Vietnam Corruption Case
Foe of Graft Caught in Middle

SAIGON - Gen. Nguyen Van Vy is a temperate, pipe-smoking soldier with a reputation for getting things done. But the even tenor of his career may be disrupted by an involved corruption case involving a multimillion-dollar army fund in which he appears to be caught innocently in the middle. A graduate of law school in Hanoi and later St. Cyr, the French military academy, he is a product of Vietnam's Mandarin class who once served as chief of Emperor Bao Dai's palace guard. He is also a former paratrooper with a good combat record, a Buddhist married to a Catholic, and a nonpolitical soldier. He went into exile after clashing with the late President Ngo Dinh Diem and returned to rejoin the army after Diem's death. At one time in his career he was cited in an official American report as a "ruthless opponent of corruption."

Natural Choice

In short, the 54-year-old soldier has qualifications matched by few of South Vietnam's generals. When President Nguyen Van Thieu instituted constitutional rule four years ago, Vy was a natural choice as defense minister. He has served dutifully - ruffling few feathers and smoothing over occasional spats with Chief of Staff Cao Van Vien, the nation's only other four-star general and something of a prima donna. The ordered path of Vy's career, however, has now been upset by the corruption case which shows signs of overshadowing by far the continuing stream of one-day sensations that normally appear in Saigon's newspapers. It concerns the administration of an army saving fund of about $10 million made up of involuntary contributions from some 800,000 men in the army and regional militia.

In addition, however, the case threatens the delicate balance President Thieu has maintained among the ranking generals who no longer constitute a formal junta but who nonetheless provide the backbone of the regime's support. And some members of the House and Senate are adding to the confusion by intimating darkly that the United States is maneuvering somewhere behind the scenes to dominate South Vietnam's economy (which is it supports to the tune of about $500 million yearly).

Already, four field grade officers in the Defense Ministry have been suspended. Vy himself may be forced to resign, although no one has produced evidence that he was anything more than the luckless man in the middle. The resignation of Vy or his transfer to another post would cause waves throughout the military hierarchy - something Thieu is notoriously reluctant to do. In addition, there about is the problem of 150 officers - many of them colonels and generals - who were detached from the army to assist in running seven companies wholly or partly financed by the fund known as the Servicemen's Mutual Aid and Savings Fund (SMASF).

Lack of Evidence

To date, no evidence has been found that there was any corruption at all in the administration of SMASF. Indeed, some financial sources feel that an investigation may show that the fund is booming. That is part of the difficulty. The fund was becoming so influential business activities that other businessmen began to question loudly whether they should have compete with the army. For example, the army was financing a construction company and at the same time the army was the likeliest customer. The aspect of the case has prompted some excessively touchy senator and assemblymen to charge that the United States was trying to curb the fund and stifle some of the growing industries it financed.

An American official laughed at the charge. He added, however, that the Americans have privately questioned the advisability of the army engaging business on such a scale. And the Americans were well aware that the sheer size of the fund was a tasty temptation in a country where temptation is resisted infrequently. Indeed, the fund looked so robust and tempting that South Vietnam's armed force already had made preparations to start a similar venture. That was before the current scandal blew up as a result of charges of mismanagement made in the assembly and in the local press. Somewhat ironically, some of the newspapers which first questioned the fund are now questioning whether it should be dismantled.

Gen. Vy, who dreamed up the idea in 1968 as a measure to give individual soldiers a nest egg on their discharge, is reportedly defending the idea strongly within the cabinet. Meanwhile, the government has halted the collection of contributions to the fund and turned its assets and books over to a government-owned bank and an investigation panel under the direction of peppery old Vice President Tran Van Huong. The investigation panel is a real blue-ribbon affair of generals, court justices and bankers, and is moving with a deliberation indicating it is well aware of the exposed nerves on all sides. However, Huong has a lifelong reputation for both honesty and unpredictability. And though he is a personal friend of Defense Minister Vy, the 69-year-old vice president also has a lifelong reputation of clashes with the army brass and he can be expected to resist any overly blatant efforts at whitewash.

George McArthur
Times Staff Writer
Los Angeles Times
Tuesday, April 4, 1972

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