Bail Cut for Man Accused in Gulf War Scheme

Bond for William R. Kennedy Jr., an El Cajon man accused of conspiring to convert millions of dollars from Kuwait for personal use, was reduced Wednesday from $1 million to $600,000 by a federal magistrate.

Magistrate Judge Richard Borchers noted that Kennedy had no prior criminal record and posed no threat to the public. But in issuing his order he directed that any cash payment of bond be investigated to make sure it is not improper.

He also barred Kennedy from being involved in any transactions involving precious metals and directed that he be kept under electronic surveillance if and when he is released.

He also directed Kennedy to surrender his passport.

Kennedy is accused of conspiring with Sam Zakhem, former state legislator and ambassador to Bahrain, to secretly accept millions of dollars from Kuwait for a pro-Gulf war media campaign.

Assistant U.S. Atty. Steve Peters told Borchers there was evidence that Kennedy was working another scam, that Kennedy was involved in a consulting plan to help former Eastern Bloc countries transform to democracy and that Kennedy was promoting seminars to Colorado State University.

Borchers scrutinized brochures that touted Kennedy’s program and said they appeared to him to be “puffery.”

“It appears to this court to be nothing more than B.S.,” the magistrate said.

Peters told the court Tuesday that the alleged scheme involved Kennedy’s attempt to once again “affect foreign policy,” and suggested again Wednesday that Kennedy had been involved, directly, in pitching the war in Kuwait to the public and to Congress.

While it is not illegal to express an opinion to Congress, Peters said in response to a question from Borchers, it is questionable if one is an unregistered agent of a foreign country.

As to the order to continue bail, Peters had reservations.

“He had money offshore,” Peters said, “and we were concerned he would go offshore with it. And that is our concern today.”

Kennedy, Zakhem and Scott Stanley Jr. were named in a 16-count indictment issued July 2 that alleges they promoted U.S. intervention on behalf of Kuwait in the Persian Gulf before the war.

The three allegedly took $7.7 million from Kuwaiti officials, but diverted $5.7 million for personal profit. Federal prosecutors also alleged the three failed to inform the government they were acting on behalf of Kuwait as required by law.

At the bond revocation hearing in U.S. District Court, federal prosecutors asked Borchers either to retain Kennedy’s bond at $1 million or hold him without bond. They contended Kennedy was a flight risk, alleging he once told employees of his that he had $1 million in offshore holdings “and I will never be poor again,” Assistant U.S. Atty. Steve Peters said.

Kennedy told Borchers on Tuesday that he was broke and destitute. He did not testify Wednesday but, at one point, broke into tears when his temporary attorney, Richard Vermeire, said he had letters of support from Kennedy’s church members, friends and his retarded son.

Vermeire moved to withdraw from the case after Wednesday’s hearing and Kennedy, apparently, will represent himself.

Borchers set arraignment for Kennedy on Monday. Zakhem, an unsuccessful candidate for the GOP nomination for the U.S. Senate last month, is to be arraigned Thursday.