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The Banker Who Said 'No' to the CIA

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The Progressive56. 6 (Jun 1992): 24.

Bob Maxwell commutes to a town called New Freedom, Pennsylvania, where he tends bar at the Colonial Hotel. This once-comfortable banker arrived there by a series of events that could only transpire in a national-security state. Maxwell says he was forced to leave his job at the First National Bank of Maryland in 1985, after refusing to launder money for the CIA's front company, Associated Traders Corporation (ATC). Months later, shattered by anxieties over transactions he knew were illegal and threats made against him when he balked, Maxwell suffered a nervous breakdown. By 1988, more outraged than afraid, Maxwell sued the bank for $4 million.

Last October, Federal Magistrate Catherine Blake, to whom Presiding Judge William Nickerson had referred a CIA motion to gag Maxwell, issued a far-reaching opinion that extended the state-secrets privilege to private business for the first time. Blake wrote that Maxwell's interrogatories concerning the CIA's relationship with First National and ATC should be excluded from pretrial discovery--thus destroying any chance for Maxwell to find justice.

"When I started this, you know, I really thought I'd get my day in court. I really did," says Maxwell, his voice heavy with bitter resignation.

The decision will allow the CIA to commit the most egregious violations of law and due process through proprietaries or contract agents, confident that they may never be held accountable in court for their crimes.

Combined with the other U.S. court rulings that have come down on the side of secrecy in recent years, the Maxwell case represents the latest in a series of legal precedents that cloak the workings of the U.S. Government. If Magistrate Blake's finding stands, it will be immensely useful to many Iran-contra and BCCI figures still to be tried.

Judge Nickerson still must decide whether to go along with Blake's opinion. If he does and Maxwell loses in an appellate court, the CIA will have a precedent that can be applied with force in subsequent cases, giving almost complete immunity to the agency's contactors and proprietaries.

Maxwell, forty-five, settled in at the First National Bank of Maryland in 1983 at a time when the CIA was pursuing its covert operations with renewed vigor under the direction of William Casey. The agency was cranking up operations all over the world.

Covert action, like organized crime, requires the cooperation of friendly banks. Soon after he arrived to manage the letters-of-credit department at First National, Maxwell was assigned the account of ATC, an arms-export firm known to the bank as a CIA front. Maxwell regarded it as an account like any other--until December 1984, when, his suit charges, ATC's treasurer asked for a transfer of $5.3 million into Switzerland through a Panamanian bank account, a maneuver clearly designed to launder the source of the funds.

Dealing with the ATC account made Maxwell uneasy. Early in February 1985, his unrest turned to anger when he learned that his name had been placed on the account as the bank's agent, implicating him in what an audit would detect as an obvious money-laundering scam. (In fact, the First National Bank of Maryland was caught laundering money. In March of this year, the bank was hit with a $950,000 fine for failing to report more than a hundred cash transactions of $10,000 or more, as required by law.)

For weeks, Maxwell demanded that his superiors issue a memo authorizing the transactions, so that he would be in the clear should the deal be discovered. Maxwell recalls in court filings that at one meeting the bank's director of international operations, John Bond, told him that the CIA wanted him to know that he and his family were not in any danger. Maxwell construed the remark as a thinly veiled threat, and it had the desired effect.

"I freaked out," Maxwell says. Failing to receive his memo of authorization for the transactions, Maxwell resigned that September, afraid for his family.

The suit Maxwell filed in 1988 named only First National as a defendant, claiming that the stress of working on the fund-transfer transactions had driven him to a breakdown. Maxwell alleged that between 1980 and 1985, ATC funded $23 million in purchases of weapons and electronics equipment through First National.

Maxwell expanded the suit in 1990, after he and his first lawyer allegedly received threats from agents of the CIA, FBI, and Justice Department through the bank's legal counsel, warning that if Maxwell pressed his case his attorney would be disbarred and Maxwell would be indicted for dissemination of classified material. Maxwell turned down a settlement offer of $100,000 and engaged new counsel who redrafted the suit to include ATC and unnamed agents of the CIA, the FBI, and the Justice Department.

First National's officers refused to discuss their dealings with the CIA, but after Judge Nickerson ordered them to respond in the summer of 1990, Director of Central Intelligence William Webster filed a memorandum asking the court to gag Maxwell. Confirmation of the bank's business relationship with the CIA would damage the national security, Webster claimed. Disclosure would threaten sources and, even if the allegations of a CIA-First National-ATC link proved false, it would enable "foreign intelligence entities ... to concentrate their efforts elsewhere," Webster argued.

Nickerson handed Webster's request off to Magistrate Blake for an opinion. Blake essentially recommended that the CIA get everything it had asked for. Blake's opinion recommends a two-part gag order. First, it would bar questions concerning relationships between the agency, First National, and ATC. Second, it would prevent Maxwell from introducing any documentation that "would tend to either confirm or deny" a connection between the CIA and the businesses.

In effect, Blake extended the state-secrets privilege to private concerns that are not official employees of intelligence agencies or contractors like Raytheon or Northrop that have entered into secrecy agreements with the Government. David MacMichael, a former estimates officer for the CIA and director of the Association of National Security Alumni, sees Blake's decision as the latest manifestation of a troubling forty-year trend to expand the state-secrets privilege.

"Historically, the courts are far too deferential. They don't ask the hard questions," says MacMichael. "There's a total lack of consideration of the effect on human beings. We got a case with a guy who has been run out of his chosen field of occupation, severely reduced, damaged in health, and quite logically he is seeking remedy in the courts. I think the question here is: What is the national security? Wherein does it lie? If it does not involve the protection of the legal and civil rights of individual citizens, that's a strange form of national security."

The courts and the Justice Department have all but abolished the concept of open, accountable government when it comes to cases involving so-called national security. Before Maxwell filed his lawsuit, the landmark case was the successful prosecution of Samuel Morison, a former U.S. Navy intelligence analyst and editor for the British publication Jane's Fighting Ships, who published a few satellite photographs of Soviet aircraft carriers. Morison was convicted and sentenced in 1985 under the Espionage Act of 1917, though he clearly was not a spy in the classic sense of the term. Though American journalists tend to dismiss the implications of the Morison case, his prosecution undeniably made it dangerous to try to find out what U.S. intelligence agencies are doing.

The Classified Information Protection Act of 1980 (CIPA), invoked by former Attorney General Richard Thornburgh, allowed Iran-contra principal Joseph Fernandez, a CIA station chief, to walk free on four counts of perjury and obstruction of justice two years ago. Thornburgh refused to release documents Fernandez's counsel had requested for his defense, raising the "national-security" flag. Iran-contra special prosecutor Lawrence Walsh claimed in a letter to the House Intelligence Committee that Thornburgh's move showed how CIPA could be invoked by the Government to cover up crimes of intelligence agents, establishing them in effect as a de-facto unprosecutable class.

Magistrate Blake's ruling in the Maxwell case takes the secrecy regimen one step further, offering blanket protection for the proxies who act, often feloniously, in the name of U.S. Government agencies. Among the material submitted to the court by Maxwell is evidence that some of the armaments purchased through First National ended up in the hands of Angolan rebels--which would be a direct violation of the Clark Amendment barring unauthorized interference in foreign military conflicts. Those allegations, if Blake's recommendation stands, might never be explored.

There is still hope, though it must be rated a long shot, that Judge Nickerson will reject Blake's finding. Maxwell's lawyers contend that case law on Government secrecy applies to Federal employees, not to employees of the bank, a private enterprise not under contract to the United States. They also claim the state-secrets privilege cannot be invoked to cover up illegal activities.

If Bob Maxwell isn't safe from the abuse of the state nor free to confront it, who really is secure?

Peter Cassidy is a business reporter based in Boston. Marsha Le Brun rendered research assistance for this article. Research was underwritten, in part, by a grant from Essential Information, Inc.

Copyright Progressive Incorporated Jun 1992

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