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TABLE OF CONTENTS
PROPRIETARIES
I. Introduction and Philosophy of Use
A. Operating Proprietaries
B. Non-Operating Proprietaries
II. Statutory Authority for Proprietaries
1
3
7
9
III.
Specific Controls
10
A. Agency Regulations and Policies
10
B. Project Reviews and Control
11
C. Financial Controls/Operating Companies and Non-
Operating Companies Keeping Books of Accounts
11
D. Financial Controls/Non-Operating Companies Except
Those Keeping Books of Accounts
13
E. Treatment of Profits
14
F. Disposition of Funds Returned from Proprietaries ..
16
G. Disposal of Proprietaries
16
H. Relations with Tax, Regulatory, and Other Agencies
18
IV. A Description of the Various Proprietaries
Proprietary List
Employees of Proprietaries as of October 1975
41
Funding and Payroll Mechanisms
42
227 2
21
24
Description of Major Headquarters-Controlled
Proprietaries as of September 1975 ..
43
Listing of Proprietaries During the Period 1952 through
1974 (Total 399)
46
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V.
(ii)
The Disposal of Agency Proprietaries
59
a.
An Overview
59
Entities Dissolved
Entities Sold
63
68
Entities "Otherwise Disposed Of"
71
Description of Disposition of Entities Sold or
Otherwise Disposed Of
74
b.
The Sale of SouthernAir Transport, Inc.: A Case
Study In Disposal of a CIA Proprietary
89-1
Background
.89-1
The Sale
89-4
Declassification of Relationship With CIA ...89-14
Conflict Of Interest
Conclusion
VI.
Project MHBOUND
VII.
VII.
Beyond "Doing Business": Peak Non-Government Security
Investments by Proprietaries Active as of December
31, 1974
MHMUTUAL:
The Insurance-Investment Complex
.89-15
89-17
90
95
22
99
a. A Brief History
99
b.
Current Status
106
Stock Portfolio Performance Chart
108
IX.
The Air Proprietaries
113
X. Issues Posed, Conclusions, and Recommendations
129
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SECRET
PROPRIETARIES EN
I. INTRODUCTION AND PHILOSOPHY OF USE
Questions have arisen as to CIA's use of proprietary mechanisms
to help carry out the Agency's missions. In particular, concerns
have been expressed about the Agency's financial and management control
over these entities and about the treatment of funds related to such
entities. A careful review of these entities has revealed that CIA's
proprietaries are appropriately limited and controlled with careful
consideration given to their use within the spirit and letter of the
law.
:
Proprietaries fall into two main categories:
1.
2.
Operating companies that actually do business as
would any private firm; and
Non-operating companies or entities that appear to
do business under commercial guise.
These entities may be legally constituted as corporations, partner-
ships, or sole proprietorships; or they may have no such legal standing,
i.e., they may be "notional" entities which have bank accounts and
backstopped addresses controlled by the Agency. Corporate proprietaries
are incorporated in accordance with the statutory provisions of the
jurisdiction of incorporation, are subject to the same review as any
corporate entity within that jurisdiction, file applicable state and/or
federal tax returns, and obtain the necessary licenses to conduct their
normal business. The purposes served by them are two-fold: they provide
cover, attribution for funding, and administrative assistance to agents
RET
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2
and covert activities; and they provide services not securely available
through normal commercial facilities. Because these instrumentalities
are established as private organizations, they must be established
and managed, to the extent possible, in accordance with practice and
requirements that are normal for the types of enterprises they give
the appearance of being.
Of the legally constituted entities, the Agency uses the corporate
form in most cases because of the advantages and flexibility of corporate
management control. These corporations are legally organized under the
laws of a state, country, or other jurisdiction and are either wholly
owned by CIA or controlled through majority stock ownership. Services
of bona fide businessmen are enlisted as nominee officers, directors,
and stockholders.
The Agency generally has employed proprietaries when it was the
only way, or clearly the best way, to achieve an approved objective.
Under Agency rules proprietaries are established or allowed to continue
in existence only so long as they contribute to accomplishment of the
Agency's mission and remain the most advantageous operational means of
achieving certain particular and necessary objectives. Current policy
calls for limited use of operating proprietary mechanisms.
The capa-
bility to use the mechanism is to be retained (this the Agency terms
its "capability in being"), and smaller entities used.
A review of Agency files shows that the number of operating
proprietaries has been consciously pared by about 50 percent since the
mid 1960's. These reductions began as a result both of the Katzenbach
guidelines associated with the National Student Association affair in
1967 and the CIA's own IG survey in that same year.
In addition, the
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need for proprietaries has declined as a result of a general shift in
emphasis away from covert action; transfer of Radio Free Europe and
Radio Liberty to the Board of International Broadcasting with funding
through State Department; continuing liquidation of the assets of the
Air America complex as requirements for CIA support in Southeast Asia
have diminished; the sale of Southern Air Transport and the continuing
liquidation of assets of Intermountain Aviation with their exposure
in the press and the decreased need for contingency air capabilities.
The evidence establishes that activities of all proprietaries,
directly or indirectly, support the Agency's foreign intelligence collectio
or covert action missions. Some of these proprietaries are located
within the United States for reasons of operational or administrative
necessity, but their ultimate impact is overseas. Some of the question-
able domestic uses of these entities is dealt with in the sections of
the Report on "Chaos" and related programs. And in one area, MHMUTUAL,
serious questions remain as to the propriety of using such a mechanism
to provide insurance and retirement benefits. This problem is detailed
later.
(See Section VIII).
Operating Proprietaries
As discussed in greater detail later, operating proprietaries
conduct business in the commercial sphere, but they are not in direct
competititon with privately owned corporations to such a degree as to
deprive the private companies of legitimate income. There is no doubt,
however, that they were and are in competition. The Agency has been
careful to limit the amount of commercial business engaged in by these
proprietaries to only that necessary to support the viability of the
commercial cover and keep it alive in the commercial world.
Revenues
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:
have been used as partial offsets to operating costs. Aggregate
profits over the years have been relatively small. Only two proprie-
taries have shown significant profits: the Air America complex in
fulfilling mostly Government contracts in Southeast Asia, and the
insurance company handling trust funds and insurance (MHMUTUAL).
The air proprietary overview, infra Section IX., details the dilemmas
posed by size. Moreover, it sheds light on questions concerning
whether commercial viability became more of a bronze god, than was
necessary to maintain adequate cover.
Operating proprietaries may be large or small in terms of capital-
ization and total assets, depending upon the functions they perform.
When the commercial purpose of an operating proprietary is incidental
to its CIA mission such as an export-import firm which engages in
commercial operations only to the extent necessary to provide cover
for a CIA officer in a foreign country a minimum capitalization,
usually in the neighborhood of $25,000 or less, is all that is required.
Examples of an operating proprietary in which commercial operations
are incidental to the Agency mission are:
A United States frozen seafood importing company which
operates in the Far East and provides cover for an Agency
employee engaged in intelligence activities.
The Agency
provided $25,000 in capital to purchase and activate a
dormant but long-established privately-owned United States
seafood distributing company. The former owner and his
partner, who are cleared and witting, provide training,
business management, and product distribution in the
United States for one-half the profits on seafood imports
financed by the proprietary. The Agency subsequently
provided $10,000 annually for fiscal years 1972, 1973, and
1974 as working capital. The proprietary since 1971 has
provided excellent cover with a minimum amount of business.
As of 20 June 1974, the proprietary had assets of $104,222.67
and a net worth (assets minus liabilities) of $74,051.15.
The company's financial accounts are handled by an Agency
proprietary management firm.
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A foreign travel service company which operates in a Southeast
Asia country and provides cover for an agent targeted against
the local Communist Party. The company was established in 1973
with an initial investment of $5,900.
Operating proprietaries whose commercial purposes are in themselves
essential to the CIA mission require much larger capitalization and
investment. They are staffed by Agency personnel plus cleared commer-
cial employees as required. Among the Agency's operating proprietaries
of this type are four management companies which provide commercial
assistance to other proprietaries and an audit firm which conducts
commercial audits of operating companies and those non-operating
proprietaries with substantial assets. The Agency's largest operating
proprietaries are Air America, an insurance complex, and the aviation
facility, Intermountain Aviation, Inc. The assets of Intermountain
have been sold, with operations ceasing on 28. February 1975; and the
corporation is in the process of being dissolved.
Air America, the Agency's largest proprietary, which is in the
process of liquidation, provided aircraft in support of Agency operations
in Southeast Asia. This support has been under cover of a commercial
flying service in fulfillment of U.S. Government contracts.
Headquarters has been in Washington, D. C., with field Headquarters
in Taipei, Taiwan.
Corporate
The insurance complex provides a mechanism for the payment of
annuities and other benefits to sensitive agents and for self-insurance
of risks involved in covert operations which, for security reasons,
cannot be attributed to the U.S. Government or handled through private
firms. The complex was formed in 1962 as a clandestine commercial
support mechanism to provide death and disability benefits to agents
or their beneficiaries when security considerations precluded payments
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attributable to the U.S. Government.
This function was broadened
to include self-insurance for many risks involved in covert operations,
including property risks incurred by operational activities of Agency-
owned air and marine companies. From an early date, the complex has
administered agents' escrow accounts and life insurance, and provided
annuity and pension programs for selected agent personnel employed by
the Agency. These programs are solely for the purpose of meeting the
Agency's obligations to agent-type personnel who have rendered services
over a substantial period of time and cannot be handled under normal
U.S. Government retirement programs. Individuals who qualify for the
CIA Retirement System or the Civil Service System are not handled
through the proprietary system. In addition, the complex has been
used to provide a limited amount of support to covert operations
specifically, for the acquisition of operational real estate and as
a conduit for the funding of selected covert activities.
Intermountain Aviation, Inc., has the purpose of providing a
variety of nonattributable air support capabilities available for
quick deployment overseas to support Agency activities. The Agency
is in the process of disposing of its assets and terminating this
activity..
As of 1 July 1974 there were 71 operating proprietary companies,
of which 21 are part of the Agency's proprietary insurance complex.
The combined net worth (assets minus liabilities) of these companies
is approximately $57.3 million. Although some, such as those in the
insurance complex, are commercially self-supporting, most operating
proprietaries usually require budgetary support.
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B.
Nonoperating Proprietaries
Nonoperating proprietaries vary in complexity according to their
Agency task, are, for the most part, either corporate shells or less
that facilitate foreign operations, and clearly pose no competitive
threat to bona fide businesses. The most elaborate are legally
:
licensed and established to conduct bona fide business. They have
nominee stockholders, directors, and officers and are generally
directed by one of four Agency proprietary management companies.
The company address may be a Post Office Box, a legitimate address
provided by a cleared and witting company official or attorney, or in
a few cases the address of a proprietary management company. They
maintain bank accounts, generate business correspondence, keep books
of account which can withstand commercial and tax audit, file State
and Federal tax returns, and perform normal business reporting to
regulatory authorities in order to backstop fully their Agency tasks.
They are moderately capitalized, generally around $5,000, and their
net worth at any one time varies according to the Agency task they
are performing. As of 31 December 1973, 38 of these companies had
a combined net worth of approximately $325,000. Of this amount,
almost $200,000 was operating capital for three companies which
provide cover for several Agency personnel. Examples of two non-
operating companies which are commercially managed, keep books of
account, and can withstand commercial and tax audit are:
A Florida corporation capitalized at $7,000 and whose legal
address is the office of a cleared and witting attorney.
Under the auspices of the Florida corporation, an Agency
officer established a branch office in a Central American
country and conducts a sporting goods business which provides
him cover. Administration of the corporation, including
purchase of inventory for the branch office, is handled by
a proprietary management company.
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A Liechtenstein Anstalt which an Agency nominee established
using a reliable but nonwitting Liechtenstein lawyer as a
resident agent. The Anstalt was used to purchase a property
in a European country from which an audio operation was
mounted against an installation of a Communist country.
Upon conclusion of the operation, the property will be sold
by the Anstalt and the proceeds returned to CIA via its
nominee.
Requiring less elaborate commercial administration because of
the nature of Agency tasks performed are 31 legally incorporated
companies which are directly managed by Agency Headquarters specialists.
operating in alias as signatories to the company bank accounts. Each
of these companies generally have a capitalization of $5,000 or less
and are domiciled in the offices of cleared and witting attorneys.
No commercial books of account are kept, and in the event of a tax
audit the Agency has to brief the auditing authority. Depending on
use, administration may be as simple as maintaining bank accounts and
filing annual franchise taxes or more extensive as required when
obtaining Employee Identification numbers, paying personnel, with-
holding taxes and Social Security, and filing tax returns. Examples
of this type of Headquarters-managed proprietary corporation are:
A Nevada proprietary corporation domiciled at the offices of
a California law form. Three members of the firm serve as
Agency nominee stockholders, directors, and officers for
the proprietary which holds title to two aircraft used by
the Agency for flight training and testing avionics equipment.
In this case, only administration is required to maintain a
bank account, file a franchise tax, and coordinate with the
law firm.
Although not proprietary corporations, but proprietaries in the
sense of being Agency-owned and administered, are 64 ostensible sole-
proprietorships. The Agency establishes and registers these sole-
proprietorships in the name of fictitious persons and opens a bank
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account on which Agency officers in alias have signatory power.
Arrangements are made with cleared and witting businessmen to
provide a domiciliary address for these entities at a law office
or telephone answering service. These entities, like the proprietary
corporation administered by Agency Headquarters specialists, provide
cover, payrolling, and tax attribution for Agency personnel and are
similarly administered.
Another type of entity used by the Agency and a proprietary
only in the sense of being Agency-owned and administered is exempli-
fied by some 215 notional companies which are not legally registered
but have names and bank accounts controlled by the Agency. The Agency
arranges with cleared and witting attorneys or proprietors of telephone
answering services to provide a domiciliary address and to refer any
queries to the Agency specialists concerned. These notional entities
are used to provide status and operational cover for Agency personnel
involved in all types of high-risk intelligence operations. They are
also used as ostensible clients for purposes of funding Agency pro-
prietaries or bona fide American companies which provide
cover and payrolling of Agency personnel.
II.
STATUTORY AUTHORITY FOR PROPRIETARIES
The Agency's statutory authority to spend money for proprietary
corporations in support of Agency operations derives from Section 8 (b)
of the CIA Act of 1949. This Act states:
"The sums made available to the Agency may be expended without
regard to the provisions of law and regulations relating to
the expenditure of Government funds; and for objects of a
confidential, extraordinary, or emergency nature, such
expenditures to be accounted for solely on the certificate
of the Director and every such certificate shall be deemed
a sufficient voucher for the amount therein certified.
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The language contained in Section 8 (b) is adequate authority to
exclude the operation of these proprietary corporations from the
law governing Government corporations in 31 U.S.C.A. 841 et. seq.
However, the CIA General Counsel ruled in 1958 that the CIA should
comply with the principles in that Act to the extent possible, and
this has been done. Attached as Appendix A is a classified Memorandum
of Law by the Agency's Office of General Counsel on CIA's authority to
acquire and dispose of a proprietary without regard to provisions of
the Federal Property and Administrative Services Act, which position
was upheld by the U.S. District Court in the Southern District of
Florida in dismissing the suit Farmer vs. Southern Air Transport on
17 July 1974.
III. SPECIFIC CONTROLS
The formation and activities of proprietaries are controlled
through various mechanisms to assure their proper use, as discussed
below.
A. Agency Regulations and Policies
Headquarters Regulation 230-8 and Headquarters Handbook 230-1
prescribe the administrative procedures to be followed in the estab-
lishment, operation, and liquidation of proprietaries (see Appendix B).
An Administrative Plan (specifying the operational purpose, admini-
strative and management procedures, and cost) and a Liquidation Plan
(specifying details of liquidation and disposition of funds when
liquidation is contemplated) must both be coordinated among components
concerned and approved at appropriate management levels.
This regu-
latory control along with policy memoranda are intended to assure
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proper conduct by entities.
Each Agency component involved is
responsible for compliance, and the Chief of the Cover and Commercial
Staff, the Director of Finance, and the Comptroller are particularly
watchful in their areas of concern.
B. Project Reviews and Control
The controls and procedures applicable to each operating proprie-
tary are specified in a project outline and administrative plan
Normal control and administra-
approved at the Deputy Director level.
Semi-annual
tion is carried out by a project officer at Headquarters.
reviews are conducted to determine whether or not the operational
need still exists, and regular audits are performed to assure proper
management and financial accountability.
Proprietaries are liquidated
as their usefulness ends; new ones are formed as needed.
C. Financial Controls/Operating Companies and Non-Operating
Companies Keeping Books of Accounts
Under Agency regulations, these proprietaries are established
and managed to appear to be consistent with normal commercial practices
and requirements of the type of enterprise concerned. Specific require-
ments for the general management and financial controls of each such
proprietary are provided in the administrative plan described above
which specifies the basic framework within which the instrumentality
is to operate. All facets of an administrative plan relating to
funding the proprietary and its financial management are subject to
the concurrence of designated representatives of the Director of
Finance and the Comptroller. A primary purpose of this coordination
is to assure that the financial controls and procedures prescribed
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for the proprietary are compatible and consistent with normal practices
and requirements for the type of instrumentality being established.
The Director of Finance representative is the Chief of the Commercial
Systems and Audit Division, a position normally occupied by a certi-
fied public accountant.
The initial and all subsequent passages of funds to such proprie-
taries are from the current year Agency operating budget.
Receipts
of funds by the proprietary are documented as appropriate ostensibly
to appear to be from a source usual to a commercial enterprise of
similar type, e.g., capital stock, paid in capital, income from
ostensible sales, etc.
The Agency treats all disbursements to such proprietaries as
current year budgetary expenditures and concurrently establishes as
a control mechanism a fully reserved investment account which is
reconciled periodically to reported net worth of the proprietary as
reflected in required financial statements received from each proprie-
tary. Each such statement is reviewed to reconcile the approved
financial activity of the proprietary to reported changes in net
worth before adjusting the Agency investment account to conform with
the reported net worth.
All control documents evidencing Agency equity or interest in
the proprietary, e.g., executed stock certificates, irrevocable stock
powers, declaration of trust, etc., are held in safekeeping by the
Commercial Systems and Audit Division/OF provided that when such
documents need to be retained by the proprietary, a report will be
made to identify the documents retained, location, name of custodian and
reason for the retention, and copies of the documents, if appropriate.
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The Chief of the Agency Audit Staff is responsible for the audit
of Agency proprietaries, utilizing Audit Staff personnel under a
suitable cover arrangement or witting or unwitting public accounting
firms as is most appropriate to the requirements of a particular
proprietary.
An example of the type of audit conducted appears at p. 105
Section VIII and concerns MHMUTUAL, the proprietary insurance-investment
complex.
D. Financial Controls/Non-Operating Companies Except Those
Keeping Books of Account
Entities in this category are financed if financing is required
through the establishment of bank checking accounts on which Agency
officers have signatory power in alias. All such accounts are maintained
in the accounting records of the Agency as current asset accounts
subject to monthly reconciliation with statements of accounts issued
by the depository banks.
All passages of funds to these accounts add to the accountable
balance of the accounts. No income is produced by these activities.
All disbursements from these accounts are charged as current expendi-
tures in liquidation of obligations of the operational activity on
behalf of which the entity was established.
Signatories are Agency officials who in each case execute a
declaration of trust acknowledging Government ownership of the account.
Payments are initiated only in response to request of an authorized
official responsible for the operational activity for which the
entity was established.
The Chief of the Agency's Audit Staff is responsible for the
audit of all accounts maintained for these entities.
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Balances of each of these accounts are monitored periodically
to assure that balances do not exceed a level warranted by the activity
for which the respective account was established. Balances excess
to current requirements and balances for entities which are dissolved
are returned to the Agency and in turn remitted to the U.S. Treasury
as Miscellaneous Receipts. (See discussion of Disposition of Funds
Returned from Proprietaries on p. 16.)
E.
Treatment of Profits
"
The CIA General Counsel, in a 6 January 1958 memorandum, ruled
that "income of proprietaries, including profits, need not be considered
miscellaneous receipts to be covered into the Treasury but may be
used for proper corporate or company purposes.' This subject was
reviewed and the opinion reaffirmed by the General Counsel in July
1965. The policy of retaining profits has continued, although as
already noted only a very few of Agency proprietaries have ever been
profitable. The CIA's legal basis for retaining profits for the use
of the operating corporate entities is discussed below.
Section 104 of the Government Corporations Control Act, 31 U.S.C.
849, provides that Congress shall enact necessary legislation to make
available for expenditure such corporate funds or other financial
resources or limiting the use thereof as the Congress may determine.
It is further provided that "this section shall not be construed as
preventing the Government corporations from carrying out and financing
their activities as authorized by existing law . . ." The legislative
history explaining this section of the act states that "in cases where
no other law required a congressional authorization of expenditures,
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the corporation, if it had means of financing other than annual appro-
priations, could continue to operate in the absence of any action by
Congress on its budget program." The statute creating a particular
Government corporation may provide specifically that the corporation
may use its profits in the conduct of its business.
The Government Corporations Control Act certainly did not contem-
plate Government corporations in the sense that the Agency must have
them. Neither is it feasible for Agency proprietaries to be created
by act of Congress or overseen precisely as provided for in the normal
Government corporation in the Act. Nevertheless, the Agency has felt
that the appropriate and reasonable policy would be to treat and control
them insofar as possible in accordance with the terms of that law.
Such being the case, the Agency believes there is no need to have more
restrictive rules applied to its corporations in the use of funds,
including profits, than are applied to Government Corporations under
the other Act or statutes. Thus, the use by a proprietary of its
earnings to carry on its corporate affairs without an offset against
Agency appropriations is considered a legitimate practice and does not
constitute an illegal augmentation of appropriations.
With rare exception, principally the large air and insurance
proprietaries, operating proprietaries have not been self-sustaining
from bona fide income. Such income, including profits, as is received
is retained by the proprietaries consistent with the usual operating
practices of business enterprises.
The use of proprietaries' profits, however, is controlled, by
annual reviews and audits within the Agency of the total capital,
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investment, and profits situations of the corporations in the context
of the operational objectives and the cover needs of the corporations.
In effect the annual project review is based upon an audit as searching
as that required for statutory Government corporations.
E.
Disposition of Funds Returned from Proprietaries
Any proprietary with funds excess to its current or foreseeable
needs is required to return such funds to the Agency. Also, all funds
realized from the liquidation or termination of a proprietary are
returned to the Agency except in a limited number of situations when
transferred to another proprietary for "similar use." On the basis
of an opinion of 3 February 1975 by the CIA General Counsel, the Agency
has revised its policy for the treatment of all returns of funds from
proprietaries; all such returns are to be remitted to the U.S. Treasury
as Miscellaneous Receipts. Prior to this change in policy, returns
had been treated as refunds of the previously recorded expenses up to
the amount of such expense for a particular proprietary with any excess
amounts returned to the Treasury as Miscellaneous Receipts. (Appendix C)
G. Disposal of Proprietaries
Air America, the Agency's largest proprietary, at its peak had
total assets of some $50 million and more than 8,000 employees (who
accounted for more than 90 percent of the people employed directly
by all proprietaries).
because it is no longer required. The Air America complex included
a number of other companies with the Pacific Corporation as the holding
company. The general plan for liquidation of Air America is for the
Pacific Corporation to sell off Air America, Inc. and Air Asia, Ltd.
( the Taipei maintenance operation). A private New York firm (R. Dixon
It is in the process of being liquidated
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.
Speas Company) was engaged to estimate a fair market value for the
complex. Although an intensive search for competitive bidders was
made, the Agency was unable to find buyers for any of the affiliated
companies except the Taipei maintenance facility. The sale of this
company as a going concern to the successful bidder was closed on
31 January 1975. The remaining parts of Air America are being
liquidated by sale of individual assets upon completion of existing
contracts. Funds realized from the sales could be as much as $25 million
and will be returned to the Treasury.
Agency financial support for Radio Liberty and Radio Free Europe,
both sizeable proprietaries, was terminated in FY 1971 and responsi-
bility for their funding and operation was assumed by the Department
of State.
Southern Air Transport was sold on 31 December 1973 because its
contingency capability was no longer needed. The Agency realized
$6,470,000 from this sale. Cash received was $3,345,000 which included
a $1.2 million award in arbitration of a dispute over the proceeds of
the sale of an aircraft by Southern Air Transport after the sale of
the company by the Agency. The balance was paid by the purchaser to
Air America to retire a debt owed by Southern Air Transport. A group
of employees of Southern Air Transport filed a civil action disputing
the propriety of the sale of the company by the Agency, but the case was
dismissed with prejudice on 17 July 1974.
A more detailed list of various disposals of smaller proprietaries
and what, if any, relationships remained thereafter between the Agency
and any subsequent entity appears infra page 39, Section V.
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3
18 -
H. Relations with Tax, Regulatory, and Other Agencies
Management and control of proprietaries often requires "cooperative
interface" with outside agencies to gain beneficial working relation-
ships and, as necessary, any appropriate authorizations. These
relationships are described below.
For those proprietaries which maintain commercial books and other
financial records. U.S. and State tax returns are prepared annually by
commercial managers based on the corporation's financial records. For
other entities where only internal Agency records are maintained, tax
returns are prepared by Agency specialists in a manner to reflect the
normal operations of a bona fide commercial business. Close coordination
is maintained with the Internal Revenue Service, which is aware of the
Agency's use of proprietary commercial entities. In the event an Agency
entity is singled out for IRS audit, it has been agreed that the Agency,
through the Office of General Counsel, will notify IRS of Agency
ownership. The IRS then cancels the audit in order to conserve auditor
manpower.
The Air proprietaries necessitated contact with the Civil Aeronautics
Board, the Federal Aviation Agency and the National Transportation
Safety Board.
Specific problems were discussed, usually with the
Office of General Counsel of the agency concerned by the CIA General
Counsel.
The Air Proprietaries dealt with State Department and the Agency
for International Development, generally on a contractor/customer basis,
although senior personnel of those agencies were advised by the Agency
of its ownership of the companies.
NW 50955 DocId: 32423532 Page 23
19 -
Those proprietaries which engaged in the shipment of weapons
or other items on the Munitions Control list required Agency assistance
in obtaining the necessary export licenses. The ownership of the
companies was discussed with State Department Office of Munitions
Control and the Bureau of Alcohol, Tax and Firearms.
The radio proprietaries, while funded by CIA, did receive policy
guidance from the Department of State to ensure that their broadcasts
were in conformance with U.S. foreign policy.
The Agency has intervened with the Department of Labor on behalf
of survivors of employees of the proprietaries in order to assist
them in receiving the available benefits under the applicable Workmen's
Compensation Acts.
The Agency, on behalf of the proprietaries, interceded with the
Defense Department to have the proprietaries' contracts exempt from the
Renegotiation Board. There was a normal exemption based on the rules
of the Board which was given for contracts performed entirely outside
the United States.
CIA requested the Air Force to consider the interest of the Agency
in connection with the awarding of commercial contracts to its proprie-
taries. Initially this was done in the mid-1950's on the basis of a
policy decision by the Operations Coordination Board that the air
proprietary in the Far East, then operating at a deficit, was an
instrument of value to national security. The Agency was able to
maintain a standby capability without budget subsidies if awarded
enough business to support large commercial aircraft. This applied to
the passenger and cargo aircraft.
NW 50955 DocId: 32423532 Page 24
-
- 20 -
The U.S. Forest Service was advised of the ownership of a pro-
prietary and asked to award contracts to the proprietary in order to
help it develop a commercial posture and permit its aircraft to be
associated with that type of flying.
NW 50955 DocId: 32423532 Page 25
- 21-
IV.
A DESCRIPTION OF THE VARIOUS PROPRIETARIES
The operational needs of the Agency have required it to venture
forth into many areas where proprietaries were a perceived necessary
vehicle. These areas have included air support, media publications,
proprietary management (accounting and management), insurance (personal
insurance coverage, annuity coverages, and escrow account maintenance
for agent personnel), covert procurement (general merchandise, arms,
ammunition and police related equipment), cover support (commercial
cover, such as management consultant firms, importing companies, travel
agencies, energy research organizations, behavior psychology companies),
personnel services (tape transcription, personnel investigations for
security clearances and approvals, public accounting firms, electoral
and political analysis firm keyed into foreign elections), operational
support (purchase of condominiums in foreign countries, sporting goods
business in United States with sales in Latin America, various overseas
foundations to provide grants, export/import firms, a company which
holds a note for certain U.S. Government funds borrowed by a consortium
of aluminum companies for the extraction of bauxite in Guinea to insure
U.S. control of bauxite extraction activities in Guinea), and various
other miscellaneous categories.
The number of employees of proprietaries as of October 30, 1975
was 321. Of this number 78 were U.S. Agency employees, 178 were U.S.
proprietary hires, and 65 were foreign proprietary hires. The various
types of funding and payrolling mechanisms used by the Agency (Devised
Facilities incorporated in the U.S.; Devised Facilities-Notionals which
NW 50955
DocId: 32423532 Page 26
-
22 -
are not incorporated but are sole proprietorships; and Notionals,
which are merely business names, are not formally constituted or
registered which do business at the address of an answering service
or witting attorney) totaled 326 as of October 31, 1975. There were
31 Devised Facilities, 67 Devised Facilities-Notionals, and 228
Notionals.
There follows a list of some of these proprietaries with brief
descriptions of their functions. There are 97 in number. Following
that list is a description of the major headquarters-controlled proprie-
taries provided as of September 24, 1975. In addition, there is
included a listing of all proprietaries during the period 1952 through
1974 (total 399) with the highest net equity balance on agency records
and the net worth balance as of December 31, 1974. The smallest net
worth balance is $400 and the largest is $31,778,000.
The year 1967 was selected to demonstrate the number of employees
in use by Agency proprietaries. In that year, the Agency owned approxi-
mately 158 proprietaries. These proprietaries employed approximately
14,416 persons. Ninety-two percent of the employees were accounted
for by three proprietary complexes as follows :
JBGREED
TPTONIC
QRACTIVE
10,218
1,800
1,300
13,318
TPTONIC and QRACTIVE (Radio Free Europe and Radio Liberty) were turned
over to the Department of State and are now being managed by the Board
of International Broadcasters. The JBGREED complex (air support
capability in the Far East) is in the process of liquidation and
NW 50955 DocId: 32423532 Page 27
-
- 23 -
currently has 63 employees. In addition to the proprietaries mentioned
above, the Agency managed 243 funding and payrolling mechanisms which
provided payrolling services for 149 employees.
NW 50955
DocId: 32423532 Page 28
24
PROPRIETARY LIST
AIR SUPPORT
IUBETON Complex
The below four companies comprise an air support capabil-
ity for worldwide contingency use. The complex is based
in the Southeastern portion of the United States with cer-
tain commercial business operations overseas.
1. IUCONTROL
A Florida corporation which acts as the holding company for
the principal operating company in the complex (immediately below);
assets consist solely of stock in the principal operating company;
no employees.
2. IUBERYL
A Florida corporation based in South Florida; a small air
service company which can be quickly expanded to meet Agency air
support requirements.
3. IUEPOCH
:
A Florida corporation which operates from an airport in the
Southeastern United States; a wholly owned subsidiary of IUBERYL
(immediately above) which operates a fixed base aviation facility;
provides an alternative air support capability.
4. IUPIECES
A Florida corporation based in Miami which acts as a purchas-
ing agent for aviation supplies for the activities of the complex;
can provide the same service for prospective Agency air support
activities; is a wholly-owned subsidiary of IUBERYL (above).
25 -
JBGREED Complex
The below five companies comprised an air support capabil-
ity in the Far East. All entities are in process of being
liquidated or sold.
5. JBCRYING
A Delaware corporation with corporate offices in Washington,
D.C., which acts as the holding company for JBCHOKE, JBHEEDFUL,
and PROPRIETARY C (see below).
6. JBCHOKE
with
A Delaware corporation which corporate offices in Washington,
D.C., which has terminated all flying services contracts. The com-
pany will be liquidated by sale or disposal of assets.
7. JBHEEDFUL
A Taiwan corporation with corporate offices in Taipei which
ceased flying operations in 1968 but has continued to provide
ticketing and other services on behalf of other affiliated com-
panies.
8. PROPRIETARY B
A Hong Kong corporation located in Hong Kong which provides
computerized accounting services for JBCHOKĔ.
9.
PROPRIETARY C
A Thailand corporation located in Bangkok, Thailand which is
the custodian for JBCHOKE files pertaining to Thai employees and
contractual services in Thailand; will be dissolved when Thai law
no longer requires retention of these records.
FROM
NOV 6 1975
10. HBSANDTRAP
Single Entity
CIA. A Delaware corporation located at Washington National Airport
which has provided secure air support for Agency employees and clas-
sified pouches between Headquarters and other Agency facilities in
-2-T
20

5.0
26
GREE
the United States; the company has accepted commercial charter
flights from non-Agency customers for income and cover purposes.
Media Publications
The below six companies comprise a worldwide book dis-
tribution and manuscript publishing activity.
11. QRBLOND
A Liberian corporation with a representative (banker) in
Brussels which pays book distribution costs; funds are controlled
by members of the New York corporation (PDPORTAL/300 - below) and
paid through this corporation to avoid some of the problems of
funding a domestic company in the total amount required to effect
project operations%;B no employees except for the Brussels repre-
sentative, who is paid on a fee basis.
12. QRBLUFF
A Liberian corporation which is used as attribution for
Agency funding to the above two proprietaries%; no employees.
13. PDPORTAL/200
A German non-profit organization, located in Munich, which
acts as the home office of its Rome Branch and is also used as
the ostensible source of all the Agency funding to other project
entities; no employees; maintains a branch, PDPORTAL/500, in
Rome, Italy.
14. PDPORTAL/100
A limited partnership located in London, England.
15. POPORTAL/400
A corporation located in Paris, France.
16.
PDPORTAL/300
A New York corporation located in New York City.
RECEIVED FROM
NOV 6 1975
CIA
SECRET
27
Single Entities
17. TOMOSAIC
A Delaware corporation based in London which provided an in-
ternational news feature service; the project also supported the
publication of books of propaganda value; the news feature service
has been discontinued and the corporation will soon be dissolved.
18. AELEDGER
A French corporate entity located in Europe which publishes
a foreign-language weekly periodical, which is disseminated to
recipients in and out of Russia and contains articles on Soviet
and Bloc matters including a large amount of material prepared
covertly in the USSR by Soviet dissidents; the periodical
attempts to encourage and assist activities of moderate segments
of Soviet society.
19. AEDYNAMIC
A New York corporation located in New York City which pub-
lishes periodicals and selected books for infiltration into the
Soviet Union and distribution to travelers and Soviets residing
outside the USSR; fosters regional nationalism within the USSR;
supports a private organization of regional nationalities; supports
the 
AEDYNAMIC branch office in Munich, Germany.
20. QRMYSTIC
A sole proprietorship located in the Washington metropolitan
area owned ostensibly by an Agency employee whose journalistic
services are utilized in support of foreign operations.
Proprietary Management
LPPANDA Complex
The below three companies support a one man accounting
and management company in Europe which provides services
to other proprietary operations.
D FROM
NOV 6 1975
CIA
ET
RET 28
21. LPREMEDY
A one man accounting and management company located in
Europe.
22. LPCLOUD
A dormant company at one time associated with the cover
of the individual now covered by LPREMEDY.
23. LPCHAIR/A
A New York company with no employees which serves as a
communication channel from Headquarters to LPREMEDY.
Single Entities
24. LPHOCUS
A New York management and accounting company (three em-
ployees) which provides accounting and related financial man-
agement assistance to other proprietary organizations.
25. LPSUGAR
A Maryland management and accounting company (three employees)
which provides accounting and related services to other proprie-
tary organizations.
26. LPBERRY/B
A New York legal and accounting firm (three employees)
which provides legal and accounting services to other proprie-
tary organizations.
Insurance
MHMUTUAL Complex
The below 25 proprietaries comprise a clandestine support
mechanism which provides personal insurance coverages,
annuity coverages, and escrow account maintenance for agent.
personnel in a manner to preclude attribution to the United
* FROM
NOV 6 1975
CIA
ACBET
29 -
States Government. The complex also underwrites. insurance
risks of certain proprietary organizations and administers
the pension plans of these organizations. In addition, the
complex has been used to provide a limited amount of
support to other Agency operations -- specifically, the
acquisition of operational real estate and as a conduit for
the funding of selected foreign covert activities. Twelve
full-time employees are involved in the management of the
complex, with the assistance of three proprietary manage-
ment firms. All expenses except for the salaries of Govern-
ment employees assigned to the complex are paid from earned
income. The companies involved are:
27. MHANVIL/A
An attorney at law operating as a sole proprietor in Washing-
ton, D.C., he is the Agency manager of the insurance complex.
28. MHGRET
A Panamanian company which provides ownership for MHCROZE,
an investment proprietary, (see below) and owns an apartment in
Buenos Aires; no employees.
29. MHCROZE
A Panamanian company which serves as an investment vehicle
and a primary mechanism for the management of funds, no employees.
30. MHSLACK
A Delaware corporation which provides payroll cover for project
personnel and serves as an investment vehicle for funds; seven em-
ployees.
31
MHVODKA
A Bermuda company which is a reinsurance vehicle for all types
of casualty and property insurance for other Agency proprietaries
and directly issues death and disability, term life, annuity and
other coverages for Agency non-staff.personnel; no employees.
32. MHDRYAD
A Panamanian company which serves as owner of MHLUMEN and
MHSPRAY (see below); no employees.
HOM
NOV 6 1975
CIA
CRET
16
.30
33. MHLUMEN
A Liberian company which serves as owner of MHFETCH (see
below) and as the source of an operational loan; no employees.
34. MHFETCH
A Bahamian company which serves as owner of MHKOALA and
MHWHIFF (see below); an investment vehicle and manager of non-
staff pension plan; no employees.
35. MHKOALA
A Liberian company currently inactive and slated for dis-
solution; no employees.
36. MHWHIFF
A Bermuda company which is a reinsurance vehicle for all
types of casualty and property insurance for Agency proprietaries
and for life and annuity coverages for non-staff personnel; no
employees.
37. MHMOLAR
Liechtenstein anstalt which serves as the beneficial owner
of MHBOMBE (see below); no employees.
38.
MHBOMBE
A Bahamian company which serves as a holding company for
MHTWANG and MHONSET (see below) and as an investment vehicle;
no employees.
39. MHONSET
A Delaware corporation which serves as an investment vehicle
and quarantor of a mortgage on a former Agency activity; no em-
ployees..
40.
MHTWANG
A Cayman Island corporation which handles certain annuities,
escrow, term life insurance, a pension plan and funding of MHPIQUE
(see below); no employees.
RECEIV
FROM
NOV 6 1975
CIA
ECRET
31 -
41. MHPIQUE
A Florida company which provides payroll cover for three
non-staff personnel who handle the Cuban dependents program
payments and correspondence; three employees.
42. MHDELFT
A Swiss company which serves as a holding company for MHHAWSE
(see below) and as a standby asset; no employees.
43. MHHAWSE
A channel Island company that serves as a direct underwriter
of term life insurance and annuity contracts for non-staff Agency
personnel; no employees.
44. MHSEPOY
A Panamanian company that serves as beneficial owner of MHUNDER
(see below) and for direct underwriting of term life and annuities
for non-staff personnel; no employees.
45. MHUNDER
A Panamanian company which is slated for dissolution; no employees.
46.
MHALATE
A Liechtenstein company which owns property in Lusaka; no
employees.
47. MHJORUM
A Panamanian company which directly underwrites death and
disability, term life and annuities
employees.
48. MHBLARE
for non-staff personnel, no
A Florida company now in dissolution resulting from abandon-
ment of Agency project; no employees.
NOV S 1975
CIA
ECAEL
☐
)
GRLI
32 -
49. MHRUCHE
A Liechtenstein anstalt which is a general use standby
asset; no employees.
50. MHCLUMP
A Liechtenstein anstalt which serves as a standby asset
for general reinsurance use; no employees.
51. BGJASMINE
A European insurance and reinsurance company which issued
direct death and disability coverage to contractor personnel en-
gaged for a DDS&T project; and reinsured other risks arising out
of the project; no employees.
Logistics Support
The below three entities operated by the Office of
Logistics provide a covert procurement mechanism
for the Agency.
52. KMJAGGERY
A Delaware corporation located in Washington, D.C., which
purchases general merchandise in a manner which cannot be traced
to the United States Government; total purchases from January to
September 1974 were $437,500; no outside commercial business; five
employees.
53.
TPLENTIC
A Delaware corporation with an address in New York which
arranges research and development and production contracts in
a manner which cannot be traced to the United States Government;
the company has no employees and is managed by Headquarters
officials in alias.
NOV 6 1975
CIA
ROM
_GRET
SECIT
33
54.
Stock Account #3
A Delaware corporation with an address in Baltimore which
purchases arms, ammunition, and police related equipment in a
manner which cannot be traced to the United States Government;
the company has no employees and is managed by Headquarters
officials in alias.
Cover Support
WUDIRK Complex.
The below five entities located in New York comprise a
Foreign Resources Division activity which provides com-
mercial cover for certain personnel assigned to the
New York Base of FR Division; no commercial activities
are undertaken by the companies in the complex, and all
revenue comes from Agency sources; two of the entities
are in the process of dissolution, and two recently
established entities will replace the ones in dis-
solution.
55. WUBODKIN
A New York corporation with offices in midtown Manhattan
which is styled as a management consulting firm; the entity
will be dissolved in the near future as soon as other cover
facilities are available for the individuals presently cover-.
ed by the entity; used by New York Base personnel for employ-
ment attribution and office space.
56. WUCURULE
A New York corporation with offices in mid-town Manhattan
which is styled as a management consulting firm; the entity will
be dissolved in the near future as soon as other cover facil-
ities are available for the individuals presently covered by
the entity; used by New York Base personnel for employment
attribution and office space.
57. WUXIPHOID
A New York corporation with offices in mid-town Manhattan
which is styled as a management consulting firm; the entity will
continue to provide cover support to the New York Base; used
by New York Base personnel for employment attribution and office
space M
NOV 6 1975
CIA
-10-
34.
-
58. WUBACH
A newly established New York corporation with offices in
mid-town Manhattan which is styled as a management consulting
firm; was created to replace WUBODKIN and WUCURULE (above);
used by New York Base personnel for employment attribution
and office space.
59. WUKNOX
A newly established New York corporation with offices in
mid-town Manhattan which is styled as a management consulting
firm; was created to replace WUBODKIN and WUCURULE (above);
used by New York Base personnel for employment attribution
and office space.
Single Entities
60. LPPIKE
A New York importing company with a branch office in a
Far East country; the branch office provides cover for one
Agency employee; no employees in New York.
61. MOKITH
A Thai company located in Bangkok, Thailand, which functions
as a travel agency and provides cover for one Agency employee in
Bangkok.
62. LKBASE
A Virginia corporation located in Washington, D.C., which,
in the past, has provided cover and funding for nonofficial cover
officers in the middle east; it is styled as a research organiza-
tion on energy matters and is now in the process of liquidation.
63. MKDILLY
A Virginia corporation operating out of the residence of
its president in Northern Virginia; the company provides cover
for one Agency officer who provides behavior psychology assistance
to the DDO.
RECEIVED FROM
NOV 6 1975
CIA
35 -
Personnel Services
Single Entities
64. SLAVE
A Delaware corporation having its principal office in Falls
Church, Virginia, which provided a centralized facility in the
Headquarters area with the capability of fulfilling field and
Headquarters requirements for tape transcription and document
translation; three employees; steps are now underway to convert
two of the employees who were proprietary hires to contract
employee status and move the function to Agency controlled
buildings.
65. MHBOUND/3
A California corporation, with its headquarters in Los
Angeles, which conducts personnel investigations for security
clearances/approvals in those cases where no United States
Government interest can be disclosed. It also renders security
assistance, i.e., badging, counter-audio inspections, etc., to
Agency projects in those cases where United States Government
involvement cannot be revealed; the company will be dissolved
by 30 June 1976.
66. MHCLIMB
Represented as the Washington, D.C. branch office or
affiliate of a legitimate New York based public accounting firm,
but actually under sole control and administration of the Agency
Audit Staff, this facility enables site audits of Agency covert
projects by experienced Agency auditors.
67. VWCADENZA
A Maryland company located in Bethesda, which is used as
cover for an Agency employee who provides electoral and political
analysis on South American and European elections; he also trains
Agency personnel in polling techniques and electoral analysis;
no outside business..
• FROM
NOV 6 1975
CIA
:
GRET
-12-'
10

- 36 -
1
NOV 6 1975
U│A
Operational Support
WUTACTIC Complex
The below 27 companies are managed by the Cover and
Commercial Staff to provide operational support mechan-
isms for DDO foreign operations. Some companies are in-.
active and held for future use.
68. LPCEMENT
A Liechtenstein company used to purchase a condominum apart-
ment in France for use as a listening post%;B net assets $84,226;
no employees, being terminated in the near future.
69. LPKILT
A Latin American company established to provide cover and
funds to an East Asian agent; agent exports goods to Latin America
for resale; gross sales last year of $1,000; assets $12,870%; one
field agent.
70. LPKNIT
A Florida corporation formed to provide cover and source of
livelihood to an Agency employee in Latin America; employee open-
ed branch office of this parent company and sells sporting goods;
gross sales last year (first year of operation) $3,367; assets
$14,125; one employee and wife.
71.
LPPURSUIT
A Liberian corporation used to backstop a field agent in the
renewal of his visa; assets of $375; no employees.
72. LPCAMEO
A Liberian corporation used as the ostensible employer of
two Agency employees in the recruitment of a foreign agent; no
assets no real employees.
73. LPMISSIVE
ROMA Liechtenstein anstalt which holds a mortgage on property
in Austria used by a field agent; assets of $788; the mortgage
is not recorded on the books of the corporation; no employees.
-13-
37
74.
LPBANGO
A Liechtenstein foundation used to give ostensible grants-
in-aid to field agents as a source of their livelihood; assets
of $165; no employees.
75. LPABBEY
A Liechtenstein foundation presently inactive; assets
$3,202; no employees.
76.
LPKITTY
A Liechtenstein foundation presently inactive; assets
$3,205; no employees.
77. LPALONE
A Liechtenstein foundation presently inactive; assets
$633; no employees.
78. LPDOUBLE
A Liechtenstein company used as a funding channel for a cover
placement, assets $2,853; no employees.
79. LPRAISIN
A Liechtenstein anstalt export/import firm formed to provide
additional status and prestige to an employee operating in alias;
assets $7,942; no employees.
80. LPBRAID
A Panamanian company used as a note holder in the sale of
an Agency proprietary entity; assets $1,818; no employees.
81.
LPADVANCE
A Panamanian company currently inactive; assets $3,589; no
employees.
RECEIVED FROM
. NOV 6 1975
CTA
SECRET
-14-
1
FORET
38
82. LPGLITTER
A Panamanian company which was used as an investment vehicle
for funds reserved for new commercial operations requiring Agency
investments; The investment project was terminated and all funds
returned to the Agency; the company has no employees'.
83. LPLOTUS
A Panamanian company currently inactive; assets of $2,831;
no employees.
84. LPVISION
A Panamanian company currently inactive%; assets of $2,831;
no employees.
85. LPRANGE
A Panamanian company which holds a note for certain United
States Government funds borrowed by a consortium of aluminum
companies for the extraction of bauxite in Guinea; purpose of
United States Govenment involvement was to insure U.S. control
of bauxite extraction activities in Guinea; the note, issued.
in 1961, was in the principal amount of $2,855,000, balance
of $1,752,000 has remained uncollected since 1962, when payments
stopped, (at the time the Government of Guinea nationalized
the extraction effort); aside from the note, the company has no
other assets and has no employees.
86. LPSHADE
A Delaware company previously used as a holder of a note on
a loan to a field agent; company now inactive; assets of $2,829;
no employees.
87. LPMANTLE
A Delaware corporation which is used to collect the proceeds
from the sale of Agency proprietary entities and to refund such
proceeds to the Agency; at 31 December 1973, total assets $650,220,
total liabilities $633,897, total stockholders equity $16,323; no
employees.
RECEIVED FROM
NOV 6 1975
CIA
Divi
-15-
- 39 -
88. LPEPIC
A Delaware corporation based in New York City with a branch
office in the Far East which provides commercial cover to a con-
tract employee in the Far East targeted against foreign intelligence;
net assets $27,265%; one employee.
89. LPSHORE
A Delaware corporation currently inactive but retained for
future use; net assets of $2,023; no employees.
90. LPRERUN
A Delaware company used to provide compensation and tax
attribution to an independent contractor, assets of $7,094; no
employees.
91. LPGRASS
A Delaware company used as the ostensible investors of
funds in LPKILT; assets of $1,826%; no employees.
92.
LPSHUFFLE
A New York company incorporated but never opened for business;
being held in reserve for possible future use; no assets; no
employees.
93. LPDAIS
A New York corporation based in New York with a branch office
in Europe. Used as the ostensible employer of an Agency employee
during his tour in Europe targeted against foreign intelligence;
net assets $6,845; one employee.
94. LPDUPE.
A Massachusetts company incorporated to provide cover and
source of livelihood to an Agency employee on a tour in the Near
East; assets of $9,647; one employee.
NOV 6 1975
CIA
ROM
SECRET16-
- 40
-
95. CATAR
Miscellaneous
Single Entities
A Liechtenstein corporation operated by a lawyer in
Europe which has been used as the lessee of apartments of
operational interest in two European cities; also used as the
ostensible employer of certain Agency employees in the Far
East when they operate in alias; no real employees; funds
have been passed through the company bank account in amounts
necessary to meet lease payments and maintain commercial
image; net worth of about $5,000 (represents minimum bank
balance); company now in the process of dissolution.
96. LPBYZAS/B
A Swiss entity which holds a current equity interest (30
percent) in a European trucking company; all other owners of the
trucking company are unwitting of Agency interest and the Agency
has been trying to sell its equity since 1973; both entities
provided cover for a career associate for four years; when
sale is completed, LPBYZAS/B will be dissolved and proceeds
returned to the Agency for credit to Miscellaneous Receipts.
97. LPESTATE
A Liechtenstein anstalt with no employees which owned a
house of operational interest in a European city; the house
was recently sold and the entity will be dissolved as soon as
the proceeds from the sale are received and the company can be
liquidated in accordance with the laws of Liechtenstein;
liquidating dividends will be returned to the Agency for credit
to Miscellaneous Receipts.
FROM
NOV 6 1975
CIA
SECRET
-17-
SECRET
-
41
Employees* of Proprietaries as of October 30, 1975
TAB B
U.S.
Agency
Employees
U.S.
Prop. Hire
Foreign
Prop. Hires
Totals
IUBETON Complex
JBGREED Complex
HBSANDTRAP
PDPORTAL Complex
TOMOSAIC
AELEDGER
AEDYNAMIC
QRMYSTIC
LPPANDA Complex.
LPHOCUS
LPSUGAR
LPBERRY/B
0
0
1
0
2
MHMUTUAL Complex
8
3
Logistic Support
Complex
WUDIRK Complex
LPPIKE
MOKITH
53-1
0
23
0
0
LKBASE
MKDILLY
1
SLAVE
5
0
MHBOUND/3
7
MHCLIMB
3
1
VWCADENZA
1
1
LPTACTIC Complex
CATAR
0
LPBYZAS/B
0
LPESTATE
0
Totals
78
178
32600-0--23100
116
31
0
10
DONOOTONM
0
0
20
7
700900300000-
120
63
6
19
0
21
10
0.
1
1
3
3
3
12
53110-53424ood
0000000
OOOOOOO6
0000-000
0-0000
65
321
*
No Foreign National Agency employees are presently employed by
Agency proprietaries.
NOV b 1975
UTA
SECRET
SECRET
- 42 -
FUNDING AND PAYROLLING MECHANISMS
TAB C
1. The various types of Funding and Payrolling Mechanisms used by
the Agency are described below:
a. Devised Facilities--Those Agency-owned and managed mechanisms
which are incorporated in U.S. jurisdictions (various States) with
nominee stockholders and are used to provide nonofficial cover pay-
roll support to Agency assets who do not have to show highly visible
cover employment. They are also used for other nonofficial cover
support tasks such as funding of proprietary organizations. No
books of account are maintained but annual tax returns are prepared
by Headquarters specialists in a manner to make it appear that the
mechanism is conducting normal commercial business. Since the tax
return cannot be substantiated from commercial records, the Internal
Revenue Service (IRS) must be notified of Agency interest in the
entity in the event of a proposed IRS audit. Management, including
direct control of the corporate bank accounts, is effected by
specialists at Headquarters. Funds are transferred from Headquarters
to the bank account of each entity in amounts and at times necessary
to meet funding obligations; otherwise, minimum balances are main-
tained in the accounts to keep them open.
b. Devised Facilities-Notionals--Those Agency-owned and managed
mechanisms similar to Devised Facilities except that the mechanisms
are not incorporated; they are sole proprietorships. The same
administrative procedures are used as for Devised Facilities.
C. Notionals--Those Agency-owned and managed mechanisms which
are merely business names (not formally constituted or registered)
which ostensibly do business at the address of an answering service
or witting attorney. Operating officials are usually fictitious
and management is effected by specialists at Headquarters. These
entities are generally used as funding attribution for monies paid
to bona fide corporations in reimbursement of cover costs for Agency
assets, and they are also used to fund proprietary organizations.
The same administrative procedures are used as for Devised Facilities.
2. As of 31 October 1975, the number of mechanisms in each category
is as follows:
a.
Devised Facilities
b. Devised Facilities-Notionals
c.
Notionals
. Total
31
67
228
326
P
NEW
TA
1975
SECRET
T
LPBERRY/B
LPPIKE
PDPORTAL
PDLEDGER
- 43 -
DESCRIPTIONS OF MAJOR HEADQUARTERS-CONTROLLED
PROPRIETARIES FOUND ON THE SCHEDULE ATTACHED
TO A 24 SEPTEMBER 1975 MEMORANDUM TO THE
COMPTROLLER FROM THE OFFICE OF FINANCE
R1779
A one man, one secretary accounting and
legal firm in New York City which pro-
vides services to Agency proprietary
clients as well as commercial customers.
The majority of the costs of this pro-
prietary are usually subsidized by the
Agency, however, during the past 12-
month period the proprietary did earn
substantial fees from legal clients in-
cluding a $20,000 fee which was congingent
upon the favorable settlement of a civil
. case.
A small importing firm in New York City
which provides cover for one Agency of-
ficer in the Far East. In the past, the
company has earned substantial revenue,
however, in recent months and for the
next year it is expected that the company
will be subsidized completely by the
Agency.
A complex of companies both in the U.S.
and abroad which comprise a worldwide.
book distribution and manuscript pub-
lishing activity. Except for $4,000 to
$5,000 a year from outside sources, all
proprietaries in this complex are sub-
sidized completely by the Agency.
A small company in Europe which publishes
a weekly periodical and disseminates this
and other material to recipients in and
out of Russia; the various written materials
produced for dissemination by the company
contain Soviet dissident literature and
other articles to encourage and assist
activities of moderate segments of Soviet
society. This company receives outside
revenue from the sale of its publications
and over the past 12 months this revenue
contributed to approximately one-half of.
the costs. The balances provided by
the Agency.
NOV 4 1975
SECRET
39
CIA
PDDYNAMIC
VWCADENZA
MHBOUND
KMJAGGERY
QRMYSTIC
MUDIRK
LPHOCUS
-
44
-
A domestic based corporation with a German
branch which fosters the aims of a nation-
alistic group within the USSR and publishes
selected books and periodicals for distri-
bution to members of this nationalistic
group. The New York and German offices
under this project are largely subsidized
by the Agency with some revenue to the
German office from the sale of publica-
tions.
A one man, one secretary, consulting
company which provides Agency officers
with training and advice on polling tech-
niques as applicable to foreign operations.
This company is wholly subsidized by the
Agency.
.MHBOUND/3, a security services company.
which supports Agency programs involving
contractor personnel and offers limited
services to commercial customers for
cover purposes. This company is almost
completely subsidized by the Agency.
A small purchasing company operated by
the Agency, Office of Logistics, which
provides covert procurement for that
office. This company is wholly subsi-
dized by the Agency.
A sole proprietorship in the Washington
area ostensibly owned by an Agency employee
whose writing and research talents are
utilized exclusively by the Agency in
support of overseas operations. This
company is wholly subsidized by the Agency.
A group of three companies in New York
which provide cover for personnel assigned
to FR Division's New York Base. The
three companies involved are supported
wholly by the Agency.
A two accountant, one secretary firm in
New York City which provides accounting
services for Agency proprietary organiza-.
tions. This company is supported almost
exclusively by the Agency.
2
2 FROM
NOV A 1975
CIA
SECRET
LPBYZAS/B
LPPANDA
MHMUTUAL
LPSUGAR
45-
A European company with no employees
which 
holds the Agency's interest in
another 
European company which was used
in the past 
to provide cover for one
Agency employee. This company is being
retained 
solely for the purpose of holding
an Agency 
investment. Until this invest-
ment is 
sold, the expenses incident to
the 
operation of the company will be
wholly 
subsidized by the Agency.
One company in New York without employees
and a one 
accountant, part-time secretary
firm in 
Europe which provides accounting
support to 
Agency proprietary organizations.
This company 
is almost exclusively sub-
sidized 
by the Agency.
This is the Agency insurance complex which,
through interest 
and dividends earned on
its 
investment portfolio, pays for all
Project expenses except for funds provided
by the 
Agency to meet the salary costs
of 
staff and contract employees in the
complex.
A two accountant, one secretary firm in
the 
Washington area which provides ac-
counting services to other Agency pro-
prietary 
organizations. This company is
almost 
completely subsidized by the Agency.
FROM
3
SECRET
NOV 4 LSTS
CIA

46-
SENSITIVE
LISTING OF PROPRIETARIES
DURING THE PERIOD
1952 THROUGH 1974
(Total 399)
PROJECT/
ENTITY
ABUNA (Same as JBCASHBOX)
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
$ 98,000
65,000
...NET WORTH
BALANCE
31 DEC 74
AEEGGHEAD
AEMARSH
1,414
AEMIRROR
42,000
AEPOKER
135,900
AEWILDFIRE
37,000
AESILVER/D
60,000
AKAROA
147,000
AMIDEA
275,000
BEDEVIL
214,000
BEHOVE
141,000
BEU FUL
9,200
SGJAGUAR
BGMARQUE
BEV. [D
59,400
3,500,000
291,000
84,400
BGSPEED
2,200
SGTENTS
13,500.
BGTHANKS
88,200
CABANA
17,000
CALANCET
29,000
CAPOX
54,800
DEINDEED
2,829,000
DEWARK
333,000
DTCRAZE
85,000
DTLAMPREY
264,500
DTLIQUOR
4,600
DTPHENYL
189,500
DTPIGGLE
DTPILLAR
OTTEEPEE
DUPLICITY/1
38,500
7,123,000
117,400
39,000
RECE
SECRET.
SENSITIVE
FROM
NOV A 1975
CIA
PROJECT/
ENTITY
SEGALT
SENSITIVE
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
47
NET WORTH
BALANCE
31 DEC 74
!
ENDOMORPH
ENGAGE
FELIX
FJCITIES
FJREFLECT
FJHOLIDAY
FJSTRICT
FUARROW
FURIOSO/H
FUSEE
$
$
202,000
5,300(a).
6,200
33,000
7,959,000
77,464
304,000
29,000
22,000
25,000
GINSENG/G(was GIMMICK)
31,000
HACKMORE
HALARC
600
9,500
HBDERRICK (was WU) (same as
HBCLUBHOUSE
OILSTONE)
917,543
HBSANDTRAP
1,103,000,
HREDITOME
546,200
H _CKORY
142,500
HBQUAIL
2,100
Housing Fund ISOLAT
ION]
16,600
HTB ALARD
14,200
HTGARLIC
203,300
HTNAMABLE
2,066,000
HTPENULT
7,000
ICIRON.
8,000
IUAIREDALE
89,000
IUQUEST
IUABATE
3,484,000
3,484,000(a)
IUPAGAN
3,332,000
IUPROTON (*)
1,830,000
880,000(a)
7,220(a)
JBFOLDAGE
JBGREED
43,000
34,110,000
31,778,000(a)
LPCRYING
JBCHOKE
RECE
JBARGON
FROM
(*) See attached schedule for non-government investments.
(a) In process of liquidation
NOV A 1975
CIA
-2-
35
SECRET
SENSITIVE
PROJECT/
ENTITY
JBGREED (continued)
JBHEEOFUL
PROP B.
PROP C
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
SECRET:
SENSITIVE
48
NET WORTH
BALANCE
31 DEC 74
$
JBOPOSONIC
3,500
JBWHIST
205,000
JMATE
JMDUST
512,000
JMHOPE
345,000
JMPOPLAR
61,400
KMHELMSMAN,
19,400
KMARDISH
8.200
KMCARDUEL
20,000
KMCASADE
49,000
KMJAGUARO
KMFERRY
KMJAGGERY
MHOLENT
S STOCK ACCT. #2
Sr. STOCK ACCT. #3
TPLENITIC
KMOCHRIOD
1,088,000
4,000
294,700
11,000
4,105,000
50,000
153,500
50,500
$
KMPRICE
141,000
KMSMORCH
8,300
LADYCHAPEL
223,000
LCFURTHER
31,800
LCKNIFE
335,300
LCPEDANT
59,800
LCROPES
311,000
LFUPRISE
MIASTOR
29,000
LILISP/G
121,700
LIMERRY
129,000
LPBERRY (was BGLEADWAY)
41,600
LPBERRY/A
65,000
LPBERRY/B
52,000
53,200
LPBYZAS/A
67,000
340(a)
LFBYZAS/B
357,000
357,000
(a) In process of liquidation.
SECRET
REGEL
NOV 4 1975
CIA
ROM
T
PROJECT/
ENTITY
LPCAPTAIN
LP.CANAL
SENSITIVE- 49
HIGHEST NET
ON
EQUITY BALANCE
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
$ 20,000
34,800
$
2,000(a)
LPDICTUM (was ZRSALTY, (same as 500,000
WUBRINY) ZRSALTY)
LPDICTUM/F
931,900
LPESTATE
87,000
LPSPICE (*)
206,000
84,400
10,500(a)
LPDICTUM/P
75,000
☐ LPSALINE (*)
1,597,000
LPETHNIC (same as WUAMICE)
LPCYHAMMER
800
LPHALTER
67,000
MODAISY
5,400
LPTOTEM
242,000
81,200(a)
LPFUNNEL
1,500
LPGAMP
27,000
LPGLOBE
29,000
LPHOCUS (same as WUHOCUS)
88,000
35,700
LPJACK (*)
49,000
54,400(a).
LPMINERAL
AIL
52,000
LCHICKEN
LPMINOR
LPMINOR/1
13,000
523,000
91,000
LPMINOR/G
LPMETAL
166,000
47,800(a)
PULSE
WUHALIBUT
9,000
311,100
LPPANDA (same as ZRBADGE)
CHAIR A(same as WUPSYCHE/
77,500
1,900
CHAIR B MUCHAIR/A & MUCHAIR/3)-7,000
LPCLOUD (same as WUCLOUD)
5,900
LPMET (*)
16,200
16,200
LPREMEDY
34,000
27,400
LPRECLAIM
LPPITCH
LPROE/
58,000
LPPIKE
73,700
56,200
LPSIPHON
12,500
LPSUGAR
55,000
35,500
RECEIVED FROM
LPTACTIC
LPABBEY
LPACROSS
3,500
4,300
1975
1,700
-4-
(*) See attached schedule
(a) In process of liquidation
SENSITIVE
SECRET
L
PROJECT/
ENTITY
SENSITIVE- 50 -
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
.1952-1974
NET WORTH
BALANCE
31 DEC 74
LPTACITC (continued)
$
LPABOUT
1,000
LPACTION
4,300
1. LPADVANCE
LPALONE
LPASSIST
20,000
3,600
6,000
400
2,500
LPBAIL
11,400
LPBANJO
1,900
1,200
LPBEAVER
2,200
LPBRAID
2,200
1,800
LPBRICK
4,200
LPCAMEO
2,000
LPCAREFREE
16,000
LPCEMENT
64,000
86,200
LPCHANNEL
500
LPCHAOS
2,500
LPDAIS
31,000
20,500
LPDARE
21,000
LPDECOR
98,700
| POOLLOP
3,000
JOUBLE
4,700
2,800
LPDRAGUN
7,000
LPDUPE
19,000
3,600
LPELECT
1,300
LPEPIC
49,000
6,600
LPFINAL
1,100
LPFLASH
101,900
LPGAMP
15,400
LPGRASS
2,000
2,400
LPGLITTER (*)
1,418,500
132,000
LPIMPORT
1,100
LPKAYO
700
LPKILT
10.600
LPKITTY
7,000
7,800.
2,500
LPKIVA
.6,000
LPKNIT
12,200
14,800
1.PLAZY
55,000.
LPLOTUS
.3,700
2,400
LPMANTLE (*)
591,000
37,800
LPMASSIVE
2,400
1,800
D FROM
LPORDER
68,500
WUOUTDONE
15,000.
LPOXAZOLE
5,100
(*) See attached schedule.
NOV 4 1975
CIA
SECRET
I
PROJECT/
ENTITY
LPTACTIC (continued)
SECRET
SENSITIVE
51.
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
LPPITCH
28,200
LPPURSUIT
2,100
2,500
LPRAISON
8,000
5,900
LPRANGE
750,000
14,000
LPRERUN
5,000
5,900
LPRIVER
4,000
LPROCKY
1,100
WUSENOR
2,700
LPSERVICE
.4,400
LPSHADE
47,000
2,400
LPSHOFFLE
60
LPSHORE
6,700
1,900
LPSOLO
398,000
1,800
LPSUMMIT
5,500
.LPVISION
3,800
2,800
LPWAMPUM
40,000
LPWEARY
4,400
LPWHISPER(same as LPCAPTAIN/PWHISPER9,900
LPL
TY/1
500
LPWANDER
5,000
LUMINANT
12,800
MENNONITE
1,200
MHAMISH
38,000
PHANVIL/A
28,000
MHANVIL/B
2,700
MHANVIL/B
3,300
MHANVIL/F
2,400
MHANVIL/G
2,000
MHBOUND/1 (same as ZRLINEN)
135,900
MHBOUND/2
28,000
MHBOUND/3
351,600
494,400
MHCLIMB
46,000
20,000
MHMUTUAL
MHALATE (*)
165,900
.103,600
MHBOMBE (*)
2,251,000
873,335
MUCAREFUL (*)
39,900
MUCHILI (*)
RECET
80,000
MHCLUMP (*)
76,500
81,400
MHCROZE (*)
2,026,600
1,605,200
MHDELFT (*)
9,400
9,300
MHDRYAD (*)
62,000
46,300
(*) See attached schedule
NOV A 1975
CIA
SOM
PROJECT/
ENTITY
MHMUTUAL (continued)
JEURCI
SENSITIVE - 52
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
MHEGRET (*)
35,000
$
33,800
WUFACET
1,128,000
MHFETCH (*)
1,261,000
(363,500)
MHHAWSE (*)
48,600
54,600
MHJORUM (*)
115,000
141,500
MHKEVEL (*)
357,000
MHKOALA (*)
250,000
211,200
MHLIBERTY (*)
4,400
MHLITRE (*)
1,600
MHLUMEN (*)
59,000
35,500
MHMATTE (*)
49,000
MHMOLAR. (*
850
550
MHNAVAL (*)
26,800
MHONSET (*)
126,000
199,000
MHPIQUE (*)
28,500
15,900
WUPRUDENT (*)
1,025,000
WUSAFETY (*)
412,799
MHSEPOY (*)
18,000
(6,100)
MHSLACK *
TWANG (*)
691,500
574,800
638,900
648,500
Pa UNDER (*
33,500
(590)
MHVODKA (*)
7,053,500
8,230,000
MHWHIFF (*)
8,385,000
MHNERVE
MHFUGUE
325,500
MHSHANK
.244,000
6,361,000
17,600(a)/(b)
MIASTOR
MICLINIC
MIPACT
MIHOLDING
MIPUSHER
34,700
2,500
21,400
37,000
MKCOTTON
459,000
MKCRUSH
MKKILLY
35,500
MKPENNY (same as MKPENNY)
366,000
MOKITH
20,200
6,000
82,000(a)
20,300
RECEIVED FROM
NOV A 1975
CIA
MOMARRON
51,700
MONITION
52,000
(*) See attached schedule.
(a) In process of liquidation.
(b) Liquidation completed in March 1975.
-7-
SECRET
SENSITIVE
30°
SEGALT
SENSITIVE 53 -
PROJECT/
ENTITY
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
NOVEL
NTEICACER
$ 51,200
80,768
OBLIVIOUS
14,600
OKMAJOR
411,000
OKSALE
46,600
OQKADIAK
92,800
OQKAIL
170,150
PAFANFARE(same as FANFARE)
30,300
PARABASIS
39,000
PAWALRUS (was WU)
92,800
PBGREGALE
47,800
PBTEMPLE
5,000
1,053,500
465,800
POBASIC
PDBASIC/200
PDBASIC/100
PDBASIC/400
PDBASIC/300
PE CID
13,000
PO...S
25,000
PODEARLY
32,800
POVARSITY
POSPOKE(same as POVARSITY)
31,900
18,000(a)
PBPOUTER
36,700
PSLAWFUL
11,000
QKACTIVE
5,500,000
QKBOTTOM
4,179
QKFEARFUL
236,900
QKHUMMER
5,000
QKOPERA
1,605,400
QKSHOGUN
21,000
QRBASTE
533,000
389,400
QRBLAZE
QRBLOND
QRBLUFF
QRBEND
220,000
QRBIBB
102,500
QRBUZZ
12,900
QRDYNAMIC(same as AEDYNAMIC)
151,500
QRTENURE
89,200
QRTERRACE
40,700
QRGLAD
16,700
(*) See attached schedule.
29
RECEIVED FROM
NOV A 1975
CHA
SECRET
SENSITIVE - 54 -
PROJECT/
ENTITY
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
QRLEDGER
QRMASTER
QRMOSAIC
$ 165,500
538,600.
.$
91,400
94,500(a)
QRHAWKBIT
106,000
QRMYSTIC
QRCYNIC
9,200
2,700
QRTRIG
100
QRTROW (*)
775,700
RIPCORD
200,000
RIPSNOTER
457,300
ROCKOIL
3,879,000
RONDURE
29,500
SEASONAL
39,900
SERING
10,500
SGSUMMON
62,100
SILVER/A
1,250
SIPUZZLE
32,000
SL.
35,000
4,900
SOPRANO
15,000
SORTIE
16,000
STFANWEED
28,000
STSKI
11,600
TENACIOUS
21,000
TETARCH
243,800
TGVIVID
23,700
THADMIRE
42,000
THOPUS
25,000
TPFOCUS
1,764,000
TPFOUMART
97,500
TPGLARE
525,000
TPGULLET
70,000
TPHERSEY
326,700
TPMANJACK
62,600
TPPELLENT
635,000
TPSAUCER
210,000
TPTONIC(same as FJINDULGE) 34,260,000
TURBINE
17,000
TUXEDO
25,000
(a) In process of liquidation.
2-8
SEC CRET
RECENED FROM
NOV 4 1975
CIA
SECRET
SENSITIVE
HIGHEST NET
EQUITY BALANCE.
ON
55
i
PROJECT/
EQUITY
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
UNAU
$
6,000
$
UNTWIG
1,200
UT-00-67-61
69,600
VWCADENZA
12,200
2,600
WSFLUFFER
291,000
WSPELICAN
34,900
WSREVOLT
14,900
WSWATERSOAK
6,000
WSWIDDER
32,700
WUADIOS
WUTABOO
243,400
WUAMPLE'
WUCOTTON
27,000
WUATLAS.
WUPESKY
192,000
WUAVON
546,600
WUE ON
IUBERYL
723,700
IUCONTROL
70,000
1,700
IUEPOCH
72,200
72,200
IUPICES
28,000
28,000
LOBSTER
53,000
WUSETTLE
11,200
WUBEVY (same as ZRGUIDE)
262,800
WUCLOAK (same as ZRCLOAK)
WUABOUT
8,000
WUACROSS
1,437
WUDUSTER
100,000
WUHARPY
210,000
WUHUMID(was WUSHINE)
815,700 (same as WUSHINE/WUHUMID)
WUMANTLE
687,000
HUOCEAN
8,200
WUSEASIDE (me WUSHINENUASD) 180,000
WUSNAPPY
1,100
MUDIRK
WUBODKIN
WUXIPHOID
WUWAMPUM(same as WUEMBARK/
WUCRULE(areas WUDIRK/WUSTILETTO)91,000.
(a) In process of liquidation.
1,315,000
NUWAMPUM)
102,500
41,300
50,100(a)
112,500(a)
41,300
27
-10-
SECRET
FROM
NOW A 1975
CIA

PROJECT/
EQUITY
SECRET
SENSITIVE- 56
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
WUEMBARK
WUHALFLIN
WUENTREE
WUMOREL
WUFILET (same as PBLANGUID)
WUFLOWER
WUPROOF
$ 250,000
8,500
25,500
1,537,000
48,000
WUSWAMP
62,600
WUGAZELLE
WUBLONGUN
365,700
WUGIRAFFE
380,700
WUZEBU
252,900
WUHELPFUL
16,600
WUMUG
53,400
WUPADDY
WUACROSS
12,000
WUORDER
450
WUTROUBLE
396,000
WUPANEL
WUCORAL
556,900
WUPEACE
351,700
WUPIGMY
WUSNAPPY
375,000
WUPILOT
WUTWINE
150,400
WURABBIT
WUDOLPHIN
44,000
WUSAUTE
77,000
WUSAXA
983,000
MUACUTE
15,500
WUSHINE(same as ZRSHINE)
WUCOMET
1,400,000
WUSHINE
1,264,000
WUINVEST
325,000
WUNOTICE
149,000
WUPUMA
(81,000)
WUREVEL
261,000
WUSOLID (same as ZRSOLID)
WUTOPSY
1,972,000
WUTRADE
460,000
WUSTAKE
387,800
WUSUNTAN
WUFLAME
44,000
Id: 32423532 Page
26
مطلق
R MED FROM
NOV A 1975
CIA
PROJECT/
ENTITY
SECRET
SENSITIVE - 57 -
HIGHEST NET
EQUITY BALANCE
ON
AGENCY RECORDS
1952-1974
NET WORTH
BALANCE
31 DEC 74
WUVENTURE
LPARCH (same as LPARCH)
$
69,000
WUABLE
209,000
WUBAKER
3,000
YJPASTIES
2,300
2,300(a)
YOBLADE
636,000
YODOOR
285,000
YOENTITY
82,000
YOTART
755,000
YOYARD
285,700
YQFLUENT
356,000
YQFLUX
33,000
ZRBENCH
118,000
ZRCREST
ZRAVAST
72,000
LIFF
4,277,000
ZRDAMSEL
100,000
ZRDRIVE
57,500
ZRDROVE
211,000
ZRMORBID
MORGLAY
12,000
ZROCCUR
59,000
ZRTINDER
ARCORONA
845,000
CATAR
LKBASE
MHMUTUAL
MHBLARE
MHRUCHE
MHSPRAY
PROPRIETARY D
SLOGAN
THE FOLLOWING ARE ON CCS NON OP LIST
(NOT INCLUDED IN ABOVE OF LISTING).
These proprietaries are not on Headquarters,
Office of Finance records; hence no net worth
fiqure was presented. CCS estimates that no
one of these companies had a net worth of over
$50,000 during their existance.
(a) In process of liquidation.
RE
NOV 4 1975
CIA
کرتے
-12-
SECRET
OUM
59 -
V. THE DISPOSAL OF AGENCY PROPRIETARIES
a) An Overview
The Agency has emphasized the degree to which the extensive
proprietary system it has maintained in the past has been disposed
of in recent years. Indeed, according to the current Chief of the
Cover and Commercial Staff, at least in so far as large proprietaries
are concerned, "because of multitudinous reasons they will be viewed
as the solution of last resort."* Size was a problem and made it
"inevitable that cover would not last." Moreover, there simply is
not a need, according to the Agency, for the kind of capabilities
supplied by an Air America either now or in the foreseeable future.
In this regard, the Agency has indicated that no "real proprietaries"
are in planning because there are no such operational requirements
before the Cover and Commercial Staff (hereafter "CCS"). But the
Committee has learned from its study that the Agency retains the
* As William E. Nelson, Deputy Director of Operations, noted recently
to the Rockefeller Commission:
I think by and large that the day of the big proprietary
is over. We have attempted over the past few years to
try to squeeze down on those kinds of proprietaries and
I think we have really gone now to a fairly small number,
and a fairly tightly controlled group of proprietaries
who are doing legitimate operational jobs, particularly
in the media field.
Our experience with proprietaries in the past has been
if left by themselves, they tend to absorb larger and
larger amounts of government money and are not particu-
larly for a business. They are not very viable in the
business sense and quickly become suspect as not having
any commercial validity. And we have, I think in the
past ten years, we have in this past ten years gotten
rid of an enormous number of proprietaries in this field.
I don't foresee us getting in the immediate future into
any expansion of that proprietary record. I think we
are about right in terms of where we are now.
NW 50955
DocId: 32423532
Page 63
- 60 -
capability "in being" to create even large proprietaries.* More-
over, numerous "shelf" corporations are kept available to provide
cover. These latter entities are generally only of the notional
variety and pose no threat either competitively or in terms of
domestic activity beyond the Agency's charter. Nonetheless, the
Agency has emphasized the need to retain this general vehicle for
at least one purpose: to retain assets. The CCS has indicated
that a method is needed to keep "good men" who are loyal, but who
need continuing work in both their ordinary and also somewhat
byzantine fields. Consequently, proprietaries offer a viable alter-
native to solve this dilemma of maintaining assets.
As a result of this, the Committee studied which proprietaries
had been sold or otherwise disposed of during the period from 1965
to 1975. It sought to find out which of those proprietaries so dis-
posed of in the last ten years maintained a significant relationship
with the Agency by contract or informal understanding for any purpose.
More specifically, the Committee sought answers to the following
questions:
(1)
How many proprietaries, by type or function, have been
dissolved or sold as a going enterprise or otherwise
disposed of by the Agency?
*
Mr. Nelson closed his recent testimony with a caveat:
I can visualize, however, depending on what happens to
the Agency in the future, the possibility that we might
want to use more proprietaries, particularly in the
field of cover if this gets terribly tight or terribly
difficult. But the average operational purpose, except
for some of these media operations, all we need is cover
and I think that most of the proprietaries that we have
fall into that category.
NW 50955
DocId: 32423532 Page 64
- 61 -
(2)
(3)
How many proprietaries have been sold, or their assets
sold, to persons, or a group including persons, who
had previously served as directors, officers or
employees of the proprietaries?
In how many instances were proprietaries sold pursuant
to a written agreement, or an unwritten agreement or
understanding, that the purchased proprietary, any
successor entity or the parties purchasing the proprie-
tary's assets would provide the Agency with goods,
services or other assistance? In each case, indicate
the nature of the business involved, whether the agree-
ment was written or, if unwritten, the way it is
reflected in Agency files, and the amounts of any
specific business volume, retainers or financial support
agreed to in connection with the proprietary's transfer.
This request covers both firm contracts for the provision
of goods and services and general agreements that the
parties acquiring the proprietary or its assets would
provide them, at the Agency's option, if requested to
do so.
(4) In how many instances did the parties acquiring the
proprietary in fact subsequently provide goods, services
or other assistance to the Agency, whether or not there
was a written or informal agreement of such a relation-
ship at the time the proprietary or its assets were
acquired from the Agency? Indicate for each instance
the nature of the business, the dollar amounts of the
transactions involved and the period of years during
which they occurred.
Our study revealed that during the indicated period 209 proprie-
taries were dissolved, sold or otherwise disposed of, thus substan-
tiating the Agency's claim that it had moved decisively to extricate
itself from this area of activity.* But in a very real sense it is
nearly impossible to evaluate whether a "link" still exists between
the Agency and a former asset related to a proprietary because
* The Agency's Office of Finance originally compiled a list of 305
cryptonyms of "entities" which were dropped from Office of Finance
records at Headquarters during the period 1965-1975. Nineteen (19)
other entities were added from other Agency divisions. Later this
list was reconciled with other Agency records to eliminate cryptonym
changes and other administrative actions not related to the actual
disposal of a proprietary organization. Ultimately, these admini-
strative "eliminations" totaled 115.
NW 50955 DocId: 32423532 Page 65
62 -
circumstances can be conceived of whereby even though formal and
informal Agency ties are discontinued, social and other ties remain.
The following
The impact of such liaisons is difficult to assess.
entities were dissolved during the referenced period:
NW 50955 DocId: 32423532 Page 66
REC
1 FROM
1
NW 50955 DocId:32423532.
63
SLOKET
ENTITIES DISSOLVED
AIR SUPPORT
WUSOLID/WUTRADE
WUSOLID/WUTOPSY
WUDERRICK/WUCLUBHOUSE
WUCLOAK/WUOCEAN
WUCLOAK/WUSEASIDE
WUCLOAK/WUSNAPPY
IUQUEST/IUPROTON
WUBETON/WUGLOBAL
WUBETON/WUAISLE
WUSHINE/WUINVEST
WUSHINE/WUREBEL
WUGAZELLE/WUEASEL
WUGAZELLE/WUGIRAFFE
WUPADDY/WUTROUBLE
MARITIME SUPPORT
YOENTITY/YODOOR
YOENTITY/YOMONEY
YOTART
IUMUG
IUHISTEP/IULAPEL
IUHISTEP/IULATCH
OPERATIONAL SUPPORT
LPTACTIC/LPDECOR
WUTACTIC/WUDARE
LPTACTIC/LPDRAGON
LPTACTIC/WUELECT
LPTACTIC/LPFINAL
WUTACTIC/WUFLOOD
WUTACTIC/WUGAMP
LPTACTIC/LPHUMID
WUTACTIC/WUIMPORT
WUTACTIC/WUKIWA
WUTACTIC/NERVE
LPTACTIC/LPPITCH
WUTACTIC/WUROCKY
WUTACTIC/WUSUMMIT
WUTACTIC/LPWAMPUM
LPTACTIC/LPWHISPER
LPTACTIC/LPORDER
SEGRET
܂
TAB A
:
;
+
:
...REC
NW 50955 DocId:32423532
64.
(OPERATIONAL SUPPORT Cont'd)
Page 68.
WUTACTIC/WUABOUT
LPTACTIC/LPACROSS
WUTACTIC/WUBAIL
LPTACTIC/LPCAREFREE
WUTACTIC/WUCHAOS
COVER SUPPORT
STLARGO
STMOD
STLAD
STUPLIFT/STKNAP
STUPLIFT/STPACER
MIPACT/MIHOLDING
HALARC
MIPACT/MOPUSHER
CYTABARD
WUDIRK/WUCURULE
WUDIRK/WUBODKIN
WUENTREE/WUMOREL
WUPANEL/WUCORAL
WUPILOT/WUTWINE
LPBYZAS/A
WUBRINY/WUTROCHUS
LPDICTUM/F
LPDICTUM/P
LPMINERAL/LPCHICKEN
LPARCH/LPDUCAT
WUATLAS/GIBLUFF
ACCOUNTING & MANAGEMENT
QUBUZZ
MHAMISH
LPPANDA/LPCHAIR/B
LPBERRY/A
WUSUNTAN/WUFLAME
WUSUGAR/B
INSURANCE
MHANVIL/B
MHANVIL/D
MHANVIL/F
MHSPRAY
MHKEVEL
MHNAVAL
TAB A
Page 2
14
#
.65
COVERT PROCUREMENT
WUMINOR/I
WUMINOR/WUHALIBUT
LPMINOR/LPMETAL
WUMINOR/PULSE
IUAIREDALE/IUOASIS
FOUNDATION OR INSTITUTE
AEWILDFIRE
LPUNITY/1
MEDIA
UOACORN/VOACTOR
FUSEE
YOYARD
TOMOSAIC/TOHAWKBIT
COMMUNITY DEVELOPMENT
WUETHNIC/MODAISY
WUETHNIC/LPHALTER
WUETHNIC/LPCYHAMMER
WUETHNIC/LPTOTEM
PERSONAL SERVICES
MKCRUSH/MKPENNY
MKCRUSH/MKCOTTON
BEUSEFUL
BGJAGUAR
ENDOMORPH/ENGAGE
INVESTMENT
LPDICTUM/K
LPDICTUM/LPSPICE
LPDICTUM/WUSALINE
RESEARCH & DEVELOPMENT
MHSHANK
RECEIVED FROM
DFC 10 1975
SEGEET
NW 50955 DocId:32423532 Page 69
i
TAB A
Page 3
3
66
SECRET
ENTITIES DISSOLVED
AIR SUPPORT
JBGREED/JBCRYING (In Liquidation)
JBGREED/QKHEAVERLY (In Liquidation)
JBGREED/QKHEEDFUL (In Liquidation)
JBGREED/JBCHOKE (In Liquidation).
ZRBENCH
WUBETON/ WULOBSTER
MARITIME SUPPORT
YOBLADE
AMCRAFT
AMSALLY
MEDIA AND/OR PUBLICATIONS
ESMIDWAY
AMIDEA
AMWIDE (SLOGAN)
AMRAPT
WURABBIT
INSTITUTE OR FOUNDATION
LPWANDER/1
LPWANDER/2
LPWANDER/3
LPWANDER/4
JMCLIPPER
QKBOTTOM
QRBIBB
PBGREGALE
QRTRIG
TAB A
COVER SUPPORT
RECEIVED FROM
JMDUSK
FUARROW
YQFLUX
DOC 32423532 - Page
KGHELMSMAN
ECIRON
GINSENG/G
SECRET 14

· 67 -
SECRET
ENTITIES DISSOLVED (Continued)
OPERATIONAL SUPPORT
LPGLOBE/WASH
SLIGO
SLAPJACK
55 DocId: 32423532 Page
LOGISTICS SUPPORT
STOCK ACCOUNT #2
KMFERRY
KMKANGANI
MHOLENT
OPSOMIC
MANAGEMENT & ACCOUNTING
LPPANDA/LPCLOUD
INVESTMENT
WUVENTURE/WUABLE
WUVENTURE/WUBAKER
COMMUNITY DEVELOPMENT.
WUAMICE
SECURITY SERVICES
MHBOUND/1
MHBOUND/2
SECRET
RELE
TAB A
DEC 10
- 68 -
The following entities were sold during the referenced period:
NW 50955 DocId: 32423532
Page 72
69
ENTITIES SOLD
AIR SUPPORT
WUSHINE/WUCOMET
WUSHINE/WUELBOW
WUSHINE/WUNOTICE
!
WUSHINE/WUPUMA
WUGAZELLE/WUBLOWGUN
WUGAZELLE/WUZEBU
ZRCREST/ZRAVAST
ZRCREST/ZRCLIFF
WUCLOAK/WUDUSTER
WUCLOAK/WUHARPY
WUCLOAK/WUVITAL
*
IUQUEST/IUABATE
*
IUQUEST/IUPAGAN
WUSAXA/WUACUTE
TRAVEL BUSINESS
WUBEVY
COVER SUPPORT
POEARLY
CALANCET
STFANWEED/STDOLLAR
STMYSTIC
MIHELEN
MIPACT/MICOUNCIL
INSURANCE
MHTHROW
MHMATTE
RECEIVED FROM
DEC
:
MHIRONY
*
Substantial Assets Sold; Entities Dissolved
132 Page 73
SEGRAT
TAB B
A. TA
SECRET
- 70 -
ENTITIES SOLD
TAB B
AIR SUPPORT
JBGREED/JBARGON
FOUNDATION OR INSTITUTE
DEINDEED/IUINHAUL
TRAVEL SERVICE
LPJACK
LOW COST HOUSING
WUFLOWER/WUSWAMP.
RESEARCH & DEVELOPMENT
HTNAMABLE
SECRET
RECEIV
DRC LO 195
- 71 -
The following entities were "otherwise disposed of" during the
referenced period:
NW 50955 DocId: 32423532 Page 75
72
ENTITIES OTHERWISE DISPOSED OF
AIR SUPPORT
WUEMBARK/WUHALFLIN
WUSTAKE/WUHOBBY
WUSAXA/WUBLUSEE
MOMARRON
WULAZY
COVER SUPPORT
YJPASTIS
FOUNDATIONS OR INSTITUTES
QRBEND
ZROCCUR/ZRMIDDY
QRSENSE/KMOCHRIOD
AESILVER
FD FROM
RECEIVED
390
NW-50955 DocId: 423:
MEDIA
PAWALRUS
POVARSITY
QRGLAD
AEEGGHEAD
ACCOUNTING & MANAGEMENT
LPCAPTAIN/LPCANAL
OPERATIONAL SUPPORT
LADYCHAPEL
WUTACTIC/WUDOLLOP
SECRET
TAB C
ठ
)
- 73
-
SECRET
ENTITIES OTHERWISE DISPOSED OF
MEDIA AND/OR PUBLICATION
LILISP/G
AMHIM
QKACTIVE
QRMASTER
TPTONIC
TPTONIC/FJINDULGE
TPTONIC/ZRNACARAT
FOUNDATION OR INSTITUTE
ZRCANNY
DTHABEAS
DTEMBARGO
ZRTINDER
QRTROW
PAFANFARE
QKFEARFUL
WSFLUFFER
DTPILLER
DTLAMPREY
QKOPERA/DTGODOWN
COVER SUPPORT
QRMUGWUMP
TRAVEL SERVICE
TGVIVID
OPERATIONAL SUPPORT
AMOT
SECRET
TAB C
RECEIVED FROM
DEC 10 1075
0
--
There follows a description of the disposition of entities
sold or otherwise disposed of during the referenced period. Twenty-
nine (29) of the entities were sold or given to witting individuals
(former officers, employees, managers, contractors, etc.) Five (5)
were sold or given to witting individuals who had no formal rela-
tionship with the proprietary. Ten (10) proprietaries continued to
provide goods or services to the Agency after the disposal. Thirty-
four (34) proprietaries did not continue to provide goods or services
to the Agency after disposal. In nine (9) instances the provision
or offer to provide goods or services were formal or informal condi-
tions of the sale or gift. In thirty-seven (37) instances this was
not the case. Six (6) proprietaries were sold to unwitting individuals
or organizations and thus no provision for services or goods was indi-
cated. Several miscellaneous dispositions developed which did not
fit neatly into any of the above categories. For example, there
was one merger of an Agency proprietary with another Agency proprie-
tary. In two instances the Agency retained a non-proprietary rela-
tionship with a former employee. On two occasions the Agency turned
over proprietaries to other government departments and on one occasion
it sold a proprietary to another government department.
There were .
several instances where the Agency gave the assets of a proprietary
after liquidation (books, materials, etc.) to previously uncompensated
participants in the various ventures. On occasion, the corporate
shells were given to attorneys in lieu of fees for dissolution.
participants were permitted to retain proceeds of sales in order to
continue the original effort of the particular proprietary.
And
Some
NW 50955 DocId: 32423532 Page 78
0
72-
finally, assets were sometimes given to other proprietaries but
without the benefit of a merger.
:
NW 50955 DocId: 32423532 Page 79
76
AL
DISPOSITION OF ENTITIES SOLD OR OTHERWISE DISPOSED OF
TAB D
WUSHINE/WUGAZELLE
ZRCREST
WUCLOAK/WUDUSTER
WUHARPY
WUCLOAK/WUVITAL
RECED FROM
DEC
The six air proprietaries in the WUSHINE and
WUGAZELLE complexes were sold as a package in 1969
to a group of witting U.S. businessmen who had
acted as nominee officers, directors, and stock-
holders for the companies in the WUSHINE complex.
Although the group offered to provide cover and/
or air support to the Agency after the sale, this
offer was not made a condition of the sale, and
no understanding or contract was negotiated for
prospective purchase of goods or services or
cover support. To date, the proprietaries sold
have not been used by the Agency.
These two air proprietary entities were sold in
1974 to the businessman who managed both entities
during the period of Agency ownership. No agree-
ments for the continued use of the entities sold
were negotiated or implied at the time of sale,
and, to date, no subsequent use has been made
of the entities by the Agency.
This air proprietary was sold in 1968 to the
witting businessman who managed the entity
during the period of Agency ownership. No
agreement for the continued use of the entity
sold was negotiated or implied at the time of
sale, and, to date, no subsequent use has been
made of the entity by the Agency.
This air proprietary (parts procurement) was
sold in 1965 after all assets had been removed
(a corporate shell) to the witting group of
businessmen from which the entity was originally
purchased. No agreement for the continued use
of the entity sold was negotiated or implied
at the time of sale, and, to date, no subsequent
use has been made of the entity by the Agency.
This air proprietary entity was sold in 1972 to
an unwitting, bona fide airline company. No
agreement for the continued use of the entity
was negotiated or implied at the time of sale,
and, to date, no subsequent use has been made
of the entity by the Agency.
NW 50955 Dec:32423532. Page 80
SHEET
:

ORGET- 77 -
TAB D
Page 2
IUQUEST/IUABATE/IUPAGAN
WUSAXA/WUACUTE
WUBEVY
POEARLY
CALANCET
STFANWEED/STDOLLAR
> RECE
DFC
FROM
-
Substantial assets of these two IUQUEST air
proprietary entities were sold in 1975 to a
bona fide aviation company which was made witting
for purposes of the sale. No agreement was nego-
tiated or implied at the time of sale for Agency
use or purchase of goods or services from the
company which purchased the assets. To date, no
goods or services have been purchased from the
buyer. The entities were subsequently liquidated.
This air proprietary entity was sold in 1971 to
an unwitting businessman. No agreement for con-
tinued use of the entity by the Agency was negoti-
ated or implied at the time of sale, and, to date,
no such use has been made of the entity.
This proprietary, which published travel guides
and was used as cover for Agency officers world-
wide, was sold in 1968 to the editor of the
travel guides. The editor was an Agency employee
and retired at the time of the sale. No agree-
ment was negotiated or implied for the continuing
use of the entity after sale. To date, no goods
or services have been purchased from the entity
by the Agency.
This proprietary entity, which provided status
and access cover for several case officers in
the Far East, was sold in 1975 to unwitting
purchasers.. There have been no Agency contacts
with the purchaser since then. All sale pro-
ceeds were returned to the Agency.
This proprietary, which provided cover support
in Europe, was sold in 1965 to a witting, bona
fide company which provided technical assistance
and marketing support to the proprietary during
the period of Agency ownership. No agreement
was negotiated or implied for prospective use
of the entity by the Agency, and no such use
was made by the Agency. The bona fide company,
did, however, continue to provide cover for
Agency officers in other areas and under offices
not related to the former proprietary's business
activities.
This proprietary was an import-export firm which
provided cover for one Agency employee in the
Far East. The entity was sold to the Agency
employee in 1966 at the time of his retirement
from the Agency. No agreement was negotiated
NW 50955 DoeId:32423532 Page 81
☐
SECCAT 78 -
TAB D
Page 3
LL QUE I
STFANWEED/STDOLLAR
(continued)
STYMYSTIC
MIHELEN
MIPACT/MICOUNCIL
MHTHROW
MHMATTE
RECEIVED FROM
DEC
or implied at the time of sale for the Agency's
purchase of goods or services, and, to date,
no such use has been made of the entity.
This small proprietary, which provided cover for
one Agency employee in the Far East, was liqui-
dated in 1974. A covert relationship has con-
tinued with the owner of the parent company of
which the Agency proprietary was a subsidiary.
The owner provides cover in the parent company
for another Agency employee, and the parent
company moved into the premises vacated by the
subsidiary and was allowed to take over fixtures
and a rental deposit at no cost.
This proprietary, which provided cover for one
Agency case officer in the Far East, was sold
in 1974 to two local-hire employees of the firm.
All Agency connections with the firm were severed
at the time of sale.
This proprietary, which provided cover for one
Agency employee, was sold in 1970 to the un-
witting members of its Board of Directors.
At the time of sale all Agency connections
with the entity were severed.
This proprietary (part of the insurance complex)
was formed for the purpose of purchasing an
apartment overseas which was used for operational
purposes. When the apartment was no longer of
operational use in 1970, the company (and the
apartment) was sold to a non-Agency connected
party. No agreement for the continued use of
the corporation or the apartment was made with
the purchaser, and, to date, no such use has
been made of the entity or the apartment.
This proprietary (part of the insurance complex)
was established to purchase an apartment overseas
of operational interest to the Agency. When the
apartment was no longer needed for operational
purposes in 1970, the corporation (and the
apartment) was sold to a non-Agency connected
party. No agreement for the continued use of
the apartment or the entity was made with the
purchaser, and, to date, no such use has been made
of the apartment or the entity.
SECRET
500
Doeld
532
55
79
MHIRONY
WUEMBARK/WUHALFIN
WUSTAKE/WUHOBBY
WUSAXA/WUBLUSEE
MOMARRON
MULAZY
RECEIVED FROM
TAB D
Page 4
This proprietary was established for the use of
the insurance complex, but it was never activated.
The corporate shell was sold in 1974 to the un-
witting attornies who served as resident agents.
No agreement was made with the purchaser for
the continued use of the entity, and, to date,
no such use has been made of the entity.
This air proprietary was merged with another
air proprietary (ZRCLIFF) in 1968.
This air proprietary was sold to the businessman
who managed the proprietary during the period
of Agency ownership on the condition that the
Agency would buy back the proprietary if the
contract which sustained the proprietary was
not renewed by USAID. The USAID contract was
not renewed, and the businessman dissolved the
entity on behalf of the Agency in 1968.
This air proprietary was disposed of by trans-
ferring all assets to another air proprietary
and turning over the corporate shell to two
unwitting foreign national nominees. No agreement
with the nominees for the purchase of goods or
services subsequent to the turn over was negotiated
or implied, and, to date, no use has been made of
the entity by the Agency.
This proprietary was established in the Far East
by two foreign agents of the Agency to provide
support services for Agency-sponsored air opera-
tions. The company failed, at least partly due
to embezzlement by the two agents, and was
liquidated apparently in late 1962 or early 1963.
The Agency station in the country involved
continued to maintain a covert relationship with
the two agents who were politically significant
for some time after the liquidation. The re-
lationship was non-proprietary.
This proprietary was involved in support of air
activities for a large Agency paramilitary
program in Africa. At such time as the program
was concluded, all assets were removed from
the company, and the corporate shell was given
to the attorney who established the entity in
lieu of paying his prospective fee for dissolv-
ing the corporation.
SECRET
SECRET
80
YJPASTIS
QRBEND
ZROCCUR/ZRMIDDY
QRSENSE/KMOCHRIOD
AESILVER
PAWALRUS
RECES
TAB D
Page 5
This proprietary, which provided cover support
for one Agency officer in the Far East, was
abandoned when the country was overrun by
Communist forces. The assets left behind will
be written off.
This proprietary, non-profit organization was
turned over to its management in 1967 when the
Agency withdrew its support to the entity. No
further Agency support has been given to the
entity, and the management intended to continue
the program with private and USAID support.
This proprietary non-profit, medical organiza-
tion was disposed of in 1967 by transfer of
all of its assets to the witting Board of
Directors for continuation without Agency
support. No further Agency support was given
to the entity.
This proprietary, non-profit entity was dis-
posed of in 1968 when all assets were turned
over to the witting trustees who intended to
continue the operation with private support.
No further support was given to the entity
by the Agency.
This foreign proprietary research institute
was disposed of in 1967, at which time the
Institute was surge funded to permit it to
continue operations for approximately two years
while a search was made for private funds to
enable continuation of the Institute or permit
its orderly liquidation. In mid-1969, the
Institute ceased its activity since sufficient
private funds could not be located to fund
Institute programs. No Agency support was
provided after 1967.
This proprietary entity published an English
language periodical in the Near East. The
publishing rights plus certain assets were
sold to indigenous purchasers and the proceeds
of sale were used to pay off corporate liabilities
prior to dissolution of the entity. Since the
periodical continued to publish articles which
coincided with U.S. objectives for the area
concerned, the Agency provided limited support
to the new owners to enable them to continue
the publication.
SECRET
3
NW 50955
81
TAB D
Page 6
POVARSITY
QRGLAD
AEEGGHEAD
LPCAPTAIN/LPCANAL
REGI
DEC
FROM
This proprietary publishing firm in the Far
East provided cover support for one Agency
employee who introduced foreign books and articles.
to Far Eastern media sources. In 1975 the firm
was de-registered and certain assets were sold
to a former employee of the firm who re-registered
the firm under a different name. The Agency
employee who was provided cover by the entity is
still active in the Far East under a new cover
and the only contact with the purchaser is in
the interest of maintaining the cover story of
the active Agency employee. No support is
being extended to the re-registered entity.
This activity provides support to a foreign
based asset to permit him to publish a foreign
language journal. The activity was inaccurately
and inappropriately categorized as a proprietary
when an Administrative Plan was prepared in 1971.
The error was corrected in 1975 when the activity
was accurately categorized as a controlled sub-
sidy. The operation continues with Agency
subsidy support.
The U.S. proprietary portion of this book pub-
lishing activity was legally liquidated in
1968. Funds remaining after settlement of all
liabilities were transferred overseas to other
parts of the operation and were used to meet
approved operational expenses. Some of the
remaining stock of foreign language books was
given to a cleared and witting contact who had
served without compensation as an officer of
the proprietary mechanism. The remainder was
shipped overseas to be distributed by the
overseas mechanisms of the operation which are
not proprietaries. They continue to distribute
books with Agency subsidy support.
This proprietary, which provided management and
accounting services for Agency activities in
Europe, was disposed of in 1974 by removal of
all assets from the entity and transfer of the
corporate shell to the U.S. businessman who had
backstopped the company without compensation.
No support has been given to the entity or use
made thereof by the Agency.
SECTET
J
- 82.
-
LADYCHAPEL
WUTACTIC/WUDOLLOP
TAB D
Page 7
This proprietary was established to purchase an
apartment building in Europe for Agency office
and residential use. In 1968, then the build-
ing was of no further use to the Agency, the
entity with the apartment building was ostensibly
given to the Department of State as a gift.
The Department actually reimbursed the Agency
for the building in Washington. The Agency,
on behalf of the Department, is attempting to
liquidate the company. This is complicated
by a disputed foreign tax claim.
This operational support mechanism had no assets
at the time of its disposal in 1971, and the
corporate shell was turned over to the attorney
who established the company in lieu of payment
of his prospective fee for dissolving the
entity.
RECE
DEC
NW 50955 DocId>3242
Page -86
SEGKET
83
SECRE
TAB D
LE
JBARGON
DEINHAUL
Disposition of Entities Sold or Otherwise Disposed Of
RECEIVED FROM
DEC 1 WHO
This air support proprietary (maintenance facility)
was sold in January 1975 to a bona fide aviation
concern which was made witting of the Agency's
ownership of the firm for purposes of the sale.
At the time of sale, it was agreed that JBARGON
would continue to provide aircraft maintenance,
supply, and bookkeeping services to JBCHOKE, the
former parent company of JBARGON. Since the date
of sale, JBARGON has provided $612,000 worth of
aircraft maintenance, supply, and bookkeeping
services to JBCHOKE; JBCHOKE is now in the process
of liquidation.
This proprietary lending institution (bank) was
established in a European country in 1955 to
provide loans and outright grants to non-communist
cooperatives. The proprietary was ostensibly owned
(backstopped) by a bona fide U.S. foundation which
was subsidized by the Agency, and the bank was
managed by a bona fide management company on behalf
of the Agency. By 1962 when it was determined
that the bank had accomplished its purposes, the
Special Group (predecessor to the 40 Committee)
instructed that the bank be phased out in an orderly
manner over the next five years. Various disposal
plans were considered over the next few years,
and in 1965 the Agency sold the bank (through its
ostensible owner--the foundation) to the firm
which managed the bank during the period of Agency
ownership. In payment, the foundation accepted
notes from the management firm, payable over a
four year period. It was expected that the payments
of the purchase price would come from the proceeds
derived from the repayment of various types of
loans made by the bank, and it was recognized that
certain unsecured bank loans were of questionable
collectibility. Accordingly, that portion of
the purchase price which was tied to the repayment
of these loans was subject to adjustment for litiga-
tion expenses associated with collection and a 20%
collection fee. Also, this portion of the purchase
price was not subject to interest on the unpaid
balance. It was also agreed that the bank would
administer a fund of $100,000 set aside by the
Agency for continuing grants in less than $25,000
amounts for Agency approved activities which were
SECRET
7
BocId: 32423532 Page
SECRET - 84
-
DEINHAUL (Cont'd)
LPJACK
WUSWAMP
HTNAMABLE
RECET
DEC 1V DHS
CIA
in concert with the original objectives of the pro-
ject. In 1967 under the terms of the Katzenbach
Report, it was necessary for the Agency to discon-
tinue its support to the bona fide U.S. foundation
(ostensible former owner of the bank as mentioned
above) which had acted as a collection agent for
the sale proceeds. Incident to the Agency's dis-
engagement from support of the foundation, the
foundation was allowed to keep all proceeds from
subsequent payments on the purchase price for the
bank.
This travel service proprietary was sold in 1975
to an Agency employee at the time of his retirement.
This individual had ostensibly owned the firm but
in fact only managed it for the Agency. No agree-
ment was negotiated for the continued use of the
travel service by the Agency, however, the Agency
was using the travel service at the time of sale
largely for the purchase of airline tickets for
travel in support of sensitive projects. This
practice still continues, and it is estimated
that Agency business represents about 30% of the
gross airline ticket sales of the entity on an
annual basis.
The Agency owned 50% of the equity in this foreign
entity which constructed low. cost housing in one
of the less developed countries of the world.
The Agency's equity was sold to WUPESKY, a private
company which provided cover for an Agency employee
who managed the Agency's foreign low cost housing
program. No agreement was made with WUPESKY for
the subsequent purchase of services or products
of WUSWAMP, and no such purchases were made.
Nevertheless, WUPESKY continued to provide cover
for the Agency Employee until 1973.
This proprietary was a non-profit organization
which undertook high risk scientific research
programs in support of Government sponsored
reconnaissance programs. In 1966, the Agency
decided to terminate its proprietary relationship
with the entity and it was determined that,
because of the charter of non-profit organizations,
any proceeds from the liquidation would have to
be given to other non-profit organizations or
foundations. Accordingly, the plant and equipment
were sold to a profit making corporation which
created a subsidiary around the assets purchased.
The proceeds of the sale were distributed among
2
32423532 Page
SECRET
6
i
SECRE
85
LILISP/G
AMHIM
QKACTIVE
QRMASTER
RECENT
several non-profit organizations under Agency
control. An unwritten condition of the sale was
that the Agency would contract with the new organizi-
ation for scientific research of interest to the
Agency in the amount of about $900,000 over an
eighteen month period. Only about $770,000 was so
committed, and all Agency relations with the
successor organization were terminated in 1968.
This media type proprietary provided cover for
an Agency employee who arranged for a foreign
motion picture firm run by an American to produce
and distribute foreign language films throughout
Latin America. For funding purposes, the proprie-
tary borrowed working capital from another prop-.
rietary, LPBERRY/A, and paid production and
distribution costs in anticipation of a return
on the proceeds of film distribution. The prop-
rietary was dissolved in 1961, and all rights to
the net profits of distribution were assigned
to LPBERRY/A in return for cancellation of the
note it held from the proprietary. After much
wrangling with the American owner of the film
production and distribution company, it became
evident that appropriate reports were not being
submitted covering recoupments or net profits
and the Agency negotiated a settlement which pro-
vided that LPBERRY/A and the distribution company
would render no further claims against each other.
Relations eased at that point.
This media proprietary compiled, published, and
distributed a newsletter overseas. In 1975,
when the Agency withdrew its support, it was
decided to discontinue the publication activity,
and the assets of the company were turned over
to AMHIM/1, the editor and manager, to enable
him to maintain a status independent of the
Agency as a commercial print shop. .
This proprietary radio broadcasting activity was
turned over to the Department of State for support
and subsequently placed under the control of the
Board of International Broadcasters for continued
operation with Congressional support.
This media type proprietary which was involved in radio
and TV projects was established in 1963 and continued
under Agency ownership until 1969 when it was sold
. 3
SECRET
5
QRMASTER (Cont'd)
TPTONIC
TPTONIC/FJINDULGE
LPTONIC/ZRNACARAT
ZRCANNY
DTHABEAS
RECEIVED FROM
SECART - 86
to its manager with full expectation of continued
operation with heavy Agency subsidy. At the time
of sale, substantial funds were removed from the
entity leaving it without sufficient working
capital. Consequently, the Agency arranged for
a line of credit through a bank guaranteed by the
funds removed from the entity. Subsequently,
the manager, with Agency permission, sold the
entity to a group of foreign nationals. The
manager formed his own corporation which contracted
with the Agency for services including the continued
management of the company sold of which he was still
president. A management dispute resulted in the
removal of the manager from the first corporation
and the bank seized the guarantee for the line
of credit which had been drawn down and used as
working capital for the first entity. The manager,
no longer supported by the Agency, is the channel
through which the Agency is to receive repayment
of loans which arose out of the line of credit.
So far, the Agency has received no payments.
These three proprietary entities were part of a
substantial radio broadcasting activity which
was turned over to the Department of State for
support and subsequently placed under the control
of the Board of International Broadcasters for
continued operation with Congressional support.
This U.S. foundation type proprietary served as
a funding mechanism for a labor organization
supported by the Agency. In 1968 all assets
plus a termination grant were turned over to the
group of U.S. businessmen who backstopped the
Agency entity. All Agency funds destined for the
Tabor union were transferred to that organization,
and the Agency created a foreign funding company
(QRSPIDER) utilizing the same businessmen to
continue support to the union. The foreign entity.
is still in being, although inactive, and will
be dissolved after all tag end negotiations are
concluded with the former management of the labor
organization which continues in revised form
without Agency support.
This proprietary non-profit entity was supported
by the Agency until. December 1974 when all Agency
funds were withdrawn and the furniture and fixtures
SECRET
4
4
32429132.

SECRET
87
DTHABEAS (Cont'd)
DTEMBARGO
ZRTINDER
QRTROW
PAFANFARE
RECEIVED FROM
DEC 10 1975
CIA
organization.
were given as a gift to the witting directors who
proposed to continue the entity as a private
No further contact has been main-
tained with the entity.
This foundation was established in 1938 without
Agency support. After a long period of inactivity,
the Agency took over the entity in 1953 and used
it to support a publication produced at a U.S.
University and aimed at Latin America. In 1967,
the Agency withdrew its support to the publication,
withdrew Agency funds from the foundation, and
gave the office furnishings to the witting directors
of the foundation with the stipulation that the
furnishings would be turned over to the university.
This proprietary institute was supported by the
Agency until 1968 when all assets and liabilities
plus a termination grant was turned over to the
management and ostensible owners of the entity
to enable the organization to continue without
Agency control or support. No further contact
was maintained with the organization.
This former proprietary is an institute located
in Europe which seeks to influence and encourage
moderate and pro-democratic youth leaders and
government officials concerned with youth and
higher education. The Agency withdrew its
support from the institute in 1974 and turned
over all assets to the management of the organiza-
tion. In addition, the Agency provided surge
funding in the amount necessary to enable the
entity to exist in reduced form for about one year
during which time the management would attempt to.
arrange private support. All Agency employees
involved in the project terminated their employment
relationship with the Agency or were reassigned,
and the Agency has not rendered further assistance
to the operation.
This foundation type proprietary provided grants
and other support to individuals and organizations
of interest to the Agency in the Near East. At
the project's termination residual funds were
turned over to one of the witting trustees to
permit the continuation of the activity for a.
period of time without Agency support. No further.
Agency support has been given to the organization.
5
SECRET
3
Page 91
-
88
SECTET
QKFEARFUL
WSFLUFFER
DTPILLAR
DTLAMPREY
QKOPERA/DTGODOWN
RECEIVE
CIA
This foundation type proprietary provided support
to a bona fide international organization interested
in international legal matters. At the time the
Agency withdrew its support for the activity in
1969 the assets of the proprietary plus termination
funding were turned over to the witting Board of
Directors. The organization, now under a new
name, continues to exist without Agency support.
This foundation type proprietary provided funds
to a bona fide foundation involved with the
development of international cooperatives. At
the time the Agency withdrew its support from the
cooperative program, the entity was dissolved,
however, it had been anticipated that the entity
would be the recipient of funds resulting from
the sale of a proprietary lending institution
in Europe. The bona fide foundation which was
part of the funding channel for the European
bank was allowed to retain the proceeds of the
sale when WSFLUFFER was dissolved. See the
write-up under DEINHAUL for more details of the
sale of the European bank..
This foundation type proprietary supported indivi-
duals and organizations of interest to the Agency
in the Far East. At the time the Agency withdrew
its support for the activity in 1967, the assets
of the organization with a substantial termination
payment were turned over to the witting Board
of Directors of the entity. The entity has
continued its work without Agency support.
This foundation type proprietary supported an
international organization concerned with indivi-
duals in the teaching profession. At the time
the Agency withdrew its support from the inter-
national organization, the proprietary was
dissolved after making one last termination grant
to the international organization. The inter-
national entity has continued without Agency
support.
This foundation type proprietary supported
individuals and international organizations
involved with cultural matters. To give the
entity substance and provide funds for day-to-day
administration, the Agency started the organization
with a substantial grant which was invested in
6
SECRET
3532
QKOPERA/DTGODOWN
(Cont'd)
QRMUGWUMP
TGVIVID
AMOT
SECRET
89
income producing securities. At the time the Agency
withdrew its support, the assets of the entity
were given to its witting Board of Directors with
the understanding that approximately 60% of the
portfolio of investments would be retained by the
organization to sustain its continued operation
without Agency support, and 40% of the proceeds
of the portfolio would be immediately granted to
other organizations and activities which fostered
the objectives of the QKOPERA project.
This small proprietary provided cover for one
individual overseas. In 1972, the employee
resigned and expressed a desire to continue the
business without Agency support. Accordingly,
the meager assets of the entity were sold to
the resigned employee. Payment for the entity
took the form of offset against funds due the
employee on separation, lump sum leave payment,
return travel, etc. The Agency has had no further
interest in the entity.
This proprietary travel Agency provided cover for
an Agency employee overseas. When the employee
was reassigned in 1966, all assets were converted
to cash and turned back to the Agency. Neverthe-
less, an indigenous employee of the entity, and
a contact of the Agency Station in the country
involved, was allowed to take over the name and
clientele and continue the business. No commit-
ments or agreements were made for continued
use of the business, and no support was sub-
sequently provided or sought from the business.
This proprietary, which produced economic and
sociological reports in support of Cuban opera-
tions, was dissolved in 1973 and its assets
turned over to another proprietary, SLIGO. SLIGO
was subsequently dissolved in 1975 (see list of
dissolved entities.)
RECEIVED FROM
7
SECRET
NW 50955
b)
THE SALE OF SOUTHERN AIR TRANSPORT, INC.: A CASE
STUDY IN DISPOSAL OF A CIA PROPRIETARY.
BACKGROUND
Southern Air Transport Incorporated (SAT) is a U.S. Air Carrier,
incorporated in the State of Florida on October 31, 1949. From its
inception until its purchase in 1960 by the Central Intelligence
Agency (CIA), it was privately owned by Messrs. Fredrick C. Moor
and Stanley G. Williams.
1960, and owned by the CIA through December 31, 1973. CIA sold the
firm back to Mr. Williams on December 31, 1973.
It was purchased by the CIA on August 5,
The decision to acquire Southern Air Transport was triggered by
a change in the regulations governing the award of Military Air Trans-
port Service (MATS) contracts. On April 1, 1960, Air America (AAM).
had begun flying a seven-month MATS contract operating out of Tachikawa
AFB in Japan, to other Pacific locations. In June of 1960, the De-
partment of Defense (DOD) and the Civil Aeronautics Board (CAB) changed
the regulations governing the awarding of MATS contracts to require
that bidders hold at least a Supplemental Certificate of Convenience
and Necessity for an Air Carrier and that they participate in the
Civil Reserve Air Fleet Program (CRAF). Air America did not meet
either of these new criteria and could not obtain appropriate waivers
to them. The Air America heavy airlift capability represented an
asset for use by the U.S. Government in future operational contin-
gencies throughout the Far East area. Loss of the MATS contract
would result in under utilization of aircraft and air crews and the
DocId: 32423532 Page 94
MATS contract revenues were needed to sustain these assets.
Therefore,
it was proposed that either AAM should obtain the necessary certi-
fication or that the Agency should buy another commercial firm that
already held these certifications. The October 1, 1960, contract
date and the need for public hearings and lengthy proceedings mili-
Also,
tated against AAM applying for the certificate themselves.
again in order to avoid lengthy public hearings, which would be time-
consuming and generate public exposure, it was decided that the
ownership of the company to be acquired' must be kept completely
separate from AAM. This solution was concurred in by the CAB, the
DOD, the CIA, and AAM management.
It was anticipated that if the new company were awarded the
ongoing MATS contract, it would actually perform the flying service
but would use equipment under conditional sale from AAM and would
Under inter-company agree-
employ personnel transferred from AAM.
ments Air America would provide all maintenance work, ground handling,
and other services for which it would be reimbursed by the new
company. In this way, Air America would share in the revenues
generated by the MATS contracts.
The proposal to purchase a supplemental carrier and operate
it under the above arrangement was approved by Allen Dulles as
Funds
Director of Central Intelligence (DCI) on July 15, 1960.
from the Clandestine Services budget for FY 61 were made available
for the purchase.
were
After World War II there had been over 200 supplemental carriers.
in existence. By 1960 there were only 18 still operating.
Air
NW 50955 DocId: 32423532 Page 95
NW 50955
America management made a survey of the 18 and determined that
wwwww
de 1001
Southern Air Transport in Miami, Florida was the most attractive
as a purchase possibility. It operated two C-46s one owned, one
leased between Miami and points in the Caribbean and South
America. Its associated company owned the four-acre property on
which SAT was located. Moreover, it operated at a modest profit
and had no long-term debts.
Negotiations for the purchase of SAT were successful and on
August 5, 1960, the CIA exchanged $307,506.10 for all outstanding
shares of capital stock of SAT and its real property owning affil-
iate. The Agency owned these shares in the name of Roger C. Hyatt,
a former board member of Air America. Mr. Hyatt together with
Percival Brundage and Perkins McGuire were added to the SAT board
of directors.
The Atlantic
Under CIA management Southern Air Transport operated with two
semi-autonomous divisions: the Pacific Division and the Atlantic
Division. The Pacific Division performed the MATS contract and
supported Agency heavylift requirements in East Asia.
Division continued to operate in the Caribbean and South America;
doing the same sort of flying SAT had done prior to Agency acquisi-
tion. The Atlantic Division was also able to furnish certain support
for the Cuban and Congo operations. At the peak of its activities,
the SAT fleet, comprised of both owned and leased aircraft, included
Douglas DC-6, Boeing 727, and Lockheed L-100 Hercules aircraft.
DocId: 32423532 Page 96
>
NW 50955
THE SALE
In 1972 it became apparent that the Agency's air capabilities
were becoming excess to its needs, and that political realities
and future operational requirements in the post-war era of Southeast.
Asia would not require large air proprietary assets. On April 21,
1972, the Director of Central Intelligence approved in principle
the divestiture of CIA ownership and control of the Air America
complex and Southern Air Transport. He approved recommendations
calling for Air America to be retained until the end of the war in
Southeast Asia, the immediate elimination of the Pacific Division
of SAT, the sale of the two 727 aircraft leased to SAT by Air America,
and subsequent divestiture of Agency ownership and control of the
remainder of SAT. * Specific note was made that conflict of interest
should be avoided and that no employee should receive a windfall
benefit as a result of these transactions,**
In May 1972, Agency officials (Charles Kane and Lawrence Houston)
met with the Chairman of the Civil Aeronautics Board, Secor D. Browne,
and his Administrative Assistant, Edwin Rector, to seek informal
Three alternatives
advice as to the best way to disengage from SAT.
were discussed: (1) dissolve the company and sell the assets;
(2) sell the assets to the current operators of the company; (3) sell
SAT to, or merge SAT into, one of the other supplemental carriers.
*
The Director determined that 'we no longer should retain air proprie-
taries purely for contingent requirements and that on the record, there-
fore, the Agency should divest itself of the Southern Air Transport
complex entirely. He stated the opinion that the desirable course of
action would be dissolution, although he realized that the problems
were many and complex. Also, he did not rule out other solutions
which might achieve the end and yet better satisfy the interests of
all concerned"
** A condition imposed by the DCI was that "in the disposition of any
of the assets involved nothing inure to the benefit of Agency employees.
or former employees or persons whose relationship with the Agency has
been or is of such a nature as might raise a question of conflict of
interest!!
Focus 2423532 Page 97
NW 50955
The CAB chairman discouraged option (3) because it would involve
public hearings and would be subject to criticism by the other supple-
mentals. Option (1), although least troublesome from the legal and
exposure standpoints, would further reduce the shrinking number of
U.S. supplementals (by 1972, there were only eleven supplemental
carriers left) and would be unfair to SAT employees. The CAB
officials had no problem with option (2). On/⑤5) May: 1972, the DCI
was presented with the results of the meeting with the CAB chairman.
He approved the recommendation to explore the sale of the equity in
SAT to the current management. It was noted that SAT had been operat-
ing as a supplemental carrier for 25 years, none of the employees of
SAT had ever been an employee of the Agency and that both the Depart-
ment of Defense and the chairman of the CAB considered it in their
best interests to keep SAT as a viable carrier rather than dissolving
the company and selling the assets. The rationale behind selling.
SAT intact to its management was:
a.
Liquidation would deprive the U.S. of a useful air carrier
and would be unfair to the employees.
b. Sale of SAT as a going concern on the open market would gene-
rate an unacceptable level of public interest and scrutiny. A
publicly advertised disposition would run contrary to the Director's
statutory mandate to protect intelligence sources and methods.
c. Although a potential for conflict of interest and windfall
profit existed, sale of SAT to its management would best
satisfy the requirements of everyone involved.
The DCI was, apparently, allowed this flexibility in method of
disposal by statute. 40 U.S.C. § 474 (17) provides that nothing in
the regulations relating to disposal of surplus government property
DocId: 32423532 Page 98
shall affect any authority of the CIA. In addition, 50 U.S.C. §
403 (d) (5) provides that the Director of Central Intelligence is
responsible for protecting intelligence sources and methods from
unauthorized disclosure. It was determined that sale of SAT stock
to Mr. Williams in a confidential manner would best prevent damage
to national security and foreign relations of the United States which
could result from disclosure of CIA ownership.
Agency officials began exploring ways in which SAT could be sold
to its management without permitting a windfall to accrue to the
buyer and in a way that could not be construed as a conflict of
interest. To establish a reasonable selling price, the Agency asked
the Certified Public Accounting firm of Lybrand, Ross Brothers and
Montgomery (now doing business as Coopers & Lybrand) to perform a
valuation study. They in turn engaged R. Dixon Speas Associates,
Inc., aviation consultants, to establish an evaluation for the
The following values were developed:
aircraft.
a. Book Value of SAT.
Estimated Total Value of SAT
Capital Stock on Open Market
Disposal as going concern
C.
d.
Liquidation Value
e.
Agency Investment
$3.9 million
$2.645 million
$2.1 million
$1.25 million
$1.5 million
Based on these figures, the Executive Director-Comptroller on
August 17, 1972, approved an asking price of $2.7 million.
Sale
at this price to the management would require simultaneous payment
in full of the $3.2 million note payable to Air America through
NW 50955
DocId: 32423532 Page 99
Actus Technology (as the associated land holding company had been
renamed) and would not include any equity in the lease purchase
agreement between SAT and Air America for a Lockheed Ľ 100-30
Hercules aircraft. Although this $2.7 million price was less than
the $3.9 million book value, it did exceed the fair market value of
the company as calculated by professional appraisers. The appraisals
were based not on depreciated purchase prices for assets, as reflected
in book values, but rather on either the earning power of the assets
adjusted to "present value" or the current resale value for all
assets.
On August 23, 1972, Mr. Williams was advised of the asking price
for SAT of $2.7 million for the acquisition of stock and $3.2 million
for payment of debt to Air America or a total of $5.9 million. A
deadline date of October 1, 1972, was established; otherwise Mr.
Williams was advised that the firm would be dissolved and the assets
liquidated. Although Mr. Williams contended the asking figure should
be reduced since the outstanding loan to Air America had been reduced
since the date of the study by Coopers & Lybrands, Mr. Williams stated
he would attempt to work out financing within the deadline date of
October 1, 1972. This deadline was extended by the Agency to
December 4, 1972.
On December 5, 1972, Mr. Williams submitted an offer for SAT of
$5 million which comprised $1.875 million for the acquisition of
SAT and $3.125 million to pay off the debt to AAM. On December 26,
1972, the Executive Director-Comptroller approved the recommendation
that Mr. Williams' offer be rejected and that if Mr. Williams was
NW 50955 DocId: 32423532 Page 100

unable to raise by January 20, 1973, the additional funds required
for the original purchase price of $5.9 million, including the Air
America debt, that the Agency proceed with liquidation plans and
dismissal of SAT employees not later than February 1, 1973.
On January 11, 1973, Mr. Williams submitted a new proposal to
purchase SAT for a total price of $5,605,000. Mr. Williams cited a
tentative commitment for a loan of $4.0 million and his offer was
contingent upon an additional loan. The offer called for a total
payment of $5,605,000 broken down as follows:
Acquisition of stock for Actus and SAT
Payment of debt to Air America
Credit for payments to AAM since
10 June) 1972, in liquidation of
long term debt
$2.145 million
3.125 million
.335 million
Total payment $5. 605 million
Prior to accepting Mr. Williams' offer, CIA representatives
with the CAB
.
again discussed the sale of SAT to Mr. Williams, Mr. R. Tenney
Johnson of CAB indicated that the board would be interested in
seeing SAT continued. Mr. Johnson stated it would not be necessary
to surface the Agency's name as the true owner of SAT in the CAB
proceedings, and that he did not anticipate any problems with
other supplemental carriers as a result of the sale to Mr. Williams.
On January 19, 1973, the DCI approved the sale of SAT to Mr.
Williams. It was noted that Mr. Williams' offer was within 5 percent.
of the original asking price, was above the independent evaluation
for sale as a going concern and was at a figure which would not seem
to give the buyer windfall profit. Such sale would constitute a
NW 50955 DocId: 32423532 Page 101
>
ر
clean break-away of SAT from the Agency with the exception of a one
year extension on the lease/purchase agreement for an L. 100-30 air-
craft 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
They applied
operating as a supplemental carrier. This pressure was applied
Λ
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
NW 50955 DocId: 32423532 Page 102
Airways and Trans International Airways (TIA) objected to SAT
operating any aircraft as large or larger than a 727 in the Far
East. Saturn Airways objected to SAT bidding on any domestic MAC
contracts. To restrict SAT to satisfy all potential competition
could make SAT sufficiently unattractive as a profitable investment
With this in mind the
that financing could become unobtainable.
Agency took the position that agreement for sale of SAT had been
executed, subject to CAB approval. If the CAB ruled against the
sale and ownership reverted to the Agency, the Agency would cease
any bids or service under MAC contracts and dissolve SAT.
Two of the other supplementals, Saturn and ONA, expressed
interest in buying SAT. ONA did not make a cash offer. On June 29,
1973, Saturn Airways, however, made a cash offer of about $2 million
in excess of what Mr. Williams had offered. There were, however,
according to the Agency, compelling reasons not to pursue these
offers. Agency officers had reason to believe that ONA was not as
interested in actually buying SAT as they were in getting a commit-
ment from the Agency which could be used to compromise the Agency's
Three reasons for not accepting
position in future CAB hearings.
either offer were:
a. Any merger with another supplemental carrier would
necessitate a very difficult series of CAB hearings during
which all other major supplementals would certainly voice
loud and strenuous objections.
NW 50955 DocId: 32423532 Page 103
b.
To sell the firm on a sole-source basis to either
outside buyer without soliciting public bids would be
contrary to sound business practice and would attract
even more adverse publicity.
C. Both offers were made directly to officials of the
CIA and not to the stockholders of record. Although the
relationship between the CIA and SAT was the subject of
much public speculation, such relationship was still
classified and an acceptance of either offer would be a
violation of security and cover.
These procedures were unaeceptable to the Agency and dissolution of
the firm or sale to Mr. Williams continued as the most acceptable
method of divestiture, subject to CAB approval.
In view of the objections by other supplemental carriers to
the sale of SAT to Mr. Williams and the award by the Air Force of a
Logistics 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 supplemental
certificate. Mr. Williams was advised of this decision, but made
a counter offer to purchase the company under the previous financial
offer but turn in his supplemental certificate, withdraw application
for acquisition for sale from CAB, and operate SAT as a commercial
carrier under Federal Aviation Regulation Part 121 authority. Such
action 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
NW 50955 DocId: 32423532 Page 104.
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.
Agreement subject to Mr. Williams obtaining $4 million
C.
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).
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
NW 50955 DocId: 32423532 Page 105
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
The
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.
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,
NW 50955 DocId:32423532 Page 106
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 CIA
In 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 Intel-
ligence 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, and
d. 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
the
A
relationship of SAT by CIA. It is noted, however, that the opera-
the
tional activities performed by SAT on behalf of CIA were and remain
Λ
classified. As a part of the Agency's defense in this suit, an
affidavit of Mr. Harold L. Brownman, Deputy Director for Management
NW 50955 DocId: 32423532 Page 107
and Services of the CIA, was presented in court. In the affidavit
the
Mr. Brownman delineated the relationship between CIA and SAT and the
authorities for purchasing and later selling the capital stock of
SAT. He also defined the employment status of the plaintiffs as
not being government employees and not being CIA employees and
therefore not being eligible for participation in the CIA Retire-
ment and Disability System.
In the Order Granting Motion for Summary Judgment, the court
found that the sale of SAT capital stock to Mr. Williams was not in.
violation of law; the plaintiffs claim to be U.S. Government employees
:
and entitled to CIA retirement benefits invalid; and that the SAT
employees were not deprived of any civil right under any state law..
As a result, the action was dismissed with prejudice as to the
plaintiff. Although this suit did cause the relationship between
the 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 laws
and was within the authority of the DCI; and
b. The directly hired employees of CIA-owned proprietary
firms such as SAT do not necessarily enjoy the status of
U.S. Government employees.
CONFLICT OF INTEREST
In the SAT divestiture, the Agency took precautions to avoid
conflict of interest. Mr. George A. Doole, Jr., retired Staff
Agent and retired Managing Director of Air America, Inc., made.
NW 50955
DocId: 32423532 Page 108
several offers to acquire SAT. In early 1972 he and some other
members of AAM management made an informal offer to buy SAT. Then
on August 7, 1972, Mr. Doole told Mr. Charles W. Kane, Agency
official responsible for the management of SAT and AAM, that he,
in association with World Airways and TIA, wanted to offer "book
value" for SAT. He stated that they were not interested in SAT's
certificate, but rather in the equipment and that if allowed to
make an offer, it would be one that would not require CAB hearings.
In both these cases, the Agency's General Counsel determined that
because of Mr. Doole's close association with the Agency, the offer
would be unacceptable. In later discussions, Mr. Doole asked to be
allowed to bid on SAT in open bidding. The General Counsel's posi-
tion on this request was that open bids would be begging the question
in terms of conflict of interest. In any transaction this complex,
selecting the bid is only a preliminary to the negotiated final
sale.
Another potential conflict of interest involved Overseas
National 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 making
these continuing overtures to the Agency was retired Admiral William
F. Raborn, former Director of Central Intelligence. Admiral Raborn
made literally dozens of phone calls to Agency officials and arranged
many meetings) all for the purpose of pressing ONA's case to purchase
SAT. ONA also proposed to arrange "shadow financing" for Mr. Williams
if he would agree to merge with ONA at some later time.
These offers
NW 50955
DocId: 32423532 Page 109
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
nominal
the
.
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 pro-
ceedings, 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 corpo-
ration to the status of private ownership once the need for it as
a Covernment-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.
CONCLUSION
The 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
NW 50955 DocId:32423532 Page 110

authority of the Central Intelligence Act of 1949 in order to
acquire 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 violation
of Section 410 of the Federal Aviation Act.
Following determination by CIA in 1972 that ownership of SAT
was no longer required to support its foreign intelligence opera-
tions, the CIA undertook to dispose of SAT under the authority of the
CIA Act of 1949 and the specific provision in the Federal Property
and Administrative Services Act of 1949 (FPAS Act) that nothing in
the act shall impair or affect any authority of the Central Intel-
ligence Agency. In the case of Robert Farmer, et al., vs. Southern
Air Transport, Inc., et al., the U.S. District Court, Southern
District of Florida, Case No. 74-467-CIV-WM, upheld the authority
of CIA to dispose of Southern Air Transport, Inc.
In disposing of SAT, the CIA determined after discussions with
CAB that SAT should not be sold as a going concern in an open
competitive market nor should merger with another air carrier be
considered. Such action would involve lengthy procedures, hearings,
and publicity which posed a threat to CIA's ability to protect
intelligence sources and methods. While CIA initially was inclined
to dissolve SAT and sell the assets, CAB and DOD both indicated
their desire to maintain SAT as a supplemental commercial air
carrier. Since this solution also would be in the best interest
of the SAT employees and there were indications this could be
NW 50955 DocId: 32423532 Page 111
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 estab-
lished 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.
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
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.
The
NW 50955 DocId: 32423532. Page 112
m
89-20 -
precautions taken and the procedures established by the CIA consi-
dered the varying factors of responsibility for public funds, con-
flicts 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.
NW 50955 DocId: 32423532
Page 113
- 90 -
VI. Project MHBOUND
In 1958, at the time construction of the new CIA headquarters
building in Langley was begun, a small counterintelligence opera-
tion 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 ex-
panded 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 Washing-
ton area and was set up to create a bona fide commercial corpor-
ation 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 addi
tion, 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 commer-
cial firms. The provisions of the so-called Pinkerton Act 'pro-
"Anti-
work
hibit a company engaged in investigative /from contracting with
NW 50955 DocId: 32423532. Page 114
- 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 commer-
cial 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 head-
quarters 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 corp-
oration called General Personnel Investigations, Inc. was organ-
ized and also headquartered in Los Angeles.
On January 23, 1966, for legal, cover and operational rea-
sons 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 corpor-
ate 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 mone-
tary controls on the projects as a whole, and to greatly enhance
NW 50955 DocId: 32423532 Page 115
- 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
ww
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.
NW 50955 DocId: 32423532 Page 116
- 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;
(1) 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,
NW 50955 DocId: 32423532 Page 117
NW 50955
- 94 -
for cover reasons, cannot be refused.
Over the past few years,
this has involved badging operations for private companies, i.e.
airlines, schools, etc. The company has never made a true profit.
To maintain its image among its competitors, however, its books
reflect a small profit on which Federal and state taxes are paid.
The office presently employes four staff agents, five contract
agents and fourteen proprietary employees. During Fiscal Year
1974, the project expended 2.9% of the OS budget ($551,000 vs.
$19,026,530).
MHBOUND, as noted, has provided support to the Office of
Security and Agency operators on sensitive covert operations
and investigative matters, CI/CE support for components of the
Agency, custodial support, courier support on truly covert activ-
ity, guard support, special non-government and sensitive inquiries
(CI/CE probes through STPROBE), technical and physical support
in surveillances and Agency proprietary support. Its commercial
capabilities have included: confidential consultants, internal
security management, security surveys, counter-audio measures and
inspections, development, installation and maintenance of security
protective equipment and devices, classified material storage equip-
ment, secure destruction of classified waste, incinerator equipment
sales, polygraph examination, investigations (personnel), and
industrial undercover activities.
A unique example of its Agency security function was project
STPROBE, which utilized both security probes and security pene-
DocId: 32423532 Page 118
- 94-1
trations. A security probe is a testing of the current effec-
tiveness of all or part of a security system within an Agency
or Agency contractor's installation. A security penetration is
an internal covert investigation and search targeted at possi-
ble subversive elements within a facility who may be engaged in
foreign intelligence or acts of sabotage or who by lack of security
discipline or gross malfeasance may be weakening the security
structure of the project or facility. It is, in essence, counter-
intelligence against a domestic installation. Eastman Kodak, for
example, was the target of a probe. An agent was sent under the
natural* cover of a union construction man to Eastman to gain
employment as a pipefitter. He succeeded in gaining access to
the target, and developed information on the installation and
its personnel in surrounding areas of the union hall, bars, cafes,
and in other appropriate places around the target area. Similar
probes were conducted against Pratt and Whitney in West Palm Beach,
Florida, Lockheed Aircraft Corporation in Burbank, California, and
other targets in New York, Nevada, and Arizona.
Their
These entities serve a useful function within the scheme of
necessary security required by sensitive Agency operations.
utility, however, as in the case of nearly all proprietaries is
relative to policy and "flap" demands. As one Agency commentator
phrased it when Newsweek revealed the relationship of L. Lee
Bean and Paul Hellmuth of the Boston law firm of Hale and Dorr
* He was in fact a legitimate tradesman.
NW 50955 DocId: 32423532 Page 119
94-2
with the CIA in setting up proprietaries:
Proprietaries have been and will continue to be an
important tool to achieve selected operational
objectives. Their use, however, has been drasti-
cally cut back, more because of changes in the
international scene and in operational priorities
than as a result of embarrassing exposures.
Of course, as has been the case with nearly all other proprietaries,
not everyone within the Agency has been satisfied with the mechanism.
Indeed, there has been constant review, criticism and internal
restraint due to a certain fear and suspicion of entities such as
Anderson which are "out there" and not readily accessible to the
leash. For example, in June of 1964, the Chief of the Operation
Support Division wrote to the Deputy Director of Security (Investi-
gations and Operational Support) concerning MHBOUND's policy and
procedures. In terms of operational objectives he noted that they
had "created an operational support entity of dubious capability
and with ill-defined objectives or purpose. He suggested that
they "look this ugly duckling in the face" and see if it could be
terminated gracefully or "see if we can nurture it into a productive
and responsive bird of acceptable countenance."*
"
He "received the definite impression that there may be some
grey area with regard to the internal channels of command and admini-
strative direction." He noted that there was confusion resulting
* In many cases these concerns dealt with the inability of the
entity to provide adequate cover. for itself in order to more
adequately fulfill its role. In one instance, the physical
backstopping of MHBOUND was inadequate. After this was rectified,
one official noted:
It is felt that this step has strengthened the
Anderson Enterprises' cover, both in Boston and
Washington so that now the company could withstand
any inquiries, except that of an official govern-
ment investigation.
NW 50955 DocId: 32423532 Page 120

- 94-2-a -
from lack of a clear-cut distinction "at just what level policy
matters may be decided
•
Management procedures for the
project were such that "under the current status everyone may take
credit but no one could be blamed." As far as operational capa-
bility was concerned he remarked:
It seems,
Quite candidly, I am somewhat concerned about the
operational capability of Project MHBOUND.
as a result of its Topsy-like growth, to be oriented
toward the military and the building trades. Quite
candidly, it is felt that the base must be broadened.
Further, I am far from convinced that we have yet
developed anywhere near the professional status neces-
sary to "sell" this Project as one having unique opera-
tional capabilities sufficient to justify its existence.
In other words, I am not impressed with the capability
as it now exists nor am I sure that we can sell this
product and then be assured that it can perform in a
satisfactory manner.
His comments concerning the attitude of Agency personnel were not
unique to this proprietary, but they are set out here as illustra-
tive of the singular problems these entities pose. His remarks
also show the dangers inherent in some areas of this activity.
It would seem that this Agency, particularly operating
components, are insistent upon pursuing an "ostrich
policy" when it comes to their operational security
procedures. I have personally witnessed almost hyster-
ical reactions to criticisms as well as total rejections
of practical suggestions with regard to operational
security procedures. Now it seems to me that we are
going about this in a very awkward and embarrassing
manner. WE ARE, IN EFFECT, ALLOWING THE WRITERS OF
SENSATIONAL BOOKS SUCH AS THE "INVISIBLE GOVERNMENT"
TO PROVIDE THE NECESSARY INFORMATION AND PRESSURE ON
TOP AGENCY MANAGEMENT TO CORRECT GLARING AND STUPID
COURSES OF ACTION BEING PURSUED AT THE WORKING LEVEL.
I have been the object of considerable personal ridicule
due to my stand in opposition to the unrealistic cover
and operational security procedures as they relate to
certain aspects of (CIA Operational Base) for example.
NW 50955 DocId: 32423532
Page 121
--
94-2-b
IF we had the authority and capability to have made
an objective probe of this sensitive activity we may
have been able to have surfaced these obviously ridi-
culous procedures in such a manner that corrective
action would have been taken. Now is the time to
present the case in light of the abiding fear of publi-
city currently permeating the Agency. I recommend that
we go after the authority to make independent (uni-
lateral) probes and/or probes requested and known only
at the very highest levels of the Agency with the results
discreetly channeled where they will do the most good.
There necessarily follows the unpleasant subject of
money. As distasteful as it may be, it is no good to
have the authority without a sufficiently large confi-
dential fund set aside and earmarked for independently
iniated activities.
He emphasized that if the Agency did not take the above kind of
action to monitor its "image" at the operational level, "we will
continue to be plagued with the unsolicited and uncontrolled
critique through the newspapers, periodicals and books." He
critically concluded:
Further, I challenge anyone to deny that such exposes
to date are largely true and usually the result of our
own "ostrich policy" and refusal to face the fact that
we have operated in some relatively amateurish manners
over the years.
NW 50955
DocId: 32423532 Page 122
- 94-3 -
Such concerns have extended beyond these operational levels
to general issues of propriety and legality. For example, as
noted earlier (supra, p. 90) the so-called "Anti-Pinkerton Act"
prohibits a company engaged in investigative work from contracting
with the Federal government. But
the Agency and its predecessor organizations began
contracting as early as November 1942 with certain
commercial, investigating companies to perform in-
vestigations and to provide commercial credentials
to, and cover backstopping for, Agency investigators.
As of March 1975, the Office of Security had a relationship with
three such companies which issue their credentials to Agency inves-
tigators and backstop the cover of same. Two of the three have
previously "conducted limited personnel investigations" on behalf
of the Agency. During that same period the Director of Security
asked the General Counsel of the CIA whether the "Anti-Pinkerton
Act" prohibited the Office's continued contractual relationship
with these three private companies or their employees for pur-
poses of conducting investigations or providing cover, or both.
The General Counsel responded as follows:
I am aware that in fulfilling the responsibilities
placed upon your office in support of the Agency's
mission, many investigations must be conducted with-
out revealing Agency interest and in some, without
even revealing Government interest. Absent the
relationships you question, you could not discharge
your responsibilities. It is this inability to
accomplish your tasks which causes recourse to the
Agency's rather broad statutory authority to expend
funds as contained in Section 8 of the CIA Act of
1949, as amended. This authority provides
NW 50955 DocId: 32423532
Page 123
94-4 -
(a) Notwithstanding any other provision of law,
sums made available to the Agency by appropria-
tion or otherwise may be expended for purposes
necessary to carry out its functions, including
(1) personal services, including personal
services without regard to limitations on
types of persons to be employed,
*
*
*
☑
(b) The sums made available to the Agency may be
expended without regard to the provisions of law
and regulations relating to the expenditure of
Government funds; and for objects of a confiden-
tial, extraordinary, or emergency nature, such
expenditures to be accounted for solely on the
certificate of the Director and every such certi-
ficate shall be deemed a sufficient voucher for
the amount therein certified.
It is my opinion that this authority permits the Agency
to continue the two practices as set out above without
fear of violation of the Anti-Pinkerton Statute.
He closed, however, with the following admonitions:
There are, of course, other dimensions to the question
you raise.
As a matter of policy I believe the prac-
tices should be reviewed at the highest levels within
the Agency and, perhaps, cleared with the Agency's
oversight committees. In addition, if one of these
relationships became public, it must be recognized
that there will be allegations that the law has been
violated. On balance, it is my view that these consi-
derations are not so significant as to warrant a termi-
nation of the two practices with the three companies.
It is suggested, however, that any subsequent, projected
association with a detective company or private investi-
gative company beyond the three present companies be
reviewed with this Office prior to its initiation.
NW 50955
DocId: 32423532 Page 124
VII.
- 95 -
BEYOND "DOING BUSINESS": PEAK NON-GOVERNMENT SECURITY
INVESTMENTS BY PROPRIETARIES ACTIVE AS OF DECEMBER 31, 1974
As described infra, MHMUTUAL (the insurance and pension complex)
has invested heavily in both domestic and foreign securities markets.
Its portfolio runs the gamut of notes, bonds, debentures, etc. But
other proprietaries have also used this investment route as a method
of increasing capital and insuring adequate cover.
For example, KMJAGGERY is a Delaware corporation located in
Washington, D.C., which purchases general merchandise in a manner
which cannot be traced to the United States Government. It provides
covert procurement for the Office of Logistics (CIA). Its total
purchases from January to September 1974 were $437,500. It has no
outside commercial business and has five employees. Yet, as of
December 31, 1974, that entity had invested $149,000 in time deposits.
Another covert procurement mechanism under this same Office is
SPECIAL STOCK ACCOUNT #3. This is also a Delaware corporation with
an address in Baltimore which purchases arms, ammunition, and police
related equipment in a manner which cannot be traced to the United
States Government. The company has no employees and is managed by
Headquarters officials in alias. As of December 31, 1974, that
entity had invested $37,500 in a certificate of deposit.
LPJACK was a travel service which was sold recently to an Agency
employee at the time of his reitrement, who had ostensibly owned the
firm before but in fact only managed it for the Agency. As of
December 31, 1974, that entity had invested $35,000 in a certificate
NW 509.55
DocId: 32423532 Page 125
NW 50955
-
- 96
of deposit.*
LPDICTUM/LPSPICE was an investment company which was dissolved.
As of March 31, 1973, it had invested $100,080 in Petrolcos Mexicanos,
S.A. Mexico.
HBSANDSTRAP is a Delaware corporation located at Washington
National Airport which has provided secure air support for Agency
employees and classified pouches between Headquarters and other
Agency facilities in the United States. The company has accepted
commercial charter flights from non-Agency customers for income and
cover purposes. As of December 31, 1974, it had invested $144,000
in a certificate of deposit.
QRTROW was a former proprietary and is now an institute located
in Europe which "seeks to influence and encourage moderate and pro-
democratic youth leaders and government officials concerned with
youth and higher education. According to the Agency
"
The Agency withdrew its support from the institute in
1974 and turned over all assets to the management of
the organization. In addition, the Agency provided
surge funding in the amount necessary to enable the
entity to exist in reduced form for about one year
during which time the management would attempt to
arrange private support.
As of March 31, 1972, that proprietary had invested $50,000 in time
deposits.
LPMANTLE is part of the WUTACTIC complex managed by the Cover
and Commercial Staff to provide operational support mechanisms for
DDO foreign operations.
It is a Delaware corporation which is used
*
The Agency today uses this firm for the purchase of airline tickets
for travel in support of sensitive projects. It is estimated by the
Agency that CIA business represents about 30% of the gross airline.
ticket sales of the entity on an annual basis.
DocId: 32423532 Page 126
- 97 -
to collect the proceeds from the sale of Agency proprietary entities
and to refund such proceeds to the Agency. At December 31, 1973, its
total assets were $650,220 and its total liabilities were $633,897.
Total stockholders equity was $16,323. It has no employees.
As
of December 31, 1974, it had invested $400,000 in a convertible subor-
dinated debenture from the sale of a company and $45,440 in notes
receivable. Another company in this TACTIC complex is LPGLITTER.
It is a Panamanian company which was used as an investment vehicle
for funds reserved for new commercial operations requiring Agency
investments. The investment project was terminated and all funds were
returned to the Agency. The company has no employees. As of December
31, 1973, it had invested $246,757 in a Security Note of Pepsico
Corporation, N.V.
taries.
IUQUEST was part of the air support complex of the Agency proprie-
Substantial assets of it were sold and the entity dissolved.
As of December 31, 1974, it had invested $215,000 in a certificate of
deposit.
LPPANDA/LPMET is part of the management and accounting complex.
As of December 31, 1974, it had $470,000 invested in time deposits.
NW 50955
DocId: 32423532 Page 127
98.
SCHEDULE I
PEAK NON-GOVERNMENT SECURITY INVESTMENTS BY PROPRIETARIES
ACTIVE AS OF 31 DECEMBER 1974
PROJECT/ENTITY
MHMUTUAL
LPPANDA/LPMET
IUQUEST
LPTACTIC/LPGLITTER
TYPE INVESTMENT
See Portfolio
Time Deposits
Certificate of Deposit
LPTACTIC/LPMANTLE
QRTROW
ABDERRICK/HBSANDTRAP
LPDICTUM/LPSPICE
LPJACK
KMJAGUARO/KMJAGGERY
KMJAGUARO/SPECIAL
STOCK ACCT. #3
NW 50955 DocId: 32423532 Page 128
DATE
AMOUNT
WEEZE......
12/31/74
$470,000
12/31/74
215,000
Security Note
Pepsico
Corp. N.V.
12/31/73
246,757
Convertible Subordinated
Debenture from Sale of
Company
12/31/74
400,000
Notes Receivable
12/31/74
45,440
Time Deposits
3/31/72
50,000
Certificate of Deposit
12/31/74
144,000
Petrolcos Mexicanos,
S.A. Mexico
3/31/73
100,080
Certificate of Deposit
12/31/74
35,000
Time Deposit
12/31/74
149,000
Certificate of Deposit
12/31/74
37,500
- 99 -
VIII: MHMUTUAL:
THE INSURANCE-INVESTMENT COMPLEX
a) A BRIEF HISTORY
MHMUTUAL is a complex of insurance companies, most of which
are located abroad, operated by the Agency to provide the following
services:
a)
reinsurance of aircraft damage or liability risks
ostensibly insured under commercially issued policies
(for cover);
b) extending term life insurance, annuities, trusts and
workmen's compensation for independent contractors
and agents working for the Agency who are not entitled
to U.S. Government benefits;
c) handling escrow accounts* for agents;
d)
e)
limited operational support activities, i.e., holding
real estate formerly used in Agency operations abroad;
and
investing in domestic and foreign markets to obtain
earnings to fund the above.
**
MHMUTUAL was created in 1962 to provide death and disability bene-
fits to agents and beneficiaries when security considerations pre-
clude attribution to the U.S. Government. The losses during the
Bay of Pigs prompted its establishment. From sixty-seven (67) to
seventy-three (73) companies operated originally under the Domestic
Operations Division and later a board of directors controlled by the
Office of General Counsel. This internal board of the project made
investment decisions.
NW 50955
* Escrow accounts are established when an agent cannot receive his
full payment from the CIA without attracting suspicion. The funds
not paid to the agent go into escrow accounts and are invested under
MHMUTUAL.
**
The CIA's domestic real property holdings appear as Appendix E.
DocId: 32423532 Page 129
100 -
Lawrence Houston, retired General Counsel of the Agency, testi-
fied that his office instigated the establishment of MHMUTUAL. This
was because his staff would be the repository of all problems related
to the death or disability of a person during the course of his
Agency work.
These problems were all handled in what Houston called
a very "sketchy way" and this was simply undesirable from all
points of view.
Moreover, when the Agency went into air proprie-
taries on a large scale there were certain risks which simply
could not be underwritten commercially.
So somewhere in the late 1950s or around 1960,
I think I was the one that posed that we might
organize our own insurance entities. I had a
couple of lawyer friends deep in the insurance
business, and I suggest I talk to one of them,
and he promptly said, well, it so happens that
I have a couple of offshore insurance entities
that I can make available to you. And we took
a look at them. It looked like they were or-
ganized properly for the purpose. They cost
practically nothing. They were just shells.
But they could be filled out. So if my recol-
lection is correct, we acquired these two as the
first step in what became the MUTUAL project.
Simultaneously, the decision was made that if the Agency was going
to maintain such a capability,
they had to have enough body and backstopping so
that if a suspicious foreign intelligence outfit
tried to investigate, they would stand up under
investigation as would any normal insurance outfit.
In other words, they had to appear to have finan-
cial stability, they had to have names that could
stand up and answer questions, and in other words
appear to be in the normal business of writing the
type of annuities (and) insurance, death and dis-
ability.
This concept was totally organized originally then under the Domestic
Operations Division. DOD eventually recommended that the complex
NW 509,55 DocId: 32423532 Page 130

-
101
-
be transferred to the Office of General Counsel.
This occurred,
and it remained there until Director Colby decided in conjunction
with Mr. Houston to transfer for operational reasons to the Cover
and Commercial Staff. This was done because CSS had the expertise
and manpower.
Moreover, Mr. Colby took exception to the Board
concept because he felt that it diluted the line responsibility by
which all other projects were administered.
As the number of insurance companies grew to cover increasing
demands placed upon the Agency by more agents, the general fund
which was retained to backstop all the needs of these companies
grew, and "the question was what to do with your money.' Houston
explained
"
Now, insurance companies are normally in the business
of investing their funds, and so this being the normal
thing, it appeared to us necessary to preserve the nor-
mal appearance of these insurance companies to carry
on investment programs for the funds involved, and
there were a variety of investments to be considered.
You could go into U.S. Treasury Bonds, notes and bills,
but actually, from the point of view of insurance bus-
iness practice, this was very unusual. It would be
very, very unusual in the insurance field. Usually
some of them would have some investment in bills, notes
or bonds, but it was a very small part of their portfolio,
and to put it in nothing that that we thought would be
a dead giveaway. So we first went in the direction of
having a general portfolio somewhat similar to the nor-
mal insurance company's investment practices, and I
originally recommended that we have the board of direc-
tors so that we could have available and demonstrate that
we had available the best competence the Agency had in-
ternally to pass judgment on what to do with their money.
Because of shifts in the stock market which made it not look as
promising as it had been during the 1960s, MHMUTUAL went into
certificates of deposit, the Eurodollar market and the bond market.
NW 50955
DocId: 32423532 Page 131
102
It was decided to invest, however, only in Eurodollar bonds that
were "guaranteed by the American parent company."
It was thought
that "they were a pretty secure investment." On occasion, "when
we got the advice of our economists on the DDI side, we took some
government paper that they considered foreign government paper
#
that they considered really a good security.' Houston became the
central figure in this investment scenario:
More and more I continued on this Board of Direc-
tors as giving basic policy advice. We had long
discussions on the areas of discussion, what to stay
away from, what to go into, what it looked like as
far ahead as they might think they could see. And
more and more I would make the individual decisions
on my own in light of their policy guidance and with
the information which my staff in MUTUAL could get from
the many friends they now had in various underwriting
and investment places on an unwitting basis, who just
thought they were customers. For instance, on the
Eurodollar bonds, they were dealing with several houses
who just thought the fellow was another investor coming
into them and would get very detailed and on the whole
pretty good advice, which often we could check from
inside through some other of our sources.
°
.Profits
from primarily the interest operations were very pro-
fitable, and these built up over the years quite rapidly
and were brought into the insurance funding identified
as profits for future possible use.
It was always recognized that a policy decision might
be made at any time that we had funds excess to the
valid backing up of our underwriting, which would be
brought back into the government for such disposition
as might be appropriate at that time.
In terms of actually providing insurance in the aviation and
maritime field, a study would be conducted in each case where in-
surance was required. If it looked as though normal commercial in-
surance would handle it, as was the case with most of Air America's
needs, then the particular entity would go ahead and procure the nor-
mal commercial insurance. If there was something peculiar in the
operational setup that precluded commercial companies from accepting
NW 50955
DocId:32423532 Page 132
-103-
the risk or if there were security problems, then it would be
handled through MHMUTUAL.
What we would do when it came to aviation and
marine, we would go to one of the cooperating
companies and see if they wanted the insurance
for their own accounts, because we had made
arrangements that if there were operations
security problems in any one claim, that they
could handle the investigation so it wouldn't
be a problem if they wanted to take for their
own account. If they didn't want to take it
for their own account or they didn't want to
take it all for their own account, they might
then seed back to us what they didn't want.
And it would be then underwritten technically
out of MUTUAL's account, although they would be
the ostensible insurers.
Several of the aviation entities, other than Air America which
dealt almost exclusively with regular commercial insurance com-
panies, did nto feel quite secure with regular insurance. They
turned to MUTUAL. MUTUAL would in turn offer the risk to one of
the cooperating insurance companies. If they would take the risk,
If
they would then negotiate the premium with the proprietary.
they did not want the risk, "then they would seed back to us and
we would take the portion of the premium that should come back.
Usually it if went through a company, they would take a small
underwriting premium to pay their costs, 3 percent or something
like that. And the rest of the premium would go back in MUTUAL,
if they were actually taking the risk."
In 1970 the Inspector General conducted a survey of the secur-
ities held by MHMUTUAL. He concluded that the project seemed to
be secure in its operations in the fields of insurance and invest-
NW 50955 DocId:32423532 Page 133
-104-
ment. The IG looked at the investments from a security (i.e.
cover) point of view in terms of MHMUTUAL's operational support
function. His concern was that each time MHMUTUAL bought a
safehouse, for example, there was the possibility that audio
surveillance of the house by the Soviets would lead to a dis-
covery of the purchase mechanism used by the Agency.
He rea-
soned that, therefore, the purchase of such items by the com-
plex was operationally unsound because it exposed the entire
complex to compromise if a foreign intelligence agency tracked
back the transactions through various corporations. According
to the Inspector General, no funds of MHMUTUAL were used for
specific projects. What would occur, however, was that a project
would transfer funds to the complex which would then disburse
them as needed through an appropriate entity. This method left
him with major reservations about MHMUTUAL security when it sup-
ported sensitive clandestine operations. Thus, MHMUTUAL's pro-
vision of cover, funding for active operations, and record owner-
ship acquired for sensitive operations was deemed inappropriate
and, accordingly, the IG proposed separating operational sup-
port activities of MHANVIL from the instrumentalities of MHMUTUAL.
It was
to be restrained to the purposes for which it had been
established in 1962*
* During the course of the IG inquiry no instances were discovered
where MHMUTUAL or its funds were used to influence foreign stock
markets or currencies. The Committee has also found no such
instances.
NW 50955 DocId:32423532 Page 134
-105-
At the time of this 1970 review by the IG, MHMUTUAL held a
surplus of $9 million. It also earned income from sources sup-
ported by public taxation. It appears from the questions that
were raised at the time about briefing congressional committees
on MHMUTUAL that this was not done, providing a situation where
an organization with assets of $30 million has been created and
was operating without oversight knowledge or approval. Moreover,
because MHMUTUAL was no longer a project after its removal from
the Domestic Operations Division, there was no annual allotment
and no annual operational review.
Houston indicated that MHMUTUAL had been operating "before
we told our committees any detail. I think it was mentioned as
a problem that we had to make arrangements to cope with insurance
problems fairly early on. But the fact that it was a business
and a business of this substance was not done for some time. My
recollection is there was not deliberate avoidance; we just didn't
get to it."
On the question of lack of annual project review,
Houston commented that this was "technically correct. But, he
added,
"
As a matter of practice I would say that MUTUAL was
more carefully reviewed in some respects than almost
any other project in the Agency in the sense that we
had the bookkeeper inside the project who was a finance
officer and bookkeeper. The project published at least
monthly reports in detail which went not only to me but
to Colonel (L.K.) White (the Comptroller) and the
Director. These were very detailed reports which often
raised questions which went back for answers.
NW 50955
DocId: 32423532 Page 135
-106-
The Inspector General was invited in, according to Houston. In
addition, the Finance Office kept its own books in the proprietary
accounts branch on MUTUAL. Such reviews were done, he said, "on a
constant basis.'
18
We were very conscious of the amount of money in-
volved and the possibilities of someone trying to,
someone yielding to temptation and trying to do
something with all of this money.
b) THE CURRENT STATUS
The project currently consists of twenty-six (26) companies
of which five (5) are domestic.
All of the clients of MHMUTUAL
The Office of Finance has indi-
are under non-official cover.**
cated that the current net worth of the project is $18 million
which is the result of retaining earnings. It was originally
capitalized in 1962 with $4 million. A Washington, D. C. lawyer
(MHANVIL) is currently the investment manager and he provides day-
to-day direction. MHANVIL is a sole proprietorship proprietary
of the Office of General Counsel.
11
Total assets are currently
*** MHMUTUAL itself is only for covert non-staff officers of the CIA.
In essence, it only works for what would broadly be described as
"agents, those not entitled to participate in the CIA retirement
plan or in the Civil Service Reitrement Plan. They are primarily
foreigners, and usually DDO employees. Those individuals who were
formerly known as contract agents and who are now known as independ-
ent contractors also participate in MHMUTUAL. In the case of most
agents, the CIA contributes 7 percent and the agent contributes
In
7 percent, in keeping with CIA practice for regular employees.
cases where the agent is well along in years and contributions from
the Agency and the agent would not provide enough funds to capital-
ize an annuity, the Agency provides the initial capitalization; how-
ever, approval of this must come from the DDO.
NW 50955 DocId:32423532 Page 136
-107-
$31 million, most of which are held outside the U.S. The companies
do not write insurance in the United States, but rather reinsure
with cooperating companies who then sell the risk to the CIA for
a percentage of the premium. The policies are written directly
abroad. Each of the U. S. companies pays little tax and a pro-
prietary auditing firm audits the books of MHMUTUAL. This method
of self-insurance enables the Agency to funnel money where needed
in any of its project categories. Currently, 60 percent of the
investments are in Eurobonds, 20 percent in off-shore time deposits
in U. S. banks, and the balance is in common stocks, debentures
and commercial paper of various types. For example, the current
breakdown is:
$7 million in time deposits abroad;
$2.4 million in Common Stock (at cost);
$20.8 million in Eurobonds;
$1 million Eurodollar convertible debentures;
$.5 million in short-term commercial paper overseas; and
$.2 million in domestic debentures.
The performance of the MHMUTUAL stock portfolio is noted at
this juncture. Comparisons of cost against market value for the
years 1970 through 1975 are given first. Following that are the
gains or losses on the sales of stock for the years 1963 through
1975.
NW 50955 DocId: 32423532 Page 137
ຍ
60955
i
SECRET
33
STOCK PORTFOLIO PERFORMANCE
Comparison of Cost Against Market Value
Year
Cost
1970
$ 3,792,804
1971
1,123,651
1972
2,969,403
1973
2,650,904
1974
2,440,686
1975
2,440,686
Gain
or (loss) on Sales of Stocks
Year
1963-1969
1970
1971
1972
1973
1974
1975
Total Gain
Gain or (loss)
$ 197,348.15
(19,910.64)
118,943.90
310,346.37
150,447.03
(172,796.04)
-0-
$ 584,378.77
SECRET
Market Value
$ 3,689,294
1,069,301
2,872,557
1,242,915
699,422
876,507
RECEIVED FROM
NOV
1975
Lini
しい
R1819
1
NW 50955
- 109
Included as Appendix D
is an in-depth list of common stock
purchases from 1971 through September 30, 1975. In addition, there
are schedules of portfolio sales from 1964 through 1974.
A look at the Project MHMUTUAL Consolidated Balance Sheet for
December 31, 1974 will give some idea of the scale as of that late
date. Current assets (cash in banks, premiums receivable, advances
receivable, accounts receivable, client notes receivable, rent
receivable, interest receivable, and investments maturing in one
year) totaled $6,910,891.00. Investments (time deposits, bonds
and commercial paper, and stocks at market value) totaled
$25,342,772.53.
Fixed assets (real estate and furniture and fix-
tures) totaled $73,084.12. Other Assets (prepaid insurance, recoverable
deposits, and other prepaid expenses) totaled $32,682.00.
These
combined for Total Assets of $32,359,430.45.
As usual, the Project was subjected to an extensive audit for
that year.
The audit included site examination of books and financial
records of 12 of the instrumentalities administered by
Agency-owned management firms as well as review and evalu-
ation of related records, controls, and procedures at
Headquarters. Five instrumentalities administered by
Agency-owned management firms are located abroad and
will be audited later. Audit of the other six instru-
mentalities administered abroad by foreign accounting
companies was limited to examination of financial reports
and such other documentation as was available at Head-
quarters. These latter examinations provided us reason-
able assurance that Agency resources, totaling about one
percent of project accountability, are adequately pro-
tected.
That audit concluded that MHMUTUAL "continue(d) to be admin-
istered in an efficient and effective manner and in compliance
DocId: 32423532 Page 139
NW 50955
-110-
with applicable Agency regulations and directives." Prior audit
reports had commented on the need for a revised administrative
plan and in accordance with these reports, the audit noted, a
"new plan was approved in March 1975." In addition, "(m) inor
administrative and financial problems surfaced during the audit
were discussed with MHMUTUAL officials and resolved." The audit
noted that total income for that year (from interest, premiums,
gain or loss on sale of securities, dividends, rentals, profes-
sional fees, gain on foreign exchange, gain on sale of property
and from miscellaneous transactions) was $4,113,590.00. The
total expenses for that year (allocation of premium income to
reserve for claims, interest, salaries, rent, accounting fees,
taxes, loss on property write-off, legal and other fees, communi-
cations, depreciation and amortization, travel, equipment rent,
real estate expenses, pensions, dues and subscriptions, directors
fees, entertainment, and miscellaneous) were $2,459,260.00.
combined for a net income of $1,654,330.00.
These
The current Chief/Central Cover Staff has focused on MHMUTUAL
in a number of interviews with both the Rockefeller Commission
staff and our own. He has suggested that the real question for
MHMUTUAL is what should its role and shape be after the termina-
tion of the large air proprietaries. One of MHMUTUAL's original
purposes was to provide reinsurance for Air America, CAT, Southern
Air Transport, Inter-Mountain Air, and the other air proprietaries.
With their passage, a reorganization and redefinition is needed.
DocId: 32423532 Page 140

36
As to the issue of safeguards against misuse of project funds
or insider information by the Agency, the Chief CCS has told the
Committee that compartmentation, the honesty of the Chief of CCS,
and display of the portfolios to appropriate congressional commit-
tees are what have prevented or will prevent such abuse.
Chief.
Houston agreed with the three safeguards outlined by the CSS
However, he added a fourth:
When we were investing in stock, I would have the
list of stock, the portfolio, reviewed by our con-
tract people, and if I found we had any contract
relationship with any of the companies involved, we'd
either refuse to Well, a couple of times our invest-
ment advisor recommended a stock which I knew we had
big contracts with, and I told the board no, this in-
volves a conflict of interest. We won't touch it.
And if we had anything from the Agency contract office
that indicated a relationship, we would either sell
the stock or wouldn't buy it.
This
Houston believes that the complex should continue in some form.
One reason is that "assets are few and far between. The acquisi-
tion of a board of directors, the establishing of accounts, basic
credibility and relations with the jurisdiction in which the entity
is located are not easy things to do according to Houston.
creates the "tendency, once you've got something that looks good,
to hang on to it." He would recommend in this regard that the
Agency be constantly forming new companies and phasing out old ones
on a rotational basis so that the same complex would not remain
for security reasons.
The cument
Chief of
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37
So it's not easy but I still think that they
should make the effort. [The Chief CCS] knows
my views on this pretty well, and we're all
worried about the security of the damn thing.
But we don't know another way to do it.
He believes that the current method while not perfect is the best
that can be devised. The problem, of course, is that the genera-
tion of funds for these companies must literally be shown to be
legitimate and non-governmental if the beneficiaries are to be
protected. Consequently, if the government were to create an
office that would funnel money to these companies without the
benefit of investment, this would create the risk that a trace-
back investigation by a foreign power could discover that the
entity is being funded by the U.S. government. Houston closed by
saying that he would invite any controls that Congress would choose
to put on the mechanism in terms of insuring propriety.
The Chief of ccs has tatele characterized the
insurance complex
aa
"indispensabile
and as an item
for which there is no wable alternative. (1-27-76; Tr. 12-1
NW 50955 DocId: 32423532 Page 142
૩.
THE AIR PROPRIETARIES
Lawrence R. Houston, the former General Counsel of the Agency,
was involved in the establishment of the first set of proprietaries
of the Agency back in the late 1940's and early 1950's. As noted
later on in section 10, page
Houston has concluded that.
proprietaries should be a mechanism of last resort. He asserts
that the Agency learned this in part "the hard way and almost all
of the lessons involved probably came out one way or the other in
connection with a major aviation proprietary in the Far East.
Others had there own special problems, but I think the Air America
complex had pretty near everything."
The theory of the acquisition of Air America in 1949 was denial
of the assets to the Red Chinese. The CIA first arranged advances
to the company to keep them going when they were running short of
cash in 1949. These advances were used up and were actually credited
to the purchase price eventually. The airline at that time had
been organized by General Claire Chennault and Whiting Willauer.
It was
a joint venture with the Chinese Minister of Transport and
was called Civil Air Transport. Houston described it as follows:
This normal aviation organization, this would have no
meaning at all, was completely at all, it would have
not standing in international law, aviation rights, or
any of that. But it worked for what they wanted, which
was to take supplies up-country into inland China and
then to bring back whatever cargo they could get commer-
cially: tallow, hides, bristles, all that sort of trade,
and then they traded that off for their own account.
for awhile the operations was fairly successful, the C-47's
and C-46's.
And
To finance this activity and to facilitate the trading of produce,
their lawyer, Thomas Corcoran, had organized a company. That company
was known as C.A.T. Inc. In addition there was a Panamanian
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)
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42
corporation which was involved that did most of the funding.
There was also an envy known as the Civil Air Transport "to further
complicate the picture, at this time Chennault and Willauer were
also negotiating with the Chinese CNAC, for the takeover of their
planes and equipment.' Chennault and Willauer came to the Agency
in connection with that operation in the Spring of 1949. At that
point the Nationalist Chinese were being "squeezed down south by
the Communists and they were really backing down toward Shanghi,
restricting their area of operation and consequently the produc-
tivity of their commercial venture." Chennault and Willauer indi-
cated to the Agency that unless they got help they would have to
go out of business.
The agency held a series of meetings in which it was determined
that it had a need for some air transport for some of its operations
particularly involving arms and ammunition and consequently the
Agency needed a contract with someone.
And so we entered into an arrangement, I think in
about September of 1949 whereby we would advance
them, the figure of $750,000 sticks in my mind,
against which we could draw for actual use of the
planes at an agreed on rate.
And we did draw
down, I think, all the flying time and expended the
$750,000 between September and about January, at which
time we suspended any further payments or draw-downs.
I think the money was exhausted.
Chennault and Willauer came to Washington about January or
February of 1950 and through a series of negotiations, the Agency
agreed to advance them more funds, taking at the same time an option
to purchase the assets of Civil Air Transport, with the liabilities
left to their account. Any unused portion of the advances were to
be credited to the purchase price. They then operated through the
DocId: 32423532 Page 144
Spring of 1950 under this arrangement and Chennault and Willauer
"came in in the Summer of 1950 and said again they were in desperate
straits for funds." Once again a series of meetings was held at
which the prognosis was that the operations in the Far East would
have a continuing need for secure airlift and also, there was a
general estimate that the loss of this airlift to the Chinese
Communists would give them a considerably greater advantage than
then possessed because they had almost no airlift of their own at
that time. "The Agency then made the decision that they would
exercise the option given there was no objection otherwise."
The Agency felt that it was necessary to get the concurrence
of the Department of State. Frank G. Wisner, at that time the
Head of the Office of Policy Coordination (OPC) which was respon-
sible for conduct of covert actions as opposed to clandestine in-
telligence, and Mr. Houston visited Mr. Livingston Merchant, who
was Assistant Secretary of State for the Far East.
He and I went to see Mr. Merchant and explained the
situation. And Mr. Merchant reminded us that it was
basic U.S. policy not to get the government in compe-
tition with U.S. private industry. But under the parti-
cular circumstances, in particular as there was really
no U.S. private industry involved in the area, and they
agreed it was important to divide the assets to the
Red Chinese. State would go along on the understanding
that we would divest ourselves of the private enterprise
as soon as such a divestment was feasible, and all of
the circumstances that might obtain.
Of course, the divestiture of these entities did not actually
occur until 1975. And, indeed, some of the entities still as yet
have not been divested.
Mr. Houston noted, however, that:
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44
We did not disregard that guidance because after
very considerable use of this asset during the
early '50's, there was a question of whether to
continue it, and the matter was taken up in the
National Security Counsel. And Allan Dulles, as
Director, opposed that we continue the ownership
and control of the assets of Air America, as it
then was known including the subsidy as needed.
And there was a subsidy at that time. It was
about $1,200,000 per year.
*
This consideration by the National Security Counsel as to whether
or not to continue to retain this asset and Mr. Dulles' recommenda-
tion that it be retained occurred in 1956.
During this period of time the business of the air proprietary
consisted almost entirely of Agency cargo carriage under contracts
which were usually using a military designation. The company was
not organized, according to Houston, to fly common carriage and
had no status in the international air business.
were
The evidence indicates that during this period of time, there
two struggles going on. One was where control should lie in
the Agency and the other was the policies to be applied to the
operation of the company itself.
The struggle within the Agency ranged all the way from
sort of quiet management discussions as to what was good
management, to sometimes rather vociferous auguments of
whose in charge here. And the operators always said,
well, we need to call the shots because it's our operation.
And this is what we were running into all the time,
of red hot operators opposed to what we would consider good
management.
'Houston indicated that there had been a subsidy running to the
entities since 1949. "$1.2 million represented about the maximum
subsidy given until, I believe, about 1958 was the turning point,
and from 1958 on, there was no subsidy as such that went into it.
The reason for that, of course, was that the air complex had become
"money-making."
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45
The management of the air proprietary at this time was in the
OPC structure and was therefore responsive to operations. An
example of some of the problems which were created as a result
of this is the acquisition in August of 1950 of the entity.
Houston was participating in the negotiations. He had been in-
vited to do so by Frank Wisner.
OPC was a curious organization. Determined as being
attached to the Agency for quarters and rationing
with policy guidance from State, which was an impossible
situation. Very nice fellows were doing the negotiating
with Wisner Frank Lindsay and Chad Breckinridge, who
is now dead. Frank Lindsay has been head of ITEK and
quite unknown to me, when they made the agreement to
purchase carrying out the option, they gave the vendors
the right to repurchase at any time within two years.
And I thought this was really inconsistent with our whole
position. And during the next two years they negotiated
out that repurchase agreement and in its place substituted
an agreement to give them a first refusal, if we were to
dispose of the airline. That first refusal plagued us for
years. They use to make all sorts of extraordinary claims
under it and it was never exercised and eventually it was
It
sort of forgotten when Chennault and Willauer died.
ran to them personally, whether it ran to them and two
others personally, and they all are dead now. But this.
shows a part of the learning curve, which was thing we
were going through. It also became clear that the organi-
zation of the airline was really impossible, it's sort've
semi-formal partnership with the Ministry of Transportation
or the Ministry of Communications (of the Nationalist Chinese
Government).*
That basically describes the preliminary situation from the period
1950 through 1954. It was in 1954 that George Doole first came
onboard as a consultant. Doole and Houston went to the Far East in
the summer of 1954 to observe the operation.
"George went out there
F The Nationalist Chinese had by this time retreated to Taiwan, they
maintained a maintenance base tied to Hainan "The maintenance base
at that time was on a LST and a great big steel barge. And we brought
the LST and the steel barge up to Kiaoshung, and it was really extra-
ordinary what a maintenance job they did on what was almost impossible
facilities. I went down and was enormously impressed by the difficul-
ties and how well they had overcome them," noted Houston.
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46
" In this
specifically to look at the organization of the Airline.
regard, it is noted that at the time the Agency purchased the Air-
line it had formed a Delaware corporation to buy it which was first
called the Airdale Corporation, counsel for which was Brackley
Shaw. Shaw and Doole were both very concerned about the technical
Doole demonstrated
organization or lack of it, of the operation.
to Houston
to my satisfaction that it was an absolute situa-
tion and that no one out there had the slightest
understanding of the problem or what they were up
against, or wanted to do anything about it (in terms
of airline management).
As a result of this Shaw and Doole planned the organization which
they thought was necessary for the future of the operation. Hugh
Grundi was installed as President of the corporation by the end of
1954.
Management responsibility internally was given to Lyle Shan-
non "who was a management type, although he was assigned to the
DDO, or by that time it might have been the DDP."
The upshot of this review by the Agency was that the theory
of running the airline was that it would be managed by manage-
ment to be responsive to Operations. "but not managed by Opera-
tions.
In order to improve its cover "the Chinese not only were wil-
ling, but at that time wanted it to be the airline that showed the
flag of China." This was done on overt records through Civil Air
Transport Company, Ltd., which was the subsidiary of Pacific Corp-
oration. Pacific Corporation held title to 40 percent of the
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47
The company
equity in the corporation and 60 percent of the equity was osten-
sibly owned by the Chinese, who gave deeds of trust to the Agency
for their shares. This overt arrangement demonstrated for purposes
of international law that the company was majority-owned and con-
trolled by Chinese. The Chinese continued to press the company
to get into the international common carriage field.
had several DC-4's and began modest operations between Hong Kong,
Taipei and Tokyo. They graduated to DC-6's, and it was at this time
that the Agency first got into the question of competition with U.S.
industry. Northwest was then flying to Tokyo and Seoul and to
Manila, and was trying to obtain rights into Hong Kong. Don Nyrop
had noted the Agency's interest in this area when he had been
Chairman of the Civil Aeronautics Board in the late 1940's and the
early 1950's. Houston told the Committee:
He (Nyrop) became head of Northwest, a very tight
manager, a very capable fellow, and he used to
complain that we were interfering, we were taking
passengers off his airline, and we would go to him
and say, we have to keep the airline in this busi-
ness because the Chinese say they need an international
airline. They're not ready to start their own yet.
And it is necessary to its overall cover status as a
going commercial concern.
By 1959 Mr. Nyrop was complaining that the Agency was doing too much.
Finally Nyrop decided to complain to the Civil Aeronautics Board and
the Agency agreed to place it before that Agency for a decision.
A meeting was held with the entire Board, at which time Nyrop was
able to make his case "for the fact that he was a private industry,
he should not be interfered with by government competition."
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48
The Agency explained its situation, the cover need, the Chinese
pressures, and the fact that they were keeping the carriage to
what they thought was a minimum that appearances could stand.
And it ended up by one of the members of the Board
turning to Nyrop and saying, Don, you ought to be
glad that you don't have a really good, reliable
competitor in there. He said, If you were being
competed with by private business, you'd have real
headaches. You ought to be real glad that it's not
worse than it is. And that's the end of that.
Houston conceded that some passengers were going on basically CIA
planes instead of Nyrop's Northwest planes. The impact, however,
was minimal.
the dilemma.
Moreover, the CAB in this proceeding was advised of
They did participate in discussions with both the
Agency and the particular business entity that was making the com-
plaint, and the CAB, after hearing both sides, "came down on the
side of the Agency after making a reasoned judgment."
By this time the airline's commercial international business
was not making money. A maintenance contract work, which was being
done at Taiwan, however, was "normally a money-maker, and this was
primarily, although not exclusively, with the U. S. Air Force."*
There were management problems in terms of the maintenance
aspects of this operation. This originally stemmed from the fact
☑ The LST and barge which had previously been used for maintenance
purposes became inadequate. Therefore the Agency built a plant
in Taiwan "that is now there but has been recently disposed of to
E Systems, and a very good plant it was. E Systems' role in the
acquisition of proprietary assets is detailed later.
"
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L
4q
that individuals out in the field are not particularly astute at
costing their contracts. Doole gave excellent advice in this area.
Moreover, Doole was quick to advise when an operation is bordering
on not being responsive to the demands of good management. Houston.
cited one instance when Doole replaced a controller in the corpor-
ation who was very able but "had his own ideas of bookkeeping and
controls." Doole insisted that the corporation put in bookkeeping
and controls completely consistent with U. S. CAB and FAA prac-
tices. And of course the maintenance contracts with the military
were audited constantly by the military audit teams that were
right in the plant.
By this time the Agency had organized an exemption from the
Contract Renegotiation Board on the grounds that if the renegotia-
tion personnel became too involved in the business, they might
recognize that this was not a straight commercial operation and
discover the fact that the CIA was involved. The Agency went to
the head of the Contract Renegotiation Board and got a letter from
the Department of Defense asking for an exemption on what the
Agency and the Department considered "perfectly legitimate grounds."
Indeed, there was a basis for exemption in the Renegotiation Act
if the business was entirely overseas, which was the case with this
airline. And so, the exemption was granted on that basis.
Agency was concerned, however, by the fact that it had in principle
made a type of profit, over 40 percent on these Air Force mainten-
ance contracts, that might have well have been the subject of re-
The
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50
negotiation, had it not been subject to the exemption. "So the
question was what to do about it. And finally, we made a volun-
tary repayment against part of the profit on that contract to the
Air Force."
As noted previously, the commercial airline aspect of the
operation was not making a profit and in fact operated mostly at
a loss. Indeed, there were periods of time when the C-46's
and C-47's cargo carriers were very busy on either CIA contracts,
the Korean War, Diem Bien Phu, and other paramilitary aspects.
There would be periods in between these activities when there was
nothing for the airlines to do. Nonetheless, the airline was still
saddled with expenses such as crews' salaries and maintenance of
the aircraft which sat on the ground.
So George posed, and we finally organized, the stand-
by contract, which was an apparent military entity on
Okinawa. It was our entity, but it had a military
I can't remember the name for it.
designation.
And
that entity contracted with Air America for so many
hours of cargo stand-by to be available any time on
call, and that they would pay so much for that capa-
bility being maintained. . . so that is how we kept
the subsidy going to maintain them during periods
when there was not profitable flying.
Another area of concern was the question of the relationship
with the Internal Revenue Service. From the very start, the company
management was informed that they would be required to pay the
appropriate U. S. taxes, and while there were the usual business
arguments about whether certain items were appropriate for taxation
and whether certain deductions should have been granted, the rela-
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NW 50955 DocId: 32423532 Page 152
51
0
tionship maintained with the IRS was basically a normal one.
Houston recalled that in the mid-50's the company, Air America,
received a notice that they were going to be audited by the IRS.
Company officials came to the Agency and indicated that this might
pose a problem in terms of security. The Agency went to the Com-
missioner of the Internal Revenue Service and indicated that
they would like to have the Commission conduct the audit and have
the audit done by a team on an unwitting basis to see what they
could find out. "We thought it would be a good test of the secur-
ity of our arrangements."
They put a very bright young fellow on and he went in-
to it. They came up with discrepancies and things that
would be settled in the normal tax argument, corporate-
IRS argument, and all of these were worked eventually,
and then we went to this fellow and said, Now, this
was owned and backed by the CIA, the U. S. Government.
What was your guess as to what was happening?
And he said, Well, I knew there was something there,
and I thought, what a wonderful asset it would be for
the Russians to have, but I came to the conclusion that
it was Rockefeller money.
Thereafter, the IRS would be notified if it began to conduct an audit
on an Agency proprietary, and the audit would be discontinued.
As the operations of Air America developed the problem of large
cargo carriers arose. In the early days of its operation the airline
was using C-54's, which had an extremely limited range but were able
to perform notwithstanding under demanding circumstances. Discussions
proceeded during that period about modernizing the equipment and
the Agency, through the proprietary, bought DC-6AB's, a conversion
of the DC-6, which had large cargo doors installed in it.
They,
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52
however, did not maintain any jet equipment at that point. This
cargo system which they developed was getting heavily into a mil-
itary air transport contract system. The system was first known
as MATS, and then it became MAC.
They got MATS contracts, and Air America got these,
and these were very good to keep a constant utiliza-
tion at a good rate, the MATS rates were usually good,
because the policy was not to do competitive bidding
for the lowest bidder because then you got the poorest
service, but give good rates to the carriers, and then
require the carrier belong to the Civil Reserve Air
Fleet.
In 1956 MATS changed its policy and required that bidders on
the contracts to be certificated. Of course, there was no real way.
that Air America could become certificated and so the Agency decid-
ed to purchase Southern Air Transport. While it was technically
a separate entity, not involved in the Air America complex, it was
actually an integral part from the management point of view, in that
all management decisions were centered again in George Doole and
the advisory team in the Agency. MAC eventually also decided to
require that bidders not only have to be certificated, but had
to have equipment qualified for the Civil Reserve Air Fleet and
this meant jet equipment. As a result the Agency went into the
acquisition of Boeing 727's. Mr. Doole eventually convinced Boeing
that they should modify the 727 to enlarge the ventral exist, which
was already in the plane, so that the plane would then have a large
airdrop capability. Boeing did so modify the plane and it proved
entirely useful for these purposes.
"So the theory was that the
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A
53
727's would be used on MAC contracts to be available on an over-
riding basis if needed for some major national security operation.
They were used, usually when they had spare time.
To my recollection, they were only called off once,
off the actual contract time, and this was for a
possible use which didn't go through. But the White
House asked if we had the capability to move some-
thing from here to there, I think from the Philippines
to somewhere in Southeast Asia, I don't recall, and so
they sent word to management that they wanted a plane
available at the earliest opportunity at Clark Field.
They pulled one of them off the MAC contract and had
it available, I think ready to go, in twelve hours,
all set for the operation. And the operation was
never called. But it showed what the capability was.
And what they had to do was get substitute service
for the MAC contract.
During the late 1960's several Chinese airline enterprises started,
both of them on quite a small basis, but one of them which became
CAL had official backing. This occurred while the CIA's proprie-
With the establish-
tary was still flying under the flag of China.
ment of these indigenous Chinese nationalist airlines which would
fly these routes, the Agency began to plan reducing its inter-
national carriage work. It decided it would keep the MAC contracts
because this did not bother the Chinese. There was in fact no com-
petition in this area. But plans were started to reduce the inter-
national common carriage. This Agency proprietary, Civil Air Trans-
port Company, Ltd., which had been organized in 1954, had the right
in international air auditing to negotiate for air routes.
was the entity that therefore did the common carriage.
Air America did the American contracting followed on then by
Southern was
Southern Air Transport, due to its certification.
That
Thereafter,
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5%
brought on to perform the MAC and MATS contracts with planes
leased from Air America, which included 727's.
Southern Air
Transport actually owned one 727 and leased two from Air America.
Houston noted that it was at this time that an internal de-
cision was made "we probably couldn't justify this major airlift
with the big jets, and so we started giving rid of them. See, they
had no utilization to speak of down in Southeast Asia. A couple of
supply flights went into India, and I think we used prop planes for
that, to my recollection." So the Agency began to phase out the
727's. This, of course, led to the decision to divest the Agency
of Southern Air Transport and eventually of Air America.
Internal management problems were assisted in 1963 by the
establishment of an executive committee of the board of directors
of the Pacific Company, Air America and Air Asia. The overt board
of directors in New York City passed a resolution organizing an
executive committee, which included Mr. Doole and two other directors.
Covertly, the Agency put with that executive committee some of its
representatives.
This resulted in management and the Agency being
represented on the executive committee of the Board, and permitted
the viewpoints of management, Agency and the operators to meet in
this executive committee to consider policies and make actual deter-
minations and give guidance to the company. Houston indicated that
this mechanism was extremely effective in controlling the company.
NW 50955 DocId:32423532 Page 156
55
"
n
So I think for the last, oh, fifteen, eighteen
years, the proprietary management system was on
the whole pretty effective fromthe Agency point
of view. I think we knew what was going on. I
think we were able to get things up for decisions,
and if we couldn't resolve them at the staff level,
we would take them up to the Director for decisions;
quite different from the early days in the early 50's
that I described, and the operators at least made the
claim that they had the right to call the tune.
During this period of time Operations people
were getting themselves involved in the acquisition
of aircraft and which were getting awfully damned
expensive at this time, and separate projects were
going after some of this expensive equipment without
consideration of what might be available elsewhere
to the Agency by contract or old aircraft.
And so
the Director of Central Intelligence set up EXCOMAIR,
of which I was Chairman, and had representation from
both the operation and management and finance out of
the Agency, to try and coordinate the overall control
and acquisition and disposition of aircraft.
Indeed, a February 5, 1963 memorandum entitled "Establishment of
Executive Committee for Air Proprietary Operations," noted that
the Committee was "to provide general policy guidance for the man-
agement of air proprietary projects, and review and final recommenda-
tions for approval of air proprietary project actions." Houston
indicated that EXCOMAIR "was sort of an amorphous group" which tried
to focus on the question of whether it reviewed the needs first and
then came up with recommendations on the operational solutions, or
whether the operators came up with a solution and put it through
11
EXCOMAIR. Houston noted that EXCOMAIR worked on a very informal
basis because "I knew all these people well, and I said. 'Let's get
together and sort these out.' He indicated that EXCOMAIR was
F 11
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56
It was re-
reasonably effective in getting overall coordination.
sponsible for making a thorough inventory of all the equipment
that the Agency had in the aviation field, and by and large was
able to keep track of who needed what and whether an asset was
available that could take care of a problem without the necessity
of acquiring a new asset.
According to Houston, a general shift in thinking at the
Agency occurred between 1968 and 1972 on the desirability of their
The records
holding substantial contingent capacity of airlift.
retained.
seem to indicate that Mr. Houston apparently convinced the Director
in the early 1970's that the capacity should no longer should be
Houston commented on this assessment as follows:
Through what knowledge I had of the utilization
of the various assets, it seemed to me that util-
ization, particularly of large assets, that is,
heavy flight equipment, was going down to the point
where there was very little of it. Consequently, we
couldn't forecast a specific requirement. Such re-
quirements as you could forecast were highly con-
tingent. But I also remember a couple of times
putting the caveat into the Director that with a
changing world and with the complications in the
aviation field, once you liquidate it, you could
not rebuild, and so you ought to think very, very
carefully before getting rid of an asset that did
have a contingent capability.
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-129-
X: ISSUES POSED, CONCLUSIONS, AND RECOMMENDATIONS
The preceding sections provide a general picture of the nature,
extent, purpose, function and problems of proprietaries. Not unlike
other areas of our inquiry, the issues raised were not simply black
and white. They were, rather, grey in nature. During recent years,
particularly at the time of the Vietnam War, serious questions were
raised about this proprietary capability. Much of the accompanying
criticism stemmed from a lack of understanding of their role in the
scheme of both United States foreign policy and intelligence. Some of
the criticism stemmed from the suspected entrance of some proprietaries
into areas where they were in apparent competition with legitimate
business interests, such as the airline industry. It is not unusual
that there would be misunderstanding since much of what would have
explained the proper role of these entities had to remain secret for
innumerable reasons. But the Committee has not been stymied by that
same embargo and has had a broad look into these operations.
In general, these mechanism have been operated with the utmost .
concern for legality, propriety and ethical standards. What slippages
have occurred were in the field and generally in the area of air opera-
tors, not management. Moreover, their use and past expansion was a
direct result of the demands placed upon the Agency by Presidents,
Secretaries of State and the policy mechanisms of government.
particularly true of the large air proprietary complex which was used
to support paramilitary operations in Southeast Asia. The only
exception to this is the investment-insurance complex which was
established on Agency initiative to fill a pressing need.
This is
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A.
An Overview
Using broad authority under the National Security Act of
1949, the Directors of Central Intelligence have established
Government-owned business enterprises, foundations and quasi-busi-
ness enterprises ("notionals") to serve a variety of intelligence
and covert action purposes. Chief among those purposes have been:
1) Cover for intelligence collection and action projects.
Commercial firms established in foreign countries have
in the past and continue to provide plausible reasons for the
presence of CIA case officers. Agency-funded foundations (e.g.,
the Asia Foundation) served as conduits of funds to scholars and
groups doing research supporting U.S. foreign policy positions.
2) Extension of Agency influence and information network in
overseas business community. The very act of establishing a firm
e.g., an air or shipping firm requires banking, insurance,
and other services that entail support, communications, and inti-
mate business relationships with the bonafide American and foreign
commercial world. In turn, this entails at a minimum the clearance
and access of outside top management into Agency business; the
relationship on occasion can entail using the Agency's commercial
contacts for information or assistance.
3) Provide supporting services for covert operations.
In paramilitary operations, airlife and sealift by Agency-owned
carriers has many advantages -- flexibility, ability to implant
photographic equipment and other sensors, etc. CIA agents, engaged
in hazardous business ordinarily uninsurable, can obtain commercial
insurance at standard or subsidized rates via MHMUTUAL, a conglomerate
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of some 26 CIA-owned companies.
In country locations where
physical contact with the nearest CIA station is not operationally
discreet, proprietaries can provide pay outlets and other adminis-
trative services for CIA personnel and agents. On occasion, firms
based in locations with permissive corporate laws and regulations
Liechtenstein, Panama, Delaware
can engage in many activities
unrelated to their charters. For example, insurance firms can
acquire real estate surrounding targeted embassies on a non-attri-
buted basis.
4) Actual conduct of covert action. In establishing the
"radios" (Radio Free Europe and Radio Liberty) in the 1950's,
CIA acquired a means of directly influencing populations behind
the Iron Curtain. These, of course, were eventually disposed of
and placed under the aegis of the Department of State, but related
enterprises, such as the book distribution program, which had
operated under radio sponsorship, continued within the Agency frame-
work.
5) Outlets for private investment. The Agency would deny
that this is a purpose of proprietaries. Agency officials state
that the standing policy is to prohibit the investment of operational
funds of the CIA into private fields without explicit DCI authoriza-
tion. Actually, the existence of proprietary enterprises which,
Moreover, the Agency
on occasion, return sizable profits, affirms that private investment
has indeed been a widespread Agency policy.
specifically has authorized MHMUTUAL to act as an institutional in-
vestor for its own and any other Agency proprietary. So the question
really is one of definition and shading.
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B.
Size of U.S. Financial Stakes
The size and variety of U.S. Government financial stakes in
CIA proprietaries has already been described in great detail.
The attached Table I gives an overview of proprietary income and
expenditures over the years. Some 450 proprietaries have been
created over the years with 20 presently active (See Table II.)
The largest sixteen proprietaries received about 80% of U.S. in-
vestment (i.e., subsidies). Accordingly, most proprietaries are
shown to be small-scale operations. In many cases the so-called
"notionals" the overseas proprietary actually conducts no business
at all; it simply has a commercial charter, staff, and cover arrange-
ments for Agency collection and action projects.
Table I also shows that proprietary income consists of a mixture
of CIA subsidy and income. In some cases, the outside income is
from sources outside the U.S. Government income
e.g., Air America
has received income for aircraft maintenance of KLM airliners in
Southeast Asia. But for the most part, proprietary income is in the
form of "cross-orders," from CIA and other Government Agencies. .
For example, the CIA paramilitary project in the Congo placed orders
for aircraft engines and pilot services with Intermountain Aviation,
Inc. As an example of order placed by other U.S. Government Agencies,
AID contracted with Air America to carry rice shipments in Laos.
In this sense, many proprietaries are analagous to what are called
"intragovernmental funds" or "industrial funds" in traditional U.S.
Government budget and accounting terms.
Table I shows, and as we remarked previously, that compared
with earlier years, the size of proprietary expenditures has markedly
declined. The potential for future expansion is nevertheless present.
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Indeed, new proprietaries have been formed within the last
several years.
In terms of U.S.. budgetary impact, Table I indicates that
proprietaries do not add much new capital to CIA available resources
i.e., while they have a very large expenditure level and momentum
over the years, the "cross-order" phenomenon means that most of
these expenditures originated in CIA and other U.S. Government
appropriations and that net profits generated by outside business
or investment have been relatively small. On the other hand, another
way of interpreting the figures is to observe that nearly half the
$1.6 billion gross income of CIA proprietaries has been supplied
by sources outside CIA.
Table II shows the pattern of income, expense, and net U.S.
investment for the twenty largest proprietaries now active, review-
ing their financial experience in the twelve months preceding
June 30, 1975, or the indicated reference date. The two biggest
proprietaries, Air America and MHMUTUAL, are seen to dwarf the
others. Air America will be phased out by June 30, 1976, ending
CIA's owned airlift and returning an estimated $20 million to the
U.S. Treasury. MHMUTUAL will continue.
Today, the CIA operates 45 major proprietaries, of which 25
are in the process of liquidation. The 16 biggest proprietaries
did a gross total of $4 million business in 1975, compared with an
average volume of $75 million annually in the heyday period of
proprietaries, 1967-1973, exclusive of CIA subsidies. On the subsidy
front, the contrast is equally striking: no net subsidy in 1975 vs.
$26 million annual subsidy in the 1967-73 period. Put differently,
if these sixteen biggest proprietaries had operated throughout
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kinds realized in 1975 ($4 million), the total gross income would
have aggregated $116 million. Actually, the CIA reports that
for this for this period gross income aggregated at $1,606 million.
By this measure, CIA's biggest proprietaries are shadows of their
former selves; their annual gross income of $4 million is about
one-fourteenth of the average gross annual income of $55 million
during the 29-year span. Shrinkage would be even greater if these
figures were adjusted for the effect of inflation.
The chief impact is decline of the bigger air proprietaries.
The Agency estimates that of some $761 million of outside income,
at least $658 million was generated by Air America ($559 million)
and Southern Air Transport ($99 million), in the period from incep-
to 1975. As late as 1974, these two airlines were garnering some
$50 million in outside contracts. With their disposal, total CIA
proprietary annual outside income in 1975 therefore shrinks to
the cited $4 million level. Most of this residual is represented
by MHMUTUAL, the insurance investment complex, where Agency invest-
ment are generating an outside income of about $3.5 million annually.
In programmatic terms, this contrast of today and yesterday
reflects the decline of paramilitary operations in Southeast Asia.
Large volumes of outside orders by Defense and AID, along with
sizable levies by CIA components and some maintenance and passenger
income from commercial operations, had been generated by a covert
war.
In turn, these operations had their echoes in Agency air
support for the Congo, Cuba, and other areas. Looking toward the
future, will new air proprietaries be established?
The CIA thinks
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not
cates.
but the matter is not resolved as discussion below indi-
Ultimately the program question is whether there will
and whether, if so,
be future U.S. involvement in covert wars
some substitute for CIA-owned air support can meet the operational
requirements of secure, well-maintained local aircraft in place,
with responsive schedules and capacity to gather a limited amount
of signals and imagery intelligence. The Chief of CSS ventured
the possibility that third-country assets could be used. Another
possibility is use of U.S. military aircraft, overtly or "sanitized".
One thing became clear: CIA sees itself as entering a different
era of proprietaries. It has rejected the long-held doctrine of
"stand-by" capability i.e., the notion that it is worth investing
considerable capital and operating resources in airlift, sealift,
and other assets primarily targeted toward contingency requirements.
Instead, assert the Agency representatives, CIA is keeping today's
and tomorrow's proprietaries strictly centered on current operational
tasks. The test of retention is the utility of a proprietary in
carrying out assigned roles instrumental in approved Agency projects.
This concept can be examined by listing the twenty major proprie-
taries which the Agency says will survive into the post-1976 time
frame:
Code Name
Latest 12-mo.
Earned Income ($000)
$43
139
LPBERRY
LPROE/PIKE
PDPORTAL
BASTE
BASIC
PDLEDGER
PDDYNAMIC
TENURE
TERRACE
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5
($1,250 subsidy)
( 1,126 subsidy)
102
35
($199 subsidy)
( 76 subsidy)
VWCADENZA
MHBOUND
KMJAGUARO/JAGGERY
QRMYSTIC/CYNIC
WUDIRK
BACH
KNOX
LPHOCUS
XIPHOID
-136-
36 subsidy)
432 subsidy)
809
(
$10 subsidy)
0
($ 191 subisdy)
50 subsidy)
50 subsidy)
22
LPBYZAS/B
2
LPPANDA
21
CHAIR/A
(
4 subsidy)
REMEDY
MHMUTUAL
LPSUGAR
21
(consolidation of 21 firms) $3,560
34 (plus $35 subsidy)
The above listing covers only the 20 biggest proprietaries
which currently operate and which will survive liquidation. It
excludes 25 major proprietaries currently operational but being
phased out
such as Air America and other airlift.
What does the whole picture of currently operated proprietaries
look like? How many and by what major types?
The Numbers of CIA Proprietaries, by type,
as of July, 1974 are:
Operating proprietaries
71
(includes 21 props. in MUTUAL insurance complex)
Non-operating proprietaries
38
Devised facilities
31
Devised facilities/Notionals ("DFN"'s)
Subtotal, externally registered
61
201
Notionals
no external registration;
Identity and financing wholly
within CIA control
215
Grand total, current proprietaries
416
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Generally, the notionals have increased in number by about
30% since the current CCS chief's takeover of Cover operations
in 1967. This reflects a policy of increasing the number of
cutout arrangements to increase security i.e., reduce likeli-
hood of outside discovery of the identity of agents or case
officers working under cover of the end-point notional by intro-
ducing intermediate notionals for payments or identity backstops.
table
tell us about basic distinctions of
What does this
one type of proprietary from another?
First, it indicates that
external registration divides the pot in half. Those which have
some form of legal standing with U.S. (State, local) and foreign
corporate regulatory and tax authorities are subject to external
governmental scrutiny. This occasions additonal expense and man-
power to assure that in all respects this group of proprietaries
behaves in accordance with local law and commercial expectations.
The second group
the notionals exist only as names on doors
and phone directories and stationery, with backstopping for identi-
fication provided by Agency switchboards, mailstops, and check
issuance.
--
The next level of distinction is within the class of legally
registered proprietaries: those which carry on a commercial in-
come-producing operation and those which are simply cover arrange-
ments, with at most a bank account and an attorney backstopping
calls and mail. The latter are shown in the table above as
"devised faciltiies" and "DFN"'s.
Within the class of commercial, income--productive proprietaries,
there is a distinction between those which are wholly dependent upon
D
>
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CIA income in the form of orders placed and/or subsidies; and
those which have mixed outside and inside income.
Even for those with mixed income, it is possible over the
years to distinguish those which have outside income wholly within
the U.S. Government (i.e., a mix of CIA-derived income and income
from other Government agencies) and those which have both U.S.
Government income and income from private contracts.
Visibility in the Budget
Accountability to the President and Congress depends in budget
review upon the extent to which the Federal agencies' budget
review upon the extent to which the Federal agencies' budget re-
quests provide enough information to make possible well-formed
judgments. Therefore, Circular A-11, issued by the Office of Manage-
ment and Budget, prescribes the financial schedules and analytical
and explanatory supporting data which all Federal agencies must
provide in their budget submissions, consistent with the Budget and
Accounting Acts of 1920 and 1950 as amended.
The Central Intelligence Agency regards itself as subject to
these prescriptions. The Agency limits its application of this
principle, however to provision of such A-11 materials as OMB and
the Congress ask for.
With regard to proprietaries, this policy has resulted in
near invisibility of proprietaries in the CIA budget submission.
Circular A-11 requires agencies to provide schedules and narrative
for each public enterprise or intragovernmental fund. The utility
of such data is to reveal all sources of funding, purposes and
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levels of expenditure, and at least approximate indications
of performance through comparisons of past and proposed funding
by activity. As applied to proprietaries, the CIA, perhaps,
should have been providing a whole family of schedules for the
proprietaries which actually do business (i.e., excluding
"notionals.")
Then, there is the question of the program impact of propri-
etaries. Table I indicates that proprietaries in fact have been
heavily involved in CIA intelligence collection and covert action.
None of this is shown in the CIA budget submission. Yet a bona-
fide policy review of the budget requires programmatic judgments
of the necessity and appropriate use of proprietaries in overseas
areas.
The Angolan question has brought into sharp focus the role
of the CIA's Contingency Reserve. All U.S. aid to forces in
Angola came from this fund. The only place in the budgets of CIA
where proprietaries have taken on even a limited visibility is in
those years when supplemental financing was needed to establish or
strengthen a proprietary.
The budget then shows, tersely, that
for a past year or for completed portions of the current years
that Contingency Reserve drawdowns had been made for such purposes.
For example, one past budget showed a certain amount for "RFE,"
meaning a subsidy for Radio Free Europe, but providing no justifica-
tion materials. In turn, this practice reflects the unwritten,
post-hoc nature of the Contingency Reserve financing process in
effect, an Executive Branch supplemental in which Congress is in-
formed after the OMB has acted. The budget does not normally indi-
cate Agency intentions to create or establish a proprietary in the
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budget year ahead. For any other Federal agency, the notion
of establishing a new publicly owned enterprise without advance
notice to the Appropriations and substantive committees of
Congress would be proscribed.
For the small-scale proprietaries, those which require small
subsidies to get underway, CIA is able to launch them without
--
supplemental financing i.e., within its regular budget
and, therefore, these remain completely invisible in the Agency
budget submission.
D. Some General Considerations
a. The relationship of utility to size: The evidence estab-
lished a dilemma faced by CIA planners who recognize that propri-
etaries can sometimes be most effective operationally when they
are large; indeed, as in Laos, there can be a thrust toward enormity
imposed by the very nature of the operation. The dilemma is that
large size conflicts with deniability: In areas of the world or
types of activity where there is little commercial appeal or few
operating commercial firms, where would large-scale enterprises
get financing but from the U.S. Government? Laotion operations
actually could not be covered in the end. The experience suggests
that proprietaries may have limited utility for paramilitary opera-
tions in the future.
b. The factor of competition with private enterprises. Do
CIA proprietaries of the income-producing class unfairly compete
with private U.S. businesses, both with regard to their Government
financing and their secrecy? Is the utility to the Government of
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such a kind and of such magnitude that CIA proprietaries should
be retained regardless of their competitive impact? Generally,
the CIA believes that CIA operating proprietaries do not compete
with U.S. private enterprise because they tend to do things which
the latter are not equipped, motivated, or staffed to perform.
For example, CIA proprietaries purchase weapons and foreign arma-
ments and technical devices; conduct security clearances; purchase
real estate; insure uninsurable risks; train foreign policy forces;
run airlines in remote areas or on commercially unattractive
routes. Would private enterprise do any or all of these things;
It is true that private enterprise does a lot of similar activity
under contract to the Government, including highly sensitive con-
tracts for CIA in technical intelligence collection and research
and development. If CIA scrapped its proprietaries and coopted
private firms, suitably cleared, would this be more desirable in
policy terms? In economy? In operational flexibility?
C.
The
Relative scarcity of commercial and official cover.
continuing push of CIA for notionals reflects the scarcity of U.S.
Government official cover in many areas of the world, the develop-
ing desire of U.S. companies not to cooperate.
Does pro-
Some question concerning profits have been raised.
prietary profit constitute a significant add-on to the resources
available to CIA? How is such profit treated in the budget? How
is it controlled? How can the Congress (or the President, for that
matter) be sure that proprietary profits are not siphoned off to
accomplish projects not countenanced by the regular CIA budget?
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First, profits (defined as net income to a proprietary after
coverage of operating expenses) are relatively small. Even in
the days when the most profitable air proprietaries were at full
swing, the most that any single firm netted was $3.9 million (Air
America in 1967). Over the entire period 1947-1975, total pro-
fits have been $50 million, an average of about $1.6 million
annually, for the 16 biggest CIA proprietaries.
years, a net loss was sustained three times
vt
And in these
$2.5 million
in 1971, $0.5 million in 1973, and $0.3 million in
1975. Looking to the future, after liquidation of the air pro-
prietaries has been completed, there is forecast to be only one
profitable proprietary: MHMUTUAL a complex of insurance, reinsurance
and, and escrow-holding companies which derives most of its pro-
fit from investment portfolios. MUTUAL's net income in 1974 was
$1.8 million and this general magnitude of profit is expected in
the foreseeable future.
As for treatment in the budget, there is both a policy and
procedural aspect. The policy of CIA has changed; in February,
1975 the General Counsel of CIA ruled that profits of proprietaries
and proceeds of liquidation must be returned to the Treasury as
miscellaneous receipts and cannot be used to augment the Contingency
This ruling
Reserve or otherwise be applied to CIA operations.
overturned the practice of the past which, on the few occasions
where profits were not applied to augment net worth of proprietaries
--i.e., plowed back into the enterprise or investment portfolios--,
was to apply proprietary net proceeds to the Contingency Reserve
for later release to operations.
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The budgetary presentation and review procedures only par-
tially focus upon proprietary profits. MUTUAL's profits are
invisible in the Agency budget; they are taken into account and
subject to scrutiny only within CIA; operationally, the DDO annual
operational review has the most detailed grasp of MUTUAL at the
Agency review levels. A stadard set of public enterprise fund
schedules, as prescribed by OMB Circular A-11, would be appropri-
ate for making MUTUAL visible in the Agency budget. Other commer-
cial proprietaries should show these schedules as well. The
Agency has indicated that the Comptroller is working with DDO and
DDA to develop a new style and content of budgetary presentation
and review procedures for CIA proprietaries in future budgets.
To what extent can these new procedures prevent abuses of
proprietary profits? To what extent do they preclude the need
for legislation in this area? What form of Congressional oversight
is needed here-- at what point should Congress exert control?
Improvement of visibility in the budget of proprietary resources
and provision for review of the major proprietaries as a regular
part of budget review by CIA, OMB, and Congressional Committees
would seem to preclude most of the dangers of abuse. On the other
hand, there is one type of abuse for which additional Congressional
scrutiny and safeguards may be needed: the possibility of a small-
scale, high-risk covert project directed by the President or DCI
which is not covered by the regular appropriation but financed by
proprietary profits. No foolproof preventives can be designed by
law or regulation; nevertheless, the possibility of such abuse or
avoidance of Congressional review can be minimized by requiring
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that all CIA proprietaries have an operational charter approved
by Congress which forbids launcing activities by proprietaries
or using their funds which are contrary to the charter. This
internal CIA standard would probably strengthen the existing
requirement that covert action projects be certified by the
President and flagged to Congressional Committees. At present,
MHMUTUAL has such a charter (not reviewed or set by Congress) which
restricts MUTUAL to insurance operations. This charter was
established in 1974 (called an "Administrative Plan") and must
be formally amended before the Chief of Cover Staff will authorize
use of MUTUAL resources for other missions.
D.
Private Investment by CIA.
The authority of the Agency to engage in private investments
and its general policy ambivalence on this matter already have been
noted. Two types of general as well as budget issues are presented,
one the inverse of the other:
1}
Could or should CIA engage in
investments which could accumulate funds outside the budget process
and hence be available for operations that have not public scrutiny
outside CIA? 2) Is CIA investment policy too restrictive in regard
to bank deposits? Specifically, should CIA place large amounts of
money in private banks without charging interest? Some 20% of its
annual $1.2 billion of appropriated and advanced funds goes into
private deposit here and abroad, with year-end balances of about
$150 million and average deposits considerably greater. The banks
selected get an interest or investment bonus. Their selection is
non-competitive, rooted in historic circumstance, albeit in insti-
tutions that have shown themselves flexible and responsive in
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Whether
providing the Agency services. Much more investigation is
needed here and we encourage the new oversight committee to
study this issue in greater detail than we have been able.
Probably this is one area where exclusion of the General Account-
ing Office from CIA audits has had an unfortunate effect:
or not there has been abuse, there is no outside reviewer of a
complex set of financial records and relationships and conse-
quently the question of confidence in the Agency's role in this
area may have been eroded.
What is the future for proprietaries?
Discussion on these questions already has been covered in part.
No new proprietaries are in formation or planned. This past fis-
cal year, 1975, one new proprietary was created to purchase a site
for the new location of the New York CIA base; it serves as a
real estate holding company or lessor for land and building.
The main provison for new growth is the plan of some years
standing for establishment in MHMUTUAL of several corporate "shells"
- legally constituted and registered companies that do very little
commercial business but which can be adapted to various new CIA
missions. To adapt to these new missions, as noted, would require
CIA to amend the MUTUAL Administrative Plan. But this could be
done quickly; the existence of the shells avoids the leadtime of
creating new corporate entities, with all the complications of
local laws and risk of exposure.
While CIA proprietaries are small today compared with yesterday,
they are so largely for administrative reasons--
i.e., responsive
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to Executive Branch direction. In this sense, there is no
reason in law, although there may well not be another era or
set of occasions when CIA will find proprietary expansion to
be operationally desirable. The Congress should be a partner
in the process of reviewing such expansion, if it should occur,
by providing for changes in the charter process. Another approach
is the setting of substantive guidelines for proprietary operation.
This approach is typified by the post-Katzenbach guidelines that
prohibit CIA operation of tax-exempt foundations.
Lawrence R. Houston, the former General Counsel of the Agency,
was intimately involved with all of the proprietaries for his
entire tenure with CIA. Consequently, his views have been invalu-
able to the Committee in reviewing and evaluating the history
and the role of these mechanisms. In the course of a far-ranging
interview with the Committee Houston concluded that proprietaries
"should be the last resort for use to backstop Agency activities."
He grounded this opinion on the fact that:
they are cumbersome. To be properly run they take
many, many man-hours of many, many different parts of
the Agency, so they are expensive in man-hours. There
are built-in difficulties in running what appears to be
a normal business for operational purposes. There's
really a built-in dichotomy there that leads to a contin-
ual conflict with policies. And due to the number of
people involved, there is a security problem on the
old grounds that security doesn't go by the mathematical
increase in the number of people. It goes geometrically
as to the number of people, the security risk.
This assessment seems correct based on all the evidence.
The current Director of Central Intelligence has insisted on
the streamlining of such operations, and is keenly aware of the
potential for abuse. (See appendix F). It is, for example,
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the current written policy of the Agency that "to the degree that
domestic proprietary or cover companies are required, a clear
justification will be developed as to the relationship of their
support of our overseas operations.
3
In the one area of continuing large-scale activity, the
investment complex, the Director has moved to insure propriety
even in an area where there is no evidence that any illegal con-
duct has occurred. The current policy, established as of
June 1975 is:
Project MHMUTUAL will be operated in conformance with
appropriate legal restrictions. Arrangements are being
made for the briefing of the appropriate Congressional
committees. Particular attention will be given to
avoiding any possible conflict of interest situations
with firms with which the Agency has contracts.
cular concern will also be exhibited over possible
improper influence on the stock market or stock dealings
through the investments involved in MHMUTUAL.
Parti-
The Committee is mindful of the potential danger inherent in such
Therefore, it recommends that the review of this
operations.
and other similar projects by the appropriate oversight Committees
be stringent in the extreme.
The disposal of proprietaries has also generally proceeded
along legal and ethical lines with more than due concern for con-
flicts of interest. Most notable in this spectrum of actions was
the degree to which the Agency tried and did in fact avoid any
conflicts of interest when it sold off Southern Air Transport.
Such internal vigilance no doubt should and will continue. More-
over, with the establishment of a permanent oversight committee,
the CIA's job in this regard will be made easier because it will
be able to report on its dealings on a regular basis and avoid
criticism.
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TABLE I
SECRET
SUMMARY OF 16 MAJOR PROPRIETARIES BY YEAR
REFLECTING APPROXIMATELY 80% OF TOTAL FUNDS
*
DIRECT
OTHER INCOME
Inception through 1964
FUNDING
SUBSIDY
$378,596,533
AGENCY
CONTRACTS
$ 13,298,782
OUTSIDE
OF AGENCY
GROSS
TOTAL
TOTAL
EXPENSES
NET
$236,372,776
628,268,091
600,174,573.
$28,093,518
44,549,432
7,824,682
35,324,243
87,698,357
74,697,484
13,000,873
36,917,328
15,487,306
46,189,505
98,594,139
94,713,002
3,881,137
48,416,970
21,476,541
69,625,534
139,519,045
134,622,493
4,896,552
30,252,926
21,876,197
61,385,548
113,514,671
111,330,900
2,183,771
35,385,835
22,375,362
57,313,623
115,074,820
110,304,688
4,770,132
32,674,350
20,134,250
57,214,126
110,022,726
108,871,504
1,151,222
34,073,032
23,968,141
48,957,610
107,008,783
109,535,656
(2,526,873)
1,212,896
28,525,628
45,433,428
75,171,952
70,254,485
4,917,467
2,367,008
21,124,434
53,480,302
76,971,744
77,470,477
498723)
327,181
14,240,049
45,524,446
60,091,676
60,033,050.
58,626
(275,382) **
208,527
4,034,609
3,967,844
4,290.926
( 323,082)
$644.498.109
$210,539.809
$760,865,840
$1.615.903.848
$1,556,299.238
TOTALS
$59.604.610
* This information has been extrapolated from a number of sources and represents the best approximation we can make based upon the time and
information available.
** No Agency funding during 1975; this credit represents miscellaneous accounting adjustments.
SPORET
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50
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TABLE II
ACTIVE MAJOR HEADQUARTERS CONTROLLED PROPRIETARIES
FINANCIAL CONDITION AND SUMMARY OF FUNDING, INCOME
AND EXPENSES FOR TWELVE MONTH PERIODS SHOWN BELOW
PER ACANCY RECORDS 30 JUNE 1975
(PDPORTAL)
LPBERRY/B
LPROE/
LPPIKE
PDDYNAMIC
PDRASTE
PDBASIC
PDLEDGER
ASSETS
Cash
Investments
$26,190
$ 34,674
$ 279,087 $319,660
Other Assets
9,482
13,043
6,063
36,159
Fixed Assets
1,408
6,503
7,113
14.828
$ 319,660 $ 104,068
676
: 17,385
10,286
KCHJAGU
POTENURE PDTERRACE VWCADENZA MUCUND KMJAGO
$ 49,555 $26,288 $ 621 $ 517,969 $ 4,48
46,200
5,788
153,7
42,575 101,6
950°
Total Assets
$37,080
54,220
293,063
370,647
161,992
| 26,203
LIABILITIES
923
$
131
$
1.42
60,063
NET WORTH
Investment
$383,699
$218,464 $6,039,344
$4,357,743
Gains & (Losses)
(352,542)
(164,375) (5,746,423)
(4,047,159)
36.157
$ 54,089
292,921
310,584
132,415
41,010 $ 1,934 $ -0- $ 174
812,365 1823,448 $257,441 $235,716
(720,960) (763,830) (231,153) (234,213)
91,405 $59,618
,036,180 $ 5.0
(4,502,903) 297,0
573,223. 5702,0
13.908
5,677 WAVER
303,
1,220 $
TOTAL LIABILITIES AND NET WORTHI
$37,080
$54,220
293,063
370,647
132,415
$61,552
26,288
26,288 $ 1,677
1,503
$ 574,452 $303,0
ACTIVITY FOR TWELVE MONTHS ENDED
3/31/75
6/30/75
3/31/75
6/30/75
12/21/74
6/30/75
6/30/75
3/31/75
6/20/75
6/30/
Funding
12,112
$51,120
$1,250,000
$1,126,500
206,000 $197,200
76,000
$ 36,150
431.718
-C.
Income Other Agency Sources
Income Outside Commercial
3685
40541
-0-
$139,428
3.0
-0-
-0-
1,885
10-
-0-
00-
-0-
41,839
102,363
-0-
Expenses
43,215
$217,484 $1,015,866
$1,145,936
322,432
$190,526
35.4183
$104,728
-Q-
200
5.6100)
4163,058
$793.5
(***)
(***)
(XXX)
(x*x)
(*-**-*)
(****)
77
NOTES: (a) Interest Income
(*)
((XX)
(-x--x-x-)
*(*•*-*-*-*-*)
New projects, no financial statements submitted to date, figures are for one quarter.
Consolidated figures not available.
Latest period for which financial statements have been submitted.
PDBASTE and PDBASIC are being consolidated into one (1) entity, PDPORTAL.
ornn
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TABLE II
ACTIVE MAJOR HEADQUARTERS CONTROLLED PROPRIETARIES
FINANCIAL CONDITION AND SUMMARY 
OF FUNDING, 
INCOME
AND EXPENSES FOR TWELVE MONTH 
PERIODS SHOWN BELOW
PER AGENCY RECORDS 30 JUNE 1975
QRMYSTIC/
WUDIRK
LPPANDA
(Consolidated)
QRCYNIC
WUXIPHOID
WURACH
WUKNOX LPHCCUS
LPBYZAS/B
LPGHAIR/A
LUREMEDY
MIMUTUAL
LPSUGAR
i
ASSETS
Cash
Investments
Other Assots
_ Fixed Assets
Total Assets
LIABILITIES
$ 3,974
17,757 $50,525 $50,000 $7,000
$ 7,954
$2,770
$ 7,548
$
177,158
$44,379
385,984
29,572,012
500
627
5,10.1
2,296
11,074
24,348
37,581
13,172
4,531,515
800
3.052
1,686
1,826
60.453
1,507
$ 31,127
$50,525 $50,000
$50,000
531 1100
WRA
2,770
$ 22,546
131,355,435
$316,694
11
-0-
-0-
$2,700 $ 3,766
10,831
$17,243.754
$4,269
NET WORTH
Investments
Gains & (Losses)
$79,657
(74.567)
$5.000
$296,000
(264,873)
31,127
$50,525 $50,000
$945,000 $142,832
$376,345
$116,001
$
$624,619
TOTAL LIABILITIES AND NET WORTHI
$5,101
31,127
$50,525
$50,05 $50,000
$50,000
(913,300) (13,1:43)
31.700 $129,389
(373,575)
(104.366)
(582.0141
2,770
11,715
$34,400 $133,155
$2,770
$22,546 $31,355,138
$40,694
ACTIVITY FOR TWELVE MONTHS ENDED
6/30/75
3/31/75
6/30/75
6/30/75
6/30/75 12/31/74
6/30/75
6/30/75
Munding
$10,000
$191,000
$50,525
$$50,000
$76,213
-0-
$ 3,965
Income
Other Agency Sources
$-0-
230
-0-
-0-
$22,252
$ -0-
-0-
27,465
$15,000
6/30/75
$ 107,413
$ -0-
6/30/75
$ 35,2007
293015
Income
Outside Commercial
-0-
-0-
-0-
-0-
-0-
$ 2,289(n)
-0-
6.167
Expenses
$13,745
$190,800
-0-
-0-
99,600
$12,738 32,415
$50,189
3,550,406(b)
2,110,521
5,525
77,
(XXX)
(*)
(*)
(XXX)
NOTES:
(a) Interest Income
(b) Includes $423,902.00 in insurance premiums
from other Agency components
(*) New projects, no financial statements submitted
to date, figures are for one quarter.
((**) Consolidated figures not available.
(*-*-*) Latest period for which financial statements have be
submitted.
(*-*-*-*) PDBASTE and PDBASIC are being consolidated into one
(1) entity, PDPORTAL.

NW 50955
Annex A
Memorandum of Law
Legal Authority to Dispose of a Proprietary
January 1974
RE
FROM
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Id: 324b3l3
CLA
DocId: 32423532 Page 181
SECHET
MEMORANDUM OF .V:
RECEIVED FROM
OCT 30.1975
CIA
many
DOES THE CIA POSSESS THE LEGAL AUTHORITY
TO SELL A WHOLLY-OWNED GOVERN-
MENT AIRLINE WITHOUT RECOURSE TO
THE FEDERAL PROPERTY AND ADMINISTRATIVE.
SERVICES ACT OF 1949, AS AMENDED ?
I. FACTS
There exist two airline corporations wholly owned by the
United States Government, which corporations were purchased by, and
are under the direct control of, the Central Intelligence Agency. Ownershi
of the corporations was acquired by means of appropriated funds expended
by the Agency under its confidential funds authority, the procurements thus
being made outside of the Federal Property and Administrative Services
Act. Both corporations were created by the Agency to assist it in fulfilling
its statutory responsibilities and, over the years, both have engaged in
sensitive support activities in the furtherance of the national security
of the United States. It has been widely reported in unclassified media that
the Central Intelligence Agency on behalf of the United States Government i
the de facto owner of the corporations. Notwithstanding, that ownership is
still a classified fact. The activities and missions of these corporations
in support of the national security of the United States would have been
impossible if United States Government ownership had been officially
admitted. Within this context it is the statutory responsibility of the Direct
of Central Intelligence to protect the overt commercial posture of these
of certain of their activities. Now
corporations and the classified nature
NW 50955 DocId: 32423532
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T
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the Director has determined that the corporations are no longer required.
by the Agency in the discharge of its responsibilities, that they are excess
to Agency requirements, and he has directed that they be disposed of
either by sale or liquidation.
II. STATUTES
The Federal Property and Administrative Services Act of 1949,
as amended, (40 U.S.C. A. 471 et seq., hereinafter referred to as 'the
Act"), is in general the controlling statute insofar as Government property
is procured, used and disposed of:
It is the intent of the Congress in enacting this
legislation to provide for the Government an economical
and efficient system for (a) the procurement and supply
of personal property and nonpersonal services, including
related functions such as contracting, inspection, storage,
issue, specifications, property identification and classifi-
cation, transportation and traffic management, establish-
ment of pools or systems for transportation of Government
personnel and property by motor vehicle within specific
areas, management of public utility services, repairing
and converting, establishment of inventory levels, establish-
ment of forms and procedures, and representation before
Federal and State regulatory bodies; (b) the utilization of
available property; (c) the disposal of surplus property; and
(d) records management. 40 U.S.C.A. 471.
As an executive agency, the Central Intelligence Agency is within the purv
of the Act (40 U.S. C. A. 472; 481), but along with a number of other agenci
and activities, it was exempted from the Act:
RE
OCT 30 1375
Congress, departments, agencies, corporations
ROMAnd persons exempted from provisions
2
NW 50955 DocId: 2423532 Page 183
ACOR
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Nothing in this Act shall impair or affect any
authority of
(17) the Central Intelligence Agency;
40 U. S. C. A. 474(17).
The Act's legislative history provides an insight into the breadt
of the exemption and, to a limited degree, Congress' intent for giving it.
Special exemptions from the act. —This sub-
section exempts from operations under the act a
number of activities requiring special treatment.
Chief among these are programs for price support,
stabilization, grants to farmers, and foreign aid;
procurement procedures under the Armed Services
Procurement Act of 1947...%; the stock-piling of
critical materials; the national school lunch program;
the Housing and Home Finance Agency with respect
to the disposal of residential property; the Atomic
Energy Commission; and the Central Intelligence
Agency.
It is not intended by these exemptions that those
administering the agencies or programs listed shall
be free from all obligation to comply with the pro-
visions of the act or from all jurisdiction of the
Administrator. On the contrary, it is expected that
they will as far as practicable procure, utilize, and
dispose of property in accordance with the provisions
of the act and the regulations issued thereunder,
particularly so far as common-use items and adminis-
trative supplies are concerned. Likewise, it is intended
that the Administrator shall have full authority, with
respect to the agencies or programs mentioned, to
RECEIVED FROMake surveys of, and obtain reports on, property and
OCT 20 1975
CIA
property-management practices, to cooperate in the
establishment of inventory levels, and to report
excessive stocking, in accordance with the provisions
of section 206 (a) (1) and (2).
NW 50955
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3
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777
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In other words, to the extent that compliance with
the act and submission to the jurisdiction of the
Administrator will not so 'impair or affect the authority'.
of the several agencies to which the subsection applies
as to interfere with the operation of their programs, the
act will govern. Any disputes that arise can be settled
by the President under the authority to prescribe policies
and directives vested in him by section 205 (a). U.S. Code
Congressional Service, 1949, Vol. 2, p. 1504. (emphasis
added)
One authority of the Central Intelligence Agency which complete
application of the Act would "impair or affect" is clearly the Agency's
authority to expend confidential funds.
The sums made available to the Agency may
be expended without regard to the provisions of law
and regulations relating to the expenditure of Govern-
ment funds; and for objects of a confidential, extra-
ordinary, or emergency nature, such expenditures to
be accounted for solely on the certificate of the Director
and every such certificate shall be deemed a sufficient.
voucher for the amount therein certified. Sec. 8(b),
CIA Act of 1949, as amended; 50 U.S. C. A. 403; (b).
The CIA Act of 1949 (63 Stat. 208, P.L. 81-110) became effective June 20,
1949; the Act (63 Stat. 378, P. L. 81-152), July 1, 1949.
The question of law thus presented is: In selling and disposing
of the two airline corporations, must the Agency adhere to the Act and
submit to the jurisdiction of the Administrator, General Services
Administration?
D-FROM
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NW 50955 DocId: 32423532
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A
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1
楼上
SECRET
III. ARGUMENT
The broad authority afforded the Agency by Section 8(b), supra,
is conclusive-"(t)he sums made available to the Agency may be expended
without regard to the provisions of law and regulations relating to the
11 That authority is enhanced, not.
expenditure of Government funds;
·
limited, by the Act-"(N)othing shall impair or affect the authority of
the Central Intelligence Agency", and by the Act's legislative history. It
follows naturally that the Agency's authority to procure on a confidential
basis without recourse to the Act inherently carries with it the authority:
to dispose on a confidential basis without recourse to the Act. By way of
an extreme hypothetical, suppose the Agency had procured a Soviet
weapons system, without Soviet knowledge. Using Section 8(b) authority,
it had expended funds through a secure facility for the procurement and
brought the system to this country where it was studied and tested. By
virtue of the testing the Government was able to develop electronic counter
measures which would effectively nullity the system. Upon a determination
that the system is of no further use, can it be seriously argued that its
disposition by the Agency should be anything other than confidential? The
purchase was confidential; possession of it by the United States Government
was confidential; and, the knowledge gained and the countermeasures
developed are confidential.
To hold otherwise would render the intended
purpose of Section 8(b) a nullity.
READED FROM
NW 50955 DocId: 32423532 Page 186
5
OC) 80 1975
SECRET
nin
SECRET
The short expression of Congressional intent found in the Act':
legislative history supports the view that the Agency's activities in the
confidential funds area are not within the purview of the Act. "As far as
practicable..." procurement, use and disposition should be "...in accord:
with the provisions of the Act……. particularly so far as common-use items
It is suggested that a Gover
and administrative supplies are concerned.
ment-owned, but overtly commercial, airline used in support of foreign
intelligence activities does not fall within a "common-use items and
administrative supplies" categorization. Similarly, if the last paragraph
of legislative history (emphasized portion) quoted above is read in the
negative, the proposition becomes clear. "... (T)he act will... (not)..:
govern...(if)... compliance with the act and submission to the jurisdiction
of the Administrator will... 'impair or affect the authority' of the several
agencies to which the subsection applies as to interfere with the operation
" Were the Agency required to comply with the
of their programs.
Act and submit to the jurisdiction of the Administrator in the exercise
of its confidential funds authority, not only would that authority be impaire
or affected, but many of the Agency's most significant statutory authoritie
and responsibilities would be frustrated.
9 FROM
OCT 1975
SECRET
NW 50955 DocId:324235 Age 187
SECRET
In looking at CIA's express authority to procure on a confidenti
basis and examining the nature of its implied authority to dispose, genera
statements on the rules of statutory construction are helpful. For
example:
R:
Where a statute confers powers or duties in
general terms, all powers and duties incidental and
necessary to make such legislation effective are
included by implication. Thus it has been stated, 'An
express statutory grant of power or the imposition of.
a definite duty carries with it by implication, in the
absence of a limitation, authority to employ all the
means that are usually employed and that are necessary
to the exercise of the power or the performance of the
duty.... That which is clearly implied is as much a
part of a law as that which is expressed.'
*
The rule whereby a statute is, by necessary
implication, extended has been most frequently'
applied in the construction of laws delegating powers
to public officers and administrative agencies....
Thus where the power to create an office is granted,
the power to abolish it will be implied, and where an
administrative body is given power to enact regulations
or exercise quasi-judicial power, the power to provide
for internal rules of procedure will be implied.... The
power of a municipality to sue and be sued was held to
imply the power to employ special counsel for those pur-
poses although the city had a regular salaried attorney.
A municipality, empowered by statute to construct sewer's
for the preservation of the public health, interest and
convenience, was permitted to construct
? protecting wall
and pumping plant which were unnecessary for the proper
working of the sewer, but were essential to public health.
Sutherland Statutory Construction § 5402.
D. FROM
7
OCT 30 1975
SEGRET
NW 50955
DocId: 32423532
Page 18
SECRET
Similarly,
and
.. (I)t has been held that an express statutory
grant of a right, power or privilege carries with it
by implication, in the absence of a limitation, all
the means that are usually employed and that are
necessary proper to the exercise or enjoyment
of the right, power or privilege granted. In such
case, the power necessarily implied is a part of
the legislative act. There is even authority in
support of the rule that power in a statutory grant
may be implied although it is not indispensible to
50 Am. Jur.,.
the exercise of the powers granted....
Statutes § 428.
Cases which speak to the subject of implied statutory powers
are abundant. In Schmiedigen v. Celebrezze, Judge Holtzofí held that:
"(I)t is a well established principle of statutory construction that every
legislative enactment must receive a sensible and reasonable construction
that would effectuate its purposes. If a strict, literal interpretation woul
frustrate the objective of the legislative body and would lead to an absurd
245 F. Supp. 825, 827 (1965). In
or futile result, it must be avoided."
U.S. v. Jones, where a statute gave federal officers the power. to enforce
compliance with the law but was silent on the power to arrest the court
stated:
NW 50955
RECERER
CCI 30 1975
CIA
So, though the term arrest is not used in the
statute, the language employed necessarily implies
that such power was included.
DocId: 32423532 Page 189
8
SEGRET
SECRET
Necessary implication refers to a logical
necessity; it means that no other interpretation
is permitted by the words of the Acts construed;
and so has been defined as an implication which
results from so strong a probability of intention.
that an intention contrary to that imputed cannot be
supported. The term is used where the intention
with regard to the subject matter may not be mani-
fested by explicit and direct words, but is gathered
by implication or necessary deduction from the
circumstances and the general language.
NW 50955
Consequently that which is implied in a statute is
as much a part of it as that which is expressed,
for a statutory grant of a power carries with it,
by implication, everything necessary to carry
out the power and make it effectual and complete.
1204 F.2d 745, 754 (1953); certiorari denied,
98 L. Ed. 368; rehearing denied, 98 L. Ed. 404.
IV. CONCLUSION
Adherence to the Federal Property and Administrative Services
Act in disposing of the two airline corporations would do far more than
impair or affect Agency programs. It would endanger the national security
which the statutory authorities available to the Agency were designed to
protect. The Central Intelligence Agency, because of the unique statutory
OCT 201
CIA
ROM
DocId: 32423532 Page 190
9.
SECRET

SECRET
grant provided it in Section 8(b) of the CIA Act, and because of the unique
nature of its statutory responsibilities, possesses both the express powe:
to procure property confidentially without recourse to the Act and the
implied power to dispose of property confidentially without recourse to tk
Act.
QCI 30 1975
CIA
DOM
10
NW 50955
DocId: 32423532 Page 191
7077
RESPECTFULLY SUBMITTED
Gary M. Breneman
Assistant General Counsel
Central Intelligence Agency
Annex B
HR 230-8 and HHB 230-1
Concerning Regulation and Administration
of
Agency's Proprietaries
REGI
UCI SO 1975
CTA
NW 50955 DocId: 32423532
Page 192
SECRET
PLANS, PROGRAMS, AND PROJECTS
HR 230-8
8. ADMINISTRATIVE PLANS, LIQUIDATION PLANS, AND FISCAL
ANNEXES
a. GENERAL
(1) In the furtherance of some Agency objectives it is necessary to establish,
operate and support overt Instrumentalities which do not have ostensible
affiliation with the U.S. Government. These ostensibly private organiza-
tions which may be susceptible to scrutiny by a variety of tax and regula-
tory authorities, the press, hostile elements and others, require operational
security of a high order. It is essential that they are established and
managed in accordance with normal practices and requirements of the
type of enterprise concerned, and that they are staffed with qualified
personnel whose cover histories are compatible with such employment.
It is also essential that there are adequate general management, financial
and security controls consistent with both operational effectiveness and
the requirements of nonattribution, for the protection of the Agency's
interests.
(2) The controls and procedures which are applicable to an instrumentality
will be specified in a project outline and administrative plan or fiscal
annex. Standards and format for administrative plans and fiscal annexes,
as well as for liquidation plans to be followed when an instrumentality is
to be discontinued, are prescribed in HHB 230-1..
b. POLICY
(1) The establishment or continuance of an instrumentality is justified only
when it contributes to the accomplishment of the Agency's mission and
is operationally determined to be the most advantageous means of gaining
a particular and necessary objective. The purpose of an instrumentality
shall be to conduct secret operations or support such operations under
cover of its overt function.
(2) No binding commitment with respect to the establishment of any in-
strumentality shall be made before the approval required by this regu-
lation has been obtained.
c. DEFINITIONS
(1) PROJECT. A project is a management device through which specific
operational activities are undertaken to meet programmed objectives.
Budgeting and financial accountability are maintained against the project
for funds and resources authorized for it.
(2) INSTRUMENTALITY. An instrumentality is a corporation, a foundation,
partnership, sole proprietorship, or other legal entity (within the private
sector, domestic or foreign) for which specific, funds or other assets
have been authorized under a formally approved project. Within a project
there may be one or more instrumentalities.
(a) Proprietary. A proprietary is an instrumentality in which the Agency
acquires ownership of a controlling interest, through appropriate
nominee or legal entity arrangements. The Agency exercises, through
stockholder or other equity arrangements, control of the instru-
mentality in terms of the policy, administration, formulation of
budgets, and the application of funds.
(b) Operational Investment. An operational investment is the acquisition
by the Agency of an equity in an instrumentality, through appropriate
nominee or legal entity arrangements, of less than a controlling
interest, with the expectation of recovering some or all of its invest-
ment. Any influence the Agency may exert over budget formulation and
Revised: August 1969 (464)
UGL so 1975
NW 50955 DocId: 32423532 Page 193
SECRET
GROUP 1
Excluded from automatic)
downgrading and
d-classification
15
HR 230-8c(3)
SECRET
PLANS, PROGRAMS, AND PROJECTS
the application of funds is a matter of negotiation. (NOTE: Operational
loans shall be handled in accordance with provisions of HR 30-9
and chapter IX of HHB 30-1.)
(c) Subsidy. A subsidy is the contribution of funds or materiel to an
instrumentality by the Agency, with the Agency acquiring no equity
in the assets nor right of participation in either the income or
the profits of the entity. (Payments to foreign liaison services are
excluded from this definition.) There are two types of subsidy:
(1) Controlled. A controlled subsidy involves support of an instru-
mentality whose income is primarily derived from Agency funds
and which is therefore largely dependent upon such support. To
the extent that the Agency is able to exercise control it does so
through the formulation of budgets, the requirement for financial
accountings, and the application of funds. Where a project consists
of a combination of separate subsidy and proprietary instrumen-
talities, proprietary regulations will be applied to the proprietary
instrumentality.
(2) Noncontrolled. A noncontrolled subsidy involves support of an
instrumentality, to which negotiated fixed-sum incentive pay-
ments of Agency funds are made, but budget formulation and
the exercise of discretion over expenditures are at a point es-
sentially beyond Agency control. Evaluation of performance is
a matter of operational judgment, not necessarily related to the
amount of the fixed-sum payments.
(d) Funding and Payrolling Instrumentalities. A funding or payrolling
instrumentality is used to fund or payroll Agency activities when, for
reasons of security or cover, funding or payrolling must be accomplished
through an overt mechanism. The Agency has legal or beneficial owner-
ship of a funding or payrolling instrumentality through appropriate
nominee or legal entity arrangements. Although these instrumentalities
are proprietaries, they operate under special authorizations that may
vary substantially from the requirements of this regulation and
HB 230 h
(3) PROJECT OUTLINE. A project outline is a written plan for accomplishing
programmed operational objectives. Upon approval by appropriate au-
thority it becomes the framework within which the project is implemented
and its effectiveness initially evaluated.
:
(4) PROJECT RENEWAL. A project renewal is the approval after evaluation
by appropriate authority for continuation of a project beyond the period
covered by its initial approval or previous renewal. The renewal may
update or supersede certain provisions of the project outlines
(5) ADMINISTRATIVE PLAN. An administrative plan is a supplement to
the project outline which upon approval by appropriate authority consti-
tutes the administrative framework within which the instrumentality is
to operate. To that extent it replaces all Agency regulations, except this
regulation and HR 230-9, in the management of project instrumentalities,
their internal activities and non-Agency employees. An administrative
plan is required for all projects establishing and utilizing proprietaries,
operational investments, funding and payrolling instrumentalities, and
controlled subsidies.
(6) TERMINATION. Termination is the discontinuance of a project or an
: instrumentality, upon written approval of the Deputy Director or Head
of Independent Office concerned.
(7) LIQUIDATION. Liquidation is the settlement of accounts of an instru-
mentality, the final disposition of its remaining assets, and dissolution of
the instrumentality.
$16
Revised: 1 August 1959 (454)
ROM SECRET
OGL 30 1975
NW 50955 DocId: 32423532 Pad 194
NW 50955
SECRET
PLANS, PROGRAMS, AND PROJECTS
.HR 230-8d.
☐ (8) DEACTIVATION. Deactivation is the discontinuance of the functioning
of an instrumentality, with the charter or franchise retained but in an
Inactive status, pending determination as to liquidation or reactivation of
the instrumentality.
'. (9) LIQUIDATION PLAN. A liquidation plan prescribes the procedures for
implementing a properly authorized operational decision to terminate
the Agency's active use of a specific instrumentality and to dispose of
the Agency's portion of the assets. An approved plan is required for
liquidation of all proprietaries, operational investments, and controlled
subsidies with proprietary aspects. No liquidating action will begin until
the liquidation plan has been approved.
(10) FISCAL ANNEX A fiscal annex is a supplement to the project outline
that sets forth funding arrangements, specific accounting control, fl-
nancial reporting requirements, and writeoff provisions. A fiscal annex
is required for all noncontrolled subsidies.
d. AUTHORITIES AND RESPONSIBILITIES
(1) AUTHENTICATION OF ADMINISTRATIVE PLANS, LIQUIDATION PLANS,
AND FISCAL ANNEXES. (HEREAFTER CALLED SUPPORT SUPPLE-
MENTS)
(a) The joint approval of the Deputy Director having jurisdiction over
the project and the Deputy Director for Administration is required for
(1) establishment, deactivation, or reactivation of an instrumentality;
(2) all support supplements and amendments thereto, including spe-
cific deviations because of unforeseen or emergency conditions;
(3) transfer between projects of any instrumentality and remaining
assets.
(b) Advances of funds to an instrumentality before approval of the related
administrative plan or fiscal annex require the approval of the
Deputy Director concerned, the Deputy Director for Administration,
and the Comptroller.
(c) All liquidation plans require the approval of the Deputy Director con-
cerned and the Deputy Director for Administration.
(2) PREPARATION
(a) The Operating Official having jurisdiction over the project is re-
sponsible for the preparation and coordination of the administrative
plan or fiscal annex, and, when required in connection with termina-
tion of the instrumentality, the liquidation plan.
(b) Administrative plans require the concurrences of designated repre-
sentatives of the General Counsel; the Director of Finance; the
Comptroller; the Director of Security; and the Chief, Cover and
Commercial Staff. Liquidation plans require the concurrences of the
designated representatives of the General Counsel; the Director of
Finance; the Chief, Cover and Commercial Staff; and in addition,
the Comptroller for those liquidation plans involving the disposition
of assets with an estimated market value in excess of $50,000. The
assistance and counsel of other offices will be obtained when their
functional responsibility is involved.
(c) Fiscal annexes require concurrence of the Director of Finance and the
Chief, Cover and Commercial Staff.
Revised: 29 October 1974. (340)
RECESSED FROM
QG 1975
DocId: 32423532, Page 195
16.1
SECRET
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CL By: 057537
HR 230-8d(3)
SECRET
PLANS, PROGRAMS, AND PROJECTS
(3) PERIODIC REVIEW AND REAFFIRMATION. The Operating Official
responsible for the project will review each approved administrative.
plan or fiscal annex at least once each year, coincident with 
considera-
tion of renewal of the project and will either
(a) affirm in writing to the responsible Deputy Director that the previously
approved provisions remain adequate and valid; or.
(b) initiate appropriate revision when changing circumstances dictate the
need.
18.21
ROM
UGI 1975
NW 50955 DocId: 32423532
Page 196
0/COMPT
Now 32 8 18 AM 74
Revised: 29 October 1974 (840)
SECRET
PLANS PROGRAMS, AND PROJECTS
HHB 230-1
FOREWORD
Rescission:
FOREWORD
HHB 230-1 dated 1 August 1969, 10 January 1973, and
16 March 1973
This handbook incorporates the Agency procedures pertaining
to the administration of project instrumentalities that will be
followed in carrying out policies prescribed in HR 230-8.
FOR THE DIRECTOR OF CENTRAL INTELLIGENCE:
DISTRIBUTION: SPECIAL
FROM
Wien 1975
CIA
Revised: 29 October 1974
NW 50955
DocId: 32423532.
Page 197
JOHN F. BLAKE
· Deputy Director
for
Administration
E2 IMPDET
S-E-C-R-E-T CL BY:
059687
PLANS, PROGRAMS, AND PROJECTS
Paragraph
S-E-C-R-E-T
CONTENTS
GENERAL.
1.
PURPOSE.
2.
3.
4.
. ADMINISTRATIVE PLAN PRESENTATION
STANDARD PROVISIONS AND REQUIREMENTS OF
a.
ADMINISTRATIVE PLANS
BUDGETING.
b. FUNDING.
C.
REFUNDS.
d.
e.
AGENCY CERTIFICATION AND APPROVAL.
ACCOUNTING IN AGENCY RECORDS
HHB 230-1
CONTENTS
Page
1
1
1
2
2
3
5
f. PROTECTION OF U.S. GOVERNMENT INTEREST
g. PERSONNEL POLICY
h. INSURANCE COVERAGE
i.
CASUALTY PROVISION
j.
LEGAL SERVICES.
6
7
8
k.
SECURITY POLICY.
1.
Not used
m.
AUDIT.
8
n.
0.
p.
FINANCIAL ACCOUNTING AND REPORTING
BORROWING, LENDING, AND PLEDGING OF ASSETS
INVESTMENT POLICY.
9
.10
.10
q.
r.
REAL PROPERTY AND OFFICE FURNISHINGS
LIMITATION ON INDIVIDUAL DISBURSEMENTS AND
CONTRACTUAL ARRANGEMENTS
.11
.11
S.
SPECIAL ADMINISTRATIVE EXPENSE POLICY.
t. TERMINATION AND LIQUIDATION.
.12
.12
.5... CONTINGENCY CASUALTY. PLAN.
6.
7.
LIQUIDATION PLAN
FISCAL ANNEXES
a.
b.
GENERAL.
.13
.13
.14
.14
ACCOUNTING PRINCIPLES.
.15
نن
FINANCIAL STATEMENTS
.15
d. USE OF CERTIFICATION AS EVIDENCE OF FULFILLMENT
نه نهان
e.
f.
OF THE PURPOSES FOR WHICH FUNDS WERE ADVANCED
USE OF CERTIFICATION FOR OPERATIONAL REVIEW.
FINANCIAL DATA FOR OPERATIONAL PURPOSES.
.15
.16
.16
FROM
g. REIMBURSEMENT FOR OPERATIONAL DEFICITS
h. FORMAT OF FISCAL ANNEXES.
.16
.16
1975 5 انان
CIA
Revised: 29 October 1974
iii
NW 50955 DocId: 32423532 Page 198
E2 IMPDET
nu
PLANS, PROGRAMS, AND PROJECTS
S-E-C-R-E-T
H3 230-1
1
SUPPORT SUPPLEMENTS FOR AGENCY INSTRUMENTALITIES
NW 50955
C
Cuer
1. PURPOSE
This handbook sets forth guidance for developing support supplements
(administrative plans, fiscal annexes, and liquidation plans) governing
Agency instrumentalities, as required by HR 230-8.
2. GENERAL
Properly approved support supplements modify or waive specific provisions
of Agency regulations except HR 230-9 and, in lieu thereof; set forth
the provisions for special authorizations and management control of
instrumentalities in the conduct of their affairs. They are designed to
promote
a.
b.
c..
d.
ED FROM
Üના અંતે 1975
CIA
3.
the most effective management, to include staffing of each instru
mentality with personnel qualified to manage it in accordance with
Agency objectives, under sound personnel policies and practices;
the establishment of an effective budgeting, accounting, and re-
porting system that will produce accurate, timely, and useful re-
ports of financial status and financial results of the operations
of each instrumentality;
the establishment of an accounting system for the instrumentalities
that is compatible and reconcilable with Agency financial records;
the highest degree of cover and security compatible with the overt
character of each instrumentality and its operation or support
objectives;
the effective Agency control of funding to, and assets held by, the
instrumentalities;
the orderly deactivation or liquidation of any instrumentality that
has ceased to be of operational value to the Agency.
ADMINISTRATIVE PLAN PRESENTATION
The administrative plan presentation should consist of (a) a memorandum
requesting approval of the administrative plan by the Deputy Director
having jurisdiction over the project and the Deputy Director for Admini-
stration; (b) the administrative plan (usually drafted by the support
element in the operating component concerned); and (c) a concurrence
sheet evidencing concurrence in applicable provisions of the administra-
tive plan by the designated representatives of the General Counsel; the
Comptroller; the Director of Finance; the Director of Security; the
DocId: 32423532 Page 199
Revised: 22 October 1974
1:2 TMDDET
1
NW 50955
RE.
HHB 230-1
S-E-C-R-E-T
PLANS
RAMS,
RAMS, AND PROJECTS
Chief, Cover and Commercial Staff; and such other Agency components
The memorandum should
whose functional responsibilities are involved.
state the project's operational objectives, the reason why it is believed
that an instrumentality is the most advantageous means for attaining the
objective, the type of instrumentality to be used, funds approved for
the current year, funds programmed for the ensuing fiscal year, and, in
the case of a revised plan, a statement as to the need for the revision
and funds expended for the past two years.
4. STANDARD PROVISIONS AND REQUIREMENTS OF ADMINISTRATIVE PLANS ·
Standard provisions and requirements of administrative plans are listed
below. A single reference may be made in each administrative plan 
that
the provisions of HHB 230-1 are applicable. Substitute 
or additional
provisions may be included in each plan to the extent necessary wherever
the standard provisions and requirements are not applicable.
a.
BUDGETING
:(1) Purpose
OCT RA 1975
CIA
The approved annual operating budget for a project provides
The antegrate 
it into the planning and budgeting
system of the Agency. The process for the annual renewal of a
project permits the appropriate Deputy Director, through his
review, evaluation, and formal approval of the project and its
operating budget, to authorize the continuation of the activity,
under which funds may be advanced, controlled, expended, 
and
accounted for, within the terms of the approved operating
budget of the project. The approved operating budget of the
project provides a basis for an objective evaluation 
of the
real (total) cost of the activity, to include:
(a) Funds Available
› Clear identification of funds either available or presumed
to be available to the project (or instrumentality) from
all sources during the period of the proposed operating
budget, which will include
DocId: 32423532 Page. 200
(1) any prior-year funds (beginning cash balance,
cluding liquid assets);
(2) other U.S. Government (non-CIA) funds;
(3) other CIA funds;
(4) all other income;
the new funds requirement of the project (from
current appropriation).
in-
Revised: 29 cober 1974

PLANS, PF. RAMS, AND PROJECTS
S-E-C-R-E-T
HB 230-1
4b
b.
(b) Proposed Expenditures
Clear identification of all proposed expenditures. re-
quiring cash, broken down in sufficient detail to separate
(1) fixed expenses (overhead); and
(2) operating expense.
(c) Estimated Cash Balance at the End of the Fiscal Year
(2) Preparation
(a) Operating budgets are to be prepared annually for each
approved project, with a detailed breakdown for each
instrumentality. The budget will cover the past year
(estimated obligations), the current year (proposed), and
a forecast for at least the next year's operations in
agreement with the limitations contained in the relevant
operational program. The categories of expense will be
consistent for all years and will follow the general
shot classification of accounts in its prescribed accounting
reports, to facilitate comparison and justify increases
or decreases (overhead vs. operational; stateside vs.
overseas; salaries, travel, etc., as applicable).
(b) Scheduling of approvals of operating budgets will conform
with the schedules established by the appropriate Deputy
Director for annual project renewals.
(c) The Office of the Comptroller is to be provided a copy of
the approved operating budget for the project immediately
following formal approval by the appropriate Deputy
Director. This requirement also pertains to any subse-
quently approved revision of the project operating budget.
FUNDING
(1) Instrumentalities generally should be provided with cash not
in excess of three months' normal operating cash requirements.
Further funding of any instrumentality should be deferred
FROM Whenever available funds exceed this limitation. If substan-
1975
tial amounts above this limitation are on hand, the instrumen-
tality should be required to return the excess to the Agency.
CIA
Revised: 29 October 1974
NW 5p955
DocId: 32423532 Page 201
E2 IMPDET
S-E-C-R-E-T. CL BY: 059687
3
NW 50955
S-E-C-R-E-T
HHB 230-1
4b(2)
OCT on 1975
FRUGRAMS,
PLAN FROGRAMS, AND PROJECTS
(2) Funds in any instrumentality that are in excess of normal
operating requirements may be held for operational purposes
when justified by the appropriate Operating Official and when
approved by the Deputy Director concerned and the Deputy
Director for Administration in the following circumstances:
(a) In order that the instrumentality may present periodic.
financial statements reflecting substantial cash balances
and investments for the purpose of strengthening cover
and providing the appropriate stature in the community of
its operations
(b) To permit the instrumentality to make investments for the
* purpose of providing income in such amounts 
that will
lend the appearance for cover purposes of not having to
rely solely on periodic contributions throughout the year
**A) (Agency funding)
(c) To provide the instrumentality with funds for any un-
usually large anticipated disbursement(s) in 
order 
to
preclude undue attention which might be created 
by 
in-
Ejection of a large amount of funds and their 
immediate
withdrawal
(3) Funds, as needed, will be made available to an instrumentality
through various appropriate funding mechanisms 
in coordination
with the Cover and Commercial Staff and 
the Office of Finance.
All funds received by the instrumentality will be deposited in
its bank account(s) whose use and authorized signatories 
have
been approved by the Operating Official responsible for 
the
project. Dual signatories are preferred on all bank accounts.
(4) All bank accounts established by instrumentalities will be
reported to the Office of Finance when opened
, or notice
thereof will be included as a part of the first financial
report submitted by the instrumentality covering the period in
Data 
reported will
which the bank account is established
.
include the name and address of the bank; names and titles of
signatory authorities; the reason why an account is 
operable
only by a single signatory, if such is the case; and 
whether
the signatories will be covered by a fidelity 
bond.
accounts normally will be in the name of the instrumentality
unless deemed operationally inadvisable by the 
responsible
Operating Official, reported and explained concurrently 
to 
the
If the bank account is to be
Director of Finance for review.
Bank
“in some other name, appropriate protective control documents
will be executed.
4
DocId: 32423532 Page 202
Revised: 29 October 1974.
SE-C-R-E-T
PLANS, PROGRAMS, AND PROJECTS
S-E-C-R-E-T
HHB 230-1
4c.
C.
☐
(5) Requests for advances of funds to instrumentalities must indi-
cate (a) the specific purpose of the advance; (b) the identity
of any intermediate instrumentalities used to introduce the
funds; and (c) the accounting treatment to be given the funds
in each receiving instrumentality, as well as any other infor-
mation that will assist in the clear identification of Agency
funding on overt records and statements.
(6) The concurrence of the Director of Finance and the Comptroller
and the approval of the Deputy Director concerned are required
for a transfer of funds to be made between instrumentalities
of different projects. Excepted from this requirement are
transfers involving payment for actual services rendered,
reimbursement of expenditures made in behalf of the trans-
mitting instrumentality, or accommodation funding.
REFUNDS
☐
(1) All refunds from instrumentalities to the Agency, whether
permanent or temporary, must be explained by a memorandum
stating the purpose of the refund and the effect of the refund
on the overt records and statements of the instrumentality.
(2) In the event funds are to be returned to the Agency under
paragraph 4b (1) above, the Operating Official having juris-
diction over the project will devise the method of repayment
in coordination with the Director of Finance and the Cover and
. Commercial Staff.
d. AGENCY CERTIFICATION AND APPROVAL
1 FRO
OCT 20 1975
The project case officer will review financial statements submitted
by the instrumentality (see paragraph 4n(3) below) and attach his
certification that "to the best of my knowledge and belief the
statements are true and correct and the reported expenditures are
within the scope of the project authorization." In addition, the
financial statements will be approved by an appropriate Agency
approving officer and forwarded to the Proprietary Systems Branch,
Office of Finance, at the earliest possible date and not later than
sixty days after the close of the accounting period; extensions of
time will be granted by the Director of Finance upon appropriate
and reasonable request. Approval procedures for the writeoff of
assets are outlined in HHB 30-1 chapter VIII for cash and receivables
and HR 45-6 for inventory or property items. A copy of the financial
statements will be forwarded to the Office of the Comptroller.
When the instrumentality is funded by more than one Agency component,
the case officer certification and approving officer approval of
such components also will be obtained.
CIA
NW 50955
DocId: 3242 siseye 26 October 1974
E2 IMPDET
5
HHB 230-1
4e
S-E-C-R-E-T
PLANS, PROGRAMS, AND PROJECTS
g.
e.
f.
ACCOUNTING IN AGENCY RECORDS
The Office of Finance is authorized to accept the financial state-
ments referred to in paragraph d above, for appropriate recording
in the Agency's system of accounts.
PROTECTION OF U.S. GOVERNMENT INTEREST
(1) In the case of a stock-issuing instrumentality, all purely
· nominal stockholders (as specifically differentiated from
Agency-controlled holding companies or non-Agency connected
⠀⠀ beneficial shareholders) either will endorse in blank at time
☐ of issue the stock certificates issued in their names or
execute an irrevocable stock power covering the stock issued.
(2) In the case of a nonstock-issuing instrumentality, control
documents protecting the equity or other interests of the
Agency will be executed. Those documents may be overt or
Classified, and will be prepared by the Office of the General
* Counsel. The classified documents will be executed on behalf.
of the Agency by the Special Contracting Officer, Office of
Personnel.
(3) The executed stock certificates, irrevocable stock powers,
declarations of trust, memoranda of understanding 
or 
other
control documents evidencing Agency equity or interest in
instrumentalities will be forwarded promptly to the Propri-
etary Systems Branch, Office of Finance, for recording and
custódy. When such documents need to be retained by an in-
strumentality, the reasons that necessitate such retention
will be reported to the Proprietary Systems Branch, Office of
Finance, by the Operating Official responsible for the project.
This report will detail the documentation retained and the 
lo-
cation and type of safekeeping facility in which it is held,
· and include a signed statement of the custodian acknowledging
responsibility for the documents. When possible, copies of
the documents will accompany this report.
PERSONNEL POLICY
(1) Unless covered in the project outline, certain personnel data
This should set
must be included in the Administrative 
Plan.
forth a table of organization, salary scales, benefits and
allowances to be provided, and a statement of key personnel
selection procedures. Such data will be reviewed and approved
by the Director of Personnel.
OCT Á 1975
6
Revised: 29 October 1974
NW 50955
DocId: 32423.
Page 204
T-C-R-E-T.
PLANS, PROGRAMS, AND PROJECTS
S-E-C-R-E-T
HB 230-1
4h
NW 50955
h.
(2) Neither salaried employees of instrumentalities nor persons
engaged by instrumentalities in other than an employee status
will receive pay in excess of the maximum rate of a GS-15
unless approved by the Director of Central Intelligence.
(3) No commitment regarding benefits or insurance coverages will
be made to personnel of an instrumentality until such proposals
have been reviewed and approved by the Deputy Director con-
cerned and the Director of Personnel.
(4)
If cover employment is to be provided Agency personnel, such
action requires prior coordination with the Cover and Commercial
Staff on an individual basis.
(5) The employment of an individual who will be responsible for
the maintenance of the instrumentality accounting records will
be subject to approval by the Director of Finance.
INSURANCE COVERAGE
(1) The insurance program required by proprietary instrumentalities
☐ will be coordinated with the Cover and Commercial Staff for
implementation through M-MUTUAL facilities or through an
alternate method agreed upon by the responsible directorate
Insurance coverages
and the Cover and Commercial Staff.
provided through MHMUTUAL include, but are not limited to,
workmen's compensation, aviation, marine and other equipment
coverages, property damage, liability, fire and extended
coverages as well as those personnel coverages referred to
below.
(2) All staff and contract employees as well as detailed civilian
and military personnel assigned to a proprietary instrumentality.
are entitled to the statutory or contractual insurance bene-
fits applicable to them by reason of their Government employ-
ment status. All personnel directly hired by a proprietary
instrumentality are entitled to the following:
RECEIVED FROM
OCT 30 1975
CIA
(a) Life insurance and commitments for death and disability
benefits in the performance of duty in accordance with
HR 20-49.
(b) Retirement pension and annuity benefits if approved by
the Director of Personnel.
(c) Medical and hospital insurance benefits if approved by
the Director of Personnel. MHMUTUAL does not normally
either directly underwrite or reinsure these coverages,
but the Cover and Commercial Staff will provide advice
and assistance upon request.
DocId: 32423532 Page 205
7
HB 230-1
41
i.
CASUALTY PROVISION
S-E-C-R-E-T
PLANS, PROGRAMS, AND PROJECTS
See paragraph 5 below.
j. LEGAL SERVICES
The Office of General Counsel at all times will be kept advised of
the current status of the legal requirements of the instrumentality
and will be responsible for accommodating its legal problems and:
for approving the use and the fee of outside counsel. Any attorney
used by an instrumentality will be selected or approved by the
Office of General Counsel.
k.
SECURITY POLICY
1.
m.
(1) Unless covered in the project outline, there should be a
statement in the Administrative Plan outlining the security
requirements. This should include the types of operationalise-
curity approvals; physical and document security controls;
contact and communications procedures between the instrumentality.
and the Agency; security indoctrination of personnel; procedures
for periodic review of operational security and related matters
by CI Operations; emergency procedures, if applicable; and
requirements for storage of classified or sensitive material.
(2) An instrumentality will be managed in a manner consistent with
its overt purpose to avoid disclosure of its true nature and
the Agency's connection with it. No non-Agency person will be
made witting of the true nature of an instrumentality without
prior approval by both the Operating Official concerned and
the Director of Security. All persons considered for em-
ployment in an unwitting capacity also will be reported for
approval, with appropriate biographic information. The respon-
sible directorate may establish additional requirements and
procedures as required.
Not used
AUDIT
An audit program will be developed and implemented in accordance
with the requirements of HR 31-1. The prior approval of the Chief,
Audit Staff is required for the employment of either witting or un-
´witting public accountants for audit pu【poses.
UCI 80 1975
NW 50955 DocId: 32423532 Page 206
ROM
Revised: 29 October 1974
'PLANS, PROC AS, AND PROJECTS
S-E-C-R-E-T
HB 230-1
4n
n.
FINANCIAL ACCOUNTING AND REPORTING
(1) The instrumentality will maintain an accounting and a financial
reporting system consistent with the dictates of cover and
security and approved by the Director of Finance.
(2) The accounting system will provide
(a) full recording of the financial operation of each instrumen-
tality;
(b) control over and accountability for all funds, property,
and other assets for which each instrumentality is re-
sponsible;
(c) information required for integration of instrumentality
accountings into the accounting records of the Agency;
(d) any other financial or cost information required for
effective management of the instrumentality by the re-
sponsible Operating Official.
(3) The instrumentality will submit the following financial state-
_ments and related data on at least a quarterly basis:
(a) Balance Sheet.
(b) Statement of Income and Expense.
Summary Statement of Cash Receipts.
(d) Summary statements of each transaction in Certificates
of Deposit and interest-bearing accounts.
(e) Schedule of salaries paid to Agency staff and contract
personnel.
(f) Schedule of salaries and expenses, classified by general
categories, paid to directors and principal executives of
the instrumentality.
(g) Schedule of cash in bank accounts with certification that
reconciliation with instrumentality accounts has been
made and reviewed.
FROM (h) If an asset has been written off during the reporting
OCT 30 1975.
(
CIA
NW 50955
period, a schedule also will be included with the fi-
nancial report describing the item(s) written off and the
circumstances that support the writeoff action. Write-
off action is subject to the approval procedures in
HHB 30-1 chapter VIII and HR 45-6.
DocId: 3242:
12 Ravasge 207 October 1974
E2 IMPDET
9.
HHB 230-1
40
S-E-C-R-E-T
PLANS PROGRAMS, AND PROJECTS
p.
(i) Any other financial reports required by the Office of
Finance and concurred in by the Agency component re-
sponsible for the project.
(4) The statements will be certified as true and correct by the
The 
statements 
will
principal agent of the instrumentality.
clearly reflect Agency funding for the period covered, or such
funds will be identified in a covering memorandum signed 
by
the appropriate Agency approving officer transmitting the
statements to the Office of Finance, including specific identi-
fication of the manner in which the funding is recorded 
on the
books of the instrumentality. In addition, the covering memo-
randum will identify all fictitious accounts and amounts in-
cluded in asset, liability, capital, income, or expense accounts,
the balances of which are distorted to cover present or 
antici-
pated Agency funding or interproject transfers of funds or
equipment. If overt records must be deceptive 
for cover
purposes, supplemental reporting should give complete and
accurate information for internal. Agency 
records.
BORROWING, LENDING, AND PLEDGING OF ASSETS
The prior concurrence of the Director of Finance and approval of
the Deputy Director having jurisdiction over the 
instrumentality
are required for borrowing or lending funds or 
pledging any asset
by an instrumentality. Bank overdraft privileges will 
be con-
sidered as borrowings and require the same concurrence 
and ap-
Notional borrowing or lending 
in 
order to
proval as stated above.
pass Agency funds between instrumentalities for approved funding
purposes does not require the above concurrence 
and approval.
INVESTMENT POLICY
(1) When an Operating Official wishes to invest funds that have
been approved for retention in accordance 
with paragraph 4b
(2)
above or funds that are a portion of the 
three months normal
operating cash requirements, he will forward to 
the Director
of Finance for his approval a memorandum recommending 
the
investment of funds. The memorandum recommending the 
in-
vestment of funds will provide the following data:
30 1975
CIA
(a) Reason for the investment.
(b) Types of investment recommended, restricted to the following:
ROOP
NW 50955 DocId: 3203532 Page 208
(1) U.S. Government securities.
(2) Interest-hearing accounts or Certificates of Deposit
in member banks of the Federal Reserve System only.
Revised: 29 October 1974
S-E-C-R-E-T
⚫ PLANS, PRO
MS, AND PROJECTS
HB 230.1
4q
9.
Non-U.S. Government securities; list specific issues
recommended for purchase.
(c) Maximum amount recommended for investment in each type.
(d) Length of time investment of funds is anticipated.
(e)
:
In the event of investments in securities, state the name
in which they will be registered and the type and location
of safekeeping facilities to be used for the securities.
(2) After initial approval of the Director of Finance, the instru-
mentality may, at its discretion, make continuing investments
in U.S. Government securities or in interest-bearing accounts
or Certificates of Deposit of approved bank(s) having maturities
of one year or less. Each purchase of Certificates of Deposit
having maturities of greater than one year and each investment
in non-U.S. Government securities must have prior approval of
the Director of Finance and the Comptroller.
REAL PROPERTY AND OFFICE FURNISHINGS
•
(1) The lease of real property requires approval of the designated
Agency approving officer for the project concerned. Purchase,
construction, improvements, or alterations of real property
(except improvements or alterations included in approved
operating budgets) require approval of the designated approving
officer for the project concerned and, in appropriate cases,
the technical authorization of the Director of Logistics.
(The component responsible for the project will maintain a
record of real property held by the instrumentality, including
the following information as applicable: country or state of
location; type, i.e., purchased or leased; size, i.e., square
footage of building and acreage of land; purchase price;
permanent improvements or alterations totaling $1,000 or more;
annual rental and term of lease, unless the property is acquired
for less than 12 months and the rent does not exceed $250 per
month. This information will be made available to the Director
of Logistics upon request.)
(2) The procurement of office furnishings not included in approved
operating budgets requires the prior written approval of the
Operating Official responsible for the project.
MIMITATION ON INDIVIDUAL DISBURSEMENTS AND CONTRACTUAL ARRANGEMENTS
Except for funding transactions, any disbursement in excess of
$5,000 or contractual arrangement of more than 12 months' duration
requires the prior approval of the designated Agency approving
officer for the project concerned.
Revised: 29 October 1974
Page 209
11
E2 IMPDET.
S-E-C-R-E-T
CL. BY:
050687
OCT 1975
CIA
(
NW 50955
DocId: 32423532
HB 230-1
4s
S-E-C-R-E-T
PLANROGRAMS, AND PROJECTS
S.
t.
SPECIAL ADMINISTRATIVE EXPENSE POLICY
Authorized
(1) Travel and subsistence expenses incurred in behalf of the
instrumentality by authorized representatives will be paid on
When actual and
the basis of actual and necessary expenses.
necessary expenses exceed the maximum allowable rate established
for reimbursement for actual expenses under HR 22-7, the
claimant will provide detailed justification.
representatives may include stockholders, officers, directors,
employees, any individual retained in a professional 
or inde-
pendent contractor capacity on a fee basis, and staff agent or
contract personnel wholly integrated into the project. 
Air
transportation less costly than first-class will 
be used to
the extent practicable. When first-class fares are paid, such
payment will be justified in writing in the files 
of the
instrumentality.
⠀⠀ (2) Operational entertainment expenses incurred by any of the
above personnel will be reimbursed on an actual 
cost 
basis in
accordance with HHB 30-1 chapter IX, to the extent that such
expenses are reasonable and necessary to the accomplishment of
operational objectives.
(3) Directors of instrumentalities may be paid up to $50 per day,
and travel and subsistence expenses for their attendance 
at
directors' meetings, except that the payment of $50 per day
will not be allowed to directors having an employment. re-
lationship with the Agency or with the instrumentality..
(4) Expenditures authorized in paragraphs s(1), (2), and (3) above
will be reviewed at periodic intervals by the responsible 
case
officer to evaluate the necessity for such expenditures 
and
their reasonableness..
TERMINATION AND LIQUIDATION
(1) The Administrative Plan will provide that when a proprietary
project or part thereof ceases to have operational 
value or
will cease to have such value in the immediate 
future, the
responsible Operating Official will prepare and submit 
to 
the
Deputy Director concerned for his approval a 
proposal to
terminate the project or a part thereof.
FROM
QUT 30 1975
CIA
(2)
(3)
The proposal will set forth any conditions or considerations
that have a bearing on the decision to discontinue 
the 
project
or a part thereof and include the date that it is 
recommended
operations cease.
The liquidation plan will be prepared in accordance with the
provisions of paragraph 6 below.
NW 50955 DocId: 32423532 Page 210
Revised: 29 October 1974

PLANS, PROC IS, AND PROJECTS
FR-E-T
HB 230-1
5
(
5.
(4) If the proposal includes deactivation of any project instru-
mentality, together with a disposition of a portion of its
assets, the memorandum will set forth, in an attachment, in-
formation concerning planned disposition, after settlement of
obligations, of cash and noncash assets of the instrumentality.
The plan for partial disposition of assets requires the same
approvals as a liquidation plan.
CONTINGENCY CASUALTY PLAN
A contingency casualty plan should be prepared for instrumentalities if
required by HR 20-49.
6. LIQUIDATION PLAN
When the Deputy Director concerned has approved liquidation and dis-
solution of a project instrumentality, a liquidation plan will be developed
by the responsible Operating Official to cover liquidation of the assets
and liabilities of the instrumentality as required by HR 230-8 and in
accordance with the format and substance set forth below. It will be
forwarded for approval as provided in HR 230-8d.
a.
Identification of instrumentality(s) to be liquidated
b. Approval for termination (cite approved proposal as required in
paragraph 4t(1) above)
A concurrence sheet showing concurrences in the applicable pro-
visions of the liquidation plan by the designated representatives
of the General Counsel; the Director of Finance; the Chief, Cover
and Commercial Staff; the Director of Logistics, when real and
personal property holdings are involved; other Agency components
when their functional responsibilities are involved; and the Comp-
troller when assets of an estimated market value in excess of
$50,000 are involved
d. Financial Statements
Furnish a current statement of assets and liabilities, and a pro-
jected statement of assets and liabilities at date of termination
to include terminating expenses.
e. Method of Liquidation
RECEIVED FROM
OCT 30 1975
CIA
(1) Party responsible for actual liquidation. Explain how liquida-
tion of the instrumentality will be handled, such as by princi-
pal agent, cleared and witting attorney, etc.
Revised: 29 October 1974
13
S-E-C-R-E-T
E2 IMPDET
CL BY: 059687
NW 50955
DocId: 32423532 Page 211
HHB 230-1
7
PLANS, PROGRAMS, AND PROJECTS.
g.
h.
i.
j.
7.
a.
RECEA
(2) How will the instrumentality be disposed of?
(a) Will it be disposed of intact? If so, by bid, negotiation,
gift, etc.; or
(b) Will the instrumentality shell be transferred to another
Agency project; or
(c) Will the charter be terminated; or
(d) Will the instrumentality continue to operate without
Agency participation; or
(e) Will the instrumentality be deactivated but retained in a
dormant state for future possible use?
Requirement, if any, for additional funds to cover liquidation and
estimated date of financial liquidation
Disposition of Assets and Liquidation
(1) If the instrumentality is not to be sold intact, how will
noncash assets be disposed of? By bid, negotiation, transfer
to another Agency project, gift, etc.?
(2) Include a positive recommendation to be developed in consulta-
tion with the Director of Finance for the disposition of all
cash assets including funds recovered or realized through the
liquidation process.
Final Audit
The plan should provide for a final audit before the instrumentality
is liquidated or sold.
Authorization for adjustment of Agency financial records for profit
or loss
A positive statement that the Office of Finance is authorized to
make necessary adjustments to the instrumentality's 
investment
account based on the final liquidation financial statement
FISCAL ANNEXES
GENERAL
:
Use of the fiscal annex is based on the principle that accounting
requirements should be determined by the nature of the relationship
between the instrumentality and the Agency, the degree of control
Revised: 29 October 1974
FROM
OCT 1975
NW 50955 DocId: 32423532
Page 212
S-E-C-R-E-Tİ
NW 50955
PLANS, PROGRA AND PROJECTS
b.
HB 230-1
7b
exercised by the Agency and, finally, the availability of meaningful
accounting data within the instrumentality. In this light, fixed,
pro forma accounting requirements are not sought; rather, each case
will be approached individually through the fiscal annex with a
view to establishing accounting requirements that will assure that
use of Agency funds is controlled and adequately documented to a
degree consistent with the nature of the instrumentality and its
relationship with the Agency: A fiscal annex is required for all
noncontrolled subsidies.
ACCOUNTING PRINCIPLES
The purpose of the fiscal annex is to document the particular fiscal
realities of an individual noncontrolled subsidy (HR 230-8c(2)(c)(2)).
The fiscal annex may authorize appropriate deviation from normal
Agency accounting requirements. It should establish funding arrange-
ments, specific accounting controls, financial reporting requirements,
and writeoff provisions consistent both with the fiscal realities
and with the Agency's responsibilities for proper use of funds.
Accounting control should be established through the use of Agency
advance accounts, intransit accounts, and memorandum accounts to
follow the flow of funds from the case officer to the ultimate
recipient.
C. FINANCIAL STATEMENTS
d.
Provision should be made in the fiscal annex for financial state-
ments to be used as the final element of accounting control through
use of Agency memorandum accounts
(1) when financial statements are the normal practice of an instru-
mentality;
(2) when they are available to the Agency within the operational
relationship; and
(3) when the Agency contribution is identifiable therein.
USE OF CERTIFICATION AS EVIDENCE OF FULFILLMENT OF THE PURPOSES
FOR WHICH FUNDS WERE ADVANCED
ED FROM
UCI 30 1975
TA
When meaningful financial statements are not available and the
nature of the operation is such that insistence upon financial
Statements is inadvisable, it is considered appropriate and con-
Sistent with Agency practice to provide for documentation of
"services rendered" in the form of a certification signed by an
appropriate case officer and approved by the designated Agency
approving officer for the project concerned. Such certification_
executed on requests for advance subsequent to the initial advance
should read substantially as follows:
Revised: 29 October 1974
DocId: 32423532
Page 213
EZ IMPDET
15
NW 50955
-HB 230-1
7e
S-E-C-R-E-T
PLANS, PROGRAMS, AND PROJECTS
I certify that to the best of my knowledge and belief funds
advanced to this project have been or are being used for the
purposes for which they were drawn and further advances are
warranted.
In these instances appropriate evidence of receipt of funds by the
instrumentality or its representatives normally will constitute.
'full accounting for use of the funds and no memorandum accounting
procedure need be used.
e.
f.
g.
USE OF CERTIFICATION FOR OPERATIONAL REVIEW
In
In addition to the use of certifications to support use of funds,
⠀⠀⠀ Operating Officials occasionally desire to use this procedure to
ensure that appropriate periodic review of the financial aspects of
the instrumentality is accomplished by responsible officers.
such cases the fiscal annex may provide that certifications will be
the basis for recording and clearing the memorandum account even
though accounting requirements are satisfied prior to such re-
cording and clearing.
study of the
FINANCIAL DATA FOR OPERATIONAL PURPOSES
Occasionally operational interest in projects requires that certain
financial information be obtained from the instrumentality. This
information ordinarily consists of data regarding the use of funds
that indicates that such use is, in general, consistent with the
purpose of the project. Although these data are of accounting
significance, the format, arrangement, and objective of the reports
may be in a form that is not susceptible to technical treatment and
recording in the accounts of the Agency. In such cases the fiscal
annex should indicate that the financial report is required for
operational but not accountability purposes.
REIMBURSEMENT FOR OPERATIONAL DEFICITS
If the amount of Agency support is determined by the operating
deficit of an instrumentality, payments must be supported by finan-
cial statements or other satisfactory evidence establishing the
amount of the deficit.
h.
FORMAT OF FISCAL ANNEXES
16
Although the format is not rigid, the sections described below are
the minimum requirements of a fiscal annex. Other sections may be
added as necessary.
DocId: 32423532
FROM
UCI 90 1975
Page 214
S-E-C-R-E-T
Revised:
29 October 1974
PLANS, PROC IS, AND PROJECTS
HB 230-1
7h(1)
(1) Purpose and Instrumentality
Furnish a brief, sterile statement of the nature and purpose
of the project and instrumentality to be used. Include a
brief description of the Agency's relationship with the in-
strumentality, showing the degree of control that the Agency
can exercise over the facility in its use of and accounting
for funds.
(2) Funding
Describe the basis for advances to the instrumentality, and
the mechanisms to be used in introducing funds into the activi-
ty; state whether it will be funded by headquarters or specified
field stations. Any special or unusual requirements should be
set forth in this section.
(3) Accounting and Writeoff
Define the accounting requirements applicable to the instru-
mentality and prescribe the documentation required to permit
certification and writeoff by the authorized certifying officer.
The use of memorandum accounts should also be described in
this section.
DISTRIBUTION: SPECIAL
RECEIVED FROM
OCT 20 1975
Revised: 29 October 1974
EZ IMPDET
S-E-C-R-E-T CL BY:
059687
NW 50955
DocId: 32423532
Page 215
17
NW 50955
OGCK-0331
3 February 1975
MEMORANDUM FOR: Director of Central Intelligence
SUBJECT:
Proprietary Withdrawals and the Contingency Reserve
1. I am attaching a memorandum of law entitled "Proprietary
Withdrawals and the Contingency Reserve." This was discussed with you
last week.
2. It is obvious that a number of policy decisions and actions will
flow from this decision. Our congressional committees need to be appro-
priately informed, the Comptroller will need to work out certain adjustments
with OMB, and I also believe there are certain policy decisions that the
Comptroller will have to work out with Finance with respect to pending
transactions which would have placed returns from proprietaries in the
Reserve. I shall send copies of this memorandum of law to all interested
components and will assist them in any way they wish.
Jim S
Wamin
JOHN S. WARNER
General Counsel
Attachment
cc: DDA
DDO
OLC
Comptroller
D/Finance
RECEIVED FROM
OCC:JSW:sin
Originaddressee
CHA
ER via Ex Secty w/att
E-2 IMPDET
OGC Subj: APPROPRIATIONS w/att
CL BY 000276
1 - Chrono
DocId: 32423532 Page 216
SECRET
SEOMET
0330
3 February 1975
MEMORANDUM OF LAW
SUBJECT:
REFERENCES:
Proprietary Withdrawals and the Contingency Reserve
A. Memo to DCI fr C/CCS, dtd 8 Jan 74, subj:
Project MHMUTUAL Policy
B. Memo for the Record fr Comptroller, dtd 19 Aug 74,
same subject
1. Reference A recommended that there be returned to the Agency
Reserve starting with calendar year 1973 that portion of MHMUTUAL annual
profits not required for Project needs. The Director approved the basic
paper on 8 February, but noted "surplus funds from MHMUTUAL earnings
will be returned to the Treasury rather than the Agency Reserve."
Reference B recorded a telephone decision by the Director that "[w]hen
funds are withdrawn from proprietaries, they will be transferred to the
Contingency Reserve...."
f1
2. The purpose of this paper is to examine the legal aspects of these
policy decisions. The concept of the Reserve was established in 1952 as a
means by which the Agency would have flexibility to fund projects or
activities which had not been contemplated in the normal appropriation
request. Its purpose was to create a mechanism to provide funds for
unforeseeable requirements which would be more rapid and secure than
the supplemental appropriation procedure employed by other Government
agencies. The Reserve has been funded by direct appropriation and by
transfer of unobligated appropriations at appropriate times after the close
of the fiscal year. Funds were and are released from the Reserve only with
the approval of OMB with subsequent notice of each Reserve withdrawal
furnished in writing to the two appropriations committees.
RECEIVED FROM
JUN 30
CIA
E-2 IMPDET
CL BY 000276
SECRET
NW 50955 DocId: 32423532 Page 217
SECRET
3. In lieu of a specific annual appropriation act for the Agency,
OMB by letter notifies the chairmen of the two appropriations committees
that the Agency budget of a specific number of dollars is contained in the
DOD appropriation request. The letter also specifies the accounts in which
these funds are located. In the past where there were appropriations to the
Reserve, that letter would specify the amount of the operating budget and
: the amount to be applied to the Reserve. After committee action, appropriate
letters, sometimes separately and sometimes jointly signed by the chairmen
of the two committees, are sent to OMB specifying what has been approved
for the Agency budget and confirming the accounts in which they are located.
Thereafter, the necessary transfers to the Agency are accomplished pursuant
to the authority of Section 5 of the CIA Act of 1949, which was specifically
worded so as to permit appropriations for the Agency to be placed in the
accounts of other agencies and then transferred to the Agency free of all
limitations and restrictions on the appropriation from which transferred.
The effect of this was to permit those funds to be expended under the authori-
ties of the CIA Act of 1949, rather than the authorities of the appropriation
acts from which transferred. A transfer under other authority such as the
Economy Act would require that the funds be spent in accordance with
limitations of the appropriation from which transferred, both as to purpose
and annuality. Unlike any other agency, our "appropriation act" is the
process described above and consists of the following principal elements:
a.
the OMB letter;
b. the chairmen letters;
c. the DOD appropriations act approved by the whole
Congress and signed by the President; and
d. the transfers to the Agency approved by OMB and
authorized by Section 5 of the CIA Act of 1949.
4. The question then arises whether a return of money from a
previously established proprietary can be placed in the Reserve and
later expended by the Agency under the law. There are several provisions
of law based on Article I, Section 9 of the Constitution, which states that "no
money may be drawn from the Treasury, but in consequence of appropriations
made by law." Twenty years after the Constitution was ratified, the act.
from which present law derives was enacted. That law is section 628 of
Title 31 of the U. S. Code which states:
Except as otherwise provided by law, sums appropriated
for the various branches of expenditure in the public service shall
be applied solely to the objects for which they are respectively made,
RECEV and for no others.
JUN 30 1975
CIA:
SEGRET
NW 50955
⚫DocId: 32423532 Page 218
SECRET
5. Illustrative of the uniformly strict interpretation given to 31 U.S.C.
628 is a decision rendered by the Comptroller General to the Secretary of
the Treasury and reported at 37 Comp. Gen. 732 (1958). In this case
Congress had authorized an appropriation for payment of inequitable losses
in pay sustained by military officers under emergency economy legislation,
but did not thereafter include funds for this purpose when it enacted appro-
priations for the Treasury. The Commandant of the Coast Guard had advised
a subcommittee of the House Committee on Appropriations during appropriation
hearings that, unless the Committee had an objection, it was intended to pay
such claims for losses in pay from the Coast Guard appropriation for "Operating
Expenses." Thereafter, the General Accounting Office Claims Division deter-
mined that over $30,000 in such claims were allowable, but the Comptroller
General was forced to conclude that no claims could be certified for payment
because there was no available appropriation earmarked for their payment.
Citing 31 U.S.C. 628 and stating the rule that "the appropriations provided
by Congress to the Federal agencies may be used only for the objects for
which they are made and no others," the Comptroller General decided that
the statement made by the Commandant before the House subcommittee did not
have the effect of making funds appropriated as "Operating Expenses" available
for payment of the special claims. The Comptroller General held that the
appropriate recourse was to submit a request for appropriation to the Congress.
6. In 1849 the Congress sought to buttress the appropriation principle
set forth in the Constitution by passing a law from which is derived 31 U.S.C.
484, which provides in part:
The gross amount of all moneys received from whatever
source for the use of the United States,... shall be paid by the
officer or agent receiving the same into the Treasury, at as
early a day as practicable, without any abatement or deduction
on account of salary, fees, costs, charges, expenses, or claim
of any description whatever.
Also, Section 487 of 31 U.S.C. (originally passed in 1877) provides specifically
that all proceeds of sales of public property of any kind, (with certain excep-
tions not relevant here) shall be deposited and covered into the Treasury as
Miscellaneous Receipts and shall not be withdrawn or applied, except in
consequence of a subsequent appropriation.
7. Where the Agency makes funds available to establish a proprietary
or to add additional investments, the funds are recorded on Agency books
as having been expended and the Director certifies to the expenditure
RELIVED FROM
JUN 30 1975
CIA
NW 50955 DocId: 32423532 Page 219
3
SEGREY
SECRET
a
under section 8(b) of the CIA Act of 1949. I am informed that when an
expenditure of this type is recorded on Agency books; nevertheless,
memorandum account is maintained so that the Agency has a record of the
precise amount of Government funds invested in the proprietary. I am also
informed that, if a proprietary were to be fully liquidated with the proceeds
scheduled to go to the Reserve, but the funds returned are in excess of the
investment, the excess would not be placed in the Reserve, but would be
credited to Miscellaneous Receipts. Where funds are returned to the Agency
from a proprietary, the current procedure is for the Agency to "reverse".
the original expenditure entry and, for those funds which are to go into the
Reserve, the Reserve account on the Agency books is credited, with notifi-
cation to OMB.
8. Let us take a hypothetical situation where 20 years ago the Agency
expended $1 million to establish a proprietary. At that time the $1 million
would have been recorded as expended, certified under the Director's
authority for purposes contemplated by the appropriation of 20 years ago.
In the meantime, that $1 million would have been spent by the proprietary
for salaries, purchase of equipment, or for other purposes. The Agency
either supplemented its original expenditure with additional monies or the
proprietary might have made a profit during these years. This proprietary,
at Agency direction, now liquidates its activities, including the selling of
assets. Under the Constitution and the laws cited above, it is my opinion
that the law requires all such return of funds to the Agency to be covered
into the Treasury as Miscellaneous Receipts.
9. The Agency may not legally expend these funds once again without
the approval of the Congress, and by that I mean the full appropriations
process and not merely the approval of OMB and notification to our two
appropriations committees. The essential element missing in this latter
procedure is that there has not been an appropriation bill approved by the
Congress as a whole and signed by the President. In effect, the Agency
would have had its appropriation supplemented without the full appropriation
process.
RECEIVED FROM
JUN 30 1975
CIA
John & Warni
JOHN S. WARNER
General Counsel
S50757
NW 50955
DocId: 32423532
Page 220

0
Register
NW
NW 50955
DocId: 32423532
Page 222
R 18.19
Date of
Purchase
Stocks
Electrical Equipment
No. of
Shares
Common Stock
Purchased at
Per Share
Amount
Per Share
31 December 1971
Amount
P/E Rai
3/31/71
4/5/71
4/ 5/71
· Combustion Engineering
Combustion Engineering
.1000
61-3/4
62,201.18.
62-1/8
62,125
500
61-3/4
31,115.90
62-1/8
31,062
Combustion Engineering
500
61-5/8
31,038.30
62-1/8
31,063
4/23/71
4/23/71
Combustion Engineering
100
69-3/4
7,020.98
62-1/8
•
6,212
Combustion Engineering
2900
69-718
203,810.21
62-1/8
180,163
Total and Average Price.
5000
66-3/4
335,186.57
62-1/8
310,625
18
6/9/71 McGraw Edison
6/10/71 McGraw Edison
6/10/71
3500
43
151,597.50
34-1/4
119,875
1000
43-1/4
43,496.30
34-1/4
34,250
McGraw Edison
500
42-3/4
21,576.90
34-1/4
17,125
Total and Average Price
5000
43
216,670.70
34-1/4
171,250
14
Insurance
.10/21/71
Crum and Forster
5000
29-7/8
149,375.00
31-1/2.
157,500
11
11/ 1/71
12/7/71
Hanover Insurance
1000
36-7/8
36,800.00
41-1/4
41,250
Hanover Insurance
1000
38-5/8
38,650.00
41-1/4
41,250
Total and Average Price
2000
37-3/4
75,450.00
41-1/4
82,500
11/1/71
Ohio Casualty
1000
43-3/4
43,750.00
48
48,000
13
Office & Business Equipment
.6/19/70
IBM
400
275
110,281.00. 336-1/2
134,600
36
Oil
7/11/69. Texaco
4000
37-1/3
149,365.60
34-3/8
137,500
10
ECEIVED FROM
NOV 10 1975
CIA
NW 50955
DocId
Common Stock
te of
Purchase
24235 Page 223
Stocks
Utilities
No. of
Shares
Purchased at
31 December 1971
Per Share
Amount
Per Share
Amount
P/E Ratic
6/11/64 VEPCO
5/18/66
533
32-3/8
17,241.07
20-1/2
10,926
VEPCO
800
Total and Average Price
1333
32-15/16
32-11/16
26,331.94
43,573.01
20-1/2
20-1/2
16,400
27,326
11
,123,651.88
$ 1,069,301
Not shown above are stock options to buy 7,500 shares of Arabian Shield Development Company stock @ $.25 per share..
The option is good until April 3, 1975. December 31, 1971, prices on Arabian Shield are 1-5/8 - 2-1/8.
RECEIVED FROM
SIST SON
GIA
NW 50955
COMMON
'OCK
Date of
Purchase
Stocks
No.
of
Purchased at
• 29 December 1972
Shares
Per Share
Amount Per Share
Amount
P/E Ratio
Automotive Supplies
2/23/72
Irvin Industries
5000
13-5/8
Q/20/72
Javelin Corporation
6000
22-5/16
67,929.63
133,875.00
9-1/8
45,625
15
10-1/2
63,000
13
Page 24
Broadcasting
8/21/72
Metromedia Incorporated
5500
38-1/4
210,218.00
32-1/2
178,750
19
Conglomerates
1/28/72
W.R. Grace
5000
29-15/16°
149,663.16
26-1/2.
132,500
3/6/72
W.R. Grace
2000
29-1/16
58,121.08
26-1/2
53,000
3/8/72
W.R. Grace
1000
28-1/16
28,093.80
26-1/2
26,500
Total and Average Price
8000
29-172
235,898.04
26-1/2
212,000
13
Electrical Equipment
6/9/72
McGraw Edison
5000
43-1/4
216,670.70
40-3/8
201,875
16
Food and Beverage
1/72
Quaker Oats
3000
40-1/2
121,389.50
45
11/ 2/72.
Quaker Oats
1000
40-7/8
40,864.00
45
Total and Average Price
4000
40-5/8
162,253.50
45
5515
135,000
45,000
180,000
24
Food Services
8/21/72
Servomation Corporation
7500
11/10/72°
Servomation Corporation
150
28-5/8
Stk Div
214,765.80
.00
Total and Average Price
7650
28-1/8
214,765.80
25-5/8
25-5/8
25-5/8
192,187.
3,844
196,031
14
RECEIVED FRO
NOV 10 1375
NW 50955
COMMON STOCK
Doc
ate of
urchase
Stocks
No. of
Shares
Purchased at
29 December 1972
Per Share
Amount
Per Share
Amount
P/E Ratic
Housing
332 Page
2/24/72
.
Shapell Industries
5000
25-1/2
127,859.50
20-5/8
103,125
12
Insurance
9/14/72
Hanover Insurance
07/19/72 Hanover Insurance
1000
52
52,000.00
54-1/4
54,250
2000
51-3/4
103,575.00
54-1/4
108,500
.1720/72
Hanover Insurance
200
52
10,400.00
54-1/4
10,850
Total and Average Price
3200
51-7/8
165,975.00
54-174
173,600
10
5/18/72
Leasco
5000
20-1/2'
102,731.20
19-1/8
95,625
.0/23/72
Monarch Capital Corporation
5000
17
84,925.00 18-1/4
91,250
16
Office and Business Equipment
.0/27/72
.1/8/72
IBM
IBM
300
380-1/16
114,020.00 402
120,600
500
378-5/8
188,925.00 402
201,000
Total and Average Price.
800
378-5/8
302,945.00 402
321,600
37
Retail Clothing
2/24/72
Associated Drygoods
1600
54-7/8
3/15/72
Associated Drygoods
2000
58-1/8
Total and Average Price
3600
58-578
87,826.00
116,266.60
204,092.60
52-1/2
52-1/2
84,000
105,000
52-1/2
189,000
18
RECEIVED FROME
NOV TO US
NW 50955
Do I 3242353
of
Purchase
Stocks
Utilities
No. of
Shares
COMMON
JCK
Purchased at
Per Share
Amount
Per Share
29 December 1972
Amount
P/E Ratio
8/3/72
12/22/72
American Tel & Tel.
10000
43-9/16
435,545.00
52-3/4
527,500
American Tel & Tel
5000
52
260,147.00
52-3/4
263,750
Total and Average Price.
15000
46-3/8
695,692.00
52-3/4
791,250
12
Page 226
1/64
VEPCO
533
32-3/8
17,241.07
22-3/8
11,926
18/64
VEPCO
800
Total and Average Price
1333
32-15/16
32-11/16
26,331.94
22-3/8
17,900
43,573.01
22-3/8
29,826
11
$ 2,969,403.98
$ 2,872,557
Not shown above are stock options to buy 7,500 shares of Arabian Shield Development Company stock @ $.25 per share.
December 29, 1972, prices on Arabian Shield are 2-1/4 to 2-5/8.
The option is good until July 29, 1975.
RECEIVED FROM
NOV 10 1975
CIA
NW 50955 DocId: 3242
COMMON STOCK
Date of
No. of
Purchased at
31 Dec 1973
Purchase
Stocks
Shares
Per Share
Amount
Per Share
Amount
P/E Ratio
Page 22
Automotive Supplies
4/72
Irvin Industries
5000
13-5/8
67,929.63
15,000
6/72
Javelin Corporation.
6000
22-5/16
133,875.00.
2
12,000
Broadcasting
8/72
Metromedia Incorporated
5500
38-1/4
210,218.00
7-3/4
42,625
Electrical Equipment
6/72
McGraw Edison
5000
43-1/4
216,670.70
19-5/8
98,125
Food and Beverage
11/72
Quaker Oats
4000
40-5/8
162,253.50 28-7/8
115,500
17
Food Services
8/72
Servomation Corporation
.7650
28-1/8
214,765.80
11-1/2
87,975
RECEIVED FROM
NOV 10 1975
CIA
NW *50955
DocId: 223532
COMMON STOCK
ate of
Purchase
Stocks
No. of
Shares
Purchased at
31 Dec 1973
Per Share
Amount
Per Share
Amount
P/E Ratic
Housing
2/72
Shapell Industries
5000
25-1/2
127,859.50
7-3/4
38,750
3
Pagé
Insurance
2/73
American Reinsurance
..6000
42-7/8
342,850.00
24-1/4
194,000
4/73
American Reinsurance
2000
38-1/2
77,000.00
124-1/4
48,500
Total and Average Price
10000
42
419,850.00
24-174
242,500
9
1/73
Gulf Life Holdings
24,000
17-3/4
426,572.95
10.
240,000
5
9/72
Hanover Insurance
2000
26
52,000.00
12
24,000
10/72
Hanover Insurance
4000
25-7/8
103,575.00
12
48,000
11/72
Hanover Insurance
400
26
10,400.00
12
4,800
Total and Average Price
6400
25-7/8
165,975.00
12
76,800
5/72
Reliance Group
5000
20-1/2
102,731.20
10-1/8
50,625
2/73
Reliance Group
2000
12-5/8
25,332.00
10-1/8
20,250
Total and Average Price
7000
18-1/4
128,063.20
10-1/8
70,875
10/72
Monarch Capital Corporation
5000
17
84,925.00
9-3/4
48,750
6
1/73
U.S. Fidelity and Guaranty
1100
40-1/4
44,280.94
36-1/8
39,737
10
RECEIVED FROM
NOV 10 1975
CIA
NW 5b955
DocId: 32423532 Page 22
COMMON STOCK
✓ Date of
Purchase
Stocks
No. of
Shares
Purchased at
31 Dec 1973
Per Share
Amount
Per Share
Amount
P/E Rat
Retail Clothing
2/72
3/72
_ Associated Drygoods
1600
54-7/8
87,826.00
26-3/8
42,200
Associated Drygoods
2000
58-1/8
116,266.60
26-318
52,750
Total and Average Price
3600
56-576
204,092.60
26-376
54,950
Utilities
5/64
VEPCO
6/64
VEPCO
800
0533
32-15/16
26,331.94
14-1/2
Total and Average Price
1333
32-3/8
32-11/16
17,241.07
14-1/2
43,573.01
14-1/2
11,600
7,728
19,328
6
$ 2,650,904.83
$ 1,242,915
Not shown above are stock options to buy 7,500 shares of Arabian Shield Development Company stock @$.25 per share.
The option is good until July 21, 1974. December 31, 1973 prices on Arabian shield are 1-3/4 - 2-1/4.
RECEIVED FROM
NOV 10 1975
CIA
WW .50955
DocId:
COMMON STOCK
of
urchase
Stocks
.No. of
Shares
Purchased at
31 December 1974
Per Share
Amount Per Share
Amount
P/E Ratic
)
3532 Tag 230
Automotive Supplies
2/72
Irvin Industries
5000
13-5/8
5/72
Javelin Corporation
6000
22-5/16
67,929.63
133,875.00
1-1/2
7,500
6,000
Electrical Equipment
6/72
McGraw Edison
5000
43-1/4
216,670.70
11-3/8
56,875
Food and Beverage
11/72
Quaker Oats
4000
40-5/8
162,253.50
13
52,000
Food Services
8/72
Servomation Corporation
7650
28-1/8
214,765.80
* 5-1/2.
42,075
RECEIVED FROM.
NOV 10 1975
CIA

NW 50955
DocId: 324232Page 231
Date of
Purchase
Housing
COMMON STOCK
Stocks
No. of
Shares
Purchased at
31 December 1974
Per Share
Amount
• Per Share
Amount
P/E Rati
2/72
Shapell Industries
5000
25-1/2.
127,859.50
5-1/2
27,500
Insurance
2/73
American Reinsurance
8000
42-7/8
342,850.00
13
4/73
American Reinsurance
2000
38-1/2
77,000.00
13
Total and Average Price
10000
42
419,850.00
13
WWE
104,000
26,000
130,000
Def
1/73
Gulf Life Holdings
24,000
17-314
426,572.95
06-3/8
153,000
9/72
Hanover Insurance
2000
26
52,000.00
5-3/4
11,500
10/72
Hanover
Insurance
4000
25-7/8.
103,575.00
5-3/4
23,000
11/72
Hanover Insurance
400
26
10,400.00
5-3/4
2,300
Total and Average Price
6400
25-7/8
165,975.00
5-374
36,800
5
5/72
Reliance Group
5000
20-1/2
102,731.20
5-3/4
28,750
7/73
Reliance Group
2000
12-5/8
25,332.00
5-3/4
11,500
Total and Average Price
7000
18-174
128,063.20
5-374
40,250
Monarch Capital Corporation
5000
17
84,925.00
8-3/4
43,750
1/73.
U.S. Fidelity and Guaranty
1100
40-1/4
44,280.94
25-3/4
28,325
9
RECEIVED FROM
NOV 10 1975
CIA
P/E Rati
COMMON STOCK
NW 50955
31 December 1974
Amount
Purchased at
Per Share
Amount
Per Share
No. of
Shares
2/72
1/72
1600
54-7/8
87,826.00
17-7/8
28,600
2000
58-1/8
Total and Average Price
3600
56-5/8
116,266.60
204,092.60
17-7/8
35,750
17-778
64,350
Date of
Purchase
Stocks
Retail Clothing
Associated Drygoods
Associated Drygoods
DocId
Utilities
5/64
6/64
VEPCO
1.800
32-15/16
26,331.94
8-1/4
6,600
VEPCO
533
32-3/8
17,241.07
8-1/4
4,397
Total and Average Price
1333
32-11/16
43,573.01
8-1/4
10,997
$ 2,440,686.83
$699,422
Le
23532
RECEIVED FROM
NOV 10 1975
CIA
NW:50955
DocId: 32423532
Page 233
COMMON STOCK
Date of
Purchase
Stocks
No. of
Purchased at
30 September 1975
Shares
Per Share
Amount
Per Share
Amount
P/E Rat
Automotive Supplies
2/72
Irvin Industries
5000
13-5/8
67,929.63
3/72.
Javelin Corporation
6000
22-5/16
133,875.00
20,000
6,000
5
Electrical Equipment
6/72
McGraw Edison
5000
43-1/4
216,670.70
18-3/4
93,750
15
Food and Beverage
11/72
Quaker Oats.
4000
40-5/8
162,253.50.
18
72,000
12
Food Services
8/72
Servomation Corporation
7650
1.28-1/8
214,765.80
8-5/8
65,981
6
RECEIVED FROM
NOV 10 1975
CIA
COMMON STOCK
223532
Date of
Purchase
Stocks
No. of
Shares
Purchased at
30 September 1975
Per Share
Amount
Per Share
Amount
P/E Rat:
Housing
2/72
Shapell Industries
5000
25-1/2
127,859.50
8-1/8
40,625
NW 50955
DocId:
Insurance
2/73
4/73
American Reinsurance
8000
42-7/8
342,850.00
13-3/4
110,000
American Reinsurance
2000
38-1/2
77,000.00
13-3/4
27,500
Total and Average Price
10000
42
419,850.00
13-3/4
137,500
Def
.1/73
Gulf Life Holdings
24,000
17-3/4
-426,572.95
6-7/8
165,000
9/72
Hanover
Insurance
2000
26
10/72
Hanover
Insurance
4000
25-7/8
..
52,000.00
103,575.00
6-3/8
12,750
6-3/8
25,500
11/72
Hanover
Insurance
400
26
Total and Average Price
6400
25-7/8
10,400.00
165,975.00
6-3/8
2,550
6-3/8
40,800
Def
5/72
Reliance Group
5000
20-1/2
102,731.20
6-1/8
30,625
2/73
Reliance Group
2000
12-5/8
25,332.00
6-1/8
12,250
Total and Average Price.
7000
18-174
128,063.20 - 6-1/8
42,875
. Def
50/72
Monarch Capital Corporation
5000
17
84,925.00
9-1/4
46,250
8
173
U.S. Fidelity and Guaranty
1100
40-1/4
44,280.94
29-7/8
32,863
12
Page 234
RECEIVED
OV in 1975
CIA
NW 50955
DocId 32423532
Page 235
COMMON STOCK
Date of
Purchase
Stocks
No. of
Shares
Purchased at
Per Share
Amount
Per Share
30 September 1975
Amount
P/E Ra
Retail Clothing
2/72
3/72
Associated Drygoods
1600
54-7/8
87,826.00
27
43,200
Associated Drygoods
2000
58-1/8
116,266.60
27
54,000
Total and Average Price
3600
56-5/8
204,092.60
27
97,200
11
Utilities
.5/64
VEPCO
800
32-15/16
26,331.94
11-3/4
9,400
6/64
VEPCO
533
32-3/8
17,241.07
11-3/4
6,263
Total and Average Price
1333
32-11/16
43,573.01
11-3/4
15,663
$ 2,440,686.83
$876,507
RECEIVED FROM
NOV 10 1975
CIA
.
NOTES ON THE SCHEDULES OF GAIN OR LOSS
ON THE SALE OF MHMUTUAL INVESTMENTS
Note #1
The MHMUTUAL portfolio, from which the attached schedules of gain or loss
on the sale of investments were taken, is not an accounting document in the
sense that it is used to account for funds handled by the Activity. The purpose
of the portfolio is to provide management with a picture of the investments held
by the complex at any point in time. The portfolio is not audited per se, and in
past years no attempt was made to insure that each presentation tied directly
back to the previous portfolio; that has been done in recent years. Due to the
lack of audit, certain errors were not discovered, and they were carried forward
to the present. One example is on the 1970 presentation of the sales of stocks
to date. The total sale price of $2,226,883.29 when subtracted from the total
purchase price of $2,246,793.93 results in a loss of $19,910.64 instead of the
loss of $27,802.99 as shown under the column marked gain or (loss) on sales.
The total gain on sales to date should therefore be $177,437.51. For some un-
known reason, the balance carried forward to the 1971 schedule of gain on the
sale of equity is stated as $206,314.47 which involves an overstatement in the
cumulative gain on the sale of equity in the amount of $28,876.96. This error
has been carried forward to the present.
Note #2
The portfolio figures cannot be directly tied in with the financial state-
ments for MHMUTUAL in the case of bonds since the statements reflect an average
cost for all the bonds of a particular issuer, and the appreciation on a dis-
counted bond is recorded as income each year with a commensurate increase in the
book value of the bond.
Note #3
The only bond transaction during 1970 was the sale of $50,000 of U.S.
Treasury bonds.
Investments."
This transaction is found on the schedule titled "Debenture
RECEIVED FROM
NOV 1975
CIA
Page 236
SECRET
NW 50955
DocId: 32423532.
tracted from
11/17/89. Portfolio
PORTFOLIO SALES OF STOCKS TO DATE
DocId: 32423532 Page 237
Date of
No. of
Purchesn
Stocks
Shares
Total
Purchase Price
Date of
Salo
Net
Sale Price
Goin or
(Lost) on Salce
4/22/64
4/22/64
7/23/04
Burlington Industries, Inc.
300
$
13,812.93
6/ 8/65
National Steel Corporation
300
16,559472
11/ 4/66
20,466.70
11,992.11
$ 6,653.77
(4.567.11)
Scott Paper Company
1100
37.550.77
11/4/66
28.013.79
(0,042.58)
4/28-(3)
10/ 2761
127-7769
7/19/65
/30/04
5/12/(1)
J. C. Penny Company.
250
16.278.71
11/4/06
13.112.15
(3.105.06)
Columbia Broadcasting System
408
16,660.52
11/4/06
21,938.59
5,235.901
Scett Forestan & Corpány
800
20.916.80
11/15/06
23.840.15
2,877.35
North Acerican Aviation
300
16.332.75
1/16/67
15.052.48
(1,250.27)
1/ 6/68
Corn Products Company.
500
20.691.50
9/21/67
22.779.43
(4.412.42)
General Public Polities
1500
49,253.63
9/71/67
43.344.42
(662)
W
Nebent Hiring Corporation
682
50,712.36
12/13/67
50.598.45
6.731.03
8/11/375)
3/12/67
*Freeport Sulphur Company
1200
37,613.52
8/ 5/08
48.217.24
15,003.72
- 37 5/GA
Chemical Bank H.Y. Trust Company
900
40.033.58
11/27/68
64,901716
16.217.59
11; 1/6/56)
6/8/75
Deures Company
1,00
15.504.76
11/27/08
22,370.93
G
2/17/67
General Boinsurance Corporation
150
43.018.90 11/77/09
54.012.45
3/13/07
International Rinerals 6 Chemicals
1700
51.935.78
11/27/68
+25.766.84
(26,178.54)
273765
Nomich Thar. Ital.Co pany
600
14,302.80
11/77/09
76.272.46
17.018.57
3/17/65
Condycer Tire & Rubber Company
2000
101,334.37
2/28/69
111,416.04
10,031.67
1/6/66); 2/23/66); 4/23/03)
37 5101
Gulf Oil Corporation
600
15.544.92
2/25/09
24.917.05
9.372.13
U.S. Gyper
Copony
200
13.891.89
2/78/09
16,395.17
2.503.37
Mayerhaeuser Copany
1030
43.784.46
7/28/69
79.778.60
35.43.14
711/03
McLouth Steel Corporation
4000
109.801.76
4/30/69
154,985.62
(9.815.04)
1/77/69); 1/15/65)
6/19/67
Scarle, (C.D.) C Comapny
2000
104,089.62
4/30/69
82.959.74
(21.129.88)
4723768)
11/77/09
Union Corp Corporation.
3000
166.024.80
4/30/69
•
202.274.06
11/15/66
Attrican Hospital Supply
6000
150,725.24
10/17/69
841.305.21
1710207
2776409)
Northwestern Life Insurance
3000
*
The foreign-based compoules are not subject to U.S. taxes on capital gains.
ร
153.332.50
$1,567,378.93
102...
Net dividends reported are net exsunts received after deductions of 30 per cent Federal Withholding
135.419.79
117-7/69
$1,366,9801.78
-7-
RECEIVED FROM
NOV 10 1975
CIA
29.06
(62.97
3.71
3.16
NW 50955
DocId: 32423532
PORTFOLIO SALES OF STUCKS TO DATE
ཉ།
Stacks
Scarce
717270
4/28/73
4/83/72
117 3/70
4/10/79
W/1/70
Sales Through" 1969
American Haye Products
3000
American Natural Gas
4000
Burlineton Industries
4000
Cincinnati Milling Machine
2:00
114.323.52
Toral
Purchase Price
$1.166,380.28
$ 202.787.09
108.997.93
175.029.63
Sale Fries
$1.564,328.93
$ 186.643.75
136.329.65
155.637 60
80.471.10
$(23
15
Coco Cola
2000
140.665167
Dr. Perit
6000
146.521.20
157.676.15
161,748.91
General Dynamics
2000
98,780.51
47,168 85
4/15/70
4719770
General Foods
1000
Pealett-Packard)
4350
77.216.80
112.991.70´
84,733.50
7.095 70
170.313.37
57
500
110.240.55
147.014.55
11/ 3/70
16/70
4/15/70
4/35/70
Liberty National Life
6000
138,690.00
130.700.00
National Cash Register
1500
216,000.00
185.648.75
RCA
4000
160.426.85
102.445.54
Shelly Oil Products
1000
69.459.00
31.086.87
4/10/77
Tompax
400
36.742.56
81.727.00
11/ 3/75
U.S. Fidelity & Guaranty
3000
104.356.00
109.072.90
(19.351.75)
(57.591.39)
(35.372.13)
3}
4/10/70
Yerox
3000
175.016.39
257.543.30
Total Sales 1970
$2.7461793.93
Total Sales to date
$3.613.774.21
$2.276 893.29
$3.791.211.72
$ 27.907.09
$169.4 16
Page 238
Foreign-based companies are not subject to 0.5. taxes on capital gein.
12/31/70 Portfolio
RECEIVED
FROM
NOV 10 1975
CIA
22/71
196/71
NW 50955 Doc324235 Plue_297
EQUITY SALES TO DATE
of
Stocks
No. of
Shares
Sales Through 1970
$3,791,211.72
Total
Purchase Price
$ 3,584,897.25
Net
Sale Price
Gain or
(Loss) on Sale
$ 206,314.47
10/71
Abbott Laboratories
4000
257,534.86
$
278,083.99
$
20,549.13
American Tel.
& Tel.
4000
200,373.50
193,615.88
30/71
American Electric Power
5000
185,594.44
141,819.03
Ampex
4000
146,568.14
89,542.58
(6,757.62)
(43,775.41)
(57,025.56)
25 71
Bankers National Life
1000
29,750.00
33,500.00
3,750.00
71
Bankers National Life
1500
44,625.00
50,550.00
5,925.00
送/71
Bankers National Life
1000
29,750.00
34,250.00
/14/71
Central &
Southwest
1000
48,229.01
46,509.06
4,500.00
(1,719.95)
/1/71
Control Data
1000
143,370.36
17/71
Coca Cola
4000
317,479.10
17/71
Continental Telephone
8000
206,557.89
37,429.84
394,210.53
166,917.41
(105,940.52)
76,731.43
(39,640.48)
/10/71
Chubb Corporation
2000
121,500.00
131,750.00
10,250.00
29/71
Dr. Pepper
2000
33,357.50
63,383.59
30,026.09
122/71
Eastman Kodak
3000
198,656.73
218,339.70
19,682.97
/17/71
Emerson Electric
2500
186,467.44
185,489.51
(977.93)
4/71
Fleetwood Enterprises
1000
38,219.13
46,260.26
8,041.13
120/71
Ford Motor
3000
154,237.41
181,127.95
22/71
Gillette
3000
1/14/71
Hardee Foods
5000
165,947.09
60,000.00
133,250.78
69,224.35
26,890.54
(32,696.31)
9,224.35
15/71
Houston Natural Gas
60
3,124.15
2,905.16
(218.99)
1/14/71
Johns Manville
6000
236,419.04
256,064.84
5/71
Liberty National Life
5000
131.279.00
178.200.00
'21/71
MMM
2000
163,032.52
230,733.41
'27 '71
National Cash Register
2000
106,738.00
78,830.54
A/71
Pepsico
4000
238,440.41
255,933.19
/25/71
Pillsbury
2000
94,178.57
107,153.84
718/71
Reynolds Metals
1000
55,407.47
21,025.77
/16/71
Scott Paper
5000
166,649.10
117,592.02
0/15/71
Shappell Industries
4000
129,643.25
137,822.01
120/71
Southern Company
10000
281,317.00
197,966.00
127/71
Sterling Drug
4000
121,807.73
172,658.95
19,645.80
46,921.00
67,700.89.
(27,907.46)
17,492.78
12,975.27
(34,381.70)
(49,057.08)
8,178.76
(83,351.00)
50,851.22
112/31/71
RECEIVED FROM
WOV 10 1975
CIA
EQUITY St. IS TO DATE
Date of
Sale
No. of
Stocks
Shares
5/29/71
8/18/71
U.S. Fidelity & Guaranty
U.S. Fidelity & Guaranty
3500
127,361.80
3500
154,000.00
12/30/71
Universal Oil Products
1000
113,444.75
10/15/71
Warner Lambert
2500
102,928.50
29/71
Total
Purchase Price
Net
Sale Price
· 160,076.64
172,835.59
102,221.53
Gain or
(Loss) on Sale
32,714.84
10,035.59
(11,223.22)
2,585.16
105,513.66
Western Casualty & Surety
400
25,000.00
31,180.00
6,180.00
718/71
Western Casualty & Surety
1400
93,400.00
112,150.00
10,750.00
8/19/71
Western Casualty & Surety
2200
139,975.00
174,900.00
34,925.00
6724/71
Xcxox
2000
161,652.30
221,942.48
Total Sales 1971
Total Sales to Date
60,290.18
$ 118,943.90
$ 325,258.37
RECEIVED FROM
NOV 10 1975
CIA

0
1 1/72
6-2/72
NW 50955
121/72
DocId: 33532 Paus 347 co
EQUITY SALES TO DATE
of
Stocks
No. of
Shares
Sales Through 1971
American Reinsurance
8000
331,687.40
8/72
Ashland Oil
8000
220,314.00
Total
Purchase. Price
Net
; Sale Price
Gain or
(Loss) on Sale
$ 325,258.37
54,662.60
15,672.93
386,350.00
235,986.93
9/72
Combined Insurance Company
5000
122,500.00
131;375.00
Combustion Engineering
5000
335,186.57
364,278.67
8,875.00
29,092.10
Crum & Forster
2000
59,750.00
60,712.50
8/18/72
2/11/72
1/6/72
1/ 9/72
1/10/72.
1/18/72
9/ 7/72
4/ 3/72
8/17/72
Crum & Forster
3000
89,625.00
99,000.00
Dean Witter
300
Gulf Life Holdings
2700
6,900.00
137,927.17
8,196.36
151,531.74
Gulf Life Holdings
1200
Gulf Life Holdings
2100
60,574.92
104,372.42
66,958.65
119,390.69
962.50
9,375.00
1,296.36
13,604.57
6,383.73
15,018.27
Hanover Insurance
2000
75,450.00
98,750.00
23,300.00
IBM
400
110,281.00
159,316.80
John
International Tel & Tel.
Deere
7000
433,870.42
394,861.05
5000
321,474.10
358,647.16-
49,035.80
(39,009.37)
37,173.06
1/ 2/72
Life Insurance of Georgia
• 2500
3/7/72
Nationwide Corporation
10000
83,125.00
110,000.00
93,000.00
9,875.00
130,875.00
20,875.00
1/7/72.
Ohio Casualty
1000
43,750.00
49,000.00
5,250.00
8/9/72
Old Line Life Insurance Company
500
16,925.00
21,875.00
8/10/72
9/14/72
old Line Life Insurance Company
Texaco
6000
203,115.88
262,500.00
4000
149,365.60
133,935.30
4,950.00
59,384.12
(15,430.30)
Total Sales 1972
Total Sales to Date.
$ 310,346.37
$ 635,604.74
12/31/72
RECEIVED FROM
NOV 10 1975
СТА
1/1/74
NW 50955 DocId: 32423532
EQUITY SALES TO DATE
curity
abes through 1972
merican Tel and Tel
mrican Tel and Tel
10000
No.
Shares
of
Date of
Purchase
Date of
Sale
Purchase
Price
Sales
Price
4/72
1/73
43-9/16
53-1/2
Gain or
(Loss) on Sale
$635,604.74
99,609.74
5000
12/72
1/73
52
53-7/8
9,450.35
800
11/72
2/73
378-5/8
430-7/8
41,772.09
Nrican Tel and Tel
1000
2/73
5/73
51
51-1/4
261.99
merican Tel and Tel
9000
· 2/73
6/73
51
50-7/8
(1,123.68)
.S. Fidelity and Guaranty
2000.
1/73
7/73
40-1/4
41-7/8
3,162.80
ngersoll Rand
4000
1/73
10/73
67-3/8
72-1/2
20,544.91
ontinental Corp
5000
2/73
10/73
40-5/8
40
(3,549.37)
R.
Grace
8000
1/72
10/73
29-1/2
28
(11,136.53)
.S. Fidelity and Guaranty
1000
1/73
11/73
40-1/4
40-1/4
24.01
hio Casualty
1000
2/73
11/73
44-3/8
44-3/4
375.00
hio Casualty
4000
. 2/73
11/73
44-3/8
44-1/2
500.00
afeco Corp
4000
2/73
11/73
50-7/8
49-1/8
(7,000.00)
.S. Fidelity & Guaranty
2900
1/73
11/73
40-1/4
+39-3/8
(2,447.28)
Total Sales 1973
$150,447.03
Total Sales to Date
$786,051.77
RECEIVED FROM
NOV 10 1975
CIA
NW 50955
DocIds 3242
EQUITY SALES TO DATE
ity
No. of
Date of
Shares
Purchase
Date of
Sale
Purchase
Price
Sales
Price
Gain or
(Loss) on Sale
through 1973
$786,051.77
remedia
5,610
8/72
7/74
37-1/2
5-7/8
(176,996.04)
Dean Shield Devel. Co.
7,500
4/74
10/74
1/4
13/16
4,200.00
_cals
$613,255.73
(
243
1/1/75
• NOV 10 1975
RECEIVED FROM
CIA
NW 50955
DocId: 3223532
Curity
es through 1974
Page 244
9/1/75
No. of
Shares
EQUITY SALES TO DATE
Date of
Purchase
Date of
Sale
Purchase
Price
Sales
Price
Gain or
(Loss) on Sale
$613,255.73
RECEIVED FROM
NOV 10 1975
CIA
CIA Domestic Real Property Holdings*
CIA has a variety of real property holdings in the United
States ranging from the major, overt Headquarters complex in McLean,
Virginia, to small leased "safehouse" apartments in many cities.
.
Real property holdings also include seven CIA-controlled installations
used as training sites, supply depots, research and development
centers, and communications transmitting and receiving facilities.
The 237 domestic real property holdings are summarized for this
report as follows:
a. Overt or nominal properties (overt properties are
identified as CIA; nominal properties as Executive
Office of the President, but CIA control is admitted
upon request) of which there are sixty-two (62);
b. Official cover properties (identified as under the
control of other U.S. Government agencies and CIA rela-
tionship is classified from CONFIDENTIAL through TOP
SECRET) of which there are fifty-three (53);
C Safehouses (properties, generally apartments or resi-
dences and generally leased, acquired for covert meetings)
of which there are eighty-one (81); and
* The information contained in this section has extreme sensitivity
as a grouped data package. It lists the entirety of CIA real property
holdings and personnel assets in the United States as of 13 January
1975; accordingly, release, unauthorized disclosure, or loss of this
information would have severe operational impact on the activities
of CIA.
NW 50955 DocId: 32423532 Page 245
d.
Non-official properties (identified as private firms
which may be wholly or partially controlled by CIA and
housing CIA employees) of which there are forty-one (41).
Attachment 1 lists CIA domestic real property and provides
specific addresses for all overt and nominal CIA real property
holdings. Official cover properties, safehouses, and non-official
properties are listed by general location. Numbers of personnel
and utilization purpose are shown for each category of real property.
This report is developed as a real property summary; therefore,
personnel data supplied are predominantly based on CIA space utili-
zation reports, and slight variation may exist in some instances.
A limited number of CIA personnel are located in non-CIA-controlled
space for example, in the Pentagon, in private residences, or in
commercial companies and these properties are not listed in this
Non-official properties not occupied by CIA
real property summary.
staff or contract employees are not listed.
mary sheet of all the previous figures.
Attachment 2 is a sum-
NW 50955 DocId: 32423532 Page 246
E
C
SECRET
DOMESTIC REAL PROPERTY LISTING
Attachment 1
Location
Washington, D. C. & Suburbs
Street Address
A. Overt & Nominal Properties
Langley, Va
Washington, D. C.
Washington, D. C. .
Washington, D. C.
Oxon Hill, Md
Washington, D. C.
Washington, D. C.
Washington, D. C.
Rosslyn, Va
Rosslyn, Va
Rosslyn, Va
Franconia, Va
McLean, Va
Arlington, Va
Alexandria, Va
Route 123 (CIA)
Central Bldg. 2430 E St. N.W. (CIA)
East Bldg. 2430 E St. N.W. (CIA)
South Bldg. 2430 E St. N.W. (CIA)
10530 Riverview Rd. (FBIS)
Navy Yard, Bldg. 213, 1st & M, S.E. (EOP)
Navy Yard, Bldg. 159E, 1st & M, S.E. (EOP).
Navy Yard, Bldg. 202, 1st & M, S.E. (EOP)
Ames Bldg., 1820 N. Ft. Myer Dr. (EOP)
Key Bldg., 1200 Wilson Blvd. (EOP)
Magazine Bldg., 1815 N. Lynn St. (EOP)
(EOP)
Tyler Bldg., 1759 Old Meadows Rd. (EOP)
Chamber Commerce Bldg, 4600 N. Fairfax (EOP)
901 Columbus Rd. (EOP)
Washington, D. C.
Arlington, Va
AJAX Bldg., 1901 Penna Ave., N.W. (EOP)
1000 Glebe Road (EOP)
Personnel Purpose
Hqs. admin. offices & printing bldg.
Technical labs & offices
7,469
88
28
Technical labs & offices
307
4
1,265
Technical labs & offices
Counter-audio training & FBIS
antenna field
Photo development & analysis
Map storage
45
0
Storage
510
Hqs. admin. offices
668
Hqs. admin. offices
340
Hqs. admin. offices
213
Supply depot & R&D shops
274
Elint & tech. admin. offices
364
Hqs. trng. offices
4
Technical training area
.9
U.S. resident contact
9
FBIS photo & printing
B.
Official Cover Properties
3 Locations
4 Locations
1 Location
1 Location
1 Location
1 Location
1 Location..
1 Location
SECRET
18
84
22
S
48
8
15
62
Research & operational support
Translation & operational support
Foreign intell. collection
Supply depot & ELINT training
Counter audio lab & office
Document research analysis
Training lab & office
Field investigation office
EZ CL By 029557
日
NW 50955 DocId: 32423532
Page 247
Street Address
Location
C. Safehouses
37 Locations
D. Non-Official Properties
1 Location
1 Location
1 Location
2 Locations
1 Location
1 Location
1 Location
1 Location
1 Location
1 Location
1 Location
1 Location
1 Location
1 Location
1 Location
SECRET
DOMESTIC REAL PROPERTY LISTING
Arizona
California
1 Non-Official Installation.
A. Overt & Nominal Properties
Los Angeles, Ca
San Francisco, Ca
San Diego, Ca
Hawthorne, Ca
312 North Spring Street (EOP)
Customs Hse, 555 Battery St. (EOP)
Gross Ctr. Bldg, 3045 Rosecrans St. (EOP)
Fed. Bldg., 15000 Creation Road (EOP)
I b
☐
།
SECRET
( 19
Personnel Purpose
N.A.
Covert meetings
13
1
1
13
3
3
2
2
16
1
330
Manages agent accounts & cover
backstop
Operational support (dormant)
Foreign intelligence collection
Human source assessment
Debriefing site
Mgt. services for proprietaries
Research & operational support
Public opinion analysis
Research admin. office
Travel support
Translation
Airline, foreign operational supp.
Airline, covert admin. travel
9
3
Covert procurement, general
4
Covert commercial audit
11
Aviation equip. R&D and procure.
13
U.S. resident contact
14
U.S. resident contact
2
U.S. resident contact
1
Personnel & recruiting office
E2 CL By 029557
Page 248
NW 50955
DocId: 32423532
Location
California
NCC §
Π
(LI
C
[
Street Address
B. Official Cover Properties
C.
D.
2 Locations
2 Locations
1 Location
1 Location
1 Location
1 Location
1 Location
1 Location
Safehouses
12 Locations
Non-Official Cover
1 Location
4 Locations
1 Location
3 Locations
Colorado
A. Overt & Nominal Properties
Denver, Co
Denver, Co
Connecticut
SECRET
DOMESTIC REAL PROPERTY LISTING
Personnel
Purpose
.38
14
84
14
Field investigation office
Foreign intelligence collection
Paper plant
8
Field procurement office
.1
Field supply office
22
Gen. admin. support to sensitive
projects
3
1
Air logistics support
Audit of covert operations
N.A.
9
4
19
13
Covert meetings
Covert Commercial investigation
Foreign intelligence collection
Management & admin. of sensitive
projects
Contractor liaison, sensitive
projects
Bankers Bldg., 2401 E 2nd St. (EOP)
Bldg. 56 DFC, 6th & Kipling Sts. (EOP)
7
U.S. resident contact
1
Field recuriting office
A. Overt & Nominal Properties
Hartford, Ct
Fed. Bldg., 450 Main St. (EOP)
3
U.S. resident contact
SECRET
E2 CL By 029557
[E
NW 30955 DocId: 32423532 Page 249
Location
Florida
Street Address
'SECRET
DOMESTIC REAL PROPERTY LISTING
Personnel
A.
Overt & Nominal Properties
Key West, Fl
U.S. Naval Base (FBIS)
5
Foreign broadcast station
Coral Gables, Fl
R&N Bldg., 299 Alambra Cir. (EOP)
6
U.S. resident contact
B.
Official Cover Properties
2 Locations
1 Location
1 Location
25
Foreign intelligence station
33
Foreign commo. center
16
Field investigation office
C.
D.
Safehouses
2 Locations
Non-Offical Cover
1 Location
2 Locations
Georgia
1 Location
A. Overt & Nominal Properties
N.A.
Covert meetings
3
Administers survivers' benefits
7
R&D and procurement, aviation
equipment
9
Cuban propaganda operations
B.
Atlanta, Ga
Official Cover Properties
3 Dunwoody Park (EOP)
3
U.S. resident contact
1 Location
6
Foreign intelligence collection
Hawaii
A. Overt & Nominal Properties
Honolulu, Hi
Dellingham Bldg., 735 Bishop St. (EOP)
3
U.S. resident contact
SECRET
EZ CL By 029557
J
☐
☐
]
☐
☐☐ 3D
}
☐
D
NW 50955
DocId: 32423532
Page 250

☐ ☐
CG
CND ON IC
070
Location
Street Address
Hawaii
B.
Illinois
Official Cover Properties
1 Location
1 Installation
A. Overt & Nominal Properties
SECRET
DOMESTIC REAL PROPERTY LISTING
Personnel Purpose
5 Field liaison CINCPAC
Commo relay station
9
Chicago, Ill
Chicago, Ill
Derksen Bldg., 219 S Dearborn St. (EOP)
Derksen Bldg., 219. S. Dearborn St. (EOP)
1 Field recruiting office
10
U.S. resident contact
B.
Official Cover Properties
1 Location
1 Location
22
11
Field Investigation office
Foreign intelligence collection
C.
Safehouses
Indiana
2 Locations
A. Overt & Nominal Properties
Indianapolis, In Fed. Bldg., 46 E. Ohio St. (EOP)
N.A.
Covert meetings
2.
U.S. resident contact
Louisiana
A.
Overt & Nominal Properties
New Orleans, La
Masonic Bldg., 333 St. Charles St. (EOP)
2
U.S. resident contact
SECRET
E2 CL By 029557
NW 50955 Docid:32423532 Page 251
"SECRET
DOMESTIC REAL PROPERTY LISTING
Location
Massachusetts
Street Address
A. Overt & Nominal Properties
Beta Bldg., 545 Technology (EOP)
Fed. Bldg., Government Center (EOP)
Cambridge, Ma
Boston, Ma
B. Official Cover Properties
1 Location
1 Location
Personnel Purpose
12
U.S. resident contact
1
Field recruiting office
13
Field investigation office
7
Foreign intelligence collection
C.
Safehouses
2 Locations
N.A.
Covert meetings
Maryland
A.
Overt & Nominal Properties
Highland Pk, Md
14048 Woodward St. (EOP)
7 U.S. resident contact
Baltimore, Md
103 S. Gay Street (EOP)
2
U.S. resident contact
B.
Official Cover Properties
1 Location
1 Location
11
Maritime research & training
1
Security liaison
6
Training facility
1 Location
"C. Safehouses
1 Location
SECRET
N.A. Covert meetings
E2 CL By 029557
Page 252
NW 50955
DocId: 32423532
Location
Minnesota
A.
Missouri
[
CR R
Street Address
Overt & Nominal Properties
SECRET
DOMESTIC REAL PROPERTY LISTING
Personnel Purpose
Minneapolis, Mn
St. Paul, Mn
Fed. Bldg., Ft. Snelling (EOP)
Fed. Bldg., 316 Robert St. (EOP)
7 U.S. resident contact
1
Field recruiting office'
A.
St. Louis, Mo.
Overland, Mo
Kansas City, Mo
Overt & Nominal Properties
Fed. Bldg., 1520 Market St. (EOP)
MPRC Bldg., 9700 Page Blvd. (EOP)
6
U.S. resident contact
2
Field investigation office
Fed. Bldg., 601 East 12th St. (EOP)
1
Field recruiting office
Nevada
A.
Overt & Nominal Properties
None
B.
New York
Official Cover Properties
1 Location
A. Overt & Nominal Properties
New York, NY.
New York, NY
Niagara, NY
Schenectady, NY
Syracuse, NY
575 Lexington Avenue (EOP)
Fed. Bldg., 26 Federal Plaza (EOP)
United Office Bldg., 220-222 First St. (EOP)
650 Franklin St. (EOP)
Loew Bldg., 108 W. Jefferson St. (EOP)
SECRET
35
Training & R&D installation
28.
1235
U.S. resident contact
Field recruiting office
U.S. resident contact
U.S. resident contact
U.S. resident contact
E2 CL By 029557
E
NW 50955
DocId: 32423532
Page 253
Location
Street Address
New York
B. Official Cover Properties
1 Location
1 Location
1 Location
C.
Safehouses
SECRET.
DOMESTIC REAL PROPERTY LISTING
Personnel Purpose
30
22
Foreign intelligence collection
Field investigation office
2
Photo procurement, foreign persons
23 Locations
D. Non-Official Properties
1 Location
N.A.
Covert meetings
2 Locations
2 Locations
3 Locations
1 Location
North Carolina.
1 Official Cover Installation
9
Foreign newspaper service
11
Foreign intelligence collection
7
28
Proprietary management services
Overseas book distribution
2
Contractor's Liaison
24
Field training facility
Ohio
A.
Overt & Nominal Properties
Cleveland, Oh
Cincinnati, Oh
Fed. Bldg., 1240 E 9th St. (EOP)
Fed. Bldg., 553 Main St. (EOP)
3
U.S. resident contact
3 U.S. resident contact
B.
Official Cover Properties
1 Location
(T)
SECRET
5
Foreign intelligence collection
E2 CL By 029557
]
NW 50955
DocId: 32423532
Page 254
C
C
C. 00 (C
[
Location
Oklahoma
Street Address
SECRET
DOMESTIC REAL PROPERTY LISTING
· Personnel Purpose
a I C
A.
Overt & Nominal Properties
Tulsa, Ok
Center Office Bldg., 630 W. .7th (EOP)
2
U.S. resident contact
Oregon
A. Overt & Nominal Properties
Portland, Or
Courthouse, Broadway & Main Sts. (EOP)
1
Field recruiting office
Pennsylvania
A.
Overt & Nominal Properties
Philadelphia, Pa
Philadelphia, Pa
Pittsburgh, Pa
Pittsburgh, Pa
Tennessee
Fed. Bldg., 600 Arch Street (EOP)
Fed. Bldg., 600 Arch Street (EOP)
Fed. Bldg., 1000 Liberty Ave. (EOP)
Fed. Bldg., 1000 Liberty Ave. (EOP)
1 Non-Official Installation
Texas
A.
Overt & Nominal Properties
Austin, Tx
Austin, Tx
Dallas, Tx
Houston, Tx
B.
Fed. Bldg., 300 E. 8th St. (EOP)
Fed. Bldg., 300 E. 8th St. (EOP)
Courthouse, 1100 Commerce St. (EOP)
Courthouse, 515 Rusk Ave. (EOP)
Official Cover Properties
1 Installation
7
.U.S. resident contact
1
Field recruiting office
8
U.S. resident contact
1
Field recruiting office
(47 Company) Aviation equipment procurement &
R&D
1
Field recruiting office
1.
U.S. resident contact
7
U.S. resident contact
4
U.S. resident contact
2
Ordnance depot
SECRET
E2 CL By 029557
NW 50955
DocId: 32423532 Page 255
Location
Texas
C. Safehouses
Street Address
SECRET
DOMESTIC REAL PROPERTY LISTING
Personnel Purpose
1 Location
.N.A.
Covert meetings
Utah
A.
Üvert & Nominal Properties
Salt Lake, Ut
Fed. Bldg., 125 S. State St. (EOP)
2
U.S. resident contact
Virginia
A.
Overt & Nominal Properties
Richmond, Va
Fed. Bldg., 400 N. 8th St. (EOP)
3
U.S. resident contact
B. Official Cover Properties
1 Installation (4 Stations)
1 Installation
1 Location
1 Installation
1 Location
Washington
A. Overt & Nominal Properties
Commo Facilities
Field Training Site
Technical R&D
Minor ordnance
286
Records Center, Training, R&D,
76
72
3
R&D project
0
storage
1 Location
Seattle, Wa
Courthouse, 1010 Fifth Ave. (EOP)
5
U.S. resident contact
B.
Official Cover Properties
SECRET
24
Foreign equipment analysis
☐)
☐☐☐
E2 CL By 029557
☐ ☐
Page 256
NW 50955
DocId: 32423532
1
☐ ☐
獎
☐
☐ ☐ ☐
D &
CP
Street Address
Location
Washington
C.
D.
Safehouses
1 Location
Non-Official Properties
1 Location
Wisconsin
A.
Overt & Nominal Properties
Milwaukee, Wi
SECRET
DOMESTIC REAL PROPERTY LISTING
Personnel Purpose
N.A.
Covert meetings
3
Contractor liaison
Courthouse, 517 E. Wisconsin Ave. (EOP)
2
U.S. resident contact
Location
Washington, D. C. and
SECRET
CIA Domestic Real Property Summary Sheet
Attachment 2.
Overt &
Nominal
Official Safehouses Non-Official
TOTAL
Suburbs
Arizona
17
13
37
16
83
1
1
California
Colorado
Connecticut
Florida
Georgia
Hawaii
Illinois
Indiana
Louisiana
Maryland
Massachusetts
Minnesota
issouri
Nevada
New York
North Carolina
Ohio.
421212212222M
10
.12
9
35
2
1
422N
2
1
2
2
12
2
3
5
SI
Oklahoma
Oregon
Pennsylvania
2014
1
2.
Tennessee
Texas
Utah
1
Virginia
1
Washington
Wisconsin
1
81
1
1
1
66941
TOTALS
62
53
81
41
237
MN
3
1
2
2
3
formed frond WH
1
23
40
l
3
1
1
NW 50955
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Page 258
SECRET
D
ON [[]
29 AUG 1973
MEMORANDUM FOR:
INFO
SUBJECT
Deputy Director for Science and Technology
Deputy Director for Intelligence
Deputy Director for Management and Services
Deputy Director for Operations
Inspector General
Questionable Activities
"
1.
As an aspect of the allegations of improper CIA activity
in connection with the Watergate and associated matters, the
Inspector General was directed to assemble all information avail-
able in the Agency on any such activities. Certain specific matters
were provided to him, and the Director by memorandum of 9 May 1973.
directed all employees to report any activities, current or past,
"which might be construed to be outside the legislative charter of
this Agency.' This information was assembled and consolidated by
the Inspector General in a memorandum of 21 May 1973 and certain
individual memoranda thereafter supplementing it. This material
was used in a detailed, page-by-page review of all such information
with Senator Symington and Congressman Nedzi, as Chairmen of the
Senate and the House Armed Services Intelligence Subcommittees,
respectively. In addition, I undertook very specific commitments
in my confirmation hearings to ensure that the Agency will remain
within its legislative charter. I am arranging for the published.
transcripts of those hearings to be circulated throughout the
Agency for compliance, and at that time will reaffirm the specific
direction made by Dr. Schlesinger in his memorandum of 9 May 1973.
This will also be incorporated into appropriate regulations.
2. With respect to the specific questionable activities which
were reported as a result of the search made throughout the Agency,
however, I believe it essential to take specific action in order
that these not seem to be condoned or overlooked. I have therefore
developed specific instructions on each reported activity. These
are included in the attachments to this memorandum, and have the
force of specific direction to you to pass on to appropriate
subordinates the instructions outlined. Separate packages of such
Instructions are being developed for each Directorate in order to
respect the sensitivity of some of the activities discussed, includ- FROM
ing those which are deemed quite appropriate within CIA's charter.
JUN 25 1975
E IMPOET CC BY
"BY 056+1
SECRET-EYES ONLY
NW 50955
DocId: 32423532_)
Page 259
220.
Similarly, each activity is placed on a separate page so that the
Deputy Director concerned may most easily forward it to the office
or offices directly concerned without distributing it more broadly.
3. In the event that these instructions raise substantial
difficulties of implementation or compliance, I would appreciate
your raising such cases with me directly, with whatever recommenda-
tions you may have for modification to carry out the spirit of the
action undertaken here but to avoid undue disruption of legitimate
activities. In the absence of such notice, I will expect full
compliance with the instructions outlined herein.
4. Each addressee Deputy. Director is instructed to recommend.
to the DDM&S modification or addition to Agency regulations of
appropriate language to reflect the direction included in this
memorandum and attachments addressed to him. DDM&S will be
responsible for consolidating such recommendations and making an
overall report to the Director through the IG, coordinating with
General Counsel.
WEColle
W. E. Colby.
Attachments
EC:ydc (27 August 1973)
stribution:
Original IG
1
Mr. Colby
DDS&T
1
DDI
1
DDM&S
1
DDO
1
OGC
w/o atts
1 OLC w/o atts
1 ER (w/o atts
being held in IG file)
2
NW 50955 Doctd:32423532 Page 260
SECRET-EYES ONLY
ED FROM
JUN 25 1975
STA
719

MEMORANDUM
SUBJECT: Domestic Proprietary Companies
Corporate cover, as managed by the Cover and Commercial Staff,
is an appropriate support for our overseas operations. To the
degree that domestic proprietary or cover companies are required,
a clear justification will be developed as to the relationship of
their support of our overseas operations.
NW 50 55
DocId: 32423532
Page 261
SECRET-EVES ONLY
RECEIVED FROM
JUN 25 1975
CIA
3.
MEMORANDUM
SUBJECT: Project MHMUTUAL
Project MHMUTUAL will be operated in conformance with appro-
priate legal restrictions.
Arrangements are being made for the
briefing of the appropriate Congressional committees. Particular
attention will be given to avoiding any possible conflict of in-
terest situations with firms with which the Agency has contracts.
Particular concern will also be exhibited over possible improper
influence on the stock market or stock dealings through the in-
vestments involved in MHMUTUAL.
SECRET-EVES ONLY
NW 50955 DocId: 32423532 Page 262
RECEIVED FROM
JUN 25 1975
CIA
SECRET
EYES ONLY
MEMORANDUM
SUBJECT: Domestic Proprietary Companies
Corporate cover, as managed by the Cover and Commercial
Staff, is an appropriate support for our overseas operations. To the
degree that domestic proprietary or cover companies are required,
a clear justification will be developed as to the relationship of their
support of our overseas operations.
Suggested addition:
Corporate cover, including notional companies, as managed
by the Cover and Commercial Staff, is an appropriate support for
:
our overseas operations. To the degree that domestic proprietary
or cover companies are required, a clear justification will be
developed as to the relationship of their support of our overseas
operations.
NW 00955
DooId: 32423532 Page 263.
SECRET
EYES GRAY.
RECEIVED FROM
JAN 25 1975
CIA
SECRET
EYES ONLY
MEMORANDUM
SUBJECT:
Project MHMUTUAL
Project MHMUTUAL will be operated in conformance with
appropriate legal restrictions. Arrangements are being made for
he briefing of the appropriate Congressional committees. ·
Particular attention will be given to avoiding any possible conflict of
Interest situations with firms with which the Agency has contracts.
Particular concern will also be exhibited over possible improper
Influence on the stock market or stock dealings through the invest-
ments involved in MHMUTUAL.
The DDO has no problem with this as written.
REST
50955
DocId: 32423532
Page 26 EVES CHLY
SECRET
ONLY
JUN 25 1975
JUN/25
CIA
nd