NEW YORK TIMES ARTICLE ENTITLED,' THE QADDAFI CONNECTION'

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP96B01172R000100040007-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 25
• Document Creation Date: December 16, 2016
• Document Release Date: August 3, 2005
• Sequence Number: 7
• Publication Date: June 16, 1981
• Content Type: MF

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16 JUN 1981
MEMORANDUM FOR: Deputy Director for Operations
FROM: Harry E. Fitzwater
Deputy Director for Administration
SUBJECT: New York Times Article Entitled, "The
Qaddafi Connection"
1. In the 14 June 1981 edition of the New York Times, an
article by Seymour M. Hersh reported that a group of former CIA
employees had been, among other things, using their former employee
status to obtain classified information and material from Agency
contractors for illegal sale to foreign governments. In this
regard you asked for an outline of how classified material is pro-
tected from unauthorized third person or foreign government access.
There are several regulatory issuances governing these procedures,
all of which stem from various federal statutes and Executive Orders.
Specifically these publications are:
a. Standard Security Procedures for Contractors,
dated 1 May 1979;
b. Security of COMINT and/or TALENT-KEYHOLE
Controlled Information Provided to or Produced by
Agency Contractors;
c. BYEMAN Industrial Security Manual, dated
November 1969;
d. U.S. Intelligence Community Physical Security
Standards for Sensitive Compartmented Information
Facilities, dated 23 April 1981;
Acquisition Handbook, dated 15 May 1980.
2. In addition to the above, every contract incorporates
boiler pla4e language regarding security and nonpublicity and
specific provisions for adherence to security requirements,
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classification, default for nonperformance on security issues,
need-to-know, etc. There is also a Contractor's Secrecy and
Security Agreement, signed by corporate officers, which incorporates
similar language. Each Request for Proposal requires specific
responses from the contractor as to their security plan and com-
pliance with security regulations and protection of Agency classified
information. There are various Agency regulations governing Agency
employees' responsibilities in this regard. Of particular note is
I regarding relationship with former employees.
STAT
by:
3. These regulations, procedures and standards are promulgated
a. Security clearances and security approvals for
Agency and contractor employees. This includes back-
ground investigations and, where applicable, polygraph
examinations.
b. EOD processing (Agency employees), and initial
briefings by the Contractor's Security Officer (CSO).
c. Secrecy Agreements which legally bind individuals
in all aspects of classified information protection.
d. Reindoctrination, continuing security education
programs, reinvestigation.and repolygraph programs which
cover the issue of unauthorized dissemination of classified
information.
e. Upon resignation or retirement, debriefings and
termination secrecy agreements.
f. Monitoring of security performance throughout the
employee's tenure for both Agency and contractor employees.
g. Security lectures at the Project Officer in the
Contractor Cycle Course (POCC) and other training involving
Contracting Officers, Project Officers, and Industrial
Security Officers.
h. Periodic industrial contractor conferences.
i. Industrial security officers training program.
j. Guidance and advice from security staffs and
individual security officers assigned to each contracting
element.
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4. Protective measures and compliance with security require-
ments are monitored by review of all contractual documents and
proceedings throughout , the; pr-ocurement process; inspections and
reinspections of contractor facilities by. contracting element
Industrial Security Officers; and security audits by the Office
of Security's Industrial Security Branch. Monitoring is handled
industrial contractorso Ideally, contractor facilities are inspected
semiannually for contractors on sensitive programs, and annually
for all others. Audits are projected for a two-and-one-half-year
cycle. The purpose of these inspections and audits is to ensure
compliance with all pertinent security requirements, to evaluate
the contractor's security program and to make recommendations to
1) fulfill requirements; 2) correct deficiencies; or 3) enhance
existing programs. There are detailed reporting, reviewing and follow-
up procedures to ensure that recommendations are complied with or
resolved to the satisfaction of the Agency and the contractor.
STAT
5. Inspections, audits and recommendations cover every aspect STAT
of security. Some of the specific key issues covered are:
3
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6. As you can see, the regulations and requirements for
protection of classified material in industry are all-encompassing,
for both Agency and contractor employees. Much of the strength
of the Agency's present Industrial Security Program results from
the Boyce and Lee case. After that incident, the program's scope
was greatly expanded and augmented with additional personnel in
contracting element security staffs. Security education was
revitalized and given greater emphasis within the Agency and the
contractor facilities. Background investigation and reinvestiga-
tion criteria were strengthened. The adjudication process was
reviewed and made more stringent. A program of unannounced com-
prehensive security audits was instituted. A total of 205 of
these audits have been conducted since this program began in the
summer of 1977. The Inspector General was tasked with periodic
reviews of the industrial contracting process to include industrial
security. Much of the stronger and more specific security language
in contracts was added after this incident. Of course, none of
these regulations, procedures and requirements are immune to cir-
cumvention by personnel who would violate U.S. laws and personnel
secrecy declarations. For this reason they are continually under
review for effectiveness and current applicability. However, the
present procedures incorporate reporting procedures designed for
the early detection of aberrations or possible violations and they
bring these items to the attention of the appropriate Agency
officials.
Harry E. Fitzwater
Attachment:
New York Times Article
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SUBJECT: New York Times Article Entitled, "The Qadda:Fi Connection"
STAT
ORIGINATOR:
16 JUN 1981
ot Security
Distribution:
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Fns(16 June 81)
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lye years ago, twoo former''
operatives of-. the United
States Central. Intelligence.,
Agency -Edwin P_ Wilson=!
and Frank E_ Terpii -made
a. business deal with Col..:
Muammar, - el-Qaddafi, the-;
r..mrwoem ruler of Libya..: In essence,
the . former (7.j .A - men,, A6:Xiad_ie-
come part ners? in-.. an art-import
business, a t.aseiLColonee1 Qaai dafi.
their accumulated years._ot.American
intelIi-ence-agenc contacts, : experi-
ence antic expertise. Theirs was a prod-
uc at could not be purchased on the,
open market. The colonel, who boasts.
of supporting terrorism in the Middle-
East, Europe and Africa and who has
been attempting to set up his own new
federation of Arab and Moslem states,
was willing - and able; because of his
vast oil wealth-topaydearly.
. As a result.-the two- Americans, ac-
cording to Federal investigators, have
made millions of dollars aiding Qaddafi
in his drive to export terrorism and.
build his own. Middle Eastern power.
Under cover of their eft-#apaxt
busz:ness, Wilson and Terpil are said to ;
have-helped Li anu actur-:
ing plants o a production o? assassi-
naion wee omens To eve themselves
helped Qaddafi plan political assassi
nations; to have recruited dozens of for-
mer Green Berets to teach Libyan Sol-
diers and Arab terrorists how to handle
volatile explosives-how, for example,
to turn ashtrays into weapons of terror;
to have illegally shipped arms explo-
sives to n g and
fraudulent State Department export
. _ tahave irivolvei3 _tbg past C .1-A 1:aders who seem unableto
#ormer C~I~ emoloyees in their pace fully the iiaticcaie_case. It
Pml t sofa cininability of the Govern,
" iformatiorr about the Qaddafi .con-. ment's investigative and Iaw. nforce-
nection has been known by the Govern- went agencies, disrupted by internal jeal-
ment since the fall of 1978. It was then
that- Kevin P. Mulcahy, at the time a.
partner- of. Wilson and Terpil. ap-
'proached the C.I.A.- and.the Federal
Bureau- of.. Investigation with grave=
doubts about the legality and ethics of
ousies and feuding; to perform effective-. -
ly. It suggests that a moral climate exists
inside and on the edges of the intelligence
community which results in the subver-
sion of national goals to personal gain.
Ed Wilson was running what
-his company's business dealings with, amo
aced versionoLhe
Muicah may-
Libya. y; a former C.I.A. em-- mili di --trial complex in which
ployee who had spent six months inside- . forZner ancl:mllilg"=tplo3r,..s
the. Wilson.. erpii .operation. would have put. their Governm!_ 14e
spend hundreds of hours, over the next
few years, providing the Government
with firsthand knowledge..
-Kevin Mulcahy has now decided to.
tell his story publicly for the first time.
Hers tired of waiting for this segment of
his life to end. He wants. to be listed
again in-the telephone directory, to hold
a driver's license in his own name, to
vote, to own property; to stop living as
if he-and not Wilson and Terpil-had
been indicted for wrongdoing. He feels
he is forced now. in effect, to give his
testimony in the pages of The New York .
Times.. The essentials of his ' account .
have been verified where- possible
through secret documents and in inter-.
views with key members of the State
Department, the Justice Department,
the F.B.L, the United States Attorney's
office in Washington, as well as.with
Stansfield Turner, the former head of
Central Intelligence, and other high
C.I.A. officials.
^?
The Wilson-Terpil case is a story of
Americans who.meet secretly in bars and
board rooms to arrange the illegal sale of
electronic-spying equipment and terrorist
Seymour M. Hersh, a former New York ? weapons, and of Americans who train as-
Times reporter, is now at work on a sassins abroad. It is a story of an old-boy
book about Henry Kissinger to be pub- network of former C.1 lives and
contacts and knowledge to tzs f~ nr large
persona monetary Fain. regardless of
ih6 image -y will do to their own
lea eau with a num r o American
manu actur~zsvt o have sp:cialized in
worknn" g for. the C.I.A. and o ntelli-
gence agencies in supp vino military
g an highly class echnicat
equip estions that should nor
ma aasked - Are a sa es o ri-
cia v auihariaed? Are they ega'.? Do
-the - t~ardize nations security? --
are not. Senior Government officials, in
recent interviews, acknowledge that.
American expertise is being trans-
ferred abroad in unprecedented fash-
ion. The phenomenon, krovn in tie bu-
reaucracy as-"technnlogy transfer," is
one apparent result of the declining mo-
rale is amide the intelligence community
and the increasing profits available.
These officials say that nations such as
Chi e, outh Korea, Brazil. Argentina,
Taiwan, ou nca . raand aki-
stan ave been able to purchase the
very latest American equi mp ent and
t oloy min cim croon atiotts mili-
tary arms computer science and nu
clear evelopment= with or witiput
autiorizatioit from the Unii States
Government. -
fished by Summit Bp roved For Releas MSMSM ? 1000 181 0ethiglrlevels. inside the Carter
 NEW YORK TIMES
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at airports thraighoul the world con-
tained only a composite drawing. Ter-.
pi1 also told Mulcahy that Ramirez was
living in barracks No. 3 at the former
\Yheelus United States Air Force base:
in Libya. Terpil seemed awed by Rami-
rez, Who was accompanied at the party
by Sayad Qaddafi, chief of Libyan intel-
ligence, identified by Terpil as Qadda-
fi's cousin and the second.most power-
ful man in Libya..
Mulcahy was now in far too" deep and:
he knew it_ .
It was late August. and-Sohn Harper
-and other. Wilson-Terpil- employees
.were at work inTripoli setting up the
munitions. 'laboratory ..fort terrorist.
bombs and a training program for their,
effective use.. Wilson and Terpil made it
:-clear to Mulcahy thatthey did not want:
him to gc to Liby Iutrahy kept: hi-
now grave doubts to himself and conbn-.
ued on?his business' trip, moving :cn to
Copenhagen : ' and--: another series of.
meetings. Terpil returned to Libya, and
he and Wilson suddenly dispatched an.
urgent cable to Copenhagen: My
was to breast" off his trip and return to.;
Wa-_,,T ngton to open ne otiatioras tore
W ith . 2r -..)-.Dynamics Co.
lion for the nirrk ?gr a p ipa cl-
eye ~toa.ir rnistdies. Gereralj~y_
n r cs" fia~C ~v~..siLged inn trade4aur.
nals that it had 13 Redeyss for sale to l e-
gally acceptor a buers The missile,
wh-Ith. 'co-M not 5eexported to Libya
under the law, is shoulder-launched and.
-has a heat-seeking component that en-,
ables it to tracts and destroy aircraft in
flight. It had been used extensively and'
successfully by the Israelis during the-
1973 war.. " My problem was not to
worry about the paperwork," l`,Yulcahy
says. "Terpil and Wilson had a pilot in :
Pennsylvania who would fl3 anywhere.,
-Once he got over the- water" -- and.
away from American legal jurisdiction
--- "he would change the paper." If the
Redeye had been purchased, the pilot
would. simply change the intemled re-
cipient listed on the' export Iicense,
from an approved ally, such as those in
NATO, for example, to Libya.
-Altering the State Department's ex-port license. known officially- as the-
end-user certificate, was considered so'
much a normal part of the arms busi-
ness by Wilson and Terpil that Mulcahy
had been authorized to quote prices 8
percent to 12 percent higher if the sale
also required supply of the certificate-
Mulcahy was unnerved by his sudden=
assignment and discussed it with an as-
sociate in Copenhagen-- a foreign m
ill-Mary attach, stationed i Denmark whd
.had a reputation for legitimate opera-
lions. "My friend told me that the-only
reasgn',Libya.would want or_e Redeye.
was for use in a terrorist attack,". Mul-
cal,y says. "We speculated that-Qad
dafi probably wanted to be-the-first to:
,shoot down- x.747: To lit a fully loaded"
. passenger plane in flight would Na- big=
ger than-;tlx destruction. of planes? at
Date`son= Air''r n i 3ordarp>?>. -when
:P.L.& terrorists h 197D blew up,thre
'international airliners and heist. scor
of passengershcstag _
Mulcahy had a leisurely dinzi .and;
began walking the stre ets of Cc
em He couldn't sleep: He llrip~
heandTerpilhadtakenn ton;?^ cared
I3 efenseApiara'1- inn: Hartf rd Conn-
where Terpil:'iscu_t t;ossible
wouf~rotect humansg~.~taradic~-
acri ty Could the Redeye carry a nu--:
clear warhead? Heknew now he would-
alit watched. the-sunrise-corn -in-Cam.
penbagen.".: Mulcahy ~ :'recalls,- :`'and
lmew what Lhad- to-do-get.bacsk:to
Washington fast..I.had.to fintkcut what:.
paperwork. existed in.tha.InterT .
nology_offices. he, shared with Wilson:
'ar.d Te_pil_.?'I,-.felt that Fran.'c_ond E&
were-:giving' Qaddafi:. an_y`:gc;dciamn
thingheasked for-"
Kevin Mulcahy goes underground-
to-save his life .The_Governinent_
drags its feet in the arms-ee,cport in=
-vtigatiori; . while; someormer_
American C.I.A:'and militarymeT.:.
continue exporting the hardware of
-::terrorism ---- timers; and: expIo-
sives -for- example 6zd 'arai .
Libyans forassa_samation:
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 .
men g . . -. _ .. .
n
eii:l...,.+.,,ar~f rn.rvnr~r fnrtha ('_ T.'A.'_c Tol"Cti-157y-.crsecret:Navy, integligen,_ .
-Connection. arxl_ -was:. a: pars:- or- Tas,.
talli ante services
ti
hasbuiltupduririgmore than 20years blflcc3Amen r,_an, :, 'X
.-verr muc,.:-.a 11-u-
weapons dealer are- the contacts- he,.. charming and
_Y 'A
Edwin P Wilson is invariably de-- pr.se in am interview upon being told.:
. picted by former.' as.. fates as-' A. of his officiallisting:"I never knew.L
charming- charismatic, , effective,. -was. on, the. board Gray said; "I
rough-and-ready. 6-foot4 swashbuc'k-- never- was: invired- to, a-board`meet~
Ierwhoexcelled inhismilitary and in- ina_ 11e--ackriowiedged'that he- has
telligence career. But thereal'reasons : had a racial and business relationship'
:for. his. success-'ass an. international- with Wilson;,-Whom' he al crm as-
'
p
pose ?:waw. Lo; conduct export unport_ ?
opz~ration_~; -but that- function was a operatives from Taiwan anal secrsi
fe itierminsidemainland China
rr'mg
':- L1itCZ11C,UV1xas ya?a.~. ava..++.- .+?-?--- --_
the I~lavy:.Tbe firm's ostensible pur: The unit also was:charged-with?therei'.
onsibility.of pic~cin' up intelllgenc&--
s
organizea - - -- ,
.: In:L[zeIate6a5. hehelps
Washington firm: called Consultants,. watcYxedfor the=;COV?rtshiprnent. of ./
....:1:>nvxr.n... l ant~_nt7f`} R>AY CVPA7X1f14
...YGl Yli,~ J4 %-L l..ceu i??w, va.r>?.a.. > _-.... .' Soviet swpp,n~ _1t. reporte-& not- only
time -&-contract employee ut19a5' ::. .
on :. i outine-. ca go- items-: bu alp
d
. I
rice. -
where they-woulcl~implant'se~rsitive
operations-
"A r:irlirt Pstulm-
-Tin ..on -w first-name basis with big :.. and:was iwvol 4in the procurement=
names in Congress and the Senate. It of: equipment forclandestiner-Navy
was always like the Government was operations ..Duriri c the Bay of Pigs; he.
su1.;urting us." Robert Keith Gray, wasassignedasapaymasterandhan
an influenrial public=relations man died procurement =as= wel E. He later.
known for his close ties to the Eisen- served i;r Southeast Asia:. and. Latin .
bower, Nixon and Reagan Adminis- America
".. The men working for him were con- was eventually`appointed to-a ni'TTL,
-vinced that he was still active in of official positioris:He alsu=was in=:;
:CJ.A:.., intelligence operations.. I valved in Congressional lobbylng-on
thought he. was reporting directly to. behalf.of;the.union.'and?-apparently.
the President;!'"one former associate began then forming his_clo-relation =
uential
recalls. "Ed still must be sanctioned-- shin: with- a number ol.,infl
by the U.S. Government- The people I members of Congress Wilson becsar:re
met yvere iraure5sive_ Ai1 of a-sudden a C.I.A~ specialist on-,maritime-issues.
ernments ort_ his =; procurement con-. the .50's wasto-infiltrate: tae.Seatar-
"..iracts.:`:? err International Union hrwhiCirhe
can manufacturers and foreign gov=- ::: utils T I'S first GI' assignment" MI
rraa of-tt-errrwit,`u military-or intellu -tii2ttsome of z?' rrsitiv?~t,
--gencebackgrounds,and, according to designed solely for useirside.China,
Federal Officials,---was.. . routinely re- = was appearing for-sale in the interna-
r s intellr- .: r- t m e rations- eere.. ~ed}
O r the next few years lu
getaee-activities were combined and after. presidenr Picr_ard. M'.-Nixon-T.
inmglec} wittz his private- operations.: Vii[ to Peidng m-1972,: and C r.A. oftf=.
He- hired:-. a. number-- of. associates, ', clais were_'astonished to iearrr later
trations, was among.-those listed as a -. _A full accounting' of- Neilson s con--
member of the board of Consultants 'nections and business activities may
International for five years, begin- never be known. He has .boasted:. of
ning in 1970. However, Gray, who having a controlling interest in more
served as co-chairman of Reagan's than 100. corporations, it- the United
Inaugural Committee: expressed sur? States and Europe.-S.M.H::'
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 Approved Fo
7ha V ai Co a d3o i/ ?m-12 In 1976, a former Central .Intelligence
Agency analyst revealed to Federal authorities the link between two former C.I.A.
men and Libyan terrorism --only to face four years of delays in the investigation
before indictments were brought against those men, who remain at large to this day.
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NEW YOR:C TL'ES MAGAZINE
21 JUNE 1981
Five years *ago, two former opera-
tives of the Central Intelligence Agency
made a deal with Col. Muammar el-
Qaddafi to supply the Libyan strong-
man with explosives for huge sums of
cash. They also hired former. Green
Berets to set up a secret training school
to teach the Libyans the latest tech-
niques in assassination and interna-
tional terrorism. As a cover for these
operations, the two men, Edwin P. Wil-
son and Frank E. Terpil, operated sev-
eral seemingly legitimate export com-
panies. To head one such company,
they hired another former C.I.A. em-
ployee, Kevin P. Mulcahy. For a long
time, Mulcahy let himself believe that
the entire operation was really part of
an unofficial but approved American
intelligence operation being carried out
by an "old-boy" network of former
Government workers, intelligence
agents and Green Berets with strong
and lasting connections to 'Washington
officialdom. In this, the second of a two-
part series, Mulcahy discovers that the
Qaddafi connection is illegal and not an
intelligence operation, and, at consid-
erable personal risk, goes first to the
C.I.A. and then to the F.B.I.
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* NEW YORE TIMES 0 2
3y Sa7oUr Id. Hersh
hortly before midnight an a
muggy Washington Sunday
in September 1978, Kevin P.
Mulcahy, a former C.I.A.
analyst who was then in the
export business, telephoned
the duty officer at agency
headquarters in - McLean.
had also agreed to set up a training
school to teach Libyans the latest in the
techniques of terrorism and political-
assassination. Only days before, Mul-
cahy told Shackley, he had been or-
dered to purchase an American-made
Redeye missile, a weapon capable of
sicoting down a commercial 'airliner,
for delivery to the Libyan ruler. Mulca-
hy's two business partners, Edwin P.
Wilson and Frank E. Terpil, who had
brought Mulcahy into the firm, were
themselves former C.I.A. operatives..
Now, on the telephone, Mulcahy
asked Shackley: "Is this a C.I.A. opera-
tionornot?"
Shackley was noncommittal, and
Mulcahy now knew that his worst suspi-
cions were correct: The Wilson-Terpil
operations did not have the sanction of
the C.I.A. He knew that in the close-knit
world of Government intelligence word
would somehow get back within days to
Mulcahy's partners that he had gone to
the authorities. So he quickly went into
hiding. disguising his appearance and
using a false name. But he anticipated
that his partners and their associates
would be quickly seized, convicted and
imprisoned. He expected this would
-happen not only for his own well-being,
but also to stop an operation he believed
inimical to the.national-security inter-
ests of his country and to world peace.
But things did not work out that way.
The Federal law-enforceme-i.. agencies
eventually became enmeshed in a long
series of bureaucratic rivalries and in-
trigues that hampered and delayed the
investigation. There was another com-
plication: a lack of Federal statutes .
that expressly barred acts of terrorism
by Americans abroad.
Mulcahy found himself in limbo, not a
fugitive from justice but, in a sense, a
captive of it. Over the coming months,
there were no quick arrests. And while
he was in hiding, Wilson and Terpil
were steadily expanding the scope of
their operations inside Libya. They ar-
ranged for illegal shipment of more
than 40,000 pounds of explosives to
Libya and continued to recruit former
Green Berets and Government ord-
nance experts for their training school.
Qaddafi is believed to have relied on the
American-provided materiel and train-
ing in his efforts to expand his influence
in the Middle East and North Africa, in.
cluding the invasion earlier this year of
neighboring Chad. The Libyan ruler is -s
suspected, too, of having ordered then
political assassination of 10 or more of
his political enemies living in exile,
Va. "There are problems
overseas," Mulcahy said without elabo?
ration, and he had totalk immediatelyto-
the agency's assistant to the deputy di.
rector of clandestine operations. Mul-
cahy would wait fora return call.
The call came within the hour. On the
telephone was Theodore G. Shackley,
one of the most influential men in the
C.IA. Mulcahy had a disturbing tale to
tell. The ffrm of which he was president
had agreed to sell the hardware of ter.
rorism - explosives and delayed-ac-
tion timers -- to Libya's Col. Muam-
mar el-Qaddafl. Moreover, the firm
Seymour M. Hersh, a former reporter
for The New York Times, is at work on
a book about Henry Kissinger to be pub-
lished by Summit Books.
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NEW YORK TIMES
with the aid, in at least one case, of Wil-
son and Terpil. It would be four years
before the two men would be indicted
by the United States Attorney's office
in Washington on charges tlfat included
illegal export of explosives-as well as
conspiracy and solicitation to' commit
murder. They are both at large to this
day. As a result, Mulcahy has now, in
frustration; decided to tell his story
publicly for Jae first time.
evin. Mulcahy's busi-
ness partnership began
to unravel in Europe in ;
late August 1978 after '
he was ordered by his
partners to purchase
the Redeye missile for
Qaddafi He then left
Wilson and Terpil and
flew to Washington to find out all that
his company, Inter-Technology, was
doing in Libya- After he arrived, he
went to the company offices and went
through the files. It was what he found
there - documents marked "secret"
which he, the firm's president, had
never seen - that led him to call thee-
C.I.A_ duty officer. There were con-
tracts and correspondence ? which
explicitly defined. the corporation's os-
tensible business dealings. with Libya
as. cover operations, and which con-
tained forgeries of Mulcahy's signa-
ture.
The documents outlined a 26-week
"training program for intelligence and
security officers in the field of espio-
nage, sabotage and general psychologi-
cal warfare," and one page said the
program's emphasis would be "placed
on the design, manufacture, implemen-
tation and detonation of explosive de-
vices." Mulcahy further learned that
his partners had proposed to Qaddafi
that the first graduates of the terrorist
school demonstrate their skills by blow-
ing up an Aramco pipeline in Saudi Ara-
bia.
Mulcahy knew he was in trouble Wil-
son and Terpil, he says, "had set me up
beautifully. By then, I was in deep
enough, and I knew they had me. I
picked up an ashtray from Frank's
desk, threw it across. the room. and
broke a lamp."
As-president of the company, he knew
he could be held criminally responsible
for its activities, and, he says, "I had to
think-what the hell do I do now? I had
to find out. Was this a C.I.A. operation
or not? Did it involve national security?
I still wanted to think there was a possi-
bility that Ed and Frank were acting on
behalf of the C.I.A. If it was a. C.I.A.
operation, I had two options- continue
to do it, or get out. If it wasn't C.I.A.,
then I could make up my mind: Do I
want to make a lyq p 44' RS16a
out and take my chances?"
He knew only too well the dangers. A
few months earlier, Terpil had passed a
message to Wilson, through Mulcahy,
reporting that "the hit's been taken
care of." Mulcahy learned from the
talkative Terpil that Wilson felt he had
been cheated six or seven years earlier
by a merchant in Paris on a transaction
involving British woolen uniforms in
storage in Nova Scotia. The "hit" re-
ferred to by Terpil apparently was a
bomb that went off under the mer-
chant's auto, severely injuring his wife,
who apparently was alone.
Kevin. Mulcahy's initial belief was
that Wilson and Terpil were operating
with the full sanction of the C.I.A. He
had been. told the exported explosives
and other materials were to be used to
clear mines planted in Libya's harbors
and battlefields during the 1973 Arab-
Israeli war. Mulcahy clearly wanted to
believe the cover story. His own alle-
giance to the C.I.A. was deep; he had
worked for the agency as an intelli.
gence analyst in the 1960's, and his fa-
ther had begun working there in 1947,
the year it was chartered. In 1968. Mul-
cahy resigned to take a job in the elec-
tronics industry, and in 1976 Ed Wilson
offered him a high-paying position in
his export company. Mulcahy knew
Wilson had served with credit in the
C.I.A.;. knew he was widely respected
by his former agency associates, and
was led to believe.that important ties
still existed.
Indeed, one night, not long after Mul-
cahy joined the business, Wilson took
him to Theodore Shackley's home.
Shackley later said he welcomed such
visits from Wilson because they
produced useful intelligence. Among
other things. Mulcahy recalls, Wilson
and Shackley discussed Wilson's forth-
coming visit to Libya for a meeting
with.Qaddafi. Wilson's main purpose
for the meeting. however, Mulcahy
says, was to seek Shackley's interven-
tion -in the granting of a Government
export license for a pending sale of
high-grade . communications gear,
whose export was about to be disap-
proved by the State Department. It is
not clear what significance Shackley
gave to the visit, but Mulcahy certainly
thought he understood the point: that
the export business was covertly ap-
proved by the C.I.A.
After Mulcahy's alarming discovery
in his company's files. he knew he
needed help, that he had to talk to
someone. "My first instinct was not to
hurt anybody," he says. "If it was a
C.I.A. operation, I didn't want to blow it
by exposing it to an outsider or to some
underling at the agency. I felt there
was no one I could safely talk to about
what I had found." So he turned to
Shackley. If the Wilson-Terpil opera-
tion was C.I.A., Mulcahy knew he could
discuss it with Shackley without jeop-
ardizing it.
1 But while, waiting for Shackley to re-
turn his call, Mulcahy also telephoned
an old family friend who worked in the
C.I.A.'s Office of Security, and asked
him to come over and review the Inter-
Technology documents. "My thought
was that no matter what Shackley de-
cided to do, or not do, I wanted someone
else in the agency to be aware of the
Libyan operation," Mulcahy recalls. "I
wanted a second reporting source."
Mulcahy's family friend was particu-
larly concerned that there was evi-
dence linking Patry E. Loomis and Wil-
liam Weisenburger with the Wilson
operation; Loomis and Weisenburger
still were on active duty with the C.I.A.
The Office of Security official' sug-
gested that Mulcahy report his infor-
mation to the F.B.I. He did so with a
sense of betrayal: Nothing in his life
had prepared him to be disloyal to for-
mer colleagues and associates, particu-
larly in an agency so closely tied to the
life of his family. It was that loyalty,
perhaps, so widespread throughout the
C.I.A., that enabled Wilson and Terpil
to operate so openly for so long.
On the very day that he began talking
to the Government..Muicahy received a
message from Wilson, who was still
overseas: "He told me to 'shut up, just
knock it off.' He'll explain everything
when he returns.-
A secretary at Inter-Technology later
passed an explicit warning to Mulcahy:
"She knew it was not a C.I.A. operation
and she said, 'Ed is going to kill you.' "
Mulcahy decided to go underground.
He armed himself with an M-16 rifle
and spent three weeks camping, shift-
ing campsites every evening. Pres-
ently, he moved to a small town in the
Shenandoah Valley and established a
new identity for himself, with a birth
certificate, driver's license. passport
and credit card. and took a job as a
drug and alcoholism counselor. A few
years earlier Mulcahy had successfully
overcome a drinking problem with the
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 Approved FoMple510/16 "LTA-R3
L also began talking exten-
sively to Federal agents
agencies, traveling at his
own expense to Washing-
ton as often as three days a
week. The F.B.I. assigned
a group of agents to the
case, and Mulcahy, was.v~n-
couraged. '-They said they needed
more stuff and we started going
through ail the paperwork I had. I was
drawing diagrams for them, giving
them organizational charts, the details
of possible political payoffs. I gave
them a long statement, agreeing that I
would continue to cooperate with them
as long as I-would never have to testify
publicly against Wilson and Terpil, and
that my name would never be men-
tioned in the press. I knew these guys
were looking for me I was afraid of
I therm. They had called members of my
family and the woman I was seeing.
trying to locate me." A constant fear
was for the safety of his two sons, both
of whom live in the Washington area
with Mulcahy's former wife and had
visited Wilson's farm.
Meanwhile, the Government received
unsolicited first-hand corroboration of
his.allegations. In early October 1976,
John Henry Harper, a former C.I.A.
bomb technician who had been hired by
Ed Wilson, returned from Libya and.
after learning of Mulcahy's defection.
went to the C.I.A.. where he, too, de-
scribed the program that Wilson and
Terpil were setting up for QaddafL
.Harper said that he and his fellow
Americans had constructed a labora-
tory and were manufacturing assassi-
nation bombs disguised as rock forma-
tions, ashtrays, lamps and tea kettles.
Wilson and Terpil also hired three
Cubans who had worked for the C.I.A.
to carry out an assassination on behalf
of Qaddafi. Wilson paid the three men
$30,040 in expenses with a personal
check drawn on his account in a Middle-
burg, Va., bank. Instead of carrying out
their assignment, the Cubans returned
from Europe and reported to the
C.I.A.; they told the agency that they
had initially believed that their assassi-
nation target would be the international
terrorist Carlos Ramirez, known to po-
lice as the Jackal, the man who planned
the 1972 Olympics massacre at Munich.
However, after meeting in Geneva with
Wilson, the Cubans said they learned
that the target would be. Umar Abdul-
lah Muhayshi, a Libyan defector who
had plotted to overthrow Qaddafi's re-
gime. The Cubans refused the assign-
ment and returned to the United States.
All of this information was made known
to the Federal investigators by the
C.I.A.
At about this time, Shackley was or-
dered by a superior to draft a memo-
randum of his late-night telephone con-
versation with Mulcahy, about which
he had never made a formal report,
senior C.I.A. officials discovered. Now
Shackley depicted Mulcahy as being.
irrational. paranoid, alcoholic and an
unreliable informant. A copy of the
Shackley memorandum eventually was
provided to the United States Attor-
ney's office in Washington and to Fed-
eral investigators. Shackley's sugges-
tion-that Mulcahy was not in full con-
trol of his faculties - would be taken at
face value by many over the next few
months. Mulcahy remains hurt and bit-
ter today about the memorandum- "It
was a cheap shot to use my past illness,
for which I'd long been treated, to dis-
credit me." ,
Wilson and Terpil continued to ex-
pand their operations inside Libya.: .
Those in their employ included Pat Loo-
mis, who was still under assignment
with the C.I.A. as a liaison officer be-
tween its headquarters and its overseas
stations; Loomis and others began
meeting with Green Berets near the
John F. Kennedy Special Forces train-
ing center at Fort Bragg, N.C., and urg-
ing them to retire from the military
and join. the operations in Libya. In
those contacts, the Green Berets later
told a-Federal grand jury, there once
again was the suggestion that every-
thing had been-sanctioned by the
agency. .
Evidence in the Wilson-Terpil. case
had been forwarded by the F.B.I. to
the Foreign Agents Registration sec-
lion of the Department of Justice-
Complicating the F.B.I.'s investiga-
tion was the fact that there are no
Federal laws prohibiting the aiding
and abetting of terrorist or presumed
terrorist activities outside the United
States. There was yet another factor
that obviously inhibited the initial in-
vestigation and made the Wilson-Ter-
psi case seem less urgent: this was the
political assassination in September
1976 of Orlando Letelier, the former
Chilean Ambassador to - the United
States. Solving Letelier's murder,
which took place in downtown Wash-
ington, became a high priority of the
United States Attorney's office in
Washington, draining off manpower
and the emotional energy of the staff.
The tension began to build for Mul-
cahy. He seemed to be unable to get
anyone in the Federal Government to
share his concern about the vital im-
portance of rapidly stopping the flow
of timers and explosives to Libya.
ODD'UOs - hands before
long. Wilson andTerpil had responded
to Mulcahy's accusations by hiring
prominent defense attorneys and de-
picting Mulcahy as. an alcoholic Viet-
nam veteran for whom they had
showed compassion by giving him a
job -only to learn that he was unsta-
ble and irrational-
In April 1977, a report in The Wash-
ington Post on the Justice Depart-
ment's pending investigation of Wil-
son's ties to Libya brought the matter
to the attention of Stansfield Turner,
the newly apppointed C.I.A. director.
Turner moved to take personal
charge of an inquiry into the Wilson
operations and quickly learned of
Mulcahy's charges. The- C.I.A. direc-
tor then called in Pat Loomis and Bill
Weisenburger, questioned them and
fired them. He also ordered a shake-
up in the C.I.A.'s. clandestine service,
replacing Ted Shackley and his im-
mediate- superior, William. Wells. -
"They were both nice guys." Turner
says, "but not right for the job." He
will not elaborate. The C.I.A. director
further had a directive posted in the
agency's. headquarters- and sent to
every office abroad.warning that no
employee -was to associate with Ed
Wilson.
What Turner did not do was call in
Kevin Mulcahy. If he had, he might -
have learned the extent of Wilson's
contacts in Libya and that Wilson's -
access inside. the C.I.A. transcended
Loomis. and Weisenburger. Turner
also might have learned that the clan-
destine-operations division had been
warned that Wilson was attempting to -
arrange a political assassination on
behalf of Qaddafi. as the Cubans had
told the C.I.A. control officers. More-
over, no one in the agency seems to
have bothered, to inform Turner of
John Harper's account of the weapons
laboratory and training programs in
? -
Libya undertaken by Wilson and Ter-
pil.
The failure of the lower-level offi-
cials of the C.I.A. to- report fully to
Stanfield Turner does not mean that
Wilson's activities were approved of
or endorsed in any way. but it does re-
veal an astonishing and not fully un-
derstood motes vivendi of the intelli-
gence business: The primary loyalty
of the man in the clandestine service
was to Ed Wilson, their former col-
league and associate and not to the
new Director of Central Intelligence,
who was viewed as an outsider who
could not understand the mentality of
an operative in the field. Kevin Mul-
cahy had violated the code.
Shipments of explosives for use in
terror weapons continued to flow into
Libya. and a second generation of
timers- far more sophisticated than
the first group shipped in 1976 -
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tat,- t~rnt- there could be blood on his
00040007-113'1jj1}cD'
 Approved FoVlea-N "108foRE--R -"E t 000100040007-1
began arriving in Tripoli. Ed Wilson,
with his charm and his C.I.A. exper-
tise,, had struck up a warm personal
friendship with Qaddafi and he
emerged by the end of 1977 as the man
in charge. Frank Terpil became dis.'
enchanted with his reduced rile -
and the reduced personal profits --
and began spending less time in
Libya. Terpil eventually moved on to
Uganda, where he received a $it mil-
lion contract to-provide arms, explo-
sives and torture devices, among
other things, to the regime of Idi
r Amin.
Wilson's contacts with Jerome S.
Brower, a California explosives -
manufacturer, Intensified during this
period and Brower - who had sup.
plied the first shipment of explosives_
to Libya in the summer of 1978
began recruiting bomb experts for the
Wilson. operations. Federal authori- .
ties learned later that two of the ex-.
pew recruited by Brower - Robert
E. Swallow and Dennis J. Wilson (no
relation to Ed Wilson) -were civilian
Navy employees at the China Lake
Naval Weapons Center in the Mojave
Desert in California, where some of..
the Navy's and C.IA.'s most sensitive
ordnance- research is %;onducted.
Swallows-and Dennis Wilson, Federal
authorities say, spent their annual
leave in 1977 on site at Ed Wilson's
training camp in Tripoli. Both men re.
turned to their Government jobs with-
out informing anyone about what was
going on in Libya. The men are now
under investigation by the United
States Attorney's office.
Not everyone kept his peace One of
the Green Berets reported to military
intelligence that he had been ap-.
proached by Loomis. In another case,
as later told to a Federal grand jury, a
former Green Beret who had worked
in the Wilson.Terpil operations. in
Libya was extensively debriefed by
military intelligence upon his return.
and referred. to the F.B.I. for further
questioning None of these reports
seemed to make any difference: The
F.B.I. investigation continued at a
slow pace: Wilson and Terpil contin-
ued their terrorist-supply operations,
and Mulcahy continued to hide and to
worry every time he started his car.
By mid-1977, Mulcahy had been
hired to design and implement a resi-
dential treatment program for alco-
holics and drug addicts in suburban
Washington. But his past association
with Wilson and Terpil continued to be
a major part of his life, and he began
to be annoyed with the F.B.I., not only
by the slowness of its investigation,
but also by the manner of some of the
agents. "I was sick and tired- of talk-
ing to the F.B.I. We had a failing out.
They kept me totally in the dark about
what they were doing, but began to ac-
cuse me of holding out on them." Mul-
cahy particularly was angered by the,.
agents' insensitivity: "They would
walk Into our treatment center unan--
nounced, right into the middle of the
house, looking like Mutt and Jeff, with.-'
=
their trench -coats an and thew ralfars.
turned. up_ Such visits inevitably
alarmed the patients in. the center,
many of whom had unresolved prob..
lems with the law, and some. began to
view Mulcahy as a Government in-
formant or under, investigation him-
self. =
Mulcahy had no illusions about his
status inside the C.I,A. that summer.
He had telephoned The Office of Se-
curity to see if. the agency would pro-
vide some protection in case Wilson
and- Terpil decided to move against
him. "They flatly refused;" Mulcahy
recalls. "It was almost. like. I was a
turncoat. I felt it was National Igloo-
Week.''
In December 1977, after more thana
year of inquiry, the Foreign Agents
Registration Office of the Justice De- .
partment concluded that Wilson and
Terpil, despite- conducting "nefari-
ous" business activities, had violated-
no American laws. They wrote pro
forma notes, known as letters of decli-
nation, to the United States Attorney's
offices in Alexandria, Va., and Wash- -
ington, recommending that the case
be dropped.
A copy of the letter was shown to
Eugene M. Propper, an aggressive-
assistant United States Attor-
ney who was then directing the
Letelier prosecution in Wash-
ington: Propper had inter-
viewed - Wilson briefly the
previous April, and Wilson em-
phatically denied any-involve-
ment in the sale of. the timers
to -Libya.;. it was a lie that
Propper vividly recalled 'When
the Justice Depart nsent sought
to drop the case: Propper
learned that the Justice De-
partment attorneys had relied
solely on F.B.I. interviews In
their.- investigation and,. he
thought he could ask-better
questions and. get better- an-
swers if he ' could bring wit-
nesses beforea grand jury.
The key was- Liulrahy, ,. who. -
reluctantly agreed now to teso
tify -- taking a step he had.
vowed he would never: do. "I.
liked Gene," Mulcahy recalls.
"He's an impressive guy, so I.
said;.'All right, I'll go before
the grand jury,. but I'm not
going. into= .court. and - testify
publicly against these guys.' I-
gave- the grand. jury every-.
thing I. had". - Propper was
doing the questioning- "and I
did it without immunity.. What
I was - telling them was the
truth. IfI did something wrong
I was willing-to pay for it.' "
Federal officials acknowl-
edged' in, recent interviews
that Mulcahy's grand-jury ap-
pearance provided the-core of
the subsequent indictments. ,
They.also said that Mulcahy
had. little to fear in refusing
immunity: "Kevin wasn't a
erim+ al, ' one Federal official
said.. "He was just doing what
his employer wanted.". Mul-
cahy had committed technical
violations of the Munitions
Control Act; the official added,
but the United States Attor-
ney's ofticee viewed. them as
not prosecutable. "What we
had on Kevin showed that he
had not ' dose - anything to
bother anybody." one official
said.
CC~i~'Tl1~'~1~'
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 Approved Fo
Mulcahy spent much of 1978
working intensely with law-
yers in the United States Attor-
ney's office. Still nothing haap-
pened, and by the end of year,
he wanted out: "The whole
thing was a. farce as far as I
was concerned;. no one was
telling me what was coming
down and yet I know that Wil-
son and Terpil were still doing
business in Libya." He was
reassured somewhat, he says,
when a Federal official told
him that Government authori-
ties had visited Wilson. at his
farm in Virginia: and graph!.
cally warned Wilson of re..
prism in case ~ anything hap.
peered to Mulcahy or his chil-
dren. It made me feel bet
ter," Mulcahy. says.. "The
Feds paid a visit- to Ed late M
the night, and told him that if
anything happened, they.
would con le looking forhim."
Federal officials subse.
quently explained., that the
delayisabtiaiz s t~
did not reflect. adversely on
Mulcahy or his testimony, but
resulted .from a basic gap in
the law, which does not specifi-
cally. make it. a crime to use
American equipment -.- and
klr row to further terrorism.
overseas- aslongas no overt
acts are done in the -United
States. WilsonandTerpil were
careful, as much as possible,
to stride their business deals ?
out ofthecx nitry.
When Eugene: Prbpper ini-
tially began his investigation,
the jurisdiction of the United
States Attorney's office. was
limited because of the lack of
statutes. Though there- was
evidence through the Cubans
that Wilson and Terpil had
conspired with Qaddafi to as-
sassinate one of his political enemies, solicitation to com-
mit murder.- that.-is, asking__..:_
or hiring someone else to do
the killing - is not a Federal
crime, and there-was no crimi-
nal statute in the District of
I Columbia barring such solici-
tation.
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000100040007-1
0 m
IEW YORK TIMES
Propper got an inspiration.
He had discovered in prosecut-
ing an earlier case that any.
crime in the Maryland code
not in conflict-with theDistrict
of. Columbia code could be
charged in Washington, since-
the District of Columbia had
adopted all of its criminal law
from Maryland in 180E Using.
that:. precedent, Propper was
able ta-investigate Wilson and
Terpil on 'solicitation charges
in. the- District of. Columbia. .
Anotherprovision in the Wash
ingtnu code also enabled!: Prop-
per to make the solicitation
charge a Federal violation. So
the United States Attorney's
office had its jurisdiction after
all, but, onceagain, there were
problems.. The: Letelier case
was going to trial and Propper
and a chief aide, E. Lawrence-,
Barcella Jr.,. were unable to %
handle both cases at the same
time.
By this time, Mulcahy had :.
become deeply embittered,.
especially toward the F.B.L.
which, h6' said, "never- as-
signed. Special status to this.
I case-. which means that the--
agents assigned to it are work-
ing exclusively on it.. At first,
the F.B.L. didn't believe nee,":T
Mulcahy-insists. "Every per-*,-.
son they interviewed sup
ported. Wilson's and Terpil's--
cover story and made me look -
like- a. guy with: a wild. tale to
tell Then if I ever asked the-..
F.B.L anything, one agent'
would look at the other to de-
tide whether they could an-
swer the question. It was a
one-way street and I felt I
couldn't help them anymore
without some kind of dialogue,
without their willingness to
tell me what they wanted and
what they didn't know."
Officially, the F.B.I. does
not comment .on pending in-
vestigations, but one agent
who. did. spend much time on
the. case disputed Mulcahy's
assessment in an interview.
"Kevin is very impatient," the
agent said. "He thinks he. can
give ussome facts one day and
we should.- begin. making are--
rests on. the next: He doesn't
understand the complexity. of
- the case and the fact that no
-one. is -exactly cooperating
with us. It's bees a long
drawn-out affair, trying to get-
some of these witnesses to give
tie a straight line: This is not a
very easy case to make. We
had to start- from the begin-
ring, and .1 think it's very un-
fair to criticize us or the
United States: Attorney's of-
fide- We've been working bard
on this for a long time "
...".Other Federal officials,how-
ever, echoed Mulcahy in rais-
ing?questions about the Justice
Department's- decision not to
give the case.higher priority,
which would. have. meant the
authorization of more F.S.I.
agents' for field work. Even
now, only one agent its-Wash
ingwn >s assigoru to monitor
developments fit the-case; and
he was pulled off- that for
months early thisyear to Kano
dre? backgrround investigations
of pending-Reagan Adminis-
tration appointments.
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 A majordevelopnient,.
ey~ May's vi ~B
1.97A_ vyh[nthe u O C
hol, Tobacco and Firearms as-
signed a new two-man team to
the case= Richard Wadsworth-
and Richard Pedersen decided
early in their . investigation
that Mulcahy was tellipg the
truth.-Novi, for the first time;.
Mulcahy believed that;l e.had
someone inside the investigaa-
tion with whom he could com-
municate. Mulcahy agreed to
cooperate in an undercover in-
vestigation with Pedersen and
Wadsworth, aimed at gather-
ing first-hand evidence of Wil--
son'S iltegar weapons dealings
in Washington the kind of:
specific evidence, that seemed.
essential to a prosecution The
operation failed- after five
months,.:. but . the
agents developed a close rela-
:'tionship with . Mulcahy and
learned - vast-. amounts about
the- way Wilson operated, in-:
formation and insight that
later, helped . theca crack. the
Mulcahy continued to live in
,low profile, routinely changing
his appearance. His- fears
were compounded - late; one
night when- he saw. 'a- truck
owned by- one of. Wilson's
trusted, associates- parked
across the street from his-
home. Mulcahy fled.the scene
and stayed away- from the
area. for two days. "It was
over three years and I wanted - .
out again," he said, "and so I
disappeared- justwert.to Ar--'.
I, izona under another name and
worked in the, construction
business."
Meanwhile, WilsandTer _
pil began spending some of the
money they were earning- By
the end of 1978, they had. pur-
chased more than $4-million of
real estate intheUnited States ?
and England, paying in. cash-
They- spent another million'.
dollars for -hotel- in Crewe,-
England, and--a town house in
London's posh - Lancaster
Mews. Federal authorities be-
lieved the hotel was to serve as
a stop on an underground rail-
way for terrorists. - By that
time, Qaddafi had set up- "hit
teams" that began to terrorize
the Libyan e2die community in
Europe. At least 10 of Qadda-
fi's political enemies were as-
sassinated by the gunmen.
1.4 V.--- access to
Another-factor in theinvesti-
Ieasgaltf1A?i1G`Ix=B
rimed-hi`fevil polite to
hying in- the United States,
which revolved around the so-
cial use of his estate in Virgin-
ia_. By the raid-1970's, Wilson
was regularly throwing par-
ties and offering huntingex-
cursions at the estate, where
senior members of the Carter
Administration mingled with
influential ? politicians and
members of the intelliageme-
community. TedShackleywas.
-also. orie- of the-guests. "The'
name of the game is legitima-
cy," one-Federal. officiaLsaid_
"Ed Wilson brings three guys
from the. C1.A and Carter's
man'.: brings two senators.
Everybody's - legitimizing
eve ybodyelse.,, . . -
' - `'Every place -we weal," the
official -added; "Ed--_Wi-lspn . '
popped. up -- not-on the sur-'
face,, but. -if you looked -far '
enough. it led to'Wilson." :_-
I`n early June.I979; the
United States Attorney's offce
told :Wadsworth and Pedersen
of the B.A.T.F. that there was
? not ennough evidence to charge
Wilson and. Terpil with: ille-
galiy exporting explosives to
r Libya.:-The. Government -had:
no--evidence that--any explo-.
._stves-had in fact. been shipped.
to Libya without the proper li-
censes and without accurate.
labeling and. bills of lading.
-which are required to insure
proper storage of the materi-
als during shipment All' of the '
witnesses interviewed by the
F.B.L. had stuck to the cover' {
story in confection with the
shipments to Libya as far as
they were corcerued; all that
Inter Technology had, under-
taken was a contract with the
Libyan Government to manu-
facture timers for use in m inee -
,clearing-operations- No explo-
sives had been- shipped,_ the
witnesses claimed. - Rick
i
Wadsworth decided. to make'
one final.. effort:-to find- evi-
dance of the shipment before'
bowing out of the case- He
spent most of the Memorial
Day weekend- in the Federal
courthouse in downtown Wash-
ingto'n reviewing all of the j
documents and testimony- He
found a work sheet buried in -
the files that had been turned. i
over by Mulcahy to the F.B.I.
in 1978. The work z,haet wi h
e-es hand-writing on it.
AYf?i47a1neeting in
August 1976 at which the Cali-
fornia tnanufactureragreect to 1
ship RDX (cyclotrimethylene 1i
trinitra,mine) and theother ex-
plosives. suspe did in 55-gal-
Ion drums, to Libya.
At this point, Eugene Prop-
per was in the process of re-
signing from the United States
Attorney's office to practice
law in Washington and write a
book on the Letelier case;
Lawrence Barcella suddenly
found himself in charge of the -
Wilson-Terpil case. Barcella
agreed, after being shown the
work sheet, to permit Wads
worth and Pedersen to fly to
California - and interview
Brower- once again. Wads-
worth and Pedersen- had dis-
-covered that the work sheet,
on which Brower had listed the
type and weights of the explo-
sives ordered. by Wilson and
Terpil; precisely matched the
bills of la.tling for a shipment of !!
explosives that week- from .i
Brower's factory. The Govern-
r nt now had its evidence
Over the next, year, how-
ever. Brower stubborzrly con-
tinued to insist that he knew {
northing abode-ilr'egal- activity
in the United States. In two ap.
pearances before the Federal
grand jury in Washington. be
denied that.the -conspiracy
meeting in Augusc 1976, as de!
scribed by Mulcahy. ever tool,
place. But the evidence. in his
n handwriting, proved to be
overwhelming and Brower
tually agreed to cooper-
ate with the prosecutors in re-
turn for dismissal of all but.,
orse of the charge again st him 1
conspiring to ship explo=
?
sixes with the Intent. use 13n,_
lawfully- When he did ttif-f .
in late- 1984, Brower acknowl-
edgedthat Mulcahywas right; - i
'QN T
who later wou
the hotel to hide from authori-
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 Approved Fo&Ieaa0I/08i WRCPVA64000100040007-1
relief over the indictments
was short-lived, however, be-
cause a Federal magistrate
subsequently reduced Terpil's
bond from $500.000 to $75,000,
of which only $15.600 had tobe
put up in cash. "To me, it was
the most absurd thing in the
world," Mulcahy recalls. "I
knew he was going to split - I
knew him, his' life style, the
fact that he had at least six dif-
ferent passports."' Mulcahy
also knew that Wilson and Ter
pit had been quietly disguising
their ownership of their busi-
ness ventures and properties
in the United States to avoid
Federal seizure. "I took there.
'duced bond as a reflection of
the importance the Govern.
went attached to this case -a
$15,000 cash bond when mil-
lions of dollars and the re.
sources of the Libyan Govern-
ment were at his disposal."
On Sept: 3, 1980, more than
four months after his indict.
ment in Washington and the
day before he was to begin
trial on the New York charges,
Terpil fled to Europe.
With Terpil jumping bond,
and Wilson choosing to remain
abroad as a fugitive, Mulcahy
concluded that it was time to
get out. He had accomplished
very little by his four years of
cooperation. So he moved to
the Middle !Vest.
There were questions that
still disturbed him. "Why
didn't the C.I.A. cooperate
fully and aggressively with the
United States Attorney's of-
fice? Why didn't the Govern-
ment ask the agency for its
assistance in locating and ap-
prehending Wilson and Terpil?
Why wasn't a combined Fed.
eral task force set up to coordi-
nate the investigation? Why
wasn't a special prosecutor
used? Why did the F.B.L. give
this case such low priority?
Where are we going to find
Qaddafi's bombs in the future?
What does it take - short of a
big body count- to get the at-
tention of the Congress and the
White House to a potentially
lethal situation? What is the
responsibility of the United
States to the world in a case
like this?"
Mulcahy returned to Wash-
ington late last year ready to
end his own involvement with
the prosecutors. "I had been
forced to live a lie." he says.
"I had often lived under an as.
sumed name, with a car and a
business registered in other
people's names." By that
time, Mulcahy had set up a
successful construction busi-
ness,-specializing in historical
restorations. He began re-
search for a book an his expert.
ences, but that did not solve
what he viewed as his immedi-
ate problem: "How to exorcise
my entire involvement with
the case." What he learned in
early 1981 convinced him that
it was time to take a step he
had not contemplated before
-going to the news media. A
former C.I.A. colleague -
Mulcahy will . not say who -
told him that Wilson, and Je-
rome Brower had conspired in
late 1977 to ship 40,000 pounds
of C4 plastique to Libya, the
largest illegal shipment of ex-
plosives known to Federal in-
vestigators. Mulcahy later
confirmed that what he had
heard was true - the ship.
? ments had been made from a
Texas airport in the fall of
1977, aboard a chartered DC-S
cargo jet An employee of one
of Wilson's firms, Around
i World Shipping and Charter-
( lug, of Houston, Tex., was
known to have been involved.
Brower and his California
company had made a profit of
$1 million on the C4 shipment
alone, Mulcahy was told.
"What I felt was absolute hor-
ror," Mulcahy recalls. "I was
horrified that they could have
shipped explosives in that
quantity, involving as many
people as they did - lawyers
from two different states,
commercial airlines, commer-
cial freight forwarding compa-
nies - and not have been de-
tected. There had to be a cast
of characters of more than 10
people, including pilots and
the companies that sold the C4.
When I learned of it, the ship.
ment was more than three
years old. and the F.B.I. and
the United States Attorney's
office were fully aware of it.
Yet no one had been charged,
or even called before a grand
jury, That was the final factor -
in my decision to go public.
The only option. left to me was
the press."
In interviews a few weeks
ago. Prosecutors at the United
States Attorney's office de-
clared that. the case still was
open and that more indict-
ments would be issued before
the end of summer, expanding
the ranks of those known to
have been involved in the Wil-
son-Terpil operations. Some
former C.IA officials, among
them Ted Shackley, are known
to have been talking with the
prosecutors, and apparently
have been shedding new light
on-.Wilson's connection - or
-lack of connection .- to the
agency. Meanwhile, Frank
Terpil was tried in absentia by
New York City authorities on
10 conspiracy and weapons
charges. found guilty and sen-
tenced, June 8; to 17 2/3 to 53
years in prrson, thema.dmum.
Mulcahy believes the Gov-
ernment is now focusing its at-
tention on the lesser lights who
flitted about the Wilson.Terpil
operations. He knows that Wil- :
son operated in Washington so
freely because of his ability to
reach into the top layer of Gov-
ernment and Congress; be-
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 Approved Fo leaseN9)08/NQ31WRDP969 000100040007-1
cause of his connections in a
city where connections are so
important. Mulcahy also
knows that Wilson and Terpil
are not the only former C.I.A.
and military men selling infor-
mation and materiel to the
highest bidder. Most impor-
tant, Mulcahy believes. that
the United States Attorney's
office in Washington, was
guilty of what he calls "Gov
ernasent complicity by orris.
sion". by not demanding that
Federal agencies, at the very
least, cut off the flow of men
and terrorist equipment to
Libya.
Mulcahy remains a believ
er: He believes in the value
and importance of the C.I.A.
and the due process of the
American judicial system.
"The. system can work." he
says, "but it can't work unless
the people who are the system
put it to work." If he had it to
do again. he says, "I know I
wouldn't have approached any
Government agencies. I would
have taken every document I
had to the White House or
hand delivered them to the
most responsible journalist I
could find. I'd never go to a
Government agency again -
because of the way I was treat-
ed, the lack of commitment
and the half-truths that I've
heard for the last five years."
Edwin Wilson could not be
reached for comment. Some-
one who answered the tele-
phone at his office in Tripoli
declined to give his name and
hung up when. asked to take a
message.
Despite the formal. disa-
vowal by the C.I.A., Wilson re-
mains anoutsider who knows
a great deal, about secret
American intelligence activi-
ties. Last August, four months
after his indictment, he was
seized by officials in Malta and
held in custody for more than
three days. Somehow, before
he could be turned over to
American authorities for ex-
tradition to Washington, he
managed to flee, flying from
Malta to- Heathrow Airport
near London on'his revoked
passport. Federal - officials
now suspect a $10,000 payoff
through a laundered bank ac-
count was made in Malta on
Wilson's behalf. There are
those in Washington who be-
lieve, that, even today, there
are some elements in the
C.I.A. who protected Wilson in
Malta and will --continue to
shield him. 0
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10
 .:CIA- P9
OUTING AND RECORD SHEET
suBJKTa(optfanoI) New York Times Article, Entitled, "The
Qaddafi. Connection"
TO: (Officer designotion,- icon number, and
building)
DATE
EXTENSION
OFFICER'S'-
INITIALS
JURIJ981
:: STAT
COMMENTS (Number each comment to show from whom
to whom. Draw- a line across column: after each comment.)
measures'' to :pre~rentYarcess
to c .assifi.ed mate_r'ial by
third parties-,'a foreign
governments-. The request
was= generated byan.?articl.e
by,---Seymour Hersh : n x the New
Yo"rk Times . on 14Juin.e. 1981
regarding former CIA
employees illega-lly yusingg
classified matexia1.obtained
from Agency and -:~ .DMA. ~;:
1 .- . D/"See'"
05 Reg,..
1 = 'PTAS/PSD/r1Sg.
PTAS/PSD/I.S`B bop
une 81)
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 STA
ROUTING AND RECORD SHEET
SUBJECT: (Optional)
New York Times Article Entitled
"The Qa a i Connection"
FROM.
NO.
DATE
16 June 1981
TO: (O r esigna ion, room number, and
building)
DATE
OFFICER'S
COMMENTS (Number each comment to show from whom
INITIALS
to whom. Draw a line across column after each comment.)
RECEIVED
FORWARDED
1.
DD/PfM
2.
3.
6i si
6
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DD/OS
4.
5.
8---
for signature
6.
7.
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8.
9.
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-
FORM 61 0 USE PREVIOUS
I-79 EDITIONS
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STAT
STAT