Thieu Ousts Five Defense Aides In Scandal on Retirement Fund

SAIGON, South Vietnam, March 22, 1972 - President Nguyen Van Thieu dismissed five top aides of the Minister of Defense today and consulted with him about the possibility of the minister's own resignation or dismissal for political reasons in a scandal about a military retirement fund.

The minister, Lieut. Gen. Nguyen Van Vy, who has been in President Thieu's Cabinets since 1967 and has a reputation for honesty, appeared to many political observers here to have fallen victim to maneuvering by Premier Tran Thien Khiem, who is rumored to be the most likely successor to the Defense Ministry.

General Vy is expected to find few stanch defenders in the United States Embassy, which is eager to avoid inflammatory Vietnam issues in this American election year.

The expected downfall of General Vy would probably bring about a Cabinet shuffle in which Premier Khiem would move over from his present concurrent post as Minister of the Interior.

The scandal has arisen over the $8-million to $10-million Soldiers' Mutual Aid and Savings Fund, about which many suspicions, but little evidence of actual wrongdoing or corruption, have been raised. General Vy is its board chairman.

Fund Wields Economic Power

The fund, which was built out of statutory monthly contributions of 100 piasters each by South Vietnam's one million men under arms, has been used by General Vy and other military figures as a powerful business enterprise. It has invested in existing corporations, founded five new ones and established one of the country's largest banks. Their avowed intention has been to raise funds for disabled veterans' an survivors' benefits.

The suspension of five high-ranking officials of the Defense Ministry who were involved in management of the fund was recommended earlier this month by Vice President Tran Van Huong. Mr. Huong was brought into office with President Thieu in the election last October and was given the mission of investigating and eradicating corruption in the Government.

President Thieu's press secretary Hoang Duc Nha, said today that the five Defense Ministry officials had been dismissed and were waiting for action by Vice President Huong's investigating committee. As far as the Defense Minister is concerned, "no decision has been made yet", he said. General Vy and President Thieu reportedly met for an hour at the presidential palace this morning, and officials there said General Vy's tenure was the subject of discussion.

General Vy has not been accused of profiting from the operation of the fund but the unproven suspicion is that his five subordinates who have been dismissed may have tried to. In any event, his prospective removal from the Government is not expected to bring on a Cabinet crisis, but only to make way for General Khiem, who has been Premier since August 1969.

A United States Embassy source commented that the Defense Minister had "just been caught up by the groundswell built up on that fund."

"A lot of people criticized him," the embassy official went on, "but he argued that it was the only way the Government could provide for disabled veterans and widows, and that the army people were the only ones in the country with experience enough to run it profitably."

The source also noted that "the Defense Ministry hasn't been the most vital spot around town." The Minister of Defense is responsible mostly for administrative affairs, while actual direction of the country's large military establishment is the province of the Chairman of the Joint General Staff, Gen. Cao Van Vien, and of the President himself.

Competition Resented

General Vien has reportedly been unhappy with the fund, encouraged the investigation into it and passed information about it to newsmen.

No actual evidence of impropriety in management of the fund has been reported. It is the appearance of impropriety in a Government fund, built with involuntary contributions from soldiers, intervening in the domestic economy and competing against private concerns, that raised complaints. According to informed officials at the United States Embassy, Ambassador Ellsworth Bunker encouraged President Thieu to press the investigation.

President Thieu ordered early this month that, after April, South Vietnamese soldiers should no longer have the monthly deduction of 100 piasters (about 25 cents) taken from their salaries, until the completion of the investigation.

The Vice President recommended the dismissal of the Defense Ministry's chief administrator, Nguyen Huu Luong, and four colonels who were members of the fund's board, and President Thieu has ousted them, according to palace officials.

Craig R. Whitney
Special to New York Times