Openness, candour went a long way

Press, 17 November 1987, Page 17

Openness, candour went a long way

William J. Casey, Ronald Reagan’s C.I.A. director until his death this year, was a tax law expert and former chairman of the Securities and Exchange Commission. He was a venture capitalist who made money first from writing lawyers' desk manuals and how-to books, such as "How to Build and Preserve Executive Wealth." He was worth at least SNZ2O million. But some of his financial dealings were questionable. For one thing, he had been legal counsel to a waste disposal firm linked in public records and court testimony to organised crime. He cofounded an agribusiness company with a person identified by the Justice Department as a Gulf Coast mob figure:

The I.R.S. was claiming back taxes on some business deductions that Casey had taken in the late 1970 s before coming to the C.I.A. Normally, such disputes were confidential between the taxpayer and the I.R.S. But some of Casey’s partners were challenging the I.R.S claims in tax court, dragging his name into the open.

This was the area of public criticism that most infuriated Casey. Most people just didn’t understand the capitalist system. Like many things, this understanding went back to the O.S.S. (Office of Strategic Services) and World War 11. Then O.S.S. had set up an Importance but simple intelligence-gathering operation. U.S. citizens had been asked to send in their vacation photos taken in Europe, especially at ports and beaches. One O.S.S.er had reduced the photos to microfilm and had them pasted on computer cards. It was all done by hand with paste and scissors, but the files had piryided a ready reference to anyfbeach or port, so the Allied troops at least

had something to go on before an agent drop, a commando raid, a landing or a bombing. During the war, a businessman had planted the seed with Casey that there would be endless commercial applications for this microfilm organization system. After the war, the businessman came back to Casey and put up the money. Casey hired an engineering firm in Boston to make a machine that would do the cut-and-paste work. A company called Film Sort was formed, and Casey began selling the machine and the technique to land title companies around the country.

First real money he had made

In 1949, the company was sold. Casey’s share was several hundred thousand dollars, an extraordinary fortune in those postwar days. It was the first real money he had made. He took $50,000 and bought Mayknoll (his home). Since then, Casey had placed great premium on seeing the future, finding applications and connections that others did not. He could have dumped his money with the big stock exchange corporations and been safe, free of any management role, disputes or lawsuits.

Instead, he had placed money in a mini-submarine venture to hunt for sunken treasure oft Key West, a firm importing Yugoslavian and rugs, a computerised tax return program, an estate-planning firm and a rac-

BOB WOODWARD:

‘Veil’ Part 2

quetball partnership. One of his investment groups was set up to develop a pen that transferred handwriting directly into a computer. Casey had put up $95 for a one per cent share. The group, called PenVerter Partners, had bought confidential technology from another firm for $4 million, but only $lOO,OOO of that had been laid out in cash. The other $3.9 million was in notes that would be paid only if the pen was developed and marketed. Using such techniques, PenVerter had losses of $6 million over four years. As a one per cent partner, for his $95 Casey had taken $60,000 in tax deductions — all of which the I.R.S. was disallowing.

The incident was potentially explosive — the C.I.A. Director getting 600 times his investment in tax deductions. The Attorney General, William French Smith, had just been publicly raked over the coals for taking a deduction only four times his investment.

He would be

happy to pay

On May 10, Casey phoned me about an inquiry that Chuck Babcock, one of the reporters assigned to my staff at the “Post,” was conducting into his I.R.S troubles. Yes, Casey, conceded, he might owe $lOO,OOO in back taxes. That was nothing, he said, and he’d be happy to pay, and could afford it. Babcock wrote a*song story about Casey’s tax and investment

troubles, headlined "C.I.A. Director Disputes I.R.S. Claim to $lOO,OOO in Back Taxes.” At a later tax court hearing in New York, Casey testified, taking the offensive and disputing the I.R.S. attorney’s claim that he had signed up with those in the business of "selling tax deductions.”

"I would like to take exception to any notion that I purchased a tax deduction,” he said. “I purchased their future... But to say I purchased tax deductions is an outrageous distortion.” He noted that he had written the first book on tax shelters, the 1952 “Tax Sheltered Investments." "I started the whole thing," he said, smiling, adding in terms of Catholic atonement, “When I became chairman of the S.E.C., I redeemed my sins.”

No-one in Congress or anyone else in the media had the st®hach for another look into the

thicket of Casey’s personal finances. Casey was surprised. A little openness and candor had gone a long way. In the fall of 1981, Senator Barry Goldwater, chairman of the Senate Select Committee on Intelligence, was still waiting for an end to the probe into the labyrinth of Casey’s finances. The inquiry was sputtering to a i conclusion with an exhaust velocity approaching zero. He had to find a graceful retreat or the committee staff had to find a smoking gun.

A sinister view of his habits

Nearly 38,000 pages of documents had been reviewed, and 110 persons interviewed. The inquiry had turned up omissions galore in Casey’s sworn disclosure statements. He had failed to list nine investments valued at more than $250,000; personal debts and other potential liabilities of nearly $500,000; four additional civil suits in which he had been involved; and more than seventy law clients he had represented during the previous five years, including two foreign governments, the Republic of Korea and Indonesia.

A new special committee counsel, Irvin Nathan, a former senior Justice Department official, took a sinister view of Casey’s financial habits. Though Nathan could not subpoena documents, did not get Casey’s tax returns and was never allowed to interview him, he drafted a confidential report of some 90 pages, outlining the unanswered ques-

TOMORROW: The defector

tlons and pointing out Casey’s pattern of cutting comers. Casey had chalk all over his feet from playing close to the foul line most of his life. But Nathan had no smoking gun. Goldwater had selected a tall, wiry 38-year-old former C.I.A. covert operator, Rob Simmons, to be the new staff director for the Senate committee. His first assignment for the Senate committee was to wrap up the Casey investigation.

“I want nothing longer than one page,” Goldwater said, asking for a final report. Simmons came up with a fivepage report that reaffirmed the committee’s earlier judgement that “no basis has been found for concluding that Mr Casey is unfit to hold office as Director of Central Intelligence.” Given the repeated failure to make full disclosure, Simmons applied terminology from his service in the Army: Casey was “at minimum inattentive to detail.” The report, unchanged, was released in December, when it was old news. There was little comment, and no fight from Casey, who told friends and Sophia, “All that stuff that comes out in the press, it only hurts for a day.” Simmons realized that Casey was not going to be pushed any further. For people who served in war, Simmons thought, that was the primary experience, real danger. Everything else paled by comparison. They had sent people to certain death. So to hustle some bucks was nothing. It was easy. To be criticised was nothing. So some judge or senator Or reporter or cartoonist was beating on you. So what? You have served in war and survived.