The CEO Who Came in from the Cold

From the beginning Rautenberg has also tried to settle the case out of court. In 1984 he turned to lawyer Mickey Kantor, now U.S. trade representative, to try to work out a deal with E-Systems. The negotiations seemed to be moving along, Rautenberg says, pointing to his correspondence with Kantor, which indicates that, at one point, E-Systems was prepared to offer Rautenberg a cash settlement, a 10-year consulting contract, a written apology, and a medal "honoring Erwin Rautenberg for his years of honorable and valuable service to the United States." Whether a private company is authorized to offer government medals is, of course, "an interesting question," notes Rautenberg.

Just who backed away from the settlement is in dispute, but Rautenberg claims that on Election Day 1984, as Walter Mondale was getting his clock cleaned by Ronald Reagan, Rautenberg was urgently summoned to Kantor's office, where federal agents were waiting. When he arrived, Rautenberg says, he and his lawyers, including Kantor and John Emerson, now White House deputy personnel director, were intimidated by federal agents into signing a protective order about his company's previous relationship with the CIA under the threat of immediate arrest or even more dire consequences. Neither Kantor nor Emerson will comment on the meeting, but one other participant does confirm Rautenberg's version of the events.

Despite the protective order, which prohibits Rautenberg from using or requesting government secrets to press his legal appeals, he continues to claim that because he was not given a copy of the secrecy pledge, he should not be expected to comply with it. (Congressman Howard Berman, chairman of the House Subcommittee on International Operations, recently petitioned the CIA to reverse the protective order.)

E-Systems, with $1.6 billion in contracts from the CIA and the Pentagon, turns away all inquiries about Rautenberg and ASF, citing its obligation to maintain the confidentiality of its government contracts. Sounding more like a jilted lover than a former secret government contractor, Rautenberg says he wants the money two juries have awarded him. He wants ironclad protection from the tax authorities. He wants a public apology. "And I want that medal."

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AIR-SEA FORWARDERS SOURCE OF SALES

(Numbers are approximate yearly averages, in millions)

Commercial Commercial
Total Gross gross sales gross sales
ASF sales from from non-
gross CIA/Valley CIA-related CIA-related
Years sales branch customers customers
1948 - 1950 $5 - - $5

1950 - 1956 $45 $40 $2 $3

1956 - 1970 $62 $50 $9 $3

1970 - 1975 $52 $38 $10 $4

1975 - 1981 $43 $27 $11 $5

1981 - 1985 $33 - $8 $25

1985 - 1992 $36 - $11 $25

Source: Erwin Rautenberg

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HE SAID, THEY SAID

Event/activity

Rautenberg's version

Government's version*

1956 handshake agreement

ASF agrees to provide cover for CIA packing operation

It never happened

Air Asia

Rautenberg knew it was a CIA-owned plane-maintenance-operation

Was a commercial air enterprise owned by CIA without Rautenberg's knowledge

ASF Valley branch

Facility where Air Asia concealed a CIA packing-and-shipping operation. Rautenberg had no key and no access to records or materials at this site

Facility that ASF allowed Air Asia to use exclusively as way to provide good customer service to an important large commercial account

Air Asia tax avoidance

CIA used ASF as a cover to avoid state taxes on CIA goods taken out of transit

CIA used ASF as a legitimate commercial-tax-reduction strategy

E-Systems legal bills

Paid in full, in perpetuity, by CIA

Not reimbursed by any government agency

O'Melveny & Myers

Prestigious L.A. law firm retained by CIA. Worked out legal problems, such as tax-avoidance scheme, Valley-branch lease, union contracts

Prestigious L.A. law firm retained by CIA-owned Air Asia, a commercial enterprise. Law firm didn't know who really owned Air Asia

Protective order

In 1984 Rautenberg was forced to sign this agreement prohibiting use of certain evidence

Government requested this order to protect confidential information not related to ASF/Air Asia dispute

*Position compiled from legal documents, court papers, and an interview with a government official familiar with the case.