Oct. 15, 1998
CIA's Drug Confession
By Robert Parry
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 claimed Ronald Reagan's National Security Council cleared his work. The NSC's favorite covert airline also was under suspicion for drug connections, the report stated.
In an historic document released on Oct. 8 -- and nearly ignored by the major news media -- CIA Inspector General Frederick Hitz confirmed long-standing allegations of cocaine trafficking by contra forces. Hitz identified more than 50 contras and contra-related entities implicated in the drug trade.
Hitz detailed, too, how the Reagan administration protected these drug operations and frustrated federal investigations which threatened to expose these crimes in the mid-1980s.
In perhaps the most stunning disclosure, Hitz published evidence that drug trafficking and money laundering tracked directly into Reagan's National Security Council 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 in Costa Rica. Hitz disclosed, too, that the second-in-command of contra forces on the Northern Front in Honduras had escaped from a Colombian prison where he was serving time for a drug conviction.
In the lengthy report -- Volume Two of a two-volume set on contra drug allegations -- Hitz continued to defend the CIA on one narrow point: that the CIA did not conspire with the contras to raise money through cocaine trafficking.
But Hitz made clear that the contra war took precedence over law enforcement and that the CIA withheld evidence of contra crimes from the Justice Department, the Congress and even the CIA's own analytical division.
Among Hitz's new disclosures:
The CIA knew the criminal nature of its contra clients from the start of the war against Nicaraguas leftist Sandinista government. 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 employed terrorist methods, including the bombing of Nicaraguan civilian planes and hijackings, to disrupt the Sandinista government, the CIA knew. [Graf 180]
Cocaine smuggling was also in the picture. 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 CIA-organized FDN. Throughout the war, Bermudez remained the top contra military commander. The CIA later corroborated the allegations about ADRENs cocaine trafficking, but insisted that Bermudez had opposed the drug shipments to the United States which went ahead nonetheless. [Graf 542]
The truth about Bermudezs claimed opposition to drug trafficking, however, is less clear. According to Volume One of Hitzs report, Bermudez enlisted Norwin Meneses, a large-scale Nicaraguan cocaine smuggler, to raise money and buy supplies for the contras.
The first volume quoted a Meneses associate, another Nicaraguan trafficker named Danilo Blandon. In an interview with Hitzs investigators, Blandon said he and Meneses flew to Honduras to meet with Bermudez in 1982.
At the time, Menesess criminal activities were well known in the Nicaraguan exile community. But the FDN commander told the cocaine smugglers that "the ends justify the means" in raising money for the contras.
After the Bermudez meeting, contra soldiers helped Meneses and Blandon get past Honduran police who briefly arrested them on drug-trafficking suspicions. After their release, Blandon and Meneses traveled on to Bolivia to complete a cocaine transaction. [For details, see iF Magazine, Mar-Apr. 1998.]
There were other indications of Bermudezs drug-smuggling tolerance. In February 1988, another Nicaraguan exile linked to the drug trade accused Bermudez of narcotics trafficking, according to Hitzs report. 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. The murder has never been solved.
In the Southern Front, in Costa Rica, the drug evidence centered on the forces of Eden Pastora, another leading contra commander. But Hitz discovered that the U.S. government may have contributed to the problem.
Hitz revealed that the CIA put a now-admitted drug operative -- known by his CIA pseudonym "Ivan Gomez" -- in a supervisory position over Pastora.
Hitz reported that the CIA discovered Gomez's drug history in 1987 when Gomez failed a security review on drug-trafficking questions. The CIA then hushed up the discovery.
In internal CIA interviews, Gomez admitted that in March or April 1982, he helped family members who were engaged in drug trafficking and money laundering. 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 family members had slid $2 million into debt and had gone 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."
Gomezs 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 in the early 1980s, Ivan Gomez was the CIA agent in Costa Rica who was overseeing drug-money donations to the contras.
Gomez "was to make sure the money was given to the right people [the contras] and nobody was taking ... profit they weren't supposed to," Cabezas declared publicly. [Graf 678]
But the CIA sought to discredit Cabezas. He did have trouble identifying Gomez's picture and put Gomez at one meeting in early 1982 -- before Gomez started his CIA assignment.
Still, Hitz's report offers the first official evidence that Gomez did have a direct role in drug-money laundering, as Cabezas alleged.
There also was more about Gomez. In November 1985, the FBI 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]
Suarez already was known as a right-wing financier. In 1980, with Argentine military support, Suarez bankrolled a 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.
Bolivias protected cocaine shipments helped transform the Medellin cartel into a corporate-style business for delivering cocaine to the U.S. market. Some of those profits allegedly found their way into contra coffers, partly through Suarez.
Flush with cash in the early 1980s, Suarez invested more than $30 million in various right-wing paramilitary operations, including the contra forces in Central America, according to U.S. Senate testimony by an Argentine intelligence officer, Leonardo Sanchez-Reisse.
In 1987, Sanchez-Reisse stated that the Suarez drug money was laundered through front companies in Miami before going to Central America. There, other Argentine intelligence officers -- veterans of the Bolivian coup -- trained the contras. [For details, see Nazi Echo in The Consortium On-line, Sept. 19, 1998.]
Hitz added another piece to this contra-Bolivian puzzle. One contra fund-raiser, Jose Orlando Bolanos, boasted that the Argentine government was supporting his anti-Sandinista activities, according to a May 1982 cable to CIA headquarters.
Bolanos made the statement during a meeting with undercover DEA agents in Florida. He offered to introduce them to his Bolivian cocaine supplier. [Graf 465]
Despite all this suspicious drug activity around the contras, the CIA insisted that it did not unmask Ivan Gomez until 1987, when he failed a security check and confessed his role in his familys drug business.
The CIA official who interviewed Gomez 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 still chose to protect Ivan Gomez. They rejected a proposal that the Gomez case be referred to the Justice Department. Their rationale was a 1982 DOJ-CIA agreement that 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, without alerting law enforcement or the congressional oversight committees. [Graf 728]
When questioned about the case nearly a decade later, one senior CIA official who had 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]
A Medellin drug connection arises in another section of Hitzs report, whe he revealed evidence suggesting that some contra trafficking may have been sanctioned by Reagan's National Security Council.
The protagonist for this part of the contra-drug mystery is Moises Nunez, a Cuban-American who worked for Norths NSC operation and for two drug-connected seafood importers, Ocean Hunter in Miami and Frigorificos de Puntarenas in Costa Rica.
Frigorificos de Puntarenas was created in the early 1980s as a cover for drug-money laundering, according to sworn testimony by two of the firms principals -- Carlos Soto and Medellin cartel accountant Ramon Milian Rodriguez.
Drug allegations began swirling around Nunez in the mid-1980s. Finally, on March 25, 1987, the CIA questioned Nunez about the cocaine-trafficking suspicions. He responded 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 round of questioning, CIA headquarters authorized an additional session, but then senior CIA officials reversed the decision. There would be no further efforts at "debriefing Nunez."
Hitz noted that "the cable [from headquarters] offered no explanation for the decision" to stop the Nunez interrogation. [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 the Nunez-NSC drug 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, about the Nunez case. 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 began insisting that he had no relationship with the NSC. [Graf 495]
By then, however, Joseph Fernandez, former CIA station chief in Costa Rica, had confirmed to congressional Iran-contra investigators that Nunez was involved in a very sensitive operation for Norths Enterprise. The exact nature of that NSC-authorized activity has never been divulged.
The CIA gave Walsh the material about Nunezs claim of NSC authorization, but not until February 1988 -- nearly a year after the admission and then only as part of a large batch of documents delivered at the end of Walsh's North investigation.
If supplied in a timelier fashion, the Nunez statement and the other evidence of money laundering might have put into focus a part of the North case that always remained fuzzy: his personal handling of dirty money.
According to littled-noticed documents that emerged during the Iran-contra scandal, North tapped into a money-laundering network that pulled $2.7 million in untraceable cash off New York City streets.
The cash deliveries were arranged through a Republic National Bank officer named Nan Morabia. She sent bags filled with cash to Norths operatives who took the money to Washington. [For details, see iF Magazine, July-Aug. 1997]
Mysterious money was showing up elsewhere in the contra operation. A total of $14 million materialized in 1985 to finance the so-called Arms Supermarket which supplied weapons to the contras in Honduras.
Norths handwritten notes from July 12, 1985, record a warning from a CIA officer in the field that $14M [million] to finance came from drugs.
The Arms Supermarket owner, Ronald Martin, denied the drug taint, but acknowledged that the financing was handled by a Cuban-American banker named John Molina, who moved money from wealthy individuals through Panamanian banks.
In 1987, John Molina told his brother, Pablo, that he had worked for the CIA from 1980 until April 1987 arranging letters of credit to purchase arms for the contras and other U.S.-backed forces in Latin America.
As the money poured in, John Molina confided to his brother that he suspected that some came from drug trafficking. In an interview with me, Pablo Molina quoted John as saying, Theres too much money coming in. ... You cant imagine how much money is involved.
A nervous John Molina tried to pull out of the operation in 1987. But he received one last assignment: to close out some contra front companies in Panama.
On Oct. 2, 1987, after completing that work, John Molina left the law offices of Sucre y Sucre in Panama City. He walked to his car and climbed in.
A young man approached from the side and shot Molina in the head. The assassin was later captured and claimed that he was dispatched by Colombian kingpins to murder Molina. [For details, see iF Magazine, July-Sept. 1997]
During the Iran-contra investigation, however, Walsh never zeroed in on the money laundering or the drug trafficking. In March 1988, Walsh indicted North for crimes related to false statements, document destruction and other relatively minor offenses.
While Moises Nunez may have worked for the NSC, the CIA worked directly with other drug-connected Cuban-Americans on the contra project, Hitz found.
One of Nunez's Cuban-American associates, Felipe Vidal, had a criminal record as a narcotics trafficker in the 1970s. But the CIA still hired him to serve as a logistics coordinator for the contras, Hitz reported. [Grafs 508-511]
The CIA soon learned that Vidals drug connections were not only in the past. A December 1984 cable to CIA headquarters revealed Vidal's ties to Rene Corvo, another Cuban-American suspected of drug trafficking. [Graf 512]
Corvo was working with anticommunist Cuban, Frank Castro, who was viewed as a Medellin cartel representative within the contra movement. [For details, see sidebar, Contras Narco-Terrorist.]
There were other narcotics problems with the CIAs Felipe 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, where Vidal worked. [Graf 526]
Despite the evidence, Vidal remained a CIA employee as he collaborated with Frank Castros assistant, Rene 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 demand information about him as part of a congressional inquiry into contra drugs.
But the CIA withheld the derogatory information. 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]
Vidal was not yet in the clear, however. In 1987, the U.S. attorney in Miami began investigating Vidal, Ocean Hunter and other contra-connected entities.
This prosecutorial attention worried the CIA. The CIA's Latin American division felt it was time for a security review of Vidal. But on Aug. 5, 1987, the CIA's security office blocked the review for fear 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," a statement that was clearly false. [Graf 528]
The CIA continued Vidals employment as an advisor to the contra movement until 1990, virtually the end of the contra war. [Graf 510]
Hitz revealed that drugs also tainted the highest levels of the Honduran-based FDN, the largest contra army.
Hitz found that Juan Rivas, a contra commander who rose to be chief of staff, admitted that he had been a cocaine trafficker in Colombia before the war. The CIA asked 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]
Defending Rivas, CIA officials insisted that there was no evidence 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]
Contra military commander 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]
Still, 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 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 reports by the DEA and U.S. Customs.
Hitz reported that someone at the CIA scribbled a note on the DEA cable about Arana stating: "Arnold Arana ... still active and working, we [CIA] may have a problem." [Grafs 608-15]
Despite its drug ties to Matta Ballesteros, SETCO emerged as the principal company for ferrying supplies to the contras in Honduras.
During congressional Iran-contra hearings, FDN political leader Adolfo Calero testified that SETCO was paid from bank accounts controlled by Oliver North. SETCO also received $185,924 from the State Department for ferrying supplies to the contras in 1986.
Hitz found other air transport companies used by the contras implicated in the cocaine trade. Even FDN leaders suspected that they were shipping supplies to Central America aboard planes that might be returning with drugs.
Mario Calero, Adolfo Caleros brother and the chief of contra logistics, grew so uneasy about one air-freight company that he notified U.S. law enforcement 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, he went to work for Vortex, another U.S.-paid contra supply company linked to the drug trade. [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 and a former CIA-owned airline.
In the mid-1980s, Southern Air flew missiles to Iran as well as supplies to the contras. SAT crewmen were involved in one flight that was shot down over Nicaragua on Oct. 5, 1986, exposing part of Norths Iran-contra network.
After that event, Attorney General Edwin Meese III briefly blocked a federal investigation into Southern Air on national security grounds. But suspicions about SAT were just starting.
Wanda Palacio, who had ties to the Medellin cartel, told Senate investigators that she witnessed Ochoa operatives loading cocaine aboard SAT planes in both 1983 and 1985.
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