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Figure in Kickbacks Alleges Bizarre Plot by U.S. to Kill Him

April 17, 1988|KIM MURPHY | Times Staff Writer

LOS ANGELES — Rex Niles knew how to do it right. You wanted dinner in a classy place. Rex knew just where to go. A weekend skiing? Rex had a condo up at Mammoth; no problem. Having a little trouble paying the bills this month? Rex would handle it.

By the time authorities reeled in Rex Niles--the biggest fish snagged in the most sweeping investigation ever into defense industry kickbacks--the Southern California high-tech sales representative had fast friends throughout the industry and subcontracting commissions approaching $1 million a year through his Woodland Hills company, Rex Rep.

"Rex was a high-roller type, very flashy in his appearance and mannerisms," recalled Ralph Guerin, a purchasing supervisor at Pioneer Magnetics Inc., who admitted accepting at least $100,000 in kickbacks from Niles. "He had a nice home, expensive cars, an exciting social life. . . . I liked Rex on a personal level, and I was very impressed by his knowledge of the electronics industry and his apparent success," Guerin said before he went to prison.

Millions in Payments

Government officials estimate that Niles had handed over millions in under-the-table payments to employees of leading contractors in exchange for lucrative subcontracts before he secretly turned government witness--and began an undercover campaign with the FBI to sting the crooked buyers who had depended on his largess.

Niles' work as an informant led to the conviction of 19 industry buyers and supervisors on fraud, tax evasion and kickback charges, and Niles retired in triumph in April of 1987, lauded for his "unprecedented cooperation," into the Federal Witness Protection Program.

But in the way stories have of not ending the way they are supposed to, Niles isn't working somewhere in the Northwest as a salesman, under a new name, with a new identity, as the scenario had called for.

Instead, he is living in a suburban home outside Los Angeles, sleeping under a makeshift foil tent fashioned to block the microwaves he believes are killing him. By night, he scrutinizes the heavens above his back yard for a sign of the mini-nuclear reactor that he says is generating the X-rays that pierce his skull.

Niles, the man federal prosecutors once dubbed their "goose that laid the golden egg," has contacted agencies from the FBI to foreign consulates claiming the government is bent on murdering him, and his bizarre assertions have already prompted some defense lawyers to consider filing new appeals for the men Niles helped to convict.

"I think the government came down on him too hard. I think they overreached, and made him do much more than he originally agreed to. They kept pressuring him until he cracked," said Jerry Webb, an Encino attorney whom Niles has hired to bring suit against the government.

Niles' story, told in a series of interviews and audiotapes, is about a middle-aged salesman's metamorphosis from businessman to secret agent, from back-yard barbecues to life on the run.

It is perhaps one of the more unpredictable sagas from a controversial program that has swept more than 5,100 federal witnesses into new lives, a program that is designed to elicit testimony against murderous criminal organizations but which sometimes leaves new victims in its wake.

"Here's a man 50 years old who has spent the majority of his life in the electronic industry," said Jerry L. Newton, Niles' former attorney. "By doing what he was doing, he had burned all his business relations, terminated all social relationships and was living the life of a double agent."

Like scores of others, Niles had become comfortably accustomed to exchanging favors with his colleagues as a cost of doing business. His job, as an agent for a number of manufacturers of custom parts, was to make sure that his clients' products were selected for purchase by larger contractors.

"The buyers had realized over the years that they had something that was of value to give--a contract--and it was very much like an auction," Niles said. "It was who did the most for me last night, and or who's going to do the most for me this weekend?"

In the 19 cases in which he secretly tape-recorded meetings with buyers, Niles usually offered 4 1/2% of his own 10% commission to make sure that his client got the contract.

But it was only after it had become clear that defendants in an earlier kickback crackdown at Hughes Aircraft had identified him as a key player that Niles walked into the U.S. attorney's office one afternoon in the summer of 1985.

"From the moment I was in the case, I knew the guy was extremely valuable," said former Assistant U.S. Atty. Fred Heather, who prosecuted the wave of cases that came to be known as "Operation DEFCON." Niles put his vast contacts to work, spending up to 14 hours a day secretly tape-recording his transactions.

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