Francesco/who-killed-jfk huggingface dataset:
[157-10014-10144.pdf — page 101]
clean break-away of SAT from the Agency with the exception of a one year extension on the lease/purchase agreement for an L100-30 aircraft from SAT. This agreement for sale between Mr. Williams and the Agency included a provision that any profit derived from the sale of assets within one year would constitute a windfall and would be added to the total sale price.On February 28, 1973, the Board of Directors of SAT executed corporate action on the Agreement for Sale of SAT to Mr. Williams. Closing date was established at not later than 30 days after CAB approval. On March 1, 1973 application for approval of acquisition of control of SAT by Mr. Williams was filed with the CAB under Docket No. 252-64. It was anticipated that CAB approval would be forthcoming within 60 days.Subsequent to the agreement for sale and application to CAB, several supplemental carriers generated a great deal of pressure to prevent SAT from being sold to Mr. Williams and to prevent SAT from operating as a supplemental carrier. This pressure was applied through their Congressional représentatives, the General Accounting Office, the General Services Administration, and other ways. The various supplemental carriers objected to the sale of SAT for a variety of reasons. Basically each objected to the portions of SAT's operating authority which would allow SAT to compete with it. Specifically, representatives of Overseas National Airways (ONA) indicated that ONA would not oppose the sale if Mr. Williams would voluntarily renounce his rights to Trans-Pacific routes. World
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Airways and Trans International Airways (TIA) objected to SAToperating any aircraft as large or larger than a 727 in the FarEast. Saturn Airways objected to SAT bidding on any domestic MACcontracts. To restrict SAT to satisfy all potential competitioncould make SAT sufficiently unattractive as a profitable investmentthat financing could become unobtainable. With this in mind theAgency took the position that agreement for sale of SAT had beenexecuted, subject to CAB approval. If the CAB ruled against thesale and ownership reverted to the Agency, the Agency would ceaseany bids or service under MAC contracts and dissolve SAT.Two of the other supplementals, Saturn and ONA, expressedinterest in buying SAT. ONA did not make a cash offer. On June 29,1973, Saturn Airways, however, made a cash offer of about $2 millionin excess of what Mr. Williams had offered. There were, however,according to the Agency, compelling reasons not to pursue theseoffers. Agency officers had reason to believe that ONA was not asinterested in actually buying SAT as they were in getting a commit-ment from the Agency which could be used to compromise the Agency'sposition in future CAB hearings. Three reasons for not acceptingeither offer were:a. Any merger with another supplemental carrier wouldnecessitate a very difficult series of CAB hearings duringwhich all other major supplementals would certainly voiceloud and strenuous objections.
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b. To sell the firm on a sole-source basis to eitheroutside buyer without soliciting public bids would becontrary to sound business practice and would attracteven more adverse publicity.c. Both offers were made directly to officials of theCIA and not to the stockholders of record. Although therelationship between the CIA and SAT was the subject ofmuch public speculation, such relationship was stillclassified and an acceptance of either offer would be aviolation of security and cover.These procedures were unaeceptable to the Agency and dissolution ofthe firm or sale to Mr. Williams continued as the most acceptablemethod of divestiture, subject to CAB approval.In view of the objections by other supplemental carriers tothe sale of SAT to Mr. Williams and the award by the Air Force of aLogistics Air contract (LOGAIR) to SAT, the DCI directed on July 31,1973, that SAT be dissolved, that SAT withdraw from the LOGAIR con-tract and withdraw its application for renewal of supplementalcertificate. Mr. Williams was advised of this decision, but madea counter offer to purchase the company under the previous financialoffer but turn in his supplemental certificate, withdraw applicationfor acquisition for sale from CAB, and operate SAT as a commercialcarrier under Federal Aviation Regulation Part 121 authority. Suchaction would remove SAT from direct competition with the supplementals,but leave it with a worthwhile market in which to operate. Addi-tionally, no CAB hearing would be necessary to obtain this type of
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operating authority.On October 1, 1973, the DCI agreed to entertain the proposal to continue the sale of SAT to Mr. Williams as a Part 121 operator, but on the condition that Mr. Williams must obtain prompt financing. Otherwise, the firm would be dissolved.On October 5, 1973, the SAT Board of Directors approved and executed a new agreement for sale including the following provisions:a. Mr. Williams to acquire stock of SAT Actus for $2,145,000.b. Mr. Williams to pay off $3,125,000 owed to Air America.c. Agreement subject to Mr. Williams obtaining $4 million loan.d. Agreement to be subject to SAT withdrawing application for renewal of its Certificate of Necessity and Convenience for an Air Carrier (Supplemental Certificate).e. Lease/purchase agreement for L-100 between AAM and SAT to be extended one year.f. Anti-windfall provision to be effective for one year from date of sale.On November 29, 1973, Mr. Williams received a commitment from The First National Bank of Chicago for a loan of $4.5 million thereby making the October 5, 1973, agreement operative. On November 30, 1973, the DCI approved the sale of SAT in accordance with the October 5 agreement for sale. On the same day, the application to the CAB for acquisition of SAT under Docket No. 252-64 was withdrawn.
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and petition for cancellation of certificate and termination of exemption authority was filed with an effective date of December 30, 1973. On December 31, 1973, the sale was closed, the note to Air America was paid off, and Stanley G. Williams became the sole owner of SAT.In early January 1974, CIA officials learned from Air America management that SAT had exercised the purchase option of the lease/ purchase agreement between SAT and Air America for the Lockheed L 100-30 Hercules aircraft. The option sale price from Air America was $3,150,000. SAT immediately resold the aircraft to Saturn Airways for $4,350,000 turning a quick $1.2 million profit. The Agency interpreted this sale as a violation of the anti-windfall provisions of the agreement for sale. On January 25, 1974, Air America executed an Escrow and Arbitration Agreement on behalf of the CIA with SAT on the disputed $1.2 million profit. The agreement called for $750,000 to be placed in escrow with the American Security and Trust Company of Washington, D.C. The escrow funds were to be held as a Certificate of Deposit purchased at the prevailing market rate. It was further agreed that SAT would also place in escrow a Promissory Note to Air America for the remaining $450,000 of the disputed amount. The note was to bear interest at the same rate currently being earned on the Certificate of Deposit in escrow. It was arranged that the escrow deposits plus accrued interest would be paid to the party deemed in favor by an arbitrator with each party to pay one-half of the costs of arbitration. On September 5,
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1974, the arbitrator ruled in favor of Air America. This decision caused an additional $1,304,243 to accrue to the Agency from the SAT sale. This was the sum of the $1.2 million under arbitration plus accrued interest, less the Agency's share of arbitration costs.## DECLASSIFICATION OF RELATIONSHIP WITH CIAIn March 1974 the employees of SAT retained an attorney and brought a class action suit in U.S. District Court for Southern Florida against Southern Air Transport, Inc., and the Central Intelligence Agency. The employees as plaintiffs sued for injunctive relief and damages. In this suit the employees alleged:a. That the CIA sold the stock of SAT to Mr. Williams illegally,b. That SAT had embarked on a program to sell off its assets, depriving the plaintiffs of employment,c. That the plaintiffs were entitled to the benefits of the CIA Retirement and Disability System, andd. That their civil rights had been violated.In view of the publicity arising from the allegations made by the other supplemental carriers during the CAB proceedings and the publicity arising from this suit, it was determined that no useful purpose would be served by continuing to deny the true ownership relationship of SAT by CIA. It is noted, however, that the operational activities performed by SAT on behalf of CIA were and remain classified. As a part of the Agency's defense in this suit, an affidavit of Mr. Harold L. Brownman, Deputy Director for Management.
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and Services of the CIA, was presented in court. In the affidavittheMr. Brownman delineated the relationship between CIA and SAT and theauthorities for purchasing and later selling the capital stock ofSAT. He also defined the employment status of the plaintiffs asnot being government employees and not being CIA employees andtherefore not being eligible for participation in the CIA Retire-ment and Disability System.In the Order Granting Motion for Summary Judgment, the courtfound that the sale of SAT capital stock to Mr. Williams was not inviolation of law; the plaintiffs claim to be U.S. Government employeesand entitled to CIA retirement benefits invalid; and that the SATemployees were not deprived of any civil right under any state law.As a result, the action was dismissed with prejudice as to theplaintiff. Although this suit did cause the relationship betweenthe Agency and SAT to be officially made public, it did establish,in a court of law, two points favorable to the Agency:a. The sale of SAT to Stanley Williams violated no lawsand was within the authority of the DCI; andb. The directly hired employees of CIA-owned proprietaryfirms such as SAT do not necessarily enjoy the status ofU.S. Government employees.CONFLICT OF INTERESTIn the SAT divestiture, the Agency took precautions to avoidconflict of interest. Mr. George A. Doole, Jr., retired StaffAgent and retired Managing Director of Air America, Inc., made
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several offers to acquire SAT. In early 1972 he and some othermembers of AAM management made an informal offer to buy SAT. Thenon August 7, 1972, Mr. Doole told Mr. Charles W. Kane, Agencyofficial responsible for the management of SAT and AAM, that he,in association with World Airways and TIA, wanted to offer "bookvalue" for SAT. He stated that they were not interested in SAT'scertificate, but rather in the equipment and that if allowed tomake an offer, it would be one that would not require CAB hearings.In both these cases, the Agency's General Counsel determined thatbecause of Mr. Doole's close association with the Agency, the offerwould be unacceptable. In later discussions, Mr. Doole asked to beallowed to bid on SAT in open bidding. The General Counsel's posi-tion on this request was that open bids would be begging the questionin terms of conflict of interest. In any transaction this complex,selecting the bid is only a preliminary to the negotiated finalsale.Another potential conflict of interest involved OverseasNational Airways. From the time the Agency first decided to divest,until the sale to Mr. Williams was consummated, ONA expressed con-tinuing interest in an ONA/SAT merger. Their representative makingthese continuing overtures to the Agency was retired Admiral WilliamF. Raborn, former Director of Central Intelligence. Admiral Rabornmade literally dozens of phone calls to Agency officials and arrangedmany meetings) all for the purpose of pressing ONA's case to purchaseSAT. ONA also proposed to arrange "shadow financing" for Mr. Williamsif he would agree to merge with ONA at some later time. These offers
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were all rejected because merger with another supplemental was not an acceptable solution and the apparent conflict of interest was too great.The sale of SAT to the President of the firm, Mr. Stanley Williams, was another area of possible conflict of interest. However, Mr. Williams was not an employee of the U.S. Government during any period of association with SAT or CIA. He had been the owner prior to CIA acquisition and his role as nominal President of SAT during CIA ownership was at the direction of CIA, which made or approved all decisions in regard to acquisition of aircraft and other major policy determinations. Additionally, this potential area of conflict had been recognized at the outset of sale proceedings, which was the basis for obtaining third-party professional evaluation and appraisals and the provision in the sale agreement against windfall profit from disposition of assets. An underlying philosophy for sale back to Mr. Williams was to restore the corporation to the status of private ownership once the need for it as a government-controlled entity had terminated. Such action was considered in the best interests of the SAT employees as well as in the interest of the U.S. Government to maintain another viable commercial air carrier.CONCLUSIONThe CIA acquired ownership of SAT and its real property owning affiliate, by purchase of all outstanding shares of capital stock on August 5, 1960. Such acquisition was accomplished under the
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authority of the Central Intelligence Act of 1949 in order toacquire a certificated air carrier to support its foreign intel-ligence operations. The purchase was accomplished after consul-tation and approval by the CAB and the DOD, and was not in violationof Section 410 of the Federal Aviation Act.Following determination by CIA in 1972 that ownership of SATwas no longer required to support its foreign intelligence opera-tions, the CIA undertook to dispose of SAT under the authority of theCIA Act of 1949 and the specific provision in the Federal Propertyand Administrative Services Act of 1949 (FPAS Act) that nothing inthe act shall impair or affect any authority of the Central Intel-ligence Agency. In the case of Robert Farmer, et al., vs. SouthernAir Transport, Inc., et al., the U.S. District Court, SouthernDistrict of Florida, Case No. 74-467-CIV-WM, upheld the authorityof CIA to dispose of Southern Air Transport, Inc.In disposing of SAT, the CIA determined after discussions withCAB that SAT should not be sold as a going concern in an opencompetitive market nor should merger with another air carrier beconsidered. Such action would involve lengthy procedures, hearings,and publicity which posed a threat to CIA's ability to protectintelligence sources and methods. While CIA initially was inclinedto dissolve SAT and sell the assets, CAB and DOD both indicatedtheir desire to maintain SAT as a supplemental commercial aircarrier. Since this solution also would be in the best interestof the SAT employees and there were indications this could be
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- 89-19 -accomplished without revealing ownership by CIA, CIA approved exploring the sale of SAT to its previous owner and current nominal President, Mr. Stanley Williams.The CIA took reasonable precautions to assure that a fair market price was received for the sale of SAT, and that no short term windfall profit would ensue. The CIA was mindful of conflict of interest problems, and obtained independent professional advice and guidance prior to executing an agreement for sale. The sale price finally received by the CIA exceeded the parameters established by this independent study.In retrospect, it is possible that open competitive bidding for sale of SAT as a going concern could have achieved as much or more return to the U.S. Government for the assets of SAT. However, such assessment is only conjecture since this market was not fully tested. Also this method of disposal had the potential for greater publicity and revelation of intelligence sources and methods. In retrospect, the alternate solution of dissolution of the corporation and sale of assets probably would have created less publicity but again this is only conjecture, since the SAT employee law suit may well have been forthcoming in any event.In conclusion, the CIA obtained a fair market value for the sale of SAT as evaluated by an independent professional appraisal. The legality of the disposal of Southern Air Transport by the CIA has been tested in court and has been shown to be fully within the statutory authorities and responsibilities of the DCI. TheNW 50955 DocId:32423532. Page 112
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- 89-20 -precautions taken and the procedures established by the CIA considered the varying factors of responsibility for public funds, conflicts of interest, U.S. Government interests for the aviation industry and its employees, and national security. The CIA actions in the disposal of SAT, accordingly, were reasonable and proper.
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# VI. Project MHBOUNDIn 1958, at the time construction of the new CIA headquarters building in Langley was begun, a small counterintelligence operation was established to maintain surveillance of activities to prevent hostile penetration and sabotage. It was successful in its objectives and, therefore, upon occupancy of the building in 1962 the Project, now known as MHBOUND, was established as an outgrowth of the initial effort.From a single office in Arlington, Virginia, the project expanded to four field offices (Arlington, Falls Church, Los Angeles and St. Louis). Also, it grew from a single corporate entity into three separate corporations. The parent organization in 1962 was Anderson Enterprises, Inc., which operated in the greater Washington area and was set up to create a bona fide commercial corporation which would perform security services on a competitive basis for any and all individuals and companies which might require them, as well as Federal and local governmental units. In addition, it would conduct operations for the Office of Security of the CIA. This activity proved most successful, with customers utilizing it for document destruction, for consultation, for guard work, and for investigations.Anderson Enterprises, Inc. developed legitimate business contracts with agencies of the Federal government and with commercial firms. The provisions of the so-called "Anti-Pinkerton Act" prohibit a company engaged in investigative work from contracting with
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- 91 -the Federal government. In order to protect the commercial cover, it became necessary to form a separate company to handle investigations in response to the requirements of commercial firms. Further, it became necessary to set up notional commercial firms through which to fund MHBOUND. for investigative work levied upon it by the Office of Security. At the time this split was accomplished, Anderson Enterprises, Inc. changed its name to Anderson Security Consultants, Inc., with its headquarters remaining in Arlington. The new company was called Anderson Security Services, Inc. and made Los Angeles its home office. As activity expanded and work increased, a third corporation called General Personnel Investigations, Inc. was organized and also headquartered in Los Angeles.On January 23, 1966, for legal, cover and operational reasons and increased administrative efficiency, Anderson Security Services, Inc. (ASSI) merged into General Personnel Investigations, Inc. (GPII) and remained incorporated in the state of California. Upon the merger, ASSI ceased and GPII succeeded it. The corporate officers and the board of directors of all three companies consisted of the same persons. Subsequently, GPII was sold and new legal straw men were introduced as officers, directors and shareholders. The home office of General Personnel Investigations, Inc. was subsequently established in Falls Church, Virginia in March 1966 for greater administrative efficiency and firmer monetary controls on the projects as a whole, and to greatly enhance
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- 92 -cover viability. Also of particular note, the "home office", with its investigative charter, has been used in the conduct of covert investigations.In addition to the conduct of investigations, MHBOUND was used in the following activities:(a) TPOCTONAL - covert monitoring of construction of CIA Headquarters building;(b) Monitoring of construction of West Gate Research Park buildings, which were to be occupied by Agency components;(c) TAPIR - covert monitoring of construction of CIA print-ing services building;(d) ZULU - surveillance of DOD civilian employees suspected to be potential defectors to Soviets;(e) STPROBE - testing security effectiveness at domestic DDS&T sites and contractor facilities;(f) MERRIMAC - monitoring of dissident groups in D.C.;*(g) AEDONOR - the proprietary hired and paid contract guards for one phase of this activity;(h) ISOTROPIC - the proprietary was a civilian contractor for the guard force at this installation;(i) TWOFOLD - was an Office of Security cryptonym for an oper-ation to recruit, process and train undercover internal security agents for the Bureau of Narcotics and Dangerous Drugs;* This particular project and other aspects of MHBOUND's domestic activities are treated in greater detail in the Committee's Staff Report dealing with the operations of MHBOUND.
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- 93 -(j) DELICATE - security support for DDS&T project, consisting mainly of badging and entry controls, background investigations, and escort of sensitive material; this is the only such activity currently being serviced by MHBOUND;(k) PINEAPPLE - physical surveillance of an Agency courier suspected of living beyond his means; also involved a surreptitious entry into his apartment;(l) BOOTS - physical surveillance of an Agency employee "who maintained contact with people of questionable loyalty"; also in- volved an audio penetration of the employee's apartment and a mail cover.Funding for the proprietary is accomplished through a cut-out mechanism whereby the Agency sends U. S. Treasury checks to ten contractors. The proprietary then bills the contractors for "services rendered" in the same amount as received by the contractor via Treasury check. Funding for the other corporations was done through use of notional firms. The ISOTROPIC guard force contract was handled by intra-Agency transfer of funds. BNDD reimbursed the Agency for all TWOFOLD expenses, except for salary of the one staff agent. DOD reimbursed the Agency for all ZULU expenses.Los Angeles is the only MHBOUND office currently in operation. During Fiscal Year 1975, 2,226 investigations were conducted, 6,125 man-hours were rendered in support of DELICATE, and a total of $551,000 was expended. Purely commercial income averages between $20,000 to $25,000. Much of this comes from walk-in business, which,