Until a $40-million fraud investigation sent federal agents knocking on the door of his El Cajon home, William R. Kennedy Jr. had a wide reputation as a super salesman and a self-styled patriot.
But indictments unsealed July 7 in Denver allege that Kennedy, 44, didn’t hesitate to put profit before patriotism when it came to selling precious metals to his largely older and politically conservative clientele.
For the record:
12:00 a.m. July 22, 1992 For the Record
Los Angeles Times Wednesday July 22, 1992 San Diego County Edition Metro Part B Page 2 Column 2 Metro Desk 1 inches; 24 words Type of Material: Correction
77th Assembly–A July 20 story incorrectly identified Steve Baldwin, a Republican candidate for the 77th Assembly District as Ron Baldwin, a Republican Party official.
Investigators allege that Kennedy’s San Diego-based Western Monetary Inc., which was forced into bankruptcy in 1989, had used a Ponzi scheme to draw millions of dollars from investors–and then failed to deliver promised silver and platinum.
That, plus allegations that Kennedy failed to declare his purported work as an agent for a foreign government, clash with his carefully cultivated image of propriety and love of country.
As publisher of the now-defunct Conservative Digest magazine, Kennedy fashioned himself a die-hard conservative who swirled in the same arena as Vice President Dan Quayle, former President Ronald Reagan, Sen. Jesse Helms and other conservative Republican luminaries.
However, for some reason, Kennedy was curiously absent from the local political scene.
“It’s almost like he tried to keep a low profile,” said local Republican Party official Ron Baldwin. “When I read in the paper that Mr. Conservative was here, it surprised me because no one knew he was here.”
Kennedy also led a quiet, seldom-seen life at a rented home on Rancho Valle Court, an upscale cul-de-sac in the southern reaches of El Cajon. “To be truthful, I didn’t even know (Kennedy) was the man across the street until after I read the newspaper and another neighbor told me who he was,” one neighbor said.
Yet federal officials have long been aware of Kennedy, who moved Western Monetary to San Diego County in the late 1980s from Colorado Springs, shortly after the firm was forced into bankruptcy.
According to the indictment, before locating in San Diego, Western Monetary illegally drew nearly $40 million from investors. The indictment does not allege fraudulent activity after the firm moved to San Diego in 1989.
Federal investigators allege, however, that Kennedy earlier assembled a high-powered sales team that played off investors’ staunchly conservative political and religious beliefs.
During seminars that were billed as “U.S. Monetary War Colleges,” a cadre of conservative speakers repeatedly advised investors to buy metals as protection against the growing communist threat and the impending crash of the U.S. banking system.
A separate indictment alleges that Kennedy and two associates failed to register as a foreign agent after receiving $4.7 million from the Kuwaiti government to lobby U.S. officials to wage war against Iraq following its invasion of Kuwait.
Kennedy also allegedly used investor funds to acquire a helicopter that was subsequently given to the Nicaraguan Contras.
And, last week, U.S. investigators in Colorado alleged that Kennedy had concocted a potentially illegal scheme to “affect American policy” in Eastern Bloc countries that are attempting to make the transition to democracy. No details were given.
“This defendant is at it again,” Assistant U.S. Atty. Steve Peters said during a recent bail bond hearing.
The charges mirror allegations lodged by several groups of disgruntled investors who have sued Kennedy and Western Monetary in San Diego and San Francisco courts–litigation that eventually prompted the federal investigation.
Kennedy, who will be arraigned today in Denver, is acting as his own attorney. He has reportedly claimed that he can no longer afford to hire an attorney. Attempts to reach Kennedy and his firm were unsuccessful.
Kennedy’s purported financial woes are in sharp contrast to the mid-to-late 1980s, when Western Monetary invited cash-rich investors to all-expenses-paid seminars at the Hotel del Coronado and other posh hotels in San Diego and elsewhere in the country.
The seminars, billed as “U.S. Monetary War Colleges,” featured Kennedy, Western Monetary officials and a “faculty” that included former military and intelligence officers and conservative personalities.
Kennedy promised “no-punches-pulled” investment advice during daylong sessions that were punctuated by “cease fires” (breaks), “victory luncheons” and dire “intelligence” reports (political observations).
The war colleges had a chilling message, according to investors: Precious metals–particularly silver and platinum–were a necessary hedge against the impending spread of communism and the impending collapse of the nation’s commercial banking system.
Kennedy used the war imagery because it was “an appropriate metaphor . . . (that) connotes the contentious, fiercely competitive nature of the free market,” according to one brochure distributed to investors.
Kennedy was a super salesman, according to investors who asked not to be identified because they are scheduled to appear as witnesses in upcoming civil and criminal trials. By his own description, he was the “nation’s leading expert on silver.” Another brochure distributed by Western Monetary described Kennedy as “Mr. Platinum.”
One man who has lost “a heavy part” of retirement income through Western Monetary silver purchases, recalls that the company paid for everything: air and cab fares, meals and hotels. “They gave us $30 or $35 each for dinners, which was quite a lot of money,” the investor recalled.
Federal regulators now allege that Western Monetary was using investor funds to cover the costs of its elaborate four- and five-day seminars.
And, they allege that Kennedy tried to isolate elderly investors from advisers who might have raised questions about proposed investments. “Attendance by lawyers, accountants and investment brokers was discouraged,” according to the indictment.
“He’s a fast talker, that’s for sure,” said one woman who attended a war college during 1988. “He’d pound his fist during speeches and get howling against communism. . . . They had good speakers, patriotic speakers . . . the kind of thing (designed) to get you all hyped up.”
The woman, whose political convictions are far less conservative than most attendees, maintained that Kennedy played upon investors’ fears by telling them that the world was rapidly falling apart, and that precious metals were the only protection.
Seminars often featured Eric Danisch, a German native who told investors about the role that precious metals played in post-World War I Germany. Danisch’s account was titled “Eyewitness to Hyperinflation: A Survivor’s Account.”
Kennedy used retired military and Central Intelligence Agency officials to “create a sense of urgency” among investors, according to federal investigators. “Presentations were designed to gain the trust and confidence of the attendees by fervent and well-orchestrated appeals to their patriotic and spiritual beliefs,” according to the indictment.
The well-packaged programs worked, according to investors.
“It’s almost like (investors) were down on their knees before (Kennedy),” said the woman, who eventually retrieved all but $45,000 of $100,000 invested with Western Monetary. “He was the moon, the stars and the sun.”
Kennedy built his image as a nationally respected conservative by portraying himself as a political intimate of Reagan, Jesse Helms and other staunch conservatives. Investors were impressed by the fact that Kennedy had had his picture taken with dignitaries–apparently during various political events.
One Western Monetary brochure described the firm’s founder as “a well-known mover and shaker in conservative political circles . . . a familiar face in Washington.”
Another described Kennedy as “more than a rising star in the firmament of precious metals and investment circles . . . he has also become a dynamic influence on the American political scene. His brand of conservatism is immensely attractive–it’s constructive . . . creative . . . compassionate.”
But Washington observers–along with federal investigators and Western Monetary investors–question whether Kennedy’s image as a leading political conservative was crafted largely to enhance his business dealings.
Leading Republicans have distanced themselves from Kennedy.
Vice President Dan Quayle’s office, for example, said that Quayle “knows Kennedy but is not closely associated with him.”
As far as Quayle and Kennedy having their picture taken together when Quayle received a pro-family award in 1991, Quayle spokesman Mac McKay said that the vice president frequently is photographed with people who attend those kinds of functions.
While investors believed that Kennedy had ties that stretched all the way to the White House, some now believe that the claimed relationships were created to help build business.
“He’s had his photo taken with Reagan, Bush, and Dan Quayle,” said one of the many attorneys who represents disgruntled Western Monetary investors. “It suggests the fact that (the photos) were all part of an artificially created image. . . . I suspect they were photo opportunities for the purpose of helping sell his business.”
Similarly, federal investigators believe that Kennedy was interested largely in image-building when, in 1985 he purchased Conservative Digest, a now-defunct Washington, D.C.-based journal that contained pieces by a wide variety of conservatives, including Helms, Jerry Falwell and Arthur B. Laffer.
Kennedy fraudulently used $300,000 in investor funds to acquire the Conservative Digest magazine from conservative mailing-list guru Richard Viguerie, according to federal investigators, who allege that the magazine was purchased to “gain credibility for the enterprise in the eyes of these targeted clients.”
Kennedy also turned the Conservative Digest into an advertising vehicle for Western Monetary’s investment programs, and “War College” faculty members contributed articles to the magazine.
He used the magazine’s mailing list to recruit candidates for upcoming seminars, according to federal investigators.
While Washington conservatives don’t doubt that Kennedy was, at heart, a conservative, Kennedy “probably bought (the Conservative Digest) as entree to conservative community where his sales pitch would be well-received,” said David Keene, chairman of the American Conservative Union. “His conservative leanings were more of a convenience . . . he was not a mover and shaker in conservative circles.”
Kennedy was “mercurial, emotional, primarily, a salesman,” Keene said. “ . . . He was like the guy in the movie ‘Tin Men.’ . . . He could sell ice to Eskimos.”
The financially troubled Conservative Digest “never, never achieved stability,” according to Peter Flaherty, chairman of the Washington, D.C.-based Conservative Campaign Fund: “(It was) never regarded as on a par with Human Events. Kennedy didn’t have a real Washington presence.”
Kennedy was “tolerated” by leading conservatives when he owned the magazine because “he had deep pockets,” said another leading conservative, who asked not to be identified. “But he was not regarded as a leader or a great intellectual thinker. He was thought of as a blustery lightweight.”
That assessment clashes with one Western Monetary brochure that described Kennedy as a “geologist, entrepreneur, investment expert, economic historian, political insider, author (and) publisher and patriot.”
Federal investigators maintain that Kennedy’s patriotism often was superseded by his profit motive.
According to a second indictment unsealed July 7 in Colorado, Kennedy and two associates, “operating under the guise of patriotism, not profit,” violated the Foreign Agents Registration Act by accepting $7.7 million from the Kuwaiti government to fund a lobbying campaign aimed at getting the United States to go to war against Iraq.
Only $2 million of the Kuwaiti money was used to lobby U.S. officials, according to the indictment, federal investigators said. Kennedy, Sam H. Zakhem, a U.S. Senate candidate in Colorado, and Kennedy associate Scott Stanley Jr. allegedly “disguised these (Kuwaiti) payments, keeping most for themselves, so as to avoid federal tax laws,” according to U.S. Attorney Michael J. Norton in Denver.
Federal regulators allege that Kennedy, Zakhem and Stanley created a propaganda outfit named the “Coalition for America at Risk” (COFAR), which they then painted as a group of patriots who strongly supported the president’s Middle East policies.
But when COFAR’s origins were questioned, the three reorganized, surfacing in a second “front” group called “The Freedom Task Force.”
Federal regulators allege that the line between patriotism and fraud also was blurred during the mid-1980s when Kennedy purchased and restored a transport helicopter that subsequently was turned over to the Nicaraguan Contras.
Kennedy, in literature mailed to investors, boasted that he and a “wealthy lady from Texas” used their own funds to purchase and restore the helicopter.
But the indictment alleges that funds “used for this helicopter should have been used to purchase metal” for investors.