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Jailed Chuck Hayes Claims FBI Setup

by James Norman

Chuck Hayes is a crooked government's worst nightmare. Which is probably why he's in jail without bond.

Sooner or later, Chuck Hayes and the FBI were destined for a show-down. Either he'd get them, or they'd get him. They both hate each other, with good reason. For many months they had played cat and mouse, warily circling each other looking for an opening. Finally, Chuck Hayes got a Pearl Harbor sneak attack.

It was a little after 5 p.m. on Tuesday, Oct. 22, 1996. Sitting in the office of the 8-unit Beckett Motel in the little town of Nancy in hilly southeastern Kentucky, overlooking a scenic arm of Lake Cumberland called Fishing Creek, Hayes watched as three men in suits drove up and walked in. "You rent rooms by the week or by the month?" asked one. "By the week, but not by the month," replied the white-haired motel proprietor and retired CIA contractor. Cordial but cautious, Hayes could smell a G-man miles away. "Doesn't really matter," replied FBI Special Agent David R. Keller: "You're under arrest."

More than a month later, the 61-year-old Hayes, remains behind bars in the nearby Laurel County Detention Facility in London, Ky., held without bond. He is charged with supposedly hiring an undercover FBI agent for a paltry $5,000 to kill his son, John Anthony Hayes, a Louisville real estate salesman who Hayes has all but disowned over alleged drug use. The "hit" allegedly meant crossing a state line and using the mail and telephone, so that made it a federal case. The FBI claims to have damning evidence: taped phone conversations ordering the supposed murder-for-hire and disposal of the body. Trial is set for mid-January. Hayes could get 10 years in prison.

On the surface, things look grim for Hayes. On October 25, U.S. Magistrate Judge J. B. Johnson Jr., citing Hayes Internet nickname "Angel of Death," declared him a threat to society and a flight risk. So he denied Hayes the right to post bail. Three times Hayes thought he had hired a lawyer, but each backed out for odd reasons amid speculation of government pressure. At a pre-trial hearing November 26, Hayes had to represent himself to get his rushed trial pushed back from December 2. Hayes has yet to get a receipt for the $2,600 of cash or the credit cards taken from him at the jail. And to add insult to injury, the motel itself and the house Hayes lived in have been turned over to his son, the would-be assassination target, as part of a long-running inheritance dispute.

So is Hayes bummed out? Hardly. He sounds elated. Calling collect from the jailhouse, Hayes declares with a laugh that he will not only prove the FBI's case is a frame-up, but that it is fraught with perjury and ethics violations. "We've notified the court we intend to prosecute FBI agent Keller on several counts of perjury," says Hayes. In addition, the Assistant U.S. Attorney, Martin Hatfield "failed to carry out a court order" to turn over evidence, claims Hayes. "That can mean his law license, and I intend to have it." In other words, he's got 'em right where they want him.

It gets better: "Charles Hayes is in jail because he tweaked the government's nose," says his new lawyer, government gadfly, legalized hemp advocate and twice-defeated Kentucky gubernatorial candidate Gatewood Galbraith of Lexington. "They tried to induce Charles into a crime. He, knowing it was the government, strung them along until they got frustrated and arrested him. In fact, a crime never occurred." Hayes claims the 10 phone tapes belatedly turned over to him for inspection by Asst. U.S. Attorney Hatfield, will show Hayes asking the undercover agent for his FBI phone number, joking about stripping him of his "wire," and proposing to meet for the payoff at a government office. "The evidence will show he (Hayes) was aware of who they were," says Galbraith: "It was a game to see how far he could take the ruse." Adds Hayes: "At no time was my son ever at risk."

Game? More like a war. This is a deadly serious confrontation between a single-minded and unorthodox former CIA computer spook bent on cleaning up government and a desperately corrupt law enforcement juggernaut. Murder for hire plots? The real question is who in Arkansas or the White House has been putting out contracts on the life of Chuck Hayes, who claims he has had to fend off or preempt at least three would-be attempts on his own life by hired killers in the past two years.

Why Hayes? Because in recent years this wily, irascible former intelligence operative has been a continual thorn in the government's paw by catching the bureaucracy in one crooked escapade after another. He has given testimony supporting the $300 million claim by Inslaw Inc. that its PROMIS tracking software was swiped by the Justice Dept. and used in a variety of other government applications. He bought a load of used computers from the U.S. Attorney's office in Lexington in 1990 and found the disk drives still had recoverable witness protection files, along with unlicensed Microsoft and Lotus programs. When the feds sued to shut him up, he won an $80,000 settlement. Plus, he has a $1 million claim against the Customs Dept. for a 25% reward or "mordi" on delivering a huge gem seizure in 1985, for which he's never been paid. Hayes claims the deadbeat government is sitting on billions of dollars worth of similar mordi claims, waiting for the claimants to die or give up.

But those are mere annoyances. What has been giving the FBI and Justice Dept. fits is Hayes' computer hacking. Nobody seems to be able to prove it, but this retired CIA computer spook and four fellow intelligence veterans, calling themselves the Fifth Column, have armed themselves with one or more powerful Cray supercomputers. For at least the past 5 years, they have been hacking their way into bank, corporate and government data bases all over the world, tracking the flow of dirty money from drug, arms and other nefarious businesses into the offshore pockets of the world's power elite.

First they find the money. Then they steal it. Or more correctly, someone using the authorization codes found for those "numbered" offshore accounts has been wire-transferring dirty money back into escrow at the U.S. Treasury. The tax-dodging bribe-takers are dared to come and claim it. All the proceeds go to specified government agencies -- if they clean up their own acts. At last count, the Fifth Column's take was pushing $4 billion, from almost 1,000 offshore accounts. It hasn't stopped there. Starting in mid-1995 in earnest, Hayes' group began quietly delivering plain brown envelopes to high-ranking government officials caught in this net, confronting them with hundreds of pages of incontrovertible bank records and other documents. The choices offered were either to retire or face exposure, prosecution, and loss of federal pension benefits. The result has been an unprecedented deluge of unexpected departures from Congress and government agencies in the past year, many for the patently phony excuse of spending more time with family. Both Democrats and Republicans have been nailed. Greed knows no party lines.

On top of that, Hayes is believed to be responsible for funneling information on funny-money bank activities to foreign governments like Mexico, Korea, Japan and Canada to help those countries go after political corruption. That led the Federales to nearly half a billion dollars in Salinas family accounts at Citibank in Switzerland, leading to a possible criminal money laundering investigation of the U.S.'s biggest bank. Fifth Column information has also been going to Whitewater Independent Counsel Kenneth Starr, who is believed to have made use of it under national security secrecy rules to help nail down the conviction of Arkansas Gov. Jim Guy Tucker. Indeed, Fifth Column fingerprints have been all over a spate of recent scandalous revelations, from finding thousands of FBI files illegally uploaded to the White House Office Data Base to tipping off The Star tabloid and even supplying the pictures for its scoop on toe-sucking, philandering Clinton political advisor Dick Morris.

Fifth Column snooping into unusually rich spending patterns by employees at the IRS region headquarters in Covington, Ky., is said to have led to the arrest of five workers there for selling crack cocaine on the job and a grand jury is said to be looking at possible sales of IRS files to outsiders for $500 apiece.

Circumstantial evidence that a massive, secretive upheaval is going on in the government is plentiful, from the record congressional departures to wholesale post-election resignations in the Clinton Administration, and anticipated indictments of First Lady Hillary Clinton. But there is precious little hard proof that the Fifth Column even exists. About all there is are the sparse details Hayes, its lone spokesman, chooses to reveal. There is corroboration on some key points by other intelligence sources -- too scared to be named in print. But the implications of all this are so staggering that even clean government officials in-the-know are loath to even whisper what's going on. The bad guys certainly aren't talking. The mainstream press has turned a blind eye, or pooh-poohed the story as fanciful conspiracy theory, as if whistling past its own graveyard. And the few journalists who have gotten a whiff of what's happening can't get stories into print because there are no hard documents available. Yet. That may soon change with Hayes in jail. "The column is MAD," declares Hayes. "Things are about to start popping."

Perhaps the clearest endorsement for Hayes' claims may be the sheer fact he's been jailed on such a clearly manufactured charge. He must be getting under SOMEbody's skin for doing more than spreading baseless rumors. Indeed, FBI agent Keller apparently was part of a 16-agent task force dispatched to try and track down the Fifth Column's computer, believed to be an air-cooled Cray model packed in a nondescript semi-trailer truck with its own generator and satellite link. As a prank, someone probably a friend of Hayes, put a captured bobcat in one of the team's empty government vehicles one evening, tearing the car's interior to shreds. "Maybe FBI stands for Federal Bobcat Investigator," chortles Hayes.

Another of his epithets for the FBI: "Federal Bulls*** Investigators." Hayes is openly contemptuous of the FBI, a perennial intramural rival of the CIA, which Hayes also says is rife with corruption. Low paid, overgrown and prone to graft, Hayes says the FBI has been easy prey for organized crime and drug cartel infiltration. Technically, he points out, the FBI is not legally chartered and its employees are not eligible for federal pensions, can't carry guns, and can't legally send people to prison for lying to them. That's because the FBI has outgrown its chartered parent, the DoJ. So Hayes likes to crow that some unknown hacker last summer busted into a government computer in Oklahoma and digitally severed FBI head Louis Freeh from his paycheck and government pension, at least temporarily.

Hayes speaks with equal disgust of the DoJ's penchant for covering up official wrong-doing while crushing small-fry lawbreakers and political enemies using intimidation, lies, coercion and the unlimited resources of the federal bureaucracy. He laughs when he tells how, a few years back one April 27 (Hayes' birthday), somebody hacked into the DoJ computer and scheduled all the Washington headquarters guards for a night off. Then a green pickup pulled up to the loading dock and made off with a truckload of sensitive computer disks. True or false, it's a great story. But he sheds real tears when he talks of Danny Casolaro, a free-lance journalist found "suicided" in a West Virginia motel room in 1991 while working with Hayes on exposing offshore bank accounts of high level government figures. There is considerable evidence rogue operatives connected with DoJ's Office of Special Investigations (the vaunted Nazi-hunters) may have been involved in Casolaro's death. "There's so many crooks in the government," snarls Hayes, "It's like shootin' fish in a barrel."

Hayes should know. He has spent most of his life working for the government -- much of it cleaning up internal corruption. It started out with him flying F86 Sabrejets at the tail end of the Korean War, being shot down later over Vietnam, rising to Colonel in the Air Force, and moving into the Central Intelligence Agency as a contract operative. In the early 1980s, Hayes was posted to Brazil, where he ran a motor home manufacturing business -- and was instrumental in heading-off a simmering Communist insurgency.

At various points in his career Hayes came face-to-face with the black reality that elements of the U.S. government were neck-deep in drug and arms running, software piracy and a raft of other abuses. It was personal profiteering under the guise of national policy. Like thousands of other straight government workers who stumbled onto this dirty trail, Hayes had little power to stop it. But he vowed one day he would deliver justice to the well-dressed scum that were turning his beloved United States into just another narco-republic. "Vengance is mine, sayeth the Lord," Hayes quips, "But gettin' even is Chuck's." Or as the motto says on his flag-bedecked Charles Hayes Group letterhead: "If it is to be, it is up to me." The secret to "gettin' even" came within Hayes' reach when he was assigned to a little known team inside the CIA called Division D, or "Squad D." According to Bob Woodward's CIA book "Veil," Division D was "an elite group...[which] did some of the risky breaking and entering in foreign-government offices to plant eavesdropping equipment." Some of that was done electronically by hacking into foreign computer systems. To do that, Hayes cryptically seems to confirm, he was trained to maintain and customize hardware and software for powerful, code-busting Cray supercomputers. All he will officially admit, usually grinning through a haze of cigarette smoke: "Mah gummint trained me wellll."

Indeed, a matchup of Charles Hayes vs. The FBI may not be as uneven a fight as you might think. The smart money is probably on Hayes, who has a reputation inside the spook world for unorthodox, sometimes illegal, but usually very effective tactics against great odds. Example: Legend has it he once shot his way out of the Israeli Mossad's "Brick on the hill" headquarters with a high-ranking wounded female defector. True story? Who knows.

Though he comes across intentionally on the phone as a good- ol'-boy junk dealer, swilling Maker's Mark bourbon at that sleepy little motel in the boondocks, Hayes is far from a country rube and drinks very little. He was raised in a prominent family near Ashland, Ky., with interests in trucking, heavy equipment and service stations. He learned to fly as a teenager and attended the Greenbrier military academy. That's how he got into Korean air combat at age 19. He attended law school in Chicago, under one of many aliases, and has practiced law in The Hague, but has never taken a U.S. bar exam. His political acquaintances allegedly run to high levels in both parties, nationally and in Kentucky. He claims to speak Mandarin, Farsi, German, Portuguese and a few other languages. What's certain is he's fluent in Hillbilly. Socially, he has hob-nobbed with big names in the country & western music world, as well as the Kennedy clan.

Of course, if you ask the CIA, the Pentagon, or anybody in official Washington if they've ever heard of Chuck Hayes, all you get are denials. Or eerie silence. His skeptics brand him a blowhard and a kook. If he IS for real, he could hardly have a better cover, surrounded by trusted fellow military and intelligence veterans in a rural hamlet where strangers are conspicuous, and very unwelcome if they still work for the government. Moreover, even Hayes' most outlandish assertions and predictions have a way of eventually proving true.

For instance, after returning from Brazil in 1985, Hayes became a dealer in government surplus equipment, which has allowed him to acquire (for mere pennies on the dollar) at least one used Cray, from the Subic Bay naval base, and the circuit boards and other hardware to build at least a couple more Cray- equivalents. Add to that batteries of disk drives, generators and sophisticated signal gear. This can be confirmed by page after page of purchase documents, court evidence and eyewitness inspection by at least two other journalists who have seen roomsful of Cray components and other powerful computer hardware.

One of these writers is J. Orlin Grabbe (pronounced GRAY- bee), a former Wharton School finance professor and author of the current standard college text on international financial markets. Grabbe is also an expert in the arcane pricing of "derivatives:" put and call options and other financial instruments for risk- hedging. He helped launch a software company (now called FNX) that is a leader in such programs. There is no BS-ing Orlin Grabbe on bank computing, money laundering or financial markets. And when Grabbe and Hayes connected in mid-1995, they quickly developed a keen mutual respect. Whatever the truth about Hayes' other adventures, the man knew wire transfers and bank computer security. Better make that "in"-security. Grabbe's involvement in all this started when government intelligence types approached the predecessor of FNX to use that company as a front for covertly spying on the financial industry. As a libertarian with a healthy skepticism about government meddling in people's bedrooms and bank accounts, Grabbe was incensed. Especially when he came to realize the feds were using any number of similar fronts as Trojan horses into the banking world. One of them, he heard, was Systematics Inc., a curious Little Rock bank data processing and software firm. Now renamed Alltel Information Services and wholly-owned by Alltel Corp. (formerly Allied Telephone) there, Systematics had for many years been controlled by Arkansas' Stephens family. What made Systematics so peculiar to Grabbe was that this small company in Arkansas, with little proprietary software of its own, had managed to land extremely sensitive back-office bank data jobs in such unlikely places as Moscow, Macao , Singapore, Malasia and Pakistan, just about the time Bill Clinton was elected in 1992. Grabbe posted a bibliography of Systematics' press releases about these deals on the Internet, hoping it would pique someone's interest.

It certainly got mine. For several months in early 1995, as a senior editor at Forbes magazine, I had been working on a complex story involving Inslaw and its PROMIS software. One of the companies suspected of illegally reselling that program, as part of a National Security Agency effort to spy on world money flows, or possibly to actually launder covert funds, was Systematics. Moreover, Deputy White House Counsel Vincent W. Foster, while an attorney at the Rose Law firm, is believed to have been a key go-between or handler for Systematics' relations with the super-secret National Security Agency. Systematics adamantly denied to Forbes that it had any ties to Foster or the NSA. But Washington Weekly, under a year-old Freedom of Information Act Request, has recently obtained documents that clearly tie Foster to highly sensitive NSA matters in the White House, and show sensitive NSA contracts with a Systematics affiliate.

The most explosive aspect of that story, later dubbed "Fostergate," was that at the time of his supposed "suicide" in July 1993, I had confirmed from multiple sources that Foster was under counter-intelligence surveillance himself. He had been suspected of selling high-level national security codes and other secrets to the State of Israel. How was he first discovered? The Fifth Column had found a coded Foster account at a former unit of the Bank Ambrosiano, the Banca della Svizzera Italiana in Chiaso, Switz., with nearly $3 million in it from Israeli banks. Worse, his former Rose partner Hillary Clinton was suspected of sharing in the proceeds of that account, with or without knowing how the cash was generated. Forbes declined to run the story, but gave me permission to publish it elsewhere. "We can't say that about Systematics (an advertizer) and we can't say that about Israel" I was told. Having confirmed much of the story from his own sources, Grabbe posted the story on several Internet newsgroups. It then ran in alternative monthly called Media Bypass, despite efforts by Systematics (and the government) to squelch it with libel threats.

That began a long series of follow-up postings on the Internet by Grabbe elaborating on the murky world of intelligence, finance, drug-money laundering and computers. It has gone far to explain the depth of corruption that lies beneath the seemingly penny-ante "Whitewater" scandal and is now an amazing library of articles on his web site at http://www.aci.net/kalliste/. In the flurry of newsgroup chatter that followed about Swiss accounts and congressional retirements, I posted a message to explain the Fifth Column's role in delivering resignation ultimatums as akin to the Biblical Angel of Death at Passover. The phrase stuck and Hayes was soon being referred to as AOD. Of course it has never referred to anything other than career death for crooked politicians. But Judge Johnson seemed to think it was threatening enough to keep an innocent man locked up without bail.

Indeed, FBI agent Keller, in sworn testimony, claimed in court that Grabbe was merely a pen-name for Hayes, who was really the author of Grabbe's taunting Sept. 18 post presaging Hayes' arrest, titled "The Dickheads are getting desperate." In that, Grabbe poked fun at the FBI, but deftly expressed growing public concern over the encroachment of government authority. Keller cited that as a threat of armed reaction and blamed Hayes. The U.S. government is determined to keep Charles locked up. Just as in 1941, Chuck Hayes has suffered a Pearl Harbor. And he may suffer another year of setbacks, like the U.S. did in the Pacific. But ultimately those World War II losses were more than reversed and a totalitarian state was eventually crushed. What the Justice Department must be wondering: Does Hayes have an A- bomb ticking?

Published in the Dec. 9, 1996 Issue of The Washington Weekly Copyright (c) 1996 The Washington Weekly http://www.federal.com December 9, 1996 Web Page: http://www.aci.net/kalliste