CIA's drug confession

By Robert Parry

- October 11, 1998 -

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Cocaine traffickers and money-launderers swarmed through the Nicaraguan contra movement in the 1980s to a far greater extent than was ever known, according to a report by the CIA's inspector general. One contra trafficker even claimed his work was cleared by Ronald Reagan's National Security Council and the NSC's covert airline came under suspicion for drug-money shipments.

In an historic document released on Oct. 8, CIA Inspector General Frederick Hitz confirmed long-standing allegations of cocaine trafficking by contra forces -- and disclosed new cases of drug involvement in all areas of the CIA-backed operation. Hitz identified more than 50 contras and contra-related entities implicated in the drug trade.

Hitz also detailed how the Reagan administration protected these drug operations and frustrated federal investigations which threatened to expose the crimes in the mid-1980s. Reagan officials successfully spun the major media with false assurances that the drug allegations were bogus or wildly exaggerated.

But perhaps most stunning, Hitz published evidence that some drug trafficking and money-laundering tracked directly into Reagan's National Security Council staff where Lt. Col. Oliver L. North oversaw contra operations.

Hitz also revealed that the CIA placed an admitted drug money launderer in charge of the Southern Front contras. Hitz disclosed, too, that the second-in-command of contra forces in Honduras was an admitted fugitive from a Colombian drug conviction and that the top contra commander had faced drug suspicions since the start of the contra war.

In the lengthy report -- Volume Two of a two-volume report on contra-drug allegations (available on CIA's web site) -- Hitz continued to defend the CIA on one narrow point: that the CIA did not conspire with the contras to raise money through narcotics trafficking.

But Hitz made clear that the contra war took precedence over law enforcement and that evidence of contra crimes was withheld from the Justice Department, the Congress and even CIA's analytical division.

Among Hitz's new disclosures:

The CIA knew that the earliest contra force, called ADREN or the 15th of September Legion, had chosen "to stoop to criminal activities in order to feed and clothe their cadre," according to a June 1981 draft CIA field report. ADREN also employed terrorist methods, including the bombing of Nicaraguan civilian planes and hijackings, to disrupt the Sandinista government. [Graf 180]

According to a September 1981 cable to CIA headquarters, ADREN decided to use drug-trafficking as another financing mechanism. Two ADREN members made the first delivery of drugs to Miami in July 1981, the CIA cable reported. [Graf 181] ADREN's leaders included Enrique Bermudez and other early contras who would later direct the major contra army, the FDN.

The CIA's reaction to the information was to try to discredit the primary source of the cable as untrustworthy. [Graf 197] But the CIA later corroborated the allegations, though still insisting that Bermudez had opposed the drug shipments to the United States. [Graf 542]

The first volume of Hitz's report, however, contained a statement by a convicted Nicaraguan drug trafficker, Danilo Blandon, which raised doubts about Bermudez's purity. Blandon told Hitz's investigators that he and a drug kingpin, Norwin Meneses, flew to Honduras in 1982 to meet with Bermudez.

Then-commander of the CIA-backed FDN contra army, Bermudez told the cocaine smugglers that "the ends justify the means" in raising money for the contras. The contras then helped the pair get past Honduran authorities who briefly arrested them. Blandon and Meneses traveled on to Bolivia to complete a cocaine transaction. [For details, see iF Magazine, Mar-Apr. 1998]

According to another CIA document, a Nicaraguan exile linked to the drug trade fingered Bermudez in February 1988 in allegations that the contra commander had engaged in narcotics trafficking. Continuing its long defense of Bermudez, however, the CIA dismissed the source as "unstable." [Graf 545]

After the contra war ended, Bermudez returned to Managua, where he was shot to death on Feb. 16, 1991. Despite speculation that he was killed by the Sandinistas or an underworld hitman, the murder has never been solved.

On the Southern Front, in Costa Rica, the contra-drug evidence centered on the forces of Eden Pastora. While the Pastora drug ties have long been known, Hitz revealed that the CIA may have compounded the problem by putting a now-admitted drug operative -- known by his CIA pseudonym as "Ivan Gomez" -- in a supervisory position over Pastora.

Hitz reported that the CIA discovered Gomez's history in 1987 when Gomez failed a security review on drug-trafficking questions.

In CIA interviews, Gomez admitted that in March or April 1982, he helped family members who were engaged in drug trafficking and money laundering in the United States. In one case, Gomez said he assisted his brother and brother-in-law in transporting cash from New York City to Miami. He admitted that he "knew this act was illegal." [Grafs 672-73]

Later, Gomez expanded on his admission, describing how his brothers had gone $2 million into debt and went to Miami to run a money-laundering center for drug traffickers. Gomez said "his brother had many visitors whom [Gomez] assumed to be in the drug trafficking business."

The brother was arrested on drug charges in June 1982. Three months later, in September 1982, Gomez started his CIA assignment in Costa Rica.

Years later, convicted drug trafficker Carlos Cabezas charged that Ivan Gomez was the CIA agent in Costa Rica who "was to make sure the money was given to the right people [the contras] and nobody was taking ... profit they weren't supposed to." [Graf 678]

But because Cabezas had trouble identifying Gomez's picture and put him at one meeting in early 1982 -- before Gomez started his CIA assignment -- the CIA disputed Cabezas's story. But Hitz's report represents the first official evidence that Gomez did have a direct role in drug money-laundering.

In November 1985, the FBI also learned from an informant that Gomez's two brothers had been large-scale cocaine importers, with one brother arranging shipments from Bolivia's infamous drug kingpin Roberto Suarez. [Graf 695]

In 1980, with Argentine military support, Suarez bankrolled a right-wing coup in Bolivia that ousted the elected government. The violent putsch became known as the Cocaine Coup because it made Bolivia the region's first narco-state.

Protected cocaine shipments helped build the Medellin cartel and allegedly generated money to the contras. That money reportedly was funnelled through Argentine intelligence operatives who helped train the contras in their early years. [For more details, see The Consortium, Sept. 28, 1998.]

Hitz also reported that one contra fund-raiser, Jose Orlando Bolanos, boasted that the Argentine government was supporting his anti-Sandinista activities. A May 1982 cable to CIA headquarters stated that Bolanos had met with undercover DEA agents in Florida and offered to introduce them to his Bolivian cocaine supplier. [Graf 465]

In 1987, after Ivan Gomez failed the security check, the CIA interviewer concluded that "Gomez directly participated in illegal drug transactions, concealed participation in illegal drug transactions, and concealed information about involvement in illegal drug activity," Hitz wrote. [Graf 674-75]

But senior CIA officials rejected a proposal that the Gomez case be referred to the Justice Department on the grounds that a 1982 DOJ-CIA agreement spared the CIA from a legal obligation to report narcotics crimes by non-employees. [Graf 714] Instead, the CIA eased Gomez, an independent contractor, out of the agency in February 1988.

Nearly a decade later, a senior CIA official who supported the gentle treatment of Gomez had second thoughts. "It is a striking commentary on me and everyone that this guy's involvement in narcotics didn't weigh more heavily on me or the system," the official acknowledged. [Graf 711]

As for the decision not to make a criminal referral, the official added: "That view that Gomez is not technically an employee and therefore reporting may not be required is slicing it pretty thin." [Graf 713] Congress also was not informed of the Gomez case. [Graf 728]

Hitz uncovered evidence that some of contra-narcotics trafficking might have been sanctioned by Reagan's NSC. Moises Nunez, a Cuban-American who managed a drug-connected seafood importer and provided supplies to the contras, responded to CIA questions about his narcotics trafficking by pointing the finger toward his superiors at the NSC.

"Nunez revealed that since 1985, he had engaged in a clandestine relationship with the National Security Council," Hitz reported. "Nunez refused to elaborate on the nature of these actions, but indicated it was difficult to answer questions relating to his involvement in narcotics trafficking because of the specific tasks he had performed at the direction of the NSC. Nunez refused to identify the NSC officials with whom he had been involved." [Graf 490]

After this first questioning of Nunez on March 25, 1987, CIA headquarters authorized an additional session but then reversed its decision and barred further efforts at "debriefing Nunez." Hitz noted that "the cable offered no explanation for the decision." [Graf 491]

When asked recently about that decision, former Central American Task Force planning chief Louis Dupart said he did not recall the reason for halting the Nunez debriefing.

But Dupart added, "the Agency position was not to get involved in this matter, and to turn it over to others because 'it had nothing to do with the Agency, but with the National Security Council. We ... told Congress and [Iran-contra special prosecutor Lawrence] Walsh. That's all we had to do. It was someone else's problem'." [Graf 492]

Dupart's boss, task force chief Alan Fiers, stated that he recalled that the lead was not pursued "because of the NSC connection and the possibility that this could be somehow connected to the Private Benefactor program [the contra money handled by North]. A decision was made not to pursue this matter." [Graf 494]

According to CIA records, the CIA briefed Sens. Warren Rudman and William Cohen, two Republicans on the Senate Intelligence Committee. Dupart offered to arrange a committee interview with Nunez but that apparently never happened. [Graf 493]

The CIA did interview Nunez again in September 1987 -- five months after his admission and at the height of the Iran-contra scandal. Nunez backed away from his earlier statement and insisted he had no relationship with the NSC. [Graf 495]

The Nunez evidence was not turned over to Walsh until February 1988 -- nearly a year after Nunez's admission and then only as part of a large batch of documents delivered near the end of Walsh's North investigation. Walsh indicted North in March, a month later, on charges unrelated to drug trafficking.

Hitz found similar tolerance of other Cuban-Americans working with the contras. One of Nunez's Cuban-American associates, Felipe Vidal, had a criminal record as a narcotics trafficker in the 1970s, but was hired directly by the CIA to serve as a logistics coordinator for the contras, Hitz reported. [Grafs 508-511]

The CIA continued Vidal's employment despite a December 1984 cable to CIA headquarters which revealed Vidal's ties to Rene Corvo, another Cuban-American suspected of drug trafficking in a Miami-based operation. [Graf 512]

There were other problems with Vidal. In January 1986, the Drug Enforcement Administration in Miami seized 414 pounds of cocaine concealed in a shipment of yucca that was going from a contra operative in Costa Rica to Ocean Hunter, Inc., a company where Vidal worked. [Graf 526]

Law enforcement also identified a related company, Frigorificos de Puntarenas, as a drug-money-laundering center. But Vidal remained a CIA favorite as he joined with Corvo in raising money for the contras, according to a CIA memo in June 1986.

By fall 1986, Sen. John Kerry had heard enough rumors about Vidal to include him as part of a congressional inquiry into contra drugs. But the CIA withheld some of the derogatory information about its contractor. On Oct. 15, 1986, Kerry received a briefing from Alan Fiers who didn't mention Vidal's drug arrests and conviction in the 1970s. [Graf 527]

In 1987, the U.S. attorney in Miami also began zeroing in on Vidal, Ocean Hunter and other contra-connected entities. This prosecutorial attention made the CIA even more nervous.

The CIA's Latin American division requested a security review of Vidal. But on Aug. 5, 1987, the CIA's security office blocked the review on the grounds that the Vidal drug information "could be exposed during any future litigation." [Grafs 520-22]

As expected, the U.S. Attorney did request documents about "contra-related activities" by Vidal, Ocean Hunter and 16 other entities. The CIA advised the prosecutor that "no information had been found regarding Ocean Hunter." [Graf 528]

Later, though still working as a CIA contractor, Vidal balked at an interview request from Walsh's Iran-contra investigators. [Graf 529] Despite the various legal concerns, the CIA continued Vidal's employment with the contra movement until 1990, virtually the end of the contra war. [Graf 510]

Hitz revealed that a senior contra commander who rose to be chief of staff for forces in Honduras admitted that he had worked as a cocaine trafficker in Colombia. The CIA asked Juan Rivas, known as El Quiche, about his background after the DEA began suspecting that Rivas might be an escaped convict from a Colombian prison. [Graf 562]

In interviews with CIA officers, Rivas acknowledged that he had been arrested and convicted of packaging and transporting cocaine for the drug trade in Barranquilla, Colombia. After several months in prison, Rivas said he escaped and moved to Central America where he joined the contras. [Graf 563]

The CIA said it doubted that Rivas engaged in trafficking while with the contras. But one CIA cable noted that he lived an expensive lifestyle, even keeping a $100,000 thoroughbred horse at the contra camp. [Graf 566]

Bermudez later attributed Rivas's wealth to his ex- girlfriend's rich family. But a CIA cable in March 1989 added that "some in the FDN may have suspected at the time that the father-in-law was engaged in drug trafficking." [Graf 567]

The CIA moved quickly to protect Rivas from exposure and possible extradition to Colombia. In February 1989, CIA headquarters asked that DEA take no action "in view of the serious political damage to the U.S. Government that could occur should the information about Rivas become public." [Graf 569]

In a Feb. 22, 1989, note, the CIA's director of operations, Richard Stoltz, argued that "what we have here is a single, relatively petty transgression in a foreign country that occurred a decade ago and that is apparently of no current interest to DEA." [Graf 573]

Rivas, however, was phased out of the contra leadership with an explanation of poor health. With U.S. government help, he was allowed to resettle in Miami. Colombia was not informed about his fugitive status. [Graf 581]

Another senior FDN official implicated in the drug trade was its chief spokesman in Honduras, Arnoldo Jose "Frank" Arana.

The drug allegations against Arana dated back to 1983 when a federal narcotics task force put him under criminal investigation because of plans "to smuggle 100 kilograms of cocaine into the United States from South America." On Jan. 23, 1986, the FBI reported that Arana and his brothers were involved in a drug-smuggling enterprise, although Arana was not charged.

Arana sought to clear up another set of drug suspicions in 1989 by visiting the DEA in Honduras with a business associate, Jose Perez. Arana's association with Perez, however, only raised new alarms.

If "Arana is mixed up with the Perez brothers, he is probably dirty," the DEA responded. Through their ownership of an air services company called SETCO, the Perez brothers were associated with Juan Matta Ballesteros, a major cocaine kingpin connected to the murder of a DEA agent, according to the DEA and U.S. Customs.

Hitz reported that someone at the CIA scribbled a note on the DEA cable about Arana which stated: "Arnold Arana ... still active and working, we [CIA] may have a problem." [Grafs 608-15]

Despite its drug ties, SETCO became the principal company for ferrying supplies to the contras in Honduras. FDN leader Adolfo Calero testified that SETCO was paid from bank accounts controlled by Oliver North. [Graf 816]

Hitz reported that other air transport companies used by the contras also were implicated in the drug trade.

Even FDN leaders suspected that they were shipping supplies to Central America aboard planes that might be returning with drugs. Mario Calero, the brother of FDN political chief Adolfo Calero, was so uneasy about one air-freight company that he notified U.S. law-enforcement agencies that the FDN only chartered the planes for the flights south, not the return the flights north. [Graf 550]

Hitz found that some drug pilots simply rotated from one sector of the contra operation to another. Donaldo Frixone, who had a drug record in the Dominican Republic, was hired by the CIA to fly contra missions from 1983-85.

Frixone then was implicated in September 1986 smuggling 19,000 pounds of marijuana into the United States. In late 1986 or early 1987, however, he went to work for Vortex, another contra supply company, and was again ferrying supplies to the contras. [Grafs 996-1000]

One of Hitz's most dramatic findings was evidence implicating Southern Air Transport, the principal airline of North's Iran-contra operations.

On Jan. 21, 1987, then-deputy CIA director Robert Gates wrote in a memo that U.S. Customs was investigating an allegation of drug trafficking by SAT crew members. Gates said the tip came from Mario Calero, who had grown suspicious of SAT, too. [Grafs 906 and 1090]

A Feb. 28, 1991, cable from DEA to CIA also linked SAT to drug smuggling. The DEA reported that SAT was "of record" in DEA's database from 1985-90 for alleged involvement in cocaine trafficking. One entry in August 1990 alleged that $2 million had been delivered to SAT's business sites and several SAT officials were suspected of smuggling "narcotics currency." [Grafs 906-07]

Though SAT officials have denied a drug role, other witnesses have fingered SAT planes as participants in cocaine trafficking. Wanda Palacio, who had ties to the Medellin cartel, testified to Congress that she witnessed cocaine being loaded aboard SAT planes in 1983 and 1985.

Despite corroboration -- she correctly placed SAT pilot Wallace Sawyer in Barranquilla in October 1985 -- Reagan's Justice Department rejected her allegations out of hand in 1986. [See iF Magazine, July-Aug. 1997]

Even after the Iran-contra scandal broke, the CIA continued to work with reputed drug traffickers in supplying the contras. The CIA turned to Alan Hyde, a Honduran businessman, in 1987 despite U.S. government reports identifying Hyde as a major cocaine trafficker. [Grafs 914-25]

The CIA continued to rely on Hyde for contra logistical support through late 1988 or early 1989. One CIA officer recalled receiving "mixed signals" from headquarters about working with Hyde, with intense pressure to get the contra "job done." [Graf 927]

Ultimately, Hyde came under more CIA criticism for allegedly stealing contra equipment than for smuggling drugs. When asked why, a senior CIA officer in Central America declared that "it was an issue of relative order of priorities. ... The issue of stealing our guns had a higher priority than verifying whether Hyde was smuggling cocaine into the U.S." [Graf 944]

The drug taint spread to the Miskito Indian contras as well, according to internal CIA cables. In 1987-88, one contra from the KISAN organization alleged that contra leader Steadman Fagoth had participated in at least two cocaine operations to raise money. One scheme involved killing Colombian traffickers in the Yucatan and stealing their cocaine for sale in the United States.

The source "believed that Fagoth and other associates probably had consummated the scheme [and] that Fagoth -- along with two Honduran military officers -- had sold marijuana and other drugs." [Grafs 587-589]

The CIA received other information alleging that a KISAN leader, named Roger Herman Hernandez, was involved with cocaine smuggling through Roatan Island in Honduras.

Hitz learned that a principal motive for the CIA's protective handling of contra-drug information was Langley's "one overriding priority: to oust the Sandinista Government. ... [CIA officers] were determined that the various difficulties they encountered not be allowed to prevent effective implementation of the Contra program." [Graf 121]

One CIA field officer explained, "The focus was to get the job done, get the support and win the war." [Graf 147] A chief of station added, "There is derogatory stuff [about the contras] and we would be careful in terms of counterintelligence and operation security, but we were going to play with these guys. That was made clear by [CIA director William J.] Casey and [Latin American Division chief Duane] Clarridge." [Graf 150]

CIA analysts explained that they prepared few finished intelligence reports about contra drug trafficking, in part, because of political pressures. President Reagan had hailed the contras as the "moral equivalent of our Founding Fathers" and had denounced the Sandinistas as Soviet clients.

"The policymakers, one analyst asserts, really wanted to 'get' the Sandinistas on this subject [drugs]," Hitz wrote. Also because of policy pressures, the Directorate of Operations "assigned a low priority to collecting intelligence concerning the Contras alleged involvement in narcotics trafficking." [Grafs 1071-72]

One senior analyst said "he always felt that Fiers was not showing the analysts any reporting that would cause problems for the Contra program," Hitz wrote. [Graf 1077]

The contra-drug allegations first surfaced in December 1985 in a story that I co-wrote with Brian Barger for The Associated Press. Although the Reagan administration denied the report, the story persuaded Sen. Kerry to begin an investigation.

Yet, because of the lack of widely disseminated information inside the CIA, the CIA analysts incorrectly concluded that "only a handful of contras might have been involved in drug trafficking." [Graf 1091] That assessment was passed on to Congress and the major news media, which largely accepted the false account as true.

Further, Hitz discovered that CIA officials, including Dupart from the Central American Task Force, fed leads to congressional Republican staff to discredit Kerry's investigation. Dupart, for instance, told GOP aide Richard Messick that the FBI had "extensive information on people who had been interviewed by Kerry's staff." [Graf 1102]

Responding to the contra-drug charges, Fiers told the Senate Intelligence Committee on July 31, 1987, that "what we have found to date is that none of the people currently involved in the resistance leadership, armed or political, have any -- we have uncovered no indications that any of these individuals are involved or have been involved in narcotics trafficking." [Graf 1108]

Though acknowleding past problems on the Southern Front, Fiers added that "we have never found any evidence indicating that the FDN or those around the Northern Front, as it is known today, have been involved in cocaine or any drug dealings, and we have looked very closely at that." [Graf 1109]

[For information about Volume One of Hitz's report and a companion report by the Justice Department's inspector general, see iF Magazine, Mar.-Apr. 1998 and Sept.-Oct. 1998].

Copyright 1998 The Consortium

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