CIA VS. ABC : TRIAL LIFTING LID ON CIA DISPUTE WITH ABC NEWS

Events leading to a disputed ABC News report that accused the CIA of illegal activities are coming to light in testimony in a Honolulu federal criminal trial.

For the first time in open court, attorneys began this week to unravel the tangled association between the Central Intelligence Agency and businessman Ronald R. Rewald’s defunct Bishop, Baldwin, Rewald, Dillingham & Wong investment firm. In testimony by former CIA officers, Rewald was characterized as an eager agency informant who successfully lied about his accomplishments to impress the agency’s operatives in Hawaii.

The nature of Rewald’s association with the CIA is the key issue in an unprecedented 11-month dispute between the intelligence agency and ABC News. Rewald and ABC have claimed that his firm was a front for a variety of CIA missions from 1979 to 1983. The CIA has denied the allegations and waged a so far unsuccessful campaign to force ABC to back down from its reporting.

According to wire service reports of this week’s trial proceedings, one former CIA official testified that Rewald was a “walk-in” agency source who was never sent on spy missions or paid substantial sums of CIA money. Another former intelligence officer denied that the CIA helped to set up Rewald’s firm or had any part in his alleged swindle of about $22 million.

John C. (Jack) Kindschi, a former CIA chief of station in Honolulu and a paid consultant to and investor in Rewald’s firm, testified that the CIA never used the Bishop, Baldwin company as a cover for clandestine CIA operations.

He acknowledged, however, that the agency installed a telephone and telex in Rewald’s offices to give the impression that agents overseas were working for a private company in Honolulu.

Kindschi said that Rewald kept the communications equipment long after the CIA stopped using it.

Kindschi testified that Rewald was a “walk in” source for the agency who constantly offered to provide information from his numerous trips abroad.

The former station chief said he was so impressed by Rewald’s claimed accomplishments that he never doubted their authenticity.

Rewald said he had been a state champion pole-vaulter, a pilot, a professional football player and a successful businessman who had operated a chain of Midwestern sporting goods store, Kindschi said.

Eugene Welch, another former CIA chief of station, testified that the agency’s ties to Rewald began when Rewald contacted the CIA office in 1978, said he would be traveling to the Far East frequently on business and wanted to volunteer information to the agency. Welch said that the public CIA office in Honolulu was open to any U.S. citizen wishing to provide information in such a manner.

Welch said the CIA cleared Rewald to receive “confidential” but not “secret” agency information. Welch admitted that a CIA clearance check on Rewald failed to turn up a Wisconsin theft conviction; it also failed to show that his claims to hold degrees from Marquette University were false. (Rewald has claimed that the CIA provided him with the fake college degrees.)

Welch’s testimony was supported by a CIA “source-contact” sheet introduced by the government as evidence and immediately challenged by Rewald’s attorney--assistant federal public defender Brian Tamanaha.

Rewald is on trial for tax evasion, fraud and perjury. Among its multiple charges against Rewald, the government claims that he lied in a sworn statement alleging that Welch instructed him to set up the Bishop, Baldwin firm for use by the CIA as a cover for agents.

That and other charges in Rewald’s statement formed much of the basis for ABC’s disputed September, 1984, investigative report. The network claimed to have verified that the CIA engaged in a variety of clandestine and illegal operations through Rewald’s company--including arms shipments to India, Syria and Taiwan. ABC also broadcast charges that the CIA plotted to murder Rewald and threatened the life of an investor in his firm.

In an unusual public confrontation, the CIA charged ABC with deliberate news distortion and asked the Federal Communications Commission to find the network in violation of broadcasting’s fairness doctrine and other regulations.

In July, the FCC denied the CIA’s complaint but upheld the right of federal agencies to bring fairness actions. That decision, which does not become official until the FCC formally releases a written order, is expected to spawn a number of legal actions.

In addition, ABC and the CIA face a $145-million libel suit by Scott T. Barnes. He was the source for the network’s report that the agency planned to kill Rewald to keep his story from getting out.

Rewald’s criminal trial opened Aug. 5 in Honolulu and is expected to continue well into the fall.