The swami connection

MARCI McDONALD November 9 1987

The swami connection

MARCI McDONALD November 9 1987

The swami connection


The cast of characters involved in the Iran-contra scandal has been varied and flamboyant. But last week a recently declassified Central Intelligence Agency (CIA) memo—released by the congressional committee preparing to publish its report on the affair this month—introduced a new figure into the drama who may be the most improbable of all. He is a bearded self-styled guru from India named Shri Chandra Swami Maharaj, known to his devotees, including film star Elizabeth Taylor, as Swamiji. Indeed, according to the CIA document—and investigations by Maclean ’s— Swamiji played a pivotal role in bringing the so-called Canadian connection into the tangled Iranian arms deal.

As spiritual adviser to high-living Saudi arms dealer Adnan Khashoggi—as well as to Taylor, tennis star John McEnroe and several Third World leaders —the globe-trotting

guru has made a fortune. To manage his affairs, he appointed his longtime follower, W. Ernest (Ernie) Miller, a Toronto real estate promoter who owns the Black Hawk Motor Inn in Richmond Hill, outside Toronto, where the swami once stayed. Miller, in turn, brought in his own longtime business partner, Donald Fraser, a former Toronto accountant who has

operated out of Monaco and the Grand Cayman Islands since 1978.

Last year, testimony before the U.S. Senate intelligence committee on the Iran-contra affair revealed that Miller and Fraser had lent Khashoggi $13 million to finance a secret May, 1986, shipment of U.S. Hawk missile spare parts to Iran. When Miller and Fraser failed to recover their investment, they said that they would expose the Iranian arms sales to influential Democratic senators. That contributed to the unravelling of the affair. Now, in a new twist to the case, the declassified CIA document indicates that the money Fraser and Miller invested may not have been entirely their own.

In a secret Nov.7, 1986, memo to CIA director William Casey, a senior subordinate named Charles Allen reported that “the third individual involved in the investment effort is a swami who lives in Los Angeles.” And sources close to the case claim that, in fact, the Fraser-Miller loan to Khashoggi for the arms deal came mainly from the funds of the guru, then based in Beverly Hills. Said one knowledgeable source: “The swami was bankrolling Khashoggi all along. He was paying for the planes, the yachts, the parties—everything.”

The revelation of the swami’s role answers one of the many questions still surrounding the affair. Observers had expressed confusion about why the two obscure Canadians, Fraser and Miller, decided to tell the CIA—through an intermediary, NeYork businessman Roy Furmar1 -that they were in a position to ex' jse the secret arms deal if they dh not get their money back. The reas .i appears to lie in the political jnnec-

tions, real or imagined, of the bearded swami. He became a familiar figure in Washington in 1985 and 1986 in his white robe, sandals and beads, as he arranged meetings and photo opportunities with the American elite.

Wherever he travelled, the swami carried a photo album showing him with such Reagan administration notables as Commerce Secretary Malcolm Baldridge (later killed in a rodeo accident) and then-agriculture secretary John Block. He also claimed intimacy with Democratic

Senator Alan Cranston of California and House Speaker Jim Wright. According to the CIA memo, Fraser and Miller were prepared to reveal details of the arms sales to Iran—and the diversion of the profits to the Nicaraguan contra rebels—to the swami’s congressional connections. Allen warned Casey in his note: “We could soon have an incredible mess on our hands.” But Miller and Fraser were pre-empted by a Beirut weekly newspaper’s disclosure of the affair in November of last year.

It was just one month later that

the Canadian connection was first revealed. Since then, Miller and Fraser have refused to comment. Reporters have been turned away from Miller’s luxury home in Whitchurch, Ont. But local lawyer and former Conservative federal MP John Gamble, who has had business dealings with Fraser and Miller, said last week that when he was in California with the two men last year he met “some Indian holy man” called Swamiji. Gamble also recalled hearing about an extravagant party thrown by Khashoggi in Beverly Hills for the swami’s 38th birthday last year, and he said that Elizabeth Taylor was one of the film stars present.

Emannuel Floor, a former executive vice-president of Khashoggi’s Triad America Corp. in Salt Lake City, Utah, has described Miller as a longtime acquaintance of the guru who has “on at least one occasion spent time in India on a sort of a retreat with the swami.” But in the CIA memo, Allen characterizes Miller as “a tough individual especially determined to get his money back.” And Gamble—a longtime friend of Fraser’s and secretary-treasurer of Miller’s Toronto-based investment firm, Vertex Financial Corp.—said he doubted that Fraser’s association with the swami was a spiritual one. Said Gamble: “I can’t imagine Mr. Fraser being deeply involved in any kind of religious activities. Organized religion has never seemed to play a part in his life.”

Gamble, meanwhile, said last week that he doubted that the swami had invested any money in the Iran arms deal. Claiming to be familiar with the list of clients whose money Fraser and Miller were handling at the time, he said, “This gentleman’s name has never come up.” Still, a former business associate of Khashoggi’s confirmed to Maclean's last week that Miller was “the guru’s right-hand man.” And Floor added, “Ernie [Miller] on two or three occasions said this is the swami’s money, and one of Khashoggi’s representatives said to me that Miller is the swami’s business manager.”

The path that led Swamiji to spiritual enlightenment, the confidence of the rich and famous, and the Iranian arms deal, has been a checkered one. According to the swami himself, he discovered his religious vocation while living in a tree in the Himalayan foothills. In a glossy brochure that the swami issues to followers, he calls himself “his Holiness” and describes himself as “our real savior.” The guru has told followers that “material wealth is mere illusion— what one needs is wealth of the spir-

it.” But his spiritual mission seems to be confined mainly to the world’s wealthy, powerful and celebrated, such as the Sultan of Brunei, frequently described as the world’s richest man.

The swami has frequently been photographed socializing with such Hollywood luminaries as Taylor, George Hamilton and Ryan O’Neal. But at the same time, his business dealings have brought him a measure of notoriety. Media reports have linked him with the controversial 1985 takeover of London’s prestigious Harrods department store by Mohamed al-Fayed, Khashoggi’s former brother-in-law. Indeed, last year India’s Onlooker magazine charged that British mining tycoon Roland (Tiny) Rowland had paid the swami $6.5 million for secret tapes and documents proving that the Sultan of Brunei had in fact financed the stormy takeover bid.

According to former aides of Adnan Khashoggi, the arms dealer first approached the swami about four years ago to act as a go-between to the sultan, with whom Khashoggi had fallen out. The swami, in return, was interested in a financial contribution from Khashoggi. But one aide said that the swami quickly learned that the Saudi’s business empire was on the verge of collapse. And in a strange reversal of roles, the swami ended up investing in Khashoggi’s ventures—apparently through Fraser and Miller’s Cayman Island corporations, Vertex Finances, SFA and Euro Commercial Finances BV. Said one former associate: “Adrian had no money, and all of a sudden an influx of cash appeared when Fraser and Miller and the swami came on the scene.”

Among the projects the swami and the Canadians allegedly bought into was Khashoggi’s planned $520-million Salt Lake City office complex. The site was to be the headquarters of Khashoggi’s Triad Corp., the assets of which are currently frozen in a multimillion-dollar bankruptcy suit. Indeed, Vertex Finances and Euro Commercial loaned Triad a total of $42 million in four payments in late 1985 and early 1986. In return, in March, 1986, Khashoggi named Fraser president of Triad America. But creditors in Triad’s bankruptcy proceedings allege that Khashoggi and the Canadians were engaged in attempting to funnel the U.S. corporation’s assets into two obscure Vancouver resource companies associated with Fraser and Miller—Skyhigh Resources Ltd. and Tangent Oil and Gas Ltd.—leaving only a hollow U.S. shell.

Shares of both Skyhigh and Tan-

gent suddenly soared on the Vancouver Stock Exchange last year after reports that Khashoggi had joined their boards. But a former Khashoggi partner claims that the Saudi’s directorships—which worked such stock market magic—were not his own idea but Fraser and Miller’s. Still, with Khashoggi’s business empire in trouble, and Fraser and Miller reportedly involved in the Iranian arms deal, the value of both companies’ shares plummeted.

Since then, while Fraser and Miller have kept extremely low profiles, the

swami has returned to his native India. There, tax inspectors in the southern city of Madras detained him briefly last September for alleged foreign exchange violations. But the guru told one Indian newspaper, the Hindustan Times, that his career was far from over. Added Swamiji: “Let me tell those in power that my shoulders are very broad. I can carry the weight of all sorts of allegations on them, but one day the truth will emerge.”

— MARCI McDONALD in Washington