Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

For The Record  

FTR #501 Norbert Schlei and the Strange Case of the “57’s”

Dave Emory’s entire life­time of work is avail­able on a flash dri­ve that can be obtained here. (The flash dri­ve includes the anti-fas­cist books avail­able on this site.)

Record­ed March 6, 2005
MP3 Side 1 | Side 2

Intro­duc­tion: Illus­trat­ing just how bru­tal and unjust “the sys­tem” can be, this pro­gram doc­u­ments the legal per­se­cu­tion of Nor­bert Schlei. An accom­plished attor­ney and for­mer assis­tant attor­ney gen­er­al under Pres­i­dent Kennedy, Schlei attempt­ed to redeem some “57’s” on behalf of some of his Asian legal clients. The “57’s” were high­ly unusu­al Japan­ese gov­ern­ment bonds issued against the M‑Fund, a vast polit­i­cal slush fund cre­at­ed out of Japan­ese loot from World War II.

These bonds were only selec­tive­ly redeemable—someone who was not part of “the in-crowd” of Japan­ese pow­er pol­i­tics could not redeem their bonds and faced severe legal ret­ri­bu­tion should they try. After an elder­ly, dis­abled wid­ow was framed for attempt­ing to redeem a “57,” Schlei was tar­get­ed for eco­nom­ic and pro­fes­sion­al destruc­tion for look­ing too close­ly into the ori­gin of the “57’s” and the M‑Fund.

A stun­ning array of gov­ern­men­tal and pri­vate assets were mobi­lized against Schlei and his con­vic­tion was obtained only through col­lab­o­ra­tion between the US judi­cial estab­lish­ment, US intel­li­gence agen­cies and Japan­ese gov­ern­men­tal offi­cials. Extra­or­di­nary legal maneu­ver­ing, includ­ing a bla­tant case of wit­ness tam­per­ing marked the course of his pros­e­cu­tion. Even­tu­al­ly, Schlei was able to clear his name, but not before he was bank­rupt­ed and pro­fes­sion­al­ly destroyed. He suf­fered a major heart attack in 2002 and died a year lat­er.

Schlei’s case con­trasts marked­ly with that of a “57” that was suc­cess­ful­ly redeemed by for­mer Sec­re­tary of State Alexan­der Haig. Haig redeemed a “57” on behalf of the Paraguayan gov­ern­ment and did so with the assis­tance of for­mer Pres­i­dent George H.W. Bush, who gave Haig an impor­tant let­ter of intro­duc­tion.

Pro­gram High­lights Include: Review of the his­to­ry of the gen­e­sis of the M‑Fund in the imme­di­ate after­math of World War II; a descrip­tion of the ori­gin of the “57’s” (issued to cov­er the lack of liq­uid­i­ty in the orig­i­nal M‑Fund); review of the con­tri­bu­tions of Japan­ese war crim­i­nal Yoshio Kodama to the M‑Fund; review of Kodama’s con­nec­tions to the CIA; a detailed pre­sen­ta­tion of the extra­or­di­nary resources devot­ed by the US gov­ern­ment to the per­se­cu­tion of Schlei and Bar­bara Jean Braven­der Ah Loo; indi­ca­tions that the per­se­cu­tion of Schlei was part of a Japan­ese effort to cur­tail “Japan-bash­ing” in the Unit­ed States; an account of some of the sus­pi­cious deaths of Japan­ese polit­i­cal fig­ures who had become involved with some of the machi­na­tions sur­round­ing the M‑Fund.

1. The “57’s” are spe­cial Japan­ese gov­ern­ment bonds, issued selec­tive­ly to both oppo­nents and allies of the rul­ing Lib­er­al Demo­c­ra­t­ic Par­ty. Allies were able to redeem them; oppo­nents were not. This gam­bit was imple­ment­ed in order to cov­er the debt incurred by the cor­rupt LDP infra­struc­ture, and its manip­u­la­tion of the M‑Fund—generated from “Gold­en Lily,” ille­gal­ly con­fis­cat­ed wealth from World War II. The ori­gin of the M‑Fund is dis­cussed at length and detail at the end of this descrip­tion.

. . . . Rather than cov­er this expo­sure by dip­ping into the M‑Fund, or into his own ‘pri­vate Bank of Japan’, Tana­ka and his clever asso­ciates at the Min­istry of Finance came up with an inge­nious dodge. They would roll over the orig­i­nal Japan­ese gov­ern­ment bonds by exchang­ing them for new finan­cial instru­ments called Cer­tifi­cates of Redemp­tion. These were not the Min­istry’s usu­al bonds but a form of debt instru­ment or IOU spe­cial­ly designed, print­ed and issued by the Min­istry of Finance in the fifty-sev­enth year of Hiro­hi­to’s reign, so they often are called ’57’s’ to dis­tin­guish them from reg­u­lar gov­ern­ment bonds. We will use that label in this book. . . .

Gold Warriors—America’s Secret Recov­ery of Yamashita’s Gold; by Ster­ling Sea­grave and Peg­gy Sea­grave; Ver­so [HC]; Copy­right 2003 by Ster­ling Sea­grave and Peg­gy Sea­grave; ISBN 1–85984-542–8; p. 127.)

2. “Bond­hold­ers who already were owed out­stand­ing inter­est would be giv­en spe­cial­ly designed and print­ed cashier’s checks from the Dai-Ichi Kangyo Bank, serv­ing as the Min­istry’s con­duit for inter­est pay­ments. Because many of the bond-hold­ers were con­sid­ered polit­i­cal­ly untrust­wor­thy, they were giv­en no choice in the mat­ter, and sim­ply were told by the Min­istry that the exchange of bonds for ’57’s’ and cashier’s checks would take place. While this might seem unusu­al in Europe or Amer­i­ca, intim­i­da­tion has been devel­oped to such a high art in Japan that to defy the exchange would mean social ostracism or even assist­ed sui­cide.”


3. Strug­gles over the M‑Fund have appar­ent­ly cost the lives of a num­ber of the par­tic­i­pants.

Already the M‑Fund appeared to have led to the death of Kishi’s broth­er, Prime Min­is­ter Sato. Many Japan­ese believe Sato was poi­soned in 1975 at the height of a con­test with Tana­ka for con­trol of the M‑Fund. A num­ber of oth­ers asso­ci­at­ed with Sato in M‑Fund financ­ing of Fuji Steel also died mys­te­ri­ous­ly in the ear­ly 1970’s. A major scan­dal over Sato’s death was avoid­ed when Tana­ka paid Sato’s 300-bil­lion from the M‑Fund. In 1984, Har­vey Fuku­da, Kodama’s pub­lish­er and busi­ness part­ner, who knew where all the skele­tons were hid­den, died of ‘heart fail­ure’ while in the hos­pi­tal being dried out and treat­ed for cir­rho­sis of the liv­er. He had expressed fear of being poi­soned, and mem­bers of his fam­i­ly did not believe his death was from nat­ur­al caus­es. In Japan, if you are afraid of being mur­dered, it is con­sid­ered good advice to avoid hos­pi­tals, where the job can be done unob­tru­sive­ly. The next assist­ed sui­cide was Prime Min­is­ter Takeshi­ta’s per­son­al assis­tant Aoki Ihei, who knew too much about the ’57’s’. Accord­ing to The Wall Street Jour­nal, Aoki ‘slashed his wrists, legs, and neck and, when that failed, hanged him­self with a neck­tie from a cur­tain rod.’


4. The phys­i­cal make­up of the “57’s” was an impor­tant ele­ment in the scam.

Phys­i­cal­ly, the ’57’s’ were unlike any­thing pre­vi­ous­ly issued by the gov­ern­ment of Japan. They were not offered to the pub­lic at large, nor were they to be trad­ed on the inter­na­tion­al bond-mar­ket like nor­mal gov­ern­ment bonds, so only the hold­ers actu­al­ly saw them. The mag­ic of this scheme is that by their very dif­fer­ence it was pos­si­ble for the Min­istry of Finance lat­er to declare all ’57’s’ to be forg­eries. Only cer­tain ones were then selec­tive­ly and very secret­ly rene­go­ti­at­ed at a dis­count. Those who paid for their orig­i­nal gov­ern­ment bonds, and then were forced to exchange them for’57’s’, were thus swin­dled twice. Wash­ing­ton has backed Toky­o’s asser­tion that the ’57’s’ are coun­ter­feit. But, as we will see, there is evi­dence both are lying. Because they were joint­ly involved in set­ting up the M‑Fund with Gold­en Lily war loot, they both have rea­son to deny its exis­tence.

(Ibid.; pp. 127–128.)

5. The strange case of the “57’s” illus­trates “the sys­tem” at its most cyn­i­cal and bru­tal. Before focus­ing on Nor­bert Schlei, the gov­ern­ment crushed an elder­ly, invalid­ed wid­ow, Bar­bara Jean Braven­der Ah Loo:

Until Wash­ing­ton turned the full force of its ire on Schlei in 1992, the tar­get of the U.S. Gov­ern­ment sting was an elder­ly invalid named Bar­bara Jean Braven­der Ah Loo, liv­ing in Los Ange­les on Social Secu­ri­ty ben­e­fits of less then $1,000 a month. A U.S. cit­i­zen of Cau­casian ori­gin, she had mar­ried a Hawai­ian Chi­nese busi­ness­man named Ah Loo and spent long peri­ods with him in Hong Kong, run­ning a com­pa­ny called Trans­field Invest­ments. In 1987, Trans­field was approached by Japan­ese clients, includ­ing Takahishi [Toshio, a for­mer Japan­ese stu­dent leader], look­ing for help in redeem­ing their ‘57’s’. Ini­tial efforts by Trans­field failed when the Bank of Japan took the posi­tion that all ‘57’s’ were fraud­u­lent. Dur­ing this peri­od, Mrs. Ah Loo met Craig Ivester, a boun­ty hunter employed by Ban­corp Inter­na­tion­al as a find­er of com­mod­i­ty trans­ac­tions. They dis­cussed the ‘57’s’ and Ivester sent a pho­to­copy of one to Union Banque Suisse, which replied auto­mat­i­cal­ly that it was fraud­u­lent, with­out both­er­ing to exam­ine the orig­i­nal.

(Ibid.; p. 132.)

6. Again, note the lengths to which the author­i­ties went in per­se­cut­ing an inno­cent, aging, wid­owed invalid!

Aging and seri­ous­ly ill, Mrs. Ah Loo then returned by her­self to Los Ange­les, and was liv­ing in a sin­gle room bor­rowed from a ter­mi­nal­ly-ill friend, in a house fac­ing fore­clo­sure, when she again encoun­tered the boun­ty hunter. At this point, Craig Ivester was mak­ing his liv­ing as a U.S. Cus­toms Ser­vice informer, look­ing for tar­gets. Remind­ed of their pre­vi­ous dis­cus­sions of the ’57’s’ in Hong Kong, Ivester decid­ed to per­suade Mrs. Ah Loo to offer some ’57’s’ for sale inside the Unit­ed States, which he knew was ille­gal, earn­ing him a find­er’s fee from the Cus­toms Ser­vice.


7. “Sick as she was, Mrs. Ah Loo still had gump­tion. She told Ivester she would nev­er nego­ti­ate a ‘57’ in the Unit­ed States. Ivester approached the Cus­toms Ser­vice, and offered to help entrap Mrs. Ah Loo by bait­ing her with the offer of a very large com­mis­sion.”


8. Your tax dol­lars at work:

Accord­ing to Schlei’s inves­ti­ga­tors, the sting oper­a­tion was mount­ed by U.S. Secret Ser­vice agent Jack Fox, and Cus­toms Ser­vice agents Michael Sankey and Michael Noo­nan, act­ing on the tip from Ivester. Their plan was to offer Mrs. Ah Loo a big com­mis­sion to coax her into obtain­ing a ‘57’ to sell in Amer­i­ca, and then to arrest her for ‘intent’, or mere­ly con­tem­plat­ing a crime. Because she was so reluc­tant, Fox got cre­den­tials show­ing he was a vice pres­i­dent of First Nation­al Bank of Chica­go. Sankey would pre­tend to be a rich busi­ness­man. They rent­ed a room in Reno that they wired, and asked her to come for a meet­ing. If they could get her to cross a state line, it could be con­strued as a fed­er­al offense, rather than a state offense. Mrs. Ah Loo could not come because she could not afford the air­line tick­et. The Secret Ser­vice sent her a free round trip tick­et, the first con­crete step in their entrap­ment. When she got to Reno, Mrs. Ah Loo said she was sor­ry, but she could not obtain any ’57’s’. Any­way, she said, the Japan­ese gov­ern­ment claimed they were fraud­u­lent, and ‘Peo­ple have gone to jail for sell­ing these bonds. . .’

(Ibid.; pp. 132–133.)

9. “Fox, Sankey and Noo­nan per­sist­ed, brow­beat­ing Mrs. Ah Loo until final­ly she said she would try again to get a ‘57’, but only if they could arrange a prop­er and legit­i­mate trans­ac­tion through a lead­ing Amer­i­can secu­ri­ties firm—a firm that would make sure all laws were observed so nobody got in trou­ble. Secret Ser­vice agent Fox promised to bring Smith Bar­ney into the deal. He faxed Mrs. Ah Loo a let­ter pur­port­ing to be from A. George Saks, Exec­u­tive Vice Pres­i­dent and Gen­er­al Coun­cil of Smith Bar­ney, offer­ing to pur­chase three ‘57’s’.”

(Ibid.; p. 133.)

10. It would be dif­fi­cult to imag­ine any­thing more cyn­i­cal than the enor­mous resources com­mit­ted to destroy­ing Mrs. Ah Loo.

For the sting to work, it had to hap­pen in a juris­dic­tion where there was a Smith Bar­ney office, and a com­pli­ant judge. They decid­ed to lure Mrs. Ah Loo to Tam­pa, Flori­da, where Smith Bar­ney had an office, and where the U.S. attor­ney expect­ed Fed­er­al dis­trict court judge Eliz­a­beth Kovachevich to be coop­er­a­tive, allow­ing him to go for the jugu­lar.


11. “Even­tu­al­ly, Mrs. Ah Loo heard about Roger Hill, a bro­ker who had some of Taka­hashi’s ‘57’s’ in his pos­ses­sion, hop­ing to find a poten­tial buy­er. But on the eve of the trip to Tam­pa, Mrs. Ah Loo suf­fered a heart attack, and asked her son—Bruce Hansberry—to go with Roger Hill in her place, to con­clude the deal at Smith Bar­ney. When they arrived in Tam­pa, on Jan­u­ary 18, 1992, they were arrest­ed.”


12. “Because she was not present, they had to rope in Mrs. Ah Loo by get­ting her on the tele­phone to dis­cuss the fic­ti­tious clos­ing, so she could be arrest­ed in Los Ange­les. This was done, and when was tak­en into cus­tody. On the pre­text that her ear­li­er res­i­dence in Hong Kong meant she might try to flee the coun­try, she was put in prison to await tri­al, and ulti­mate­ly was con­vict­ed of con­spir­a­cy, wire fraud, mon­ey-laun­der­ing and secu­ri­ties fraud. Bewil­dered, Mr. Ah Loo began to lose her mind, and was moved to a prison psy­chi­atric ward. There, she was found to have can­cer of the throat, and died.”


13. “By Jan­u­ary 1992, six­teen offices of the Secret Ser­vice were said to be involved in the Ah Loo sting. Mrs. Ah Loo was too insignif­i­cant to jus­ti­fy such an expen­di­ture of tax­pay­ers’ mon­ey, so the vig­i­lantes looked for some­one else to lynch. One pos­si­bil­i­ty was Taka­hashi, to whom the ’57’s’ belonged, but when they broke into his Los Ange­les apart­ment, it was emp­ty and he was out of the coun­try in hid­ing. Tro­phy hunt­ing has become a fea­ture of the Amer­i­can crim­i­nal jus­tice sys­tem. Taka­hashi was not famous, so he was not a prop­er tro­phy for an ambi­tious U.S. attor­ney.”


14. Because Schlei was inves­ti­gat­ing some of the secrets of World War II Japan­ese Loot, he was tar­get­ed for the sting.

Nor­bert Schlei, on the oth­er hand, was stick­ing his nose into Deep Black secrets, and alarm­ing Tokyo. His high pro­file made him a per­fect tar­get. One year ear­li­er, Schlei had writ­ten a memo about the M‑Fund. It was not meant for gen­er­al cir­cu­la­tion but a copy was passed to U.S. Gov­ern­ment offi­cials, who became alarmed and angry. If they could snare Schlei, all branch­es of the U.S. Gov­ern­ment would coop­er­ate to stop his dig­ging into the M‑Fund, and the LDP lead­er­ship in Tokyo would be indebt­ed.

(Ibid.; pp. 133–134.)

15. “How to snare him was the prob­lem. Schlei had nev­er tried to nego­ti­ate a ‘57’ in Amer­i­ca, only in Japan, on behalf of clients legal­ly enti­tled to have an attor­ney make inquiries. Fur­ther­more, Schlei had nev­er accept­ed a pen­ny from these clients. But Taka­hashi was so impa­tient to sell one of his ’57’s’ that he had tak­en sev­er­al of them back from Schlei and, with­out telling him, turned them over to Roger Hill to mar­ket. It was quite a stretch to argue that Schlei had any­thing to do with the inde­pen­dent mar­ket­ing of the ’57’s’ by Roger Hill. The gov­ern­ment could try to get Schlei indict­ed as a par­ty to the con­spir­a­cy of Ah Loo, Hans­ber­ry, and Hill, because he hap­pened to be Taka­hashi’s attor­ney and was admit­ted­ly try­ing to nego­ti­ate oth­er ’57’s’ in Japan. It would be absurd to assert that Schlei was involved in the Tam­pa trans­ac­tion, but that could be cov­ered by a lit­tle sleight of hand, mis­di­rect­ing the jury so it did not notice. Final­ly, since Schlei freely acknowl­edged that the Japan­ese gov­ern­ment regard­ed the ’57’s’ as coun­ter­feit, it could be argued that he was admit­ted­ly mar­ket­ing cer­tifi­cates he knew to be false. This dodged the cru­cial point, which Schlei stat­ed again and again, that he was con­vinced the Japan­ese gov­ern­ment was lying to avoid pay­ment.” (Ibid.; p. 134.)

16. “In sum, the case against Schlei would depend on a tro­phy-hunt­ing pros­e­cu­tor, a com­pli­ant judge, a mis­di­rect­ed jury, a coor­di­nat­ed effort by Wash­ing­ton to block all Schlei’s efforts at dis­cov­ery, denial by the court of leave for Schlei to take depo­si­tions in Japan, intim­i­da­tion of defense wit­ness­es, and ‘expert’ pros­e­cu­tion wit­ness­es brought in from Japan’s Min­istry of Finance and Dai-Ichi Bank, who seemed to have been coached to be eva­sive and to give false tes­ti­mo­ny.”


17. A mea­sure of the extreme nature of the case against Schlei is the fact that he was­n’t even aware of the case in con­nec­tion with which he was to be indict­ed!

. . . . Aston­ished to be named a par­ty to the Ah Loo deal, of which he was not even aware, Schlei found him­self the sub­ject of Grand Jury pro­ceed­ings in Tam­pa and was indict­ed. Imme­di­ate­ly, clients hold­ing ‘57’s’ scat­tered to avoid being drawn in, or—if cornered—became so fright­ened that they offered to tes­ti­fy against Schlei in return for immu­ni­ty from pros­e­cu­tion. . . .


18. “In court, the pros­e­cu­tion ‘proved’ the cer­tifi­cates were fakes by bring­ing in two minor offi­cials of Japan’s Min­istry of Finance and Dai-Ichi Bank, who had a vest­ed inter­est in stick­ing to this sto­ry. Schlei’s defense coun­tered, ‘Cor­rupt Japan­ese offi­cials were now false­ly claim­ing that these finan­cial instru­ments were not gen­uine.’ How­ev­er, Pro­fes­sor Lausi­er insist­ed they were gen­uine (as quot­ed ear­li­er): ‘The doc­u­ments . . . are so pre­cise­ly in agree­ment in innu­mer­able respects with the offi­cial pub­lished records of the gov­ern­ment of Japan . . . that, in my opin­ion, it is quite impos­si­ble for them, or the Cer­tifi­cates that result­ed from them, to have been the work of any coun­ter­feit­er.’ ”


19. Var­i­ous agen­cies of the Unit­ed States gov­ern­ment, includ­ing the CIA, col­lab­o­rat­ed to block Schlei’s defense from being able to prove the truth.

. . . . To demon­strate col­lu­sion between Tokyo and Wash­ing­ton, the defense attempt­ed to locate any reports or doc­u­ments show­ing covert pay­ments by the U.S. Gov­ern­ment to the gov­ern­ment of Japan or any polit­i­cal par­ty in Japan, from 1945 to the present. As we have seen, this has been con­firmed by a num­ber of sources includ­ing for­mer CIA offi­cials and U.S. diplo­mats. But, fight­ing for his life, Schlei need­ed all the doc­u­men­tary evi­dence avail­able. As a for­mer assis­tant attor­ney gen­er­al of the Unit­ed States, he was cer­tain he would find these doc­u­ments. . . .

(Ibid.; pp. 134–135.)

20. “It was Schlei’s legal right to make such dis­cov­er­ies, but fed­er­al agen­cies flat­ly refused to com­ply. News sto­ries about the M‑Fund and ’57’s’ oblig­ed the court to order the CIA, the Secret Ser­vice, Nation­al Archives, and State Depart­ment to con­duct a search of their data­bas­es. Giv­en the intense secre­cy sur­round­ing the Black Eagle Trust, the 1951 Peace Treaty, the M‑Fund, and the dis­ap­pear­ance of mil­lions of doc­u­ments con­cern­ing Japan, it would have been a great sur­prise if any­thing turned up. The jury was told that ‘search of the records of the CIA, the Secret Ser­vice, and the Nation­al Archives did not dis­close any rel­e­vant or mate­r­i­al doc­u­ments or infor­ma­tion that sub­stan­ti­at­ed . . . that the CIA gave mon­ey to employ­ees or offi­cials of the Japan­ese gov­ern­ment, or any polit­i­cal par­ty in Japan’. The court record says, ‘The gov­ern­ment searched hun­dreds of files of CIA paper records dat­ing back to 1948 for any doc­u­ments that might indi­cate that pay­ments were made by the CIA to either the Japan­ese gov­ern­ment, the Lib­er­al Demo­c­ra­t­ic Par­ty, or indi­vid­ual par­ty mem­bers. They also con­duct­ed com­put­er search­es for Mar­quat Fund. . .[and] the search . . . did not dis­cov­er any rel­e­vant or mate­r­i­al doc­u­ments or infor­ma­tion.’ ”

(Ibid.; p. 135.)

21. “The jury was not told that Act­ing CIA Direc­tor Admi­ral William O. Stude­man had informed The New York Times in March 1995, that CIA was not about to divulge infor­ma­tion on the sub­ject of pay­ola to for­eign gov­ern­ments and politi­cos. Stude­man said the Agency had an oblig­a­tion to ‘keep faith’ with politi­cians who ‘received legal­ly autho­rized covert sup­port from the Unit­ed States.’ This state­ment actu­al­ly con­firms that such pay­ments were made, and mere­ly refus­es to give details. Japan­ese politi­cians bribed with huge sums of mon­ey had to be pro­tect­ed, which was more impor­tant than jus­tice in Amer­i­can courts. Schlei told the court, ‘I fig­ured that if the Iran Con­tra case peo­ple like Ollie North and Admi­ral Poindex­ter and Mr. Mac­Far­lane could be doing things and lying about, then maybe peo­ple in the Japan­ese Gov­ern­ment could be lying about some things, too.’ ”


22. In order to bol­ster its case, the gov­ern­ment sanc­tioned wit­ness tam­per­ing by the pros­e­cu­tion:

. . . . Judge Kovachevich refused Schlei the right to take depo­si­tions in Japan, and brushed aside Schlei’s protests that a key defense wit­ness had been intim­i­dat­ed by the U.S. attor­ney. His attor­neys alleged that the pros­e­cu­tion tam­pered with the wit­ness, S.M. Han who had an immu­ni­ty agree­ment with U.S. attor­ney Mark Krum. Han swore that Krum told him if he tes­ti­fied for the defense, his immu­ni­ty agree­ment would be nul­li­fied. Han also said Krum told him he had ‘bet­ter not give him any basis to with­draw the immu­ni­ty because he would not hes­i­tate to do so’. Wit­ness tam­per­ing is one of the most seri­ous crimes in the U.S. judi­cial sys­tem and is grounds for dis­bar­ment. Judge Kovachevich denied a motion for a new tri­al based on the charge of wit­ness tam­per­ing, and even refused to hold an evi­den­tiary har­ing to deter­mine whether Han’s alle­ga­tions were true. . . .


23. “After six years of per­se­cu­tion, Schlei was con­vict­ed on one felony count of secu­ri­ties fraud, and one mis­de­meanor. Before the tri­al began, he had assets in the neigh­bor­hood of $10-mil­lion. Dur­ing his tri­al, he was unable to prac­tice law, and had enor­mous legal costs. He was pro­fes­sion­al­ly and finan­cial­ly ruined, left vir­tu­al­ly bank­rupt. He esti­mat­ed that the U.S. Gov­ern­ment spent over $45-mil­lion of tax­pay­ers’ mon­ey on the sting and the law­suit.”

(Ibid.; pp. 135–136.)

24. Final­ly, Schlei was able to clear his name:

Schlei appealed, and in Sep­tem­ber 1997, the Eleventh Cir­cuit Court of Appeals reversed and vacat­ed the con­vic­tion on the felony count and the mis­de­meanor, remand­ing the mis­de­meanor to the dis­trict court for a hear­ing on Schlei’s motion for a new tri­al, based on gov­ern­ment intim­i­da­tion of wit­ness­es. The three appeals court judges paid spe­cial atten­tion to the way Kovachevich had han­dled the wit­ness-tam­per­ing issue. In their deci­sion they wrote that the trans­ac­tions lead­ing to the Schlei indict­ment were ‘unusu­al, if not bizarre’. They found Kovachevich’s han­dling of the wit­ness tam­per­ing ‘enig­mat­ic’. They said, ’ We can­not deter­mine whether Schlei was deprived of his right to due process. . . because the [Kovachevich] court did not con­duct an evi­den­tiary hear­ing. . . .Where defen­dants present evi­dence to the dis­trict court that the gov­ern­ment intim­i­dat­ed a defense wit­ness a tri­al court must grant a hear­ing to deter­mine whether the alle­ga­tions of intim­i­da­tion are true.’ (Our ital­ics.)

(Ibid.; p. 136.)

25. “So a case that was con­trived to start with and dragged on for six years, result­ing in Schlei’s com­plete ruin, was over­turned. Still insist­ing on his inno­cence, Schlei asked for a retri­al, but the gov­ern­ment knew he was broke. Near­ly 70, and in no posi­tion to fight indef­i­nite­ly to clear his name, he final­ly agreed not to press his charges of wit­ness tam­per­ing, leav­ing the minor mis­de­meanor charge unre­solved. In Wash­ing­ton to this day he is slan­dered. An emi­nent libel lawyer, who should know bet­ter, recent­ly insist­ed that Schlei’s evi­dence was ‘untrust­wor­thy’ because he was a ‘con­vict­ed felon’. Oth­ers declared Schlei’s unre­solved mis­de­meanor con­vic­tion amount­ed to ‘moral turpi­tude’.”


26. Although he was even­tu­al­ly exon­er­at­ed, Schlei was destroyed finan­cial­ly and professionally—finally suf­fer­ing a debil­i­tat­ing heart attack in the spring of 2002. He died a year lat­er.

It took fur­ther wran­gling with the Cal­i­for­nia bar to have this smear removed from the offi­cial record. In Jan­u­ary 2001, the Cal­i­for­nia Bar Jour­nal announced that Schlei was once again ‘an attor­ney in good stand­ing’. But the harm had been done. In the Spring of 2002, while jog­ging on a Cal­i­for­nia beach, Schlei suf­fered a major heart attack, col­lapsed and hit his head. A home­less man near­by called for help, but Schlei remained in a coma for many months. The last time we saw Schlei, he told us, ‘I now know how and why the jury con­vict­ed me. Until I fig­ured that out, I was a very trou­bled man.’


27. “Oth­er events unfold­ing in Jan­u­ary 1992 may have led direct­ly to Schlei’s per­se­cu­tion. He was not the only tar­get of M‑Fund stings. Also arrest­ed was James P. Sena, a 17-year vet­er­an of the U.S. Secret Ser­vice, the agency that also inves­ti­gates coun­ter­feit­ing for the Trea­sury Depart­ment. Sena had exam­ined M‑Fund finan­cial instru­ments in Amer­i­ca and Japan, where he became con­vinced of the legit­i­ma­cy of the ’57’s’. He decid­ed to sell some him­self. He and Ian York­shire of Great Britain and Fran­cis Che­ung of Hong Kong were all arrest­ed for attempt­ing to mar­ket ’57’s’ with a total face val­ue of $50-bil­lion. Abrupt­ly, and for no appar­ent rea­son, in Novem­ber 1995, the case against them was sud­den­ly dis­missed ‘with prej­u­dice’, mean­ing the charges can­not be re-filed. Nev­er­the­less, pros­e­cu­tors refused to return the ’57’s’ they had con­fis­cat­ed as evi­dence, call­ing them ‘con­tra­band’. If coun­ter­feit, why were they con­tra­band? We were told by a Wall Street source that Trea­sury is eager to get its hands on ’57’s’ and oth­er sup­pos­ed­ly coun­ter­feit deriv­a­tives, to nego­ti­ate them secret­ly.”


28. Con­trast­ing sharply with the treat­ment accord­ed Nor­bert Schlei was the suc­cess­ful nego­ti­a­tion of a “57” by Alexan­der Haig. Haig (an inti­mate of the MacArthur group in the mil­i­tary) nego­ti­at­ed the “57” on behalf of the Paraguayan gov­ern­ment. Piv­otal to the suc­cess of this oper­a­tion is the fact that Haig had a let­ter of rec­om­men­da­tion writ­ten by then Pres­i­dent George H.W. Bush.

 Anoth­er promi­nent Amer­i­can who report­ed­ly became involved in nego­ti­at­ing ‘57’s’ dur­ing the same peri­od was the for­mer Sec­re­tary of State, Gen­er­al Alexan­der Haig. Unlike Schlei, Haig was not arrest­ed or per­se­cut­ed, demon­strat­ing how selec­tive Wash­ing­ton has been in choos­ing its sting tar­gets.

(Ibid.; p. 137.)

29. “Accord­ing to a detailed account we have from some­one present at all the meet­ings, Haig was asked to inter­cede in behalf of Paraguay. The gov­ern­ment of Paraguay had bought a sin­gle ‘57’ with a face val­ue of $500-mil­lion from First Hanover Secu­ri­ties in New York City on Novem­ber 20, 1991, at the very moment the sting of Mrs. Ah Loo was going down. The same day, Paraguay asked MIC Debt Read­just­ment Com­pa­ny to arrange for the Japan­ese gov­ern­ment to redeem this ’57′—not for cash but for cred­it against 40-bil­lion Yen in for­eign aid that Paraguay owed Tokyo. This rep­re­sent­ed 80 per­cent of the face val­ue of the ‘57’, and Tokyo could keep the oth­er 20 per­cent as a dis­count. (MIC is an orga­ni­za­tion backed by the Israeli gov­ern­ment, which nego­ti­ates adjust­ments of nation­al debt for gov­ern­ments in East­ern Europe and South Amer­i­ca.) If suc­cess­ful, MIC was to be giv­en oil explo­ration and devel­op­ment rights on Paraguayan ter­ri­to­ry. After con­sid­er­ing for­mer Sec­re­tary of State Hen­ry Kissinger and for­mer Ambas­sador Mike Mans­field, MIC chose Haig as their nego­tia­tor.”


30. “He was a good choice. Haig knew Japan because in 1947, fresh out of West Point, he had served as an aide to Gen­er­al MacArthur in Tokyo until the gen­er­al’s recall in 1951. As a MacArthur aide, work­ing in a tight cir­cle with men like Whit­ney and Willough­by, Haig doubt­less heard a lot about black oper­a­tions and secret funds set up in Tokyo dur­ing the occu­pa­tion. While in Japan, Haig mar­ried the daugh­ter of Gen­er­al Alon­zo Patrick Fox, MacArthur’s deputy chief of staff. Haig lat­er served Pres­i­dent Nixon on the nation­al secu­ri­ty staff, was White House chief of staff for both Nixon and Ford, and Sec­re­tary of State for Pres­i­dent Rea­gan.”


31. “At a strat­e­gy meet­ing in Mia­mi, attend­ed by our source, MIC and the Paraguayans asked Haig to nego­ti­ate per­son­al­ly with for­mer Japan­ese prime min­is­ter Takeshi­ta, a key man in the M‑Fund and one of the LDP king­mak­ers. After being embar­rassed by bribery scan­dals, includ­ing the Recruit scan­dal involv­ing M‑Fund kick­backs and war loot, Takeshi­ta had been forced to resign as prime min­is­ter two years ear­li­er, in 1989, but he remained pow­er­ful. Haig agreed to meet with Takeshi­ta in Tokyo in Jan­u­ary 1992. He report­ed­ly told the Mia­mi round­table that the ‘57’ should be nego­ti­at­ed ‘under­ground’ as quick­ly as pos­si­ble.”


32. “To learn more about the back­ground of the ‘57’s’ our source said Haig had dis­cus­sions in Wash­ing­ton with the FBI and CIA, much as Schlei had done. One CIA offi­cial explained that Japan had a num­ber of secret funds, includ­ing what he called ‘the MacArthur Fund’, appar­ent­ly refer­ring to the San­wa Bank joint account in the names of MacArthur and Hiro­hi­to, which Japan­ese call the Showa Fund, refer­ring to the reign title of Hiro­hi­to. He also explained how the Japan­ese call the Showa Fund, refer­ring to the reign title of Hiro­hi­to. He also explained how the Japan­ese gov­ern­ment bonds had evolved into the ’57’s’. Our source said Haig also paid a vis­it to the White House, to tell Pres­i­dent Bush of his forth­com­ing meet­ing with Takeshi­ta to nego­ti­ate the ‘57’ for Paraguay. Explain­ing the give-and-take involved, he asked Bush for his sup­port. To ease the way, our source said, Bush gave Haig a per­son­al let­ter to Takeshi­ta.”


33. “Pres­i­dent Bush was on his way to Japan him­self that Jan­u­ary. He was in Tokyo a few days before Haig, a vis­it made famous when Bush vom­it­ed all over Prime Min­is­ter Miyaza­wa.”

(Ibid.; p. 138.)

34. “On Jan­u­ary 13, 1992, Haig was informed that two weeks lat­er he was to be guest of hon­or at a lunch in Toky­o’s Impe­r­i­al Hotel with the LDP Diet com­mit­tee, after which he and Takeshi­ta were to have a pri­vate talk in an adjoin­ing room. MIC said Takeshi­ta would prob­a­bly start by say­ing all ‘57’s’ were coun­ter­feit. Haig had to be pre­pared for this, and ready to say two or three things that would jolt Takeshi­ta. He asked MIC to choose the three most impres­sive sup­port­ing doc­u­ments to show Takeshi­ta. One of these was an insur­ance pol­i­cy issued by Yasu­da Fire Insur­ance Com­pa­ny in Tokyo to cov­er trans­port­ing the cer­tifi­cate from the Min­istry of Finance. This alone estab­lished the authen­tic­i­ty of the ‘57’. MIC briefed Haig in detail about the sig­nif­i­cance of these sup­port­ing doc­u­ments, and reviewed the dif­fer­ences between ’57’s’ and ordi­nary Japan­ese gov­ern­ment bonds.”


35. “Short­ly before the meet­ing in Tokyo on the 27th, Haig was told that Takeshi­ta had been acute­ly embar­rassed by a recent series of major scan­dals, so what the LDP leader hoped to get from Haig was a promise to stop Japan-Bash­ing in Amer­i­ca. If Takeshi­ta could come out of their meet­ing with such an assur­ance, he might sur­vive the scan­dals and resume pow­er.”


36. “When the two men sat down pri­vate­ly at 2:40 p.m., our source said Takeshi­ta opened as pre­dict­ed, ask­ing Haig to get U.S. com­pa­nies and politi­cians to stop Japan-Bash­ing. Haig replied pos­i­tive­ly, hand­ing Takeshi­ta the per­son­al let­ter from Pres­i­dent Bush. Takeshi­ta then said that any agree­ment on set­tling Paraguay’s debt to Japan would have to include Japan­ese par­tic­i­pa­tion in devel­op­ing oil­fields in that coun­try. With that on the table, Haig explained that one of the main rea­sons for his vis­it to Tokyo was to get Takeshi­ta’s assur­ance that Paraguay’s ‘57’ would be cred­it­ed against its for­eign aid debt. He showed Takeshi­ta the ‘57’ that Paraguay had pur­chased from Hanover.”


37. “Takeshi­ta glanced at the doc­u­ment and said, ‘Mr. Haig, this paper is a forgery print­ed in Hong Kong.’ ‘Then,’ Haig said, ‘please take a look at these doc­u­ments.’ He hand­ed Takeshi­ta the Yasu­da insur­ance cov­er doc­u­ment, and the two oth­ers. Read­ing each doc­u­ment in turn, ‘Takeshi­ta’s face turned pale and his voice faint.’ ‘Mr. Haig,’
he said, ‘it seems to include a very del­i­cate prob­lem for the set­tle­ment.’ ‘Yes,’ said Haig. ‘I agree. It’s del­i­cate.’ I can­not give you an imme­di­ate reply . . .’ ”


38. “The meet­ing end­ed, and min­utes lat­er, Haig report­ed all this to the MIC group in his suite. He said it was only when he saw Takeshi­ta recoil in shock at sight of the insur­ance cov­er that he real­ized how seri­ous was the secre­cy sur­round­ing the ’57’s’. Our source said Haig turned angri­ly to the Paraguayans and said, ‘You’re mak­ing me black­mail him!’ Then he grinned and said, ‘That first mis­sile hit the tar­get!’ He warned the Paraguayans and Israelis to be very care­ful about their per­son­al safe­ty while they were in Japan, because Takeshi­ta was not hap­py, and he would cer­tain­ly alert Japan’s secret ser­vice.”


39. “Next day, our source said Takeshi­ta’s per­son­al sec­re­tary came to see Haig. Insist­ing on talk­ing in the hall­way where they could not be mon­i­tored, he said: ‘Mr. Haig, the cer­tifi­cate and doc­u­ments are not for­mal. So our gov­ern­ment can­not repur­chase it.’ Haig squint­ed at him and said, ‘So we can make it pub­lic?’ Takeshi­ta’s sec­re­tary turned pale. He said he would speak again to Takeshi­ta. The sec­ond mis­sile also hit home. The fol­low­ing morn­ing Takeshi­ta’s sec­re­tary came again. ‘As for the prob­lem of the cer­tifi­cate, many inquiries are com­ing to Our Min­istry of Finance local­ly and over­seas, and the admin­is­tra­tion is great­ly per­plexed.’ He paused. ‘We are ready to take cer­tain mea­sures on the cer­tifi­cate in ques­tion. You must treat this nego­ti­a­tion as strict­ly con­fi­den­tial. If a sim­i­lar demand is made by anoth­er gov­ern­ment, our admin­is­tra­tion would suf­fer because we are not pre­pared for it finan­cial­ly.’ ”

(Ibid.; p. 139.)

40. “In short, Haig had suc­ceed­ed, and the deal went down. But how could Haig nego­ti­ate a ‘57’ in Mia­mi, Wash­ing­ton, and Tokyo, with dis­cus­sions at the FBI, CIA and with Pres­i­dent Bush in the White House, with­out being arrest­ed and pros­e­cut­ed like Nor­bert Schlei? Fed­er­al agents always insist­ed it was ille­gal to nego­ti­ate one inside Amer­i­ca, or even to con­tem­plate it.”


41. Haig’s suc­cess­ful nego­ti­a­tion of the Paraguayan “57” may have been part of a quid pro quo involv­ing the per­se­cu­tion of Nor­bert Schlei. Schlei may have been neu­tral­ized as part of a deal by the Japan­ese in order to abate “Japan-Bash­ing.”

If all ‘57’s’ are coun­ter­feit, why did Haig suc­ceed? If Haig’s ‘57’ was gen­uine, did he still do some­thing ille­gal? Does the legit­i­ma­cy of a Japan­ese debt instru­ment depend on your con­nec­tions to the cur­rent occu­pant of the White House? Nor­bert Schlei was drawn into the sting soon after Haig’s Tokyo nego­ti­a­tion con­clud­ed. One of Takeshi­ta’s con­di­tions about end­ing Japan-Bash­ing may have been that Schlei, who was ask­ing so many embar­rass­ing ques­tions, must be silenced and removed from the field of play. If so, Haig cer­tain­ly would have report­ed this to Pres­i­dent Bush, which could explain why Schlei was then dragged into the Ah Loo case.


42. “There is a les­son here for investors. Finan­cial instru­ments grow­ing out of the Black Eagle Trust con­tin­ue to float around the glob­al mar­ket, like mag­net mines left over from World War II that can blow up and sink any insti­tu­tion or indi­vid­ual that comes in con­tact with them. If some cer­tifi­cates are coun­ter­feit while oth­ers are legit­i­mate, investors and their attor­neys have a right to inquire, with­out fear of arrest or intim­i­da­tion, whether the doc­u­ments they hold are real or fake, and not to be brushed off with false­hoods. Espe­cial­ly when the issu­ing gov­ern­ment has a his­to­ry of eva­sive­ness, and is strong­ly sus­pect­ed of lying. When Wash­ing­ton demon­strates that it has a greater sense of respon­si­bil­i­ty to cor­rupt for­eign politi­cians than it does to its own cit­i­zens, we may right­ly ask whom it real­ly is pro­tect­ing. Wash­ing­ton’s main con­cern has been to pro­tect and pre­serve a sys­tem of secret finan­cial col­lu­sion with Japan, which has worked to its sat­is­fac­tion for over half a cen­tu­ry. And to pro­tect the careers and rep­u­ta­tions of U.S. Gov­ern­ment offi­cials involved in that col­lu­sion. In the end, how many bil­lions went to Japan­ese politi­cians is less impor­tant than how much went into to pock­ets of Amer­i­can offi­cials. As pow­er cor­rupts, secret pow­er cor­rupts secret­ly.”


43. Next, the pro­gram reviews the for­ma­tion of the Mar­quat or “M‑Fund”, used to manip­u­late and con­trol the post­war Japan­ese polit­i­cal land­scape. (The “57’s” were deriv­a­tives of the M‑Fund.) In par­tic­u­lar, the M‑Fund was used to shore up the Japan­ese oli­garchs who had direct­ed and prof­it­ed from Japan’s bru­tal war of aggres­sion and to sta­bi­lize the post­war Japan­ese econ­o­my. What made the “57’s” such a sen­si­tive inter­na­tion­al issue con­cerns the dark his­to­ry sur­round­ing the fund. It is because of this dark his­to­ry that Nor­bert Schlei was destroyed.

In this con­text of intense cor­rup­tion and art­ful mis­rep­re­sen­ta­tion, it was inevitable that the polit­i­cal action funds Amer­i­ca set up in Japan would be divert­ed. But the cor­rup­tion, dis­hon­esty, and moral turpi­tude can­not be blamed only on the Japan­ese. Amer­i­cans were involved in divert­ing the funds, ben­e­fit­ed from their abuse, and may still be ben­e­fit­ing today in a mul­ti­tude of ways.

(Ibid.; p. 109.)

44. “Three under­ground funds were con­trolled by Amer­i­can offi­cials dur­ing the occupation—the M‑Fund, the Yot­suya Fund and the Keenan Fund. Accord­ing to Takano Hajime, the M‑Fund was named after Gen­er­al William Fred­er­ic Mar­quat, chief of SCAP’s Eco­nom­ic and Sci­en­tif­ic Sec­tion. In the­o­ry, Mar­quat head­ed Amer­i­ca’s pro­gram to pun­ish and reform Japan­ese busi­ness­es that had gorged on war prof­i­teer­ing. In real­i­ty, Mar­quat’s biggest pub­lic rela­tions headache was how to help them con­ceal these obscene prof­its, which by cus­tom were shared with the impe­r­i­al fam­i­ly. His­to­ri­an John Dow­er explains that Mar­quat ‘assumed respon­si­bil­i­ty for noth­ing less than super­vis­ing all devel­op­ments in finance, eco­nom­ics, labor, and sci­ence, includ­ing the dis­so­lu­tion of zaibat­su hold­ing com­pa­nies and the pro­mo­tion of eco­nom­ic decon­cen­tra­tion. Every major gov­ern­ment finan­cial and eco­nom­ic insti­tu­tion report­ed to his sec­tion, includ­ing the Min­istry of Finance, the Min­istry of Com­merce and Indus­try, and the Bank of Japan.’ ”


45. “Lit­tle has been writ­ten about Mar­quat, who usu­al­ly is por­trayed as an ami­able nin­com­poop, unfit for the job. This hard­ly comes as a sur­prise. Like Willough­by and Whit­ney, Mar­quat was one of MacArthur’s inner-cir­cle ‘The Bataan Boys,’ whose chief qual­i­ty was undy­ing loy­al­ty. John Gun­ther said Mar­quat ‘pays lit­tle atten­tion to the jar­gon of his present field; once he . . . turned to his first assis­tant dur­ing a heavy con­fer­ence on eco­nom­ic affairs, say­ing ‘What is mar­gin­al econ­o­my, any­way?’ ”


46. “Mar­quat was sup­posed to dis­solve the banks and con­glom­er­ates that financed Japan’s war and prof­it­ed from it. Despite pure­ly cos­met­ic changes and the break-up and sale of sev­er­al small con­glom­er­ates, the biggest war prof­i­teers were let off with­out even a slap on the wrist. Gen­er­al Mar­quat was also in charge of clos­ing down and pun­ish­ing Japan’s bio­log­i­cal and chem­i­cal war­fare ser­vice, Unit 731. Instead, the U.S. Gov­ern­ment secret­ly absorbed Unit 731, mov­ing most of its sci­en­tists, per­son­nel, and doc­u­ments to U.S. mil­i­tary research cen­ters like Fort Diet­rick in the Mary­land coun­try­side. All infor­ma­tion about its activ­i­ties, includ­ing bio­log­i­cal war­fare atroc­i­ties, and hor­rif­ic exper­i­ments on ful­ly con­scious vic­tims, was with­held by Wash­ing­ton from the Amer­i­can and Japan­ese pub­lic, and from the Tokyo War Crimes Tri­bunals. All Unit 731’s records held by the U.S. Gov­ern­ment are still top secret.”

(Ibid.; p. 110.)

47. “So while he was sup­posed to be mak­ing Japan more demo­c­ra­t­ic, Mar­quat was doing the oppo­site. The M‑Fund was cre­at­ed to buy elec­tions for Japan­ese politi­cians so far to the right that they were solid­ly anti-com­mu­nist. Japan was the most high­ly indus­tri­al­ized coun­try in Asia; Wash­ing­ton want­ed it to be a cap­i­tal­ist bas­tion against com­mu­nism, for its econ­o­my to thrive so there would be no need for labor unions, left­ist orga­niz­ers, or rev­o­lu­tion. This was the view of Amer­i­can con­ser­v­a­tives who thought Pres­i­dent Roo­sevelt was a com­mu­nist, and believed that Britain should have allied itself with Ger­many and Japan, and gone to war against the USSR. As a con­se­quence of this think­ing, plans to reform Japan were trun­cat­ed or abort­ed. (One major excep­tion was land reform, suc­cess­ful­ly com­plet­ed before it could be halt­ed.)”


48. Shoring up Japan as an anti-com­mu­nist bul­wark was the over­all goal of the appli­ca­tion of the M‑Fund. Again, in order to do this, the very fas­cists and oli­garchs most respon­si­ble for Japan’s war of aggres­sion were returned to pow­er and poten­tial oppo­nents and dis­si­dents neu­tral­ized, often vio­lent­ly.

The first big appli­ca­tion of the M‑Fund was in the late 1940’s when a Social­ist gov­ern­ment hap­pened to win elec­tion in Japan—a devel­op­ment that aston­ished, pan­icked, and gal­va­nized SCAP. Imme­di­ate­ly, great sums were dis­trib­uted by SCAP to dis­cred­it the Social­ist cab­i­net, and to replace it with a regime more to Wash­ing­ton’s lik­ing. Lat­er, when Tokyo con­sid­ered estab­lish­ing rela­tions with the Peo­ple’s Repub­lic of Chi­na, sums again were dis­bursed to get Japan back on the right track. When Yoshi­da Shigeru became prime min­is­ter, Wash­ing­ton relaxed because Yoshi­da was trust­ed, con­ser­v­a­tive, and per­son­al­ly very rich. Dur­ing his peri­od as prime min­is­ter, the M‑Fund was called the Yoshi­da Fund. (In a con­ver­sa­tion in 1987, White House nation­al secu­ri­ty advi­sor Richard Allen said: ‘All my life I’ve heard of a thing called the Yoshi­da Fund—I think that’s the same thing as the M‑Fund.’)


49. One of the resources com­bined with the M‑Fund was the enor­mous cache of war loot acquired by Kodama Yoshio (also known as Yoshio Kodama), a Japan­ese under­world king­pin who became a pri­ma­ry func­tionary in the Japan­ese Empire and the post­war Japan­ese pow­er polit­i­cal stage. Kodama worked very close­ly with the CIA and became one of the ear­ly prime-movers with­in the Uni­fi­ca­tion Church. (Note that the Uni­fi­ca­tion Church has a close con­nec­tion with George Bush Sr. and Jr.)

Anoth­er great for­tune dis­cov­ered by U.S. intel­li­gence ser­vices in 1946 was $13-bil­lion in war loot amassed by under­world god­fa­ther Kodama Yoshio who, as a ‘rear admi­ral’ in the Impe­r­i­al Navy work­ing with Gold­en Lily in Chi­na and South­east Asia, was in charge of plun­der­ing the Asian under­world and rack­e­teers. He was also in charge of Japan’s wartime drug trade through­out Asia. After the war to get out of Sug­amo Prison and avoid pros­e­cu­tion for war crimes, Kodama gave $100-mil­lion to the CIA, which was added to the M‑Fund’s cof­fers. Kodama then per­son­al­ly financed the cre­ation of the two polit­i­cal par­ties that merged into Japan’s rul­ing Lib­er­al Demo­c­ra­t­ic Par­ty (LDP), strong­ly backed to this day by Wash­ing­ton.

(Ibid.; p. 8.)

50. Kodama was on excel­lent terms with Emper­or Hiro­hi­to, who assist­ed with the acqui­si­tion of the $13-bil­lion fund Kodama even­tu­al­ly com­bined with the M‑Fund. Kodama was the king­pin of the Japan­ese drug trade dur­ing, and after, World War II. The drug trade was one of the pri­ma­ry sources of Kodama’s largesse. The infor­ma­tion about Kodama is being reviewed here in order to present the listener/reader with some per­spec­tive on the deep pol­i­tics under­ly­ing the M‑Fund and the “57’s”. It is the deep pol­i­tics that make dis­clo­sures con­cern­ing the M‑Fund so sen­si­tive.

Anoth­er source of under­ground funds was Kodama, who was report­ed to have amassed some $13-bil­lion in war loot for his per­son­al use. This includ­ed two truck-loads of dia­monds, gold bars, plat­inum ingots, radi­um, cop­per, and oth­er vital mate­ri­als. In order to cur­ry favor with MacArthur’s men, Skukan Bun­shun said at war’s end ‘Kodama had a good por­tion of [his] valu­ables trans­port­ed to the vault of the Impe­r­i­al Fam­i­ly in the Impe­r­i­al Palace.’ Despite his life­long involve­ment in mur­der, kid­nap­ping, drugs and extor­tion, Kodama is said to have been regard­ed by Emper­or Hiro­hi­to as a true patri­ot, pos­si­bly because of the great sums he gen­er­at­ed for Gold­en Lily. This may explain why Japan’s top gang­ster was per­mit­ted to hide some of his loot in palace vaults. But it goes deep­er to include nar­cotics.

(Ibid.; p. 108.)

51. “In the spring of 1945, Kodama made a quick trip to Tai­wan to see that its many hero­in fac­to­ries were dis­man­tled for return to Japan, along with remain­ing stocks of hero­in and mor­phine. On his return, Kodama was assigned to be a spe­cial advi­sor to the emper­or’s uncle, Prince Higashiku­ni, who served as Japan’s prime min­is­ter briefly at the start of the U.S. occu­pa­tion. Accord­ing to Kodama’s own mem­oir, imme­di­ate­ly after the sur­ren­der, Higashiku­ni had ‘two or three of us coun­cilors arrange a meet­ing and secret­ly, unknown to his cab­i­net min­is­ters, [Higashiku­ni] vis­it­ed Gen­er­al MacArthur in Yoko­hama.’ Kodama pro­vides no details of what tran­spired at this meet­ing, or whether he accom­pa­nied the prince.”


52. Kodama worked very close­ly with the CIA.

Kodama then spent two years in Sug­amo Prison as an indict­ed war crim­i­nal, but was mag­i­cal­ly released in mid-1948 when he made a deal with Gen­er­al Willough­by to give the CIA $100-mil­lion (equal to $1‑billion in today’s val­ues.) This pay­ment bought Kodama his free­dom from prison and from any pros­e­cu­tion for war crimes. The mon­ey was placed in one of the secret slush funds con­trolled by the CIA sta­tion at the U.S. Embassy. Sub­se­quent­ly, Kodama was put direct­ly on the CIA pay­roll, where he remained for many years, until his death in 1984. Tad Szulc of The New York Times wrote, ‘Kodama had a work­ing rela­tion­ship with the CIA.’ Chalmers John­son said Kodama was ‘prob­a­bly the CIA’s chief asset in Japan.’


53. “While lit­er­al­ly an employ­ee of the U.S. Gov­ern­ment, Kodama con­tin­ued to over­see Japan’s post­war drug trade. Hero­in labs were moved back not only from Tai­wan, but from North Chi­na, Manchuria and Korea. Chi­nese who had col­lab­o­rat­ed with Japan in drug pro­cess­ing and dis­tri­b­u­tion, were giv­en sanc­tu­ary and began oper­at­ing from Japan­ese soil. Two of the three major play­ers in Asian nar­cotics soon died: Nation­al­ist Chi­na’s gen­er­al Tai Li was assas­si­nat­ed in a 1946 plane crash; Shang­hai god­fa­ther Tu Yueh-sheng died in Hong Kong of nat­ur­al caus­es in 1951. Kodama was left Asi­a’s top druglo­rd, while on the U.S. pay­roll. This could have been embar­rass­ing, for Japan’s dom­i­nant role in nar­cotics was wide­ly known and undis­put­ed, but a Cold War hush descend­ed over it like an Arc­tic white­out. Dur­ing the occu­pa­tion, U.S. pro­pa­gan­da char­ac­ter­ized Asi­a’s drug trade as exclu­sive­ly the enter­prise of left­ists and com­mu­nist agents. In truth it was dom­i­nat­ed by Kodama in Japan, and by Gen­er­alis­si­mo Chi­ang through the KMT opi­um armies based in the Gold­en Tri­an­gle, who were under the direct con­trol of the Gen­er­alis­si­mo’s son, Chi­ang Ching-kuo, the KMT chief of mil­i­tary intel­li­gence at that time. (The two top KMT opi­um war­lords in the Gold­en Tri­an­gle, Gen­er­al Tuan and Gen­er­al Li spoke to us open­ly of this.)”

(Ibid.; pp. 108–109.)

54. This descrip­tion con­cludes with an excerpt­ing of the obit­u­ary of Nor­bert Schlei. (Note that this obit­u­ary opened the orig­i­nal broad­cast itself.) After exam­in­ing the M‑Fund and the sor­did his­to­ry of the “57’s”, we can achieve a greater under­stand­ing of the forces that destroyed him and why they did so.

Nor­bert A. Schlei, a key lawyer in the Kennedy and John­son admin­is­tra­tions who found legal under­pin­ning for the 1962 block­ade of Cuba, wrote land­mark civ­il rights leg­is­la­tion and once waged a strong bid to replace an entrenched Repub­li­can Cal­i­for­nia sec­re­tary of state, has died. He was 73. . . . Schlei, a per­son­able Demo­c­ra­t­ic cam­paign­er, was only yards from Robert Kennedy at Los Ange­les’ Ambas­sador Hotel when Kennedy was fatal­ly shot on the night of the Cal­i­for­nia pri­ma­ry in 1968. He large­ly bowed out of pol­i­tics after serv­ing as a del­e­gate to the Demo­c­ra­t­ic Nation­al Con­ven­tion that year in Chica­go. . .

(“Nor­bert Schlei, 73: Prin­ci­pal Author of the Civ­il Rights Act, Oth­er Land­mark Laws” by Myr­na Oliv­er; The Los Ange­les Times; 4/21/2003; p. B9.)

55. ” . . . Joan Schlei said Sat­ur­day that Schlei had been com­plete­ly exon­er­at­ed after fed­er­al pros­e­cu­tors con­ced­ed that there was a ‘pos­si­bil­i­ty the instru­ments are valid’ and that Schlei had been wrong­ly pros­e­cut­ed. Schlei main­tained all along that he had done noth­ing ille­gal, and that pros­e­cu­tors who issued charges against the oth­ers after a sting oper­a­tion had added him only because of his high pro­file in Demo­c­ra­t­ic and gov­ern­ment cir­cles to ‘get in the papers’ and make the tri­al ‘news­wor­thy.’ ”


56. “At issue were bonds the Japan­ese gov­ern­ment claimed were coun­ter­feit and cre­at­ed by a forg­er they impris­oned in 1983. Schlei coun­tered that the secu­ri­ties were legit­i­mate, that they had been issued in 1983. Schlei coun­tered that the secu­ri­ties were legit­i­mate, that they had been issued in 1983 by Japan’s min­is­ter of finance, Michio Watan­abe, at the request of for­mer Prime Min­is­ter Kakuei Tana­ka after Tana­ka left office in a bribery scan­dal. Schlei said he had nev­er sold the secu­ri­ties and had sim­ply tried to help about 30 clients pur­chase them with the under­stand­ing that the secu­ri­ties would be redeemable only if they could per­suade a cur­rent Japan­ese gov­ern­ment to hon­or them.”



2 comments for “FTR #501 Norbert Schlei and the Strange Case of the “57’s””

  1. So, are the 57’s J.Bonds are REAL ? Can be redeemed ? Are the belong to any descen­dent of the Roy­al fam­i­ly ( Hiro­hit­to ) ?

    I appre­ci­ate your answer.

    Posted by Olivia Savu | November 7, 2013, 9:18 pm
  2. Posted by morlock | December 12, 2014, 3:38 pm

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