Lost History: Contras, Dirty Money & CIA
By Robert Parry
WASHINGTON -- On the afternoon of Oct. 2, 1987, John
F. Molina, a 46-year-old Cuban with the look of a Latin Sean Connery,
sauntered from the stylish Panama City offices of the law firm, Sucre y
Molina and his companion, Enrique Delvalle, had been
clearing up business that they had with lawyers who had created shell
corporations for an arms supply network for the Nicaraguan contra rebels.
The two men stepped out onto the busy street and climbed into Molina's red
Mitsubishi four-wheel drive vehicle.
Without their noticing, a
young bushy-haired man with a moustache darted toward the car. The young
man raised a .32-caliber pistol, pointed it at Molina's head and fired
three times. Molina slumped across the front seat. For a moment,
Delvalle thought Molina was reaching toward the opposite side door. Then,
Delvalle realized that John Molina was dead.
The gunman fled on foot.
He was chased and cornered by an armed bystander, and then was arrested by
Panamanian police. In custody, the killer identified himself as Maximillano
Casa Sanchez, a Colombian hit man. Casa Sanchez told police that Colombian
narcotraffickers had sent him to Panama to rub out Molina over a drug debt.
In the following days, La Republica, a newspaper allied with
then-dictator Manuel Noriega, played up the drug angle -- and Molina's ties
to Noriega's political enemies in the Cruzada Civilista. The newspaper also
noted that in the 1970s, Molina was president of UniBank, or the Union de
Bancos, the Panamanian outpost for the WFC Corp., a shadowy money-laundering
network run by Miami-based Cuban-Americans with close ties to the CIA.
But the Molina case had a more contemporary CIA connection. At
the time of his death, Molina was the financial architect behind a mysterious
arms warehouse in the dusty Honduran town of San Pedro Sula. The warehouse,
sometimes called the Arms Supermarket, was stacked high with millions of
dollars in guns and ammunition earmarked for the contras. In that operation,
Molina had told family members that he worked for the CIA.
day, the mystery of the Arms Supermarket's money is one of the most
intriguing unanswered questions of the Iran-contra scandal. But the Molina
case sheds new light as well into another dark corner of the Reagan
administration's contra war: how, in a variety of cases, the funding for
that covert operation was closely tied not only to guns-for-drugs -- as has
been alleged for years -- but to the even-murkier world of drug money-laundering.
For more than a decade, drug pilots and other cocaine-cartel
operatives have asserted that contras assisted in transhipping cocaine to
the United States in exchange for money and guns, or that cartel kingpins
contributed cash to the contras to curry favor with the Reagan administration.
Those charges, which resurfaced last year in a series by the
San Jose Mercury-News, are now under review by Congress and by the
inspectors general of the Justice Department and the CIA. But the Molina
case could be a doorway to the other question: how much did the contra war
benefit from dirty money.
Guns & DrugsThe CIA would neither
confirm nor deny a relationship with Molina. "This is not something I can
really, really give you a definite answer on," said CIA spokesman David
Christian. "We just don't have the resources to check all inquiries of
The Drug Enforcement Administration also failed to
respond to repeated requests about the late John Molina. A senior
government official, however, confirmed that Molina's name was mentioned in
a number of DEA criminal files, including some cases that are still under
U.S. government records also show that the money for
the Arms Supermarket's guns was always suspect. Oliver North's handwritten
notes on July 12, 1985, recounted a warning from one CIA officer in the
field that "$14M [million] to finance came from drugs."
a contra-supply flow chart, obtained by The Consortium from Walsh's
Iran-contra records at the National Archives, the Arms Supermarket was part
of a complex arms network ultimately reporting to former CIA officer Felix
Rodriguez, an anti-Castro Cuban who used the pseudonym "Max Gomez." Through
Rodriguez, the arms network connected to the office of then-Vice President
"The 'Arms Warehouse' was started with 'seed money' of
approximately $14 million, from the CIA," read the text accompanying the
flow chart. "Later, it was believed that funds relating to narcotics
traffic found its way into inventory in the warehouse." Although the
authorship of the flow chart is unclear, it matches information supplied to
investigators by another contra arms broker, Barbara Studley, who worked
closely with retired Gen. John K. Singlaub.
In a deposition in a
related civil case, Studley testified that "General Singlaub informed me
that he had been briefed by Oliver North that the Supermarket had been
funded by drug money." Asked if she had heard those allegations from anyone
else, Studley responded, "numerous conversations with numerous people, ...
this item came up."
In a telephone interview, Ronald Martin, the Arms
Supermarket's principal owner, vehemently denied any drug connection and
denounced the charge as a lie spread by North and other business rivals who
wanted to horn in on contra arms profits.
"All they were trying to do
was taint us and push us out of any business that might be forthcoming,"
Martin said. But Martin acknowledged that Molina did arrange the Arms
Supermarket's money through banks in Panama. Martin also would not say
exactly who put up the money.
Dirty MoneyDuring the official
Iran-contra investigations, these drug suspicions were never resolved.
William Hassler, a lawyer who handled the issue for independent counsel
Lawrence Walsh, explained that the Martin group was not a focus of the
Iran-contra probe. "I'm not sure we considered it a part of our
investigation," Hassler explained.
So, the suspicions about the Arms
Supermarket remain hazy to this day. But Molina's use of Panamanian banks
as the source of funds for the contra weapons -- and his own connection to
the world of drug-money laundering -- give a concrete form to the suspicions
for the first time.
But Molina was not alone straddling the
money-laundering line. North and others involved in the contra operations
also crossed into areas of apparent criminality. Indeed, little-noticed
Iran-contra evidence demonstrated that the Reagan administration repeatedly
turned to criminal money-laundering to finance contra activities.
While serving as a key White House national security aide, for
instance, North tapped into a money-laundering network that pulled hundreds
of thousands of dollars in untraceable cash off New York City streets.
The cash deliveries were arranged by Swiss financier Willard Zucker working
through a Republic National Bank officer, named Nan Morabia.
Zucker's orders, Morabia tapped into a money-laundering operation controlled
by her husband in New York City. Her husband and son then delivered bags
filled with hundreds of thousands of dollars to North's operatives in New
York hotel rooms. Sometimes, to cap off these amateurish spy operations,
North's men first would be required to display matching halves of torn
At the European end of this money-laundering scheme,
Zucker would make equivalent transfers from North's Swiss bank accounts
(containing profits from U.S. arms sales to Iran) into the Swiss accounts
of the money-launderers. That way, the money-launderers could turn their
"dirty" money in the United States into "clean" money in Europe.
Morabia, who was granted immunity from prosecution in exchange for
her cooperation, acknowledged that the so-called "cash drops" were
designed to circumvent federal currency laws. Those anti-money-laundering
statutes require federal reporting of any cash transfer of $10,000 or more
into or out of the United States.
Iran-contra independent counsel
Lawrence Walsh described these "cash drops" in a brief section of his final
report in 1993. Walsh said the cash transfers through Zucker's operation
totaled $2.7 million.
More Bags of MoneySimilarly, Walsh's
probe found that another $467,000 went in bags from Southern Air Transport's
petty cash fund in Miami to pay salaries and buy gas for North's contra air
re-supply operations based at El Salvador's Ilopango airport. SAT, a
onetime CIA-owned airline, was then reimbursed through money transfers from
North's Swiss accounts, Walsh report stated.
Again, the cash deliveries
flouted federal requirements to report the removal of more than $10,000 in
cash from the United States. But given the strong political pressures on
Walsh to wrap up his long-running investigation and the complexity of the
cases, the independent counsel chose not to prosecute the participants in
the money-laundering schemes. The apparent money-laundering crimes also
received scant media attention.
Recently, however, newly discovered
documents have given a more sinister cast to the SAT-Ilopango operation.
As North's pilots were carrying those bags of cash from Miami, a female FBI
informant was alleging, in September 1986, that she had witnessed cocaine
being loaded aboard SAT planes in Barranquilla, Colombia, in 1983 and 1985.
The woman, Wanda Palacio, identified a North pilot, Wallace "Buzz" Sawyer,
as one crew member loading drugs onto a Barranquilla flight in early October
Ronald Reagan's Justice Department spurned Palacio's testimony
as lacking credibility. But Sawyer's flight logs -- recovered after Sawyer
was killed in the crash of a North supply plane over Nicaragua on Oct. 5,
1986 -- corroborated Palacio's claim that Sawyer was in Barranquilla in
early October 1985 flying an SAT cargo plane. [See The Consortium, Nov.
11, 1996] The Palacio allegations suggest that participants in North's
contra resupply operations were trafficking in drugs and possibly using the
secret government operation as a cover to "clean" their money.
Reagan administration's collaboration with alleged drug traffickers and
money-launderers also was far from isolated. In 1986, the Reagan
administration paid $806,401 to four companies to supply the contras with
non-lethal aid despite documentary evidence of drug trafficking by all four
Washington & TraffickersOne of the contra
contractors, a Costa Rican seafood company called Frigorificos de
Punterennas, was created as a cover for drug-money laundering, according to
sworn testimony by two of the firm's principals, Carlos Soto and Ramon
Milian Rodriguez. Still, in 1986, the State Department put $261,937 into a
Frigorificos bank account controlled by Cuban-American Luis Rodriguez. A
year later, Rodriguez was charged in federal court as a major marijuana
The State Department has never explained how the four money-
laundering companies were selected, although Ambassador Robert Duemling who
oversaw contra "humanitarian" aid recalled that North wanted continuation of
"the existing arrangements of the resistance movement," the contras.
Those "existing arrangements" were maintained despite even earlier drug
warnings from some of North's field operatives. In June 1984, North's
courier, Robert Owen, passed on information that Cuban-Americans working
with the contras are "involved in drugs." Another North aide, Lt. Col.
Robert Earl, recalled that in 1986, CIA officers on the ground were worried
because these Cubans were knee-deep in "corruption and greed and drugs."
But the DEA has stated that it has no record that North or his
associates passed on evidence of contra drug trafficking. Indeed, some DEA
officers, including Celerino Castillo, have claimed that their investigations
were undermined by senior officials in Washington.
In one 1989 memo,
Castillo summarized his findings, which implicated a half dozen pilots and
other drug smugglers who were associated with the contra network at El
Salvador's Ilopango military airport. In addition, Castillo's memo on drug
trafficking implicated senior Salvadoran Air Force officers who protected
North's secret contra operation and sold fuel to North's pilots.
Still, the case of John Molina may represent the most provocative link
between the contra supply operation and drug money-launderers. Like so much
other intrigue that has plagued Latin America for nearly four decades, it is
a story dating back to the hottest days of the Cold War, when Fidel Castro's
revolutionary forces ousted Mafia-connected dictator Fulgencio Batista in
Next Issue -- Part 2:
Contras, Dirty Money & the CIA
(c) Copyright 1997
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