LAROUCHE FOLLOWERS INDICTED

VA. OFFICES RAIDED 10 PERSONS, 5 GROUPS FACE FEDERAL CHARGES

Federal, Virginia and Loudoun County law enforcement officers staged a dawn raid on the Leesburg headquarters of political extremist Lyndon H. LaRouche Jr. yesterday as a federal grand jury in Boston handed up indictments of 10 LaRouche followers and five affiliated organizations on credit card fraud and obstruction-of-justice charges.

The 117-count indictment, which names three of LaRouche's top aides and a former Pennsylvania Ku Klux Klan leader who has worked closely with the group for years, caps a 23-month grand jury probe of allegations that the group defrauded more than 1,000 contributors of a total of about $1 million.

More than 275 armed officers from numerous agencies, carrying search warrants, took part in the 6:45 a.m. raid on two Leesburg office buildings the LaRouche group rents.

"The indictment reflects the persistence of the FBI in investigating allegations in the face of attacks on the U.S. attorney's office and on the FBI, and {the group's} efforts to stop the investigation," said Robert S. Mueller III, the U.S. attorney in Boston.

LaRouche group spokesmen said yesterday that the charges are politically motivated.

Federal officials said the investigation had been one of the most difficult in recent memory because the LaRouche group had filed many court motions delaying the proceedings. Authorities said the federal and state investigations are continuing.

The investigations center on the LaRouche group's ambitious telephone solicitation campaign, the organization's main source of funds. Law enforcement officials and donors who have filed complaints said that the fund raisers used high-pressure tactics and often called dozens of times claiming that worldwide crises would ensue if the funds were not raised.

The main charges in the federal indictment are that LaRouche group members made large unauthorized withdrawals from the credit card accounts of persons who had made smaller contributions to the group, and that the fund raisers falsely promised that loans to the group would be repaid quickly.

Also, federal investigators are looking into possible income tax law violations.

Investigators did not enter the 171-acre, $1.3 million estate outside Leesburg where LaRouche lives. But up to 100 of LaRouche's associates were reported to be gathered there yesterday in the hours following the raid. State police and FBI agents surrounded the property, which includes a 14-room manor house, and recorded the license plate numbers of vehicles that approached the remote property.

The indictments represent the first substantial federal law enforcement action against the organization in its 18-year history. The group started as a radical leftist sect, took a turn to the extreme right in the 1970s and now has a complex ideology determined by the 64-year-old LaRouche. Law enforcement officials and former group members say LaRouche holds considerable sway over his followers, who number up to 1,000 worldwide.

Yesterday's action made public the state investigation of alleged fraud and sale of unregistered securities, overseen by state Attorney General Mary Sue Terry. The state probe, begun in May on what one official called a "fast-track" basis, is the most ambitious of any state investigation of the LaRouche group.

More than 10 states have launched similar investigations, but they focus on supposed financial fraud committed against residents of that particular state. Virginia's investigation involves aggrieved LaRouche contributors nationally.

Virginia law says that persons soliciting investors to give money must be registered to sell securities. The Virginia investigators are looking into allegations that the LaRouche fund raisers obtained money by seeking investments in LaRouche enterprises, but that the fund raisers were not registered to sell securities.

Ed Spannaus, a longtime LaRouche aide and the group's legal expert, repeated the group's longtime accusations that Justice Department officials are engaged in a collosal conspiracy with money launderers and the media to attack LaRouche unfairly.

"This is one of the biggest political dirty tricks in history," Spannaus said at a news conference. Spannaus called the federal investigation "a two-year fishing expedition," adding, "They have come up with absolutely nothing."

Spannaus ordered representatives of The Washington Post and NBC banned from the Leesburg news conference. Spannaus' comments were obtained from a tape recording of the conference. Spannaus said through a LaRouche group spokesman that representatives of the organizations were banned because their reports "contributed" to an atmosphere of "witch hunt."

Yesterday, the Supreme Court upheld without comment a lower court's finding that LaRouche owes NBC more than $250,000 stemming from a 1984 lawsuit. LaRouche lost a libel suit against the network, but NBC won a judgment against him for sabotaging an NBC interview with a U.S. senator.

Agencies taking part in yesterday's raid included the FBI, the Internal Revenue Service, the U.S. Bureau of Alcohol, Tobacco and Firearms, the Secret Service, the Postal Service, the Virginia attorney general's office, the Virginia State Police, the State Corporation Commission and the Loudoun County Sheriff's Department.

The two office buildings raided are at 20 S. King St. and 722 E. Market St. in Leesburg.

Investigators spent most of yesterday inside the buildings combing through records and computerized files on the group's finances and fund-raising operations. Trucks stood ready outside the buildings to take files away.

Henry Hudson, U.S. attorney in Alexandria, had no comment on the case yesterday.

One of those indicted on obstruction-of-justice charges was Roy Frankhouser, 47, of Reading, Pa., who was in the Ku Klux Klan and neo-Nazi groups until recently and has been a security consultant to the LaRouche group since the mid-1970s, according to former and current LaRouche associates. Frankhouser pleaded guilty in 1975 to dealing in stolen dynamite, and he had served as an informant for several federal and local law enforcement agencies, officials said.

Also indicted on obstruction-of-justice charges yesterday were Jeffrey Steinberg, 39, his wife Michelle Steinberg, 36, and Paul Goldstein, 37, all Leesburg residents who are top LaRouche aides on his "security" squad. They provide for LaRouche's personal security -- he says that he is in constant danger of assassination -- and they perform sensitive tasks for the group and enforce discipline, say law enforcement officials and former LaRouche associates.

The indictment says that in November 1984, Frankhouser, Goldstein and the Steinbergs discussed ways in which to "fix" or "quash" the Boston grand jury investigation, which had started that month. The indictment says that the LaRouche security aides told Frankhouser to contact a former Central Intelligence Agency deputy director and "request that he arrange to fix or quash the Boston grand jury investigation."

The LaRouche group has long sought to trade information with CIA officials, and it has had numerous meetings with them over the years. Group members have worked closely with a former low-level CIA operative on a number of matters, ex-LaRouche group members said.

The indictment stated that Frankhouser instructed the LaRouche security aides to derail the federal investigation by burning documents and by sending away persons with knowledge of matters under investigation. Assistant U.S. Attorney Kent Robinson said in a court hearing that the Steinbergs induced three of the indicted persons to flee to Europe recently.

Indicted on a charge of fraud by wire were four LaRouche organizations -- the LaRouche Campaign, Independent Democrats for LaRouche, Caucus Distributors Inc. and Campaigner Publications Inc. -- as well as four rank-and-file LaRouche associates, who were based in Boston in 1984. They are Michael Gelber, Richard Sanders, Charles Park and Michael Billington.

Also indicted on various charges yesterday were LaRouche associates Elliot Greenspan and Richard Black, and the National Caucus of Labor Committees, the central LaRouche group.

In his news conference, Spannaus said that the Boston-based investigation was hobbled by not having "a cooperating witness inside" the organization.

But law enforcement officials said that they gained the cooperation of LaRouche associates who left the organization recently and employes of LaRouche-affiliated corporations who do not belong to the group. This has given law enforcement agencies their best understanding ever of the LaRouche group's workings, officials said.

A Virginia State Police affidavit, on file in the Loudoun County courthouse, stated that a county sheriff's deputy, Donald Moore, received the cooperation of numerous local residents, including a former employe of a LaRouche company called Publication and General Management Inc. Like several other local people who helped the authorities, the source required confidentiality because of "fear for personal safety," the affidavit said.

Last year, U.S. District Judge A. David Mazzone in Boston imposed a series of fines against the LaRouche group that now total $21 million for failing to produce subpoenaed documents. Under the judge's order, the fines are increasing by $45,000 a day. So far, the judge has issued judgments -- allowing actual collection of the fines -- for only $430,000 of that amount.

The indictment said that in March 1985, LaRouche told Spannaus that the way to deal with the probe was "just keep stalling, stall and appeal."

Prosecutors say that the group has provided scanty, unorganized records.

Before the grand jury, and in depositions in numerous cases, LaRouche associates frequently refuse to answer questions on various grounds.

While these tactics slowed the Boston grand jury, the March victory of two LaRouche associates in the Democratic primary for statewide offices in Illinois reportedly helped speed the investigation. It caused an uproar in national political circles and brought pressure on the Justice Department to get the investigation moving, law enforcement sources said.

A month after the Illinois vote, William Weld, the longtime U.S. attorney in Boston who had led the investigation, was nominated to be chief of Justice's criminal division. Since 1984, LaRouche associates have made personal attacks on Weld.

In late spring of this year, awaiting confirmation by Congress, Weld galvanized Justice and FBI officials in Washington, sources said. He demanded action from the U.S. attorney's office in Alexandria, which had been relatively inactive on the LaRouche investigation, according to the sources.

"Weld just threw a hand grenade into the Department of Justice," one law enforcement source said. "The feeling was, 'Let's hit them.' "Staff writers Caryle Murphy and Mary Jordan contributed to this report.

Articles appear as they were originally printed in The Washington Post and may not include subsequent corrections.