chief of clandestine op-
erations only hours after publication of
allegations of improper and possibly il-
legal business practices.
The ramifications of the crisis go far
beyond the immediate issues involved
in the Hugel resignation.
CIA Director William Casey himself
is under a cloud, with his future as di-
rector of the nation's intelligence oper-
ations in doubt. His judgment and qual-
ifications for the top intelligence job
are being challenged.
Lengthening shadow. Compounding
the doubts about Casey's future at the
CIA are disclosures that he, too, is ac-
cused of engaging in questionable busi-
ness activities.
A federal court, it transpires, recent-
ly ruled that he was guilty of knowing-
ly participating in a misleading invest-
ment offering. Another court found
that Casey and other directors of a
AP
company had driven their firm "deep-
er and deeper into debt." Casey denies
responsibility for these actions and is
appealing.
Beyond the controversy over the
leadership of the CIA, there is wide-
spread concern about the agency's se-
curity system, which gave Hugel clear-
ance ,to become chief of clandestine
operations, the most sensitive post in
the intelligence community. This sys-
tem is supposed to weed out misfits
and "moles," enemy agents who seek
to penetrate the country's espionage
apparatus.
As a result, what appeared to be a
successful drive to rebuild the morale
and credibility of a battered CIA has
suffered a setback.
Tape recordings. The rapid-fire
chain of events that led to the latest
CIA crisis was sparked by publication
in the Washington Post on July 14 of
allegations that Hugel was involved in
stock transactions in the 1970s that.
were improper and perhaps illegal.
The accusations were made by two
brothers, Thomas and Samuel McNeil,
who were the principal brokers han-
dling the stock of a company that was
then run by Hugel. They provided
MARION TRIKOSKO-USNAWR
tapes of conversations to subst.intiate
their charges.
The brothers alleged !.hat !Rigel
sought to manipulate the 1- rice of stock
of his firm by giving then "insider"
information and by providng funds to
buy his firm's securities. A ccording to
the charges, the scheme fa led, nncl re-
lations between Hugel and the 7\ irNeil
brothers deteriorated into bitter feud-
ing. One of the McNeil tape ?s contained
a claim by Hugel that the, brothers
were attempting to blackmail him.
The controversial spy nrister insists
that the charges against hi Lri are "un-
founded, unproven and um rue."
Strategy's goal. The bombshell con-
fronts the Reagan White II 'use with a
major test in crisis inanaement. To
deal with it, the President' aides have
mounted a "damage limitation" opera-
tion, which so far has been relatively
successful in minimizing embarrass-
ment to Reagan.
Aim of the White House strategy:
Demonstrate that the Hugel affair is a I
Casey problem, not a Reagan problem. !
White House Communications Di-
rector David Gergen went out of his
way to stress that it was I :asey who
selected Hugel, saying: "As con know,
Mr. Hugel was not 110I111MC ed by the
President."
At the same time, Reagan's advisers
moved with extraordinfm speed to
guarantee that the problem was liqui-
dated and so avoid the risk )f creating
a Reagan version of Jimm s Carter's
"Bert Lance albatross."
Reagan's aides are attemp ing to dis-
miss the affair as a minor aberration
that is over and done with. 1s Gergen
put it: "As far as the White !louse is
MARION IIIIKOS.KO-USAMWR
Ex-spy mAtighprOVegil Gri
sparking new crisis for battered CIA.
? .
Wil . . :o. .y nman is viewed as
probable successor if Casey goe!:.
In doubt?if troubles continue.
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concerned, this matter is closed."
That, in the view of political ob.
serv?ers, may prove to be wishful
t hinking.
Already the Senate Intelligence
Committee has launched a prelim-
inary investigation of the CIA's Of-
lice of Security and its handling of
the Hugel screening. The panel is
also looking into alleged financial
misconduct by Hugel and Casey.
And the Senate Judiciary Com-
mittee may undertake an inquiry
into Casey's past business activities,
if some members get their way.
What disturbs some congress-
men as well as former top intelli-
gence officials is what they call the
"politicization" of the CIA. From
the outset of the Reagan adminis-
tration, they have been privately
critical of the appointment of Rea-
gan's 68-year-old campaign man-
ager as boss of a deeply troubled
intelligence- community that re-
quired dynamic leadership.
The CIA, says Senator Patrick
Leahy (D-VL), "is not a place to
pay off campaign debts." - -
Opposition to Casey in Congress
was blunted by the appointment
of the nation's foremost professional in-
telligence expert as his chief deputy,
Adm. Bobby Inman. In fact, Inman,
former chief of the National Security
Agency, was favored by many on Capi-
tol Hill for the top CIA job. He is seen
as the obvious successor if Casey is
forced out.
Criticism that the CIA was being po-
liticized surfaced again after Casey in
mid-May promoted Hugel, one of his
political campaign helpers with no pre-
vious intelligence experience, to con-
trol clandestine operations.
Defending the candidate.- In the
face of almost universal opposition
from intelligence professionals and
White House aides, the CIA director
went directly to the President to win
approval of Hugel's appointment.
Says a congressional aide associated
with the intelligence committees: "Hu-
gel had no visible qualifications for the
job. An untested person should never
be put in that sensitive position."
Casey defended the appointment,
praising Hugel as uniquely qualified
for the job of managing all covert act
Eons a.nd.clandestine intelligence-gath-
ering operations overseas. In 4. letter to
the New York Times, the CIA director
said of his choice as spy master that
his drive, clarity of mind and execu-
tive ability would... offer the best way
ito both strengthen and effectively run
the directorate."
The inference was widely drawn
T1081 HERDLOCK IN WASHINGTCN POST
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FOR ATOP,
SEtiSitNt
posirt0t4
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qw
1.1114t
0.50, -1,,rel-Ft-Est..0z-K
"We have complete confidence
in what's-his-name here."
and close associate in the sensitive job.
But when Hugel was forced to resign,
Casey denied Hugel's claim that the
two had known each other for 20 years.
He said that he had been acquainted
with Ilugel for only 17 months.
In replacing Hugel, Casey has ap-
pointed the career officer recommend-
ed for the post initially: John H. Stein, a
48-year-old CIA veteran NVith 20 years'
experience in covert operations.
No less disturbing than the alleged
politicization of the CIA, in the view of
many in Congress, is the apparent
breakdown of the CIA's security-clear-
ance system in its screening of IIugel.
On this score, too, questions are being
raised concerning Casey's role.
Incomplete picture. Ordinarily, offi-
cials say, a security investigation, espe-
cially of a candidate for a sensitive CIA
? job, requires months. In Hugel's case,
the inquiry was rushed through in a
week, and possibly less.
The investigation was begun on Jan-
uary 14, and by January 21 he was giv-
en full clearance. During that period,
agents for the CIA's Office of Security
conducted 28 interviews. The picture
that emerged was of a "workaholic"
who had amassed a fortune as a feisty
and hard-driving businessman. -
With the exception_ of reports Of
brief marital difficulties, no derogatory
information surfaced from the inquiry"
or from a lie-detector test, which is a
routine part of the intelligence agent
Surprisingly, the inve,tigators
failed to discover the McNeil ?
brothers, although one them
claims that he tried unsu( cessfully
to contact the White Hou e to pass
along the information he had con-
cerning Hugel's question. ble busi-
ness activities.
Nor did IIugel hirrisel inform
the security agents of hi ; convic-
tion that the McNeil bro: hers had
attempted to blackmail din. His
explanation was simply: 'I didn't
think it was a reportable -vent."
Intelligence experts s; y a key
rule in the espionage till: le is .that
the slightest hint of blackr Lail must
be reported immediately o securi-
ty authorities.
Following orders. Wh) was the
Hugel security inve tigation
rushed through so quickh No ex-
planation has yet been offered_
But a former CIA director makes
this point: "The securit people
work for the director. if he ex-
presses his interest in getting
quick clearance for a personal
choice, that must have an effect."
The major issue at the heart of
the latest CIA crisis involves Ca-
sey's judgment?in appointiig Hugel
against the virtually unanimo ts advice
of intelligence experts, in condoning if
not encouraging an inadequa e securi-
ty screening, in failing to inform the
congressional intelligence co nmittees
of- the charges against Hug -1 and in
failing to move against his onetime
campaign aide until charges of shady
dealings made headlines. .
The White House insists th t Reagan
retains "full confidence" in C ey. But a
top White house aide concedt s that the
President's advisers are keel- ing their
fingers crossed. They worry about the
prospect of more embarrassing sur-
prises growing out of Casey s role as
defendant in several lawsuits Lemming
from his past business
"If," says the White Hose .aide,
"there is. a series of lawsuits showing a
pattern. of illegal dealings that he was
caught in, then that would be serious."
Even without such a pattern, there is
growing speculation that Cts ?y' effec-
tiveness has been critically compro-
mised and that the Presider: is likely
to find his retention as chi f of the '
nation's intelligence operatic ns an in-
creasing embarrassment.
?That judgment is reflected in a Chi-
cago Tribune editorial in these words:
"Whether Mr. Hugel or 1V; r. Casejr.
committed any improprietie ; in their
private business dealings, the y are the
wrong men to run U.S. espionage." El
that the CIA director wanted a trusted cy's clearance procedure. - Bv JOSEPH FROMM
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[proved ?F$3,1 Release i1Th :tMADRIDR911-00901R0005
July 1981
Time Running Out on CIA's Casey?
Despite public statements of support
from the President, insiders say it is
only a matter of time before the be-
sieged William Casey departs as di-
rector of the CIA and is succeeded by
Deputy Director Bobby Inman, who
is widely regarded as the nation's
most respected intelligence expert.
* * *
White - House aides are suspicious
that reporters got wind of a 2-month-
old court ruling against Casey at the
same time they were tipped to allega-
tions of improper business dealings
by his deputy, Max Hugel. Conclu-
sion by some presidential advisers:
Both men made bitter enemies with-
in the CIA itself, and these foes
leaked the matters to the press.
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Approved For Release 2001/03/07 : CIA-RDP91-00901
U.S. NEWS & WORLD REPORT
27 July 1981
Sudden departure of a controversial spy master is sparking
probes of the agency's security system?and even of the top
man himself. The upshot could pose a problem for Reagan.
The nation's secret intelligence orga-
nization is caught up in a new and
damaging crisis?just as it was showing
signs of recovery from six years of scan-
dals and turmoil.
Triggering the crisis: The forced res-
ignation on July 14 of Max Hugel as the
Central Intelligence Agency's spy mas-
ter. He quit as chief of clandestine op-
erations only hours after publication of
allegations of improper and possibly il-
legal business practices.
The ramifications of the crisis go far
beyond the immediate issues involved
in the Hugel resignation.
CIA Director William Casey himself
is under a cloud, with his future as di-
rector of the nation's intelligence oper-
ations in doubt. His jticlgment and qual-
ifications for the top intelligence job
are being challenged.
Lengthening shadow. Compounding
the doubts about Casey's future at the
CIA are disclosures that he, too, is ac-
cused of engaging in questionable busi-
ness activities.
A federal court, it transpires, recent-
ly ruled that he was guilty of knowing-
ly participating in a misleading invest-
ment offering. Another court found
that Casey and other directors of a
AP
company had driven their firm "deep-
er and deeper into debt." Casey denies
responsibility for these actions and is
appealing.
Beyond the controversy over the
leadership of the CIA, there is wide-
spread concern about the agency's se-
curity system-, which gave Hugel clear-
ance to become chief ? of clandestine
operations, the most sensitive post in
the intelligence community. This sys-
tem is supposed to weed out misfits
and "moles," encany agents who seek
to penetra.te the country's espionage
apparatus.
As a result, what appeared to be a
successful drive to rebuild the morale
and credibility of a battered CIA has
suffered a setback.
Tape recordings. The rapid-fire
chain of events that led to the latest
CIA crisis was sparked by publication
in the Washington Post on July 14 of
allegations that IIugel was involved in
stock transactions in the 1970s that
were improper and perhaps illegal.
The accusations were made by two
brothers, Thomas and Samuel McNeil,
who were the principal brokers han-
dling the stock of a company that was
then run by Hugel. They provided
1.1AqICN TRIKOSKO--USNAWR
tapes o. conversations to subst.intiate
their charges.
The brothers alleged that Hugel
sought to manipulate the! rice Of stock
of his firm by giving dueri "insider"
information and by provioing funds to
buy his firm's securities. itccording to
the charges, the scheme Ede& and re-
lations between Hugel an the NIeNell
brothers deteriorated into bitter feud-
ing. One of the McNeil tap 's contained
a claim by Hugel that the bi others
were attempting to blackmail him.
The controversial spy master insists
that the charges against Lim are "un-
founded, unproven and untrue."
Strategy's goal. The bombshell con-
fronts the Reagan White 1 ouse with a
major test in crisis manal,ernent. To
deal with it, the President's aides have
mounted a "damage limitation" opera-
tion, which so far has be n relatively
successful in minimizing embarrass- .
ment to Reagan.
Aim of the . White House strategy:
Demonstrate that the Hugel affair is a
Casey problem, not a Reag,in problem.
White House Commurucations Di-
rector David Cergen went out of his
way to stress that it was Casey who
selected Hugel, saying: "A you know,
Mr. Hugel was not nomin tted by the
President."
At the same time, Reag:efs advisers
moved with extraordinar speed to
guarantee that the problem was liqui-
dated and so avoid the risk of creating
a Reagan version of Jimmy Carter's
"Bert Lance albatross."
Reagan's aides are attemating to dis-
miss the affair as a minoi aberration
that is over and done with As Cergen
put it: "As far as the 1,11hite House is
RION TNIKOEKO-V.51,3,9
btk A
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I
NATIONAL AFFAIRS
L,eagan. s CIA
hen a bantamweight businessman
named Max Hugel was put in charge
of cloak-and-daggering for the CIA, veter-
ans of the in teliigence agency were shocked.
The. Brooklyn-born Hugel had only one real
qualification for the super-sensitive post of
deputy director for operations: a connec-
tion with CIA Director- William J. Casey,
with whom he had worked in Ronald Rea-
gan's Presidential campaign. So when
fluge.-.1 resigned last week, just hours after
the appearance of a newspaper story charg-
ing him with past financial improprieties,
the fallout settled mostly on his CIA
boss. Casey had other problems: two
judges. it turned out, had cited him
for dubious financial dealings?and
suddenly the Reagan Administration
had a potential political liability on
its hands.
For the record, White House offi-
cials insisted they had full confi-
dence in the rumpled, mumble-
prone Casey, a former Securities and
Exchange Commission chairman
and tinder Secretary of State for
Economic Affairs. But chairman
Barry Goldwater of the Senate intel-
ligence committee ordered a staff in-
vestigation of Casey's business deal-
ings, and other members were
pressing for a full-bore examination
of Casey's career, of his judgment in
bringing Hugel to the CIA and of
agency security procedures that
failed to red-flag Hugel's past. Top
Reagan aides conceded privately
that a formal inquiry?or more dis-
closures about Casey in the press--
could make the director's position
untenable.
Neophyte: Ironically, one of Ca-
sey's principal goals had been to low-
er the CIA's profile and strengthen its
authority and credibility after the em-
barrassments of recent years. But Ca-
sey brought at least one new problem
with him to the agency in the person
of Max Hugel?a toupee-topped for-
mer importer ofJapanese sewing ma-
chines and typewriters. Hugel joined
the Reagan team last year in New
Hampshire as a political neophyte
carrying the endorsement of power-
ful publisher William Loeb. Hugel
quickly impressed Casey with what
other top campaign aides thought
were "harebrained" schemes to mo-
bilize voluntgers and voteirs,_He was
"a bull in a 8RPralkecilthriariBie le
worker recalled. "People who saw
him in action would say, 'Christ, you
NE1,137,4E"Ii.
27 July 1981.
Troubles
gel and moved him through several post
before putting him in charge of top-seer
intelligence gathering and clandestine ope
ations. He saw Hugel's background in bus
ness overseas as useful in arranging "cover
for secret agents, and he wanted a toug
minded administrator whom he felt h
could trust.
Hugel was cleared by the CIA's Office
Security in just one week, and that invest
gation failed to turn up the long-runnin
battle with two former stockbrokers
prompted his resignation. The two me
'We have complete confidence in what's his nam
5. 1981 Herbloch in The Was
cHoSe
44140EVER-9E-WAs
FoR ATOP
sENSMIE
posffi0r4
BEcAose
scpAcEa
tejka4 Att.%
Hugel (left), Casey: Charges of dubious financial deal-
ings?and a potential political liability
Mark rimnstein?Photoreporters
Bruce Hoertel
despite- advice from LA general
counsel Stanley Sporki i that there:
was no clear-cut violati: en of law in-
volved. Shortly after al.: Post story:
appeared, Casey ad'. ised White!
house chief of staff Jan les A. Baker!
III that Hugel would i sign. Hugel:
did, and Casey replacedl:im with CIA
officer John Stein, a ve!eran station
chief with solid exper ence in the:
agency's Asian, Africa i and Soviet
operations. The White I i ouse was de-
lighted. "There were a ot of memo-
ries around here of th, Bert Lance
affair when this thing copped," said ,
one top staffer. "There was a great
desire to have it over wit!l."
Circular: But it wasa't. As. ques-
tions mounted about Ca.ey's appoint-
meat of Hugel, it was dis:losed that an
interim ruling by a Feceral judge ini
New York last May cit id Casey and
c ther officials of a failec agribusiness
company called Multiponics, Inc., for
knowingly misleading prospective in-?
vestors in 1968. Judg:i Charles E.
Stewart Jr. concurred with earlier
findings that Casey and the other offi-
cials had distributed an offering circu-
lar containing false and misleading
information?failing, for example, to
mention that Multipcnics had as-
sumed more than $2 7 million in !
mortgage debts from it:t- founders iind
also had exaggerated the operations
00aNAZUKWZI that the McNeil
brothers'originally took their tile to a New York
Times editor. who referred them to Was.hinston-
based reporterJetf Gcrth. Thr McNeil) sii,takenty
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WALL STREET JOU/1L
27 July 1981
CIA's- Casey Fas a 'Full-Minim' Probe
If He Doesn't Quit, Some'Senators 'Warn
By GERALD F. SF.IB
And JONATHAN KWITNY
S!..'aff Rorer t of Tla WALL. STRet7r JoL-ILNAL
WASHINGTON ? CIA Director William
enetey wee face a long and potentially em-
barrassing Senate invettgadon of his busi-
ness affairsoif he doesn't. quit,. lawmakers
warn. ? ?
The staff "of the Senate Intelligence Com-
mittee is schilduled- to submit today a report
on Mr. Casey's business. history and finan-
cial disclosure statements. The. panel will
hold a closed, session tomorrow to discuss
the report.
Yesterday afternoon, Mr. Casey sent the
committee cartcns of documents giving de-
tails of his financial affairs. He also asked to !
appear personally before the committee as
I seon as possible, but aides couldn't say
we ether he would beinvited.
Some committee members- say this
week's report, begun- just nine days ago,
won't clear up all the questions surrounding
Me. Casey's financial history.
Unless he resigns as chief of the Central
Leteilige.nce Agency, lreemakers say, the re-
port would be only the prelude to a long in-
vesdgaton by the Senate.
"If he's going te stay; I think its incum-
bent for the committee to do a fulablovra in-
vestigation with hearing," said panel mem-
ber Sen. Joseph Elden (D., Del.). "I'd like
:o avoid all of that." ?
Both Republicans and Democrats are
_ .
worried that such a long public debate will
shatter morale at the CIA. They believe the
. agency is just recoveringlrom turmoil that
arose from long Senate hearings in the mid-
' 197es into abuses by intelligence officials.
As a result; some influential Republicans
think Mr.. Casey should quite Alaska ,Sene
Theodore Stevens, the Senate's secand-ranek-
? LegRepublicanacalled on Mr. Casey nastep
aside, saying Senators are "worried about
.the future of. the agency if the director be
,
.comes the focal point of controversy right at
dine." Similarly, :Sen.. William. Roth
(a, Del.) asked Mr. Casey to resign so that
the CLa's attention isn't "diverted from its
c.eitical respoesibilides by the kinds ot
gatons now being made." -ai??
- The commitee staff has- been investigat-
ing, Mr. Casey's activities as a director of
Multtponics Inc, a failed agricultural. core
cern. A federal judge in New York recently
ruled that Mr.. Casey and other Multiponici
enrectors misled potential investors, about
the company's finances.
The staff aLso is looking into other law-
suits and business actnees that Mr. Casey
didn't ? disclose b statements? required of
preidential. appointees, cores giotial aides ?
said. FoAplafilikVelliyrsell. Fteie89 ;
didn't disclose his involvement in a second'
suit against Multtponics in Louisiana-a; I
La addition? , aides saidethe staff will too'
into Mr. Casey's role_ as an attorne.y repre-
senting SCA Services Inc., a waste-disposal
concern that has been linked in public rec-
ords and sworn testimony to organized
crime. After serving as chairman of the Se- I
curities and Exchange Commission, Mr.
Casey represented 'SCA...in dealings with the'
conunisslon.
Mr. Casey has pledged to provide materi-
als to the committee by- today that will re-
solve "this entire controversy." He has re-
fused requests for interviews. ..
Congressional wthapplaess with Mr.
Casey doesn't all stem from his business ac-
tivities, though. Lawmakers are openly
questioning his job. performance. particu-
larly his judgment in appointing Max Hugel
as chief of the CIA's spy operations. Mr.
Hugel, who. hadn't any experience in intel-
ligence, operations, was forced to resign
after being accused of improper and pos-
sibly illegal business arecivities. He has
denied wrongdoing.
Sen. Barry Goldwater CR.. Ariz.), Chair-
man of the Senate Intelligence Committee.
also is angry that the panel wasn't informed
Le advance of the brewing scandals over St-.
Hugel and Multiponics, aides said..
Th a nnharnir126.3 with Mr. Casey on Capi-
tol HIlL "seems:. to- he.: an accumulation of i
events," said one White House official-Some
Senators would-like-to see Mr-. Casey's dep-
utya Admiral Bobby- Ray ?Lernan, step into i
the top CIA jobahemdded_ ? .
Admiral Inmattis a longtime intelligence.
official who ise-widelY respected by other
profee.sicmals itbei&d Earlier this year,
Sen. Goldwater called him 'the outstanding
intellig,ence expert in the world." Most ob-
servers think the White House would name
him to head the CIA if Mr. Casey resig,nede
Publicly, though, the White House
strengthened Its support of Mr. Casey over
the weekend. The President believes Bill
Casey is a good and decent man who has
served the century well for a good many
years," said White House spokesman David '
Gerigen. ? "He also believes - Mr. Casey js '
.doing a fine- job at the Ctent
In -addition,- some Senatori -spoke- out :in;
defense of airaCasey. Sen." Henry Jackson
urged his colleagries to give Mr. 'Casey more
time-lo- respond to recent alleg,ations. "Itl
Ick s to me like they're trying to lynch him(
public,", the Washinrsore.Democrat said!
I on NBC-TV's "Meet the Press." Most of the
allegations against Mr. Casey "have been
around for a while," Sen. Jackson added.--':-
Sen. Paul Laitalt (FL, Nev.), a close
friend of President Reagan, also urged at a
weekend news conference that Senators
Spo eneral Coun-
sel,/.8?,9971staniy kin, CIA :nelr likaRO
ceG1.3-0119 1
and Leonard Marks, former U.S. Infor-
mation Agency director. aLso defended Mr
I After considertng the -ep-ort of its staff
tomorrow the committee nay communicate
's feelings about Mr. C ..sey to the White
House, staff members sat _
Among issues in the C tsey inquiry is his
extensive legal work for SCA SerOces, a
oempany a-aded on the Nt`v9 York Stock Ex-
change. after Mr. Case- served as SEC
chairrr.an from 1971 to 197 e
According to SEC ofaciais, Mr. Casey
personally negotiated a so-,-ttlernent of SCA's
complex troubles with the SEC in 1977. Last
year, Mr. Casey's law firm prepared an ex-
tensive public-relations erograrn for SCA
and urged the company to use the program
to counter SCA's tainted ireage.
Christopher?. Recklina SCA's president
until his resig,naton in 1975, was_ convicted
of wire fraud and. filing faise staternents
with the SEC. Burton Steir, its chairman until
his resignaton in 1976, was convicted of fil-
tng false statements. The,: (tenses concerned
what the SEC said was a ?liversion of some
34 mullion to Mr. Recklies's personal use.
Anthony Benrro helped divert the money,
the SEC said, ad was liter sentenced to
prison with his close assceiate, ateel cap-
tain and then-Teamster official, Anthony
"Tony Pro" Proveneeno, for conspiring to
split a S2S3.000 kickback on a S2.3 million
Teamster pension-fund loan.
Last month, 'Thomas C. Viola,. who suc-
ceeded Mr. Steir as chief executive ofidcer
of SCA, was himself replaeed after a House
committee heard charges that he was in-
volved with organezed-crime figures in the
wastedisposal business in his home state of
I New Jersey. Mr. Viola later, in his own tes-
timony, maintained his ineocence.
SCA's representation by Sir. Casey's New
York law firm, P-ogers & `hells, was brought
to light by John Kelly, ednor of Counterspy
alagadne in Washington. Caesar Pireesy,
managing parther of P-ogers ee Wells, said
at least 20 people in the ETTTI worked oe the
SCA account, but "my reeollection is that
Casey didn't have anything to do with it."
SEC officials confirmed for this newspa-
per, however, that Mr._ Casey succ.essfutly
settled the SEC's caarges a gair,st SCA relat-
ing to the ?4 million tune diversion, false
disclosures- ande what the SEC said were
"bribes to obtain cona-ac-s and to obtain
permission to use properto owned by SCA
for landfill '' In the settlerient SCA neither
admitted nor denied the cha rges. It agreed to
appoint two outside directors acceptable to
the SEC and to maintain ac audit committee
Cf four outside directors.
An SCA official who didr a want his name
used said Mr. Casey anti the late Jack
Wells, a Rogers le Wells partner. led the
SCA's leg-al team for the fi i.
Neither Rogers Se Wells nor SCA would
, say when SCA hired the fem. although Joe
Boren, SCA's director of coeporate and com-
munity relations, said it "could have'' been!
as early as 1974. The SEC iharges involved i
events occurring in 1974 anI 1975_
R000500270007-0
[,
4701 Wll.LARD AVENUE, CHEVY CHASE, MARYLAND 20015
p9ikleo
656-4068
FOR
PUBLIC AFFAIRS STAFF
PROGRAM Nightline
DATE
STATI NTL
STATION WJLA TV
ABC Network
July 27, 1981 11:30 PM CITY Washington, DC
SUBJECT Full Text
TED KOPPEL: William J. Casey, the embattled Director
of the CIA. Tonight we'll examine Casey's career and the back-
ground of the current demands thot he resign. We'll talk live
with the number two man at the CIA, Admiral Bobby Inman.
And on another top story we'll take a look at prepara-ions
for the Royal Wedding in London from the vantage point of an Amri-
can visitor.
ANNOUNCER: This is ABC News Nightline. Reporting fr)m
New York, Ted Koppel.
KOPPEL: Good evening.
If you don't know where to look you might not notice :my-
thing out of the ordinary. But there are armies massing in Wasling-
ton, DC these days. They don't march in formation nor do they aear
uniforms. And the weapons they use for this battle is already under-
way, tha weapons of the telephone and the mimeograph machine, the
telegram and the news conference.
This battle is for the political survival or destruction
of one of the President's men, William Casey.
The efforts. to unseat Mr. Casey from his position as Director
of the CIA are on one level easily visible, with open calls, for
example, from several prominent Republican senators for his resig-
nation. Less visible on the part of Mr. Casey's Opponents, the
gossip, the news leaks. And less visible among Casey supporters,
the rallying of the "old boy" network, the call, as in this mailgram
which was sent out last Friday to an alumni of the OSS and maro, other
friends of Bill Casey for special support luncheons in New York and
OFFICES IN. WASHINGTON D.C. ? NEW YORK ? LOS ANGELES ? CHICAGO ? DETROIT * AND OTHER PRINC PAL CITIES
ma, ffld'obYReaddiofnIsnOelPee0.299119quae.,,PAt&Rop.rurconctRactaw2,70007.40.,,,,ited
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2
Washington next Monday and Thursday.
One way or another William Casey's future is at stake.
Here's Sander Vanocur.
SANDER VANOCUR: CIA Director William Casey is in effect
on trial in Washington. It is becoming a Washington ritual, a close
friend of a president in trouble six months after that president takes
office.
Four years ago this summer Jimmy Carter's close friend Bert
Lance, Director of the Office of Management and Budget, was called
before Congress to explain his financial past. He later resigned.
Now history repeats itself with William Casey, a close
personal friend of a new president, Director of the CIA, about to
face a congressional investigation into his financial past.
Bert Lance was relatively unknown on the Washington scene.
That is not true of Bill Casey. He is part of the American political
and financial establishment.
His credentials: World War II service in the Office of
Strategic Services, the predecessor of the CIA. Multiple careers
as tax lawyer, teacher, author, and businessman, activities that have
made him a millionaire. Political posts that have included government
service in the early '70s, Chairman of the Securities and Exchange
Commission, Undersecretary of State for Economic Affairs, President
of the Export-Import Bank, and finally, Director of Ronald Reaan's
1980 presidential campaign, taking over on the day before the rew
Hampshire primary.
WILLIAM CASEY: Governor Reagan decided that he wantcd to
reshape the campaign and felt that he needed new management to do
it.
VANOCUR: Ironically that campaign provided the catalyst
for Casey's present problems. Prominent in that campaign was rax
Hugel, a New Hampshire businessman, a good friend of William Lcwe,
the powerful, controversial, right-wing publisher of the state's
most influential newspaper, the Manchester Union Leader.
Casey astonished official Washington, but especially the
CIA itself and the Senate Intelligence Committee by naming 1-Ingc',
who had no intelligence experience, his Deputy for Covert OperEtions,
the most sensitive post in the agency.
On July 14th Hugel resigned.
MAX HUGEL: In my letter of resignation to Director Casey
1 feel I can no longer effectively serve him or the agency.
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5
VANOCUR: Hours after, the Washington Post reported charges
by two stockbrokers that Hugel had engaged in insider trading and
manipulation of the stock of an export-import firm he headed n the
early '70s.
The day after the Post story on Hugel it was revealed that
a federal judge in New York had ruled May 19th that Casey and other
directors of a defunct New Orleans agribusiness firm, Multipor ics,
Incorporated, knowingly misled investers in 1968. For Casey he
fat was in the fire.
Senator Barry Goldwater, chairman of the Senate Intelli-
gence Committee, met with Casey July 15th, reportedly was angry
not only about the charges against Casey but also because Casry
had failed to warn Goldwater in advance of the charges against Hugel.
The follow day, Senator Majority Leader Howard Baker said
the Intelligence Committee staff had been ordered to review ail of
its material on Hugel and Casey.
But Hugel quickly became a side issue. Front and center
were questions about Casey's judgment in hiring him in the first place,
and Casey's financial past.
President Reagan was quick to come to Casey's defense.
UNIDENTIFIED REPORTER: How do you feel about the Bill
Casey controversy?
PRESIDENT RONALD REAGAN: There's no controversy. 1 have
complete trust in him.
VANOCUR: But the Senate Intelligence Committee wanted all
the information and wanted it fast, no member more than Committee
vice chairman, Daniel Patrick Moynihan.
SENATOR DANIEL PATRICK MOYNIHAN: If this administration
wants Mr. Casey to stay in office they'd better start answerinj the
phone calls of Mr. Blake and Dr. Schulski. If they are going to
cover up, they are going to lose themselves a Director of CIA -ight
fast.
VANOCUR: But it seemed last week as if Casey's fellew
Republicans had formed a judgment about Casey before all the f-crs
were in.
BARRY GOLDWATER: The damage done by Mr. Hugel's app)intment
to the morale of the CIA, in my opinion, is a sufficient posit.on for
either Mr. Casey to decide to retire or for the President to decide
to ask him to retire.
VANOCUR: Even the President, who had been so forthr ght
in his support the previous weeks, appeared last Friday to be hedging
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his best.
UNIDENTIFIED REPORTER: Does it seem to you Mr. Case ''s
going to have to resign?
PRESIDENT REAGAN: I haven't got any answer on that.
As I said, we still have confidence -- and our people -- to be talking
to the senators about that. And so I don't have any answers.
VANOCUR: And on the weekend Casey supporters were on
the counterattack, with friends like Paul Laxalt, the Presiden is
closest friend in the Congress rallying to Casey's defense.
SENATOR PAUL LAXALT: Surely it's politically contro-er-
sial, surely it's politically difficult. But I would hope tha-
my colleagues and whoever else is involved in this process, in
eluding the media, give this man a fair shake.
VANOCUR: It may be that Casey is a victim of McCart y-
like tactics. It may also be that Casey is caught up in a raw
struggle for power over the future of the CIA. Do old hands a-
the CIA and its powerful lobby of former CIA officials want one
of their own to head the CIA?
And it may be that congressinal egos are bruised for
a number of reasons.
Casey did not work the Hill as much as his predecess, rs.
Casey did not advise Senator Goldwater or other members of the
Intelligence Committee about the charges against Hugel.
There is the question of Casey's judgment, not just lbout
Hugel but also about CIA operations. For instance, an alleged plan
reported today by Newsweek magazine to destabalize Libyan Pres dent
Qaddafi's regime, a plan, which according to Newsweek prompted a
letter of protest from the House Intelligence Committee to the Presi-
dent. But the White House and House Intelligence Committee Chlirman
Edward Boland today denied the report.
And there's also the question of egos at the White Huse.
Casey and his Deputy, Admiral Bobby Ray Inman reportedly clashed
early this year with White House National Security Advisor Ricard
Allen over proposals for lifting restrictions on CIA covert operations
with Allen favoring a wider latitude in those operations, Case', and
Inman opposed.
Perhaps for that reason Newsweek was told by a White House
official over the weekend that Inman was not on the list of poesible
successors to Casey should Casey resign.
As in all tribal rituals there is in this current spectacle
both reality and symbol. The symbol in this instance is Casey s
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5
financial dealings and perhaps his judgment. The reality is vit-)
controls the CIA in the future and to what end.
Sander Vanocur, ARC News, Washington.
KOPPEL: In a moment we'll look at the Senate Intelligence
Committee's investigation of William Casey, where it stands, where
it's going. And we'll talk live with the CIA's Deputy Director,
Admiral Bobby Inman.
KOPPEL: CIA Director William Casey made clear again today
that he does not intend to take the efforts to remove him lyin down.
Ann Compton reports now on the Casey counterattack and on the (?_nate
investigation into the charges against him.
ANN COMPTON: William Casey means business. He's al;
oyer Capitol Hill these days. But he does not mean to quit. In
fact, Casey says support back at CIA headquarters is reassurin(
CASEY: 1 had talked to the employees of the CIA in
our auditorium today and I found them very supportive. High si irits,
they gave me a prolonged ovation, and it felt very good.
COMPTON: In pursuit of the case against Casey came lred
Thompson, once the Republican's Watergate investigator. Now fc.r.
the Senate Intelligence Committee Thompson will try to make qu ck
work of a mountain of evidence.
FRED THOMPSON: I expect it to be a thorough inquiry, but
I hope that it's resolved in the near future.
COMPTON: Thompson spent his first day on the job siting
through hundreds of pages of documentation on Casey. Tomorrow morn-
ing behind the closed doors of the Intelligence Committee hear ng
room he'll spread it out on the table for senators.
The results would be quick indeed if the members fin
some compelling evidence against Casey, but one senator recent
described the whole affair as no smoking gun, just a lot of sm
In that case, it could take a long time to clear the air.
Ann Compton, ABC News, Capitol Hill.
KOPPEL: Standing by live now in our Washington bure,u
is the Deputy Director of the CIA, a former Director of Naval
Intelligence, and of the National Security Agency, and a forme'
Vice Director of the Defense Intelligence Agency, Admiral Bobby
Inman.
km.
Admiral, forgive the question, I realize it's kind o a
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strange one. You are here because we invited you, and we're gld
that you are here, but it is almost unprecedented, and in fact, I
can't recall another time when a Vice Director of the CIA has arpeared
on a program like this. And I have to ask you, sir, why is it lhat
you are willing to appear?
ADMIRAL BOBBY INMAN: Mr. Koppel, I had a call yester(ay
from an old friend for whom I have great regard who told me tha he'd
been approached by a couple of friends in the news business who had
asked him if it was true that Bobby Inman was in fact orchestra- ing
a campaign to have Bill Casey removed in order to succeed. It'e
preposterous on its face. But the fact that the charge was cir,u-
lated at all prompted me to decide it was time to go on camera -o
say that I think he's doing a great job and I hope he stays.
KOPPEL: What's going to happen, do you think, to Wil iam
Casey at this point? I mean, I can see, as can many people around
Washington, that there is this tremendous effort now to rally s'ipport
for him. But how long can the administration keep rallying if he
charges keep coming?
ADMIRAL INMAN: The key is whether or not there are aldi-
tional charges that are coming, Mr. Koppel. As you know, Mr. Cisey
has moved with a comprehensive response to the allegations rega-ding
his personal integrity relating to financial dealings prior to :om-
ing to his current job.
He's sent a full response back. I've not seen it, l'n
told that its very thorough, and that he's confident that it will
remove all charges. He's assured me that there are no other chArges
pending.
What We then have to deal with are the rumors which cen-
tinue to circulate. That will be harder to do. But the faster we
can get it behind us and get back to work the better the country will
be, and certainly the better the CIA will be.
KOPPEL: Much of your professional life, Admiral, has
dealt with analysis. Give me your analysis of why you think this
has gone as tar as it has.
ADMIRAL INMAN: A combination of events, Mr. Koppel. Ihere's
clearly a political fight. The Republicans have been riding fairly
high in the Congress. Getting to one of the President's men would
have its own impact. There clearly was an underriding current of
dissatisfaction, particularly among the retired employees of CIA,
about the appointment of Mr. Hugel. The media has certainly played
its part. One of my friends described it as the time of the dcldrums
when there's an absence of news and therefore this has filled
lot of pages and a lot of hours on camera.
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7
KOPPEL: But Admiral, when you talk about the politial
element, you know as well as I do that the harshest charges, tIe
loudest calls for his resignation have come from the Republical
side of the aisle, from men like Barry Goldwater. That doesn't sound
political.
ADMIRAL INMAN: Mr. Koppel, that's a particularly difficult
one for me, finding myself between Senator Goldwater and Mr. Casey.
Mr. Goldwater has been a great supporter for these last several years
while I've been in some leadership jobs in the intelligence bu-3iness
in Washington. And during the years when he was the Vice Chairman of
the committee, whether he agreed or disagreed with the topic at hand
he was our stalwart in protecting intelligence sources and methods.
It's therefore not a happy occasion to find myself in disagreement
with him on whether or not Mr. Casey has the ability and the w II to
continue to provide the leadership CIA needs.
KOPPEL: But you're also in disagreement, Sir, with senator
Roth, you're also in disagreement with Senator Stevens, and ironically,
and I understand, I think, the political motivations here almo!;t as
well as you do, the Democrats are quite clearly gleeful to stand back
on the sidelines and even make noises about no McCarthyism at his time
because the Republicans are doing the work for them.
Mr. Casey
have been
I carried
overseas.
How is it that so many Republicans are active in thi!,?
ADMIRAL INMAN: Mr. Koppel, it's a fact of life that neither
nor I have spent the time with the senators that ought to
spent over the past six months. There are a lot of excuses.
two jobs until April, he has been busy doing some traveling
But both of us have been learning the agency and the commu-
nity and trying to decide where it needs to go.
In that process, we've not given the attention that the
senators would like to have had. That's clearly one of the problems
that underlies the current difficulties.
KOPPEL: But that almost makes it sound as though the U.S.
Senate Is made up of rather petulant people. I mean, that's not
enough reason to go after the man and try to remove him from his job.
ADMIRAL INMAN: I would not describe them as petulant, but
clearly don't like to be surprised. And they like to have a
amount of time spent keeping them apprized of ongoing everts.
they
fair
KOPPEL: All right, Admiral. We'll continue this conversa-
tion, with your permission, in a moment.
KOPPEL: With us again now from our studios in Washington,
the CIA's Deputy Director, Admiral Bobby Inman.
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8
Admiral, it seems that perhaps the most damaging charge
against Director Casey is the one of bad judgment. Can you give us
some insight as to why he would go to a man to head our covert opera-
tions who has absolutely no experience in that area?
ADMIRAL INMAN: Mr. Koppel, a long period of time was
spent studying the problems of the clandestine service. Bill Casey
got a start on that a good month before I joined him.
His conclusion early on was that the service was being
well-run and was being very productive for what it was now doing,
but that it had been drawn down below a safe level to deal with the
U.S. interests in the years out ahead.
And as that draw-down had gone out over the past decade,
there was a tendency to rely on official cover to go for what was
going to be most cost-effective rather than that which might be
most survivable, if you lost an embassy, as in Tehran or in other
places where embassies have been attacked.
In deciding where the agency needed to grow in the future,
specifically the clandestine service, it was Bill Casey's judgment
that they were going to have to rely far more on non-official cover,
the use of commercial drops to provide the necessary cover for clan-
destine agents all over the world.
It was his conclusion, and I shared the view, that an
experienced businessman who had spent 20 years working in that
area could be helpful in leading the way toward rebuilding the
clandestine service with the proviso that you had plenty of pro-
fessional people backstopping everything that he did. And that
backstop was in place from the time Mr. Hugel first took his job.
KOPPEL: If there is any arm, Admiral, of the CIA that
really calls for a great degree of confidence, it would seem to
be the clandestine service. And we both heard Senator Goldwater
in that taped comment from a few days ago saying that if anything,
Mr. Hugel's appointment seems to have damaged the morale of the
CIA. And I assume he was referring specifically to clandestine
services. Is he wrong?
AOMIRAL INMAN: Mr. Koppel, I asked one of the most senior
and respected members of clandestine service day before yesterday
for his view on the damage from the Hugel appointment. And his
response to me was that its damage ended on the day that Mr. Hugel
dropped out of the newspapers.
KOPPEL: Now that Mr. Hugel is out, and let's assume for
a moment that you all are successful in keeping Mr. Casey in, would
you do it again? Would you go the same way? Would you once again
go to someone who does not have a background in intelligence?
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9
ADMIRAL INMAN: Mr. Koppel, I think there's a reinforcement
of the value of using professionals in all of these jobs if you can
get the right professional. There are places, though, where you want
to use outside experts. We've already brought some in to deal with
the area of analysis, and there may be some more.
It's a curious mix. Clearly, those inside the agency
would prefer that all the promotions come from inside. But the
most difficult feature, certainly for the analytical side, is
retaining objectivity. And you can find the right people who are
willing to come to government service, not withstanding pay caps
and the intense scrutiny of their previous lives, hopefully you
can bring better objectivity, the right kinds of questions to
help us do a better job in the analytical area than we've done in
the past decade.
KOPPEL: Admiral Inman, you've seen the report in today's
Newsweek magazine suggesting that there was to be a clandestine
operation against Qaddafi of Libya. Tomorrow morning's Washington
Post says it wasn't Libya, it Mauritania. Was that kind of an
operation being put into play again?
ADMIRAL INMAN: Mr. Koppel, both the State Departmen-1- and
Chairman BolOtid denied the report this morning. And you'll under-
stand that I'm not going to be drawn into hopping around each country
in Africa hoping we'll finally end up with something even remo-'ely
close to the inaccurate stories that have been printed.
KOPPEL: No, I can understand that. And I can even under-
stand if you won't answer this next question. But I have to a--,k you
whether in fact, as Sander Vanocur said before, there has been open
disagreement or perhaps quiet disagreement between you and Director
Casey on the one hand and National Security Advisor Richard Allen
on the other on this general subject.
ADMIRAL INMAN: There has been some disagreement on what
an Executive Order ought to look like. I'm persuaded that the
Executive Order needs to be the road map for the professionals inside
the intelligence community that tells them what they can do and
what they cannot, the standard that they will be held accountable
to ten years down the road.
Our views are shaped from having been in this business
through the difficulties we've lad in the last decade. I don't
want to see them repeated for another generation down the road.
KOPPEL: Admiral Inman, what will it take for Director
Casey to survive this?
ADMIRAL INMAN: It will take regaining the confidence of
the Senate and giving us some breathing room.
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Mr. Koppel, the real problem is rebuilding the capabilities
of this U.S. intelligence community after ten years of drawing down
both manpower and dollars. We're only going to succeed in doi,ig that
if we have a Director of Central Intelligence who has the direct access
to and the confidence of the President. And that's what persuddes me
and many at CIA that notwithstanding the current difficulties, Bill
Casey is the right man to continue as the Director.
KOPPEL: In that context, Admiral, will Director Casey
be testifying before the Senate Intelligence Committee this week?
ADMIRAL INMAN: He's asked to testify, and I hope thdt
they will offer him the opportunity before they go in recess to
respond to all the allegations that have been made.
KOPPEL: How's the general support been from the "Old Boys"
network?
ADMIRAL INMAN: I think with the departure of Mr. Hugel,
the support has picked back up pretty sharply. Certainly there's
been a great flood of letters from many of the retired personnel
from the CIA to the Director subsequent to that departure.
KOPPEL: Admiral Inman, thank you very much for joining us.
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ARTICLE APPEARED
ON ?AGE
PIE irduriu BUT ,I,ETT ( PA )
26 July 1_9d
STATINTL
By SANDY GRADY
Of The Bulletin-Staff
WASHINGTON''-z-- Admiral Bobby I
Ray Inman is theNo.- I, choice to re-- I
place William EXaSey as director of
the Central Intelligence Agency if -
Casey succurnisserrifing
sure for his resipialion.: ?'
Sources close tthe-SenateIriteIIj'
gence Committee said Inman, 49, is
the heavily. favorite for 'several rea-::
sons: -
? Inman is respected in the Wash-:'
ing ton, intelligenccommunity- and
popular :With key senators; esPecial-_1,'
ly Sen. Barry-Goldivater
.; As-Casey's rnan-,:-Inrnan "in place" place" and available. ;????: ? '1
? Because he isknown as an intel-
ligence professional: and a shrewd
lptireaucratic- infighter, Inman..could!-
restore confidence-at :a CIA shaken
by the Casey ozintroversies.. -
"Inman is seen as a pro who woulth-
save the agency from the ama?
teurs," said a Senate intelligence
source. "Goldwater, has wanted' In-
man in the job:all along be.canse he
has no confidence in Casey."
A Texan who spent 28 yearn in the-
Navy, Inman- is considered an expert
on spy satellitesand other espionage:
technology.,-Before? Casey persuaded
himta becoiner his deputy at the CIA,
Inman operate&theNational Securi-
ty Agencyat?highlrSecretive'Outfitf
that is the code-breaking elite of the
Fentagort.z.:rritr,"404-,:y.-
While Irunan-:i.vaitedin
C:asey was: being bombarded brdec-:
rn ands, from?key?-Republicans
chiding Goldwater-that Casey Step..
down; i74 7r.,1"9
Go1dwatee,'Iirelieitoperr-:."7-Tdain
criticism wherr he'..sharply"attacked-1
Casey for hiringan unqualified Man,
Max Hugel, t& head the CIA's clan-!.
destine activitleik,,Huge1abrimt1yie-4.
signed. : amid -'diSclosures -of-- stock'
market manipulations:,!...t
Calling_ the Bilge aRmintrne-00;a"
very' baAklaiNfikeeqA0CAKW
ous," Goldwater. said Casey should,:
retire from the:CEPt- or -1`the Presi-
?
Because he is regaining his old
clout as the Senate's top conserva-
tive and heads the Senate Intelli-
gence Committee, Goldwater's fusil-
lade was considered near fatal to Ca-
? sey's chances. Sen. Ted Stevens (R-
Alaska), the GOP's No. 2 Senate
[leader; .and Sen. William. Roth (R
De a., member of the Intelligence:
Committee, joined Goldwater in de--
manding Casey's scalp.:
[
?
- President Reagan intimated pub-
licly that he:would fight to-retain the-
68-year-old Casey; a New York mil- -
lionaire who, had-.rebuilt Reagan's
sagging; campaign starting- last
March. Reagan told reporters he
"hada:not,ichanged his mind' and
?"stilr has confidence! 'irv Casey, to -
run the CIA.-- ? ? - -
, But the White House had its top
lawyer, Fred Fielding, going over
Casey's business dealings- that- have
troubled Goldwater and other sena-
tors. A White House source said the
results -of ? the Senate Intelligence
Cornmittee's Tuesday meeting would
decide whether "we have to pull the
; plug on Cisey."
Casey has been politicking hard to
( keep bis job. He has pushed his case ?
with Reagan's senior aides. He has -
. lobbied top senators and carried on a
storm/telephone _conversation with
Goldwater, claiming Goldwater was ?
provided "inaccurateinforrnation."
Democrats,: sensing that this iwas
a Republican-family feud; have been -;
cautious. Sea. Joseph Biden,(D-Del),,.,
a member otthe ?Intelligence Com,,?.-
mittee;-:-,-said.': he 7.. was; ..convinced2
"there's no way Casey can:remain-in-:
?Ithe job," but he'll wait to see the eyi-4
'dence..before formally asking _ r" a --.
? resignation. Sen.-Henry:Jackson (13H
Wash), -after .a-30-minute meeting-
with_ Casey, Said he was "being tried -
in the preSs."
It mill, beirOnic, if Inman becomes:
'the,neyk,CIA. chief ---:-:Casey? had to:
promiseUnmais a *fourth ' admiral's,
star .ailea-rraiige for a prs?1 p1ea::
(1104/23Fa7i bEGIA
accept:the CIA's No. 2 job..:1t.'",:t?
Inman:: who has been running- the
?
dai[y operations- of the C s
? known on Capitol Hill, wl- ?-w has
been a strong advocate r ecang
up the CIA's talent pool f -x[
enced agents and analp tnian
has asked Congress for h e?[:[ s of-
millions of dollars to slit e up the,
CIA's technical spying d covert
activities: r -
Reagan probably will .1.1 le Ca:-:=
sey's fate next week.:
_ .
, Bobby Inman
901R000500270007-0
Approved For Release
STATI NTL
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Approved For Release 2001/03/07 : CIA-RDP91-00901R000
ARTICLE AI-TEA:ICED
ON PAGE
Ilia-Pan
Protests
tovert- ,laii,o-
, - i:- lolt _ :??-?-?-' -'1'."...-.4-,..W.-=.
-,..,. By 15fithaelcietleney'.:
w..eieven ?pit etwr waft-. f ..-
. Membersog the,HOuse Se--...
lett Committeee,:On,,; Intelli-
gence, ins movvdescribed as -
"rare" by7govermnentespe--
?
. cialists, have:written ta-Pres:=5
" ident Reagan-, objecthir to ar.
Central Intelligence - Agency-
- plan fora. covert action opee
eration hr-Africa,-acco -
to informed sources. ev ---4,-:..,---t
Sources in both the exece:1
utiveand legislative- ch
branes:
of government.say that While.,
it- is not tmusual for Commit-
tee members,- to, -OCCEtSi011411ir L'?
voice ?concern in closecL-door
, meetings with CA officials
over various . covert%?action?
schemes, it is,highly *Anal-
for members, pue. their-
views in writing for the-pisi-iie=
ident,-. who ultimately: must;
approve or disapprove:th
actions.. Some, sourcese4;
.. that, in the,fixileYear4''sitick
the House COmraittee was es
tablished,..theY could thinkcif-:
no othercase ihiclizneM.
hers went so farZtt:.,-4t17,;.1:17--.
These sources:wouki? i pro-s
vide no detaili: an- the- cxx
operation.' its Sae:. Orjrnbor'i"
tance, . except f' that. -. itef,was.
aimed at someplaci in.A.frizA
. .. _
ca. They said, however, _thet-
a number-of House comrciite.:
tee membeiee: both ,Derno-1.::
crats and RepUblicane,..were:
troubled bY bath the &nit; _
self, which-they felt . weal. not-
properly - thought', throi.*
Approved For Release 2
THE WASHINGTON POST
25 July 1981
STATI NTL
? The plan .rePOrtedly Wis- first broUght to th
_
'committee by Max Hugel, the CIA's former de
:uty director for operations. Hugel has since
- signed-in the wake of allegations concerning h.
..-2,clealings as a, businessman before being brought.
: :into ther highly sensitive intelligence job by CIA:
:Dior William J. Casey. Hugel reportedly was
accompanied at the House briefing by a State-De-
partment- intelligence-pfficial,.Herman J. Cohen-',".1
"; In those !heaiings, misgTVings aWDut- the-plan:
Were voiced to Hugel and-Coherrisources say. But.
? some- committee members:. either did not have?
:.pnottet ? confidence that their'eonCerns:wou/d be
:-passed;alOng to. Casey and the-president, or felt
-sufficiently--exerCised:about- the-matter,.-to . write
:the president directly; the sources
V-1:Apyt?-? ITrT3 LT ..L:TL
Under'ae variety of amendecl'federal `statutes
'.de.aling, with congressional oversight of planned
U.S. cover ?undercover lligenCe activities;:
the president: must first _make a,',.Tuiding" that.
;such activities' are- necessary forrnitional security:
and then the director of Clkia obliged ta inform
the Hauaenil Senate, selectintelligence 'commit-
tees, which:were set up- irr.,the past four-to-five
year-The-committees haveno formal role in- an-,
Proving or disapproving of st.tch actions, but theyi
can make concerns known and thus contribute to?
a change in plans. .
? _
Nor
thOse-concerns- -do not go beYond the!
hearing room.. Under. the_Carter_administration
sources said, CIA Director Stansfield Turner fre-4
quently briefed the committee personally, so con-
cerns were dearly known.to him. Thus far in. the;
Reagan administration, sources say Casey hes not!
handled these appearances but delegated them
mostly to Hugel and his predecessor and On oc-:
casion to deputy CIA director Bobby Ray Inman.;
In the case of the Africa plan, the members were;
not as sure that their concerns would be properl
conveyed, the sources. gait:3 Scones. say there has!
been no response yet from the White House to thfI
letter from_ the House panel naerhber
eee ?e-
?
Last:year; Iegislaton was passed that narroWe
the numberaf committees required to be kept in-
formed of.Sensitive intelligence operations from
eight to- the-two select committees...:One source:
said that-because-of - this narrowing, membersot
s.
the two remaining committees took their jobs,
even more seriously because, in effect, they were:
now responsible to the whole Congress if some-1
thing goes wrong. ----
-
Though the Reagan arirein;etration- 'Made!.
clear its intention to beef up-U.& covert action ca-I
pabilities, officials say this is a slow process re4
quiring both skilled people in the field and morel
na
001/a
oloiaizeirtitaaiaita say th uildu a iv)
the former pre;identi.:11-Arigia his mind about the!
Russians, and will: Continue increasing under the4
_
70007-0
e lease 2001/03M7Ailql#TRpP91-00901R00050
25 July 1981
* Key U.S. inieffigence sources are concerned ,
that certain individuals within the Reagan-Admin-'
istration, along with a number of.congressional
liberals, are trying to replace CIA director William
Casey:?badly shaken by last week's resignation
under fire of Max Hugel, his chief of clandestine
operations?with Casey's No 2 "man,, -Admiral
Bobbie Ray inman_Though originally backed for
the No. 2 spot by no-nonsense security types on_
the Hilt, Many 'of these same hardliners are now
having second thoughts because of Inman' s oppa-
Sition to efforts to lift burdensome restrictions on
the CIA imposed by the Carter Executive Order.
"Changes. are critical it the agency is to perform
well," says one knowledgeable intelligence source,
"but Inman is opposed to all but cosmetic altera-
tions."
STATINTL
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ARTICLE APPEARED
ON PAGE
THE NEWS WORLD (Ni)
23 JULY 931
STATI NTL
By Robert Morton
NEWS WORLD STAFF
The controversy Surrounding
- CIA Director William Casey inten-
sified yesterday when anotherof his
high-level appointees became the
object of critical questioning.
On July 7, the administration
announced that Henry S. Rowen had
been chosen .to head the National
Intelligence Council ? a group
responsible for preparing national
intelligence estimates for the CIA.
. Rowen resigned under pressure as
president of the Rand Corp. in 1971,
reportedly because he collaborated
with Daniel Ellsberg in the release
of the"Pentagon Papers."
Casey yesterday refused to com-
ment about the selection of Rowen
and a spokeswoman told The News
World that Casey was "unwilling to
make any statements about why he
appointed him to that position."
Admiral Bobby R. Inman, CIA
deputy director, also declined com-
ment.
Tax about security'
"I think that the biggest worry is
that here is a man who is pretty lax
about security ? sufficiently lax
that he lost his job at Rand," said
retired Lt. Gen. Daniel 0. Graham,
former 'director 9f ' the Defense
Intelligence Agency.- ,
?
"As theboss out there at Rand, he
was ultimately responsible for the
safeguarding of classified papers,"
Graham said in a telephone inter-
view from his office at the
American Security Council in
- - ?
Washington.
"I do recall that he testified essen-
tiality forEllsberg at the trial. That's
a very strange background fora guy
. .
U?I
William J. Casey
_
to get the job that he's getting."
Last week Max Hugel, Cases 's
deputy in charge of CIA's covert
operation section, resigned as a
result of what he called unfounded,
unproven, and untrue" allegations
in a Washington Post article that he
had engaged in "improper" stock ?
market practices in the 1970s.
Intelligence sources said Huger
was the victim of either a personal
vendetta from his two former busi-
ness associates (one of whom ?
Samuel McNeil ? isreported miss-
ing) or of "an inside hatchet job at.
the company:'
Although President Reagan has
defended Casey, some intelligence .
specialists are more alarmed by the -
CIA director's appointment of
Rowen than by the apparent short-
comings of the background investi-
gation that preceded Hugel's
appointment.
A White House spokesman
, declined comment on Rowen's
selection, saying only that Casey
1--was responsible for the
IthC, ilJZ,LJt.c1111. JeLl LI y oc
defense for international sect' ity
affairs, and two of his top assista its,
Leslie Gelb and Morton Halperi I.
Halperin is now director of the
Center for National Security SI ad-
ies which was founded in 1974 by the
radical left-wing think tank, the
Institute for Policy Studies.
The CNSS publishes the Co' ert
Action InformatiOn Bulletin wl- ich
exposes the activities of Amen i :an
intelligence agencies and spec t al-
izes in identifying agents by nai ie.
Warnke headed the Arms t. on-
trol and Disarmament Age Icy
under the Carter administrat on. tn-
Both he and Gelb, now a New .N.k
Times reporter, are known as-a,!vo-
cates of a weakened U.S. strategic
and military posture.
"For along time, Rand was ti.,rn-
ing out papers on strategy and mili-
tary matters in support of poli
that are from our point of view ad-
ures," Gen. Graham said.
? "Unless Mr. Rowen has changed
his mind, and according to some of
his statements about the unculy
optimistic estimates by the CIik he
maV-have changed his stripes, that
worries me a little bitrheadder
Rowen, who had worked with Ell-
sberg in Rand's economic divi ;ion
as early as 1959.. criticized his
friend's disclosure of the Pentagon
Papers. Nevertheless his resigna-
tion from Rand- in 1971 appare itly
resulted from a breakdown in t -ust
between Rowen. and , the Depart-
ment of Defense.
Pentagon officials reporn-dly
feared that he was attracting people.
to his staff who were antimilitar y.
appointment and that "there is no
change in this administration's sup-
port of Casey." .
Approved For Release 2gattputiQegigfrarall00
Paniel.Ellsberg, resigned his posi-
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CHRI 3 CI ..?1\1 CL7C I.-70NITOR
23 July 1981
,L9pj.jarsch
Credentials for the CIA
The Senate Intelligence Committee
vestigating the past financial dealings of
thrector Wilitam J. Casey. The White House
. says the President retains "full confindence"
inMr. Casey, but White House aides indicate
that this "full confidence" could diminish if
the investigation turns tip anything serious or
unpleasant. .
So Mr. Hugel is gone from, a job for w
is in- he was obviously not suited. He has been
CIA placedy a 48-year-old CIA veteran, John II.
Stein. Mr. Stein was the person the pro-
fessionals in the operations directorate of CIA
had wanted .in the first place_ Morale is re-
ported enormously improved :ince Mr. Stein
subordinates ?
hanging .over Mr. Casey's ability to select
replaced Mr_Ilugel. A question mark is left
More importantly, there-is a question left
over whether a politician should ever have
been put in charge of the CIA.
Historically, American political campaign
managers were sent to run the Post Office De-
partment. The classic case was James A.
Farley, one of the greatest of them all, who
incidentally-was an excellent postmaster gen-
eral ? until he broke with Franklin Delano
Roosevelt over the third-term issue and re-
tired from government.
There is one argument for putting a politi-
cian in that most sensitive of roles in govern-
ment in Washington. A man with Mr. Casey's
record as a successful politician has easy ac-
cess to the White House. He can take CIA ma:
terial there and get quicker and more careful
consideration for it than could a professional
sei intelligenceofficer without politica
credentials.
o- The purpose of having a Central Intelli
gence Agency is to provide the president wit
is the best and most objective inforrnation an
appraisal possible for his foreign policY deci
- 'Mons. Politics will enter into those decisions
ut
the White House, of courseeB there is no
son for a CIA to exist unless it can come up
h sound nonpolitical materiale-- and get it
he president.
If the man who runs the CIA is himself po-
al and is thinking about what is good for
president on the domestic political stage
president is not certain to get pure and
dulterated intelligence, material. His for-f
_policy decisions may be unduly influ-!
ed by politics.
An experience of Mr. Casey's predecessor,
. Stansfield Turner, illustrates the point
STATI NTL
hich I When the Shah of Ix an s toppled- fro'
re-1 throne, the US lost a monitoring systel
Iran's northern bon Dili that loss re
dangerously US ability to monitor. Sovie
servance of limits on their numbers and t
of strategic nuclear weapons?. !:
Admiral Turner Nes put underTpres
from the White House to tell the Congress
he had alternate and just as good sources
refused until he was sure it was a fact..
have just learned rec Tidy that begot the
nese to let him put up new monitoring stat
in China on the Soviet frontier). His orig
refusal angered some of the political figt
at the White House w:to declared that the
miral would certainle- not be reappointe.
Mr. Carter had a secol id term as President
The admiral stood his ground under si
pressure, Would a poi; tician stand his grot
as firmly under similw- pressure? ,.
In theory the ideal CIA director would
both an incorruptible professional inte
gence officer and a pc litician, Such men z
few 'and far- between. If a choice has to
made it should be on the side of the incorru
ible professional.
Guessing in the intelligence community
the wake ef the Hugel effair is that the Whi
1 , House will find a more suitable outlet for N
I Casey's political skills - tnd let the CIA be La
_ by its present deputy dieec.tor, Adm. Bobby I
h Inman, who has the enthusiastic support .
the entire intelliger ce community i
Washington.
-
. .
Thus, Mr. Casey's tenure at CIA depends.
in part on whether there is anything more
than is already- known about his role in the
promotion of business. stock issues which
proved to be less, sound than the advertising
implied.
But even if Mr. Casey ? himself comes
through the Senate committee investigation
Li n se a th ed , two questions have,emerged out of
recent events at the CIA, which could and per-
haps should weigh more heavily than Mr.
Casey's financial record. -- ?
The first question is about Mr. Casey's own
j a figment.
He insisted on picking as his deputy in
charge of CIA "operations" a personal politi-
cal associate who had no experience in intern-
gence work, Max Hugel. The selection was
strongly opposed within the professional intel-
.
Lgence community and in the White Hou
staff. Mr. Casey was allowed to have his wz
because he had managed the President's p
litical campaign brilliantly and successful'
It is difficult for any president to say no to h
successful campaign manager.
Events since the selection have justified at
the doubts which had been raised, CIA finsid- rea
ens say that the Hugel performance in charge wit
of the secret and clandestine side of the CIA to t
has been a professional disaster. They say his
ignorance of the spy business has alarmed iitic
friendly and allied intelligence agencies, thus the
reducing the normal flow of information to 'the
the United States from the resources of other
countzies. They say that the professionals un- ? una
eign
der him have been demoralized by his igno-
rance of the business. - ? ? enc
The above has come out in the wake of the Mm
resignation of Mr. Hugel,--brought by newspa-
per exposure of questionable business deal-
ings. The White House is claiming credit for
having allowed Mr. Hugel to resign on the
once..
sixth day after the exposure. Intelligence
professionals say he should have been fired at
]
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AR T I C LE APPEARED
ON PAGE .71ig
NEW YOT!: TIMES
22 JULY 1931
STATI NTL
TYloypillan Asks Faster Action on. Casey
By TERENCE H. SMITH ..;
speceemeeeseNeeeenee,
WASHINGTON, July 21 ? Senator
Daniel Patrick Moynihan charged today
that the ST/like-House and the-Justice De-
partment had ignored the Senate Intern-.gnce Committee's repeated requests
for confidentianfilesrelating to the busi-
r.ess dealings of the Director of Central;
; Intelligence; Williarn,I; Casey,. .,.. -?Esqn:
H "For the past-two- ays. we have been
' urgently trying to lind out whether the
Director Of the C.r.A. has been involved
in illegal activities that would make him
unfit to hold' his office' the New-York
Democrat shouted,, wavinghis'arms for
emphasis- at. a . lipanng by_ the..- Intelli-
gence Com mitteeS -7 - -. -1-:;:.._!..-..-,-- 7
. ? ,..,,,f, .;-.. -,-,
4 -
1The panel is-examining whether Mr.
in
Casey was ?volved in questionable-
. stock market practices in the late 1960"se
Today it senta leiter to the White House
and the Justice Department asking for
all material an4re1evant documents
from an F.B.I. background check of Mi.:
Casey. The letteri was signed :by Mr.
Moynihan, the-committee's ranking mi-
nority members and the committee
chairman, .Senatoe.;;Barry Goldwater,
Republican narizona, . ? . -, e: 'S f:
.?, But at thist-morning's hearing,: Mr;
; Moynihan . said r.' "We've called: the
? White House and we've-called the White
House and we've called the White
? House. I've calted-die Attorney General
and he doesn't answer. Maybe he does-
n't know who I aan, or maybe he doesn't
know what goes on up here or think that
it matters.:;t --------------?:,;t. .:', .--ne-...L....eq.
"Well; itdoei matter, and if they-are
going to cover up, they are going to lose
themselves a Director of ehe.C.I.A....,!:,
Mr. Moynihan said, his face flushed. -- -.
A Justice' DePartriiint (".spokesman
? later denied a Cover-up and said Senator
Moynihan's . assertion that the Depart-
ment was not cooperating with the: in-
vestigation was "just blatantly wrong."
And at the White.House, Fred.F, Field-
- hag, the counsel, said that the committee
would be given access to the background I
materials on Mr. Casey tomorrow.
An examination of Senate records and ;
court records in New York shows that
Mr. Casey did not disclose on forms
completed for the Senate Intelligence ?
Committee in January that he was a de-
fendant in two related lawsuits that in-
volved the sale of a mutual fund, Fund
of America. Mr. Casey was a director of
.thetftmd from 1969 to 1971. Both suits
_ nvere settled out of court in 1979.
n-The Senate disclosure form completed
last:January by Mr. Casey as part of his
confirmation process called for him to
list any legal actions in the last-five
years in which you have been a plaintiff,
defendent or witness." On that form he ,
did clisclose his involvement in several
othercases still pending or settled in the
last five yea
etneni e- ???'? ? '
-1.ast.',weeks after the resignation of
? Mr.. Casey's top deputy, Max C. Hugel,
itewas disclosed that a Federal District
-Court ruling had named Mr e Casey as
;pine -who, had "omitted and misrep re-
'sented facts" to investors in Multiponics
Ine.ca firm in which he was a principal.
On Friday the Senate Intelligence Com-
mittee announced it would conduct a
staff investigation of the - matter to
determine whether Mr. Casey should re-
sign from the C.I.A. .. ? _
On Friday afternoon, Mr. Moynihan
said, the staff began phcning the White
House and the Justice Department to
obtain a report of the Federal Bureau of
Investigation's background check of
Mr. Casey, as well as other relevant
documents./They didn't answer our
calls," the Senator said.. . - -
The formal letter from the committee
was delivered to the White ,House and
, Jiistice , Department this morning.,
Kama :Small;., a White House spokes-
man, said?the letter was redeived at
I 11:40- A.M4 -about an hour' after Mr.
Moynihanspoke at the hearing. .
' _Thomas P. Cair, a Justice Depart-
ment spokesman, said that the first written
-
? written request from the Intelligence
Committee had been received by the de-
partment this morning:- -"There's no
question but that we intend to cooperate
fully," he said "We have no intention of
covering up anything." A
,
Senator' Goldwater, who. last -? week
? said he thought Mr. Casey should resign
but later said he had changed his mind;
reportedly has been telling colleagues in
'private that he believes it would be best
for Mr. Casey to step down. Speaking
:with reporters today, however, he said
that he believed that Mr. Casey "will re
main tmless -we. find further allegations
Approved For Releas -tar. calrlitiAT-%
Mr. Goldwater said the committee
was., locking into both "published and
unpublished" allegations but decal- ed tc I
say what unpublished charges we e in-
volved.
Lawsuits Filed in New York
The two lawsuits naming Mr. Casey
as a defendant were filed by two epa-
ra te Fund of America shareholders in
1971 in Federal court in Brooklyr. and
New York. The suits, which were con- ,
solidated in 1973 and settled out of seat
in 1979, according to court records also
" named more than a dozen other int- ivid-
uals and companies associated with the...
fundA
- Mr. Casey's involvement in the rases
was minimal. In the New York ca e he
?
was never officially served wit} the
original complaint, though he was off i-
cially notified in the Brooklyn suit Mr.
? Casey never testified in the case in r did
he make any contribution to the none-
? tary settlement completed in 1979.
The Fund of America and varioes'af--
filiates were sold in 196 by Bernard
Cornfeld's Investors Overseas Ser /ices
to --Equity Funding Corportatio i of
America, a financial conglomerate that
subsequently , collapsed after in,/ Ave-
merit in one of the nation's largest nan-
cial scandals. ? '-
After the sale of the mutual funds Mr.
Casey and others were chosen by E. ,(uity
Funding officials to become directc?rs of
the fund. The lawsuits charged that
there had been, violations of the In /est-
rnent Company Act of 1940, arisine out
of "kickback arrangements"' and ether
improper payments in the 1969 sale that
deprived Fund of America stockhoh fers.
The lawsuits said the fund's ne-v di-
rectors, including Mr. Casey, seould
have sued to recover the payments. ? -
At today's- Intelligence Cornrr ittee
hearing, several of the nation's
? gence chiefs, -including Mr. Ca ,ey's
deputy; Adm.. Bobby Ray . Inman " apn
pealed to Congress to exempt the C IA.
from the Freedom of Information Act on
the grounds that it risked inadve -tent
disclosure of national secrets. ? . t
-?? ; ? ?
_ Admiral Inman said that the life if an
agent had been endangered in one ease
and that in dther instances confidential
material supplied: by foreign govern-
ments had been disclosed.. The exemp--
tion was opposed by, historians and by
'spokesmen for the American Newspa-
per Pulishers Association and foe the
igma Delta Chi, the Society of Profes-
sional Journalists. They contended that
the intelligence agencies have suffi en t
? protection against inadvertent disclo-
sure under the existing law.: ? :n :
_ ?. _
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'a T I CI APPEARED PHILADELPHIA INQUIRER JE
22 JULY 1981 STATINTL
ON PAGE e014'
National
? Intelligence.chiefs Say secrets have
been inadvertently disclosed. "
In testimony yesterday,CIA Deputy
Director --Bobby Inman said- "there
? have been mistakes" in,:.which the
CIA inadvertently released informa-
tion-"that was of enormous,concern" ,
in its responses to inquiries filed
under. the Freedom of Information
? Act.'Inman, and, the directors o( the
National Security Agency,. and ? the
Defense .Intelligence Agency urged
the committee to exempt their agen-
r.-ies from the act. Robert Lewis of the
Society. of Professional1 journalists,
testifying in-opposition to their re-
quest? pointed out thaw no court has
yet required intelligence agencies to
.release... information classified as
secret. "The act is an 'annoyance- to=
the CIA, but public servants often
find accountability annoyin, be
said.
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ARTICLE APPEPaED
ON PAGE 1,1ASHITIGTON POST
22 July 1981
L/4
STATI NTL
itacji*.Freedom of ,Information hw
-ili:Serio,te 'I-Tearing, Asks to Be. Exern, ted
- 'By George Lardner
Washington Post Stan Writer ?
'-e'R.inking, officials of the CIA and ?
other 'U.S. intelligence- agencies as-
sailed the., Freedom of Information.
ket7y,esterclay as "incompatible"' with -
their work and asked Congress for a.,
-complete exemption from the law.
- CIA. deputy director Bobby Ray
Ininan, Who led- the parade before
the .:Senate. intelligencee.committee,
said-the agencies had asked for lees
v
scping.. reli et- ire the past.,only:hee
causttetheyehad :note beeni able:to
I.drum rip sufficient support for what
they,ieally wanted. ,
'
"it isn't a case of trying. to, hide
e.waste, fraud, abuse and inismanag&e.
riient,"..:Iaman insisted, "but of trying
tO.,Pi)ot.ect sources and methods,"
Otter witnesses at the hearing,
?
from the American Civil Liberties
Union, the American Newspaper
Publishers Association, the Ameri-
can Historical Association and the
Society., of Professional Journalists,
expressed their sttorong opposi
?-`,:e tion t
the broad-gauged request.
; But committee Chairman Barry
Goldwater (R-Ariz.) was clearly
sympathetic. "We have made our-
:selves the most public secret Intel-'
service in the-world," Gold-.
e' water cdeclared. "That has to be -
stopped."'
Inman suggested that the Senate
? and House intelligence committees-
could serve as adequate- surrogates
for the public in maldng sure the in-
telligence community behaves prop-
erly; but Goldwater expressed his
-.distaste even for that. "I don't even
,
like to have an intelligent e oversight
committee," he. said. "I .lon't think
it's any of our business."
The hearing dealt-primarily with
a bill offered by Sen. John H. Chafes
(R-RI.) that would permit the di-
? rector of central intelligence to des-
ignate most intelligence . gency files
as beyond the reach of FOIA. Cit-
izene and resident aliens could still e
seek records "concerning hemselves"
under the Privacy Act.
, spokesman e for- the the ANPA
:warned that the step would be "es-
pecially disturbing' in liget of recent
events at CIA, including the down-'
grading of the public information of-
. ficee the cessation of )ackground
briefings for journalists, tr.d the re-
cent allegations of improper businees
dealings by top CIA officals.
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T I C AI'P. E 11E4D
ON PAGE_ er
LOS ANGELES TIMES
22 JULY 1931
STATI NTL
Classitie.Screts GiDi Out1-Jtater
Iri1ormatioiAct, Spy _Chiefs .Sa.
: .
of
1.V Journalists. ASIIINGION CD?Officials of the-Defense Intelligence Agency,
the ma me
or Arican intelligence testified in support of legislation to - Professional: Si.,.,-raa
. Delta O'n.i.
agencies testilied before._ Senate .. exempt-their agencies from- some --- - - a seems somewhat. imp/ obable
ag,
panel Tuesday that classified S e - .-- provisions of the la6E that encies with. a sophh Licated; law.: . .-- ':- . .: . .
of
, . 1
crets have been imidvertently dis- . "The KGB (the- Soviet':. intei- capability for evaluating in ora-
cloned
-
. - -
Closed in their responses' to Free- -: "". ligerice ag,en tion Could inadvertently elease
cy). can ask (for infor- .1
; ,.. .:; wis
dom of Informi.d.ion,./sx t inqt.dries-. . -, :-. mation)?..arid=if.we .:dori.t.: comply; classified_.data Robert Lt.
-...:.
Central Intel ri
tigec'e-AgencyrDe---r, ,'? they can.alsO-anoeal and take-us to Sigma Delta Chi said
, , :
puty Director Bobby Ray . Inman . -.court under the law," Inman said... -,::....*:-'-
Lewis pointed out that n court
,l, -
said "there have- been mistakes in .,._ Asked whether the _ agencies has yet: required intelligent agen-
'-'
:.,
which the CIA relelised information _..."--,.would have to: remand to an infor:- '' cies to release inforriration-clissified
r se-
"that was of enormouS concern." ." . mation request bi- Soviet President _f as secret_ He said.disclosur of -', - - f! a . h
In one case, Inman told the Sen-. ' Leonid .L Brezhnev, Inman flooded. -
cret '.o deliberate politic Ily in-
'ation- is .. _: -
ate Intelligence Cominitte-e; the life ?t., i: i Sen_ ',Barry M.- :Goldwater - (R- . .
result f.
, .---
of art intellis?, nee7 source' WaS en., ---- ...Ariz.),." chairman at the.cdrnthitte-e,'.., spired leaks, not inquiries un ler the-
:-.-T.:-Freedom of Information Act_ -_-.,- srl
dangered_ In other cases, confiden? :'.asked whether "a recognized ene-
As an .example,.- he cited discro2 -
.tial material supplied by-.:forcigrx.:;_!, rrt. y country" coUld make .sin-tilar de- :7: --
sure :, of '-.the.i. new. radar-r-sistant
governments was disclosed, he said.?1.:::mands.,;''.:,,,,I,: ... - ': ?:- '?-?-., :.?''..*-1:"...ii--. f '
- ? - ? ? , - - ,- ? ' -'''-.-- By law: ' -- '"--- 7-----6d-:-"?... - ?'-'Stealth'`bombe-.. tech-tolo -d
said.:2:::,.:?,: ,....? .. . _,_ ,.....::- _ y.rf,,,,.....?- ,,,,,;-,,,!. , .inta last year: selection camp ignri.
Inman,. atong?with- Lt.,:. Genljtin-,''':...:-.7'-' :,i.,...y_e: aFe, rplwr , ,JnIcian;:
cola D. Fatirer, diree.or of the Ma- .f_ The act is an -annoyaricc to- the
tional Security Ngency, and Maj. - ...? :_i"Even though we might beat war - CIA; but public servants oft ,ri find
Gen. Richard X.: Larkin:, director of-- -.'with-- that : - country?that's,- true?" ? - accountability annoying:" hi". -7a'ct:
. -,..
_.
? - .
Goldwater asked.
"Yes, sir," Inman said. .
The views of Inman, Faur.:tr and
Larkin were challenged by -,okes -
men for the American _Taper-
Publishers Assn. and for the: c.,cietv
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U- 1 .4 k J illy tyc3
T n ArPE-1 TO
, pqrcived For Releas000140:VOr9tIAVRDP91-00901R000500
CIA Chief Casey to Face Senate Inquiry
On Multiponics Role, Agency Procedures
7
" By WALL STRforr JOURNAL. Staff Reporter
WASHLNGT0ii Central Intelligence
Agency: Director William Casey this week
faces a,double-pronged.inquiry from an un-
happy Senate. In telligence Committee.
The committee's staff': has been: .in-
structed to examine in-more detail-MreCas-,
ey's involvement irt ..Multiponics- -Inc.,: a
failed agricultural concern of .which he was?
a director. Last week, it was. disclosed that
a federal judge haderuled that. Mr:. Casey
and other officers of the company knowingly.
misled investors- in -a!secirrities offering cir-
cular. ... ? . er..e
In addition, the-stafferrill study the CIA's.
security procedures to see- why they didn't
uncover allegations of. improper business ac-_
tivity by Max Hugel..) thw man .Mre. Casey
chose to be director of the CIA's spy opera-
tions. Mr. Hugel.resigned- last week after be
was accused by past business associates of.
improper -and' possibly illega.V.Securities
tivities in 1974. ? ???
The twin Scandals-....have ? created wide-
spread unhappiness on Capitol Hill with Mr.
Casey's performance; Members of the influ-
ential Senate Intelligence Committee are
particularly upset because they weren't in-
formed in advance that the scandals were
brewing, aides saide."
"The thing that concerned them was that
the consultative process seems to have bro-
ken dowre,"%*one staff. aide .said..."The corn
mittee. was, taken ,by- surprise: .They don't
like that.!-.'e,'?ee ?
. ,
The committee members registered their
unhappiness "rather clearly" in a meeting
Friday with CIA Deputy Director Bobby In-
man, staff members said. The meeting had
been scheduled before- the scandals
Senators on the-.Intelligence Committee
want . the staff to -report findings. early
next weeke. Committee members want to
"clear the air" quickly, one congressional
sourcesaldr "I: think-i! the -committee: is
agreed on anything; it's on that,'.',he added.
--Mr. Casey might have to appear, person-
ally-to convince the-committee that there
won't be further embarrassing, details of his
business, dealings, this source said.. Other-
wise, he added, some lawmakers could be-
gin pushing for Mr..Casey taste]) asidee,
:;Even: before -.last: week's developments,
some lawmakers had been unhappy with Mr.
Casey because of his inSistende on appoint-
ing Mr. Hugel to-a sensitive CIA job...Mr.
Hugel. a Reagan campaign supporter, didn't
have any previous intelligence experience..
On Friday; the White House again reiter-
ated President Reagan's support for Mr.
Casey. The President -is very firm- in ex-
pressing his confidence in him, said White
House Director of. David
Cergen. He added: "I think there is a con-
cern that this .not be blown out of propor-
tion.- ' .? ?
Sen. Barry Goldwater . (R., Ariz.);:" the
committee's chairman, also said that Mr.
Casey should 'stay in office-"unless we find
further allegations.''.- - - - ?
STATI NTL
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''':::'-'::-;:-?-''APptOyed*or Release001/03/07 C A-RDP91-00901R000500
01; LU ? %i7;
1.9 duly 1981
BY JOSEPH VOLZ
NCE AGAIN, it may be time for
a broom at the top of the
Central Intelligence Agency.
The often-embattled spy corps has
had its worst week since a Senate panel
revealed six years ago that the agency
planned to kill Cuban President Fidel
Castro and other world leaders.-- -
But the problem now is not_ what'
CIA Director William Casey- bee don
since becoming top spy last January,
but what he and his recently clisoatch-1
ell covert operations chief, Max Hugel,
were doing in the business world
fore they joined the agency. ,
Once again, the ethics of . the na-
tion's top spies is underscrutinye- -
Hugel was forced to quit when The-
Wallington Post?not the CIA's Office
of Security?uncovered .a tangled tale
of alleged stock manipulation in the
reid-1970s designed to boost the worth
oi his company, Brother International
Corp.
But hardly had Hugel, a brash
amateur and the most unpopular head
of covert operations since the agency
wa3 formed in 1947, been pushed out
the door before Casey's own bueines3
dealings came into question. A now
defunct farming venture, Multiponics
Inc., in which he Invested, has been the
subject of a civil suit for years.
So far, President Reagan says he
has "full confidence" in the brusque
Casey who was his campaign chief last
year.
But Casey doe!" not have the "full
confidence" of hie clandestine opera-
Uv e. The undercover crowd, expected
to be more and more active in suchl
'
flashpoints 33 Afghanistan, El Salva-
dor and Guatemala, is appalled that
Casey picked an amateur, Hugel, to run
the sensitive covert division.
Casey, in his first monthe ns dire-
ctor, ha 3 tried to shut down tha CIA
public affairs office and 'make the
.agency exempt from the Freedom of
Information Act, to the anger of civil
libertarians who argue that such secre-
cy got the CIA- in trouble before and
could prevent future Hugels from
being rooted out.-- e
Sen. Daniel P. Moynihan (D-N.Y.),
committee vice chairman, wants-a full
report on how the papers could find
out things about Hugel that eluded the
CIA's probers.
The betting here is that, regardless
-
of President Reagan'e -"full confi-
dence," Casey will be out by year'e end,
to be replaced by a professional who
eleMmeetteestmeisrestemereeereeeeeeei
esee
eeee
Tho CIA's Casey: Too hig a profi,e
keeps a low profile and does not panic'
in crisis someone like Admiral Bobby.
R. Inman, deputy- CIA director, or.
Frank Carlucci, the former deputy who.
is now deputy;defense secretary
Joseph Volz cavers national affairs-
from The News' Washington bureau.
reeeeeeseeeseemeinseeepteseepeneeeeeneweseeeee
STATI NTL
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t
-morning with It' senators present,: know, when he. became control/ r-
i,:;., Bobby' R. Inman,. lieported as pre- friend. -
? By Henry S.?Bradsher ? ,.. --- _---,1 , . .
' Washirwoo :Star'Staft Yinter ''',' ;-.. '
, _ . V101,Sly ochechiled on CIA wcirk in ;
the first six months of the new aci.. ,J,, _
? Whit'e'Honse s'poke.sraan
. ' David :C
. ., . ,...,,,..:_,..:,:.?.:;.1.;: ....:,...-.: ?---.. min is tra t ion.. ' ' - ? ? " - ' ' - - 1.' ..,' -.-. :: ?uvi'-'irig.,, e16'ils;ic(ilpotpheeraptree?siivdietilli rtsheofsf: le:
_ ? ..._._
' After that closed session, the' seni --
The Senate:Select Committee: on -
?ate committee's inquirY..Cergen a( I- '
-Intelligence decided yesterday to in /.-ators excluded .'ev'ert Ineir key staff ?,:..,.
williarn- j. members and ';faiked about Casey's -. ,ed that Reagan ",is very firm in I s
aesey's tangled business affairs, and !'and ,! Hugel 's'. personal , problems. .-: view. of,
'ouir:?. into CIA Director
support for Casey.' ? -. -..
, the committee's legal staff then held :-Then ? committee, chairmau Barry
with CIA la W - : Goldwater, It went :out and ?'...;1:;.'Ill'i.e-eil."i'day'S-Whit;. 1-iou.se'C'e:ilyers
? a orelitninary meeting
: red ,ielding had "asked for atI -i
'the -securityl.clearanc;e of
; told .reporters that the -inquiry, o.riT.'-'re le d - th.e 'court dectsions'`- (-1 4
Hirgel i-Gtal'seYwine New Y,orls andNew Orleat ,-? ;
-:Ivould be broadened to'coVer Casey's%
,Situation..-,Y;;,)--.! -, . 1- .? r - .! :,: . j
:,....?., .er,gen-sad.-.-..-,,. --- i --,? ' ? ' '.'"..f - ? f.,
;?-.: The conntriltee's legal- staff I:Cad-4,1;i l'We're. concerned ":that the Ca.
been in,structecl-t.o.cheoc:?"whateyee '.,2'not be blown out of propdrtion,-"!t1
.1
matters might be hanging'-' about ;?spokesman added.' '. ' '' i
Casey, QoldwaterSaid. This includeff'.
:not only' business affairs. Ina also 1
-Casey's. -possible= role ' 'in. placing
...- The inquiry on hinn Merged into
. ? . -, ? ? ? ,-, - -' i - Hugel in the spyinaster's job without.,t1
. the normally lengthy and careful e-.,
One that /he- committee already had :Curity cheeks. ! - 4. .- ? ? 1 '. ' Hi-, . ''',.:-?(
started on the. way Casey put his pc- ''.' _Speaking to repel-ter.> abont CaSeyi,
litical aide;?:Max. -Hugel,--in.to the job ' 'Coldwater,said that,'"as;a director::
of CIA spymaster without normal se-- ;.he's done a Commenable job except .-
curity checks. Hugel was -quickly for picking a 'man with no back-
:
pushed outof the jo'aTtiesday by the: ;ground" to head the clandestine sr-?
White House after the disclosure pl; , ; vices, When asked if Casey should re-.
. ?
questionable business practices," ---4
..-.Corarnittee'soure'es..sald..the- CIA'i.
lawyers.-- had: : promised- ., access --to,:
'Whatever data was' required for-the '
inquiry on CctseY:?A preliminary re- j ;7, of . no: rea.son?pt this' Cm-error; Casey)
port On both Casey and Hugel. was :: ''. to re-sign,':? '.?': ? ?? ' *.',: -',.- ::.,:._
expected by the committee before its . :??':. "A number .of senators expressed
members 'Jo on recess: in early Aii-i-- their concerfiS to about the Casey
'gust., .. , . ....?, r,.... ?. ,..,?:,._.,...._..,...., A I. stories thal'haVe'appeared and the)
? ' .
-Probe of-OA Chief- Casey's. deputy director: sial and dropping, Casey, an
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AI:T C;LE AITJEAEED ?UNGTON ST AR
ON PAGE. )9_/ 1 18 JULY 1()Eil
' The Senate cOmilitiee held between the Wnite House's push,
.Sendte Panel'Orders War weekly , meet:rig yesterd4i out Hugel, whom Reagan did ?
STATI NTL
?
Both theWhiteHouse and-several
Senate leaders publicly. voiced-sup--
port for Casey to continue to. run the-:
intelligence agency: Privately,- how-
ever.,some congessionaI leaders
suggested that itwaS becoming in-
creasinglif likely that Casey would
have to be replaced by his personal
friend, President Reagan...-.
. main ? as, CIA director; Goldwater .
?
Yes,?1 think he should,"
? Senate majority leader Howard H.
*Baker Jr. told reporters that "I know
...;-'? Neither. - committee:, nor-;- CIA -
.._... : - - -? . - - : :-- ? .' - -- -,*.Hugel stories,:' Baker said, rand I exi-Ji
1.4ect. tiot:pnti). those are resolved.'
.ii.sources could Say what light: the: IA. that Casey- will continue to, be in a
' agency Could, shed on Casey'S-,per-
. sonal *business ventures that oc-,.
: !degree of trOttbl but not trnuble in
e. .,
.t the sense of his continuing to seiv.Z, .-.'
; curred.before? he-. becam52?.director.;2,1:.fr-?1 Support Bill Casey and will con-i
Nor was it clear: Whether-hisco?!in 1,,.:tinue to do so,!! Baker added; Puntil,?1
lawyers'woUld become.invgl'ied.:., i.,,!?or 14es4 Quiwiiri, is made.ig au-
-. Casey's own lawyers have been del -:pear ,_that, ,?liticiermines . my!,?cont.k:i
'fending him against charges that 4 i.l. e.ellqe.f,),i '.:',A...;.:i.i?,-..i ;----:13;4'.',"?,...'
. .
;knowipgly .Misled potential Alls'-ii.-',4`,.. 'Despite :these ., .-.._,
;tors in a 1968 farm business venture public shoWS'Of con;
and also drove the company ill:''fidetice, there was a growing feeling
:deeper-.1!,nn Capitol -Hill that the,moiniting:
_land deeper into debt for his personal problems for Casey could lead to his:
i/ benefit.' Despifei-legali!judgmlltS .departure Some 11111 sources-noted.
', vgainst him, his lawyers. have' dehowever:that there was a difference'
/lied the charges. -: -.1 --'1
ii; Casey- was Reagan'S-.!..Campaignci
-manager last year; and Hugel Was all.:1
"-assistant. Reagan named Casey tp the-1
'C14 post. Hugel-Went along as a perli!
'..'sonal aide and later. became deputy
directqr for operations, in charge of
the agency's yery:sens41ve cliaclq....
t tine work , . .
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Approved For Release 2001/03/07 : CIA-RDP91-00901R0
.e,"" ARTICLE .A.P.IS'ARE1)
ON PAT.& A 6
aer a
0 11
I 0
/.,, -1-1 , ill
. . _
By George Lardner Jr.
WunliMaNdiStaftWrIter..
? Sen. Barry Goldwater, (R-Ariz.),
accused the press :yesterday of make '
? I
ing "a mountain out of a molehill'. ati
.the CIA, and.said he_saw no reason?
for Director William J. Casey to re-
sign "unless we find further allega-
tions."
. The Senate Intelligence Commit-
tee, of which Goldwater is chairman,1,
farreally instructed 1t2 staffto begin,
a series- of meetings- with .CIA
ye.rs to review allegations of financia1'.
misconduct by Casey and analleged:
case of attempted "blackmail" in-,
volving his former chief of covert,op-i
. erations, Max
. Committee investigators also plan.
_to' inspect the records: of the back-i
ground investigation the FBI con-
: ducted before Ronald Reagan nom-
inated Casey as.. CIA 'direttor last
; .December.
Presidential press, spokesmart,
David Gergen said the White House.
would cOoperate completely in the
inquiry. He added that the president
has "full confidence" in Casey.
Similarly, Goldwater said he did,
not think Casey should resign, and
added that "I don't think there's
enough proof to call for resignation."
"With all due respect to you .fellas,
you made a mountain out of a mole
hill," Goldwater told 'reporters after
the two-hour committee sessions
"Now wait until -.theehill..gets
wait till the bugs start .crawling out:
Then you'll have something, or you
a4 -
may not."
Instead of getting:. bigger, he stage.
geeted, "it may goeright into the .
ground." - ? ea a-aeakaaaa:. ,eas
Questions concerning Casey's
tenure as CIA director arose this
week when Hugel resigned as deputy
director for operations, one of the
THE WASHINGTON POST
18 July 1981
ks
ult f:
STATI NTL
agency's most sensitive posts, hours
after The Washington Post disclosed
accusations oMMproper or illegal
stock-tradingractices on Hugel's
part in the early 1970s.
Hugel contended that the two for-.
mer Wall Street stockbrokers, who
leveled the charges had attempted to
blackmail him several times daring
?their acrirridniOus relationship -He
denied any wrongdoingabut quit the
agency Tuesday morning saying he
said he felt he could no longer be ef4
fective.
CIA general 'counsel Stanley Spor?
kin and other agency officials ,met
with Senate committee staff director
John Blake and his aides on Capitol.
Hill later in the day to begin the re--
view. a ra-
. As far as Hugel is concerned, one
source said, the committee primarily.
wants to know "how it's possible that.
somebody who claims he was being
blackmailed..?got:' past the security
-people." -
Goldwater Said he thought at first
that the CIA.' would be badly dam-
aged by the week's events, but has. ,
since changed his mind. ? I
- "In fact, I. think they're so happy -
out thee to have gotten rid of Mr.
Hugel 'and' gotten the new man
:[John Steinj in. his place ... that it's'
pretty Well:oVershadowed everything,
;else," Goldwater said. "I think every-,
thing's going good at the agency."
? Surfacing in the aftermath of the
controversy were several court rut-,
ings critical of Casey's connections
with. -el-IOW-defunct farming firm,
Multiponics Inc. It has been the sub- '
ject.of litigation in New York and .
New Orleans. ?
Goldwater said he felt Casey had -
done "a commendable job" at the
CIA except in his selection of Hugel,.
a Reagan Campaign colleague whom
Casey had..insisted on appointing to
head the clandestine service despite:
.Hugel's .lacIt.'?of intelligence _experi-?
L.
Goldwater said, however, that he
did not regard Hugel as security
risk despite his failure to tell CIA in-
vestigators about his on e-volatile
relationships on Wall Streea
Hugel. "wanted to serve his coun-
try and was just-a little c.treless in
. telling the . whole-' truth ? about his
, background," Goldwater sa d.
a Several Democratic Members of.I
the Senate Intelligence Committee.,
by contrast, have voiced chagrin over
.the failure of the CIA's security in- ,
vestigators to raise any 'question ,
marks about" Hugel's business career.
They have also expressed clissatis-
.faction with Casey's disci iimer. of
responsibility for misleadi poten-
tial Multiponics investors.
Committee member J )seph
Biden (D-Del.)..., said through a
spokesman that unless asey and
.the administration ?come forward
quickly with "a plausible and legal
explanation" of the -matt -trs under
review, "then Mr. Casey ihould be
. asked to do what- is bet for the
? _
agency and. the country and step
aside." ? '
The review coneerning Casey ap-
parently will concentrate on the
Nlultiponics ligitation in New Or-
leans. Casey had informed the ?In-
telligence Committee of the New.
York suit at th6.time-. of his conftr-'
mation ? hearings, .but Goldwater
noted yesterday that 11,-t had not
been aware of the Louisia. case. ,
There was little indica-ion yes ter-.
day,. however, that the committee
plans to carry its .,staff nquiryebe-
yond what has been puhlished and
try to satisfy itself that there are .'-'no
further alleaatiens" to 'un, over.
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ELL 17 July 1981
xl ? !
EtIsey,, Huge!
Face Possible I
Senate Probe
By George Lardner Jr.
Via3hIngton Past tart Wr1wr
The Senate Intelligence
Committee has begun a pre-
liminary inquiry into allega-
tions of financial misconduct
by both CIA Director Wil- ?
liam J. Casey and his former
chief of covert operations,
Max Hugel. .
Senate Majority Leader
2Ioward H. I-3a ker. (R-Tenn.),
an ex officio member; said
-the committee ordered a re-
.of "the whole package"
of 'various accusations involv-
ing the two men in unrelated
mies.
"Yes, I'd say he's in trou-
b!e," Baker initially told re-
carters inquiring:, about
Casey's status. Moments lat-,
however, he amended
that as a bit too strong. He;
said "concern" was a better
word for the moment.?
"A number of senators,
have expressed concern to
me" about Casey, Baker said.
Hugel resigned as deputy
.CIA director for operations
- Tuesday morning after The
Washington Post reported:
that two former Wall Street.
stockbrokers who had busi?
ness dealings ? with?Hugel
were accusing him of illegal'
or improper stock trading.
practices in the early 1970s.
At the same time, court.
rulings critical of "Casey's
connections with a now de-;
funct New Orleans company::
Multiponies Inc., began sur-
facing..
In fine case involving Mul,
tiponics, an agribusiness firm.
Approved For R
which went bankrupt in 1971, a
appellate court wrote that Casey and
other directors of the company had ,
driven it "deeper and deeper into
debt." The court stymied an effort
by the directors to claim part of the
assets of the bankrupt compel-my.
Then, in separate litigation, a fed-
-eral judge in New York held in May
that Casey and the other ?Multi-
ponies officers and directors had
knowingly misled potential investors
in a $3.5 million fund-raising effort
for the company.
Other members of the Senate In-
telligence Committee told reporters
that a decision on a formal inquiry
will not be made until the staff re-
view is submitted.
Sen. Walter D. Huddleston
Ky.) said committee colleagues he'd
spoken to were "more concerned
about Casey than litigeL"..- -
'Chairman- Barry Goldwater (R:
Ariz.) could not be reached for com-
ment following a report that he had
told some fellow senators he felt
'Casey "should -be removed as CIA
director?' Speaking for Goldwater,
Katherine Grammer said the senator
denounced the report as "a malicious
lie." ? -? ? - ?
Committee sources said Casey
met with Goldwater. privately Wed-
nesday, but did- himself neither
much good nor much harm. Gold-
water and others reportedly are cha-
grined by the fact that the CIA
failed to inform the senators about
the Hugel matter before it appeared
in The Post. ? :
Several Senate sources said Casey
is remaining in the job only because
Reagan wants him to stay and only
if no more derogatory information
surfaces about his investment career.
Despite all the public disclaimers,
one source close to Sen. Baker said,
"the word is out that Casey is in
trouble, with Goldwater and in the
White House. Not with Reagan, but
in the White House."
Sen Lloyd Bentsen (D-Tex.), who
also sits on the Intelligence Commit-
tee, said the staff inquiry would also
include a look at the CIA's security
procedures due to its failure to raise
even 'a 'mild alarm about Hugel's
4141V&ancTigrutiti9ef orRr
making ,very detailed investigations,
but they- certainly Maw th;.2 Ana "
STATI NTL
I3entsen told reporters. "I think CI ey
obviously did a very poor job in
checking out a man for a very s# n-
sitive post."
Another committee member, S,,n.
David Durenberger (R-Minn.), s. id
he had "a bit of concern about liii
from the beginning."
Durenberger said if Casey is
faulted, for his judgment ab t ut
Hugel, he should be credited for his
selection of Adm. Bobby Inman as
the CIA's deputy director. 'lie
widely popular Inman, a forn er
head of the National Security Agen-
cy and Goldwater's original prefer-
ence as CIA director, makes it eas er
for the senators to conternpl, te
Casey's departure. ?
White House chief of staff Jan es
A. Baker III took what appeared to
be a carefully controlled slap- at
Casey _yesterday. Asked s-.1 abc ut
Hugel's inexperience, Baker replied:
"We would hope that in the futt re
due consideration would be given to
professional expertise for this pod-
tion." -
In connection with the.' Mtil
ponies case,. Casey told The Wash-
ing,ton Post that he "never !nisi ed
anyone" in stock-offering circulars,
"I didn't prepare the circulars. I
had a technical responsibility as a
director," he said.
A review of court records, howe.-
er, shows that the question of con-
trol over the contents of the circula s
has been hotly contested in the law-
suit. Casey served not only as a d
rector of the firm, but as corporal e
secretary and legal counsel. -,,
An FBI agent checked 1-611 e
Multiponics litigation file at the U.;.
courthouse in New York City Weo-
nesday. A New York FBI spokesman
. refused to comment, but Justice Di -
partment spokesman Tom DeCa r
said later that the agent had bet m
dispatched at the request of White!
House counsel Fred F. Fielding.
White House spokesman Larry
Speakes said yesterday- that aa
Multiponics litigation had not been
brought- to the president's attention
last winter because Fielding,"in b s
discussions with Casey, made a &--
termination" that this was vnot
essaly. DeCair ? told- a:reporter tbl,t
DP91 -oRtsMpay
Cannon and Morton Mint7 rnntrit.
rtermeeUg. _
soltr
- Staff writers Patrick Tyler
ARTICLE Ar
0/1 pAGE
ed For Release 20011403107TPCIIMIDP91 4;41111111111111111111111111
16 July 1981
Linguist Shortage
Affecting Spy Units
A woe lated Pres.,
Tho CIA's second-ranking official said yester,
day the nation's intelligence apparatus has been !
severely affected by deepening shortages of per-
sonnel who are trained in foreign languages.
"The foreign language capability? of our country
is poor and growing worse," Adm. Bobby R.
Inman, deputy director of the Central Intelligence
Agency, told a Hill panel. He called for "decisive
action" by the government to help reverse the
trend.
Inman testified at House postsecondary edu-
cation subcommittee hearings on a bill by the
panel's chairman, Rep. Paul Simon (D-I11.),
provide $80 million a year in federal grants to
schools and colleges for expanded foreign language-
programs.
Inman said he was limited in what he could dis?
close "about the statistical effect declining lan-
guage foreign language ability has had on our op-
erations. Suffice it to say that we have been im-
pacted severely."
2 He added that "in the 'operations' area, we are
now losing many of our most experienced people
who have had 20 or so years of service using a sec-
ond or third language. Replacement of these peo-
ple has been made difficult by the fact that many
universities and colleges no longer have foreign
language requirements as part of their mandatory
curriculum."
Inman said the U.S. intelligence community is
"especially vulnerable when it Comes to the more
exotic languages such as Urdu, Arabic and Feral."
,
STATI NTL
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Distribution II
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STATI NTL
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- 0 VEg
Approved For Release 2001/03/07 : CIA-RDP91-0090
ART. I CLE A.T.'PEARED
/
01.1 A
IIEW 'MAK TIMEi
8 JULY 1951
STATI NTL
.Ex-Rand President C' ?
70 Head New Ce,/,..4. Panei
ley JUDITH MILLER. .
Special ns The New York limes
WASHINGTON, July 7?The Reagan
Administration has selected Henry S.
Rowen to head a newly created National
Intelligence Council at the Central Intel-
ligence Agency, Administration offi-
cials said today.
Mr. Rowen, a former-president of the
Rand Corporation who resigned in 1971,
partly because of Pentagon dissatisfac-
tion with Rand's security arrangements
for the Pentagon papers, has until re-
cently 1:oe.n a professor at Stanford Uni-
versity's Graduate School of Business.
He has already begun working at the
C.I.A., but his appointment has not been
announced. ? e ?
According tc Administration officials,
William J. Casey, the Director of Cen-
tral Intelligence, chose Mr. Rowen for
the post and decided to create the coun-
cil
intelligence estimate; are
cil to upgrade the system under which
I produced.
Preparation of national intelligence
estimates, which are supposed to be
comprehensive studies of an issue or
subject that reflect the views of the en-
tire intelligence apparatus, has been a
source of bitterness with intelligence of-
ficials for nearly eight years. Mr. Casey
recently told C.I.A. officials in an
agency newsletter that the system had
become "slow, cumbersome and incon-
sistent with providing the policy maker
with a timely, crisp forecast that incor-
porates clearly defined ' alternative
views."
Critics ol the process have also
charged that the estimates have pre-
dominantly reflected C.I.A.: views, with
important dissents from other intelli-
gence agencies relegated to footnotes.
Stansfield Turner, Director of Central
Intelligence in the Carter Administra-
tion, was accused by some intelligence
officials of distorting estimates to make
them dovetail with the Carter Adminis-
tration's foreign policy, an allegation
that Mr. Turner denied, although he ac-
ictowledged that he had personally re-
written estimate papers.
Mr. Rowen hi linself has been a vocal
critic of the intelligence estimates sys-
tem, especially of what he has charac-
terized as the C.I.A.'s optimistic assess-
ments of Soviet military strength in the
past_ Mr. Rower, an Oxford-trair.ed
economist, served as Deputy Assistant
Secretary of Defense under Robert S.
McNamara from 1961 to 19115, and be-
came president of Rand in 1966.
?
Separate 'Views Enctaaraged
Under the new system, the council
will be composed of those national intel-
ligence officers charged with producing
the estimates. They will report directly
to Mr. Casey and to Bobby R. Inman,
the C.I.A.'s Deputy Director.
Senate critics of the agency, such as
Daniel Patrick Moynihan, Democrat of
New York, and Malcolm Wallop, Repub-
lican of Wyoming, have urged Mr.
Casey to encourage the intelligence
agencies to offer separate views and
estimates. Several officials who follow
intelligence matters, closely said that
they doubted that the new council would
lead to such a debate about the esti-
mates.
"I fear that this means business as
usual," one Administration official ob.
served. ?
Approved For Release 2001/03/07 : CIA-RDP91-00901R000500270007-0