He washed out not because he was some sort of despicable character, but because he was a bit slow in picking up Russian. He also had a very high security clearance, back when they were worth the paper they were printed on.
Not a conspiracy, just politics as usual. Believe those in power at your own risk.
When you come up with a better source than one of your buddies who washed out of a class 45 years ago, for a 45 year conspiracy of making American GIs disappear from existence, to hide the true combat losses in the Vietnam war, let us know.
I bet their insurance designates didn’t like it, and the decades of their fellow vets and friends and squad and platoon leaders looking for their names on the death lists and the Vietnam wall, probably had quite a few heads being scratched when they noticed that guys who died in battle with them, beside them, serving for them, aren’t listed.