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Spook Wars in Cyberspace

Is the FBI Railroading Charles Hayes?

High Times, June, 1997
by Dick Russell

Why does the international dope trade just keep flourishing, even while major traffickers and their government protectors keep getting exposed and imprisoned? Well, it could just possibly be that the ones going to jail aren't using the right computer software. Here's another murky peek into the legendary PROMIS conspiracy.

This is a story straight from a Tom Clancy novel, or maybe Mission: Impossible. Shortly before last November's election, Kentucky surplus- computer dealer, who claims to be a longtime CIA contract agent, gets arrested by an FBI SWAT team and is charged with hiring an undercover agent- to murder his own son.

At his trial in January, 61-year- old Charles Hayes testifies that he's been set up by the federal government. And why? Because he's part of a team of retired intelligence types calling themselves the "Fifth Column," who've been using a supercomputer to hack into certain secret foreign bank accounts used by numerous US politicians to stash illegal funds garnered mainly from drug and arms dealers.

The prosecution's key witness against Hayes, at the trial in London, KY, turns out to be a right-wing California journalist who occasionally informs for the FBI, a fugitive with a history of mental institutionalization. For the defense, a former senior editor at Forbes magazine vouches for Hayes' credibility. After the jury hears tapes of Hayes discussing a $5,000 payoff for a prospective hit on his estranged son, the defendant responds that he'd known all along he was talking to an FBI undercover, but had been stringing the Bureau along so he could develop evidence against them. When the CIA introduces affidavits disavowing any relationship with Hayes, he takes the stand to provide his cover name, "Charles Lawson," and an ID number.

Following three hours of deliberation, the jury finds Hayes guilty, to the astonishment of nearly 100 supporters present. He says from his jail cell afterwards, while his attorney moves for a new trial, that he anticipates "assistance" from higher powers.

Hayes Gets Around

Is Charles Hayes for real, or merely a con man looking for a get-out- of-jail-free card? For months prior to his arrest last year, revelations about Hayes and his postulated Fifth Column had been circulating on the Internet and in Media Bypass, a colorful "patriot" publication out of Evansville, IN. Not only was this Fifth Column said to have downloaded financial records on government officials from up to 3,000 hidden overseas accounts, but they also allegedly wire-transferred about $4 billion clear out of those accounts into "escrow holding funds" at Federal Reserve banks.

Then, according to Hayes, these alleged Robin Hoods of cyberspace began quietly announcing their findings to certain congress people and foreign governments; which is why, so the yet- undocumented saga brags, a record number of 60-some US senators and representatives announced their retirements just before the 1996 elections. And that also is supposedly how the Mexican federales got turned on to the drug-laundered millions salted away in Switzerland by the family of ex- President Carlos Salinas de Gortari.

On the face of it, these assertions might appear preposterous. But a HIGH TIMES investigation into Hayes' background reveals a tantalizing trail of evidence indicating, at the least, considerable insider knowledge about computers and smuggling.

In 1985, Charles Hayes was a key government witness in a Kentucky trial involving the largest gemstone seizure ever by US Customs-millions of dollars' worth that had been smuggled out of Brazil

In 1991, the telephone records of doomed journalist Danny Casolaro showed numerous phone calls to Hayes in the month before Casolaro was found dead in a West Virginia hotel room. Casolaro had spent the past several years investigating a tangled web of government corruption he called "the Octopus." One of Casolaro's focuses was the Inslaw case, in which the Justice Department stands accused of having stolen the company's PROMIS computer software, which was capable of tracking complicated financial transactions.

In 1992, Hayes testified about the Inslaw matter before a Chicago grand jury. In April '96, he was subpoenaed and gave a lengthy deposition about Inslaw to a Justice Department attorney, who quizzed him about his computer expertise. FBI Special Agent David Keller testified at Hayes' January trial that he knew of him from a previous FBI investigation into the Inslaw matter.

In July 1995, Rep. Jim Leach, chairman of the House Banking Committee, wrote to the director of the National Security Agency, seeking "your agency's help in verifying or laying to rest various allegations of money- laundering in Arkansas in the late 1980s." Among other matters, Rep. Leach asked about Inslaw's PROMIS software- and Charlie Hayes.

Several of Hayes' associates back up his contention that he's being framed, in an attempt to put the Fifth Column out of business. One well-placed source, who requested anonymity, affirms that Hayes was a CIA asset, adding, "I think Hayes has been set up to the nth degree to discredit him."

Mena and the Octopus

Hayes launched the five-member Fifth Column himself, he maintains to HIGH TIMES, primarily to follow the money-laundering of the international drug cartels. It's a personal crusade, according to one of his associates in Kentucky, triggered by the way Hayes' 37-year-old son, John-the alleged murder-for-hire target-supposedly "cooked his mind on drugs." Mark Swaney, whose Arkansas Committee was responsible for much of the early publicity surrounding the notorious CIA drugs-and-arms operation out of Mena, AK, (HighWitness News, Jan. 95) spoke with Hayes on a number of occasions between 1992 and '95: "A lot of what he told me about Mena turned out to be true," says Swaney.

Swaney's notes from a July '92 interview with Hayes contain charges that both the federal government and the Arkansas State Police were involved in distributing cocaine out of Mena. Asked if then-Governor Bill Clinton was aware of the Mena operation, Hayes responded, "No, but his associates were involved." He elaborated that some of the money was laundered through two powerful Arkansas companies with ties to Clinton.

In a five-hour jailhouse interview not long before his trial, Hayes, a former Air Force pilot, described a CIA assignment he'd once undertaken to fly a weapons shipment from Mena to Aruba in the Caribbean. On discovering that the cargo was actually cocaine, Hayes told me, he dumped it on the runway and ended up in a shoot-out that killed several people.

This is one of many stories, such as Hayes' claimed friendships with Fidel Castro and Sen. Edward Kennedy, that prove impossible to verify. But William Hamilton of St. Louis, the president of Inslaw, tells of encounters with Hayes which add credence to the existence of the Fifth Column. Hamilton first became aware of Hayes in 1990, in the midst of Inslaw's legal battle to prove that the Justice Department, FBI, CIA, NSA and other federal agencies had illegally appropriated their PROMIS database- management software for their own purposes.

As recounted in a heavily redacted House Judiciary Committee report, The Inslaw Affair (September 1992): "Mr. Hayes is a surplus computer dealer with alleged ties to both United States and foreign intelligence communities. Mr. Hayes first came to the attention of the Committee during August 1990, following assertions that excess Haris- Lanier word-processing equipment he had purchased from the US Attorney's office for the Eastem District of Kentucky, located in Lexington, contained the PROMIS software." The Justice Department had subsequently seized the equipment back from Hayes, preventing its use as evidence in the Inslaw case. (The computer gear had also allegedly contained sensitive classified material, such as the identities of narcotics informants.)

Hamilton therefore contacted Hayes, who told him the military owed Inslaw plenty of money, because it had secretly distributed his PROMIS software. When Hamilton subsequently learned from a CIA contact that PROMIS had indeed been used aboard US submarines, he visited Hayes in Kentucky in January '91. PROMIS was "in the CIA, DEA, FBI, everywhere," Hayes told him. Checking him out with other sources, Hamilton was told that Hayes and a partner both code- named "Running Fox" had belonged to an elite intelligence unit which "had to be able to take apart and put back together, without any diagrams, the Cray supercomputer."

According to Hayes, this elite spy unit was known as "Squad D." First mentioned in Bob Woodward's book Veil: The Secret Wars of the CIA, 1981-1987, Squad D was established by William Casey, Ronald Reagan's CIA director. Part of its mission was computer hacking. "There was penetration of the international banking system," Woodward wrote, "allowing a steady flow of data from the real, secret sets of books kept by many foreign banks that showed some hidden investing by the Soviet Union."

And not just by the USSR. PROMIS- short for "Prosecutors' Management Information System"-had originally been designed to track complicated illegal currency transactions through intricate systems of laundering and wire- transfers; it could readily be "enhanced" to track transactions by banks and dummy corporations used by terrorists and dope dealers. Hamilton's Inslaw had sold PROMIS to the early Reagan Justice Department, which promptly reneged on a $6 million payment due, asserting that a portion of the contract was not fulfilled. Inslaw went bankrupt, and its ongoing lawsuit against the Feds is still in the US Court of Claims.

Promis Them Anything

Inslaw's attorneys, who include former Attorney General Elliott Richardson, present evidence that a covert intelligence operation in fact transformed PROMIS into an unprecedented high-tech spying tool. It seems a brilliant young CIA contract agent out of Seattle named Michael Riconosciuto, reputedly a past master at clandestine drug chemistry and computer hacking, not only "enhanced" the PROMIS package to implement its use in tracking international currency transfers, but fitted it with a secret "trap-door" access port that enabled US espionage agencies to electronically monitor its use by anyone who bought it.

According to Richardson, PROMIS was peddled to as many as 88 foreign governments by "cut-out" front men working for the Department of Justice, the NSA and CIA. It was also purchased by numerous international banks in Switzerland and elsewhere, which were interested in standardizing their wire- transfer data. None of these buyers knew about Riconosciuto's trap-door application that not only allowed Uncle Sam to monitor their money-laundering in progress, but, whenever desired, to invisibly modify it.

One of the "cut-out" peddlers of this stolen, hyped-up and poisoned money-tracking software took it to Brazil in the mid-'80s, according to Charles Hayes, who was there at the time, as a CIA contract agent, in the matter of the stolen gemstones. Dr. Earl Brian (convicted last year in Los Angeles of multimillion-dollar international financial fraud) had been California Secretary of Health during Reagan's govenorship in the '70s. Michael Riconosciuto has alleged that some time after 1979, Brian was given the PROMIS software to peddle around the world to line his personal pockets. It was during a sales trip to Brazil in 1985 that Dr. Brian allegedly told Hayes about PROMIS.

Shortly after this Brazil adventure, Hayes moved back to his hometown of Nancy, KY, and, as his CIA cover, set up a salvage company specializing in computer parts-and also began working with Riconosciuto. The Fifth Column's Cray Model 3B supercomputer was primarily constructed, it is said, through purchases at Department of Defense auctions.

Initially, Hayes' Fifth Column's work had been done under government sponsorship. Veteran investigative journalist James Norman has written that besides penetrating the international banking system, the Column had initially succeeded in downloading information from over 50 intelligence services around the globe, including the Soviet KGB and the Israeli Mossad.

Then Riconosciuto got busted for running a methamphetamine lab in 1992, and wound up in the federal penitentiary, where he currently resides. Around the same time, Hayes' team discovered that the codes in the PROMIS software featured not just one, but two trap-door ports, suggesting that Riconosciuto had planned to use one of these himself, possibly to raid accounts in banks using PROMIS.

Hayes says the Column shut down Riconosciuto's port and created their own multiple setup, by which through a modem they could dial into a computer's security systems and circumvent them with a few keystrokes. Then Hayes further customized the software to sort through vast amounts of data; using a Cray, the Column could handle astounding data rates, which could be quickly downloaded and analyzed off- line in search of money flows and other connections. (In the virtual-reality realm, "money" is merely stored information; with the proper authorization codes, computers can electronically launch volumes of digitized currency from one bank account to another.)

Charging that the CIA "didn't hold up their end" of some unspecified bargain, Hayes says that he and the other four Fifth Columnists decided to go rogue. Having sole access to their own software modifications, they were now essentially creating their own private currency tracking enterprise.

Plundering The Pirates

Secret "numbered" accounts in Swiss banks, according to Hayes, are not actually numbered but lettered, with codes which appear on the lower right-hand side of their documents; using tracking software and a sufficiently powerful computer, they are not difficult to penetrate. Hayes says the Column uncovered a $1.5 million bribe paid by the Cali cartel to a witness against former Panama dictator Manuel Noriega, who was subsequently convicted in Florida of narcotics crimes the cartel may actually have committed. Then after the Column in 1994 examined the secret accounts of the Salinas family in Europe, he says they passed the incriminating data to the DEA-which promptly alerted the Mexican government.

"On an official basis," says former Wharton School finance professor and money-laundering expert Orlin Grabbe, a friend of Hayes, "people associated with the Fifth Column had tried to take their evidence to the appropriate legislative committees and the Justice Department-and ran into a sea of corruption. So they decided to show them, 'We'll do our job anyway, even if it's in a different form.' "

Others are more skeptical. One well-placed HIGH TIMES source who requested anonymity says he believes Hayes and his associates may indeed have accessed foreign accounts, but may also have kept considerable sums for themselves rather than just transferring money to Federal Reserve accounts.

The Fifth Column first surfaced publicly in 1995, after James Norman, then a senior editor at Forbes, was alerted by Inslaw's Bill Hamilton to Hayes. Having broken a cover story on Iraqi arms-money laundering through oil markets, Norman was tipped by Hamilton to the PROMIS case: "Hamilton said that, as crazy as the things Hayes said seemed to be, they invariably had a way of proving true six months later," Norman recalls.

So Norman, who describes himself as a Liberal Democrat, visited Hayes at the Beckett Hotel in Nancy, where they spent an evening comparing notes. Hayes was interested in connections Norman had already discovered involving the PROMIS software, the NSA and a Little Rock bank-data-processing company then called Systematics (since absorbed by Alltell Information Services). Controlled by Arkansas billionaire Jackson Stephens, Systematics, according to Norman's sources, shuffled money for covert CIA and NSA spying operations, and was also involved in a massive bank-spying effort called "Follow The Money."

Sources also alleged a link to Vincent Foster, the White House deputy counsel whose death on July 20, 1993 was officially labeled a suicide. Foster was said to be a behind-the- scenes overseer for Systematics on behalf of the NSA, even while he was a partner with Hillary Clinton at the Rose Law Firm in Little Rock. (Alltell's chairman, Joe Ford, has denied any connection between Systematics and Vincent Foster.)

"Along about midnight," Norman remembers, "Hayes dropped this bombshel1 on me: 'You know, Vince was under investigation when he died.' I said, 'What investigation?' And Hayes, in his inimitable way, took a long drag on his cigarette, leaned back in his swivel chair, and said, 'Well, it's es- pie-oh-nage.' "

Hayes was only the first of more than a dozen sources that Norman eventually uncovered in reporting his "Fostergate" story-for Media Bypass, after Forbes backed away from publishing it. Initially Hayes did not tell Norman about the Fifth Column, which he learned of from another source. But the article was the first published reference to the Column, which had been monitoring Foster's Swiss bank account.

"They had located it," Norman wrote, "by tracking money flows from various Israeli government accounts, after finding Foster's name while secretly snooping through the electronic files of Israel's Mossad."

Foster, who was said to have had access to highly sensitive US code- encryption and data-security information, allegedly was peddling some of it to the Israelis. Norman continued: "Foster's first indication of trouble came when he inquired about his coded bank account at Banca Della Svizzera Italiana in Chiasso, Switzerland, and found the account empty. Foster was shocked to learn from the bank that someone using his secret authorization code had withdrawn all $2.75 million he had stashed there, and had moved it to, of all places, the US Treasury."

In April 1995, Norman sent a letter to White House press secretary Michael McCurry concerning his article, then slated to appear in that May's issue of Forbes. Among the allegations it spelled out were Foster's having learned from Hillary Clinton, shortly before his death, that he was under investigation by the CIA; that the President's wife was also a beneficiary of funds from Foster's Swiss account; that documents relating to the Systematics company had been removed from his office after his death, and that Systematics was also involved in laundering funds from covert operations, "including drug and arms sales related to activities in and around Mena."

A week later, the White House responded that these allegations were "outrageous" and "baseless." Forbes, at the last minute, killed Norman's story, and so it appeared in the August 1995 issue of Media Bypass. Norman was keeping in touch with Hayes, digging up new information and consulting him for leads.

From another source, months earlier, Norman had acquired some account numbers that had been found among the personal effects of Barry Seal , a cocaine-smuggling CIA asset who'd worked out of the Mena airport, and was murdered by Colombian hitmen in Baton Rouge in 1986. (See HighWitness News, Jun. '86). "In a suitcase in the trunk of Seal's car was a scrap of paper," says Norman, "with a curious string of ten letters. One source who'd been involved in money-laundering in the past was quite confident it was a Swiss bank-account number in encrypted form." Norman passed it-KPFBMMBODB along to Charles Hayes.

It was not long thereafter that Norman was informed that his "Fostergate" story was being abruptly spiked, on orders from the very top: Forbes publisher emeritus Caspar Weinberger, Secretary of Defense under Reagan. Weinberger's motivation was a mystery to Norman until he subsequently learned, from Hayes, that the encrypted number from Barry Seal's effects had led to the Union Bank of Switzerland, and to none other than Caspar Weinberger. The Fifth Column had supposedly raided $2.3 million from that very account, and then left a note in Weinberger's drop- box in Bar Harbor, ME, listing the number and a message: "You have been had."

In August 1995, Norman sent Forbes editor Jim Michaels a memo with further corroboration for his Fostergate piece, including evidence emerging from credit- card and airline frequent flier records indicating that Foster had made periodic one-day trips to Switzerland. Then Norman dropped his bomb on Forbes: "If you have any doubts about the ability of the CIA's Fifth Column to raid foreign bank accounts and withdraw funds, just ask Caspar Weinberger." Enclosing a copy of documents found in Seal's trunk, he added: "The clear implication is that Caspar Weinberger, while Secretary of Defense, was taking kickbacks on drug and arms sales. A cosignatory on this account appears to be connected with [a relative of] Howard Metzenbaum, the retired senator from Ohio. We are talking about bipartisan payola. Which helps explain why Congress is so squeamish about investigating this stuff."

After sending his internal memo, Norman was told to go on indefinite unpaid leave or to resign. As Fortune noted in an article about its rival's imbroglio that fall, "The embarrassing memo was particularly ill-timed. Malcolm S. 'Steve' Forbes Jr., the magazine's 48-year-old editor-in chief, is readying a campaign to run for President on the GOP ticket." Fortune's photo of Norman was captioned: "Ex- reporter Norman's startling sleuthing proved a little too gutsy."

Putting A Stop To It

Days later, the now-unemployed Norman met with Hayes in Pittsburgh, along with Orlin Grabbe of Reno, NV, who had started examining the Foster saga in a lengthy series on his World Wide Web page (http://www.aci.net/kalliste). "Hayes made some astounding predictions," Norman recalls about pending unprecedented departures of members of Congress and the Senate. I pooh-poohed the whole thing as ridiculous. He said, 'Wait and see.' " The Fifth Column, Hayes claimed, was sending plain brown envelopes to politicians containing copies of their illicit accounts in Switzerland and offshore banks in places like the Cayman Islands. By early 1996, Hayes' outlandish prognostications indeed seemed to becoming true, as dozens of prominent senators and representatives announced their retirements.

Norman says, "He would make allusions to some geographical area or other way of describing people other than by name, who invariably would announce they weren't going to run again. It became almost like pin-the- tail-on-the-donkey." As his findings continued to appear in Media Bypass, Norman began getting calls from other mysterious sources, who he now believes were government disinformation artists "looking for stuff on Hayes."

Both Norman and Grabbe speak of repeated attempts being made on Hayes' life, including the sabotage of his car's brakes on an occasion when all three were riding in it near Pittsburgh. Grabbe's Web page alleges that one hit plot emanated from Arkansas, farmed out through a New Orleans crime syndicate which contracted with a pair of ex-CIA assassins.

There would certainly appear to be plenty of people with reason to want Hayes and the Fifth Column put into permanent dry-dock. Hayes delights in telling a story in which the Column wire-transferred millions of dollars into the US Treasury out of secret Swiss accounts held by Nancy Reagan, Henry Kissinger and Oliver North , and then proceeded to play them off against one another. This happened, Hayes says, back when North was the front-runner in the polls for a Senate seat from Virginia, which he lost after Nancy got an anonymous call telling her North "had given out her unlisted account number and they got hers and Henry's money." (North's use of secret Swiss accounts in the Iran- Contra affair is notorious.)

Hayes maintains that the Fifth Column has been a leading source for Whitewater investigator Kenneth Starr, having even downloaded "the entire White House database"-with plenty of ammunition that's yet to surface concerning FBI files provided to the Clinton Administration and contributions to Democratic campaigns.

In June last year, just as the Column's purported activities emerged, then-CIA director John Deutsch announced plans to create a "cyberwar center" to protect the nation against the growing security threat posed by computer hackers. Attacks on international wire transfers, he told the Senate, were of special concern. (As to why the banks don't just change their PROMIS software, Hayes says it's not that easy to do. Besides, he claims, the banks have been informed that if they try to do that, their competitors will receive a printout listing all their illicit moneys.)

Then last September, some 16 FBI and Secret Service agents in four cars showed up in Nancy, asking questions about Hayes.Some say they were also searching for the Column's Cray supercomputer, said to have been installed in the back of a 48-foot tractor-trailer complete with backup power supply.

And on October 22, just before a meeting Hayes had arranged with some oil-company executives in the Mellon Bank case, the FBI busted him at his residence on the murder-for-hire charge. It was no secret that Hayes and his son, John Anthony, were involved in an $800,000 court property fight over Hayes' mother's will. But after Charles' arrest, John Anthony Hayes assured a local newspaper that if his dad had really wanted him out of the way, he'd have handled it himself.

Denied bond in federal court nevertheless, Hayes was remanded to the Laurel County Detention Center to await trial. Also denied the right to act as his own counsel, he hired charismatic Lexington attorney Gatewood Galbraith.

The January trial was, to say the least, bizarre. The star prosecution witness, Lawrence W. Myers, had interviewed Hayes for a magazine article last August, and then called the FBI office in Birmingham, AL, to report that Hayes was looking to have someone killed. FBI agent Don Yarborough, posing as a would-be hit man, contacted Hayes, who spoke with him about the prospective murder over an open phone line, and used his own return address on a packet of documents he sent to this make-believe assassin. The phone tapes revealed Hayes offering to provide $5,000, seven days after his son's proposed murder, at "the best place to meet-a funeral office." In his testimony, Hayes said he "figured the government was getting ready to set up something, so I thought it would be a good time to reverse it on 'em... I figured I would be able to get them caught in a trap."

Hayes had been on CIA contract since age 19, he stated under oath. The Fifth Column had "split off" from Bill Casey's Squad D to "champion a lot of peoples' rights." Asked by Galbraith to name names of politicians forced to resign because of the Column's findings, Hayes singled out former Maine senator William Cohen (recently named Secretary of Defense) and Colorado senator Pat Schroeder. (No direct evidence has been produced concerning either of Hayes' courtroom allegations.) When he began describing how Vince Foster "had been relieved of a bank account in Bern, Switzerland," the judge ruled that such detail "must be shown to be necessary" to the defense; Foster's name was not mentioned again.

At the end of the trial's fourth day, new information surfaced concerning Lawrence Myers' background. In 1985, he had been charged with extortion and spent a year in a psychiatric facility; a felony warrant for him remained active in California. It also came out that he had been sharing information on several cases with the FBI, which had doctored "rap sheets" to hide his background.

The judge granted a two-week continuance, but after the trial resumed on January 27, refused to allow most of the damaging information about Myers into evidence. [Kennetta] Williamson, an investigator for the Tennessee attorney general's office, described him in testimony as "a professional and pathological liar." Reporter Norman testified that his investigation confirmed that Hayes "had a long relationship with the CIA as a contract agent"-which was denied in three CIA affidavits later introduced by the prosecution. That was when Hayes took the stand to reveal his alias and contract number.

But the jury believed the tapes incriminated Hayes. "The main thing I can't understand," said one juror after the guilty verdict, "is how he thought he could entrap the government."

Marvin Miller, a prominent Washington criminal-defense attorney with years of experience in espionage cases, is drafting a motion for a new trial. "We believe there are significant errors that occurred at the trial," he says. "The jury simply was not allowed to hear a number of things that could have reasonably changed their decision."

Awaiting his May sentencing, Hayes says from his cell: "Hey, I love my government. They trained me well. And the Fifth Column ain't out of business yet."

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