Chapter Thirty-three

The World's Most Expensive Glass of Sherry

Millions of senior citizens live alone. Often desperate for companionship, they are prone to manipulation by younger people who pretend to show interest in them. They also are easily intimidated or frightened. Some are in the early stages of senility, no longer able to make wise decisions about money, yet unprotected by a financial guardian. Others have clouded judgment because of illness or the recent death of a spouse. They may have substantial assets in the form of their life savings in stocks or bonds. They also may own their homes or other property, which can be borrowed against or even sold outright. They are thus ripe for the pickings, as LaRouche's followers perceived.

Anne Cresson, seventy-seven, of Princeton, New Jersey, was living alone when contacted in 1985. Her husband was in a nursing home with Alzheimer's, and her son lived in California. She was not wealthy, but from time to time she had donated to the Republican Party and various conservative causes. This put her on the New Right's fundraising lists. The LaRouchians obtained her name from one of these lists and called her. They said they were patriots fighting for Ronald Reagan's policies. They asked her if she would like to personally help the President of the United States. They didn't ask her to donate money. Instead, they asked her if she had any property that could be used as collateral for loans.

Mrs. Cresson told them she owned a coin collection appraised at $75,000. A LaRouche fundraiser offered to pay her 12 percent interest for the use of it as loan collateral—seemingly a generous offer given the low loan-to-value ratio on coin collections. Mrs. Cresson consented, and a man from the LaRouche organization came to her house and picked up the coins. He gave her an unsecured promissory note—a printed form on the letterhead of Caucus Distributors. The address on the letterhead was the former NCLC headquarters on West Fifty-eighth Street in Manhattan, which by this time was an empty building slated for demolition. (The LaRouche organization had moved out several months earlier.)

Mrs. Cresson had second thoughts the next day. She called LaRouche fundraiser Joyce Rubinstein and asked that the coin collection be returned. Mrs. Rubinstein refused, saying the coins had been sent to Chicago for appraisal, but offered to visit Mrs. Cresson to discuss the matter further. Mrs. Cresson happened to speak to her son on the phone that day and told him the story. He called the Princeton police. They arrested Mrs. Rubinstein at Mrs. Cresson's home. She was charged with theft by deception and held at the police station. It was one of the rare occasions when someone took a tough line with the LaRouchians. Several hours later, Mrs. Rubinstein's comrades meekly returned the coin collection to Mrs. Cresson.

Not all schemes had such happy endings for the intended targets. Margaret Beynen, eighty-three, of Berkeley, California, suffered more than a year of trauma to get back a portion of her money. LaRouche fundraisers began calling her in late 1985. They told her America's banking system was about to collapse. Her money would be safer if she lent it to them, and they would pay 10 percent interest. The loan would be used to fight drugs, which otherwise would destroy America. Then began the subtle intimidation: "Through long and frequent telephone calls," Mrs. Beynen later told the court, the LaRouchians "probed deeply" into her personal and financial affairs, pressuring her for money. Over a two-month period she made four loans to them totaling $60,000—a substantial portion of her life savings. They sent Federal Express couriers to pick up the checks.

Next, the LaRouchians began urging her to convert the loans into gifts. When she refused, they called her a selfish old woman. Interest payments on the loans, which had been intermittent, ceased altogether. In May 1986 she received a form letter from Caucus Distributors, Inc. (CDI), asking all its lenders to extend or forgive their loans. "If you have not been repaid according to schedule," the letter said, "you may be angry. You have a right to be angry." However, the letter suggested the anger should be directed at the Justice Department, the Eastern Establishment, and the drug lobbyists, who had launched "financial warfare" against LaRouche and CDI. The letter also warned about certain liars who were going around saying that "LaRouche preys on old people," and urged any lender contacted by such a person to alert CDI immediately.

Mrs. Beynen wrote to CDI requesting the interest due on her loan. Weeks passed before she received a brief reply: "We are winning the war—stay with us." But still no money came. In August she sent another letter. This time there was no reply at all. Mrs. Beynen realized that she might never see her money again and that she had jeopardized the financial security of her only heir, her blind and diabetic son.

A San Francisco attorney, Dan Bookin, was willing to take Mrs. Beynen's case pro bono, and filed a racketeering suit on her behalf in federal court. Mrs. Beynen eventually obtained a court order to seize the assets of two LaRouche front groups.

Thousands of elderly people have not been so lucky. Most cannot obtain free legal counsel, and even those who can afford a lawyer at the going rate are often too frightened, confused, or embarrassed to sue. Many are in such poor health that even if they did take legal action they probably would not live to see the suit and the collection process through to the end.

The amount of personal trauma has been enormous. As of mid-1987 Virginia state investigators listed 4,500 questionable LaRouchian loan transactions totaling $30 million in all fifty states and twelve foreign countries. Of the 3,000 victims in these transactions, about 75 percent are senior citizens, Virginia Commonwealth attorney Mary Sue Terry told CBS-TV: "We don't know of a single instance in which the terms of a note have been met in full by one of the entities that borrowed the money." (Federal investigators believe that the total amount bilked from the public may be much higher than $30 million.)

Occasionally a LaRouchian fund-raiser hits the jackpot with a genuinely wealthy senior citizen. In 1986 the NCNB National Bank of Florida, trustee for eighty-year-old retired steel executive Charles Zimmerman, sued the LaRouchians to recover $2.6 million. Zimmerman had been induced to loan cash to the Fusion Energy Foundation and Caucus Distributors, transfer stock to the FEF, and purchase a limited partnership in a Maryland radio station controlled by the LaRouchians.

Some victims were disoriented by painful illnesses. Norman Flaningam, seventy-four, a Washington attorney dying of cancer, had turned over more than $100,000. In return, the LaRouchians gave him free copies of EIR special reports and a box of chocolates on St. Valentine's Day, with a handwritten note "to a wonderful patriot." His daughter recalled coming into his room near the end and finding him in a distraught state, begging the LaRouchians on the telephone to return his money.

Carl Swanson, sixty-one, a stroke victim, was taken for $7,000 in credit-card charges. His wife and son told the Baltimore Sun how he had received calls from LaRouchian fundraiser Rochelle Ascher every five or ten minutes for hours at a time. His wife first learned about it when she discovered him "crying and trembling" on the phone. She picked up the receiver and heard Ascher tell him it was "his patriotic duty" to give money. Mrs. Swanson told Ascher not to call again, but Ascher persisted, disguising her voice and giving false names.

Elizabeth Rose, an eighty-four-year-old widow who lived alone in a Pennsylvania retirement village, was relieved of over $1 million, mostly in stocks. Her daughter, Nancy Day, explains that Mrs. Rose had made large contributions to Ronald Reagan's 1984 reelection campaign. In February 1986 the LaRouchians contacted her, saying they had obtained her name from a fundraising list. They told her about the drug menace, the AIDS menace, the Soviet menace, and the various plots against Lyndon LaRouche's life. Soon they were at her doorstep with videotapes of LaRouche's speeches. Cautiously at first, they induced her to donate money via her credit card, a thousand or two thousand dollars at a time. Don't tell your children, they warned her. Your children don't care about you, they just want to put you on a shelf. "It all happened very fast, in less than a month," said Mrs. Day. "They opened my mother up like a flower."

When the LaRouchians learned that Mrs. Rose was a major stockholder in Church & Dwight (the manufacturers of Arm & Hammer baking soda), they induced her to turn over 92,000 shares that had been passed down in the family for generations. Her daughters found out and intervened. Although the LaRouchians had sold much of the stock as soon as they received it, the family was eventually able to retrieve about a third. "My mother clearly didn't know what she was doing," says Mrs. Day. "In the middle of all this I was talking to her, right in her bedroom. She said, 'All my stock belongs to you kids.’ She was not aware she had given it away."

When Mrs. Day and her two sisters went to court in Bucks County, Pennsylvania, to seek a guardian for their mother, the LaRouche organization urged Mrs. Rose to fight them. When the court case began, her behavior became increasingly erratic. "Some days I was a friend, other days the enemy," says her daughter. "She told me the LaRouchians had promised to send her to the moon and that she hoped to be the first grandmother on Mars," The LaRouchians introduced Mrs. Rose to a nationwide telephone support network of elderly LaRouche followers, all of whom were in conflict with their children regarding donations to LaRouche, "When the trial began, she got calls from old people as far away as Alaska," said her daughter. Mrs. Rose's attorneys called as their expert Dr. Judianne Densen-Gerber, the former Odyssey House director who had spoken at LaRouchian anti-drug rallies. She testified that Mrs. Rose was perfectly able to conduct her own affairs. The judge was unconvinced, especially after Mrs. Rose told the court her views on the Rockefeller family and dope dealing. He ruled that Mrs. Rose had been the victim of "designing persons" and appointed her daughters as guardians of her financial affairs.

The LaRouchians then sent Mrs. Rose on a tour of Italy, presenting her to the media as a victim of an American "reign of terror" against the elderly. NCLC literature described how happy she fell to give money to LaRouche. New Solidarity made her into a heroine with headlines like "Elizabeth Rose Inspires Audiences" and "Patriotic 84-Year-Old Begins Tour for Seniors' Rights."

Back from Italy, Mrs. Rose began her political career in earnest. She went to cadre school once a week, and counseled other elderly LaRouche contributors by phone. She testified before LaRouche's fact-finding commission set up to prove that he and other indicted members of the NCLC were victims of a political witchhunt. She went to a "thank you" reception in Leesburg where elderly donors were served sherry and allowed to chat briefly with LaRouche. Prosecutors in the loan fraud cases say that LaRouche's mansion serves "the world's most expensive glass of sherry."

"My mother used to have a great sense of humor," said Mrs. Day, "but she hasn't laughed since she met those people. They've filled her with hate. They told her we only want her money." In effect, the LaRouchians had become her mother's "surrogate children." Seducing her first with flowers and attention, they had offered her an illusory sense of personal fulfillment as an "organizer" of other vulnerable senior citizens. "They'd suck out her eyeballs if they could," Mrs. Day said.

NCLC defector Charles Tate, a federal witness in the Boston case, said the treatment of Mrs. Rose, Mrs. Beynen, and other senior citizens reflects an increasing recklessness within the LaRouche organization, Tate recalls the first months of the big fund-raising push in 1984. "It was crystal clear to every single member...that the organization would never be able to pay back [the] gargantuan amounts of loans...." he said. "And quite frankly, nobody really cared."

Internal NCLC memos seized by federal authorities in their October 1986 raid on LaRouche's headquarters reveal the predatory mentality of the fundraisers. A May 1986 memo described how a Louisiana oil worker took out a $90,000 mortgage on his home and lent the organization over $100,000 during a period when three LaRouche fundraisers were courting him. But he started asking for his money back because of the influence of his girlfriend (described as a "raving witch"). The memo examined ways to avoid full repayment. "If we are going to offer him a schedule which we can't keep," it suggested, "we might just as well call his bluff now and get it over with." It also speculated that it might be best to pay him $2,000 a week for several weeks just to cool him off.

The memos dealt with what were called "hardship" cases, such as a man in Alaska who "lent us his life savings and is dependent on us to a high degree," or the elderly woman "who did everything, including selling her house," and thus had "no means of support except our beneficence." In the Orwellian semantics of the NCLC, these victims were transformed into welfare loafers who should be grateful to the LaRouchians for grudgingly returning a tiny fraction of their money. Often there was a steely insensitivity to their plight. One woman who lent $60,000 was ridiculed as "the famous hardship case...going crazy as usual." A man who lent $17,000 and was having his wages garnished by the IRS was described as "going bananas." One destitute lender was said to have "nowhere to go besides us to cover living expenses and the mortgage on his house....He's hysterical." Another was called a "psycho" and a "troublemaker" because she demanded her money back.

Meanwhile, the massive sums raised were being used to build up LaRouche's real estate and other commercial holdings in Leesburg. The organization spent millions of dollars on industrial lots, a summer camp, a radio station, a weekly newspaper, and a 4,550-acre paramilitary training facility in the Blue Ridge Mountains as the bulk of the NCLC national staff of about two hundred people moved into Loudoun County in 1984-85, When Lyn and Helga decided they needed a larger estate, the organization persuaded David Nick Anderson, an Oklahoma oilman, to put up $400,000 and finance $900,000 for the purchase of Ibykus Farm, a 171-acre estate with a fourteen-room manor house. Three LaRouche fundraising entities then kicked in almost $1 million for improvements, which included a swimming pool, riding ring, horse barn, and landscaping.

But the LaRouchians, with all their aspirations to public influence and eventual mass leadership, were unable to win many minds and hearts in Loudoun County. At first they provided jobs for local residents, but the paychecks soon began to bounce and many employees quit. Hundreds of checks to contractors and merchants also bounced. Although a few local ultraconservatives were willing to deal secretly with LaRouche, most residents were soon fed up. If the LaRouchians were not squabbling with the sheriff’s office over their applications for concealed-weapons permits, they were battling with the local zoning board over their right to operate a children's day camp. Their newly founded Loudoun County News tried to whip up hysteria among local small businessmen over a nonexistent plot by county officials to drive them out of business. The LaRouchians threatened the life of a female attorney (who promptly fled town), sued a jeweler for libel, and published smears against families who had lived in the county for generations. The nadir probably was reached when LaRouche called the local Garden Society a nest of KGB agents.

The move to Leesburg turned out to be the biggest miscalculation the LaRouchians had yet made. In New York they had been protected by the anonymity of big-city life, their power over Roy Cohn, and the reluctance of prosecutors to tangle with them. But in Leesburg, population 8,000, their intimidation tactics and deadbeat attitude toward paying bills were much more conspicuous, "It was like they moved into a fishbowl and turned on the lights," says Loudoun Times-Mirror reporter Bryan Chitwood. Before long, the Times-Mirror and a member of the county board of supervisors, Frank Raflo, were raising public question about the antics of LaRouche and his followers, while a wide range of citizens contacted the sheriff’s office with varied complaints. Don Moore, the deputy sheriff in charge of the investigation, began to sense the nationwide and international scope of the swindles emanating from the NCLC headquarters in downtown Leesburg across from the colonial courthouse. A Vietnam veteran, he looked at the office building filled with LaRouche entities and thought that the time to take that hill had come. But he ran into the usual stonewall when he tried to interest the FBI and other federal authorities.

The first breakthrough came in Massachusetts. In the fall of 1984 the Boston FBI had received complaints that suggested a pattern of credit-card fraud by organizations linked to LaRouche. A federal grand jury was convened in November. At first, the investigation proceeded slowly: The FBI and the U.S. Attorney's office had no idea of the magnitude of LaRouche's fundraising operation or its bewildering network of corporate shells. The LaRouchians allegedly sent potential witnesses to hide in Europe, destroyed documents, and refused to honor subpoenas. But when LaRouche followers scored big in the 1986 Illinois Democratic primaries, newspapers around the country began to pay more attention to LaRouche's finances. Elderly victims and their relatives read these articles and came forward with complaints. Authorities in state after state launched investigations.

Meanwhile, First Fidelity Bank's civil racketeering suit against LaRouche pierced his corporate veil, while U.S. Attorney William Weld in Boston appointed an assistant with special qualifications to prosecute the credit-card fraud case. This prosecutor, John Markham, had once represented in private practice a wealthy California cult, the Process Church of the Final Judgment. Markham knew how cults operate and how their members think. He also knew the key to cracking a case against a cult-like organization: Find defectors, offer them immunity, and get them to lead you to more defectors.

The LaRouchians seemed unaware that they had passed into the danger zone. After all, had they not outwitted the authorities a hundred times and always with impunity? Their sense of invulnerability was so brazen that when they brought a New Jersey attorney to Boston to defend them in the credit-card fraud investigation, they paid for his airline ticket via an unauthorized credit-card charge. (He resigned from the case when the Justice Department informed him of this fact.) In Leesburg every Wednesday evening, a shredding machine at LaRouche headquarters destroyed bank statements, canceled checks, and other documents—as many as ten thirty-gallon bags’ worth each week. But no one thought to destroy the Security staff notebooks and financial memos that described and gloated over the NCLC's machinations in extraordinary detail. The NCLC leadership was preoccupied with raising as much money as possible, as fast as possible, seemingly regardless of the risk. In an August 1986 briefing, Helga LaRouche ordered members to raise $750,000 in five days by focusing on "money questions as the absolutely necessary logistics" to defeat the evil oligarchy. "For us," she said, money represents "the bullets, the guns, laser weapons, and other kinds of weapons, which we absolutely need."

The LaRouche organization would need criminal lawyers more than laser guns. In October 1986, ten LaRouchians, including four of LaRouche's top aides, were indicted in Boston federal court for credit-card fraud and obstruction of justice. Several more LaRouchians were subsequently added to the Boston indictment, and in February 1987, a Virginia grand jury indicted sixteen for securities fraud. In March, New York State indicted fifteen for securities fraud, grand larceny, and conspiracy, including LaRouche's closest lieutenants, Ed and Nancy Spannaus. At least twelve states meanwhile obtained cease-and-desist orders against LaRouche fund-raising entities. On July 2, 1987, LaRouche himself was indicted in Boston for obstruction of justice.

The first conviction was obtained in December 1987: Roy Frankhouser, tried separately from the other Boston defendants, was found guilty of obstructing justice. That same month the main Boston trial began. Although it ended in a mistrial, a replay was scheduled for early 1989. Meanwhile, a federal grand jury in Alexandria was considering massive evidence of loan and tax fraud, and the LaRouchians themselves predicted it would hand down a "grand slam series of indictments." In October 1988, after a probe lasting almost two years, LaRouche and six followers (including Ed Spannaus and chief fundraiser William Wertz) were indicted on thirteen counts of mail fraud, income tax fraud, and conspiracy. The indictment charged them with obtaining over $34 million in fraudulent loans between 1983 and 1987 (they denied all charges, claiming that harassment and seizure of records by authorities prevented their repaying loans). If convicted, LaRouche faced up to sixty-five years in jail and fines of $3.25 million.

If LaRouche were the head of an ordinary criminal conspiracy, motivated simply by greed, he would have been washed up long before the 1988 indictments. His associates would have offered to cut deals with the prosecutors to inform on each other and the boss himself. But the LaRouchians are an ideological movement with an intense collective spirit. Such movements often function most vigorously when under attack, even when their top leaders are in jail or exile. By early 1988 most law enforcement officials no longer believed the LaRouchian leadership would collapse under fear of jail sentences. In an update report on the NCLC, the Anti-Defamation League of B'nai B'rith noted its "resilience" and "quick recovery." Whenever NCLC members were indicted, authorities found that within days many of the indicted people were back on the phones raising money. Their bravado was expressed in comparisons between their fundraising methods and those of Benjamin Franklin and George Washington. The Founding Fathers, NCLC publications maintained, had resorted to a prototype of "credit-card fraud" to save the American Revolution!

The adaptability of the LaRouchians was also seen when the Justice Department brought involuntary bankruptcy proceedings against three entities that had refused to pay contempt-of-court fines of over $16 million. (The fines had been accruing daily for over a year, ever since the entities defied a Boston grand jury subpoena of their financial records.) A federal judge in Alexandria placed them under the control of interim trustees, but when U.S. marshals seized the firms' sixty-five known bank accounts, all but $20,000 was gone. And when the marshals seized the firms' offices and publications, the latter just reopened under new names: New Solidarity as The New Federalist, and Fusion as Twenty-First Century Science and Technology In addition, the firms moved their telephone boiler rooms to private apartments also to operate under new names. In late 1987, federal authorities estimated the LaRouche money machine was still raising $2.5 million a month.